<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 1997
REGISTRATION NO. 333-19433
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HS RESOURCES, INC.
HSRTW, INC.
ORION ACQUISITION, INC.
(Exact name of registrant as specified in its charter)
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HS RESOURCES, INC.
94-3036864
HSRTW, INC.
93-1200451
ORION ACQUISITION, INC.
DELAWARE 1311 93-1200453
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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ONE MARITIME PLAZA
15TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111
(415) 433-5795
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
------------------------
JAMES M. PICCONE, ESQ.
GENERAL COUNSEL
HS RESOURCES, INC.
1999 BROADWAY, SUITE 3600
DENVER, COLORADO 80202
(303) 296-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
It is requested that copies of communications be sent to:
RONALD R. LEVINE II, ESQ.
DAVIS, GRAHAM & STUBBS LLP
370 SEVENTEENTH STREET, SUITE 4700
DENVER, COLORADO 80202
(303) 892-9400
------------------------
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, please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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==============================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE(1)
- --------------------------------------------------------------------------------------------------------------
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9 1/4% Senior Subordinated Notes
due 2006......................... $150,000,000 100% $150,000,000 $45,455
- --------------------------------------------------------------------------------------------------------------
Guaranties of 9 1/4% Senior
Subordinated Notes............... (2) (2) (2) (2)
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(1) Fee paid on January 8, 1997.
(2) No separate consideration will be received for the guaranties of the debt
securities registered hereby.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 20, 1997
PRELIMINARY PROSPECTUS
HS RESOURCES, INC.
OFFER TO EXCHANGE ITS 9 1/4% SENIOR SUBORDINATED NOTES DUE 2006 THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON APRIL 21, 1997,
UNLESS EXTENDED (THE "EXPIRATION DATE")
HS Resources, Inc., a Delaware corporation (the "Company" or "HSR"), 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 $150,000,000 aggregate
principal amount of its 9 1/4% Senior Subordinated Notes due 2006 (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 herein)
of which this Prospectus constitutes a part, for a like principal amount of its
outstanding 9 1/4% Senior Subordinated Notes due 2006 (the "Outstanding Notes"
and, together with the Exchange Notes, the "Notes"), of which $150,000,000
aggregate principal amount is outstanding. The Exchange Notes and the
Outstanding Notes are collectively referred to herein as the "Notes."
The terms of the Exchange Notes are identical in all material respects to
the 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 generally will
not be entitled to registration rights, and (ii) the Exchange Notes will not
provide for any increase in the interest rate thereon related to such
registration rights. In that regard, the Outstanding Notes provide that if an
exchange offer registration statement is (i) not filed by January 24, 1997 or
(ii) not declared effective by March 27, 1997, 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. In
addition, (i) if an exchange offer is not consummated or a resale shelf
registration statement is not declared effective by April 25, 1997 or (ii) if
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions),
Special Interest will accrue and be payable semi-annually until such time as an
exchange offer is consummated or a resale shelf registration statement is
declared effective, as the case may be. See "Description of the Exchange Notes"
and "Description of the Outstanding Notes." The Exchange Notes are being offered
for exchange in order to satisfy certain obligations of the Company under the
Registration Agreement dated November 27, 1996 (the "Registration Agreement")
between the Company and the Initial Purchasers (as defined) of the Outstanding
Notes. The Exchange Notes will be issued under the same Indenture (as defined)
as the Outstanding Notes and the Exchange Notes and the Outstanding Notes will
constitute a single series of debt securities under the Indenture. In the event
that 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 amount of Notes have taken certain actions or exercised certain rights
under the Indenture.
The Exchange Notes will be general, unsecured obligations of the Company,
subordinated in right of payment to all existing and any future Senior
Indebtedness (as defined) of the Company. The Exchange Notes will rank pari
passu with existing and any future senior subordinated indebtedness and senior
to any future subordinated indebtedness of the Company. See "Description of the
Exchange Notes -- Subordination." The Exchange Notes will be fully and
unconditionally guaranteed on an unsecured, senior subordinated basis by certain
Restricted Subsidiaries (as defined). Each of the current Subsidiary Guarantors
(as defined) is a borrower under, or guarantor of, the Chase Facility (as
defined), which ranks senior to the Exchange Notes, and the obligations under
the Chase Facility are secured by a significant portion of the assets of the
Company. In addition, all indebtedness and liabilities of the Company's
subsidiaries that are not Subsidiary Guarantors will be effectively senior in
right of payment to the Exchange Notes and the Subsidiary Guaranties (as
defined). As of December 31, 1996, (i) Senior Indebtedness was approximately
$174.7 million, (ii) senior subordinated indebtedness was approximately $225.0
million, (iii) the total consolidated indebtedness of the Company was
approximately $399.7 million and (iv) the total liabilities and indebtedness of
the Company's subsidiaries that are not Subsidiary Guarantors (including trade
payables, deferred taxes and accrued liabilities), on an aggregate basis, was
approximately $5.5 million. The Indenture permits the Company and its Restricted
Subsidiaries to incur additional Indebtedness (as defined) under certain
circumstances. See "Use of Proceeds," "Description of Other Indebtedness" and
"Description of the Exchange Notes."
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, starting on
the Expiration Date and ending on the close of business on the first anniversary
of the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. 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 PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE> 3
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
JAMES M. PICCONE, SECRETARY, HS RESOURCES, INC., 1999 BROADWAY, SUITE 3600,
DENVER, COLORADO 80202, TELEPHONE (303) 296-3600. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY APRIL 11, 1997.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporate Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the staff
of the Division of Corporate Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporate Finance, and subject to the two immediately following
sentences, the Company believes that the Exchange Notes issued pursuant to this
Exchange Offer in exchange for the Outstanding Notes may be offered for resale,
resold and otherwise transferred by a holder thereof (other than a holder who is
a broker-dealer) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such 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. However, any holder of the Outstanding Notes who is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or who intends to participate in the Exchange Offer for the
purpose of distributing Exchange Notes, or any broker-dealer who purchased
Outstanding Notes from the Company to resell pursuant to Rule 144A under the
Securities Act ("Rule 144A") or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporate 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. Each broker-dealer
that receives Exchange Notes for its own account 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, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." In the event that applicable interpretations
by the staff of the Division of Corporate Finance of the Commission 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 provisions 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 not an "affiliate" of the Company, (ii) any Exchange Notes to be received
by it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such 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 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 Corporate Finance of the
Commission in the interpretive letters referred to above, 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 the prospectus delivery requirements with respect
to the Exchange Notes received upon exchange of such
2
<PAGE> 4
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, that 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 one year
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. See "The Exchange Offer -- Resales of
Exchange Notes."
