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As filed with the Securities and Exchange Commission on August 20, 1998
Registration No. 333-60655
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
NUEVO ENERGY COMPANY
(Exact name of registrant as specified in its charter)
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DELAWARE 1311 76-0304436
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1331 Lamar, Suite 1650, Houston, Texas 77010
Telephone: (713) 652-0706
(Address, including zip code, and telephone number including
area code, of registrant's principal executive offices)
Robert M. King
1331 Lamar, Suite 1650, Houston, Texas 77010
Telephone: (713) 652-0706
(Name, address, including zip code, and telephone number
including area code, of agent for service)
Copy to:
BUTLER & BINION, L.L.P
1000 Louisiana, Suite 1600
Houston, Texas 77002
Attn: George G. Young III
Telephone: (713) 237-3605
Telecopy : (713) 237-3202
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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NUEVO ENERGY COMPANY
Offer to Exchange its 8 7/8% Series B Senior Subordinated Notes Due 2008 that
have been registered under the Securities Act of 1933 for any and all of its
Outstanding 8 7/8% Series A Senior Subordinated Notes Due 2008
The Exchange Offer will expire at 5:00 P.M., New York City time, on
September 24, 1998, unless extended (the "Expiration Date")
Nuevo Energy Company, a Delaware corporation (the "Company" or "Nuevo"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"), to exchange up to $100,000,000 aggregate
principal amount of its 8 7/8% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement (as
defined) of which this Prospectus constitutes a part, for a like principal
amount of its outstanding 8 7/8% Series A Senior Subordinated Notes due 2008
(the "Outstanding Notes" and, together with the Exchange Notes, the "Notes"), of
which $100,000,000 aggregate principal amount is outstanding. The Exchange Notes
will evidence the same debt as the Outstanding Notes and will be issued under
and will be entitled to the benefits of the Indenture (as defined).
The Exchange Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company, which will include borrowings under the Company's
Credit Facility (as defined). The Exchange Notes will rank pari passu with the
Company's existing and future Pari Passu Indebtedness (as defined), including
the Company's 9 1/2% Senior Subordinated Notes due 2006 (the "Existing Notes").
The Exchange Notes also will be structurally subordinated to liabilities of the
Company's subsidiaries. Under certain circumstances described herein, the
Exchange Notes will, in the future, be jointly and severally guaranteed on an
unsecured senior subordinated basis by Restricted Subsidiaries (as defined) of
the Company. The terms of such subordination will be the same as those for the
Outstanding Notes. See "Description of the Notes-Subordination." The Exchange
Notes will rank senior to the Company's 5.75% Convertible Subordinated
Debentures (the "Convertible Debentures"). The Indenture under which the
Exchange Notes will be issued will permit the Company and its subsidiaries to
incur additional indebtedness, including additional Senior Indebtedness and Pari
Passu Indebtedness. See "Use of Proceeds" and "Description of the Notes."
Outstanding Notes may be tendered for exchange on or prior to 5:00 p.m.,
New York City time, on September 24, 1998 ("Expiration Date"), unless the
Exchange Offer is extended by the Company (in which case the term "Expiration
Date" shall mean the latest date and time to which the Exchange Offer is
extended). Tenders of Outstanding Notes may be withdrawn at any time on or prior
to 5:00 p.m., New York City time, on the business day prior to the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount
of Outstanding Notes being tendered for exchange. However, the Exchange Offer is
subject to certain events and conditions and to the terms and provisions of the
Registration Agreement (as defined). See "The Exchange Offer--Conditions to the
Exchange Offer." Outstanding Notes may be tendered in whole or in part in a
principal amount of $1,000 and integral multiples thereof. The Company has
agreed to pay all expenses of the Exchange Offer.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes where
such Outstanding Notes were acquired by such broker-dealer as a result of market
making activities or other trading activities. The Company has agreed that, if
required under the applicable securities laws and upon prior written request, it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale for a period of 90 days after the consummation of the
Exchange Offer. See "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is August 20, 1998.
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The Outstanding Notes, whether sold in offshore transactions in reliance on
Regulation S under the Securities Act or in the United States in reliance on
Rule 144A under the Securities Act ("Rule 144A"), were initially represented by
two, permanent global notes (the "Global Note"), which were deposited with the
Trustee, as custodian for The Depository Trust Company ("DTC"), and registered
in the name of Cede & Co., DTC's nominee, for credit to an account of a direct
or indirect participant in DTC. The Exchange Notes exchanged for the
Outstanding Notes that are represented by the Global Note will continue to be
represented by a permanent global note in definitive, fully registered form,
registered in the name of a nominee of DTC and deposited with the Trustee as
custodian, unless the beneficial holders thereof request otherwise. See
"Description of the Notes--Certain Covenants--Book Entry, Delivery and Form."
Each Exchange Note will bear interest from the most recent date to which
interest has been paid or duly provided for on the Outstanding Note surrendered
in exchange for such Exchange Note or, if no such interest has been paid or duly
provided for on such Outstanding Note, from June 8, 1998. Holders of the
Outstanding Notes whose Outstanding Notes are accepted for exchange will not
receive accrued interest on such Outstanding Notes for any period from and after
the last interest payment date to which interest has been paid or duly provided
for on such Outstanding Notes prior to the original issue date of the Exchange
Notes or, if no such interest has been paid or duly provided for, will not
receive any accrued interest on such Outstanding Notes, and will be deemed to
have waived the right to receive any interest on such Outstanding Notes accrued
from and after such interest payment date or, if no such interest has been paid
or duly provided for, from and after June 8, 1998. This Prospectus, together
with the Letter of Transmittal, is being sent to all registered holders of the
Outstanding Notes as of August 19, 1998.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company under the Registration Agreement (the "Registration
Agreement") dated as of June 8, 1998, among the Company, Salomon Brothers Inc,
J.P. Morgan Securities Inc. and NationsBanc Montgomery Securities LLC (the
"Initial Purchasers"). Based on no-action letters issued by the staff of the
Securities and Exchange Commission (the "Commission") to third parties,
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
May 13, 1988), Morgan Stanley & Co., Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, SEC No-Action
Letter (available June 5, 1991), the Company believes the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by a holder thereof (other than a "Restricted Holder," being (i) a
broker-dealer who acquires Outstanding Notes exchanged for such Exchange Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the Exchange Notes in the
ordinary course of such holder's business and is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the Exchange Notes. Holders of Outstanding Notes wishing to accept the
Exchange Offer must represent to the Company that such conditions have been met.
Holders who tender Outstanding Notes in the Exchange Offer with the intention to
participate in a distribution of the Exchange Notes may not rely on the Morgan
Stanley Letter or similar no-action letters. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, if required under applicable
securities laws and upon prior written request, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of 90 days from the consummation of the Exchange Offer or such shorter
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period as will terminate when all Outstanding Notes acquired by broker-dealers
for their own accounts as a result of market-making activities or other trading
activities have been exchanged for Exchange Notes and resold by such broker-
dealers. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the Notes.
The Company does not intend to list the Exchange Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the Exchange Notes
will develop. To the extent that a market for the Exchange Notes develops, the
market value of the Exchange Notes will depend on market conditions (such as
yields on alternative investments), general economic conditions, the Company's
financial condition and other conditions. Such conditions might cause the
Exchange Notes, to the extent that they are actively traded, to trade at a
significant discount from the face value. Historically, the market for
securities similar to the Exchange Notes has been subject to disruptions that
have caused substantial volatility in the prices of such securities. There can
be no assurance that any market for the Exchange Notes, if such market develops,
will not be subject to similar disruptions. The National Association of
Securities Dealers, Inc. ("NASD") has designated the Outstanding Notes as
securities eligible for trading in the Private Offerings, Resales and Trading
through Automatic Linkages ("PORTAL") market of the NASD. The Initial Purchasers
may act as market makers for the Notes. However, they are not so obligated, and
any such market making may be discontinued at any time without notice.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of or the trading
market for the Exchange Notes. See "Risk Factors--Lack of Public Market."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OUTSTANDING NOTES ARE URGED TO READ THIS PROSPECTUS AND
THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM:
NUEVO ENERGY COMPANY, 1331 LAMAR, SUITE 1650, HOUSTON, TEXAS 77010, TELEPHONE
(713) 652-0706; ATTENTION: BARBARA FORBES, DIRECTOR OF INVESTOR RELATIONS. IN
ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
SEPTEMBER 17, 1998.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy and other information may be inspected and
copied at the public reference facilities of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at
the following Regional Offices: 7 World Trade Center, Suite 1300, New York, New
York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Commission by
mail at prescribed rates. Requests should be directed to the Commission's Public
Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.gov that contains reports, proxy statements, and other
information. Nuevo's common stock is listed on the New York Stock Exchange.
Reports, proxy and information statements and other
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information relating to Nuevo can be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission, and reference is hereby made
to the Registration Statement and to the exhibits relating thereto for further
information with respect to the Company and the Notes. Any statements contained
herein concerning the provisions of any document are not necessarily complete,
and, in each instance, reference is made to a copy of such document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission (File No. 001-10537), are incorporated herein by reference: (i)
Annual Report on Form 10-K for the year ended December 31, 1997, (ii) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998,
and (iii) Current Reports on Form 8-K filed May 14, 1998 and May 20, 1998. All
documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act prior to the Expiration Date of the Exchange Offer
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date any such document is filed.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of such person, by
first class mail or other equally prompt means within one business day of
receipt of such request, a copy of any or all of the documents that are
incorporated by reference herein, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to Nuevo Energy Company, 1331 Lamar, Suite 1650,
Houston, Texas 77010, telephone (713) 652-0706; Attention: Barbara Forbes,
Director of Investor Relations.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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PROSPECTUS SUMMARY
The following is a summary of the more detailed information appearing
elsewhere or incorporated by reference in this Prospectus and is qualified in
its entirety by reference thereto. Prospective purchasers should carefully
consider the information set forth in "Risk Factors" in evaluating the Exchange
Offer. Unless the context otherwise requires, all references in this Prospectus
to "Nuevo" or the "Company" are to Nuevo Energy Company and its subsidiaries.
THE COMPANY
Nuevo is primarily engaged in the acquisition, exploitation, development,
exploration for and production of oil and gas properties. The Company is the
largest independent producer in California, with properties located both onshore
and offshore. The Company also owns properties in East Texas and the onshore
Gulf Coast region and internationally offshore the Republics of Congo and Ghana
in West Africa. Since the Company's inception in 1990, it has grown and
diversified its operations through a series of opportunistic acquisitions of oil
and gas properties and the subsequent exploitation and development of these
properties. The Company has complemented these efforts with an active
exploration program, which provides exposure to prospects which have the
potential to add substantially to the growth of the Company.
RECENT DEVELOPMENTS
On July 2, 1998, the Company announced that it had entered into a letter of
intent to sell its Illini pipeline. Upon consummation of this sale, the Company
will have completed the sale of its non-core gas gathering pipeline and storage
assets, including the Bright Star gathering system and Richfield gas storage
assets, for approximately $14 million. Closing of the Illini pipeline sale is
expected in August, pending finalization of a purchase and sale agreement and
certain regulatory approvals.
In response to lower price realizations on its oil production during the
first quarter of 1998, the Company has announced a $45 million reduction in
capital spending plans for 1998 to $151 million, including $112 million for
exploitation and $39 million for exploration. This reduction will primarily
affect oil development projects whose projected rates of return fall below
acceptable threshold levels assuming the continuation of current low oil prices.
The Company believes that all of these projects will ultimately be undertaken
once oil prices return to acceptable levels.
Additionally, the Company has announced that it has retained an investment
banking firm to evaluate options for maximizing the value of certain of its gas
producing properties in East Texas ("East Texas Gas Properties"), including the
possible sale of such properties. Estimated net proved reserves associated with
these properties were approximately 275 Bcfe at December 31, 1997. Should the
Company ultimately elect to dispose of some or all of these properties, the cash
proceeds will be primarily used to reduce indebtedness under the Credit Facility
and, depending upon market conditions and other factors, including the receipt
of a consent to an amendment to the indenture for the Existing Notes, to fund
repurchases of the Company's Common Stock pursuant to a one million share
repurchase program authorized by its Board of Directors.
The Company has elected to convert, effective January 1, 1998, from the
full cost method to the successful efforts method of accounting for its
investments in oil and gas properties. Under the successful efforts method,
certain exploration expenditures, including geological and geophysical costs,
dry hole costs and delay rentals, are expensed against current period income
rather than capitalized as under the full cost method. Management believes that
the change to the successful efforts method improves earnings quality and
results in a balance sheet that more closely approximates the underlying
economic value of the Company. In accordance with accounting rules, all prior
years' financial statements presented herein have been restated to give effect
to the change to successful efforts accounting. The effect, after tax, of the
change in accounting method as of December 31, 1997, was a reduction to retained
earnings of $64.1 million. Had the Company not converted to the successful
efforts method, the results of operations for the three months ended March 31,
1998 would have included an approximate pre-tax full cost ceiling test write-
down of $250.0 million.
The principal executive offices of the Company are located at 1331 Lamar,
Suite 1650, Houston, Texas 77010. Its telephone number is (713) 652-0706.
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The Exchange Offer
The Exchange Offer relates to the exchange of up to $100,000,000 principal
amount of Exchange Notes for up to $100,000,000 principal amount of Outstanding
Notes. The form and terms of the Exchange Notes are identical in all material
respects to the form and terms of the Outstanding Notes except that the Exchange
Notes have been registered under the Securities Act and will not contain certain
transfer restrictions and hence are not entitled to the benefits of the
Registration Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto. The Exchange Notes will evidence the same debt
as the Outstanding Notes and will be issued under and be entitled to the
benefits of the Indenture governing the Outstanding Notes. See "Description of
the Notes."
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EXCHANGE OFFER.................................. Up to $100,000,000 aggregate principal amount of Exchange Notes are
being offered in exchange for a like principal amount of
Outstanding Notes. Outstanding Notes may be tendered for exchange
in whole or in part in a principal amount of $1,000 and multiples
thereof. The Company is making the offer in order to satisfy its
obligations under the Registration Agreement relating to the
Outstanding Notes. The Company will issue the Exchange Notes to
tendering holders of the Outstanding Notes promptly following the
Expiration Date.
REGISTRATION AGREEMENT.......................... The Outstanding Notes were sold by the Company on June 8, 1998 to
the Initial Purchasers, who placed the Outstanding Notes with
Qualified Institutional Buyers ("QIBs") or pursuant to offers and
sales that occurred outside the United States in reliance on
Regulation S under the Securities Act. In connection therewith,
the Company executed and delivered for the benefit of the holders
of the Outstanding Notes the Registration Agreement providing for,
among other things, the Exchange Offer. See "Exchange Offer;
Registration Rights."
RESALE.......................................... The Company believes that the Exchange Notes issued pursuant to the
Exchange Offer generally will be freely transferable by the holders
thereof without registration or any prospectus delivery requirement
under the Securities Act, except for certain Restricted Holders who
may be required to deliver copies of this Prospectus in connection
with any resale of the Exchange Notes issued in exchange for such
Outstanding Notes. See "The Exchange Offer" and "Plan of
Distribution."
EXPIRATION DATE................................. 5:00 p.m., New York City time, on September 24, 1998 unless the
Exchange Offer is extended by the Company, in which case the term
"Expiration Date" means the latest date to which the Exchange Offer
is extended. See "The Exchange Offer--Expiration Date; Extensions;
Amendments."
CONDITIONS TO THE EXCHANGE OFFER................ The Exchange Offer is subject to certain conditions, which may be
waived by the Company in its sole discretion. See "The Exchange
Offer--Conditions to the Exchange Offer." The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of
Outstanding Notes being
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tendered or accepted for exchange. The Company reserves the right (i) to
delay the acceptance of the Outstanding Notes for exchange, (ii) to
terminate the Exchange Offer at any time prior to the Expiration Date upon
the occurrence of certain conditions, (iii) to extend the Expiration Date
of the Exchange Offer and retain all of the Outstanding Notes tendered
pursuant to the Exchange Offer, subject, however, to the right of holders
of the Outstanding Notes to withdraw their tendered Outstanding Notes and
(iv) to waive any condition or otherwise amend the terms of the Exchange
Offer in any respect. Holders of Outstanding Notes will have certain rights
against the Company under the Registration Agreement should the Company
fail to consummate the Exchange Offer. See "The Exchange Offer--Expiration
Date; Extensions; Amendments" and "Exchange Offer; Registration Rights."
PROCEDURES FOR TENDERING OUTSTANDING NOTES...... Each holder of Outstanding Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, or an Agent's Message (as defined)
together with such Outstanding Notes and any other required
documentation to the Exchange Agent (as defined) at the address set
forth herein or effect a tender of Outstanding Notes pursuant to
the procedures for book-entry transfers as provided herein. See
"The Exchange Offer--Procedures for Tendering Outstanding Notes."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS........ Any beneficial owner whose Outstanding Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender such Outstanding Notes in the
Exchange Offer should contact such registered holder promptly and
instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on its
own behalf, such owner must, prior to completing and executing the
Letter of Transmittal and delivering its Outstanding Notes, either
make appropriate arrangements to register ownership of the
Outstanding Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not be able
to be completed prior to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering Outstanding Notes--Beneficial
Owners."
GUARANTEED DELIVERY PROCEDURES.................. Holders of Outstanding Notes who wish to tender their Outstanding
Notes and whose Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes, the Letter of
Transmittal or any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date, or
who cannot complete the procedure for book-entry transfer on a
timely
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basis and deliver an Agent's Message, must tender their Outstanding
Notes according to the guaranteed delivery procedures set forth in
"The Exchange Offer--Procedures for Tendering Outstanding Notes--
Guaranteed Delivery."
WITHDRAWAL RIGHTS............................... Tenders may be withdrawn at any time prior to 5:00 p.m. New York
City time, on the business day prior to the Expiration Date. See
"The Exchange Offer--Withdrawal Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES......... The exchange of the Outstanding Notes for Exchange Notes by
tendering holders will generally not be a taxable exchange for
federal income tax purposes, and such holders will not recognize
any taxable gain or loss or any interest income for federal income
tax purposes as a result of such exchange. Holders should review
the information set forth under "Certain Federal Income Tax
Consequences" for a discussion of certain U.S. tax considerations
relating to the Exchange Notes prior to tendering the Outstanding
Notes in the Exchange Offer.
USE OF PROCEEDS................................. The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. See "Use of Proceeds."
EXCHANGE AGENT.................................. State Street Bank and Trust Company is serving as Exchange Agent in
connection with the Exchange Offer. See "The Exchange Offer--
Exchange Agent."
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THE EXCHANGE NOTES
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EXCHANGE NOTES.................................. The form and terms of the Exchange Notes are identical in all
material respects to the terms of the respective Outstanding Notes
for which they may be exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions and registration rights
relating to the Outstanding Notes and except for certain interest
provisions relating to such registration rights. See "Description
of the Notes."
MATURITY........................................ June 1, 2008
INTEREST ON THE EXCHANGE NOTES.................. The Exchange Notes will bear interest at the rate of 8 7/8% per
annum, payable semiannually in arrears on June 1 and December 1
commencing December 1, 1998.
OPTIONAL REDEMPTION............................. The Exchange Notes will be redeemable at the option of the Company,
in whole or in part, at any time on or after June 1, 2003, at the
redemption prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption. In addition,
prior to June 1, 2001, up to 33 1/3% of the aggregate principal
amount of the Notes originally issued may be redeemed at the option
of the Company, in whole or in part, at any time and from time to
time, at 108 7/8% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption, with the net
proceeds of one or more Equity Offerings (as defined), provided
that at least 66 2/3% of the aggregate principal amount of the Notes
originally issued remains outstanding immediately after such
redemption. See "Description of the Notes--Optional Redemption."
MANDATORY REDEMPTION............................ None.
SUBSIDIARY GUARANTEES........................... The Exchange Notes will be structurally subordinated to liabilities
of the Company's subsidiaries. Under certain circumstances, the
Exchange Notes will, in the future, be jointly and severally
guaranteed on an unsecured senior subordinated basis by Restricted
Subsidiaries (as defined) of the Company. The terms of such
subordination will be the same as those for the Outstanding Notes.
See "Description of the Notes--Subsidiary Guarantees of Notes."
SUBORDINATION OF NOTES.......................... The Exchange Notes will be general unsecured obligations of the
Company, subordinated in right of payment to all existing and
future Senior Indebtedness of the Company, which will include
borrowings under the Credit Facility. The Notes will rank pari
passu with the Company's existing and future Pari Passu
Indebtedness, including the Company's Existing Notes, and will be
structurally subordinated to all liabilities of the Company's
subsidiaries. As of June 30, 1998, after giving effect to the
issuance of the Outstanding Notes and the application of the net
proceeds therefrom, the Company had
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
approximately $217.1 million of outstanding Senior Indebtedness, which
ranks senior in right of payment to the Notes and $160.0 million of
Existing Notes which rank pari passu with the Notes. The Company also had
outstanding $115.0 million in Convertible Debentures which are subordinated
in right of payment to the Notes. In addition, as of June 30, 1998,
Nuevo's subsidiaries had liabilities on their balance sheets of $57.0
million. See "Risk Factors--Subordination," and "Description of the Notes--
Subordination."
CHANGE OF CONTROL............................... Upon a Change of Control (as defined), the Company will be required
to make an offer to repurchase all outstanding Notes at 101% of the
principal amount thereof plus accrued and unpaid interest to the
date of repurchase. See "Description of the Notes--Repurchase at the
Option of Holders--Change of Control."
CERTAIN COVENANTS............................... The Indenture pursuant to which the Notes will be issued will
contain certain covenants, including, but not limited to, covenants
with respect to the following matters: (i) limitation on
restricted payments; (ii) limitation on the incurrence of
indebtedness; (iii) limitation on issuances and sales of capital
stock by restricted subsidiaries; (iv) limitation on liens; (v)
limitation on disposition of proceeds of asset sales; (vi)
limitation on transactions with affiliates; (vii) limitation on
dividends and other payment restrictions; and (viii) limitation on
mergers, consolidations or sales of assets. See "Description of
the Notes--Repurchase at the Option of Holders" and "--Certain
Covenants."
EXCHANGE OFFER; REGISTRATION RIGHTS............. The Company agreed to use its reasonable best efforts to file and
cause to become effective a registration statement relating to the
Exchange Offer for the Outstanding Notes or, in lieu thereof, to
file and cause to become effective a shelf registration statement
for the resale of the Outstanding Notes. If (i) an exchange offer
registration statement is not filed on or prior to September 6,
1998, (ii) the exchange offer registration statement or, if
applicable, the resale shelf registration statement (each, a
"Registration Statement") is not declared effective on or prior to
November 5, 1998, (iii) the Exchange Offer is not consummated on or
prior to December 5, 1998, or (iv) a Registration Statement is
filed and declared effective on or prior to November 5, 1998 and
such Registration Statement ceases to be effective or usable (at
any time the Company is obligated to maintain the effectiveness
thereof), Special Interest (as defined) will accrue and be payable
semi-annually until such time as a Registration Statement is filed
or becomes effective, as the case may be. Upon the consummation of
the Exchange Offer or the declaration of effectiveness of a shelf
registration statement with respect to the Outstanding Notes, the
Special Interest will cease accruing. See "Exchange Offer;
Registration Rights."
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ABSENCE OF A PUBLIC MARKET FOR THE NOTES The Exchange Notes will be a new issue of securities for which
there is currently no market. The Company does not intend to apply
for listing of the Notes on any securities exchange or stock market. The
Initial Purchasers are not obligated to make a market in the Notes, and any
such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development of liquidity
of any market for the Notes. The Outstanding Notes currently trade in The
Portal Market.
</TABLE>
For additional information with respect to the Exchange Notes
(including defined terms), see "Description of the Notes."
RISK FACTORS
Prior to making an investment decision, prospective investors in the
Exchange Notes should consider all the information set forth in this Prospectus
and should carefully evaluate the considerations set forth in "Risk Factors."
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RISK FACTORS
This Prospectus includes and incorporates by reference "forward looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All
statements other than statements of historical facts included and incorporated
by reference in this Prospectus, including without limitation, statements under
"Prospectus Summary" regarding the Company's financial position, intent to sell
the East Texas Gas Properties estimated quantities and net present values of
reserves, business strategy, plans and objectives of management of the Company
for future operations, the outcome of pending litigation and covenant
compliance, are forward-looking statements. No assurances can be made that such
forward looking statements will prove to be correct. Important factors that
could cause actual results to differ ("Cautionary Statements") materially from
the forward looking statements are disclosed below and elsewhere in this
Prospectus as well as in the documents incorporated by reference. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified by the
Cautionary Statements. Prospective purchasers of the Notes offered hereby
should carefully consider, together with other information included and
incorporated by reference in this Prospectus, the following factors that affect
the Company.
CONSEQUENCES OF A FAILURE TO EXCHANGE OUTSTANDING NOTES
The Outstanding Notes have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions, including the
Company's and Trustee's right in certain cases to require the delivery of
opinions of counsel, certifications and other information prior to any such
transfer. Outstanding Notes that remain outstanding after the consummation of
the Exchange Offer will continue to bear a legend reflecting such restrictions
on transfer. In addition, upon consummation of the Exchange Offer, holders of
Outstanding Notes that remain outstanding will not be entitled to any rights to
have such Outstanding Notes registered under the Securities Act or to any
similar rights under the Registration Agreement (subject to certain limited
exceptions). The Company does not currently anticipate that it will register
the Outstanding Notes under the Securities Act. If Outstanding Notes are
tendered and accepted in the Exchange Offer, the market for untendered
Outstanding Notes is likely to diminish; accordingly, holders who do not tender
their Outstanding Notes may encounter difficulties in selling such notes
following the Exchange Offer.
The Exchange Notes and any Outstanding Notes that remain outstanding
after consummation of the Exchange Offer will constitute a single series of debt
securities under the Indenture and, accordingly, will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture. See "Description of the Notes."
The Indenture provides for the payment of Special Interest (as
defined) on the Outstanding Notes in certain circumstances. Following
consummation of the Exchange Offer, neither the Outstanding Notes nor the
Exchange Notes will be entitled to Special Interest or any increase in the
interest rate thereon. See "Description of the Notes."
LEVERAGE AND DEBT SERVICE
The Company's level of indebtedness will have several important effects on
its future operations, including (i) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of interest on its
indebtedness and will not be available for other purposes, (ii) covenants
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contained in the Company's debt obligations will require the Company to meet
certain financial tests, and other restrictions will limit its ability to borrow
additional funds or to dispose of assets and may affect the Company's
flexibility in planning for, and reacting to, changes in its business, including
possible acquisition activities, and (iii) the Company's ability to obtain
financing in the future for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired. The Company's
ability to meet its debt service obligations and to reduce its total
indebtedness will be dependent upon the Company's future performance, which will
be subject to general economic conditions and to financial, business and other
factors affecting the operations of the Company, many of which are beyond its
control.
SUBORDINATION
The Outstanding Notes are, and the Exchange Notes will be, subordinated in
right of payment to all existing and future Senior Indebtedness of the Company
and will rank pari passu with the Company's existing and future Pari Passu
Indebtedness, including the Existing Notes. The Outstanding Notes are, and the
Exchange Notes will also be, structurally subordinated to the obligations of the
Company's subsidiaries. In the event of bankruptcy, liquidation or
reorganization of the Company and its subsidiaries, the assets of the Company
will be available to pay obligations on the Notes only after all Senior
Indebtedness has been paid in full, and the assets of the Company's subsidiaries
will be available to pay obligations on the Notes only after all obligations of
the subsidiaries have been repaid in full. There may not be sufficient assets
remaining to pay amounts due on any or all of the Notes outstanding. The
aggregate principal amount of Senior Indebtedness of the Company as of June 30,
1998 was $260.0 million and the liabilities on the balance sheet of the
Company's subsidiaries as of June 30, 1998 was $57.0 million. Additional
Senior Indebtedness may be incurred by the Company from time to time, subject to
certain restrictions, and the Company's subsidiaries may incur obligations which
are structurally senior to the Notes. See "Description of the Notes--
Subordination."
LIMITATION ON PURCHASE OF NOTES UPON THE OCCURRENCE OF A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be
required to make an offer to purchase the Notes and the Existing Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of repurchase. If a Change of Control were
to occur, there can be no assurance that the Company would have sufficient
financial resources, or would be able to arrange financing, to pay the purchase
price for all Notes and Existing Notes tendered by the holders thereof. The
Credit Facility contains, and any future credit agreements or other agreements
relating to indebtedness (including Senior Indebtedness or other Pari Passu
Indebtedness) to which the Company becomes a party may contain, restrictions on
the purchase of Notes. If a Change of Control occurs at a time when the Company
is unable to purchase the Notes or Existing Notes (due to insufficient financial
resources, contractual prohibition or otherwise), such failure would constitute
an event of default under the Indenture and the indenture for the Existing
Notes, which would, in turn, constitute a default under the Credit Agreement and
may constitute a default under the terms of any other indebtedness of the
Company then outstanding. In such circumstances, the subordination provisions in
the Indenture would likely prohibit payments to holders of Notes. See
"Description of the Notes--Subordination" and "--Repurchase at the Option of
Holders--Change of Control." The definition of "Change of Control" in the
Indenture includes a sale, lease, conveyance or transfer of "all or
substantially all" of the assets of the Company and certain of its Restricted
Subsidiaries, taken as a whole, to a person or group of persons. There is little
case law interpreting the phrase "all or substantially all" in the context of an
indenture. Because there is no precise established definition of this phrase,
the ability of a holder of the Notes to require the Company to purchase such
Notes as a result of a sale, lease, conveyance or transfer of all or
substantially all of the Company's assets to a person or group of persons may be
uncertain.
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<PAGE>
VOLATILITY OF OIL AND GAS PRICES
The Company's financial condition, operating results, future growth and the
value of its oil and gas properties are substantially dependent on prevailing
prices of, and demand for, oil and gas. The Company's ability to maintain or
increase its borrowing capacity and to obtain additional capital on attractive
terms is also substantially dependent upon oil and gas prices. Historically the
markets for oil and gas have been volatile and are likely to continue to be
volatile in the future. Prices for oil and gas are subject to large fluctuations
in response to relatively minor changes in the supply of and demand for oil and
gas, market uncertainty and a variety of additional factors beyond the control
of the Company. These factors include weather conditions in the United States
and elsewhere, economic conditions in the United States and elsewhere, the
actions of the Organization of Petroleum Exporting Countries ("OPEC"), domestic
and foreign governmental regulation, political stability in the Middle East and
elsewhere, the domestic and foreign supply of, and demand for, oil and gas, and
the availability and prices of foreign imports and the availability of alternate
fuel sources. The NYMEX price for oil on December 31, 1997 was $17.64 per Bbl.
On March 31, 1998, this price had declined to $15.61 per Bbl, and as of
August 19, 1998 was $13.20 per Bbl. Applying March 31, 1998 prices to
December 31, 1997 reserves would have decreased the PV-10 Value of the Company's
reserves to a total of approximately $637.3 million from $901.1 million. Any
continued and extended decline in the price of oil or any substantial and
extended decline in the price of gas would have an adverse effect on the value
of the Company's reserves, borrowing capacity, ability to obtain additional
capital, and its financial condition, revenues, profitability and cash flows
from operations.
Volatile oil and gas prices make it difficult to estimate the value of
producing properties for acquisition and often cause disruption in the market
for oil and gas producing properties, as buyers and sellers have difficulty
agreeing on such value. Price volatility also makes it difficult to budget for
and project the return on acquisitions and development and exploitation
projects.
Approximately 35% of the Company's 1997 production on a BOE basis was
California heavy oil. The market for California heavy oil differs substantially
from the established market indices for oil and gas, due principally to the
higher transportation and refining costs associated with heavy oil and periodic
crude oil imports from other oil producing nations. As a result, the price
received for heavy oil is generally lower than the price for medium and light
oil, and the production costs associated with heavy oil are relatively higher
than for lighter grades. The margin (sales price minus production costs) on
heavy oil sales is generally less than for lighter oil, and the effect of
material price decreases will more adversely affect the profitability of heavy
oil production compared with lighter grades of oil. In addition to the steep
decline in oil prices during the first quarter of 1998, the differential between
the prices for heavy oil and the prices for light and intermediate grades of oil
have increased, further reducing the price received for the Company's heavy oil
production from California. Continued low prices received by the Company for
its heavy oil production may have a material adverse effect on the Company.
There is also no established futures market for California heavy oil, and the
difference between the prices received for California heavy oil and prices in
established futures markets ("basis differential") is volatile, making it
difficult to hedge California heavy oil production. The Company generally does
not attempt to hedge the basis differential of its California heavy oil
production. See "--Hedging."
RESERVE REPLACEMENT RISKS
The Company's future performance depends upon its ability to find, develop
and acquire additional oil and gas reserves that are economically recoverable.
Without successful exploration, exploitation or acquisition activities, the
Company's reserves and revenues will decline. No assurances can be given that
the Company will be able to find and develop or acquire additional reserves at
an acceptable cost.
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<PAGE>
The successful acquisition and development of oil and gas properties
requires an assessment of recoverable reserves, future oil and gas prices and
operating costs, potential environmental and other liabilities and other
factors. Such assessments are necessarily inexact and their accuracy inherently
uncertain. In addition, no assurances can be given that the Company's
exploitation and development activities will result in any increases in
reserves. The Company's operations may be curtailed, delayed or canceled as a
result of lack of adequate capital and other factors, such as title problems,
weather, compliance with governmental regulations or price controls, mechanical
difficulties or shortages or delays in the delivery of equipment. In addition,
the costs of exploitation and development may materially exceed initial
estimates.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial capital
expenditures for the exploitation, exploration, acquisition, development,
production and abandonment of oil and gas properties. Historically, the Company
has financed these expenditures primarily with cash generated by operations,
proceeds from bank borrowings and the proceeds of debt and equity issuances.
The Company believes that it will have sufficient cash provided by operating
activities and borrowings under its Credit Facility and proceeds of debt and
equity issuances to fund planned capital expenditures. If revenues or the
Company's Borrowing Base under its Credit Facility decreases as a result of
lower oil or gas prices, operating difficulties or declines in reserves, the
Company may have limited ability to expend the capital necessary to undertake or
complete future acquisitions, exploitations or exploration activities. There
can be no assurance that additional debt or equity financing or cash generated
by operations will be available to meet these requirements.
UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET CASH FLOWS
Estimates of economically recoverable oil and gas reserves and of future
net cash flows are based upon a number of variable factors and assumptions, all
of which are to some degree speculative and may vary considerably from actual
results. Therefore, actual production, revenues, taxes, and development and
operating expenditures may not occur as estimated. Future results of operations
of the Company will depend upon its ability to develop, produce and sell its oil
and gas reserves. The reserve data included herein are estimates only and are
subject to many uncertainties. Actual quantities of oil and gas will differ
from the amounts set forth herein, and such differences may be material. In
addition, different reserve engineers may make different estimates of reserve
quantities and cash flows based upon the same available data.
CONVERSION TO SUCCESSFUL EFFORTS METHOD OF ACCOUNTING
The Company has elected to convert, effective January 1, 1998, from
the full cost method to the successful efforts method of accounting for its
investment in oil and gas properties. Under the successful efforts method,
certain exploration expenditures, including geological and geophysical costs,
dry hole costs and delay rentals, are expensed against current period income
rather than capitalized as under the full cost method. Management believes the
change to the successful efforts method improves earnings quality and results in
a balance sheet that more closely approximates the underlying economic value of
the Company. In accordance with accounting rules, all prior years' financial
statements presented herein have been restated to give effect to the change to
successful efforts accounting. The effect, after tax, of the change in
accounting method as of December 31, 1997 was a reduction to retained earnings
of $64.1 million. Had the Company not converted to the successful efforts
method, the results of operations for the three months ended March 31, 1998
would have included an approximate pre-tax full cost ceiling test write-down of
$250.0 million.
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OPERATING RISKS
Nuevo's operations are subject to risks inherent in the oil and gas
industry, such as blowouts, cratering, explosions, uncontrollable flows of oil,
gas or well fluids, fires, pollution, earthquakes and other environmental risks.
These risks could result in substantial losses to the Company due to injury and
loss of life, severe damage to and destruction of property and equipment,
pollution and other environmental damage and suspension of operations.
Moreover, offshore operations are subject to a variety of operating risks
peculiar to the marine environment, such as hurricanes or other adverse weather
and sea conditions, marine and helicopter operations, more extensive
governmental regulation, including regulations that may, in certain
circumstances, impose strict liability for pollution damage, and interruption or
termination of operations by governmental authorities based on environmental or
other considerations.
The Company's operations could result in liability for personal injuries,
property damage, oil spills, discharge of hazardous materials, remediation and
clean-up costs and other environmental damages and suspension of operations. The
Company could be liable for environmental damages caused by previous property
owners. As a result, substantial liabilities to third parties or governmental
entities may be incurred, the payment of which could have a material adverse
effect on the Company's financial condition and results of operations. The
Company carries insurance that it believes is in accordance with customary
industry practices, but, as is common in the oil and gas industry, the Company
does not fully insure against all risks associated with its business either
because such insurance is not available or because the cost thereof is
considered prohibitive. The Company maintains limited insurance coverage for
sudden environmental damages, but does not believe that insurance coverage for
environmental damages that occur over time is available at a reasonable cost.
The occurrence of an event that is not covered, or not fully covered, by
insurance could have a material adverse effect on the Company's financial
condition and results of operations.
The Company outsources certain administrative, marketing and operating
functions to Torch Energy Advisors Incorporated ("Torch"), a company engaged in
rendering outsourcing services for oil and gas companies, pursuant to various
agreements (collectively, the "Torch Agreements"). The principal agreement with
Torch provides that it may be terminated by the Company following December 31,
1998, provided that the Company gives one year's advance notice and pays certain
costs to reimburse Torch for terminating the business associated with rendering
services to the Company. Torch also has the option to terminate the agreement
after 2000. The Company and Torch are currently renegotiating the Torch
Agreements. No assurances can be given that the Torch Agreements will be
successfully renegotiated by the Company. Although the Company believes that it
could ultimately replace or internally duplicate the services provided by Torch,
the unanticipated loss of Torch as a service provider may have a material
adverse effect on the Company.
FOREIGN INVESTMENTS
The Company's foreign investments involve risks typically associated with
investments in emerging markets such as uncertain political, economic, legal and
tax environments and expropriation and nationalization of assets. These risks
may include, among other things, currency restrictions and exchange rate
fluctuations, loss of revenue, property and equipment as a result of hazards
such as expropriation, nationalization, war, insurrection and other political
risks, risks of increases in taxes and governmental royalties, renegotiation of
contracts with governmental entities and quasi-governmental agencies, changes in
laws and policies governing operations of foreign-based companies and other
uncertainties arising out of foreign government sovereignty over the Company's
international operations. The Company's international operations may also be
adversely affected by laws and policies of the United States affecting foreign
trade, taxation and investment. In addition, if a dispute arises in its foreign
operations, the Company may be subject to the exclusive jurisdiction of foreign
courts or may not be successful in subjecting foreign persons to the
jurisdiction of the United States. The Company attempts to conduct its
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business and financial affairs so as to protect against political and economic
risks applicable to operations in the various countries where it operates, but
there can be no assurance the Company will be successful in protecting against
such risks.
The Company's private ownership of oil and gas properties under oil
and gas leases in the United States differs distinctly from its ownership
interests in foreign oil and gas properties. In foreign countries in which the
Company does and may do business in the future, the state generally retains
ownership of the minerals and consequently retains control of (and in many cases
participates in) the exploration and production of reserves. Accordingly,
operations outside of the United States may be materially affected by host
governments through royalty payments, export taxes and regulations, surcharges,
value added taxes, production bonuses and other charges. In addition, changes in
prices and costs of operations, timing of production and other factors may
affect estimates of oil and gas reserve quantities and future net cash flows
attributable to non-U.S. properties in a manner materially different than such
changes would affect estimates for U.S. properties. Agreements covering foreign
oil and gas operations also frequently contain provisions obligating the Company
to spend specified amounts on exploration and development, or to perform certain
operations, or forfeit all or a portion of the acreage subject to the contract.
During the third quarter of 1997, a civil war in Congo resulted in a new
government being established in Congo. The operator of the Company's Congo
properties temporarily moved its field offices to Gabon, but has re-established
its offices in Congo. The Company's Congo production is located approximately
30 miles offshore and flows into a floating production, storage and off-loading
vessel for direct shipment to western markets. The Company experienced no
production interruption as a result of the conflict.
In 1996, the previous Congo government requested that the convention
governing the Company's Marine I Exploitation Permit be converted to a
production sharing agreement ("PSA"). Preliminary discussions were held with
the government in early 1997. Nuevo believes that it is currently under no
obligation to convert its ownership interest to a PSA. The Company's position
with the previous government of the Congo was that any conversion to a PSA would
have no material adverse impact to Nuevo. In late 1997, a new government was
established in Congo. Preliminary discussions with the new government have
indicated that it may request conversion to a PSA. If the new government
requires such conversion, no assurances can be made as to the terms of the PSA.
DUAL CONSOLIDATED LOSSES IN CONGO SUBSIDIARY
In connection with their respective acquisitions of two subsidiaries owning
interests in the Yombo field offshore the Republic of Congo (each a "Congo
subsidiary"), the Company and a wholly owned subsidiary of CMS NOMECO Oil & Gas
Co. ("CMS") agreed with the seller of the subsidiaries not to claim certain tax
losses ("dual consolidated losses") incurred by such subsidiaries prior to the
acquisitions. Pursuant to the agreement, the Company and CMS may be liable to
the seller for the recapture of dual consolidated losses utilized by the seller
in years prior to the acquisitions if certain triggering events occur,
including: (i) a disposition by either the Company or CMS of its respective
Congo subsidiary; (ii) either Congo subsidiary's sale of its interest in the
Yombo field; (iii) the acquisition of the Company or CMS by another consolidated
group; or (iv) the failure of the Company's or CMS's Congo subsidiary to
continue as a member of its respective consolidated group. A triggering event
will not occur, however, if a subsequent purchaser enters into certain
agreements specified in the U.S. Internal Revenue Service's consolidated return
regulations intended to ensure that such dual consolidated losses will not be
claimed. The Company and CMS have agreed among themselves that the party
responsible for the triggering event shall indemnify the other for any liability
to the seller as a result of such triggering event. The Company's potential
direct liability could be as much as $50 million if a triggering event with
respect to the Company occurs, and the Company believes that CMS's liability
(for which the Company would be jointly liable with an indemnification right
against CMS) could be as much as $67 million. The Company does not
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expect a triggering event to occur with respect to it or CMS and does not
believe the agreement will have a material adverse effect upon the Company.
The Company has been advised that, under one interpretation of the
applicable agreements, the execution of a PSA with Congo could be a triggering
event unless certain provisions are included in such PSA. The Company does not
intend to enter into a PSA which causes a triggering event to occur. No
assurances can be made, however, as to the terms of the PSA. See "--Foreign
Investments."
HEDGING
The Company periodically seeks to reduce its exposure to price volatility
by hedging its production through swaps, options and other commodity derivative
instruments. In a typical hedging transaction, the Company will have the right
to receive from the counterparty to the hedge the excess of the fixed price
specified in the hedge and a floating price based on a market index, multiplied
by the quantity hedged. If the floating price exceeds the fixed price, the
Company is required to pay the counterparty the difference. The Company would
be required to pay the counterparty the difference between such prices
regardless of whether the Company's production was sufficient to cover the
quantities specified in the hedge. In addition, the index used to calculate the
floating price in a hedge is frequently not the same as the prices actually
received for the production hedged. The difference (referred to as basis
differential) may be material, and may reduce the benefit or increase the
detriment caused by a particular hedge. There is not an established pricing
index for hedges of California heavy crude oil production, and the cash market
for heavy oil production in California tends to vary widely from index prices
typically used in oil hedges. Consequently, hedging California heavy crude oil
is particularly subject to the risks associated with volatile basis
differentials.
COMPETITION; MARKETS FOR PRODUCTION
The Company operates in the highly competitive areas of oil and gas,
acquisition, exploration, exploitation, development and production. The
availability of funds and information relating to a property, the standards
established by the Company for the minimum projected return on investment, the
availability of alternate fuel sources and the intermediate transportation of
gas are factors which affect the Company's ability to compete in the
marketplace. The Company's competitors include major integrated oil companies
and a substantial number of independent energy companies, many of which possess
greater financial and other resources than the Company.
The Company's heavy crude oil production in California requires special
treatment available only from a limited number of refineries. Substantial
damage to such a refinery or closures or reduction in capacity due to financial
or other factors could adversely affect the market for the Company's heavy crude
oil production. In addition, the Company's heavy crude oil production may
compete for refining capacity with heavy crude oil production that is shipped to
California from other oil producing nations.
ENVIRONMENTAL AND OTHER REGULATION
The Company's operations 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 require the acquisition
of a permit before drilling commences, restrict the types, quantities and
concentration of various substances that can be released into the environment in
connection with drilling and production activities, limit or prohibit drilling
activities on certain lands lying within wilderness, wetlands and other
protected areas, and impose substantial liabilities for pollution which might
result from the Company's operations. A substantial amount of the Company's
assets are located in California, which has more stringent environmental
regulations than many other states. Moreover, the recent trend toward stricter
standards in environmental legislation and regulation is likely to continue.
For instance,
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legislation has been proposed in Congress from time to time that would
reclassify certain oil and gas exploration and production wastes as "hazardous
wastes" which would make the reclassified wastes subject to much more stringent
handling, disposal and clean-up requirements. If such legislation were to be
enacted, it could have a significant impact on the operating costs of the
Company, as well as the oil and gas industry in general. Initiatives to further
regulate the disposal of oil and gas wastes are also pending in certain states,
and these various initiatives could have a similar impact on the Company. The
Company could incur substantial costs to comply with environmental laws and
regulations.
The Oil Pollution Act of 1990 imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills. The
implementation of new, or the modification of existing, environmental laws or
regulations, including regulations promulgated pursuant to the Oil Pollution Act
of 1990, could have a material adverse impact on the Company.
The Company's business is subject to certain laws and regulations
relating to taxation, exploration for and development and production of oil and
gas, and environmental and safety matters in both the United States and the
foreign countries in which the Company or any of its subsidiaries operates or
owns property. Various laws and regulations often require permits for drilling
wells and also cover spacing of wells, the prevention of waste of oil and gas
including maintenance of certain gas/oil ratios, rates of production and other
matters. The effect of these statutes and regulations, as well as other
regulations that could be promulgated by the jurisdictions in which the Company
has production, could be to limit the number of wells that could be drilled on
the Company's properties and to limit the allowable production from the
successful wells completed on the Company's properties, thereby limiting the
Company's revenues.
On September 28, 1997, there was a spill of crude oil into the Santa
Barbara Channel in California from a pipeline connecting the Company's Point
Pedernales Field with shore-based processing facilities. The volume of the
spill was estimated to be 163 barrels of oil. Substantially all of the
currently identified costs to repair and clean up the spill were or are expected
to be covered by insurance, less applicable deductibles. The Company, however,
has exposure to certain costs that may not be covered by insurance, including
fines, penalties, and damages. Such costs are not quantifiable at this time,
and, although no assurances can be made, are not expected to be material to the
Company.
ACQUISITION RISKS
The Company expects to continue to evaluate and pursue acquisition
opportunities. The successful acquisition of producing properties requires an
assessment of recoverable reserves, future oil and gas prices, operating costs,
potential environmental and other liabilities and other factors beyond the
Company's control. This assessment is necessarily inexact and its accuracy is
inherently uncertain. In connection with such an assessment, the Company
performs a review it believes to be generally consistent with industry
practices. This review, however, will not reveal all existing or potential
problems, nor will it permit the Company to become sufficiently familiar with
the properties to assess fully their deficiencies and capabilities. Inspections
generally are not performed on every well, and structural and environmental
problems are not necessarily observable even when an inspection is undertaken.
Even when problems are identified, the seller may not be willing or financially
able to give contractual protection against such problems, and the Company may
decide to assume environmental and other liabilities in connection with acquired
properties. There can be no assurance that the Company's acquisitions will be
successful. Any unsuccessful acquisition could have a material adverse effect on
the Company's financial condition and results of operations.
-19-
<PAGE>
LACK OF PUBLIC MARKET
The Outstanding Notes were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. The
Outstanding Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes. See "--Consequences of a Failure to Exchange
Outstanding Notes."
Although the Exchange Notes will generally be permitted to be resold
or otherwise transferred by the holders (who are not affiliates of the Company)
without compliance with the registration and prospectus delivery requirements
under the Securities Act, they will constitute a new issue of securities with no
established trading market. See "The Exchange Offer--Resales of Exchange Notes."
The Initial Purchasers are not obligated to make a market in the Exchange Notes
and any market making activity with respect to the Exchange Notes may be
discontinued at any time without notice in the sole discretion of each Initial
Purchaser. In addition, any such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act and may be limited
during the Exchange Offer. If the Exchange Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities and
other factors including general economic conditions and the financial condition
of the Company. The Company does not intend to apply for a listing or quotation
of the Exchange Notes on any securities exchange or stock market. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes.
The liquidity of, and trading market for, the Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Outstanding Notes
pursuant to the Exchange Offer will be made only after timely receipt by the
Exchange Agent of such Outstanding Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
the Outstanding Notes desiring to tender such Outstanding Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. The
Company is under no duty to give notification of defects or irregularities with
respect to tenders of Outstanding Notes for exchange.
YEAR 2000 ISSUE
All major financial and administrative information processing services
are provided to the Company by Torch, which is conducting a review of its
computer systems to identify and upgrade systems that could be affected by the
"Year 2000" issue. The Year 2000 issue results from computer programs written
with date fields that cannot distinguish between the year 1900 and 2000. The
Company believes that its financial and administrative systems should be Year
2000 compliant in the first half of 1999. The Company does not believe that
costs incurred to address the Year 2000 issue with respect to its financial and
administrative systems will have a material effect on the Company. The
information systems in the Company's field operations are currently not believed
to be fully Year 2000 compliant. The Company and Torch are currently studying
the steps necessary to make the Company's operations Year 2000 compliant and to
otherwise effect a smooth transition to the Year 2000. These steps include:
upgrading, testing and certifying its computer system and field operation
services and obtaining Year 2000 compliance certification from all of Torch's
and Nuevo's important business suppliers. The Company anticipates making
significant progress between now and December 1999, but acknowledges that
important business functions may be disrupted. Costs to address these
disruptions are not known at this time. The Company is also uncertain as to the
impact that the Year 2000 issue will have on the companies with which it
conducts business. In these cases, the effect of the Year 2000 issue may be
material.
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<PAGE>
PRIVATE PLACEMENT
On June 8, 1998, the Company completed the private sale to the Initial
Purchasers of $100,000,000 principal amount of the Outstanding Notes in a
transaction not registered under the Securities Act in reliance upon Section
4(2) of the Securities Act. The Initial Purchasers thereupon offered and resold
the Outstanding Notes to QIBS or pursuant to offers and sales that occurred
outside the United States in reliance on Regulation S under the Securities Act.
The net proceeds to the Company from the sale of the Outstanding Notes was
$97.0 million. The Company used the net proceeds of the offering of the
Outstanding Notes to repay indebtedness under its Credit Facility with a
syndicate of commercial banks which was incurred to fund a portion of the
acquisition of the properties acquired in April 1996 from Union Oil Company of
California and a portion of the Company's capital budget. Amounts outstanding
under the Credit Facility bear interest at a rate equal to the London Interbank
Offered Rate ("LIBOR") plus a number of basis points which increases as senior
indebtedness of the Company as a percent of the Borrowing Base increases. The
interest rate on borrowings under the Credit Facility averaged 6.1% for the
six months ended June 30, 1998. As of June 30, 1998, the Company had $265.0
million of borrowing capacity under its Credit Facility after consideration of
the increase in the Borrowing Base from $330.0 million to $380.0 million, which
is available to fund its capital budget and for possible future acquisitions.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Agreement. The Company will not receive any
cash proceeds from the issuance of the Exchange Notes in the Exchange Offer. In
consideration for issuing the Exchange Notes as contemplated in this Prospectus,
the Company will receive Outstanding Notes in like principal amount. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Outstanding Notes, except for certain transfer
restrictions and registration rights relating to the Outstanding Notes and
certain interest provisions relating to such registration rights. See
"Description of the Notes." The Outstanding Notes surrendered in exchange for
the Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the outstanding debt of the Company.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data for the Company for
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and for the six
month periods ended June 30, 1997 and 1998. The selected historical
consolidated financial information for the years ended December 31, 1993 through
1997 has been derived from the Company's audited financial statements. The
historical information for the six months ended June 30, 1997 and 1998 is
derived from the Company's unaudited consolidated financial statements. Such
unaudited consolidated financial statements have been prepared on the same basis
as the Company's audited financial statements, and the Company believes that
such unaudited consolidated financial statements contain all adjustments
necessary for a fair presentation of the financial information presented
(consisting only of normal, recurring adjustments). Interim results are not
necessarily indicative of results for the full year. See the Consolidated
Financial Statements and Notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, (1) ENDED JUNE 30,
----------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997(1) 1998
--------- -------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Oil and gas revenues................................. $ 67,184 $ 79,968 $102,455 $279,859 $335,202 $168,710 $123,045
Gas plant revenues.................................... 24,680 28,798 27,183 34,802 11,597 11,597 1,405
Pipeline and other revenues........................... 14,697 10,309 7,222 6,774 5,772 2,737 2,224
Gain on sale of assets, net........................... -- 2,402 -- 6,008 1,372 4,400 1,677
Interest on sale of assets, net and other income...... 1,271 245 1,106 1,614 3,335 942 967
--------- -------- --------- --------- -------- -------- --------
Total revenues....................................... 107,832 121,722 137,966 329,057 357,278 188,386 129,318
--------- -------- --------- --------- -------- -------- --------
Costs and expenses:
Lease operating expenses.............................. 11,992 15,160 28,873 93,062 123,178 59,361 65,774
Gas plant operating expenses.......................... 20,975 25,794 22,667 29,311 10,220 10,220 1,423
Pipeline and other operating costs.................... 9,978 6,767 4,726 6,105 5,243 2,301 1,842
Provision for impairment of assets held for sale (2). -- -- -- -- 23,942 -- --
Exploration costs..................................... 7,748 4,300 2,357 4,571 11,082 1,627 4,094
Provision for impairment of oil and gas
properties (3)....................................... -- -- -- -- 30,000 -- --
General and administrative expenses................... 7,734 7,480 5,444 14,880 19,822 8,620 10,913
Outsourcing fees...................................... 5,110 6,369 5,857 10,249 11,984 6,187 4,812
Depreciation, depletion and amortization.............. 33,009 48,144 4 5,233 75,664 102,158 48,199 46,556
Interest expense...................................... 11,861 12,560 15,389 36,009 27,357 14,008 14,444
Loss on sales of assets, net.......................... 13,449 -- 645 -- -- -- --
Dividends on TECONS(4)................................ -- -- -- 165 6,613 3,270 3,306
Other expense......................................... 36 2,387 45 1,069 3,019 259 228
--------- -------- --------- --------- -------- -------- --------
Total costs and expenses............................. 121,892 128,961 131,236 271,085 374,618 154,052 153,392
--------- -------- --------- --------- -------- -------- --------
Income (loss) before income taxes, minority interest,
and extraordinary item............................... (14,060) (7,239) 6,730 57,972 (17,340) 34,334 (24,074)
Income tax expense (benefit).......................... (4,368) (2,865) 2,582 23,965 (6,656) 13,741 (9,870)
Minority interest in earnings (loss) of subsidiary.... 272 52 16 (271) (8) (5) --
--------- -------- --------- --------- -------- -------- --------
Income (loss) before extraordinary item............... (9,964) (4,426) 4,132 34,278 (10,676) 20,598 (14,204)
Extraordinary loss on early extinguishment of debt
net of income tax benefit of $2,037(5)............... -- -- -- -- 3,024 3,024 --
--------- -------- --------- --------- -------- -------- --------
Net income (loss)..................................... (9,964) (4,426) 4,132 34,278 (13,700) 17,574 (14,204)
Dividends on preferred stock.......................... 1,750 1,750 1,472 939 -- -- --
--------- -------- --------- --------- -------- -------- --------
Earnings (loss) attributable to common
stockholders.........................................$ (11,714) $ (6,176) $ 2,660 $ 33,339 $(13,700) $ 17,574 $(14,204)
========= ======== ========= ========= ======== ======== ========
Earnings (loss) per common share--basic...............$ (1.18) $ (0.57) $ 0.24 $ 1.99 $ (0.69) $ 0.88 $ (0.72)
Weighted average common shares outstanding............ 9,937 10,763 11,057 16,755 19,796 19,890 19,759
Earnings (loss) per common share--diluted.............$ (1.18) $ (0.57) $ 0.23 $ 1.84 $ (0.69) $ (0.85) $ (0.72)
Weighted average common and dilutive potential
common shares outstanding............................ 9,937 10,763 11,355 18,596 19,796 20,752 19,759
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, (1) ENDED JUNE 30,
----------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997(1) 1998
--------- -------- --------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Cash Flows Data:
Net cash flows provided by operating activities.......$ 28,403 $ 58,513 $ 37,194 $ 126,921 $ 165,462 $ 80,583 $ 21,917
Net cash flows used in investing activities...........$ (63,164) $(100,158) $ (32,582) $(546,002) $ (169,478) $(76,619) $(94,603)
Net cash flows (used in) provided by financing
activities...........................................$ 32,961 $ 29,929 $ (2,294) $ 426,952 $ (412) $(12,726) $ 69,842
Other Financial Data:
Capital expenditures..................................$ 69,659 $ 105,048 $ 41,445 $ 582,346 $ 195,895 $102,318 $102,095
EBITDAX (6)...........................................$ 52,007 $ 55,363 $ 70,354 $ 168,373 $ 182,440 $ 97,038 $ 42,649
Ratio of EBITDAX to interest expense.................. 4.4x 4.4x 4.6x 4.7x 6.7x 6.9X 3.0X
Ratio of earnings to fixed charges (7)................ -- -- 1.4x 2.6x -- 2.7x --
Balance Sheet Data:
Working capital.......................................$ 22,382 $ 6,396 $ 15,757 $ 22,338 $ 9,257 N/A $ 2,598
Total assets.......................................... 230,901 272,444 262,359 817,643 804,286 N/A 851,387
Total debt............................................ 87,941 119,541 116,709 292,446 309,656 N/A 380,754
Stockholders' equity.................................. 123,549 117,557 123,349 345,439 324,739 N/A 311,933
_______________________________
(1) Effective January 1, 1998, the Company changed its method of accounting for its investments in oil and gas properties from
the full cost to the successful efforts method. All prior years' financial statements presented herein have been restated to
reflect this change.
(2) Provision for impairment of assets held for sale reflects a charge to reduce the value of the Company's mid-stream assets
to the amount expected to be received from the sale of these assets.
(3) The Company incurred an impairment of $30.0 million on certain fields at December 31, 1997 due to decreased crude oil
prices.
(4) TECONS are the Company-Obligated Mandatorily Redeemable Convertible Preferred Securities of Nuevo Financing I. The
principal assets of Nuevo Financing I are $115.0 million of Convertible Debentures. Interest payments on the Convertible
Debentures made by the Company to Nuevo Financing I are paid by Nuevo Financing I as dividends on the TECONS.
(5) During 1997 the Company redeemed its 12 1/2% Senior Subordinated Notes prior to maturity and recorded $3.0 million as an
extraordinary loss on early extinguishment of debt, net of income tax benefit.