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 untrue in
any material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration 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 each such
Participating Broker-Dealer or the Company has give notice that the sale of
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 one-year
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.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Outstanding Notes. The Exchange Notes will be a new
issue of securities for which there is currently no market. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Exchange Notes. Although the Initial Purchasers have informed the Company that
they each currently intend to make a market in the Exchange Notes, they are not
obligated to do so, and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Exchange Notes. The Company currently does not
intend to apply for listing of the Exchange Notes on any securities exchange or
for quotation through the National Association of Securities Dealers Automated
Quotation System.
Any Outstanding Notes not tendered and accepted in the Exchange Offer will
remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Indenture (except
for those rights that terminate upon the consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Outstanding Notes
will continue to be subject to the existing restrictions upon transfer thereof
and the Company will have no further obligation to such holders (other than
Initial Purchasers or under certain limited circumstances relating to holders
who are not eligible to participate in the Exchange Offer) to provide the
registration under the Securities Act of the Outstanding Notes held by them. 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
3
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Notes may encounter difficulties in selling such notes following the Exchange
Offer. See "Risk Factors -- Consequences of a Failure to Exchange Outstanding
Notes."
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.
Outstanding Notes may be tendered for exchange on or prior to 5:00 p.m.,
New York City time, on April 21, 1997, 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 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 that may be waived by the Company and to the terms and
provisions of the Registration Agreement. 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, except for any expenses
relating to the printing of this Prospectus, which printing expenses will be
paid by the Initial Purchasers. 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
November 27, 1996. 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 (as defined)
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 November 27, 1996. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of the Outstanding Notes as
of March 21, 1997.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. See "Use of Proceeds." No dealer-manager is being
used in connection with this Exchange Offer. See "Plan of Distribution."
Solicitation of tenders of Outstanding Notes may be made in person or by mail,
telephone or telegram, by directors, officers and regular employees of the
Company. Such persons will receive no additional compensation for any
solicitation activities. The Company may employ third-party agents to solicit
tenders of Outstanding Notes, for which services such agents would be paid their
usual and customary fee.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY
JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
OR ITS SUBSIDIARIES SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
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AVAILABLE INFORMATION....................................... 5
INCORPORATION BY REFERENCE.................................. 6
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS............. 6
PROSPECTUS SUMMARY.......................................... 7
RISK FACTORS................................................ 12
THE EXCHANGE OFFER.......................................... 19
USE OF PROCEEDS............................................. 29
DESCRIPTION OF OTHER INDEBTEDNESS........................... 30
DESCRIPTION OF THE EXCHANGE NOTES........................... 32
DESCRIPTION OF THE OUTSTANDING NOTES........................ 64
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 64
PLAN OF DISTRIBUTION........................................ 68
LEGAL MATTERS............................................... 69
EXPERTS..................................................... 69
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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 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 material 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. HSR's common stock is listed on the New York Stock Exchange (the
"NYSE"). Reports, proxy and information statements and other information
relating to HSR can be inspected at the offices of the NYSE at 20 Broad Street,
New York, New York 10005. In addition, for so long as any of the Outstanding
Notes remains outstanding, the Company and the Subsidiary Guarantors have agreed
to make available to any prospective purchaser of the Outstanding Notes or
beneficial owner of the Outstanding Notes in connection with any sale thereof
the information required by Rule 144A(d)(4) under the Securities Act. Any such
request and requests for the agreements summarized herein should be directed to
James M. Piccone, Secretary, HS Resources, Inc., 1999 Broadway, Suite 3600,
Denver, Colorado 80202, telephone (303) 296-3600.
This Prospectus constitutes a part of a registration statement on Form S-4
(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.
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<PAGE> 7
INCORPORATION BY REFERENCE
The Company's annual report on Form 10-K for the year ended December 31,
1996, as amended by the Company's Form 10-K/A-1, is incorporated by reference in
this Prospectus. All documents filed by the Company with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the Exchange Offer shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. 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 that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of
this Prospectus.
Upon request, the Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered a copy of any documents
incorporated by reference herein (other than exhibits unless the exhibits are
specifically incorporated by reference into this Prospectus). Requests should be
directed to James M. Piccone, HS Resources, Inc., 1999 Broadway, Suite 3600,
Denver, Colorado 80202.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes statements that are not purely historical and are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, including statements regarding the
Company's expectations, hopes, beliefs, intentions or strategies regarding the
future. All statements other than statements of historical facts included in
this Prospectus, including without limitation, statements under "Prospectus
Summary" and "Risk Factors," regarding reserves and their values, the Company's
financial position, business strategy and other plans and objectives for future
operations, and future oil and natural gas demand, supply, marketing,
transportation and pricing factors, are forward-looking statements. All
forward-looking statements included in this Prospectus are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update such forward-looking statements. Although the Company
believes that the assumptions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct or that the Company will take any actions that may
presently be planned. There are numerous uncertainties inherent in estimating
quantities of proved oil and natural gas reserves and projecting future rates of
production and timing of development expenditures, including many factors beyond
the control of the Company. Certain important factors that could cause actual
results to differ materially from the Company's expectations are disclosed under
"Risk Factors" and elsewhere in this Prospectus. All subsequent written or oral
forward-looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by such factors.
6
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements, the Unaudited Pro Forma Combined Financial Statements and
the notes thereto appearing elsewhere or incorporated by reference in this
Prospectus. The pro forma combined statement of operations and reserve
information give effect to (i) the acquisition of certain assets from Basin
Exploration, Inc. ("Basin") in March and June 1996 (the "Acquisitions") and (ii)
the merger with Tide West Oil Company ("Tide West") in June 1996 (the "Merger").