(6) EBITDAX is defined as earnings before interest, dividends on TECONS, taxes, depreciation, depletion and amortization,
property impairment and exploration costs and certain other non-cash charges. EBITDAX is included as a supplemental disclosure
because it is commonly accepted as providing useful information regarding a company's ability to incur debt. EBITDAX, however,
should not be considered in isolation or as a substitute for net income, cash flow provided by operating activities or other
income or cash flow data prepared in accordance with generally accepted accounting principals or as a measure of a company's
profitability or liquidity. Because EBITDAX excludes some, but not all, non-cash charges, it may not be comparable to
similarly titled items of other companies.
(7) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) before income taxes and
fixed charges, and fixed charges include interest expense (including interest on the TECONS), amortization of debt issuance
costs and that portion of operating lease expense which is deemed to be representative of an interest factor. Earnings were
not sufficient to cover fixed changes in the years 1993, 1994 and 1997 and the first six months of 1998 by $14.1 million, $7.2
million, $19.5 million and $24.6 million, respectively.
</TABLE>
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Outstanding Notes, the Company entered
into the Registration Agreement with the Initial Purchasers, pursuant to which
the Company agreed to file and to use its best efforts to cause to become
effective with the Commission a registration statement with respect (subject to
certain exceptions) to the exchange of the Outstanding Notes for debt securities
with terms identical in all material respects to the terms of the Outstanding
Notes. A copy of the Registration Agreement has been filed as an Exhibit to the
Registration Statement of which this Prospectus is a part. See "Exchange Offer;
Registration Rights."
The Exchange Offer is being made to satisfy the contractual obligations of
the Company under the Registration Agreement. The form and terms of the Exchange
Notes are the same as the form and terms of the Outstanding Notes except that:
(i) the Exchange Notes have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Outstanding Notes and will not be entitled to resale registration under the
Registration Agreement, although the Registration Agreement does provide for
prospectus delivery procedures to assist resales of Exchange Notes, and (ii) the
Exchange Notes will not provide for any increase in the interest rate thereon.
In that regard, the Outstanding Notes provide that if (i) an exchange offer
registration statement is not filed on or prior to September 6, 1998, (ii) the
exchange offer registration statement or, if applicable, the resale shelf
registration statement (each, a "Registration Statement") is not declared
effective on or prior to November 5, 1998, (iii) the Exchange Offer is not
consummated on or prior to December 5, 1998, or (iv) a Registration Statement is
filed and declared effective on or prior to November 5, 1998 and such
Registration Statement ceases to be effective or usable (at any time the Company
is obligated to maintain the effectiveness thereof), Special Interest (as
defined) will accrue and be payable semi-annually until such time as an exchange
offer registration statement is filed or becomes effective, as the case may be.
See "Description of the Notes--Registration Rights" and "Exchange Offer;
Registration Rights."
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Outstanding Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction. Unless the context
requires otherwise, the term "holder" with respect to the Exchange Offer means
any person in whose name the Outstanding Notes are registered on the books of
the Company or any other person who has obtained a properly completed bond power
from the registered holder, or any person whose Outstanding Notes are held of
record by The Depository Trust Company who desires to deliver such Outstanding
Notes by book-entry transfer at The Depository Trust Company. Only a holder may
tender Outstanding Notes in the Exchange Offer.
TERMS OF THE EXCHANGE
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $100,000,000 aggregate principal amount of Exchange Notes for a
like aggregate principal amount of Outstanding Notes properly tendered on or
prior to the Expiration Date and not properly withdrawn in accordance with the
procedures described below. The Company will issue, promptly after the
Expiration Date, an aggregate principal amount of up to $100,000,000 of Exchange
Notes in exchange for a like principal amount of Outstanding Notes tendered and
accepted in connection with the Exchange Offer. Holders may tender their
Outstanding Notes in whole or in part in a principal amount of $1,000 and
integral multiples thereof.
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<PAGE>
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered. As of the date of this Prospectus,
$100,000,000 aggregate principal amount of the Outstanding Notes are
outstanding.
Holders of Outstanding Notes do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Outstanding Notes that are not
tendered for or are tendered but not accepted in connection with the Exchange
Offer will remain outstanding and be entitled to the benefits of the Indenture,
but will not be entitled to any further registration rights under the
Registration Agreement, except under limited circumstances. See "Risk Factors--
Consequences of a Failure to Exchange Outstanding Notes."
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, or upon the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Outstanding Notes will
be returned, without expense, to the tendering holder thereof promptly after the
Expiration Date.
Holders who tender Outstanding Notes in connection with the Exchange Offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Outstanding Notes in connection with the Exchange Offer. The Company
will pay all charges and expenses, other than certain applicable taxes described
below, in connection with the Exchange Offer. See "--Fees and Expenses."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OUTSTANDING NOTES AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING NOTES PURSUANT TO
THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OUTSTANDING NOTES MUST MAKE THEIR OWN DECISION
WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE
AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE
LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR
OWN FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
September 24, 1998, unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Outstanding Notes for exchange, (ii) to terminate
the Exchange Offer (whether or not any Outstanding Notes have theretofore been
accepted for exchange) if any of the events or conditions referred to under
"--Conditions to the Exchange Offer" have occurred or exist or have not been
satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain
all Outstanding Notes tendered pursuant to the Exchange Offer, subject, however,
to the right of holders of Outstanding Notes to withdraw their tendered
Outstanding Notes as described under "--Withdrawal Rights," and (iv) to waive
any condition or otherwise amend the terms of the Exchange Offer in any respect.
If the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, or if the Company waives a material condition of
the Exchange Offer, the Company will promptly disclose such amendment by means
of a prospectus supplement that will be distributed to the registered holders of
the Outstanding Notes, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
amendment and the
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<PAGE>
manner of disclosure to the registered holders if the Exchange Offer would
otherwise expire during such five to ten business day period.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, Exchange Notes for
Outstanding Notes validly tendered and not withdrawn (pursuant to the withdrawal
rights described under "--Withdrawal Rights") promptly after the Expiration
Date.
In all cases, delivery of Exchange Notes in exchange for Outstanding Notes
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of (i) (x) Outstanding Notes and
the Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or (y) a book-entry
confirmation of a book-entry transfer of Outstanding Notes into the Exchange
Agent's account at the DTC and an Agent's Message, and (ii) any other documents
required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Outstanding Notes into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, Outstanding
Notes validly tendered and not withdrawn as, if and when the Company gives
written notice to the Exchange Agent of the Company's acceptance of such
Outstanding Notes for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Company for the purpose of receiving tenders of
Outstanding Notes, Letters of Transmittal and related documents, and as agent
for tendering holders for the purpose of receiving Outstanding Notes, Letters of
Transmittal and related documents and transmitting Exchange Notes to validly
tendering holders. Such exchange will be made promptly after the Expiration
Date. If for any reason whatsoever, acceptance for exchange or the exchange of
any Outstanding Notes tendered pursuant to the Exchange Offer is delayed
(whether before or after the Company's acceptance for exchange of Outstanding
Notes) or the Company extends the Exchange Offer or is unable to accept for
exchange or exchange Outstanding Notes tendered pursuant to the Exchange Offer,
then, without prejudice to the Company's rights set forth herein, the Exchange
Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c)
under the Exchange Act, retain tendered Outstanding Notes and such Outstanding
Notes may not be withdrawn except to the extent tendering holders are entitled
to withdrawal rights as described under "--Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Outstanding Notes will
warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Outstanding Notes, that
the Company will acquire good, marketable and unencumbered title to the tendered
Outstanding Notes, free and clear of all liens, restrictions, charges and
encumbrances, and the Outstanding Notes tendered for exchange are not subject to
any adverse claims or proxies. The holder also will warrant and agree that it
will, upon request, execute and deliver any additional documents deemed by
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<PAGE>
the Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment, and transfer of the Outstanding Notes tendered
pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
Valid Tender
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Outstanding Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
In addition, either (i) the certificates for such Outstanding Notes must be
received by the Exchange Agent along with the Letter of Transmittal or (ii) a
book-entry confirmation, if such procedure is available, pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent along with an Agent's Message prior to the Expiration Date or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. The tender by a holder of Outstanding Notes will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal. Delivery of
all documents must be made to the Exchange Agent at its address set forth
herein. Holders may also request that their respective brokers, dealers,
commercial banks, trust companies or nominees effect such tender for such
holders.
The term "Agent's Message" means a message, transmitted by DTC to, and
received by, the Exchange Agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering Outstanding Notes which are the subject of such
book-entry confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant.
If less than all of the Outstanding Notes are tendered, a tendering holder
should fill in the amount of Outstanding Notes being tendered in the appropriate
box on the Letter of Transmittal. The entire amount of Outstanding Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. NO LETTER OF
TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
Book Entry Transfer
The Exchange Agent will establish an account with respect to the
Outstanding Notes at DTC for purposes of the Exchange Offer within two business
days after the date of this Prospectus. Any financial institution that is a
participant in DTC's book-entry transfer facility system may make a book-entry
delivery of the Outstanding Notes by causing DTC to transfer such Outstanding
Notes into the Exchange Agent's account at DTC in accordance with DTC's
procedures for transfers. However, although delivery of Outstanding Notes may be
effected through book-entry transfer into the Exchange Agent's account at DTC,
an Agent's Message must be transmitted to and received by the Exchange Agent at
the Exchange
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Agent's address set forth under "--Exchange Agent" on or prior to the Expiration
Date, or the guaranteed delivery procedure set forth below must be complied
with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. THE LETTER OF TRANSMITTAL OR AN
AGENT'S MESSAGE MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME ON SEPTEMBER 24, 1998.
Signature Guarantees
If the Letter of Transmittal is signed by the record holder(s) of the
Outstanding Notes tendered thereby, the signature must correspond with the
name(s) written on the face of the Outstanding Notes without alteration,
enlargement or any change whatsoever. If the Letter of Transmittal is signed by
a participant in DTC, the signature must correspond with the name as it appears
on the security position listing as the holder of the Outstanding Notes.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act (an "Eligible Institution") unless the Outstanding Notes
tendered pursuant thereto are tendered (i) by a registered holder (or by a
participant in DTC whose name appears on a security position listing as the
owner) who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal and the Exchange
Notes are being issued directly to such registered holder (or deposited in the
participant's account at DTC) or (ii) for the account of an Eligible
Institution. If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Notes listed therein, such Outstanding
Notes must be endorsed or accompanied by appropriate bond powers which authorize
such person to tender the Outstanding Notes on behalf of the registered holder,
in either case signed as the name of the registered holder or holders appears on
the Outstanding Notes.
Guaranteed Delivery
If a holder desires to tender Outstanding Notes pursuant to the Exchange
Offer and the certificates for such Outstanding Notes are not immediately
available or time will not permit the Letter of Transmittal to reach the
Exchange Agent on or before the Expiration Date, or the procedures for book-
entry transfer and delivery of an Agent's Message cannot be completed on a
timely basis, such Outstanding Notes may nevertheless be tendered, provided that
all of the following guaranteed delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(iii) the certificates (or a book-entry confirmation and Agent's
Message) representing all tendered Outstanding Notes, in proper form for
transfer, together with a properly completed and duly executed Letter of
Transmittal and all other documents required by the Letter of Transmittal,
are received by the Exchange Agent within five New York Stock Exchange
trading days after the date of execution of such Notice of Guaranteed
Delivery.
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The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of Exchange Notes
in exchange for Outstanding Notes tendered and accepted for exchange pursuant to
the Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Outstanding Notes and a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), or of a book-entry confirmation
with respect to such Outstanding Notes and an Agent's Message. Accordingly, the
delivery of Exchange Notes might not be made to all tendering holders at the
same time, and will depend upon when Outstanding Notes, book-entry confirmations
with respect to Outstanding Notes and other required documents are received by
the Exchange Agent.
The Company's acceptance for exchange of Outstanding Notes tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt), acceptance for exchange of any tendered Outstanding Notes and
withdrawal of any tendered Outstanding Notes will be determined by the Company,
in its sole discretion, whose determination shall be final and binding on all
parties. The Company reserves the absolute right, in its sole and absolute
discretion, to reject any and all tenders determined by it not to be in proper
form or the acceptance of which, or exchange for, may, in the view of counsel to
the Company, be unlawful. The Company also reserves the absolute right, subject
to applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Outstanding Notes of any particular holder whether
or not similar conditions or irregularities are waived in the case of other
holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of Outstanding Notes will be deemed to have been
validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
Beneficial Owners
Any beneficial holder whose Outstanding Notes are registered in the name of
such holder's broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on behalf of the registered holder.
If such beneficial holder wishes to tender directly, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and delivering
his Outstanding Notes, either make appropriate arrangements to register
ownership of the Outstanding Notes in such holder's name or obtain a properly
completed bond power from the registered holder. The transfer of record
ownership may take considerable time and may not be able to be complete prior to
the Expiration Date.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity
such person
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should so indicate when signing, and unless waived by the Company, proper
evidence satisfactory to the Company, in its sole discretion, of such person's
authority to so act must be submitted.
RESALES OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on a position of the
staff of the Division of Corporation Finance of the Commission as set forth in
certain interpretive letters addressed to third parties, including Exxon Capital
Holdings Corporation, SEC No-Action Letter (available May 13, 1988), Morgan
Stanley & Co., Inc., SEC No-Action Letter (available June 5, 1991) (the "Morgan
Stanley Letter") and Mary Kay Cosmetics, SEC No-Action Letter (available June 5,
1991). However, the Company has not sought its own interpretive letter and
there can be no assurance that the staff of the Division of Corporation Finance
of the Commission would make a determination with respect to the Exchange Offer
similar to that made in such interpretive letters to third parties. Based on
these interpretations by the staff of the Division of Corporation Finance, and
subject to the two immediately following sentences, the Company believes that
Exchange Notes issued pursuant to this Exchange Offer in exchange for
Outstanding Notes may be offered for resale, resold and otherwise transferred by
a holder thereof (other than a "Restricted Holder," being (i) a broker-dealer
who acquires Outstanding Notes exchanged for such Exchange Notes directly from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an affiliate of the Company
within the meaning of Rule 405 under the Securities Act) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in a
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Accordingly, any holder of Outstanding Notes who is a Restricted Holder, who did
not acquire the Exchange Notes in the ordinary course of such holder's business
or who intends to participate in the Exchange Offer for the purpose of
distributing Exchange Notes, (a) will not be able to rely on the interpretations
of the staff of the Division of Corporation Finance of the Commission set forth
in the above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Outstanding Notes in the Exchange Offer and (c) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Outstanding
Notes unless such sale is made pursuant to an exemption from such requirements.
In addition, as described below, if any broker-dealer holds Outstanding Notes
acquired for its own account as a result of market-making or other trading
activities and exchanges such Outstanding Notes for Exchange Notes, then such
broker-dealer must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of such Exchange Notes. In the
event that applicable interpretations by the staff of the Division of
Corporation Finance change or otherwise do not permit resales of the Exchange
Notes without compliance with the registration and prospectus delivery
requirements of the Securities Act, holders of Exchange Notes who transfer
Exchange Notes in violation of the prospectus delivery requirements of the
Securities Act or without an exemption from registration thereunder may incur
liability thereunder.
Each holder of Outstanding Notes who wishes to exchange Outstanding Notes
for Exchange Notes in the Exchange Offer will be required to represent that (i)
it is neither an affiliate of the Company nor a broker-dealer tendering
Outstanding Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it are being acquired in the ordinary
course of its business, (iii) it is not participating in, and it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such Exchange Notes, and (iv) if
such holder is not a broker-dealer, such holder is not engaged in, and does not
intend to engage in, a distribution (within the meaning of the Securities Act)
of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its
own account pursuant to the Exchange Offer must acknowledge that it acquired the
Outstanding Notes for its own account as the result of market-making activities
or other trading activities and must agree that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so
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acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters issued to third parties, including
Shearman & Sterling SEC No-Action Letter (available July 2, 1993), the Company
believes that broker-dealers who acquired Outstanding Notes for their own
accounts as a result of market-making activities or other trading activities
("Participating Broker-Dealers") may fulfill their prospectus delivery
requirements with respect to the Exchange Notes received upon exchange of such
Outstanding Notes (other than Outstanding Notes that represent an unsold
allotment from the original sale of the Outstanding Notes) with a prospectus
meeting the requirements of the Securities Act, which may be the prospectus
prepared for an exchange offer so long as it contains a description of the plan
of distribution with respect to the resale of such Exchange Notes. Accordingly,
this Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer during the period referred to below in
connection with resales of Exchange Notes received in exchange for Outstanding
Notes where such Outstanding Notes were acquired by such Participating Broker-
Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration
Agreement, the Company has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of such Exchange Notes for a period ending ninety days
after the consummation of the Exchange Offer or, if earlier, when all such
Exchange Notes have been disposed of by such Participating Broker-Dealer. See
"Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of
the Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Outstanding
Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution
of the Letter of Transmittal, that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained in this Prospectus untrue in any material respect or which
causes this Prospectus to omit to state a material fact necessary in order to
make the statements herein, in light of the circumstances under which they were
made, not misleading or of the occurrence of certain other events specified in
the Registration Agreement, such Participating Broker-Dealer will suspend the
sale of Exchange Notes pursuant to this Prospectus until the Company has amended
or supplemented this Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the Exchange
Notes may be resumed, as the case may be. If the Company gives such notice to
suspend the sale of the Exchange Notes, it shall extend the ninety day period
referred to above during which Participating Broker-Dealers are entitled to use
this Prospectus in connection with the resale of Exchange Notes by the number of
days during the period from and including the date of the giving of such notice
to and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the Exchange Notes or to and including the date on which the Company has given
notice that the sale of Exchange Notes may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" on or prior
to 5:00 p.m., New York City time, on the business day prior to the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person who
tendered the Outstanding Notes to be withdrawn, (ii) identify the Outstanding
Notes to be withdrawn (including the
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certificate number or numbers and the aggregate principal amount), and (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to have the trustee under the Indenture
register the transfer of such Outstanding Notes into the name of the person
withdrawing the tender and (iv) if certificates for such Outstanding Notes have
been tendered, the name of the registered holder of the Outstanding Notes as set
forth on the Outstanding Notes, if different from that of the person who
tendered such Outstanding Notes. If Outstanding Notes have been delivered or
otherwise identified to the Exchange Agent, then prior to the physical release
of such Outstanding Notes, the tendering holder must submit the serial numbers
shown on the particular Outstanding Notes to be withdrawn and the signature on
the notice of withdrawal must be guaranteed by an Eligible Institution, except
in the case of Outstanding Notes tendered for the account of an Eligible
Institution. If Outstanding Notes have been tendered pursuant to the procedures
for book-entry transfer set forth in "--Procedures for Tendering Outstanding
Notes," the notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawal of Outstanding Notes, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of
Outstanding Notes may not be rescinded. Outstanding Notes properly withdrawn
will not be deemed validly tendered for purposes of the Exchange Offer, but may
be retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described above under "--Procedures for
Tendering Outstanding Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Outstanding Notes which have been
tendered but which are withdrawn will be returned to the holder thereof promptly
after withdrawal.
INTEREST ON THE EXCHANGE NOTES
Each Exchange Note will bear interest at the rate of 8 7/8% per annum from
the most recent date to which interest has been paid or duly provided for on the
Outstanding Note surrendered in exchange for such Exchange Note or, if no
interest has been paid or duly provided for on such Outstanding Note, from June
8, 1998 (the date of original issuance of such Outstanding Notes). Interest on
the Exchange Notes will be payable semiannually in arrears on June 1 and
December 15, commencing on the first such date following the original issuance
date of the Exchange Notes. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
Holders of Outstanding Notes whose Outstanding Notes are accepted for
exchange will not receive accrued interest on such Outstanding Notes for any
period from and after the last interest payment date to which interest has been
paid or duly provided for on such Outstanding Notes prior to the original issue
date of the Exchange Notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such Outstanding Notes,
and will be deemed to have waived the right to receive any interest on such
Outstanding Notes accrued from and after such interest payment date or, if no
such interest has been paid or duly provided for, from and after June 8, 1998.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Outstanding Notes for any Exchange Notes, and, as
described below, may terminate the Exchange Offer (whether or not any
Outstanding Notes have theretofore been accepted for exchange), or may waive any
conditions to or
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amend the Exchange Offer, if any of the following conditions have occurred or
exist or have not been satisfied:
(a) the Exchange Offer, or the making of any exchange pursuant to the
Exchange Offer, violates applicable law or any applicable interpretation of
the staff of the Commission; or
(b) any action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency or body with respect
to the Exchange Offer; or
(c) any law, statute, rule or regulation shall have been adopted or
enacted prohibiting or limiting the Exchange Offer; or
(d) a banking moratorium shall have been declared by United States
federal, New York or Texas state authorities; or
(e) trading on the New York Stock Exchange or generally in the United
States over-the-counter market shall have been suspended by order of the
Commission or any other governmental authority; or
(f) such other conditions reasonably acceptable to the Initial
Purchasers which, in the Company's judgment, would reasonably be expected
to impair the ability of the Company to proceed with the Exchange Offer.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law and the provisions of the
Registration Agreement, terminate the Exchange Offer (whether or not any
Outstanding Notes have theretofore been accepted for exchange) or may waive any
such condition or otherwise amend the terms of the Exchange Offer in any
respect. If such waiver or amendment constitutes a material change to the
Exchange Offer, the Company will promptly disclose such waiver by means of a
prospectus supplement that will be distributed to the registered holders of the
Outstanding Notes, and the Company will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange Agent
for the Exchange Offer. Delivery of the Letter of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
by Registered or Certified mail: by hand or overnight delivery:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Two International Place
Post Office Box 778 Corporate Trust Window, Fourth Floor
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen
Telephone: (617) 664-5587
Facsimile: (617) 664-5290 (for Eligible Institutions only)
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
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FEES AND EXPENSES
The Company has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Outstanding Notes, and in handling or tendering for
their customers.
Holders who tender their Outstanding Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however,
Exchange Notes and/or substitute Outstanding Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the Outstanding Notes tendered, or if tendered
Outstanding Notes are registered in the name of any person other than the person
signing this letter, or if a transfer tax is imposed for any reason other than
the exchange of Outstanding Notes in connection with the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder and the Exchange Agent will retain possession
of an amount of Exchange Notes with a face amount equal to the amount of such
transfer taxes due by such tendering holder pending receipt by the Exchange
Agent of the amount of such taxes.
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The expenses of soliciting
tenders will be borne by the Company. The principal solicitation is being made
by mail; however, additional solicitation may be made by telegraph, telephone or
in person by officers and regular employees of the Company and its affiliates.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes, which is face value, as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Company upon the consummation of the Exchange
Offer. The expenses of the Exchange Offer will be amortized by the Company over
the term of the Exchange Notes under generally accepted accounting principles.
DESCRIPTION OF THE NOTES
The Exchange Notes are to be issued under the Indenture, dated as of June
8, 1998 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as trustee (the "Trustee"). The Exchange Notes will be issued under
the same Indenture as the Outstanding Notes and the Outstanding Notes and the
Exchange Notes will constitute a single series of debt securities under the
Indenture. The terms of the Exchange Notes are identical in all material
respects to the Outstanding Notes, except that the Outstanding Notes have not
been registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain registration rights under the Registration
Agreement (which rights terminate upon the consummation of the Exchange Offer,
except under limited circumstances). If the Exchange Offer is consummated, any
Outstanding Notes that remain outstanding after consummation of the Exchange
Offer and the Exchange Notes issued in the Exchange Offer will vote together as
a single class for purposes of determining whether holders of the requisite
percentage in outstanding principal of Notes (as defined herein) have taken
certain actions or exercised certain rights under the Indenture.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Notes are
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subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The Company will provide a copy
of the Indenture upon request to the Company at the address set forth under
"Available Information." Whenever particular provisions and definitions of the
Indenture are referred to, such provisions and definitions are incorporated by
reference as part of the statements made, and the statements are qualified in
their entirety by such reference. For purposes of this section of this
Prospectus, references to the "Company" mean Nuevo Energy Company, excluding its
subsidiaries. The definitions of certain terms used in the following summary are
set forth below under "--Certain Definitions."
The Exchange Notes will be limited to $100,000,000 aggregate principal
amount. The Outstanding and Exchange Notes are referred to herein as the
"Notes." Under the circumstances described below, the obligations of the Company
under the Notes will be in the future unconditionally guaranteed on an unsecured
senior subordinated basis by Restricted Subsidiaries of the Company. See
"--Subsidiary Guarantees of Notes."
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be general unsecured senior subordinated
obligations of the Company, limited in aggregate principal amount to
$100,000,000 and will mature on June 1, 2008. Interest on the Notes will accrue
at the rate of 8 7/8% per annum and will be payable semiannually in arrears on
June 1 and December 1 to the Persons in whose names the Notes are registered in
the Note Register at the close of business on May 15 or November 15 next
preceding such interest payment date. Interest on the Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date of original issuance. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest on the Notes will be payable, and
the Notes will be exchangeable and transferable, at the office or agency of the
Company maintained for such purpose within the City and State of New York. In
addition, in the event the Notes do not remain in book-entry form, interest may
be paid, at the option of the Company, by check mailed to the registered holders
of the Notes at their respective addresses as set forth on the Note Register.
No service charge will be made for any transfer or exchange of Notes, but the
Company or the Trustee may require payment of a sum sufficient to cover any tax
or other governmental charge that may be payable in connection therewith. The
Notes will be issued in denominations of $1,000 and integral multiples thereof.
The interest on the Outstanding Notes is subject to increase in certain
circumstances (such additional interest being referred to as "Special Interest")
if the Company does not file a registration statement relating to the Exchange
Offer on a timely basis, if such registration statement is not declared
effective on a timely basis or if certain other conditions are not satisfied,
all as further described under "--Registration Rights." All references herein to
interest include Special Interest, if applicable.
SUBORDINATION
The payment of the principal of, and premium, if any, and interest on the
Notes will be subordinated in right of payment, as set forth in the Indenture,
to the prior payment in full of Senior Indebtedness, which will include
borrowings under the Credit Facility, whether outstanding on the date of the
Indenture or thereafter incurred. In the event of any insolvency or
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bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relating to the
Company or to its creditors, as such, or to its assets, or any liquidation,
dissolution or other winding-up of the Company, whether voluntary or involuntary
and whether or not including insolvency or bankruptcy, or any assignment for the
benefit of creditors or other marshaling of assets or liabilities of the Company
(provided that this provision will not require the repayment of all Senior
Indebtedness in full in connection with the consolidation or merger of the
Company or its liquidation or dissolution following the conveyance, transfer,
lease or other disposition of all or substantially all the properties and assets
of the Company and its Restricted Subsidiaries on a consolidated basis upon the
terms and conditions described under "--Merger, Consolidation or Sale of Assets"
below as a prerequisite to any payments being made to Holders of Notes), the
holders of Senior Indebtedness will first be entitled to receive payment in full
of all amounts due on or in respect of all Senior Indebtedness, or provision
must be made for such payment, before the Holders of Notes will be entitled to
receive any direct or indirect payment or distribution of any kind or character
(other than any payment or distribution in the form of Permitted Junior
Securities) on account of principal of (or premium, if any, on) or interest on
the Notes or on account of the purchase or redemption or other acquisition of
the Notes (including pursuant to an optional redemption, a Change of Control
Offer or a Net Proceeds Offer). In the event that, notwithstanding the
foregoing, the Trustee or the Holder of any Note receives any payment or
distribution of properties or assets of the Company of any kind or character,
whether in cash, property or securities, by set-off or otherwise, in respect of
principal of (or premium, if any, on) or interest on the Notes before all Senior
Indebtedness is paid or provided for in full, then the Trustee or the Holders of
Notes receiving any such payment or distribution (other than a payment or
distribution in the form of Permitted Junior Securities) will be required to pay
or deliver such payment or distribution 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.
The Company also may not make any payment or distribution of any properties or
assets of the Company of any kind or character (other than Permitted Junior
Securities) on account of principal of (or premium, if any, on) or Interest on
the Notes or on account of the purchase or redemption or other acquisition of
Notes upon the occurrence of a Payment Event of Default and receipt by the
Trustee of written notice thereof until such Payment Event of Default shall have
been cured or waived or shall have ceased to exist or such Senior Indebtedness
shall have been paid in full or otherwise discharged, after which the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments.
The Company also may not make any payment or distribution of any properties or
assets of the Company of any kind or character (other than Permitted Junior
Securities) on account of any principal of (or premium, if any, on) or interest
on the Notes or on account of the purchase or redemption or other acquisition of
Notes for the period specified below ("Payment Blockage Period") upon the
occurrence of a Non-payment Event of Default and receipt by the Trustee and the
Company of written notice thereof from one or more of the holders of Specified
Senior Indebtedness (or their representative). The Payment Blockage Period will
commence upon the earlier of the dates of receipt by the Trustee or the Company
of such notice from one of more or the holders of Specified Senior Indebtedness
(or their representative) and shall end on the earliest of (i) 179 days
thereafter, (ii) the date, as set forth in a written notice from the holders of
the Specified Senior Indebtedness (or their representative) to the Company or
the Trustee, on which such Non-payment Event of Default is cured, waived in
writing or ceases to exist or such Specified Senior Indebtedness is discharged
or (iii) the date on which such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from one or more of
such holders (or their representative) initiating such Payment Blockage Period,
after which the Company will resume (unless otherwise prohibited pursuant to the
immediately preceding paragraph) making any and all required payments in respect
of the Notes, including any missed payments. In any event, not more than one
Payment Blockage Period may be commenced during any period of 360 consecutive
days. No Non-payment Event of Default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee can be made the
basis for a subsequent Payment Blockage Notice. In the event that,
notwithstanding the foregoing, the Company makes any payment to the Trustee or
the Holder of any Note
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prohibited by the subordination provision of the Indenture, then such payment
will be required to be paid over and delivered forthwith to the Company.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provision described above, such failure would constitute an Event of Default
under the Indenture and would enable the Holders of the Notes to accelerate the
maturity thereof. See "Certain Covenants--Events of Default and Remedies."