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 "HSR" or the "Company" are to HS
Resources, Inc. and its subsidiaries.
THE EXCHANGE OFFER
EXCHANGE OFFER............ Up to $150,000,000 aggregate principal amount of
Exchange Notes are being offered in exchange for like
aggregate 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
integral multiples thereof. The Company is making the
exchange 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
November 27, 1996 to Salomon Brothers Inc, Chase
Securities Inc., Lehman Brothers Inc. and Prudential
Securities Incorporated (collectively, the "Initial
Purchasers"), who placed the Outstanding Notes with
Qualified Institutional Buyers ("QIBs") and
institutional accredited investors. 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.
EXPIRATION DATE........... 5:00 p.m., New York City time, on April 21, 1997
unless the Exchange Offer is extended by the Company.
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 tendered or
accepted for exchange.
The Company reserves the right (i) to delay the
acceptance of the Outstanding Notes for exchange,
(ii) to terminate or amend 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 or (iv) to waive any condition or
otherwise amend the terms of the Exchange Offer in
any respect. See "The Exchange Offer -- Conditions to
the Exchange Offer."
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,
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<PAGE> 9
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such
Outstanding Notes and any other required
documentation to the Exchange Agent (as defined) at
the address set forth herein. By executing the Letter
of Transmittal each holder will represent to the
Company that, among other things, (i) the Exchange
Notes acquired pursuant to the Exchange Offer by the
holder and any beneficial owners of Outstanding Notes
are being acquired in the ordinary course of business
of the person receiving such Exchange Notes, (ii)
neither the holder nor such beneficial owner is
participating in, intends to participate in or has an
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes and (iii) neither the holder nor such
beneficial owner is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or,
if it is an affiliate of the Company, that it will
comply with the registration and prospectus delivery
requirements of the Securities Act to the extent
applicable. Each broker-dealer that receives Exchange
Notes for its own account in exchange for Outstanding
Notes, where such Outstanding Notes were acquired by
such broker or dealer as a result of market making
activities or other trading activities, may
participate in the Exchange Offer but may be deemed
an "underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Company has undertaken, for a period of one year
from the consummation of the Exchange Offer, to
maintain the effectiveness of this Prospectus for use
in satisfaction of such persons' obligations to
deliver a prospectus. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a broker or dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. See "The Exchange
Offer -- Resales of Exchange 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.
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
must tender their Outstanding Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS......... Tenders may be withdrawn at any time prior to the
Expiration Date. See "The Exchange
Offer -- Withdrawal Rights."
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<PAGE> 10
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............ The exchange of the Outstanding Notes for Exchange
Notes by tendering holders will 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............ Harris Trust Company of New York is serving as
Exchange Agent in connection with the Exchange Offer.
See "The Exchange Offer -- Exchange Agent."
THE EXCHANGE NOTES
EXCHANGE NOTES............ $150,000,000 in aggregate principal amount of 9 1/4%
Senior Subordinated Notes due 2006. 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 Exchange
Notes."
MATURITY.................. November 15, 2006.
INTEREST ON THE
EXCHANGE NOTES.......... The Exchange Notes will bear interest at the rate of
9 1/4% per annum, payable semiannually on May 15 and
November 15, commencing May 15, 1997.
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 November 15, 2001, at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, to the date of redemption. In addition, prior
to November 15, 1999, up to 33 1/3% of the aggregate
principal amount of the Notes originally issued is
redeemable at the option of the Company, in whole or
in part, from time to time, at 109.25% 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 Exchange
Notes -- Optional Redemption."
SUBSIDIARY GUARANTIES..... The Exchange Notes will be unconditionally guaranteed
on a senior subordinated basis by each of the Initial
Subsidiary Guarantors (as defined) under the
Subsidiary Guaranties and by certain Restricted
Subsidiaries of the Company if they become a
Significant Subsidiary (as defined) in the future.
See "Description of the Exchange Notes -- Subsidiary
Guaranties."
SUBORDINATION OF EXCHANGE
NOTES AND SUBSIDIARY
GUARANTIES.............. The Exchange Notes and the Subsidiary Guaranties will
be general, unsecured obligations of the Company and
the Subsidiary Guarantors, as applicable. The Notes
and the Subsidiary Guaranties will be subordinated
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<PAGE> 11
in right of payment to all existing and any future
Senior Indebtedness, will rank pari passu with
existing and any future senior subordinated
indebtedness and senior to any future subordinated
indebtedness of the Company or the Subsidiary
Guarantors, as applicable. See "Description of the
Exchange Notes -- Subordination." As of December 31,
1996, (i) Senior Indebtedness was approximately
$174.7 million, (ii) senior subordinated indebtedness
was approximately $225.0 million, (iii) the total
consolidated indebtedness of the Company was
approximately $399.7 million and (iv) the total
liabilities and indebtedness of the Company's
subsidiaries that are not Subsidiary Guarantors
(including trade payables, deferred taxes and accrued
liabilities), on an aggregate basis, was
approximately $5.5 million. Subject to certain
limitations set forth in the Indenture, the Company
and its subsidiaries (including the Subsidiary
Guarantors) may incur additional indebtedness
including indebtedness that would be senior to or
pari passu with the Notes. See "Description of Other
Indebtedness" and "Description of the Exchange
Notes -- Certain Covenants" herein and "Management's
Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital
Resources" in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996,
which is incorporated herein by reference.
CHANGE OF CONTROL......... Upon the occurrence of a Change of Control (as
defined), each holder of the Exchange Notes may
require the Company to purchase for cash such
holder's Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to
the date of purchase. In the event of a Change of
Control, there can be no assurance that the Company
or the Subsidiary Guarantors will have the financial
resources or be permitted under the terms of their
other indebtedness to repurchase the Exchange Notes.
See "Risk Factors -- Risks Relating to a Change of
Control" and "Description of the Exchange
Notes -- Repurchase at the Option of Holders Upon a
Change of Control."