As a result of such subordination provisions described above, in the event of
a distribution of assets upon the liquidation, receivership, reorganization or
insolvency of the Company, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Holders of the Notes, and
assets which would otherwise be available to pay obligations in respect of the
Notes will be available only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes.
The subordination provisions described above will cease to be applicable to
the Notes upon any Legal Defeasance or Covenant Defeasance of the Notes as
described under "--Legal Defeasance and Covenant Defeasance."
SUBSIDIARY GUARANTEES OF NOTES
The Company shall cause each Restricted Subsidiary, prior to, or
contemporaneously with, such Restricted Subsidiary's incurrence of any
obligations that guarantee or secure any Pari Passu Indebtedness or Subordinated
Indebtedness of the Company, to execute and deliver a supplement to the
Indenture pursuant to which such Restricted Subsidiary agrees to be bound by the
terms of the Indenture and to unconditionally guarantee, jointly and severally,
the full and prompt performance of the Company's obligations under the Indenture
and the Notes, including the payment of principal of (and premium, if any, on)
and interest on the Notes.
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or made by or on behalf of any other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Subsidiary Guarantor that makes a
payment or distribution under its Subsidiary Guarantee shall be entitled to a
contribution from each other Subsidiary Guarantor, if any, in a pro rata amount
based on the Adjusted Net Assets of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell or
otherwise dispose of all or substantially all of its properties and assets to
the Company or another Subsidiary Guarantor without limitation, except to the
extent any such transaction is subject to the "Merger, Consolidation or Sale of
Assets" covenant of the Indenture. Each Subsidiary Guarantor may consolidate
with or merge into or sell all or substantially all of its properties and assets
to a Person other than the Company or another
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Subsidiary Guarantor (whether or not Affiliated with the Subsidiary Guarantor),
provided that (a) if the surviving Person is not the Subsidiary Guarantor, the
surviving Person agrees to assume the Subsidiary Guarantor's Subsidiary
Guarantee and all its obligations pursuant to the Indenture (except to the
extent the following paragraph would result in the release of such Subsidiary
Guarantee) and (b) such transaction does not (i) violate any of the covenants
described under the heading "--Certain Covenants" or (ii) result in a Default or
Event of Default immediately thereafter that is continuing.
Upon the sale or other disposition (by merger or otherwise) of a Subsidiary
Guarantor (or all or substantially all of its properties and assets) to a Person
other than the Company or another Subsidiary Guarantor and pursuant to a
transaction that is otherwise in compliance with the Indenture (including as
described in the foregoing paragraph), such Subsidiary Guarantor shall be deemed
released from its Subsidiary Guarantee and the related obligations set forth in
the Indenture; provided, however, that any such termination shall occur only to
the extent that all obligations of such Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, other Indebtedness of the Company or any other
Restricted Subsidiary shall also terminate upon such sale or other disposition.
In addition, all of the Subsidiary Guarantors shall be deemed released from
their respective Subsidiary Guarantees and the related obligations set forth in
the Indenture in the event that all obligations of the Subsidiary Guarantors
under all of their guarantees of, and under all of their pledges of assets or
other security interests which secure, other Indebtedness of the Company
(excluding any Senior Indebtedness) shall also terminate.
The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee
will be subordinated to the prior payment in full of all Guarantor Senior
Indebtedness of such Subsidiary Guarantor to substantially the same extent as
the Notes are subordinated to Senior Indebtedness.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to June 1,
2003. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 or more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest to the applicable redemption
date, if redeemed during the twelve-month period beginning on June 1st of the
years indicated below:
YEAR PERCENTAGE
- ------------------------------------------- -----------
2003....................................... 104.438%
2004....................................... 102.958%
2005....................................... 101.479%
2006 and thereafter........................ 100.000%
Notwithstanding the foregoing, prior to June 1, 2001 the Company may,
at any time or from time to time, redeem up to 33 1/3% of the aggregate
principal amount of the Notes originally issued at a redemption price of
108 7/8% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date), with the net proceeds of one or more Equity Offerings of the Company,
provided that at least 66 2/3% of the aggregate principal amount of the Notes
originally issued remains outstanding after the occurrence of such redemption
and provided, further, that such redemption shall occur not later than 90 days
after the date of the closing of any such Equity Offering. The redemption shall
be made in accordance with procedures set forth in the Indenture.
If less than all the Notes are to be redeemed at any time, selection
of Notes for redemption will be made by the Trustee on a pro rata basis;
provided that no Notes of $1,000 or less shall be redeemed in
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part. Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon surrender of the original Note. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral part thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, thereon (the "Change of Control Purchase Price") to the date
of purchase (the "Change of Control Payment Date"). Within 30 days following any
Change of Control, the Company will mail a notice to the Trustee and each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Notes pursuant to the procedures required by the
Indenture and described in such notice. The Change of Control Payment Date shall
be a Business Day not less than 30 days nor more than 60 days after such notice
is mailed. The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions relating to the Change of Control Offer, the Company will comply with
the applicable securities laws and regulations and will not be deemed to have
breached its obligations described herein by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Purchase Price in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture will provide
that, prior to complying with the provisions of this covenant, but in any event
within 30 days following a Change of Control, the Company will either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the
Indenture will not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
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The Credit Facility provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer at the same
purchase price, at the same times and otherwise in substantial compliance with
the requirements applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
ASSET SALES
(a) The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, engage in any Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets
and properties sold or otherwise disposed of pursuant to the Asset Sale (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a Board Resolution), (ii) all of the
consideration received by the Company or the Restricted Subsidiary, as the case
may be, in respect of such Asset Sale consists of cash, Cash Equivalents, Liquid
Securities or Exchanged Properties ("Permitted Consideration"); provided,
however, that the Company and its Restricted Subsidiaries shall be permitted to
receive any property or assets other than Permitted Consideration, so long as
the aggregate fair market value (determined on the date of each Asset Sale) of
all such property or assets other than Permitted Consideration received from
Asset Sales and held by the Company or any Restricted Subsidiary at any one time
shall not exceed 10.0% of Adjusted Consolidated Net Tangible Assets and (iii)
the Company delivers to the Trustee an Officers' Certificate (which Officers'
Certificate shall be conclusive) certifying that such Asset Sale complies with
clauses (i) and (ii). The amount (without duplication) of any Indebtedness
(other than Subordinated Indebtedness or Pari Passu Indebtedness) of the Company
or such Restricted Subsidiary that is expressly assumed by the transferee in
such Asset Sale and with respect to which the Company or such Restricted
Subsidiary, as the case may be, is unconditionally released by the holder of
such Indebtedness, shall be deemed to be cash or Cash Equivalents for purposes
of clause (ii) and shall also be deemed to constitute a repayment of, and a
permanent reduction in, the amount of such Indebtedness for purposes of the
following paragraph.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale, the
Company or such Restricted Subsidiary may either, no later than 365 days after
such Asset Sale, (i) apply all or any of the Net Cash Proceeds therefrom to (A)
repay Indebtedness under the Credit Facility or (B) repay or purchase other
Indebtedness (other than Subordinated Indebtedness or Pari Passu Indebtedness)
of the Company or any Restricted Subsidiary, provided, in the case of clause
(B), that the related loan commitment (if any) is thereby permanently reduced by
the amount of such Indebtedness so repaid or purchased, or (ii) invest all or
any part of the Net Cash Proceeds thereof in properties and assets that will be
used in the Oil and Gas Business of the Company or its Restricted Subsidiaries,
as the case may be. The amount of such Net Cash Proceeds not applied or invested
as provided in this paragraph will constitute "Excess Proceeds."
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(c) When the aggregate amount of Excess Proceeds equals or exceeds $10
million, the Company shall make an offer to purchase, from all Holders of the
Notes and any then outstanding Pari Passu Indebtedness required to be
repurchased or repaid on a permanent basis in connection with an Asset Sale, an
aggregate principal amount of Notes and any such Pari Passu Indebtedness equal
to such Excess Proceeds as follows:
(i) (A) The Company shall make an offer to purchase (a "Net Proceeds Offer")
from all Holders of the Notes in accordance with the procedures set forth
in the Indenture the maximum principal amount (expressed as a multiple of
$1,000) of Notes that may be purchased out of an amount (the "Payment
Amount") equal to the product of such Excess Proceeds multiplied by a
fraction, the numerator of which is the outstanding principal amount of the
Notes and the denominator of which is the sum of the outstanding principal
amount of the Notes and such Pari Passu Indebtedness, if any (subject to
proration in the event such amount is less than the aggregate Offered Price
(as defined in clause (ii) below) of all Notes tendered), and (B) to the
extent required by any such Pari Passu Indebtedness and provided there is a
permanent reduction in the principal amount of such Pari Passu
Indebtedness, the Company shall make an offer to purchase such Pari Passu
Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu
Indebtedness Amount") equal to the excess of the Excess Proceeds over the
Payment Amount.
(ii) The offer price for the Notes shall be payable in cash in an amount equal
to 100% of the principal amount of the Notes tendered pursuant to a Net
Proceeds Offer, plus accrued and unpaid interest, if any, to the date such
Net Proceeds Offer is consummated (the "Offered Price"), in accordance with
the procedures set forth in the Indenture. To the extent that the
aggregate Offered Price of the Notes tendered pursuant to a Net Proceeds
Offer is less than the Payment Amount relating thereto or the aggregate
amount of the Pari Passu Indebtedness that is purchased or repaid pursuant
to the Pari Passu Offer is less than the Pari Passu Indebtedness Amount
(such shortfall constituting a "Net Proceeds Deficiency"), the Company may
use such Net Proceeds Deficiency, or a portion thereof, for general
corporate purposes, subject to the limitations of the "Restricted Payments"
covenant.
(iii) If the aggregate Offered Price of Notes validly tendered and not
withdrawn by Holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis. Upon completion of such
Net Proceeds Offer and Pari Passu Offer, the amount of Excess Proceeds
shall be reset to zero.
The Company will not permit any Restricted Subsidiary to enter into or suffer to
exist any agreement that would place any restriction of any kind (other than
pursuant to law or regulation) on the right of the Company to make a Net
Proceeds Offer following any Asset Sale. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder, if applicable, in the event that an Asset Sale
occurs and the Company is required to purchase Notes as described above. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions relating to the Net Proceeds Offer, the Company will comply with
the applicable securities laws and regulations and will not be deemed to have
breached its obligations described above by virtue thereof.
CERTAIN COVENANTS
Ownership of Capital Stock
The Indenture will provide that the Company (a) will not permit any Restricted
Subsidiary to issue any Capital Stock (other than to the Company or a Wholly
Owned Restricted Subsidiary) and (b) will not permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary) to own any Capital
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Stock of any Restricted Subsidiary, except, in each case, for (i) directors'
qualifying shares, (ii) Capital Stock of a Restricted Subsidiary organized in a
foreign jurisdiction required to be issued to, or owned by, the government of
such foreign jurisdiction or individual or corporate citizens of such foreign
jurisdiction in order for such restricted Subsidiary to transact business in
such foreign jurisdiction, (iii) a sale of all or substantially all of the
Capital Stock of a Restricted Subsidiary effected in accordance with the "Asset
Sales" covenant, (iv) Qualifying TECONS and (v) the Capital Stock of a
Restricted Subsidiary owned by a Person at the time such Restricted Subsidiary
became a Restricted Subsidiary or acquired by such Person in connection with the
formation of the Restricted Subsidiary; provided, however, that any Capital
Stock retained by the Company or a Restricted Subsidiary shall be treated as an
Investment for purposes of the "Restricted Payments" covenant, if the amount of
such Capital Stock represents less than a majority of the Voting Stock of such
Restricted Subsidiary.
RESTRICTED PAYMENTS
(a) The Indenture will provide that the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, take the following
actions:
(i) declare or pay any dividend or make any distribution on account of the
Company's Capital Stock (other than dividends or distributions payable
solely in shares of Qualified Capital Stock of the Company or in options,
warrants or other rights to purchase Qualified Capital Stock of the
Company);
(ii) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any Affiliate thereof (other than any Wholly Owned
Restricted Subsidiary) or any options, warrants or other rights to acquire
such Capital Stock;
(iii) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, scheduled sinking fund payment or maturity, any Subordinated
Indebtedness, except that this clause (iii) shall not include any such
payment with respect to any such Subordinated Indebtedness (A) to the
extent of Excess Proceeds remaining after compliance with the provisions of
the Indenture described under "Asset Sales" and (B) to the extent required
by the indenture or other agreement or instrument pursuant to which such
Subordinated Indebtedness was issued;
(iv) declare or pay any dividend on, or make any distribution to the holders
of, any shares of Capital Stock of any Restricted Subsidiary (other than to
the Company or any of its Wholly Owned Restricted Subsidiaries) or
purchase, redeem or otherwise acquire or retire for value any Capital Stock
of any Restricted Subsidiary or any options, warrants or other rights to
acquire any such Capital Stock (other than with respect to any such Capital
Stock held by the Company or any Wholly Owned Restricted Subsidiary of the
Company); or
(v) make any Investment (other than any Permitted Investment);
(such payments or other actions described in (but not excluded from) clauses (i)
through (v) are collectively referred to as "Restricted Payments"), unless at
the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be the amount
determined by the Board of Directors of the Company, whose determination shall
be conclusive and evidenced by a Board Resolution), (1) no Default or Event of
Default shall have occurred and be continuing, (2) the Company could incur $1.00
of additional Indebtedness (excluding Permitted Indebtedness) in accordance with
the covenant described under "--Incurrence of Indebtedness," and (3) the
aggregate amount of all Restricted Payments declared or made after the date of
the Indenture shall not exceed the sum (without duplication) of the following:
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(A) 50% of the aggregate Consolidated Net Income of the Company accrued on a
cumulative basis during the period beginning on April 1, 1998 and ending on the
last day of the Company's last fiscal quarter ending prior to the date of such
proposed Restricted Payment (or, if such aggregate Consolidated Net Income shall
be a loss, minus 100% of such loss), plus
(B) the aggregate net cash proceeds or the fair market value of any property
or assets other than cash, received after the date of the Indenture by the
Company as capital contributions to the Company (other than from any Restricted
Subsidiary), plus
(C) the aggregate net cash proceeds or the fair market value of any property
or assets other than cash, received after the date of the Indenture by the
Company from the issuance or sale (other than to any of its Restricted
Subsidiaries) of shares of Qualified Capital Stock of the Company or any option,
warrants or rights to purchase such shares of Qualified Capital Stock of the
Company, plus
(D) the aggregate net cash proceeds received after the date of the Indenture
by the Company (other than from any of its Restricted Subsidiaries) upon the
exercise of any options, warrants or rights to purchase shares of Qualified
Capital Stock of the Company, plus
(E) the aggregate net cash proceeds received after the date of the Indenture
by the Company from the issuance or sale (other than to any of its Restricted
Subsidiaries) of debt securities or shares of Redeemable Capital Stock that have
been converted into or exchanged for Qualified Capital Stock of the Company,
together with the aggregate cash received by the Company at the time of such
conversion or exchange, plus
(F) the aggregate net cash proceeds received after the date of the Indenture
by the Company or its Restricted Subsidiaries, computed on a consolidated basis,
constituting a return of capital on an Investment (other than a Permitted
Investment) made by the Company or any Restricted Subsidiary after the date of
the Indenture, plus
(G) $25 million.
(b) Notwithstanding paragraph (a) above, the Company and its Restricted
Subsidiaries may take the following actions so long as at the time thereof, no
Default or Event of Default shall have occurred and be continuing (except in the
case of clause (i) below) and (in the case of clause (vi) below) the Company
could incur $1.00 of additional Indebtedness (excluding Permitted Indebtedness)
in accordance with the covenant described under "--Incurrence of Indebtedness":
(i) the payment of any dividend on any other Capital Stock of the Company or
any Restricted Subsidiary within 60 days after the date of declaration
thereof, if at such declaration date such declaration complied with the
provisions of paragraph (a) above (and such payment shall be deemed to
have been paid on such date of declaration for purposes of any
calculation required by the provisions of paragraph (a) above);
(ii) the repurchase, redemption or other acquisition or retirement of any
shares of any class of Capital Stock of the Company or any Restricted
Subsidiary, in exchange for, or out of the aggregate net cash proceeds
of, a substantially concurrent issue and sale (other than to a
Restricted Subsidiary) of shares of Qualified Capital Stock of the
Company;
(iii) the repurchase, redemption, repayment, defeasance or other acquisition
or retirement for value of any Subordinated Indebtedness (other than
Redeemable Capital Stock) in
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exchange for, or out of the aggregate net cash proceeds of, a substantially
concurrent issue and sale (other than to a Restricted Subsidiary) of shares
of Qualified Capital Stock of the Company;
(iv) the purchase, redemption, repayment, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the aggregate net cash proceeds of, a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, Subordinated
Indebtedness so long as (A) the principal amount of such new Indebtedness
does not exceed the principal amount (or, if such Subordinated Indebtedness
being refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration thereof,
such lesser amount as of the date of determination) of the Indebtedness
being so purchased, redeemed, repaid, defeased, acquired or retired, plus
the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus the amount of expenses of the Company
incurred in connection with such refinancing, (B) such new Indebtedness is
subordinated to the Notes at least to the same extent as such Indebtedness
so purchased, redeemed, repaid, defeased, acquired or retired, and (C) such
new Indebtedness has an Average Life to Stated Maturity that is longer than
the Average Life to Stated Maturity of the Notes and such new Indebtedness
has a Stated Maturity for its final scheduled principal payment that is at
least 91 days later than the Stated Maturity for the final scheduled
principal payment of the Notes;
(v) the repurchase, redemption or other acquisition or retirement for value of
any Qualified Capital Stock of the Company or any of its Subsidiaries held
by any current or former officers, directors or employees of the Company
or any of its Subsidiaries pursuant to the terms of agreements (including
employment agreements) or plans approved by the Company's Board of
Directors, including any such repurchase, redemption, acquisition or
retirement of shares of such Qualified Capital Stock that is deemed to
occur upon the exercise of stock options or similar rights if such shares
represent all or a portion of the exercise price or are surrendered in
connection with satisfying federal income tax obligations; provided,
however, that the aggregate amount of such repurchases, redemptions,
acquisitions and retirements shall not exceed the sum of (a) $1.0 million
in any twelve-month period and (b) the aggregate net proceeds, if any,
received by the Company during such twelve-month period from any issuance
of such Qualified Capital Stock pursuant to such agreements or plans; and
(vi) the repurchase or other acquisition of any Qualified Capital Stock of the
Company in an amount not to exceed the lesser of (A) $40,000,000 and (B)
50% of the net after-tax gain from Specified Property Sales.
The actions described in clause (i) of this paragraph (b) shall be Restricted
Payments that shall be permitted to be taken in accordance with this paragraph
(b) but shall reduce the amount that would otherwise be available for Restricted
Payments under clause (3) of paragraph (a) (provided that any dividend or
distribution paid pursuant to clause (i) of this paragraph (b) shall reduce the
amount that would otherwise be available under clause (3) of paragraph (a) when
declared, but not also when subsequently paid pursuant to such clause (i)), and
the actions described in clauses (ii), (iii), (iv), (v) and (vi) of this
paragraph (b) shall be Restricted Payments that shall be permitted to be taken
in accordance with this paragraph and shall not reduce the amount that would
otherwise be available for Restricted Payments under clause (3) of paragraph
(a). Further, the Company or any Restricted Subsidiary may make a Restricted
Payment, if at the time the Company or any Restricted Subsidiary first incurred
a commitment for such Restricted Payment such Restricted Payment could have been
made; provided that all commitments incurred and outstanding shall be treated as
if such commitments were Restricted Payments expended by the Company or a
Restricted Subsidiary at the time the commitments were incurred, except that
commitments incurred and outstanding which are treated as a Restricted Payment
expended by the
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Company or a Restricted Subsidiary and which are terminated shall no longer be
treated as a Restricted Payment expended by the Company or a Restricted
Subsidiary upon the termination of such commitment for such purposes; and
provided further, that at the time such Restricted Payment is made no Default or
Event of Default shall have occurred and be continuing and the Company could
incur $1.00 of additional Indebtedness (excluding Permitted Indebtedness) in
accordance with the "Incurrence of Indebtedness" covenant.
INCURRENCE OF INDEBTEDNESS
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, create, incur, assume, guarantee or otherwise
become directly or indirectly liable for the payment of (collectively, "incur")
any Indebtedness (including any Acquired Indebtedness but excluding Permitted
Indebtedness), unless at the time of such event and after giving effect thereto
on a pro forma basis the Consolidated Fixed Charge Coverage Ratio for the four
full fiscal quarters immediately preceding such event, taken as one period,
would have been at least equal to 2.5 to 1.0.
LIENS
The Indenture will provide that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind, except for Permitted Liens, upon any of
their respective assets or properties, whether now owned or acquired after the
date of the Indenture, or any income or profits therefrom to secure any Pari
Passu Indebtedness or Subordinated Indebtedness, unless prior to or
contemporaneously therewith the Notes are directly secured equally and ratably,
provided that (1) if such secured Indebtedness is Pari Passu Indebtedness, the
Lien securing such Pari Passu Indebtedness shall be subordinate and junior to,
or pari passu with, the Lien securing the Notes and (2) if such secured
Indebtedness is Subordinated Indebtedness, the Lien securing such Subordinated
Indebtedness shall be subordinate and junior to the Lien securing the Notes at
least to the same extent as such Subordinated Indebtedness is subordinated to
the Notes. The foregoing covenant will not apply to any Lien securing Acquired
Indebtedness, provided that any such Lien extends only to the properties or
assets that were subject to such Lien prior to the related acquisition by the
Company or such Restricted Subsidiary and was not created, incurred or assumed
in contemplation of such transaction.
DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture will provide that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (a) pay dividends, in
cash or otherwise, or make any other distributions on or in respect of its
Capital Stock to the Company or any other Restricted Subsidiary, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make an
Investment in the Company or any other Restricted Subsidiary or (d) transfer any
of its properties or assets to the Company or any other Restricted Subsidiary,
except in each instance for such encumbrances or restrictions pursuant to (i)
the Indenture, the Credit Facility or any other agreement in effect on the date
of the Indenture, (ii) any agreement or other instrument of a Person acquired by
the Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any other Person, or the properties or assets
of any other Person, other than the Person, or the property or assets of the
Person, so acquired, (iii) customary restrictions in leases and licenses
relating to the property covered thereby and entered into in the ordinary course
of business or (iv) any agreement that extends, renews, refinances or replaces
the agreements containing the restrictions in the foregoing clauses (i) through
(iii), provided that the terms and conditions of any such restrictions are not
materially less favorable to the Holders of the Notes than those under or
pursuant to the agreement evidencing the Indebtedness so extended, renewed,
refinanced or replaced, and except with respect to clause (d) only, (i)
restrictions in the
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form of Liens which are not prohibited as described in the "Liens" covenant and
which contain customary limitations on the transfer of collateral and (ii) with
respect to clause (d) only, customary restrictions contained in asset sale
agreements limiting the transfer of such assets pending the closing of such
sale.
LIMITATION ON LAYERING DEBT
The Indenture will provide that the Company will not incur, or permit to
remain outstanding, any Indebtedness (including Acquired Indebtedness and
Permitted Indebtedness) other than the Notes, that is subordinated in right of
payment to any Senior Indebtedness, unless such Indebtedness is also pari passu
with, or subordinated in right of payment to, the Notes pursuant to
subordination provisions substantially similar to those contained in the
Indenture.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company will not, in any single
transaction or series of related transactions, consolidate or merge with or into
any other Person, or sell, assign, convey, transfer, lease or otherwise dispose
of all or substantially all of the properties and assets of the Company and its
Restricted Subsidiaries on a consolidated basis to any Person or group of
Affiliated Persons, and the Company will not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in a
sale, assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries on a consolidated basis to any other Person or group of Affiliated
Persons, unless at the time and after giving effect thereto (i) either (A) if
the transaction is a merger or consolidation, the Company shall be the surviving
Person of such merger or consolidation, or (B) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or to
which the properties and assets of the Company or its Restricted Subsidiaries,
as the case may be, are sold, assigned, conveyed, transferred, leased or
otherwise disposed of (any such surviving Person or transferee Person being the
"Surviving Entity") shall be a corporation organized and existing under the laws
of the United States of America, any state thereof or the District of Columbia
and shall, in either case, expressly assume by a supplemental indenture to the
Indenture executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture,
and, in each case, the Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction or
series of transactions on a pro forma basis (and treating any Indebtedness not
previously an obligation of Company or any of its Restricted Subsidiaries in
connection with or as a result of such transaction as having been incurred at
the time of such transaction or series of transactions), no Default or Event of
Default shall have occurred and be continuing; (iii) except in the case of the
consolidation or merger of any Restricted Subsidiary with or into the Company,
immediately after giving effect to such transaction or transactions on a pro
forma basis, the Consolidated Net Worth of the Company (or the Surviving Entity
if the Company is not the continuing obligor under the Indenture) is at least
equal to the Consolidated Net Worth of the Company immediately before such
transaction or transactions; (iv) except in the case of the consolidation or
merger of the Company with or into a Wholly Owned Restricted Subsidiary or any
Restricted Subsidiary with or into the Company or any Wholly Owned Restricted
Subsidiary, immediately before and immediately after giving effect to such
transaction or transactions on a pro forma basis (on the assumption that the
transaction or transactions occurred on the first day of the period of four
fiscal quarters ending immediately prior to the consummation of such transaction
or transactions, with the appropriate adjustments with respect to the
transaction or transactions being included in such pro forma calculation), the
Company (or the Surviving Entity if the Company is not the continuing obligor
under the Indenture) could incur $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) pursuant to the covenant described under "--Incurrence
of Indebtedness"; (v) if any of the properties or assets of the Company or any
of its Restricted Subsidiaries would upon such transaction or series of related
transactions become subject to any Lien (other than a Permitted Lien), the
creation or imposition of such Lien shall have been in compliance with the
"Liens"
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covenant; (vi) if the Company is not the continuing obligor under the Indenture,
then any Subsidiary Guarantor, unless it is the Surviving Entity, shall have by
supplemental indenture to the Indenture confirmed that its Subsidiary Guarantee
of the Notes shall apply to the Surviving Entity's obligations under the
Indenture and the Notes; and (vii) the Company (or the Surviving Entity if the
Company is not the continuing obligor under the Indenture) shall have delivered
to the Trustee, in form and substance reasonably satisfactory to the Trustee,
(a) an Officers' Certificate stating that such consolidation, merger,
conveyance, transfer, lease or other disposition and the supplemental indenture,
if any, in respect thereto comply with the requirements under the Indenture and
(b) an Opinion of Counsel stating that the requirements of clause (i) of this
paragraph have been satisfied.
Upon any consolidation or merger or any sale, assignment, lease, conveyance,
transfer or other disposition of all or substantially all of the properties and
assets of the Company and its Restricted Subsidiaries on a consolidated basis in
accordance with the foregoing, in which the Company is not the continuing
corporation, the Surviving Entity shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if the Surviving Entity had been named as the Company therein,
and thereafter the Company, except in the case of a lease, will be discharged
from all obligations and covenants under the Indenture and the Notes and may be
dissolved and liquidated.
TRANSACTIONS WITH AFFILIATES
The Indenture will provide that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer
to exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company (other than the Company or a
Restricted Subsidiary) unless (i) such transaction or series of related
transactions is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than would be available in a
comparable transaction in arm's-length dealings with an unrelated third party,
(ii) with respect to a transaction or series of related transactions involving
payments in excess of $1.0 million in the aggregate, the Company delivers an
Officers' Certificate to the Trustee certifying that such transaction complies
with clause (i) above, (iii) with respect to a transaction or series of
transactions involving payments in excess of $5.0 million but less than $25
million in the aggregate, the Company delivers an Officers' Certificate to the
Trustee certifying that (A) such transaction or series of related transactions
complies with clause (i) above and (B) such transaction or series of related
transactions shall have been approved by a majority of the independent directors
of the Board of Directors of the Company and (iv) with respect to a transaction
or series of transactions involving payments of $25 million or more in the
aggregate, the Company delivers an Officers' Certificate to the Trustee
certifying that (A) such transaction or series of related transactions complies
with clause (i) above; (B) such transaction or series of related transactions
shall have been approved by a majority of the independent directors of the Board
of Directors of the Company and (C) the Company shall have received the written
opinion of a nationally recognized investment banking firm or appraisal firm in
the United States that such transaction or series of transactions is fair, from
a financial point of view, to the Company or such Restricted Subsidiary;
provided, however, that the foregoing restriction shall not apply to (s) the
provision of services and payments under any of the existing agreements with
Torch or its subsidiaries described under "Management--Relationship with Torch"
so long as each of the agreements (including any modifications, renewals,
replacements or substitutions thereof or amendments thereto entered into on or
after the date of the Indenture) has been approved by a majority of the
independent directors of the Board of Directors of the Company, (t) loans or
advances to officers, directors and employees of the Company or any Restricted
Subsidiary made in the ordinary course of business and consistent with past
practices of the Company and its Restricted Subsidiaries in an aggregate amount
not to exceed $3,000,000 outstanding at any one time, (u) the payment of
reasonable and customary regular fees to directors of the Company or any of its
Restricted Subsidiaries who are not employees of the Company or any Affiliate,
(v) the Company's employee compensation and other benefit
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arrangements, (w) indemnities of officers and directors of the Company or any
Subsidiary consistent with such Person's bylaws and applicable statutory
provisions or (x) Restricted Payments permitted by the Indenture.
REPORTS
The Indenture will require that the Company file on a timely basis with the
Securities and Exchange Commission ("Commission"), to the extent such filings
are accepted by the Commission and whether or not the Company has a class of
securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that the Company would be required to file if it
were subject to Section 13 or 15 of the Exchange Act. The Company will also be
required (a) to file with the Trustee (with exhibits), and provide to each
Holder of Notes (without exhibits), without cost to such Holder, copies of such
reports and documents within 30 days after the date on which the Company files
such reports and documents with the Commission or the date on which the Company
would be required to file such reports and documents if the Company were so
required and (b) if filing such reports and documents with the Commission is not
accepted by the Commission or is prohibited under the Exchange Act, to supply at
its cost copies of such reports and documents (including any exhibits thereto)
to any Holder of Notes, securities analyst or prospective investor promptly upon
written request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an "Event of
Default":
(i) default for 30 days in the payment when due of interest on the Notes; or
(ii) default in the payment when due of the principal of or premium, if any,
on the Notes, whether such payment is due at maturity, upon redemption,
upon repurchase pursuant to a Change of Control Offer or a Net Proceeds
Offer, upon acceleration or otherwise; or
(iii) default in the performance or breach of the provisions described under
the "Merger, Consolidation or Sale of Assets" covenant, the failure to make
or consummate a Change of Control Offer in accordance with the provisions
of the "Change of Control" covenant or the failure to make or consummate a
Net Proceeds Offer in accordance with the provisions of the "Asset Sales"
covenant; or
(iv) failure by the Company or any Subsidiary Guarantor to comply with any
other term, covenant or agreement contained in the Notes, any Subsidiary
Guarantee or the Indenture (other than a default specified in (i), (ii) or
(iii) above) for a period of 60 days after written notice of such failure
stating that it is a "notice of default" under the Indenture and requiring
the Company or such Subsidiary Guarantor, as the case may be, to remedy
the same shall have been given (x) to the Company by the Trustee or (y) to
the Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding; or
(v) the occurrence and continuation beyond any applicable grace period of any
default in the payment of the principal of or premium, if any, on or
interest on any Indebtedness of the Company (other than the Notes) or any
Restricted Subsidiary for money borrowed when due, or any other default
resulting in acceleration of any Indebtedness of the Company or any
Restricted Subsidiary for money borrowed, provided, that the aggregate
principal amount of such Indebtedness shall exceed $10,000,000 (or, in the
case of Non-Recourse Purchase Money Indebtedness, $40,000,000), and
provided, further, that if any such default is cured or waived or any such
acceleration rescinded, or such Indebtedness is repaid, within a period of
10 days from the continuation of such default beyond the applicable grace
period or the occurrence of such
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acceleration, as the case may be, such Event of Default under the Indenture
and any consequential acceleration of the Notes shall be automatically
rescinded, so long as such rescission does not conflict with any judgment
or decree; or
(vi) any Subsidiary Guarantee shall for any reason cease to be, or be asserted
by the Company or any Subsidiary Guarantor, as applicable, not to be, in
full force and effect, enforceable in accordance with its terms (except
pursuant to the release or termination or any such Subsidiary Guarantee in
accordance with the Indenture); or
(vii) final judgments or orders rendered against the Company or any
Restricted Subsidiary that are unsatisfied and that require the payment in
money, either individually or in an aggregate amount, that is more than
$10,000,000 over the coverage under applicable insurance policies and
either (A) commencement by any creditor of an enforcement proceeding upon
such judgment (other than a judgment that is stayed by reason of pending
appeal or otherwise) or (B) the occurrence of a 60-day period during which
a stay of such judgment or order, by reason of pending appeal or otherwise,
was not in effect; or
(viii) the entry of a decree or order by a court having jurisdiction in the
premises (A) for relief in respect of the Company or any Material
Subsidiary in an involuntary case or proceeding under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar
law or (B) adjudging the Company or any Material Subsidiary bankrupt or
insolvent, or approving a petition seeking reorganization, arrangement,
adjustment or composition of the Company or any Material Subsidiary under
any applicable federal or state law, or appointing under any such law a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Material Subsidiary or of a
substantial part of its consolidated assets, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
for relief or any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(ix) the commencement by the Company or any Material Subsidiary of a voluntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or any other case or
proceeding to be adjudicated a bankruptcy or insolvent, or the consent by
the Company or any Material Subsidiary to the entry of a decree or order
for relief in respect thereof in an involuntary case or proceeding under
any applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by the Company or any Material
Subsidiary of a petition or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it under any such
law to the filing of any such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of any of the Company or any
Material Subsidiary or of any substantial part of its consolidated assets,
or the making by it of an assignment for the benefit of creditors under any
such law, or the admission by it in writing of its inability to pay its
debts generally as they become due or taking of corporate action by the
Company or any Material Subsidiary in furtherance of any such action.
If any Event of Default (other than as specified in clause (viii) or (ix)
above) occurs and is continuing, the Trustee, by written notice to the Company,
or the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding, by notice to the Trustee and the Company, may, and the Trustee upon
the request of the Holders of not less than 25% in aggregate principal amount of
the Notes then outstanding shall, declare the principal of, premium, if any, and
accrued interest on all of the Notes due and payable immediately, upon which
declaration all amounts payable in respect of the Notes shall be immediately due
and payable. If an Event of Default specified in clause (viii) or (ix) above
occurs and is
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continuing, then the principal of, premium, if any, and accrued interest on all
of the Notes shall automatically become and be immediately due and payable
without any declaration, notice or other act on the part of the Trustee or any
Holder of Notes.
After a declaration of acceleration under the Indenture, but before a judgment
or decree for payment of the money due has been obtained by the Trustee, the
Holders of a majority in aggregate principal amount of the outstanding Notes, by
written notice to the Company, the Subsidiary Guarantors, if any, and the
Trustee, may rescind such declaration if (a) the Company or any Subsidiary
Guarantor has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of (and
premium, if any, on) any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the Notes,
and (iv) to the extent that payment of such interest is lawful, interest upon
overdue interest and overdue principal at the rate borne by the Notes (without
duplication of any amount paid or deposited pursuant to clause (ii) or (iii));
(b) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction; and (c) all Events of Default, other than the nonpayment
of principal of (and premium, if any, on) or interest on the Notes that has
become due solely by such declaration of acceleration, have been cured or
waived.
No Holder of any of the Notes will have any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless such Holder has
notified the Trustee of a continuing Event of Default and the Holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 60 days after receipt of such notice
and the Trustee, within such 60-day period, has not received directions
inconsistent with such written request by Holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations will not apply,
however, to a suit instituted by a Holder of a Note for the enforcement of the
payment of the principal of (or premium, if any, on) or interest on such Note on
or after the respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee will be required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default shall occur and be continuing, the Trustee will not
be under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Notes unless such
Holders shall have offered to the Trustee reasonable security or indemnity.
Subject to certain provisions concerning the rights of the Trustee, the Holders
of a majority in aggregate principal amount of the outstanding Notes will 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 under the Indenture.
If a Default occurs and is continuing and is known to the Trustee, the Trustee
shall mail to each Holder of Notes notice of the Default within 60 days after
the occurrence thereof. Except in the case of a Default in payment of principal
of (or premium, if any, on) or interest on any Notes, the Trustee may withhold
the notice to the Holders of Notes if the Trustee determines in good faith that
withholding the notice is in the interest of such Holders.
The Company is required to deliver to the Trustee annual and quarterly
statements regarding compliance with the Indenture, and the Company will also be
required, upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of the
obligations of the Company and the Subsidiary Guarantors, if any, discharged
with respect to the outstanding Notes ("Legal Defeasance"). Such Legal
Defeasance means that the Company and the Subsidiary Guarantors shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes and to have been discharged from all their other obligations
with respect to such Notes and the Subsidiary Guarantees, except for (i) the
rights of Holders of outstanding Notes to receive payment in respect of the
principal of and premium, if any, and interest on such Notes when such payments
are due, (ii) the Company's obligations to replace any temporary Notes, register
the transfer or exchange of any Notes, replace mutilated, destroyed, lost or
stolen Notes and maintain an office or agency for payments in respect of the
Notes, (iii) the rights, powers, trusts, duties and immunities of the Trustee,
and (iv) the Legal Defeasance provisions of the Indenture. In addition, the
Company may, at its option and at any time, elect to have the obligations of the
Company and each Subsidiary Guarantor released with respect to certain covenants
that are described in the Indenture, some of which are described under "--
Certain Covenants" above, and thereafter any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes ("Covenant Defeasance"). In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, insolvency and
reorganization events) described under "Events of Default and Remedies" will no
longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company or any Subsidiary Guarantor must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in United States
dollars, U.S. Government Obligations (as defined in the Indenture), or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of (and premium, if any, on) and interest on the outstanding Notes to
redemption or maturity; (ii) the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance or 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 Legal Defeasance or Covenant Defeasance had not
occurred (in the case of Legal Defeasance, such opinion must refer to and be
based upon a published ruling of the Internal Revenue Service or a change in
applicable federal income tax laws); (iii) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit or insofar as
clauses (viii) and (ix) under the first paragraph under "--Events of Default and
Remedies" are concerned, at any time during the period ending on the 91st day
after the date of deposit; (iv) such Legal Defeasance or Covenant Defeasance
shall not cause the Trustee to have a conflicting interest under the Indenture
or the Trust Indenture Act with respect to any securities of the Company or any
Subsidiary Guarantor; (v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company or any Subsidiary Guarantor is a
party or by which it is bound; and (vi) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, which, taken
together, state that all conditions precedent under the Indenture to either
Legal Defeasance or Covenant Defeasance, as the case may be, have been complied
with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money or certain United States governmental obligations
have theretofore been deposited in trust or segregated and
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held in trust by the Company and thereafter repaid to the Company or discharged
from such trust) have been delivered to the Trustee for cancellation or (b) all
Notes not theretofore delivered to the Trustee for cancellation have become due
and payable or will become due and payable at their Stated Maturity within one
year, or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the serving of notice of redemption by the
Trustee in the name, and at the expense, of the Company, and the Company has
irrevocably deposited or caused to be deposited with the Trustee funds in an
amount sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of (and
premium, if any, on) and interest on the Notes to the date of deposit (in the
case of Notes which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be, together with instructions from the Company
irrevocably directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (ii) the Company has paid all other
sums then due and payable under the Indenture by the Company; and (iii) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, which, taken together, state that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have been
complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at least
a majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a nonconsenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the Stated Maturity of any
Note or alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the caption
"Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of (or the premium, if any, on) or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal of or premium, if
any, or interest on the Notes, (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the caption "Repurchase at the Option of Holders"), (viii) reduce the
relative ranking of any Notes or any Subsidiary Guarantees or (ix) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes, the
Company, the Subsidiary Guarantors, if any, and the Trustee may amend or
supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, to add or release any Subsidiary Guarantor pursuant to the terms
of the Indenture, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's
obligations to Holders of Notes in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not adversely affect the interests of any such
Holder in any material respect, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
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CONCERNING THE TRUSTEE
State Street Bank and Trust Company will serve as trustee under the Indenture.
State Street Bank and Trust Company also acts as trustee under the indenture for
the Existing Notes and maintains normal banking relationships with the Company
and its Subsidiaries and may perform certain services for and transact other
business with the Company or its Subsidiaries from time to time in the ordinary
course of business.
The Indenture (including the provisions of the Trust Indenture Act
incorporated by reference therein) will contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Indenture will
permit the Trustee to engage in other transactions; provided, however, if it
acquires any conflicting interest (as defined in the Trust Indenture Act) it
must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Notes and any Subsidiary Guarantees will be governed by the
laws of the State of New York, without regard to the principles of conflicts of
law.
BOOK-ENTRY, DELIVERY AND FORM
The Notes will be issued in the form of a fully registered Global Certificate.
The Global Certificates will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York (the "Depositary") and registered in the name
of the Depositary's nominee.
Except as set forth below, the Global Certificate may be transferred, in whole
and not in part, only to another nominee of the Depositary or to a successor of
the Depositary or its nominee.
The Depositary has advised the Company as follows: It is a limited-purpose
trust company which was created to hold securities for its participating
organizations (the "Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. Participants
include securities brokers and dealers (including the Initial Purchasers),
banks, trust companies, clearing corporations and certain other organizations.
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). Persons who are not Participants may beneficially own
securities held by the Depositary only through Participants or Indirect
Participants.
The Depositary has also advised that pursuant to procedures established by it
(i) upon the issuance by the Company, of the Notes, the Depositary will credit
the accounts of Participants designated by the Initial Purchasers with the
principal amount of the Notes purchased by the Initial Purchasers, and (ii)
ownership of beneficial interests in any Global Certificate will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary (with respect to Participants' interests), the
Participants and the Indirect Participants. Any person acquiring an interest in
a Global Certificate through an offshore transaction in reliance on Regulation S
may hold such interest through the Euroclear System or Cedel, S.A. The laws of
some states require that certain persons take physical delivery in definitive
form of securities which they own. Consequently, the ability to transfer
beneficial interests in a Global Certificate is limited to such extent.
So long as the Depositary or its nominee is the registered owner of a Global
Certificate, the Depositary or such nominee will be considered the sole owner or
holder of the Notes for all purposes
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under the Indenture. Except as provided below, owners of beneficial interests in
the Global Certificate will not be entitled to have Notes registered in their
names, will not receive or be entitled to receive physical delivery of Notes in
definitive form and will not be considered the owners or holders thereof under
the Indenture.
Neither the Company, the Trustee, the paying agent nor the Notes registrar
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Certificate, or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
Principal and interest payments on a Global Certificate registered in the name
of the Depositary or its nominee will be made by the Company, either directly or
through a paying agent, to the Depositary or its nominee as the registered owner
of such Global Certificate. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Notes are registered as
the owners of such Notes for the purpose of receiving payments of principal and
interest on such Notes and for all other purposes whatsoever. Therefore,
neither the Company, the Trustee nor any paying agent has any direct
responsibility or liability for the payment of principal or interest on the
Notes to owners of beneficial interests in a Global Certificate. The Depositary
has advised the Company and the Trustee that its present practice is, upon
receipt of any payment of principal or interest to credit immediately the
accounts of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interests in a Global
Certificate as shown on the records of the Depositary. Payments by Participants
and Indirect Participants to owners of beneficial interests in a Global
Certificate will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name" and will be the responsibility of such
Participants or Indirect Participants.
As long as the Notes are represented by a Global Certificate, the Depositary's
nominee will be the holder of the Notes and therefore will be the only entity
that can exercise a right to repayment or repurchase of the Notes. See "--
Repurchase at the Option of Holders--Change of Control" and "--Asset Sales."
Notice by Participants or Indirect Participants or by owners of beneficial
interests in a Global Certificate held through such Participants or Indirect
Participants of the exercise of the option to elect repayment of beneficial
interests in Notes represented by a Global Certificate must be transmitted to
the Depositary in accordance with its procedures on a form required by the
Depositary and provided to Participants. In order to ensure that the
Depositary's nominee will timely exercise a right to repayment with respect to a
particular Note, the beneficial owner of such Note must instruct the broker or
other Participant or Indirect Participant through which it holds an interest in
such Note to notify the Depositary of its desire to exercise a right to
repayment. Different firms have cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other Participant or Indirect Participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary. The Company will not be liable for any delay in delivery of notices
of the exercise of the option to elect repayment.
CERTIFICATED NOTES
The Company will issue Notes in definitive form in exchange for a Global
Certificate if, and only if, either (1) the Depositary is at any time unwilling
or unable to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, or (2) an Event of Default has occurred and is
continuing and the Notes registrar has received a request from the Depositary to
issue Notes in definitive form in lieu of all or a portion of such Global
Certificate. In either instance, an owner of a beneficial interest in a Global
Certificate will be entitled to have Notes equal in principal amount to such
beneficial interest registered in its name and will be entitled to physical
delivery of such Notes in definitive form.
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Notes so issued in definitive form will be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form only, without
coupons.
REGISTRATION RIGHTS
Holders of Exchange Notes are not entitled to any registration rights with
respect to the Exchange Notes. Holders of Outstanding Notes are entitled to
certain registration rights pursuant to the Registration Agreement. The Company
has agreed with the Initial Purchasers pursuant to the terms of the Registration
Agreement, for the benefit of the Holders of the Outstanding Notes, that the
Company will use its reasonable best efforts, to file and cause to become
effective a registration statement (the "Exchange Offer Registration Statement")
with respect to a registered offer to exchange the Outstanding Notes for an
issue of notes of the Company with terms identical to the Outstanding Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions, registration rights or the additional interest provisions
described below). Upon such registration statement being declared effective,
the Company shall offer the Exchange Notes in return for surrender of the
Outstanding Notes. The Exchange Offer shall remain open for not less than 30
days after the date notice of the Exchange Offer is mailed to Holders of the
Outstanding Notes. For each Outstanding Note surrendered to the Company under
the Exchange Offer, the Holder will receive an Exchange Note of the same series
and of equal principal amount. The Registration Statement of which this
Prospectus is a part constitutes the Exchange Offer Registration Statement.
In the event that applicable interpretations of the staff of the Commission do
not permit the Company to effect the Exchange Offer or one of the other events
specified under "Exchange Offer; Registration Rights" occurs the Company shall
use its best efforts to cause to become effective a shelf registration statement
with respect to resales of the Notes (a "Shelf Registration Statement"). The
Company agrees to use its best efforts to keep the Shelf Registration Statement
continuously effective until June 8, 2000 or such shorter period that will
terminate when all of the Outstanding Notes and Exchange Notes covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement.
The Outstanding Notes provide that if (i) an Exchange Offer Registration
Statement is not filed with the Commission on or prior to September 6, 1998,
(ii) the Exchange Offer Registration Statement or, if applicable, a Shelf
Registration Statement (each a "Registration Statement") is not declared
effective on or prior to November 5, 1998, (iii) the Exchange Offer is not
consummated on or prior to December 5, 1998, or (iv) a Registration Statement is
filed and declared effective on or prior to November 5, 1998, but shall
thereafter cease to be effective or usable (at any time that the Company is
obligated to maintain the effectiveness thereof) in connection with resales of
Outstanding Notes or Exchange Notes in accordance with and during the periods
specified in the Registration Agreement (each such event referred to in clauses
(i) through (iv), a "Registration Default"), Special Interest will accrue on the
Outstanding Notes (in addition to the stated interest on the Outstanding Notes)
from and including the date on which the first such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured. Special Interest will accrue at a rate of 0.5% per annum during the 90-
day period immediately following the occurrence of the first such Registration
Default and shall increase by 0.25% per annum at the end of each subsequent 90-
day period, but in no event shall such rate exceed 1.00% per annum. All
accrued Special Interest shall be paid to holders in the same manner as interest
payments on the Outstanding Notes on semi-annual payment dates which correspond
to interest payment dates for the Notes. Following the cure of all Registration
Defaults, the accrual of Special Interest will cease. The Exchange Notes are
not entitled to any such Special Interest.
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This summary of certain provisions of the Registration Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Registration Agreement, a copy of which
is available from the Company upon request.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an acquisition of properties or assets from such Person or (b)
outstanding at the time such Person becomes a Subsidiary of any other Person
(other than any Indebtedness incurred in connection with, or in contemplation
of, such acquisition or such Person becoming such a Subsidiary). Acquired
Indebtedness shall be deemed to be incurred on the date of the related
acquisition of properties or assets from any Person or the date the acquired
Person becomes a Subsidiary.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (a) the sum of (i) discounted future net revenues
from proved oil and gas reserves of the Company and its Restricted Subsidiaries
calculated in accordance with SEC guidelines before any state or federal income
taxes, as estimated by a nationally recognized firm of independent petroleum
engineers in a reserve report prepared as of the end of the Company's most
recently completed fiscal year, as increased by, as of the date of
determination, the estimated discounted future net revenues from (A) estimated
proved oil and gas reserves acquired since the date of such year-end reserve
report, and (B) estimated oil and gas reserves attributable to extensions,
discoveries and other additions and upward revisions of estimates of proved oil
and gas reserves since the date of such year-end reserve report due to
exploration, development, exploitation, production or other activities, in each
case calculated in accordance with SEC guidelines (but before any state or
federal incomes taxes and utilizing the prices utilized in such year-end reserve
report), and decreased by, as of the date of determination, the estimated
discounted future net revenues from (C) estimated proved oil and gas reserves
produced or disposed of since the date of such year-end reserve report and (D)
estimated oil and gas reserves attributable to downward revisions of estimates
of proved oil and gas reserves since the date of such year-end reserve report
due to exploration, development, exploitation, production or other activities,
in each case calculated in accordance with SEC guidelines (but before any state
or federal income taxes and utilizing the prices utilized in such year-end
reserve report); provided, that in the case of each of the determinations made
pursuant to clauses (A) through (D), such increases and decreases shall be as
estimated by the Company's petroleum engineers, except that in the event there
is a Material Change as a result of such acquisitions, dispositions, or
revisions, then the discounted future net revenues utilized for purposes of this
clause (a)(i) shall be confirmed in writing by a nationally recognized firm of
independent petroleum engineers, (ii) the capitalized costs that are
attributable to oil and gas properties of the Company and its Restricted
Subsidiaries to which no proved oil and gas reserves are attributable, based on
the Company's books and records as of a date no earlier than the date of the
Company's latest annual or quarterly financial statements, (iii) the Net Working
Capital on a date no earlier than the date of the Company's latest annual or
quarterly financial statements and (iv) the greater of (A) the net book value on
a date no earlier than the date of the Company's latest annual or quarterly
financial statements or (B) the appraised value, as estimated by independent
appraisers, of other tangible assets (including, without duplication,
Investments in unconsolidated Restricted Subsidiaries) of the Company and its
Restricted Subsidiaries, as of the date
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no earlier than the date of the Company's latest audited financial statements,
minus (b) the sum of (i) minority interests (other than a minority interest in a
Finance Person), (ii) any net gas balancing liabilities of the Company and its
Restricted Subsidiaries reflected in the Company's latest audited financial
statements, (iii) to the extent included in (a)(i) above, the discounted future
net revenues, calculated in accordance with SEC guidelines (but before any state
or federal income taxes and utilizing the prices utilized in the Company's year-
end reserve report), attributable to reserves which are required to be delivered
to third parties to fully satisfy the obligations of the Company and its
Restricted Subsidiaries with respect to Volumetric Production Payments on the
schedules specified with respect thereto and (iv) the discounted future net
revenues, calculated in accordance with SEC guidelines, but before any state or
federal incomes taxes, attributable to reserves subject to Dollar-Denominated
Production Payments which, based on the estimates of production and price
assumptions included in determining the discounted future net revenues specified
in (a)(i) above, would be necessary to fully satisfy the payment obligations of
the Company and its Restricted Subsidiaries with respect to Dollar-Denominated
Production Payments on the schedules specified with respect thereto.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date means the
amount by which the fair value of the properties and assets of such Subsidiary
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such
date.
"Affiliate" of any specified Person means (i) any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director or
executive officer of (a) such specified Person or (b) any Person described in
the preceding clause (i). For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition to any Person other than the Company or any of its Restricted
Subsidiaries (including, without limitation, by way of merger or consolidation)
(collectively, for purposes or this definition, a "transfer"), directly or
indirectly, in one or a series of related transactions, of (a) any Capital Stock
of any Restricted Subsidiary held by the Company or any Restricted Subsidiary
(other than directors' qualifying shares and shares owned by foreign
shareholders to the extent required by applicable local laws in the foreign
countries), (b) all or substantially all of the properties and assets of the
Company or any of its Restricted Subsidiaries or (c) any other properties or
assets of the Company or any of its Restricted Subsidiaries other than (i) a
disposition of hydrocarbons or other mineral products, inventory, accounts
receivable, cash, Cash Equivalents or other property in the ordinary course of
business, (ii) any lease, abandonment, disposition, relinquishment or farm-out
of any oil and gas property in the ordinary course of business, (iii) the
liquidation of property or assets received in settlement of debts owing to the
Company or any Restricted Subsidiary as a result of foreclosure, perfection or
enforcement of any Lien or debt, which debts were owing to the Company or any
Restricted Subsidiary in the ordinary course of business of the Company or such
Restricted Subsidiary or (iv) the issuance and sale of Qualified Capital Stock
by a Finance Person. For the purposes of this definition, the term "Asset Sale"
shall not include (i) any transfer of properties or assets that is governed by,
and made in accordance with, the provisions described under "--Merger,
Consolidation or Sale of Assets"; (ii) any transfer of properties or assets to
an Unrestricted Subsidiary, if permitted under the "Restricted Payments"
covenant; or (iii) any transfer, in one or a series of related transactions, of
properties or assets having a fair market value of less than $2,500,000.
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"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including,
without limitation, any sinking fund or mandatory redemption payment
requirements) of such indebtedness multiplied by (ii) the amount of each such
principal payment by (b) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents in the equity
interests (however designated) in such Person, and any rights (other than debt
securities convertible into an equity interest), warrants or options exercisable
for, exchangeable for or convertible into such an equity interest in such
Person.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and, for the purpose of
the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of indebtedness with a maturity
of 180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 180 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500,000,000; (iii) commercial
paper with a maturity of 180 days or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and rated at least A-1 by S&P or at
least P-l by Moody's; (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i) above
entered into with any commercial bank meeting the specifications of clause (ii)
above; (v) overnight bank deposits and bankers' acceptances at any commercial
bank meeting the qualifications specified in clause (ii) above; (vi) deposits
available for withdrawal on demand with any commercial bank not meeting the
qualifications specified in clause (ii) above but which is organized under the
laws of any country in which the Company or any Restricted Subsidiary maintains
an office or is engaged in the Oil and Gas Business, provided that (A) all such
deposits are required to be made in such accounts in the ordinary course of
business, (B) such deposits do not at any one time exceed $5,000,000 in the
aggregate and (C) no funds so deposited remain on deposit in such bank for more
than 30 days; (vii) deposits available for withdrawal on demand with any
commercial bank not meeting the qualifications specified in clause (ii) above
but which is a lending bank under any of the Company's or any Restricted
Subsidiary's credit facilities, provided all such deposits do not exceed
$5,000,000 in the aggregate at any one time; and (viii) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (i) through (v).
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the
total Voting Stock of the Company; (b) the Company is merged with or into or
consolidated with another Person and, immediately after giving effect to the
merger or consolidation, (A) less than 50% of the total voting power of the
outstanding Voting Stock of the surviving or resulting Person is then
"beneficially owned" (within the meaning of Rule 13d-3 under the Exchange Act)
in the aggregate by the stockholders of the Company immediately prior to such
merger or consolidation, and (B) any "person" or "group" (as defined in Section
13(d)(3) or 14(d)(2) of the Exchange Act) has become the direct or indirect
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of the Voting Stock of the surviving or
resulting Person; (c) the Company, either
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individually or in conjunction with one or more Restricted Subsidiaries, sells,
assigns, conveys, transfers, leases or otherwise disposes of, or the Restricted
Subsidiaries sell, assign, convey, transfer, lease or otherwise dispose of, all
or substantially all of the properties and assets of the Company and the
Restricted Subsidiaries, taken as a whole (either in one transaction or a series
of related transactions), including Capital Stock of the Restricted
Subsidiaries, to any Person (other than the Company or a Wholly Owned Restricted
Subsidiary); (d) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; (e) the
liquidation or dissolution of the Company; or (f), so long as any Existing Notes
are outstanding, any other event constituting a Change of Control pursuant to
the indenture for the Existing Notes.
"Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
"Consolidated Exploration Expenses" means, for any period, exploration
expenses of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio
of (a) the sum of Consolidated Net Income, Consolidated Interest Expense, the
portion of Consolidated Exploration Expenses deducted in computing Consolidated
Net Income, Consolidated Income Tax Expense and Consolidated Non-cash Charges
deducted in computing Consolidated Net Income, in each case, for such period, of
the Company and its Restricted Subsidiaries on a consolidated basis, all
determined in accordance with GAAP, decreased (to the extent included in
determining Consolidated Net Income) by the sum of (x) the amount of deferred
revenues that are amortized during such period and are attributable to reserves
that are subject to Volumetric Production Payments and (y) amounts recorded in
accordance with GAAP as repayments of principal and interest pursuant to Dollar-
Denominated Production Payments, to (b) the sum of such Consolidated Interest
Expense for such period; provided, however, that (i) the Consolidated Fixed
Charge Coverage Ratio shall be calculated on the assumption that (A) the
Indebtedness to be incurred (and all other Indebtedness incurred after the first
day of such period of four full fiscal quarters referred to in the covenant
described under "--Certain Covenants--Incurrence of Indebtedness" through and
including the date of determination) and (if applicable) the application of the
net proceeds therefrom (and from any other such Indebtedness), including to
refinance other Indebtedness, had been incurred on the first day of such four-
quarter period and, in the case of Acquired Indebtedness, on the assumption that
the related transaction (whether by means of purchase, merger or otherwise) also
had occurred on such date with the appropriate adjustments with respect to such
acquisition being included in such pro forma calculation and (B) any acquisition
or disposition by the Company or any Restricted Subsidiary of any properties or
assets outside the ordinary course of business, or any repayment of any
principal amount of any Indebtedness of the Company or any Restricted Subsidiary
prior to the Stated Maturity thereof, in either case since the first day of such
period of four full fiscal quarters through and including the date of
determination, had been consummated on such first day of such four-quarter
period, (ii) in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness required to be computed on a pro
forma basis in accordance with the covenant described under "--Certain
Covenants--Incurrence of Indebtedness" and (A) bearing a floating interest rate
shall be computed as if the rate in effect on the date of computation had been
the applicable rate for the entire period and (B) which was not outstanding
during the period for which the computation is being made but which bears, at
the option of the Company, a fixed or floating rate of interest, shall be
computed by applying, at the option of the Company, either the fixed or floating
rate, (iii) in making such computation,
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the Consolidated Interest Expense attributable to interest on any indebtedness
under a revolving credit facility required to be computed on a pro forma basis
in accordance with the covenant described in paragraph (a) under "--Certain
Covenants--Incurrence of Indebtedness" shall be computed based upon the average
daily balance of such Indebtedness during the applicable period, provided that
such average daily balance shall be reduced by the amount of any repayment of
Indebtedness under a revolving credit facility during the applicable period,
which repayment permanently reduced the commitments or amounts available to be
reborrowed under such facility, (iv) notwithstanding clauses (ii) and (iii) of
this proviso, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate per annum
resulting after giving effect to the operation of such agreements, (v) in making
such calculation, Consolidated Interest Expense shall exclude interest
attributable to Dollar-Denominated Production Payments, and (vi) if after the
first day of the period referred to in clause (a) of this definition the Company
has retired any Indebtedness out of the net cash proceeds of the issue and sale
of shares of Qualified Capital Stock of the Company within 30 days of such
issuance and sale, Consolidated Interest Expense shall be calculated on a pro
forma basis as if such Indebtedness had been retired on the first day of such
period.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including any state franchise
taxes accounted for as income taxes in accordance with GAAP) of the Company and
its Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
(i) the sum of (a) the interest expense of the Company and its Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, (A) any amortization of debt discount,
(B) the net cost under Interest Rate Protection Obligations (including any
amortization of discounts), (C) the interest portion of any deferred payment
obligation constituting Indebtedness, (D) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing and (E) all accrued interest, in each case to the extent attributable
to such period, (b) to the extent any Indebtedness of any Person (other than the
Company or a Restricted Subsidiary) is guaranteed by the Company or any
Restricted Subsidiary, the aggregate amount of interest paid (to the extent not
accrued in a prior period) or accrued by such other Person during such period
attributable to any such Indebtedness, in each case to the extent attributable
to that period, (c) the aggregate amount of the interest component of
Capitalized Lease Obligations paid (to the extent not accrued in a prior
period), accrued and/or scheduled to be paid or accrued by the Company and its
Restricted Subsidiaries during such period as determined on a consolidated basis
in accordance with GAAP and (d) the aggregate amount of dividends paid (to the
extent not accrued in a prior period) or accrued on Redeemable Capital Stock of
the Company and its Restricted Subsidiaries, to the extent such Redeemable
Capital Stock is owned by Persons other than the Company or its Restricted
Subsidiaries, and to the extent such dividends are not paid in Common Stock,
less (ii) to the extent included in (i) above, amortization of capitalized debt
issuance costs of the Company and its Restricted Subsidiaries during such
period.