CERTAIN COVENANTS......... The Indenture pursuant to which the Exchange Notes
will be issued contains certain covenants that, among
other things, limit the ability of the Company and
its Restricted Subsidiaries to (i) incur additional
Indebtedness, (ii) incur Indebtedness that is
subordinate to Senior Indebtedness but senior to the
Exchange Notes, (iii) incur secured Indebtedness that
is not Senior Indebtedness, (iv) pay dividends or
make other distributions with respect to the Capital
Stock (as defined) or Redeemable Stock (as defined)
of the Company or to purchase, redeem or retire
Capital Stock or Redeemable Stock of the Company or
any Affiliate (as defined) thereof or make other
Restricted Payments (as defined), (v) enter into
certain transactions with Affiliates, (vi) create
certain liens, (vii) enter into certain
consolidations, mergers and transfers of assets,
(viii) issue any Capital Stock of a Restricted
Subsidiary or permit any Person (as defined) other
than the Company or a Restricted Subsidiary to own
such stock, (ix) permit any Restricted Subsidiary to
suffer to exist certain types of restrictions on the
ability of Restricted Subsidiaries to pay dividends
and make other transfers of assets to the Company and
other Restricted Subsidiaries and (x) dispose of the
proceeds of certain asset sales. All of these
limitations are subject to a number of important
qualifications. See "Description of the Exchange
Notes -- Certain Covenants" and "-- Merger,
Consolidation and Sale of Substantially All Assets."
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LISTING................... None. See "Risk Factors -- Lack of Public Market."
SINKING FUND.............. None.
For additional information with respect to the Exchange Notes (including defined
terms), see "Description of the Exchange Notes."
RISK FACTORS
An investment in the Exchange Notes involves certain risks that a potential
purchaser should carefully evaluate prior to making such an investment. See
"Risk Factors."
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<PAGE> 13
RISK FACTORS
Holders of the Outstanding Notes should consider carefully the specific
factors set forth below, as well as the other information set forth elsewhere in
this Prospectus, in connection with their investment in the Company and in
considering the Exchange Offer.
VOLATILITY OF OIL AND NATURAL GAS PRICES; MARKETABILITY OF PRODUCTION
The Company's revenues, profitability and future rate of growth are
substantially dependent upon prevailing prices for its oil and natural gas.
Hydrocarbon prices can be extremely volatile and in recent years have been
depressed at times by warm weather, weak demand and excess total domestic and
imported supplies. Oil and natural gas prices have risen recently, but there can
be no assurance that such price levels will be sustained. Prices are also
affected by actions of state and local agencies, the United States and foreign
governments and international cartels. These external factors and the volatile
nature of the energy markets make it difficult to estimate accurately future
prices of oil and natural gas. Prices for D-J Basin natural gas, which
represents a significant portion of the Company's overall production, were
depressed until recently and have at times been more volatile than the prices
prevailing in the broader United States natural gas market. Although from time
to time the Company hedges a portion of its oil and natural gas production to
provide some protection from price declines, any substantial or extended decline
in the price of oil or natural gas would have a material adverse effect on the
Company's financial condition and results of operations. The marketability of
the Company's production depends upon the availability and capacity of
refineries, natural gas gathering systems, pipelines and processing facilities.
Federal and state regulation of oil and natural gas production and
transportation, general economic conditions and changes in supply and demand all
could adversely affect the Company's ability to produce and market its oil and
natural gas. If market factors were to change dramatically, the financial impact
on the Company could be substantial. The availability of markets and the
volatility of product prices are beyond the control of the Company and thus
represent a significant risk. See "-- Governmental and Environmental Regulation"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, which is incorporated herein by reference.
EFFECTS OF LEVERAGE; EXISTING INDEBTEDNESS
As of December 31, 1996, the Company's total long-term debt was
approximately $399.7 million. The Company's leverage has important consequences
to holders of the Notes, including the following: (i) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired; (ii) a
portion of the Company's cash flow from operations must be dedicated to the
payment of the principal of and interest on its existing indebtedness; (iii)
certain of the Company's borrowings, principally those under the Chase Facility,
are at variable rates of interest, which may make the Company vulnerable to
increases in interest rates; and (iv) the terms of certain of the Company's
indebtedness permit its creditors to accelerate payments upon certain events of
default or a change of control of the Company. As of December 31, 1996,
excluding the effect of interest rate hedging arrangements covering $80 million
in principal amount of indebtedness, 43.8% of the aggregate borrowings of the
Company would have been floating rate obligations and 56.2% of the Company's
borrowings would have been fixed rate obligations, with an overall range of
interest rates from 6 5/8% to 9 7/8% per annum. See "Use of Proceeds" herein and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, which is incorporated
herein by reference.
The Chase Facility, the indenture under which the Company's 9 7/8% Notes
(as defined) were issued (the "Existing Indenture") and the Indenture impose
financial and other restrictions on the Company and its subsidiaries, including
limitations on the incurrence of additional indebtedness and limitations on the
sale of assets. The Chase Facility also requires the Company to (i) make
periodic payments of interest, (ii) make principal payments from the proceeds of
certain asset sales and in the event the Company's outstanding debt exceeds the
Borrowing Base (as defined therein), (iii) maintain certain financial ratios,
including interest coverage and leverage ratios and (iv) maintain a minimum
level of consolidated cash flow. There can be no
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<PAGE> 14
assurance that these requirements or other material requirements of the Chase
Facility will be met in the future. If they are not, the lenders under the Chase
Facility would be entitled to declare the indebtedness thereunder immediately
due and payable. Additionally, in the event of such an acceleration of
indebtedness by the lenders under the Chase Facility, a default would be deemed
to occur under the terms of the Notes and the 9 7/8% Notes. See "Description of
Other Indebtedness" and "Description of the Exchange Notes -- Events of Default
and Notice."