"Consolidated Net Income" means, for any period, the consolidated net
income (or loss) of the Company and its Restricted Subsidiaries for such period
as determined in accordance with GAAP, adjusted by excluding (a) net after-tax
extraordinary gains or losses (less all fees and expenses relating thereto), (b)
net after-tax gains or losses (less all fees and expenses relating thereto)
attributable to Asset Sales, (c) the net income (or net loss) of any Person
(other than the Company or any of its Restricted Subsidiaries), in which the
Company or any of its Restricted Subsidiaries has an ownership interest, except
to the extent of the amount of dividends or other distributions or interest on
indebtedness actually paid to the Company or any of its Restricted Subsidiaries
in cash by such other Person during such period (regardless of whether such cash
dividends, distributions or interest on indebtedness is attributable to net
income (or net loss) of such Person during such period or during any prior
period), (d) net income (or net loss) of any Person
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combined with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(e) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary is not at the date of determination permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders, (f) dividends paid
on Qualifying TECONS and (g) Consolidated Exploration Expenses and any
writedowns or impairments of non-current assets (less an amount equal to the
amortization on a quarterly basis of the cumulative Consolidated Exploration
Expenses and writedowns or impairments of the non-current assets, calculated as
two and one-half percent of the cumulative net balance of such costs).
"Consolidated Net Worth", means, at any date, the consolidated
stockholders' equity of the Company and its Restricted Subsidiaries less the
amount of such stockholders' equity attributable to Redeemable Capital Stock or
treasury stock of the Company and its Restricted Subsidiaries, as determined in
accordance with GAAP.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, depletion, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries reducing Consolidated Net Income for such
period, determined on a consolidated basis in accordance with GAAP (excluding
any such non-cash charge which requires an accrual of or reserve for cash
charges for any future period).
"Credit Facility" means that certain Amended and Restated Credit Agreement
among the Company, certain Subsidiaries of the Company, NationsBank of Texas,
N.A., as Administrative Agent, Morgan Guaranty Trust Company of New York, as
Documentation Agent, and certain lenders named therein, as the same may be
amended, modified, supplemented, extended, restated, replaced, renewed or
refinanced from time to time.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Equity Offering" means a bona fide underwritten sale to the public of
Common Stock of the Company pursuant to a registration statement (other than on
Form S-8 or any other form relating to securities issuable under any employee
benefit plan of the Company) that is declared effective by the Commission
following the Issue Date.
"Event of Default" has the meaning set forth above under the caption
"Events of Default and Remedies."
"Exchanged Properties" means properties or assets used or useful in the Oil
and Gas Business received by the Company or a Restricted Subsidiary in exchange
for other properties or assets owned by it, whether directly or indirectly
through the acquisition of the Capital Stock of a Person holding such properties
or assets so that such Person becomes a Wholly Owned Restricted Subsidiary of
the Company, in trade or as a portion of the total consideration for such other
properties or assets.
"Finance Person" means a Subsidiary of the Company, the Common Stock of
which is owned by the Company, that does not engage in any activity other than
(i) the holding of Subordinated Indebtedness with respect to which payments of
interest on such Subordinated Indebtedness can, at the election of the
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issuer thereof, be deferred for one or more payment periods, (ii) the issuance
of Qualifying TECONS and Common Stock and/or debt securities and (iii) any
activity necessary, incidental or related to the foregoing.
"GAAP" means generally accepted accounting principles, consistently
applied, that are set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession of the United States of America, which are
effective on the date of the Indenture.
The term "guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments or documents for collection
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of non-
performance) of all or any part of such obligation, including, without limiting
the foregoing, the payment of amounts drawn down by letters of credit; provided,
however, that a guarantee by any Person shall not include a contractual
commitment by one Person to invest in another Person provided that such
Investment is otherwise permitted by the Indenture. When used as a verb,
"guarantee" shall have a corresponding meaning.
"Guarantor Senior Indebtedness" means the principal of (and premium, if
any, on) and interest on (including interest accruing after the filing of a
petition initiating any proceeding pursuant to any bankruptcy law) and other
amounts due on or in connection with (including any fees, premiums, expenses,
including costs of collection, and indemnities) any Indebtedness of a Subsidiary
Guarantor, whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness will be
pari passu with or subordinated in right of payment to its Subsidiary Guarantee.
Notwithstanding the foregoing, Guarantor Senior Indebtedness of a Subsidiary
Guarantor will not include (i) Indebtedness of such Subsidiary Guarantor
evidenced by its Subsidiary Guarantee, (ii) Indebtedness of such Subsidiary
Guarantor that is expressly pari passu with its Subsidiary Guarantee or is
expressly subordinated in right of payment to any Guarantor Senior Indebtedness
of such Subsidiary Guarantor or its Subsidiary Guarantee, (iii) Indebtedness of
such Subsidiary Guarantor to the extent incurred in violation of the "Incurrence
of Indebtedness" covenant of the Indenture, (iv) Indebtedness of such Subsidiary
Guarantor to the Company or any of the Company's other Subsidiaries or to any
Affiliate of the Company or any Subsidiary of such Affiliate and (v) any
Indebtedness which when incurred and without regard to any election under
Section 1111(b) of the Federal Bankruptcy Code is without recourse to such
Subsidiary Guarantor.
"Holder" means a Person in whose name a Note is registered in the Note
Register.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person for borrowed money or for the deferred purchase
price of property or services (excluding any trade accounts payable and other
accrued current liabilities incurred in the ordinary course of business), and
all liabilities of such Person incurred in connection with any letters of
credit, bankers' acceptances or other similar credit transactions or any
agreement to purchase, redeem, exchange, convert or otherwise acquire for value
any Capital Stock of such Person, or any warrants, rights or options to acquire
such Capital Stock outstanding on the date of the Indenture or thereafter, if,
and to the extent, any of the foregoing would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, (b) all
obligations of such Person evidenced by bonds, notes, debentures or other
similar instruments, if, and to the extent, any of the foregoing would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, (c) all Indebtedness of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights
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and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (d) all
Capitalized Lease Obligations of such Person, (e) all Indebtedness referred to
in the preceding clauses of other Persons and all dividends of other Persons,
the payment of which is secured by (or for which the holder of such Indebtedness
has an existing right to be secured by) any Lien upon property (including,
without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness (the amount of such obligation being deemed to be the lesser of the
value of such property or asset or the amount of the obligation so secured), (f)
all guarantees by such Person of Indebtedness referred to in this definition
(including, with respect to any Production Payment, any warranties or guaranties
of production or payment by such Person with respect to such Production Payment
but excluding other contractual obligations of such Person with respect to such
Production Payment), (g) all Redeemable Capital Stock of such Person valued at
the greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends and (h) all obligations of such Person under or in respect of
currency exchange contracts, oil or natural gas price hedging arrangements and
Interest Rate Protection Obligations; provided, however, that indebtedness shall
not include Qualifying TECONS and Indebtedness (including guarantees thereof)
relating to Qualifying TECONS and held by a Finance Person. For purposes hereof,
the "maximum fixed repurchase price" of any Redeemable Capital Stock which does
not have a fixed repurchase price shall be calculated in accordance with the
terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by, the
fair market value of such Redeemable Capital Stock, such fair market value shall
be determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock; provided, however, that if such Redeemable Capital
Stock is not at the date of determination permitted or required to be
repurchased, the "maximum fixed repurchase price" shall be the book value of
such Redeemable Capital Stock. Subject to clause (f) of the first sentence of
this definition, neither Dollar-Denominated Production Payments nor Volumetric
Production Payments shall be deemed to be Indebtedness.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements or arrangements designed to protect
against or manage such Person's and any of its Subsidiaries' exposure to
fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan, guarantee of Indebtedness or other extension of credit or capital
contribution to (by means of any transfer of cash or other property or assets to
others or any payment for property, assets or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities (including derivatives) or
evidences of Indebtedness issued by, any other Person. In addition, the fair
market value of the net assets of any Restricted Subsidiary at the time that
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be
deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude (a) extensions of trade credit under
a joint operating agreement or otherwise in the ordinary course of business,
workers' compensation, utility, lease and similar deposits and prepaid expenses
made in the ordinary course of business, (b) Interest Rate Protection
Obligations entered into in the ordinary course of business or as required by
any Permitted Indebtedness or any other Indebtedness incurred in compliance with
the "Incurrence of Indebtedness" covenant, but only to the extent that the
stated aggregate notional amounts of such Interest Rate Protection Obligations
do not exceed 105% of the aggregate principal amount of such Indebtedness to
which such Interest Rate Protection Obligations relate, (c) bonds, notes,
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debentures or other securities received in compliance with the "Asset Sales"
covenant, and (d) endorsements of negotiable instruments and documents for
collection in the ordinary course of business.
"Issue Date" means the date on which the Exchange Notes were first issued
under the Indenture.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance or similar agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any
agreement to give or grant a Lien or any lease, conditional sale or other title
retention agreement having substantially the same economic effect as any of the
foregoing) upon or with respect to any property of any kind. A Person shall be
deemed to own subject to a Lien any property which such Person has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement.
"Liquid Securities" means securities (i) of an issuer that is not an
Affiliate of the Company, (ii) that are publicly traded on the New York Stock
Exchange, the American Stock Exchange, the Toronto Stock Exchange, the
Australian Stock Exchange, the London Stock Exchange or the Nasdaq National
Market; provided that securities meeting the requirements of clauses (i) and
(ii) above shall be treated as Liquid Securities from the date of receipt
thereof until and only until the earlier of (x) the date on which such
securities (or securities exchangeable for, or convertible into, such
securities) are sold or exchanged for cash or Cash Equivalents and (y) 180 days
following the date of receipt of such securities. If such securities (or
securities exchangeable for, or convertible into, such securities) are not sold
or exchanged for cash or Cash Equivalents within 180 days of receipt thereof,
for purposes of determining whether the transaction pursuant to which the
Company or a Restricted Subsidiary received the securities was in compliance
with the provisions of the Indenture described under "Asset Sales," such
securities shall be deemed not to have been Liquid Securities 181 days following
the date of receipt of such securities.
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 30% during a fiscal quarter
in the estimated discounted future net revenues from proved oil and gas reserves
of the Company and its Restricted Subsidiaries, calculated in accordance with
clause (a) (i) of the definition of Adjusted Consolidated Net Tangible Assets;
provided, however, that the following will be excluded from the calculation of
Material Change: (i) any acquisitions during the quarter of oil and gas
reserves that have been estimated by a nationally recognized firm of independent
petroleum engineers and on which a report or reports exist and (ii) any
disposition of properties held at the beginning of such quarter that have been
disposed of as provided in the covenant described under the caption "--Asset
Sales."
"Material Subsidiary" means, at any particular time, any Restricted
Subsidiary that, together with its Subsidiaries, (a) accounted for more than 5%
of the consolidated revenues of the Company and its Restricted Subsidiaries for
the most recently completed fiscal year of the Company, or (b) was the owner of
more than 5% of the consolidated assets of the Company and its Restricted
Subsidiaries at the end of such fiscal year, all as shown in the case of (a) and
(b) on the consolidated financial statements of the Company and its Restricted
Subsidiaries for such fiscal year.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary) net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal
counsel and investment banks) related to such Asset Sale, (ii) provisions for
all taxes payable as a result of such Asset Sale, (iii) amounts required to be
paid to
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any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets subject to the Asset Sale and (iv) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve required in accordance with GAAP consistently applied
against any liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all as
reflected in an Officers' Certificate delivered to the Trustee; provided,
however, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Cash Proceeds.
"Net Working Capital" means (i) all current assets of the Company and its
Restricted Subsidiaries, less (ii) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in consolidated financial statements of
the Company prepared in accordance with GAAP.
"Non-payment Event of Default" means any event (other than a Payment Event
of Default), the occurrence of which (with or without notice or the passage of
time) entitles one or more Persons to accelerate the maturity of any Specified
Senior Indebtedness.
"Non-Recourse Purchase Money Indebtedness" means (i) Indebtedness (other
than Capital Lease Obligations) of the Company or any Restricted Subsidiary
incurred in connection with the acquisition by the Company or such Restricted
Subsidiary in the ordinary course of business of fixed assets used in the Oil
and Gas Business (including office buildings and other real property used by the
Company or such Restricted Subsidiary in conducting its operations) and (ii) any
renewals and refinancings of such Indebtedness; provided that the holders of
such Indebtedness described in clauses (i) and (ii) agree that they will look
solely to the fixed assets so acquired which secure such Indebtedness (subject
to customary exceptions such as indemnifications for environmental, title, fraud
and other matters), and neither the Company nor any Restricted Subsidiary (a) is
directly or indirectly liable for such Indebtedness or (b) provides credit
support, including any undertaking, guarantee, agreement or instrument that
would constitute Indebtedness (other than the grant of a Lien on such acquired
fixed assets).
"Note Register" means the register maintained by or for the Company in
which the Company shall provide for the registration of the Notes and of
transfer of the Notes.
"Oil and Gas Business" means (i) the acquisition, exploration, development,
operation and disposition of interests in oil, gas and other hydrocarbon
properties, (ii) the gathering, marketing, treating, processing, storage,
selling and transporting of any production from such interests or properties,
(iii) any business relating to or arising from exploration for or development,
production, treatment, processing, storage, transportation or marketing of oil,
gas and other minerals and products produced in association therewith, (iv) any
power generation and electrical transmission business in a jurisdiction outside
of North America where fuel required by such business is supplied, directly or
indirectly, from production reserves substantially from blocks in which the
Company or its Restricted Subsidiaries participate and (v) any activity
necessary, appropriate or incidental to the activities described in the
foregoing clauses (i) through (iv) of this definition.
"OPIC Facility" means that certain Finance Agreement dated December 28,
1994, among The Nuevo Congo Company, The Congo Holding Company, and the Overseas
Private Investment Corporation, as such agreement may be amended, modified,
supplemented, extended, restated, replaced, renewed or refinanced from time to
time in one or more credit agreements, loan agreements, instruments or similar
agreements, as such may be further amended, modified, extended, restated,
replaced, renewed or refinanced.
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"Pari Passu Indebtedness" means any Indebtedness of the Company that is
pari passu in right of payment to the Notes, including, without limitation, the
Existing Notes.
"Payment Event of Default" means any default in the payment or required
prepayment of principal of (or premium, if any, on) or interest on any Specified
Senior Indebtedness when due (whether at final maturity, upon scheduled
installment, upon acceleration or otherwise).
"Permitted Indebtedness" means any of the following:
(i) Indebtedness under the Credit Facility in an aggregate principal amount
at any one time outstanding not to exceed the greater of (i) $400,000,000,
less any amounts of principal of such Indebtedness repaid pursuant to
clause (b)(i)(A) of the covenant described under "Asset Sales," or (ii) the
borrowing base thereunder, provided, (i) and (ii) shall include any
guarantee of any such Indebtedness and any fees, premiums, expenses
(including costs of collection), indemnities and other amounts payable in
connection with such Indebtedness;
(ii) Indebtedness under the Notes and any Subsidiary Guarantees relating
thereto or to any other Notes;
(iii) Indebtedness outstanding on the date of the Indenture (and not
repaid or defeased with the proceeds of the offering of the Notes) and
additional Indebtedness permitted to be incurred pursuant to commitments
existing under the OPIC Facility on the date of the Indenture;
(iv) obligations of the Company or a Restricted Subsidiary pursuant to
Interest Rate Protection Obligations, but only to the extent that the
stated aggregate notional amounts of such obligations do not exceed 105% of
the aggregate principal amount of the Indebtedness covered by such Interest
Rate Protection Obligations; obligations under currency exchange contracts
entered into in the ordinary course of business; and hedging arrangements
that the Company or a Restricted Subsidiary enters into in the ordinary
course of business for the purpose of protecting its production against
fluctuations in oil or natural gas prices;
(v) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary or
a Finance Person and Indebtedness of a Restricted Subsidiary to the Company
or a Wholly Owned Restricted Subsidiary or a Finance Person; provided,
however, that upon any subsequent issuance or transfer of any Capital Stock
or any other event which results in any such Wholly Owned Restricted
Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or such
Finance Person ceasing to be a Finance Person, as the case may be, or any
other subsequent transfer of any such Indebtedness (except to the Company
or a Wholly Owned Restricted Subsidiary or a Finance Person), such
Indebtedness shall be deemed, in each case, to be incurred and shall be
treated as an incurrence for purposes of the "Incurrence of Indebtedness"
covenant at the time the Wholly Owned Restricted Subsidiary or Finance
Person in question ceased to be a Wholly Owned Restricted Subsidiary or
Finance Person, as the case may be;
(vi) in-kind obligations relating to net gas balancing positions arising in
the ordinary course of business and consistent with past practice;
(vii) Indebtedness in respect of bid, performance or surety bonds issued
for the account of the Company or any Restricted Subsidiary in the ordinary
course of business, including guaranties and letters of credit supporting
such bid, performance or surety obligations (in each case other than for an
obligation for money borrowed);
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(viii) any guarantee of Senior Indebtedness or Guarantor Senior
Indebtedness, incurred in compliance with the Limitation on Indebtedness
covenant, by a Restricted Subsidiary or the Company;
(ix) Non-Recourse Purchase Money Indebtedness;
(x) any renewals, substitutions, exchanges, refinancings or replacements
(each, for purposes of this clause, a "refinancing") by the Company or a
Restricted Subsidiary of any Indebtedness incurred pursuant to the
provisions of the Limitation on Indebtedness covenant or pursuant to clause
(ii) or (iii) of this definition, including any successive refinancings by
the Company or such Restricted Subsidiary, so long as (A) any such new
Indebtedness shall be in a principal amount that does not exceed the
principal amount (or, if such Indebtedness being refinanced provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, such lesser amount as of the date of
determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium reasonably determined
by the Company or such Restricted Subsidiary as necessary to accomplish
such refinancing, plus the amount of expenses of the Company or such
Restricted Subsidiary incurred in connection with such refinancing, and (B)
in the case of any refinancing of Indebtedness of the Company that is not
Senior Indebtedness, such new Indebtedness is either pari passu with the
Notes or subordinated to the Notes at least to the same extent as the
Indebtedness being refinanced and (C) such new Indebtedness has an Average
Life equal to or longer than the Average Life of the Indebtedness being
refinanced and a final Stated Maturity equal to or later than the final
Stated Maturity of the Indebtedness being refinanced; and
(xi) any additional Indebtedness in an aggregate principal amount not to
exceed $25.0 million at any one time outstanding.
"Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or any of its Restricted
Subsidiaries; (iii) Investments in any amount not to exceed $10,000,000 at any
one time outstanding (iv) Investments by the Company or any of its Restricted
Subsidiaries in another Person, if as a result of such Investment (A) such other
Person becomes a Restricted Subsidiary or (B) such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all of
its properties and assets to, the Company or a Restricted Subsidiary; (v)
investments and expenditures made in the ordinary course of, and of a nature
that is or shall have become customary in, the Oil and Gas Business as means of
actively exploiting, exploring for, acquiring, developing, processing,
gathering, marketing or transporting oil and gas through agreements,
transactions, interests or arrangements which permit a Person to share risks or
costs, comply with regulatory requirements regarding local ownership or satisfy
other objectives customarily achieved through the conduct of Oil and Gas
Business jointly with third parties, including, without limitation, (A)
ownership interests in oil and gas properties or gathering systems and (B)
Investments and expenditures in the form of or pursuant to operating agreements,
processing agreements, farm-in agreements, farm-out agreements, development
agreements, area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties (including Unrestricted Subsidiaries); (vi) entry into any hedging
arrangements in the ordinary course of business for the purpose of protecting
the Company's or any Restricted Subsidiary's production against fluctuations in
oil or natural gas prices; (vii) entry into any currency exchange contract in
the ordinary course of business; (viii) Investments in obligations or securities
received as a result of any Asset Sale; (ix) advances and loans to officers,
directors and employees of the Company or any Restricted Subsidiary in the
ordinary course of business; (x) Investments pursuant to any agreement or
obligation in effect on the date of the Indenture; and (xi)
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Investments in obligations or securities received in settlement of debts owing
to the Company or a Restricted Subsidiary as a result of bankruptcy or
insolvency proceedings or upon the foreclosure, perfection or enforcement of any
Lien in favor of the Company or a Restricted Subsidiary, in each case as to debt
owing to the Company or a Restricted Subsidiary that arose in the ordinary
course of business of the Company or any such Restricted Subsidiary.
"Permitted Junior Securities" means any equity securities or 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, in the case of any such subordinated debt securities, are subordinated in
right of payment to all Senior Indebtedness that may at the time be outstanding
to substantially the same degree as, or to a greater extent than, the Notes are
so subordinated as provided in the Indenture.
"Permitted Liens" means the following types of Liens:
(a) Liens existing as of the Issue Date (except to the extent such Liens
secure Indebtedness that is repaid or defeased with proceeds of the
offering of the Notes), and any renewal, extension, refunding, exchange or
refinancing of any such Lien provided that thereafter such Lien extends
only to the properties that were subject to such Lien prior to the renewal,
extension, refunding, exchange or refinancing thereof;
(b) Liens securing the Notes or the Subsidiary Guarantees relating thereto;
(c) Liens in favor of the Company; and
(d) Liens resulting from the deposit of funds or evidence of Indebtedness
in trust for the purpose of decreasing or defeasing Indebtedness of the
Company or any of its Subsidiaries so long as such deposit of funds is
permitted under the "Restricted Payments" covenant.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock, whether now outstanding or issued after
the date of the Indenture, including, without limitation, all classes and series
of preferred or preference stock of such Person.
"Production Payments" means, collectively, Dollar-Denominated Production
Payments and Volumetric Production Payments.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock and, with respect to the
Company, Qualified Capital Stock includes, without limitation, any Qualifying
TECONS.
"Qualifying TECONS" means preferred trust securities or similar securities
issued by a Finance Person after the date of the Indenture.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is, or upon the happening of an event or passage of
time would be, required to be redeemed prior to the final Stated Maturity of the
Notes or is redeemable at the option of the holder thereof at any time prior to
such final Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity.
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"Restricted Subsidiary" means any Subsidiary of the Company, whether
existing on or after the date of the Indenture, unless such Subsidiary of the
Company is an Unrestricted Subsidiary or is designated as an Unrestricted
Subsidiary pursuant to the terms of the Indenture.
"S&P" means Standard and Poor's Ratings Service, a division of The McGraw-
Hill Companies, Inc., and its successors.
"Senior Indebtedness" means the principal of (and premium, if any, on) and
interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law) and other amounts due
on or in connection with (including any fees, premiums, expenses, including
costs of collection, and indemnities) any indebtedness of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness will be pari passu with or
subordinated in right of payment to the Notes. Notwithstanding the foregoing,
"Senior Indebtedness" will not include (A) Indebtedness evidenced by the Notes,
(B) Indebtedness of the Company that is Pari Passu Indebtedness or is expressly
subordinated in right of payment to any other Indebtedness of the Company, (C)
Indebtedness that is represented by Redeemable Capital Stock, (D) Indebtedness
of the Company to the extent incurred in violation of the covenant described
under "--Certain Covenants--Incurrence of Indebtedness," (E) Indebtedness of the
Company to any Subsidiary of the Company or any other Affiliate of the Company
or any subsidiary of such Affiliate and (F) Indebtedness which when incurred and
without regard to any election under Section 1111 (b) of the Federal Bankruptcy
Code is without recourse to the Company.
"Specified Senior Indebtedness" means (a) all Senior Indebtedness of the
Company in respect of the Credit Facility and any renewals, amendments,
extensions, supplements, modifications, deferrals, refinancings, or replacements
(each, for purposes of this definition, a "refinancing") thereof by the Company,
including any successive refinancings thereof by the Company and (b) any other
Senior Indebtedness and any refinancings thereof by the Company having a
principal amount of at least $10,000,000 as of the date of determination and
provided that the agreements, indentures or other instruments evidencing such
Senior Indebtedness or pursuant to which such Senior Indebtedness was issued
specifically designates such Senior Indebtedness as "Specified Senior
Indebtedness" for purposes of the Indenture. For purposes of this definition, a
refinancing of any Specified Senior Indebtedness shall be treated as a Specified
Senior Indebtedness only if the Indebtedness issued in such refinancing ranks or
would rank pari passu with the Specified Senior Indebtedness refinanced and only
if Indebtedness issued in such refinancing is permitted by the covenant
described under "--Certain Covenants--Incurrence of Indebtedness."
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable, and, when used with respect to any other Indebtedness or any
installment of interest thereon, means the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or such installment of interest is due and
payable.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned by
such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries
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thereof or such Person and one or more Subsidiaries thereof, directly or
indirectly, at the date of determination thereof, have at least majority
ownership interest entitled to vote in the election of directors, managers or
trustees thereof (or other Persons performing similar functions).
"Subsidiary Guarantee" means an unconditional, unsecured, senior
subordinated guarantee of the Notes by any Restricted Subsidiary pursuant to the
terms of the Indenture.
"Subsidiary Guarantor" means, unless released from their Subsidiary
Guarantees as permitted by the Indenture, any Restricted Subsidiary that becomes
a guarantor of the Notes in compliance with the provisions of the Indenture and
executes a supplemental indenture in which such Restricted Subsidiary agrees to
be bound by the terms of the Indenture.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination will be designated an Unrestricted Subsidiary by the
Board of Directors of the Company as provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors of the Company may designate
any Subsidiary of the Company as an Unrestricted Subsidiary so long as (a)
neither the Company nor any Restricted Subsidiary is directly or indirectly
liable pursuant to the terms of any Indebtedness of such Subsidiary; (b) no
default with respect to any Indebtedness of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity; (c) neither the Company nor any Restricted Subsidiary has
made an Investment in such Subsidiary unless such Investment was made pursuant
to, and in accordance with, the "Restricted Payments" covenant (other than
Investments of the type described in clause (iv) of the definition of Permitted
Investment); and (d) such designation shall not result in the creation or
imposition of any Lien on any of the properties or assets of the Company or any
Restricted Subsidiary (other than any Permitted Lien or any Lien the creation or
imposition of which shall have been in compliance with the "Liens" covenant);
provided, however, that with respect to clause (a), the Company or Restricted
Subsidiary may be liable for Indebtedness of an Unrestricted Subsidiary if (x)
such liability constituted a Permitted Investment or a Restricted Payment
permitted by the "Restricted Payments" covenant, in each case at the time of
incurrence, or (y) the liability would be a Permitted Investment at the time of
designation of such Subsidiary as an Unrestricted Subsidiary. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by filing a Board Resolution with the Trustee giving effect to such
designation. The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving
effect to such designation, (i) no Default or Event of Default shall have
occurred and be continuing, (ii) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the "Incurrence of
Indebtedness" covenant and (iii) if any of the properties or assets of the
Company or any of its Restricted Subsidiaries would upon such designation become
subject to any Lien (other than a Permitted Lien), the creation or imposition of
such Lien shall have been in compliance with the "Liens" covenant.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the
extent (i) all of the Capital Stock or other ownership interests in such
Restricted Subsidiary, other than any directors'
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qualifying shares mandated by applicable law, is owned directly or indirectly by
the Company or (ii) such Restricted Subsidiary is organized in a foreign
jurisdiction and is required by the applicable laws and regulations of such
foreign jurisdiction to be partially owned by the government of such foreign
jurisdiction or individual or corporate citizens of such foreign jurisdiction in
order for such Restricted Subsidiary to transact business in such foreign
jurisdiction, provided that the Company, directly or indirectly, owns the
remaining Capital Stock or ownership interest in such Restricted Subsidiary and,
by contract or otherwise, controls the management and business of such
Restricted Subsidiary and derives the economic benefits of ownership of such
Restricted Subsidiary to substantially the same extent as if such Restricted
Subsidiary were a wholly owned Subsidiary.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company agreed pursuant to a registration agreement (the "Registration
Agreement") with the Initial Purchasers, for the benefit of the Holders, that
the Company will, at its cost, use its reasonable best efforts to (i) not later
than September 6, 1998, file a registration statement with the Commission with
respect to a registered offer (the "Exchange Offer") to exchange the Outstanding
Notes for Exchange Notes having terms substantially identical in all material
respects to the Outstanding Notes (except that the Exchange Notes will not
contain terms with respect to transfer restrictions) and (ii) cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
not later than November 5, 1998. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer the Exchange Notes in exchange
for surrender of the Outstanding Notes. The Company will use its reasonable
best efforts to keep the Exchange Offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders. For each Outstanding Note surrendered to the
Company pursuant to the Exchange Offer, the holder of such Outstanding Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Outstanding Note. Interest on each Exchange Note will accrue from
the last interest payment date on which interest was paid on the Outstanding
Note surrendered in exchange therefor or, if no interest has been paid on such
Outstanding Note, from June 8, 1998. Under existing Commission interpretations,
the Exchange Notes would be freely transferable by holders (other than
affiliates of the Company and broker-dealers who purchased Outstanding Notes
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act) after the Exchange Offer without further
registration under the Securities Act if the holder of the Exchange Notes
represents that it is acquiring the Exchange Notes in the ordinary course of its
business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of the Company, as such terms are interpreted by the Commission,
provided that broker-dealers who acquired Outstanding Notes for their own
accounts as a result of market-making activities or other trading activities
("Participating Broker-Dealers") receiving Exchange Notes in the Exchange Offer
will have a prospectus delivery requirement with respect to resales of such
Exchange Notes. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to Exchange Notes with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Agreement, the Company is
required to allow Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
Exchange Notes.
A holder of Outstanding Notes (other than certain specified holders) who
wishes to exchange such Outstanding Notes for Exchange Notes in the Exchange
Offer will be required to represent that (i) any Exchange Notes to be received
by it will be acquired in the ordinary course of its business, (ii) that at the
time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and (iii) that it is not an
"affiliate" of the Company, as defined in Rule 405 under the Securities Act.
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If (i) changes in law or applicable interpretations of the Commission staff
do not permit the Company to effect such an Exchange Offer, (ii) for any other
reason the Exchange Registration Statement is not declared effective on or prior
to November 5, 1998 or the Exchange Offer is not consummated on or prior to
December 5, 1998, (iii) any of the Initial Purchasers so request with respect to
Outstanding Notes not eligible to be exchanged for Exchange Notes in the
Exchange Offer or with respect to Exchange Notes received in an Exchange Offer
that are not freely tradable, (iv) any holder (other than an Initial Purchaser)
is not eligible to participate in the Exchange Offer or does not receive freely
tradable Exchange Notes in the Exchange Offer other than by reason of such
holder being an affiliate of the Company (it being understood that the
requirement that a Participating Broker-Dealer deliver the prospectus contained
in the Exchange Offer Registration Statement in connection with sales of
Exchange Notes shall not result in such Exchange Notes being not "freely
tradable"), (v) any applicable law or interpretations do not permit any holder
to participate in the Exchange Offer, or (vi) the Company so elects, the Company
will, at its cost, use its reasonable best efforts to (i) as promptly as
practicable (but in no event more than 30 days after so requested pursuant to
the Registration Agreement), file a Shelf Registration Statement (the "Shelf
Registration Statement") covering resales of the Outstanding Notes or the
Exchange Notes, as the case may be, (ii) cause the Shelf Registration Statement
to be declared effective under the Securities Act and (iii) keep the Shelf
Registration Statement effective until June 8, 2000 or such shorter period that
will terminate when all of the Outstanding Notes and Exchange Notes covered by
the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. The Company will, in the event a Shelf Registration
Statement is filed, among other things, provide to each holder for whom such
Shelf Registration Statement was filed copies of the prospectus that is a part
of the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Outstanding Notes or the
Exchange Notes, as the case may be. A holder who sells such Outstanding Notes
or Exchange Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions of the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Agreement which are
applicable to such holder (including certain indemnification obligations).
The Outstanding Notes provide that if (i) an Exchange Offer Registration
Statement is not filed with the Commission on or prior to September 6, 1998,
(ii) the Exchange Offer Registration Statement or, if applicable, a Shelf
Registration Statement (each a "Registration Statement") is not declared
effective on or prior to November 5, 1998, (iii) the Exchange Offer is not
consummated on or prior to December 5, 1998, or (iv) a Registration Statement is
filed and declared effective on or prior to November 5, 1998, but shall
thereafter cease to be effective or usable (at any time that the Company is
obligated to maintain the effectiveness thereof) in connection with resales of
Outstanding Notes or Exchange Notes in accordance with and during the periods
specified in the Registration Agreement (each such event referred to in clauses
(i) through (iv), a "Registration Default"), Special Interest will accrue on the
Outstanding Notes (in addition to the stated interest on the Outstanding Notes)
from and including the date on which the first such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured. Special Interest will accrue at a rate of 0.5% per annum during the 90-
day period immediately following the occurrence of the first such Registration
Default and shall increase by 0.25% per annum at the end of each subsequent 90-
day period, but in no event shall such rate exceed 1.00% per annum. All accrued
Special Interest shall be paid to holders in the same manner as interest
payments on the Outstanding Notes on semi-annual payment dates which correspond
to interest payment dates for the Notes. Following the cure of all Registration
Defaults, the accrual of Special Interest will cease. The Exchange Notes are
not entitled to any such Special Interest.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is available upon request to the Company.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences generally applicable to a holder that exchanges Outstanding Notes
for Exchange Notes in the Exchange Offer. This discussion is based on the
Internal Revenue Code of 1986, as amended to the date hereof (the "Code"),
existing and proposed Treasury regulations, and judicial and administrative
determinations, all of which are subject to change at any time, possibly on a
retroactive basis. It relates only to persons who hold their Outstanding Notes,
and will hold Exchange Notes exchanged therefor, as "capital assets" within the
meaning of Section 1221 of the Code. It does not discuss state, local or
foreign tax consequences, nor except as otherwise noted, does it discuss tax
consequences to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks and
dealers in stocks and securities. Tax consequences may vary depending on the
particular status of an investor. No rulings will be sought from the Internal
Revenue Service ("IRS") with respect to the federal income tax consequences of
the Exchange Offer. There can be no assurance that the IRS will not take
positions concerning tax consequences of the purchase, ownership or disposition
of the Outstanding Notes or the Exchange Notes which are different from those
discussed herein.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO PARTICIPATE IN THE
EXCHANGE OFFER. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE ITS OUTSTANDING
NOTES FOR EXCHANGE NOTES.
THE EXCHANGE OFFER
Under recently-issued Treasury regulations, the exchange of Outstanding
Notes for Exchange Notes pursuant to the Exchange Offer should not constitute a
significant modification of the terms of the Outstanding Notes and, accordingly,
such exchange should be treated as a "nonevent" for federal income tax purposes.
Therefore, such exchange should have no federal income tax consequences to
holders of Outstanding Notes who participate in the Exchange Offer, and each
such holder would continue to be required to include interest on the Exchange
Notes in its gross income in accordance with its method of accounting for
federal income tax purposes.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (i) a citizen or resident of
the United States, (ii) a domestic corporation or domestic partnership or (iii)
an estate or trust other than a "foreign estate" or "foreign trust" as defined
in Section 7701(a)(31) of the Code.
TAXATION OF STATED INTEREST
In general, U.S. holders of the Exchange Notes will be required to include
interest received thereon in taxable income as ordinary income at the time it
accrues or is received, in accordance with the holder's regular method of
accounting for federal income tax purposes.
Under the tax rules relating to original issue discount, holders of debt
instruments issued at a discount that exceeds a nominal amount may be required
to recognize taxable interest prior to the receipt of accrual of stated
interest. The Outstanding Notes were treated by the Company as issued without
taxable original issue discount. In the case of a debt instrument issued that
provides for contingent
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payments, Treasury Regulations provide that such payments will not be taken into
account in computing original issue discount if there is a remote likelihood
that the payments will occur. Had the Company failed to effect the Exchange
Offer on a timely basis, special interest (the "Special Interest") would have
accrued on the Outstanding Notes. Because the Company determined that, when the
Outstanding Notes were issued, there was only a remote possibility that events
would occur which would cause the Special Interest to accrue on the Outstanding
Notes, the Company determined that the Special Interest should not be taken into
account in concluding that the Outstanding Notes were issued without original
issue discount. The IRS could disagree with this determination. Each U.S. Holder
should consult his own tax advisor with respect to the possible accrual of
original issue discount on the Outstanding Notes or the Exchange Notes.
OPTIONAL REDEMPTION OR REPURCHASE
The Outstanding Notes and the Exchange Notes are subject to (i) redemption at
the option of the Company on or after June 1, 2003, at predetermined redemption
prices plus any accrued and unpaid interest, and (ii) repurchase at the option
of each Holder thereof upon the circumstances described under "Description of
the Notes--Repurchase at the Option of Holders" at predetermined redemption
prices plus any accrued and unpaid interest. See "Description of the Notes."
Upon the optional redemption or repurchase of an Outstanding Note or an Exchange
Note, it is expected that the amount received by a Holder in excess of the
Holder's adjusted tax basis in the Outstanding Note or Exchange Note will be
taxable as a capital gain, if the Outstanding Note or the Exchange Note is held
as a capital asset (except to the extent that such amount received is
attributable to accrued but unpaid interest or market discount, which will be
treated as ordinary income).
PAYMENTS OF PRINCIPAL; DISPOSITIONS
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of an Outstanding Note or an Exchange Note, a U.S. Holder will
generally recognize taxable gain or loss equal to the difference between the sum
of cash plus the fair market value of all other property received on such
disposition (except to the extent such cash or property is attributable to
accrued but unpaid interest or market discount, which will be taxable as
ordinary income) and such U.S. Holder's adjusted tax basis in the Outstanding
Note or the Exchange Note. A U.S. Holder's adjusted tax basis in an Outstanding
Note or an Exchange Note generally will equal the cost of the Outstanding Note
or the Exchange Note to such U.S. Holder (increased for accrued original issue
discount, if any), less any principal payment received by such U.S. Holder.
Gain or loss realized by a U.S. Holder on the sale, redemption or other
disposition of an Outstanding Note or an Exchange Note generally will be long-
term capital gain or loss if, at the time of the disposition, the Outstanding
Note or the Exchange Note has been held for more than one year. Beginning after
December 31, 2000, special capital gain rates may apply if the Outstanding Note
or Exchange Note has been held for more than five years.
BACKUP WITHHOLDING
Under the Code, a holder of an Outstanding Note or Exchange Note may be
subject, under certain circumstances, to "backup withholding" at a 31% rate with
respect to payments in respect of interest thereon or the gross proceeds from
the disposition thereof. This withholding generally applies only if the holder
(i) fails to furnish his or her social security or other taxpayer identification
number ("TIN") after request therefor, (ii) furnishes an incorrect TIN, (iii) is
notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to backup withholding or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that
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the required information is furnished to the IRS. Corporations, Non-U.S. Holders
and certain other entities described in the Code and Treasury regulations are
generally exempt from such withholding if their exempt status is properly
established.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
This section discusses special rules applicable to a Non-U.S. Holder of
Exchange Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder or the tax
consequences to Non-U.S. Holders that are subject to United States federal
income tax on a net basis on income with respect to a Note because such income
is effectively connected with the conduct of a U.S. trade or business. For
purposes hereof, a "Non-U.S. Holder" is any person that is not a U.S. Holder.
INTEREST
Payments of interest on the Exchange Notes to a Non-U.S. Holder that do not
qualify for the portfolio interest exception discussed below will be subject to
withholding of U.S. federal income tax at a rate of 30% unless a U.S. income tax
treaty applies to reduce the rate of withholding. To claim a treaty reduced
rate, the Non-U.S. Holder must provide a properly executed Form 1001 (see
discussion below for changes to withholding tax provisions to be effective for
payments of interest made after December 1, 1998).
Interest that is paid to a Non-U.S. Holder on an Exchange Note will not be
subject to U.S. income or withholding tax if the interest qualified as
"portfolio interest." Generally, interest on the Exchange Notes that is paid by
the Company will qualify as portfolio interest if (i) the Non-U.S. Holder does
not own, actually or constructively, 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (ii) the Non-U.S.
Holder is not a controlled foreign corporation that is related to the Company
actually or constructively through stock ownership for U.S. federal income tax
purposes, (iii) the Non-U.S. Holder is not a bank receiving interest on a loan
entered into in the ordinary course of business, and (iv) either (x) the
beneficial owner of the Note provides the Company or its paying agent, a
properly executed certification on IRS Form W-8 (or a suitable substitute form)
signed under penalties of perjury that the beneficial owner is not a "U.S.
person" for U.S. federal income tax purposes and that provides the beneficial
owner's name and address, or (y) a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its business holds the Note and certifies to the Company or its agent
under penalties of perjury that the IRS Form W-8 (or a suitable substitute) has
been received by it from the beneficial owner of the Exchange Note or a
qualifying intermediary and furnishes the payor a copy thereof.
SALE, EXCHANGE OR RETIREMENT OF NOTES
Any gain realized by a Non-U.S. Holder on the sale, exchange or retirement
of the Exchange Notes, will generally not be subject to U.S. federal income tax
or withholding unless (i) the Non-U.S. Holder is an individual who was present
in the U.S. for 183 days or more in the taxable year of the disposition and
meets certain other requirements, or (ii) the Non-U.S. Holder is subject to tax
pursuant to certain provisions of the Code applicable to certain individuals who
renounce their U.S. citizenship or terminate long-term U.S. residency. If a
Non-U.S. Holder falls under (ii) above, the holder will be taxed on the net gain
derived from the sale under the graduated U.S. federal income tax rates that are
applicable to U.S. citizens, resident aliens, and domestic corporations, as the
case may be, and may be subject to withholding under certain circumstances. If
a Non-U.S. Holder falls under (i) above, the holder generally will be subject to
U.S. federal income tax at a rate of 30% on the gain derived from the sale (or
reduced treaty rate) and may be subject to withholding in certain circumstances.
-75-
<PAGE>
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Back-up withholding and information reporting generally will not apply to
an Exchange Note issued in registered form that is beneficially owned by a Non-
U.S. Holder if the certification of Non-U.S. Holder status is provided to the
Company or its agent as described above in " --Certain Federal Income Tax
Consequences to Non-U.S. Holders-Interest," provided that the payor does not
have actual knowledge that the holder is a U.S. person. The Company may be
required to report annually on Form 1042-S to the IRS and to each Non-U.S.
Holder the amount of interest paid to, and the tax withheld, if any, with
respect to each Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of
an Exchange Note by or through the foreign office of a custodian, nominee or
other agent of such beneficial owner, or if the proceeds of the sale of Notes
are made to the beneficial owner of an Exchange Note through a foreign office of
a "broker" (as defined in the pertinent Treasury Regulations), the proceeds will
not be subject to backup withholding (absent actual knowledge that the payee is
a U.S. person). Information reporting (but not backup withholding) will apply,
however, to a payment by a foreign office of a custodian, nominee, agent or
broker that is (i) a U.S. person, (ii) a controlled foreign corporation for U.S.
federal income tax purposes, or (iii) derives 50% or more of its gross income
from the conduct of a U.S. trade or business for a specified three-year period;
unless the broker has in its records documentary evidence that the holder is not
a Non-U.S. Holder and certain conditions are met (including that the broker has
no actual knowledge that the holder is a U.S. Holder) or the holder otherwise
establishes an exemption. Payment through the U.S. office of a custodian,
nominee, agent or broker is subject to both backup withholding at a rate of 31%
and information reporting, unless the holder certifies that it is a Non-U.S.
Holder under penalties of perjury or otherwise establishes an exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
U.S. federal income tax liability, provided that certain information is provided
by the holder to the IRS.
The IRS released Treasury Regulations on October 14, 1997 that revise the
procedures for withholding tax, and the associated backup withholding and
information reporting rules described above for payments of interest and gross
proceeds made after December 31, 1999. The regulations modify the requirements
imposed on a Non-U.S. Holder or certain intermediaries for establishing the
recipient's status as a Non-U.S. Holder eligible for exemption from withholding
and backup withholding. In particular, the regulations impose more stringent
conditions on the ability of financial intermediaries acting for a Non-U.S.
Holder to provide certifications on behalf of the Non-U.S. Holder, which may
include entering into an agreement with the IRS to audit certain documentation
with respect to such certifications. Non-U.S. Holders should consult their tax
advisors to determine how the regulations will affect their particular
circumstances.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Outstanding Notes where
such Outstanding Notes were acquired as a result of market-making activities or
other trading activities. The Company has agreed that for a period of 90 days
after the consummation of the Exchange Offer, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale, if required under applicable securities laws and upon
prior written request. A broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Agreement (including certain indemnification
rights and obligations).
-76-
<PAGE>
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-
dealer that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit from any such resale of
Exchange Notes and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus meeting the requirements of the Securities Act, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 90 days after the consummation of the Exchange Offer, the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Securities) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Outstanding Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The Company has not entered into any arrangements or understandings with
any person to distribute the Exchange Notes to be received in the Exchange
Offer.
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon by Butler & Binion,
L.L.P.
EXPERTS
The consolidated financial statements of Nuevo and subsidiaries as of
December 31, 1996 and 1997 and for each of the years in the three-year period
ended December 31, 1997, have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1997, consolidated
financial statements contains an explanatory paragraph that states that the
Company has given retroactive effect to the change in accounting for oil and gas
properties from the full cost method to the successful efforts method.
INDEPENDENT RESERVE ENGINEERS
Information incorporated by reference in this Prospectus from the Company's
Annual Report on Form 10-K regarding the Company's estimated quantities of oil
and gas reserves and the discounted present value of future net cash flows
therefrom is based upon estimates of such reserves and present values prepared
by Miller and Lents, Ltd., S.A., Holditch and Associates, Inc., Ryder Scott
Company, D.O.R. Engineering Inc., T.J. Smith & Company, Inc. and Poco Oil Co.,
independent petroleum engineers. All of such information has been incorporated
by reference herein in reliance upon the authority of such firms as experts in
such matters.
-77-
<PAGE>
<TABLE>
<S> <C>
================================================== ==================================================
No dealer, salesperson or any other person has
been authorized to give any information or to $100,000,000
make any representations not contained in this
Prospectus in connection with the offer contained
herein and, if given or made, such information or
representations must not be relied upon as having
been authorized by the Company. This Prospectus
does not constitute an offer to sell or a
solicitation of an to buy, the Notes offered
hereby by anyone in any jurisdiction in which
such offer is not authorized, or in which the NUEVO ENERGY COMPANY
person making such offer is not qualified to do
so, or to any person to whom it is unlawful to
make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create
an implication that there has been no change in 8-7/8% SENIOR SUBORDINATED NOTES DUE 2008
the affairs of the Company since the date hereof
or that the information contained herein is
correct as of any time subsequent to the date
hereof.
Table of Contents
Page
----
Available Information......................... 3
Incorporation of Certain Documents
by Reference................................. 4
Prospectus Summary............................ 5
Risk Factors.................................. 12
Private Placement............................. 21 -------
Use of Proceeds............................... 21 PROSPECTUS
Selected Consolidated Financial Data.......... 22 -------
The Exchange Offer............................ 24
Description of the Notes...................... 34
Exchange Offer; Registration Rights........... 71
Certain Federal Income Tax
Consequences................................. 73
Plan of Distribution.......................... 76
Legal Matters................................. 77
Experts....................................... 77
Independent Reserve Engineers................. 77
AUGUST 20, 1998
================================================== ==================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware,
pursuant to which the Company is incorporated, provides generally and in
pertinent part that a Delaware corporation may indemnify its directors and
officers against expenses, judgments, fines, and settlements actually and
reasonably incurred by them in connection with any civil, criminal,
administrative, or investigative suit or action except actions by or in the
right of the corporation if, in connection with the matters in issue, they acted
in good faith and in a manner they reasonably believed to be in or not opposed
to the best interests of the corporation, and in connection with any criminal
suit or proceeding, if in connection with the matters in issue, they had no
reasonable cause to believe their conduct was unlawful. Section 145 further
provides that in connection with the defense or settlement of any action by or
in the right of the corporation, a Delaware corporation may indemnify its
directors and officers against expenses actually and reasonably incurred by them
if, in connection with the matters in issue, they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification may be made in respect of any
claim, issue, or matter as to which such person has been adjudged liable to the
corporation unless the Delaware Court of Chancery or other court in which such
action or suit is brought approves such indemnification. Section 145 further
permits a Delaware corporation to grant its directors and officers additional
rights of indemnification through bylaw provisions and otherwise, and or
purchase indemnity insurance on behalf of its directors and officers. Article
Nine of the Certificate of Incorporation of the Company and Article VII of the
Bylaws of the Company provide, in general, that the Company may indemnify its
officers and directors to the full extent of Delaware law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NUMBER AND DESCRIPTION
- ------------------------------
(1) Underwriting agreement*
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession*
(4) Instruments defining the rights of security holders, including
indentures
4.1 Indenture dated June 8, 1998 between the Company and the
Trustee**
4.2 Form of Note (included in Exhibit 4.1)**
4.3 Registration Agreement**
4.4 Purchase Agreement**
(5) Opinion re legality
5.1 Opinion of Butler & Binion, L.L.P.**
(8) Opinion re tax matters
8.1 Opinion of Butler & Binion, L.L.P. (included in the prospectus
that forms a part hereof)
(12) Statement re computation of ratios
12.1 Computations of ratio of earnings to fixed charges
(15) Letter re unaudited interim financial information*
(23) Consents of experts and counsel
23.1 Consent of Butler & Binion, L.L.P. (included in its opinion
filed as Exhibit 5.1)**
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Miller and Lents, Ltd.**
23.4 Consent of S.A. Holditch and Associates, Inc.**
23.5 Consent of Ryder Scott Company**
23.6 Consent of D.O.R. Engineering Inc.**
23.7 Consent of T.J. Smith & Company, Inc.**
23.8 Consent of Poco Oil Co.
II-1
<PAGE>
(24) Power of attorney**
(25) Statement of Eligibility of Trustee
25.1 Form T-1**
(99) Additional Exhibits
99.1 Form of Exchange Agent Agreement**
99.2 Letter of Transmittal
- -------------------------------
* Inapplicable to this filing
** Previously filed
FINANCIAL STATEMENT SCHEDULES
None.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "1933 Act"),
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (the "1934 Act") (and where
applicable, each filing of an employee benefits plan's annual report pursuant to
Section 15(d) of the 1934 Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the provisions referred to in Item 20, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act ("Act") in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Act.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form S-4, within one business day or receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on August 19, 1998.
NUEVO ENERGY COMPANY
(Registrant)
By: /s/ Douglas L. Foshee
----------------------------------------------
Douglas L. Foshee, Chairman of the Board,
President and Chief Executive Officer
(principal executive officer)
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Douglas L. Foshee* Chairman of the Board, President August 19, 1998
- ---------------------------------- and Chief Executive Officer
Douglas L. Foshee (principal executive officer)
/s/ Robert M. King* Senior Vice President and Chief Financial August 19, 1998
- ---------------------------------- Officer (principal accounting and financial
Robert M. King officer)
/s/ Robert L. Gerry III* Director August 19, 1998
- ----------------------------------
Robert L. Gerry, III
/s/ David Ross* Director August 19, 1998
- ----------------------------------
David Ross
/s/ Gary R. Petersen* Director August 19, 1998
- ----------------------------------
Gary R. Petersen
/s/ Thomas D. Barrow* Director August 19, 1998
- ----------------------------------
Thomas D. Barrow
/s/ Isaac Arnold, Jr.* Director August 19, 1998
- ----------------------------------
Isaac Arnold, Jr.
/s/ James T. Hackett* Director August 19, 1998
- ----------------------------------
James T. Hackett
/s/ Robert W. Shower* Director August 19, 1998
- ----------------------------------
Robert W. Shower
/s/ Charles M. Elson* Director August 19, 1998
- ----------------------------------
Charles M. Elson
</TABLE>
* By: /s/ Douglas L. Foshee
-----------------------------------
Douglas L. Foshee, Attorney-in-Fact
II-4
<PAGE>
EXHIBIT 12.1
NUEVO ENERGY COMPANY
COMPUTATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION> SIX MONTHS
YEAR ENDED DECEMBER 31,(1) ENDED JUNE 30,
-------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997(1) 1998
----- ---- ---- ---- ---- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes, minority interest
and extraordinary item............................... (14,080) (7,239) 6,730 57,972 (17,340) 34,334 (24,074)
Interest expense...................................... 11,881 12,580 16,389 38,908 27,357 14,008 14,444
TECONS dividends...................................... -- -- -- 165 6,613 3,270 3,308
------- ------ ------ ------ ------- ------ -------
Adjusted earnings (loss)............................ (2,189) 5,321 22,119 94,146 16,830 51,612 (6,324)
Fixed Charges:
Interest expense...................................... 11,881 12,560 15,380 36,000 27,357 14,008 14,444
Capitalized interest.................................. -- -- -- -- 2,143 1,661 488
TECONS dividends...................................... -- -- -- 165 6,613 3,270 3,308
------- ------ ------ ------ ------- ------ -------
Total Fixed Charges................................. 11,551 12,560 15,389 38,174 38,113 18,939 18,236
Ratio of Earnings to Fixed Charges...................... -- -- 1.4 2.6 -- 2.7 --
Earnings required to cover Fixed Charges................ 14,060 7,239 -- -- 19,483 -- 24,560
</TABLE>
(1) Effective January 1, 1998, the Company changed the method of accounting for
its investments in oil and gas properties from the full cost to the
successful efforts method. All prior years' financial statements presented
herein have been restated to reflect this change.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Nuevo Energy Company:
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
Our report dated May 12, 1998, contains an explanatory paragraph that states
that the Company has given retroactive effect to the change in accounting for
oil and gas properties from the full cost method to the successful efforts
method.
August 20, 1998
/s/ KPMG Peat Marwick LLP
<PAGE>
CONSENT OF POCO OIL COMPANY,
INDEPENDENT PETROLEUM ENGINEERS
We consent to reference to our firm under the caption "Independent Reserve
Engineers" and elsewhere in Amendment No 1 to the Registration Statement and
related Prospectus constituting Nuevo Energy Company's Registration Statement on
Form S-4 filed with the Securities and Exchange Commission on August 20, 1998.
/s/ Arthur L. Bear
----------------------------
POCO OIL COMPANY
August 19, 1998
<PAGE>
LETTER OF TRANSMITTAL
NUEVO ENERGY COMPANY
OFFER TO EXCHANGE
8-7/8% Series B Senior Subordinated Notes Due 2008
Which Have Been Registered Under The Securities Act of 1933, As Amended Pursuant
To The Prospectus Dated August 20, 1998
FOR
ALL OUTSTANDING
8-7/8% Series A Senior Subordinated Notes Due 2008
The Exchange Offer Will Expire At 5:00 P.M., New York City Time,
On September 24, 1998
Unless Extended (the "Expiration Date")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE
Deliver to STATE STREET BANK AND TRUST COMPANY, Exchange Agent
by registered or certified mail: by hand or overnight delivery:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Two International Place
Post Office Box 778 Corporate Trust Window, Fourth Floor
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen
Telephone: (617) 664-5587
Facsimile: (617) 664-5290 (for Eligible Institutions only)
(originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS
COMPLETED.
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated August 20, 1998 (the "Prospectus"), of Nuevo Energy Company, a
Delaware corporation (the "Company"), and this Letter of Transmittal (the
"Letter"), which together constitute the Company's offer (the "Exchange Offer")
to exchange, from the registered holders (the "holders") thereof an aggregate
principal amount of up to $100,000,000 of the Company's 8-7/8% Series B Senior
Subordinated Notes due 2008 (the "Exchange Notes"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
a Registration
<PAGE>
Statement of which the Prospectus is part, for a like principal amount of the
issued and outstanding 8-7/8% Series A Senior Subordinated Notes due 2008 (the
"Outstanding Notes") of the Company. Capitalized terms used but not defined
herein have the respective meaning given to them in the Prospectus.
For each Outstanding Note accepted for exchange, the holder of such
Outstanding Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Outstanding Note. Accordingly, registered holders of
Exchange Notes on the relevant record date for the first interest payment date
following the consummation of the Exchange Offer will receive interest accruing
from the most recent date to which interest has been paid on the Outstanding
Notes or, if no interest has been paid, from June 8, 1998. Outstanding Notes
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders whose Outstanding Notes are
accepted for exchange will not receive any payment in respect of accrued
interest on such Outstanding Notes otherwise payable on any interest payment
date the record date for which occurs on or after consummation of the Exchange
Offer.
This Letter is to be completed by a holder of Outstanding Notes either if
certificates for such Outstanding Notes are to be forwarded herewith or if a
tender is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "DTC") pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering
Outstanding Notes--Book-Entry Transfer" section of the Prospectus and an Agent's
Message is not delivered. Tenders by book-entry transfer may also be made by
delivering an Agent's Message in lieu of this Letter of Transmittal. The term
"Agent's Message" means a message, transmitted by the DTC to and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation (as defined
below), which states that the DTC has received an express acknowledgment from
the tendering holder, which acknowledgment states that such holder has received
and agrees to be bound by the Letter of Transmittal and that the Company may
enforce the Letter of Transmittal against such holder. Holders of Outstanding
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their
Outstanding Notes into the Exchange Agent's account at the DTC (a "Book-Entry
Confirmation") and all other documents required by this Letter to the Exchange
Agent on or prior to the Expiration Date, must tender their Outstanding Notes
according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Outstanding Notes Guaranteed Delivery" section
of the Prospectus. See Instruction 1. Delivery of documents to the DTC does not
constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
The undersigned, by completing the box entitled "Description of 8-7/8%
Series A Senior Subordinated Notes due 2008" below and signing this Letter, will
be deemed to have tendered the Outstanding Notes as set forth in such box below.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL AND
THE PROSPECTUS CAREFULLY BEFORE COMPLETING THE BOXES
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
-2-
<PAGE>
List below the Outstanding Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Outstanding Notes should be listed on a separate signed schedule affixed hereto.