In addition, the Indenture and the Existing Indenture contain certain
restrictive covenants that may limit the ability of the Company to engage in
certain transactions. The restrictive covenants contained in the Indenture are
in many cases materially different from the restrictive covenants contained in
the Existing Indenture, and in certain cases, may allow the Company to engage in
transactions that are prohibited by the terms of the 9 7/8% Notes. The Company's
ability to take advantage of any such possible increased flexibility may be
limited during the period that the 9 7/8% Notes remain outstanding. Similarly,
the restrictive covenants in the Indenture may limit the ability of the Company
to engage in transactions permitted by the Existing Indenture. See "Description
of Other Indebtedness" and "Description of the Exchange Notes -- Certain
Covenants."
Moreover, in certain situations, holders of the 9 7/8% Notes have rights
that are senior to the rights of the holders of the Notes. Specifically, in the
event of an asset sale by the Company that triggers an obligation to offer to
purchase the 9 7/8% Notes and the Notes pursuant to their respective indentures,
the Company is required to fulfill such payment obligations relating to the
9 7/8% Notes prior to fulfilling such payment obligations relating to the Notes.
There can be no assurance that the Company will have sufficient funds to fulfill
its obligations under the Indenture in the event of such an asset sale. See
"Description of Other Indebtedness" and "Description of the Exchange
Notes -- Certain Covenants -- Limitation on Asset Sales."
Based upon the current and anticipated level of operations, the Company
believes that its cash flow from operations, together with the estimated net
proceeds from the sale of the Outstanding Notes, the proceeds available under
the Chase Facility and its other sources of liquidity, will be adequate to meet
its anticipated requirements in the foreseeable future for working capital,
capital expenditures, interest payments and scheduled principal payments. There
can be no assurance, however, that the Company's business will continue to
generate cash flow at or above current levels. If the Company is unable to
generate sufficient cash flow from operations to service its debt, it may be
required to refinance all or a portion of its existing debt, including the Notes
(provided the necessary consents are obtained), or to obtain additional
financing. There can be no assurance that any such refinancing would be possible
or that any additional financing could be obtained. The Company's ability to
meet its debt service obligations and reduce total indebtedness will be
dependent not only upon its future drilling and production performance, but also
on oil and natural gas prices, general economic conditions and financial,
business and other factors affecting the Company's operations, many of which are
beyond the Company's control. The Company's strategy and historical focus has
been, and is expected to continue to be, the development, acquisition,
exploitation, exploration, production and marketing of oil and natural gas. Each
of these activities requires substantial capital. The Company intends to finance
such capital expenditures in the future through cash flow from operations, the
incurrence of additional indebtedness and/or the issuance of additional equity
securities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, which is
incorporated herein by reference. For a more detailed description of certain of
the Company's outstanding indebtedness and loan covenants related thereto that
could limit the Company's operating and financial flexibility, see "Description
of Other Indebtedness."
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 the Trustee's right in certain cases to require the delivery of
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<PAGE> 15
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 currently intends to register under the Securities Act
Outstanding Notes that remain outstanding after consummation of the Exchange
Offer only if such Outstanding Notes are held by Initial Purchasers and persons
ineligible to participate in the Exchange Offer. 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 Exchange Notes."
The Indenture provides that if an exchange offer registration statement is
(i) not filed by January 24, 1997 or (ii) not declared effective by March 27,
1997, Special Interest 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. In addition, (i) if an exchange offer is not consummated or a
resale shelf registration statement is not declared effective by April 25, 1997
or (ii) if either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions),
Special Interest will accrue and be payable semi-annually until such time as an
exchange offer is consummated or a resale shelf registration statement is
declared effective, as the case may be. Following consummation of the Exchange
Offer neither the Outstanding Notes nor the Exchange Notes will be entitled to
any increase in the interest rate thereon. See "Description of the Outstanding
Notes" and "Description of the Exchange Notes."
SUBORDINATION OF THE NOTES AND THE SUBSIDIARY GUARANTIES
The Outstanding Notes are and the Exchange Notes will be subordinated in
right of payment to all present and future Senior Indebtedness of the Company,
including the principal, premium (if any) and interest with respect to the
Senior Indebtedness. The Notes will rank pari passu with all present and future
senior subordinated indebtedness of the Company and will rank senior to all
future Subordinated Indebtedness (as defined) of the Company. In addition, the
Subsidiary Guaranties will be subordinated in right of payment to all existing
and future Senior Indebtedness of the Subsidiary Guarantors, will rank pari
passu with all existing and future senior subordinated indebtedness of the
Subsidiary Guarantors and will rank senior to all future Subordinated
Indebtedness of the Subsidiary Guarantors. As of December 31, 1996, the Company
and the Subsidiary Guarantors had approximately $174.7 million of Senior
Indebtedness outstanding. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company, assets of the Company and the Subsidiary Guarantors will be
available to pay obligations of the Notes only after all Senior Indebtedness of
the Company and the Subsidiary Guarantors has been paid in full. There can be no
assurance that there will be sufficient assets to pay amounts due on all or any
of the Notes. The holders of any indebtedness of the Company's subsidiaries
other than the Subsidiary Guarantors will be entitled to payment thereof from
the assets of such subsidiaries prior to the holders of any general, unsecured
obligations of the Company, including the Notes. See "Description of the
Exchange Notes -- Subordination," "-- Subsidiary Guaranties" and "Description of
the Outstanding Notes."
The Notes are also unsecured and will be effectively subordinated to any
secured indebtedness of the Company. As of the date of this Prospectus, the
indebtedness outstanding under the Chase Facility is secured by liens on a
portion of the assets of the Company. Any Senior Indebtedness of the Company or
any Subsidiary Guarantor may be secured by all or a portion of the assets of the
Company or such Subsidiary Guarantor, as appropriate. The ability of the Company
to comply with the provisions of the Chase Facility or
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<PAGE> 16
any other Senior Indebtedness may be affected by events beyond the Company's
control. The breach of any such provisions could result in a default under the
Chase Facility or any other Senior Indebtedness, in which case, depending on the
actions taken by the lenders thereunder, or their successors or assignees, such
lenders could elect to declare all amounts borrowed under the Chase Facility or
any other Senior Indebtedness, together with accrued interest, to be due and
payable, and the Company and the Subsidiary Guarantors could be prohibited from
making payments of interest and principal on the Notes until the default is
cured or all Senior Indebtedness is paid or satisfied in full. In addition, such
lenders could proceed against the collateral, which constitutes a significant
portion of the Company's assets. See "Description of Other Indebtedness,"
"Description of the Exchange Notes -- Subordination" and "Description of the
Outstanding Notes."