DESCRIPTION OF 8-7/8% SERIES A SENIOR
SUBORDINATED NOTES DUE 2008
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF REGISTERED AGGREGATE PRINCIPAL AMOUNT
HOLDERS (AS IT/THEY APPEAR(S) PRINCIPAL AMOUNT TENDERED (MUST BE
ON THE NOTES) CERTIFICATE REPRESENTED BY IN INTEGRAL MULTIPLES
(PLEASE FILL IN IF BLANK) NUMBERS(*) CERTIFICATE(S) OF $1,000)**
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
TOTAL
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering holder of 8-7/8% Series A Senior Subordinated Notes due 2008 will
be deemed to have tendered the entire aggregate principal amount
represented by the column labeled "Aggregate Principal Amount Represented
by Certificates(s)." If the space provided above is inadequate, list the
certificate numbers and principal amounts on a separate signed schedule and
affix the list to this Letter of Transmittal. The minimum permitted tender
is $1,000 in principal amount of 8-7/8% Series A Senior Subordinated Notes
due 2008 and all tenders must be in integral multiples of $1,000 in
principal amount.
[_] Check here if tendered Outstanding Notes are enclosed herewith.
[_] Check here if tendered Outstanding Notes are being delivered by book-entry
transfer made to the account maintained by the Exchange Agent with DTC and
complete the following (for use by eligible institutions (as hereinafter
defined) only):
Name of Tendering Institution___________________________________________________
Account Number__________________________________________________________________
Transaction Code Number_________________________________________________________
[_] Check here and enclose a photocopy of the Notice of Guaranteed Delivery if
tendered Outstanding Notes are being delivered pursuant to a Notice of
Guaranteed Delivery previously sent to the Exchange Agent and complete the
following (for use by eligible institutions only):
Name(s)of Registered Holder(s)__________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Window Ticket Number (if available)_____________________________________________
Name of Institution which Guaranteed Delivery___________________________________
Account Number (if delivered by book-entry transfer)____________________________
Transaction Code Number (if delivered by book-entry transfer)___________________
Tendering Institution (if delivered by book-entry transfer)_____________________
-3-
<PAGE>
<TABLE>
<S><C> <C>
--------------------------------- -------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3, 4 and 5) (See Instructions 3 and 4)
To be completed ONLY (i) if To be completed ONLY if
certificates for Outstanding certificates for Outstanding
Notes not tendered, or Notes not tendered, or
Exchange Notes issued in Exchange Notes issued in
exchange for Outstanding exchange for Outstanding Notes
Notes accepted for exchange, accepted for exchange, are to
are to be issued in the name be delivered to someone other
of someone other than the than the undersigned, or to
undersigned, or (ii) if the undersigned at an address
Outstanding Notes tendered other than that shown above.
by book-entry transfer which
are not exchanged are to be Mail to:
returned by credit to an
account maintained at the Name:________________________
DTC other than the DTC (Please Print)
Account Number set forth
above. Address:_____________________
Issue certificate(s) to: _____________________________
(Include Zip Code)
Name_______________________
(Please Print)
_____________________________
Address____________________ (Tax Identification or Social
Security No.)
___________________________
(Include Zip Code)
___________________________
(Tax Identification or
Social Security No.)
Credit Outstanding Notes not
exchanged and delivered by
book-entry transfer to the
DTC account set forth below:
___________________________
DTC Account Number
--------------------------------- -------------------------------
</TABLE>
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<PAGE>
SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
1. Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Outstanding Notes described above. Subject to, and effective upon, the
acceptance for exchange of the Outstanding Notes tendered hereby, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to such Outstanding Notes as are
being tendered hereby. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge
that the Exchange Agent also acts as the agent of the Company) with respect to
the tendered Outstanding Notes with full power of substitution to (i) deliver
certificates for such Outstanding Notes, or transfer ownership of such
Outstanding Notes on the account books maintained by DTC, to the Company and
deliver all accompanying evidences of transfer and authenticity to, or upon the
order of, the Company and (ii) present such Outstanding Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Outstanding Notes, all in accordance with
the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
2. The undersigned hereby represents, warrants and agrees that the
undersigned has full power and authority to tender, exchange, sell, assign and
transfer the Outstanding Notes tendered hereby and to acquire the Exchange Notes
issuable upon the exchange of such tendered Outstanding Notes and that the
Company will acquire good, marketable and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims or proxies when the same are accepted by the Company.
3. The undersigned also acknowledges that the Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to third
parties, that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Outstanding Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or a broker-dealer who acquired Outstanding Notes exchanged for such
Exchange Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not participating, and have no arrangement with
any person to participate, in a distribution of such Exchange Notes; however,
the Commission has not considered the Exchange Offer in the context of a no-
action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in
other circumstances. If any holder is an affiliate of the Company, is engaged
in or intends to engage in, or has any arrangement or understanding with any
person to participate in, a distribution of the Exchange Notes to be acquired
pursuant to the Exchange Offer, such holder (i) could not rely on the applicable
interpretations of the staff of the Commission and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is not a broker-
dealer, the undersigned represents that it is not engaged in, and does not
intend to engage in, a distribution of the Exchange Notes. If the undersigned
or person receiving the Exchange Notes is a broker-dealer that will receive
Exchange Notes for its own account, it represents that the Outstanding Notes to
be exchanged for the Exchange Notes were acquired by it as a result of market-
making activities or other trading activities and acknowledges and agrees that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so
-5-
<PAGE>
acknowledging and by delivering a prospectus, the undersigned broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. Each such broker-dealer agrees that upon receipt of notice from
the Company of the occurrence of any event or the discovery of any fact which
makes any statement contained in the Prospectus untrue in any material respect
or which causes the Prospectus to omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or the occurrence of certain other events
specified in the Registration Agreement, such broker-dealer will suspend the
sale of Exchange Notes pursuant to the Prospectus until the Company has amended
or supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to such broker-dealer
or the Company has given notice that the sale of the Exchange Notes may be
resumed, as the case may be. The undersigned acknowledges that if the
undersigned is participating in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) the undersigned cannot rely on the position
of the staff of the SEC in the Morgan Stanley Letter and similar SEC no-action
letters, and, in the absence of an exemption therefrom, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes, in which
case the registration statement must contain the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
of the SEC, and (ii) a broker-dealer that delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Agreement (including certain indemnification
rights and obligations).
4. Unless the box under the heading "Special Registration Instructions" is
checked, the undersigned hereby represents and warrants that:
(i) the Exchange Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder whether or
not the undersigned;
(ii) the holder is not participating in and does not intend to
participate in a distribution (within the meaning of the Securities Act) of
such Exchange Notes;
(iii) the holder does not have an arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of such Exchange Notes; and
(iv) the holder is not an "affiliate," as such term is defined under
Rule 405 promulgated under the Securities Act, of the Company or, if the
undersigned is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
5. The undersigned may, if, and only if, unable to make all of the
representations and warranties contained in Item 4, above, elect to have its
Outstanding Notes registered in the shelf registration statement described in
the registration agreement (the "Registration Agreement") dated as of June 8,
1998, among the Company and the Initial Purchasers. Such election may be made
by checking the box under "Special Registration Instructions" on page 7. By
making such election, the undersigned agrees, as a holder of Outstanding Notes
or Exchange Notes participating in a shelf registration, to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs such
shelf registration statement and each person who controls the Company within the
meaning of either the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or
-6-
<PAGE>
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement as originally filed or in any
amendment thereof, or any preliminary Prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission of alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; but only with
respect to information relating to the undersigned furnished in writing by or on
behalf of the undersigned expressly for use in the Registration Statement, the
preliminary Prospectus or Prospectus or any amendments or supplements thereto.
Any such indemnification shall be governed by the terms and subject to the
conditions set forth in the Registration Agreement, including, without
limitation, the provisions regarding notice, retention of counsel, contribution
and payment of expenses set forth therein. The above summary of the
indemnification provision of the Registration Agreement is not intended to be
exhaustive and is qualified in its entirety by the Registration Agreement.
6. The undersigned acknowledges that the Company's acceptance of properly
tendered Outstanding Notes pursuant to the procedures described under the
caption "The Exchange Offer Procedures for Tendering Outstanding Notes" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer. The undersigned warrants and agrees to, upon
request, execute and deliver any additional documents deemed by the Company or
the Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment and transfer of the Outstanding Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer Withdrawal Rights" section
of the Prospectus. Unless otherwise indicated herein in the box entitled
"Special Issuance Instructions" above, please issue the Exchange Notes (and, if
applicable, substitute certificates representing Outstanding Notes for any
Outstanding Notes not exchanged) in the name of the undersigned or, in the case
of a book-entry delivery of Outstanding Notes, please credit the account
indicated above maintained at the DTC. Similarly, unless otherwise indicated
under the box entitled "Special Delivery Instructions" above, please send the
Exchange Notes (and, if applicable, substitute certificates representing
Outstanding Notes for any Outstanding Notes not exchanged) to the undersigned at
the address(es) shown above in the box entitled "Description of 8-7/8% Series A
Senior Subordinated Notes due 2008."
- --------------------------------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if (i) the undersigned satisfies the conditions set
forth in Item 5 above, (ii) the undersigned elects to register its Outstanding
Notes in the shelf registration statement described in the Registration
Agreement and (iii) the undersigned agrees to indemnify certain entities and
individuals as set forth in Item 5 above. (See Item 5.)
[_] By checking this box the undersigned hereby (i) represents that it is unable
to make all of the representations and warranties set forth in Item 4 above,
(ii) elects to have its Outstanding Notes registered pursuant to the shelf
registration statement described in the Registration Agreement and (iii) agrees
to indemnify certain entities and individuals identified in, and to the extent
provided in, Item 5 above.
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: ________________________________________
Address: ________________________________________
________________________________________
________________________________________
- --------------------------------------------------------------------------------
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<PAGE>
PLEASE SIGN HERE
TO BE COMPLETED BY ALL TENDERING HOLDERS
(Complete accompanying Substitute W-9)
- --------------------------------- ------------------------------, 1998
Signature(s) of Holder(s) Date
- --------------------------------- ------------------------------, 1998
Signature(s) of Holder(s) Date
Area Code and Telephone Number:___________________________________________
This letter must be signed by the registered holder(s) as the name(s)
appear(s) on the certificate(s) for the Outstanding Notes hereby tendered or on
a security position listing, or by any person(s) authorized to become registered
holder(s) by endorsements and documents transmitted herewith. If signature is by
a trustee, executor, administrator, guardian, officer or other person acting in
a fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s):________________________________________________________________________
(Please Type or Print)
Capacity (Full Title):__________________________________________________________
Address:________________________________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE (if required by Instruction 3)
Signature(s) Guaranteed by an Eligible Institution:
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Date:__________________, 1998
-9-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND OUTSTANDING NOTES, GUARANTEED DELIVERY
PROCEDURES. This Letter is to be completed by holders of Outstanding Notes
either if certificates for such Outstanding Notes are to be forwarded herewith
or if tenders are to be made pursuant to the procedures for delivery by book-
entry transfer set forth in "The Exchange Offer Procedures for Tendering
Outstanding Notes Book Entry Transfer" section of the Prospectus and an Agent's
Message is not delivered. Tenders by book-entry transfer may also be made by
delivering an Agent's Message in lieu of this Letter of Transmittal. The term
"Agent's Message" means a message, transmitted by the DTC to and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the DTC has received an express acknowledgment from the tendering holder,
which acknowledgment states that such holder has received and agrees to be bound
by the Letter of Transmittal and that the Company may enforce the Letter of
Transmittal against such holder. Certificates for all physically tendered
Outstanding Notes, or Book-Entry Confirmation, as the case may be, as well as a
properly completed and duly executed Letter (or facsimile hereof or Agent's
Message in lieu thereof) and any other documents required by this Letter, must
be received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Outstanding Notes tendered hereby must be
in denominations of principal amount of $1,000 and any integral multiple
thereof.
Holders whose certificates for Outstanding Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Outstanding Notes pursuant to the guaranteed delivery procedures
set forth in "The Exchange Offer Procedures for Tendering Outstanding Notes
Guaranteed Delivery" section of the Prospectus. Pursuant to such procedures, (i)
such tender must be made through an Eligible Institution; (ii) on or prior to
5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must
receive from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the Company
(by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Outstanding Notes and the amount of
Outstanding Notes tendered stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Outstanding Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter (or facsimile thereof or Agent's
Message in lieu thereof) with any required signature guarantees and any other
documents required by this Letter will be deposited by the Eligible Institution
with the Exchange Agent; and (iii) the certificates for all physically tendered
Outstanding Notes, in proper form for transfer, or Book-Entry Confirmation, as
the case may be, together with a properly completed and duly executed Letter (or
facsimile thereof or Agent's Message in lieu thereof) with any required
signature guarantees and all other documents required by this Letter, are
deposited by the Eligible Institution within five NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Outstanding Notes and all other
required documents is at the option and sole risk of the tendering holders, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If Outstanding Notes are sent by mail, it is suggested that the mailing
be registered mail, properly insured, with return receipt requested, or by an
overnight delivery service, and made sufficiently in advance of the Expiration
Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date.
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<PAGE>
Only a holder (as defined in the Prospectus) of Outstanding Notes may
tender such Outstanding Notes in the Exchange Offer. Any beneficial holder of
Outstanding Notes who is not the registered holder and who wishes to tender
should arrange with the registered holder to execute and deliver this Letter of
Transmittal on his behalf or must, prior to completing and executing this Letter
of Transmittal and delivering his Outstanding Notes, either make appropriate
arrangements to register ownership of the Outstanding Notes in such holder's
name or obtain a properly completed bond power from the registered holder.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by the Company in its sole discretion,
which determination will be final and binding. The Company reserves the absolute
right, in its sole and absolute discretion, to reject any and all Outstanding
Notes not properly tendered or any Outstanding Notes the Company's acceptance of
which, or exchange for, would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the absolute right, subject to applicable
law, to waive any of the conditions of the Exchange Offer or any irregularities
or conditions of tender as to particular Outstanding Notes whether or not
similar conditions or irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Notes must be cured within such time as
the Company shall determine. Neither the Company, any affiliates or assigns of
the Company, the Exchange Agent nor any other person shall be under any duty to
give notification of defects or irregularities with respect to tenders of
Outstanding Notes, nor shall any of them incur any liability for failure to give
such notification. Tenders of Outstanding Notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any
Outstanding Notes received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived will
be returned by the Exchange Agent to the tendering holders of Outstanding Notes,
unless otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date. See "The Exchange Offer" section of the
Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTE HOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER). If less than all of the Outstanding Notes evidenced by a
submitted certificate are to be tendered, the tendering holder(s) should fill in
the aggregate principal amount of Outstanding Notes to be tendered in the box
above entitled "Description of 8-7/8% Series A Senior Subordinated Notes due
2008 Principal Amount Tendered." A reissued certificate representing the balance
of nontendered Outstanding Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box of this Letter, promptly after the
Expiration Date. All of the Outstanding Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS, GUARANTEE OF
SIGNATURES. If this Letter is signed by the holder of the Outstanding Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates or on a DTC security position listing without
any change whatsoever.
If any tendered Outstanding Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Outstanding Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this letter as there are different registrations of
certificates.
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<PAGE>
When this Letter is signed by the registered holder or holders of the
Outstanding Notes specified herein and tendered hereby, no endorsements of
certificates or separate bond powers are required. If, however, the Exchange
Notes are to be issued, or any untendered Outstanding Notes are to be reissued,
to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Outstanding Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchanges Medallion Program (each, an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Outstanding Notes are tendered: (i) by a registered
holder of Outstanding Notes (or by a participant in DTC whose name appears on a
security position listing as the owner) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on this
Letter and Exchange Notes are being issued directly to such registered holder
(or deposited in the holder's account at DTC), or (ii) for the account of an
Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of
Outstanding Notes should indicate in the applicable box the name and address to
which Exchange Notes issued pursuant to the Exchange Offer and/or substitute
certificates evidencing Outstanding Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. Note holders
tendering Outstanding Notes by book-entry transfer may request that Outstanding
Notes not exchanged be credited to such account maintained at the DTC. If no
such instructions are given, such Outstanding Notes not exchanged will be
returned to the name and address of the person signing this Letter.
5. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Outstanding Notes to it or its order pursuant to
the Exchange Offer. If, however, Exchange Notes and/or substitute Outstanding
Notes not exchanged are to be delivered to, or are to be registered or issued in
the name of, any person other than the registered holder of the Outstanding
Notes tendered hereby, or if tendered Outstanding Notes are registered in the
name of any person other than the person signing this Letter, or if a transfer
tax is imposed for any reason other than the transfer of Outstanding Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed to such tendering holder and the Exchange Agent
will retain possession of an amount of
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<PAGE>
Exchange Notes with a face amount equal to the amount of such transfer taxes due
by such tendering holder pending receipt by the Exchange Agent of the amount of
such taxes.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Outstanding Notes specified in this
Letter.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions to the Exchange Offer enumerated in the
Prospectus.
7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Outstanding Notes,
by execution of this Letter or an Agent's Message in lieu thereof, shall waive
any right to receive notice of the acceptance of their Outstanding Notes for
exchange.
8. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES. Any holder
whose Outstanding Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated above for further
instructions.
9. WITHDRAWAL OF TENDERS. Tenders of Outstanding Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date. For a withdrawal of a tender of Outstanding Notes to be
effective, a written, telegraphic, telex or facsimile transmission notice of
withdrawal must be received by the Exchange Agent at its address set forth above
prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Outstanding Notes to be withdrawn (the "Depositor"),
(ii) identify the Outstanding Notes to be withdrawn (including the certificate
number or numbers (where certificates for Outstanding Notes have been
transmitted) and principal amount of such Outstanding Notes), (iii) be signed by
the holder in the same manner as the original signature on this Letter
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the trustee under the Indenture register the
transfer of such Outstanding Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Outstanding Notes are
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, in its sole discretion, whose determination shall
be final and binding on all parties. Neither the Company, any affiliates or
assigns of the Company, the Exchange Agent nor any other person shall be under
any duty to give any notification of any irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Outstanding Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes
that have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Outstanding Notes may be retendered by following the
procedures described above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus, this Letter and other related documents may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11. IMPORTANT TAX INFORMATION. Under current federal income tax law, a
holder of Exchange Notes is required to provide the Company (as payor) with such
holder's correct taxpayer identification number ("TIN") on Substitute Form W-9
or otherwise establish a basis for exemption from backup withholding to prevent
backup withholding on any Exchange Notes delivered pursuant to the Exchange
Offer and any payments received in respect of the Exchange
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<PAGE>
Notes. If a holder of Exchange Notes is an individual, the TIN is such holder's
social security number. If the Company is not provided with the correct taxpayer
identification number, a holder of Exchange Notes may be subject to a $50
penalty imposed by the Internal Revenue Service. Accordingly, each prospective
holder of Exchange Notes to be issued pursuant to Special Issuance Instructions
should complete the attached Substitute Form W-9. The Substitute Form W-9 need
not be completed if the box entitled Special Issuance Instructions has not been
completed.
Certain holders of Exchange Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt prospective holders of Exchange
Notes should indicate their exempt status on Substitute Form W-9. A foreign
individual may qualify as an exempt recipient by submitting to the Company,
through the Exchange Agent, a properly completed Internal Revenue Service Form
W-8 (which the Exchange Agent will provide upon request) signed under penalty of
perjury, attesting to the holder's exempt status. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of Exchange Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service. To prevent backup
withholding on any Exchange Notes delivered pursuant to the Exchange Offer and
any payments received in respect of the Exchange Notes, each prospective holder
of Exchange Notes to be issued pursuant to Special Issuance Instructions must
provide the Company, through the Exchange Agent, with either: (i) such
prospective holder's correct TIN by completing the form below, certifying that
the TIN provided on Substitute Form W-9 is correct (or that such prospective
holder is awaiting a TIN) and that (A) such prospective holder has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified such prospective holder that he or she
is no longer subject to backup withholding; or (ii) an adequate basis for
exemption.
If the Outstanding Notes are in more than one name or are not in the name
of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a TIN,
check the box in Part 2 of the Substitute Form W-9 and write "applied for" in
lieu of its TIN. Note: Checking this box and writing "applied for" on the form
means that such holder has already applied for a TIN or that such holder intends
to apply for one in the near future. If such holder does not provide its TIN to
the Company within 60 days, backup withholding will begin and continue until
such holder furnishes its TIN to the Company.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE ORIGINAL NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN
ORIGINAL HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
-14-
<PAGE>
TO BE COMPLETED BY TENDERING HOLDERS
(SEE INSTRUCTION 11)
PAYOR'S NAME: NUEVO ENERGY COMPANY
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
-----------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT RIGHT AND CERTIFY BY SIGNING AND OR
Form W-9 DATING BELOW. -----------------------------
Employer Identification Number
---------------------------------------------------------------------------------------------------
Department of the PART 2 -- Certification Under penalties of perjury, I certify that:
Treasury -- (1) The number shown on this form is my correct taxpayer Identification Number (or I
Internal Revenue Service am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because I have not been notified by
PAYER'S REQUEST FOR the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result
TAXPAYER IDENTIFICATION of failure to report all interest or dividends, or the IRS has notified me that I
NUMBER (TIN) am no longer subject to backup withholding. Certification Instructions You must cross
out item (2) in Part 2 above if you have been notified by the IRS that you are subject to
backup withholding because of under reporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS stating that you are no longer subject to
backup withholding, do not cross out item (2).
---------------------------------------------------------------------------------------------------
SIGNATURE________________________ PART 3 --
Awaiting TIN [_]
DATE_______________________, 1998 Please complete the Certificate of
Awaiting Taxpayer Identification
Number bleow.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-15-
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor within 60
days, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide a number.
Signature:______________________________ Date_____________, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States citizen
or resident (or I am signing for a foreign corporation, partnership, estate or
trust).
Signature:______________________________ Date_____________, 1998
- --------------------------------------------------------------------------------
-16-
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR NUEVO ENERGY COMPANY
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Nuevo Energy Company (the "Company") made pursuant to the
Prospectus, dated August 20, 1998 (the "Prospectus"), if certificates for the
outstanding 8-7/8% Series A Senior Subordinated Notes due 2008 (the "Outstanding
Notes") of the Company are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to State Street Bank and Trust Company ("Exchange Agent") as set
forth below. Capitalized terms not defined herein are defined in the Prospectus.
STATE STREET BANK AND TRUST COMPANY, Exchange Agent
by registered or certified mail: by hand or overnight delivery:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Two International Place
Post Office Box 778 Corporate Trust Window, Fourth Floor
Boston, Massachusetts 02102 Boston, Massachusetts 02110
Attention: Kellie Mullen Attention: Kellie Mullen
Telephone: (617) 664-5587
Facsimile: (617) 664-5290 (for Eligible Institutions only)
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE TO A NUMBER OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, the signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
-17-
<PAGE>
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus, the undersigned
hereby tenders to the Company the principal amount of Outstanding Notes set
forth below, pursuant to the guaranteed delivery procedure described in "The
Exchange Offer Procedures for Tendering Outstanding Notes Guaranteed Delivery"
section of the Prospectus.
<TABLE>
<CAPTION>
<S> <C>
Principal Amount of Outstanding Notes Tendered: If Outstanding Notes will be delivered to DTC,
provide account number.
$______________________________________________ Account Number:____________________________
Certificate Nos. (if available):
_______________________________________________
Total Principal Amount Represented by
Certificate(s):
$______________________________________________
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
_______________________________________________ ______________________, 1998
Signatures of Holder(s) or Authorized Signatory Date
_______________________________________________ ______________________, 1998
Signatures of Holder(s) or Authorized Signatory Date
Must be signed by the holder(s) of Outstanding Notes as their name(s)
appear(s) on certificates for Outstanding Notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer or other person acting in a fiduciary or representative capacity,
such person must set forth his or her full title below. If Outstanding Notes
will be delivered by book-entry transfer to DTC, provide account number.
Please print name(s) and address(es)
Name(s):________________________________________________________________________
Capacity:_______________________________________________________________________
Address(es):____________________________________________________________________
Area Code and Telephone Number:_________________________________________________
Account Number:_________________________________________________________________
-18-
<PAGE>
GUARANTEE
(Not to be used for signature guarantees)
The undersigned, a financial institution that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Outstanding Notes being tendered hereby in proper
form for transfer or confirmation of book-entry transfer of such Outstanding
Notes into the Exchange Agent's account at DTC pursuant to the procedures for
book-entry transfer set forth in the Prospectus, in either case, together with
one or more properly completed and duly executed letters of transmittal/or
facsimile thereof or Agent's Message in lieu thereof and any other documents
required by the Letter of Transmittal within five NYSE trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:___________________________________________________________________
Address:________________________________________________________________________
Area Code & Telephone No.:______________________________________________________
______________________________
Authorized Signature
______________________________
Name (Please Type or Print)
______________________________
Title
_________________________, 1998
Date
NOTE: DO NOT SEND CERTIFICATES OF OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES OF OUTSTANDING NOTES SHOULD BE SENT ONLY WITH A COPY OF THE LETTER
OF TRANSMITTAL.
-19-
<PAGE>
NUEVO ENERGY COMPANY
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
8-7/8% SERIES A SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8-7/8% SERIES B SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 24, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
UNLESS PREVIOUSLY ACCEPTED FOR EXCHANGE.
To Our Clients:
We are enclosing herewith a Prospectus, dated August 20, 1998, of Nuevo
Energy Company, a Delaware corporation (the "Company"), and a related Letter of
Transmittal, which together constitute the Company's offer (the "Exchange
Offer") to exchange its 8-7/8% Series B Senior Notes due 2008 (the Exchange
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of its issued and
outstanding 8-7/8% Series A Senior Notes due 2008 (the "Outstanding Notes"),
upon the terms and subject to the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered.
We are the holder of record of Outstanding Notes held by us for your own
account. A tender of such Outstanding Notes can be made only by us as the
record holder and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Outstanding Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of the
Outstanding Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations and warranties contained in the Letter
of Transmittal.
Very truly yours,
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE.
-20-
<PAGE>
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated August
20, 1998 (the "Prospectus") of Nuevo Energy Company, a Delaware corporation (the
"Company") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange its 8-7/8% Series B Senior Notes due 2008 (the "Exchange
Notes"), for all of its outstanding 8-7/8% Series A Senior Notes due 2008 (the
"Outstanding Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Outstanding Notes held by you for the account
of the undersigned.
The aggregate face amount of the Outstanding Notes held by you for the
account of the undersigned is (FILL IN AMOUNT):
$__________ of the 8-7/8% Series A Senior Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] To TENDER the following Outstanding Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF OUTSTANDING NOTES TO BE
TENDERED) (IF ANY):
[_] NOT to TENDER any Outstanding Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Outstanding Notes held by
you for the account of the undersigned, it is understood that you are
authorized to make, on behalf of the undersigned (and the undersigned by
its signature below, hereby makes to you), the representations and
warranties contained in the Letter of Transmittal that are to be made with
respect to the undersigned as a beneficial owner, including but not limited
to the representations, that (i) the Exchange Notes acquired in exchange
for Outstanding Notes pursuant to the Exchange Offer are being acquired in
the ordinary course of business of the person receiving such Exchange
Notes, whether or not the undersigned, (ii) the undersigned is not
participating in and does not intend to participate in a distribution of
the Exchange Notes, (iii) the undersigned does not have any arrangement or
understanding with any person to participate in the distribution of
Exchange Notes, and (iv) neither the undersigned nor any such other person
is an "affiliate" (within the meaning of Rule 405 under the Securities Act
of 1933, as amended) of the Company. If the undersigned is a broker-dealer
that will receive Exchange Notes for its own account in exchange for
Outstanding Notes, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
SIGN HERE
Name of beneficial owner(s):____________________________________________________
Signature(s)
Name(s):________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print)
Address:________________________________________________________________________
Telephone number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
-21-
<PAGE>
NUEVO ENERGY COMPANY
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING
8-7/8% SERIES A SENIOR NOTES DUE 2008
IN EXCHANGE FOR
8-7/8% SERIES B SENIOR NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
SEPTEMBER 24, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE")
OUTSTANDING NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY
TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO THE
EXPIRATION DATE UNLESS PREVIOUSLY ACCEPTED FOR EXCHANGE.
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the offer
by Nuevo Energy Company, a Delaware corporation (the "Company"), to exchange its
8-7/8% Series B Senior Notes due 2008 (the "Exchange Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for a like principal amount of its issued and outstanding 8-7/8% Series A Senior
Notes due 2008 (the "Outstanding Notes") upon the terms and subject to the
conditions set forth in the Company's Prospectus, dated August 20, 1998, and the
related Letter of Transmittal (which together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated August 20, 1998;
2. Letter of Transmittal (together with accompanying Substitute Form W-9
Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you hold
Outstanding Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with such client's
instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Outstanding Notes
will make certain representations, including but not limited to, representations
that (i) the Exchange Notes acquired in exchange for Outstanding Notes pursuant
to the Exchange Offer are being acquired in the ordinary course
-22-
<PAGE>
of business of the person receiving such Exchange Notes, whether or not the
undersigned, (ii) the undersigned is not participating in and does not intend to
participate in a distribution of the Exchange Notes, (iii) the undersigned does
not have any arrangement or understanding with any person to participate in the
distribution of Exchange Notes, and (iv) neither the undersigned nor any such
other person is an "affiliate" (within the meaning of Rule 405 under the
Securities Act of 1933, as amended) of the Company. If the holder is a broker-
dealer that will receive Exchange Notes for its own account in exchange for
Outstanding Notes, it acknowledges that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The enclosed Letter to Clients contains an authorization by the beneficial
owners of the Outstanding Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or dealer or
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Outstanding Notes pursuant to the Exchange Offer.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
NUEVO ENERGY COMPANY
-23-