FRAUDULENT CONVEYANCE
If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, or the Company as a
debtor-in-possession, were to determine under relevant Federal or state
fraudulent conveyance statutes that the Company did not receive fair
consideration or reasonably equivalent value for incurring indebtedness,
including the Notes, and that, at the time of such incurrence, the Company (i)
was insolvent, (ii) was rendered insolvent by reason of such incurrence or
grant, (iii) was engaged in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital or (iv)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, then such court, subject to applicable statutes
of limitation, could void the Company's obligations under the Notes, subordinate
the Notes to other indebtedness of the Company or take other action detrimental
to the holders of the Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value or the fair saleable value of all of that company's
property or if the present fair saleable value of that company's assets is less
than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and matured. Moreover, regardless of
solvency, a court could void an incurrence of indebtedness, including the Notes,
if it determined that such transaction was made with the intent to hinder, delay
or defraud creditors. In addition, a court could subordinate indebtedness,
including the Notes, to the claims of all existing and future creditors on
similar grounds. The Company believes that, after giving effect to the offering
of the Outstanding Notes, the Company was (i) neither insolvent nor rendered
insolvent by the incurrence of indebtedness in connection with the offering of
the Outstanding Notes, (ii) in possession of sufficient capital to run its
business effectively and (iii) incurring debts within its ability to pay as the
same mature or become due.
In addition, the Subsidiary Guaranties may be subject to review under
relevant Federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit brought by or on behalf of
creditors of the Subsidiary Guarantors. In such a case, the analysis set forth
above would generally apply, except that the Subsidiary Guaranties could also be
subject to the claim that, since the Subsidiary Guaranties were incurred for the
benefit of the Company (and only indirectly for the benefit of the Subsidiary
Guarantors), the obligations of the Subsidiary Guarantors thereunder were
incurred for less than reasonably equivalent value of fair consideration. A
court could void the Subsidiary Guarantors' obligation under the Subsidiary
Guaranties, subordinate the Subsidiary Guaranties to other indebtedness of the
Subsidiary Guarantors or take other action detrimental to the holders of the
Notes. See "Description of Other Indebtedness," "Description of the Exchange
Notes" and "Description of the Outstanding Notes."
ESTIMATION OF RESERVES
There are numerous uncertainties in estimating quantities of proved
reserves, future rates of production and the timing and success of development
expenditures, including many factors beyond the control of the Company. Thus,
the reserve data incorporated by reference in this Prospectus are calculated
estimates only. The Company's historical reserve information incorporated by
reference in this Prospectus represents estimates based on reports prepared by
the Company and, as to approximately 78% of such reserves, reviewed
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<PAGE> 17
by independent petroleum engineering consultants as of December 31, 1996.
Although the Company believes all of its reserve estimates to be reasonable,
reserve estimates are only estimates and should be expected to change as
additional information becomes available. Furthermore, estimates of oil and
natural gas reserves, of necessity, are projections based on engineering and
production data, and the interpretation thereof, the projection of future rates
of production and the timing and success of development expenditures.
Reserve engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be exactly measured, and the
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. Accordingly,
estimates of the economically recoverable quantities of oil and natural gas
attributable to any particular property or group of properties, classifications
of such reserves based on risk of recovery and estimates of the future net cash
flows expected therefrom, which are prepared by different engineers or by the
same engineers at different times, may vary substantially. Moreover, there can
be no assurance that the reserves set forth herein will ultimately be produced
or that the proved undeveloped reserves will be developed within the periods
anticipated. Variances from the estimates contained herein could be material. In
addition, the estimates of future net revenues from proved reserves of the
Company and the present value thereof are based upon certain assumptions about
production levels, prices and costs, which may be inaccurately estimated. With
respect to such estimates, the Company emphasizes that the discounted future net
cash flows should not be construed as representative of the fair market value of
the proved oil and natural gas properties belonging to the Company, as
discounted future net cash flows are based upon projected cash flows that do not
provide for changes in oil and natural gas prices or for changes in expenses and
capital costs. The accuracy of such estimates is highly dependent upon the
accuracy of the assumptions upon which they were based. Actual results may
differ materially from the results estimated. Holders of Outstanding Notes
making a decision whether to exchange such notes for Exchange Notes are
cautioned not to place undue reliance on the reserve data and resulting cash
flow estimates included in this Prospectus.
The Company accounts for its oil and natural gas producing activities under
the full cost method. This method imposes certain limitations on the carrying
(book) value of proved oil and natural gas properties and requires a writedown
of such assets for accounting purposes if such limits are exceeded. The risk
that the Company will be required to write down the carrying value of its oil
and natural gas properties increases as oil and natural gas prices decline or
remain depressed. If a writedown is required, it would result in a non-cash
charge to earnings. In the past, the Company has not been required to write down
its oil and natural gas properties. However, no assurance can be given that the
Company will not be required to make such a writedown in the future.
REPLACEMENT OF RESERVES
HSR's future performance depends in part upon its ability to acquire, find
and develop additional oil and natural gas reserves that are economically
recoverable. Without successful acquisition, exploration or development
activities, HSR's reserves will decline. No assurance can be given that HSR will
be able to acquire or find and develop additional reserves on an economic basis.
HSR's business is capital intensive and, to maintain its asset base of
proved oil and natural gas reserves, a significant amount of cash flow from
operations must be reinvested in property acquisitions, development or
exploration activities. To the extent cash flow from operations is reduced and
external sources of capital become limited or unavailable, HSR's ability to make
the necessary capital investments to maintain or expand its asset base would be
impaired. Without such investment, HSR's oil and natural gas reserves would
decline.
HSR's strategy will include continued exploitation and exploration of its
existing properties and may include opportunistic acquisitions of other oil and
natural gas properties. The successful acquisition of producing properties
requires an assessment of recoverable reserves, future oil and natural gas
prices and operating costs, potential environmental and other liabilities and
other factors. Such assessments are necessarily inexact and their accuracy
inherently uncertain. There can be no assurance that HSR's acquisition
activities and exploration and development projects will result in increases in
reserves. HSR's operations may be curtailed, delayed or canceled as a result of
a lack of adequate capital and other factors, such as title
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problems, weather, compliance with governmental regulations or price controls,
mechanical difficulties or shortages or delays in the delivery of equipment.
Furthermore, while HSR's revenues may increase if prevailing natural gas and oil
prices increase significantly, HSR's finding costs for additional reserves could
also increase. In addition, the costs of exploration and development may
materially exceed initial estimates.
SIGNIFICANTLY INCREASED OPERATIONS
The Acquisitions and the Merger substantially increased the Company's
reserves, cash flow and production. The Company's ability to achieve any
advantages from the Acquisitions and the Merger will depend in large part on
successfully integrating the properties and personnel of the acquired entities
into the operations of the Company. No assurances can be made that the Company
will be able to achieve such integration successfully.
RISKS OF HEDGING AND TRADING TRANSACTIONS
In order to manage its exposure to price risks in the marketing of its oil
and natural gas and in connection with its trading activities, HSR has in the
past entered and may in the future enter into oil and natural gas futures
contracts on the New York Mercantile Exchange ("NYMEX"), fixed price delivery
contracts and financial swaps. Those transactions that are intended to reduce
the effects of volatility of the price of oil and natural gas may limit
potential gains by HSR if oil and natural gas prices were to rise substantially
over the price established by the hedge. In addition, HSR's hedging and trading
may expose HSR to the risk of financial loss in certain circumstances, including
instances in which (i) production is less than expected, (ii) there is a
widening of price differentials between delivery points for HSR's production and
Henry Hub (in the case of NYMEX futures contracts) or delivery points required
by fixed price delivery contracts to the extent they differ from those of HSR's
production, (iii) HSR's customers or the counterparties to its futures contracts
fail to purchase or deliver the contracted quantities of oil or natural gas or
honor their financial commitments or (iv) a sudden, unexpected event materially
affects oil or natural gas prices. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, which is incorporated herein by reference.
RISKS RELATING TO A CHANGE OF CONTROL
Upon a Change of Control, holders of the Notes and the 9 7/8% Notes will
have the right to require the Company to repurchase all or any part of such
holders' notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase. The certain
events that constitute a Change of Control under the Indenture and the Existing
Indenture would constitute a default under the Chase Facility, which prohibits
the purchase of the Notes by the Company in the event of certain Change of
Control events unless and until such time as the Company's indebtedness under
the Chase Facility is repaid in full. There can be no assurance that the Company
and the Subsidiary Guarantors would have sufficient financial resources
available to satisfy all of its or their obligations under the Chase Facility,
the Notes and the 9 7/8% Notes in the event of a Change of Control. The
Company's failure to purchase the 9 7/8% Notes or the Notes would result in a
default under the Existing Indenture, the Indenture and under the Chase
Facility, each of which could have adverse consequences for the Company and the
holders of the Notes. See "Description of Other Indebtedness," "Description of
the Exchange Notes -- Repurchase at the Option of the Holders Upon a Change of
Control" and "Description of the Outstanding Notes." 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
repurchase 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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GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The Company's operations are subject to various Federal, state and local
governmental laws and regulations, which may be changed from time to time in
response to economic or political factors. Matters subject to regulation
include, but are not limited to, drilling and operations permits and approvals,
performance bonds, reports concerning operations, discharge and other permitting
requirements, the spacing of wells, unitization and pooling of properties and
taxation.
The Company's operations are subject to complex and constantly changing
environmental laws and regulations adopted by Federal, state and local
governmental authorities. Compliance with such laws has not had a material
adverse effect upon the Company to date. Nevertheless, the discharge of oil,
natural gas or other pollutants into the air, soil or water may give rise to
significant liabilities by the Company to the government and/or third parties,
and may require the Company to incur substantial costs for remediation.
Moreover, the Company has agreed to indemnify certain sellers of producing
properties from whom the Company has acquired properties against certain
liabilities for environmental claims associated with the properties purchased by
the Company. No assurance can be given that existing environmental laws or
regulations, as currently interpreted or as may be in the future, or future laws
or regulations will not materially adversely affect the Company's results of
operations and financial condition or that material indemnity claims will not
arise against the Company with respect to properties acquired by the Company.
Recently there has been an increased level of regulation of oil and natural
gas activities in Colorado. For example, the Colorado Oil and Gas Conservation
Commission adopted, and is considering the adoption of additional, stricter
regulation of matters such as soil conservation, land reclamation, fluid
disposal and bonding of oil and natural gas companies. Additionally, various
cities and counties are currently reviewing their ordinances to determine the
level of regulatory authority, if any, they should assert over such matters. At
present, it cannot be determined to what degree stricter regulations, if
adopted, would adversely affect the Company's operations.
OPERATING HAZARDS; UNINSURED RISKS
The Company's operations are subject to hazards and risks inherent in
drilling for and production and transportation of oil and natural gas, such as
fires, natural disasters, explosions, encountering formations with abnormal
pressures, blowouts, cratering, pipeline failures and spills, any of which can
result in loss of hydrocarbons, environmental pollution, personal injury claims
and other damage or impacts to properties of the Company and others, including
suspension of operations. The business is also subject to environmental hazards
such as oil spills, natural gas leaks, ruptures and discharges of toxic natural
gases, which could expose the Company to substantial liability due to pollution
and other environmental damage. The Company's coverages include, but are not
limited to, comprehensive general liability, automobile, personal injury, bodily
injury and property damage, pollution liability, physical damage on certain
assets, workers' compensation and control of well insurance. The Company
believes that its insurance is adequate and customary for companies of a similar
size engaged in operations similar to those of the Company, but losses could
occur for uninsurable or uninsured risks or in amounts in excess of existing
insurance coverage.
COMPETITION
The oil and natural gas industry is highly competitive. The Company
competes in the areas of property acquisitions and the development, production
and marketing of oil and natural gas with major oil companies, other independent
oil and natural gas concerns and individual producers and operators. The Company
also competes with major and independent oil and natural gas concerns in
recruiting and retaining qualified employees. Many of these competitors have
substantially greater financial and other resources than the Company.
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
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<PAGE> 20
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 Company has been advised by the Initial Purchasers that the Initial
Purchasers presently intend to make a market in the Exchange Notes. However, the
Initial Purchasers are not obligated to do so and any market making activity
with respect to the Exchange Notes may be discontinued at any time without
notice. In addition, 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.
Notwithstanding the registration of the Exchange Notes in the Exchange
Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of the Company may publicly offer for sale or resell the Exchange Notes
only in compliance with the provisions of Rule 144 under the Securities Act. See
"The Exchange Offer -- Resales of Exchange Notes."
Each broker-dealer that receives Exchange Notes for its own account 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, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "The Exchange Offer -- Resales of
Exchange Notes."
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
Company 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.
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.
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
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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 an exchange offer registration statement is (i) not filed
by January 24, 1997 or (ii) not declared effective by March 27, 1997, Special
Interest 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.
In addition, (i) if an exchange offer is not consummated or a resale shelf
registration statement is not declared effective by April 25, 1997 or (ii) if
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions),
Special Interest will accrue and be payable semi-annually until such time as an
exchange offer is consummated or a resale shelf registration statement is
declared effective, as the case may be. See "Description of the Outstanding
Notes" and "Risk Factors -- Consequences of a Failure to Exchange Outstanding
Notes."
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.
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 $150,000,000 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 $150,000,000 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.
The Exchange Offer is not conditioned upon any minimum number of
Outstanding Notes being tendered. As of the date of this Prospectus $150,000,000
aggregate principal amount of the Outstanding Notes is 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,"
"Description of the Exchange Notes -- Registration Rights Agreement" and
"Description of the Outstanding Notes."
If any tendered Outstanding Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted 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."
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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 April
21, 1997 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 the Company determines, in its sole and absolute
discretion, that 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 to the
extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Company may choose to make any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to 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) Outstanding Notes or a
book-entry confirmation of a book-entry transfer of Outstanding Notes into the
Exchange Agent's account at The Depositary Trust Company ("DTC"), (ii) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, and (iii) any other documents
required by the Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Outstanding Notes into the Exchange Agent's account at
DTC.
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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 oral
or 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 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
Except as set forth below, in order for Outstanding Notes to be validly
tendered pursuant to the Exchange Offer, the Exchange Agent must receive, at one
of its addresses set forth under "--Exchange Agent," a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents (collectively, the "Letter
of Transmittal") and either (i) tendered Outstanding Notes, or (ii) Outstanding
Notes tendered pursuant to the procedures for book-entry transfer set forth
below and a book-entry confirmation, in each case on or prior to the Expiration
Date, or (iii) Outstanding Notes tendered in accordance with the guaranteed
delivery procedures set forth below.
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.
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
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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, the Letter of Transmittal
must in any case be delivered to and received by the Exchange Agent at one of
the Exchange Agent's addresses 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 MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO , 1997.
Signature Guarantees
Certificates for the Outstanding Notes need not be endorsed and signature
guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate
for the Outstanding Notes is registered in a name other than that of the person
surrendering the certificate or (b) such registered holder completes the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Outstanding Notes must be duly endorsed or accompanied by a properly
executed bond power, with the endorsement or signature on the bond power and on
the Letter of Transmittal guaranteed by a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as an "eligible guarantor" institution,
including (as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities broker or dealer or government securities broker or
dealer; (iii) a credit union; (iv) a national securities exchange, registered
securities association or clearing agency; or (v) a savings association that is
a participant in a Securities Transfer Association (an "Eligible Institution"),
unless surrendered on behalf of such Eligible Institution. See Instruction 1 to
the Letter of Transmittal.
Guaranteed Delivery
If a holder desires to tender 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 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
Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Outstanding Notes, in proper form for transfer, together with a
properly completed and duly executed 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.
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, or of a book-entry confirmation with
respect to such Outstanding Notes, and a properly completed and duly executed
Letter of Transmittal (or facsimile thereof). 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.
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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) and acceptance for exchange 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.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Outstanding Notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF 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 in other transactions.
However, the Company has not sought its own interpretive letter and there can be
no assurance that the staff of the Division of Corporation Finance of the
Commission would make a 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 holder who is a broker-dealer) 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. However, any
holder of Outstanding Notes who is an "affiliate" of the Company or who intends
to participate in the Exchange Offer for the purpose of distributing Exchange
Notes, or any broker-dealer who purchased Outstanding Notes from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act, (a) will not be able to rely on the interpretations of the staff
of the Division of Corporation Finance of the Commission set forth in the above-
mentioned interpretive letters, (b) will not be permitted or entitled to tender
such 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
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<PAGE> 26
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.
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 not an Affiliate of the Company, (ii) any Exchange Notes to be received by
it are being acquired in the ordinary course of its business, (iii) it has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of such 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 acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company believes
that broker-dealers who acquired 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 which represent an unsold allotment from the original
sale of the Outstanding Notes) with a prospectus meeting the requirements of the
Securities Act, that 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 one year 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 or incorporated by reference in this Prospectus untrue in
any material respect or which causes this Prospectus to omit to state a material
fact necessary in order to make the statements contained or incorporated by
reference herein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration 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 one-year 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.
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<PAGE> 27
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Outstanding Notes may be
withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "-- Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Outstanding Notes to be withdrawn, the
aggregate principal amount of Outstanding Notes to be withdrawn, and (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 9 1/4% 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
November 27, 1996 (the date of original issuance of such Outstanding Notes).
Interest on the Exchange Notes will be payable semiannually on May 15 and
November 15 of each year, commencing on the first such date following the
original issuance date of the Exchange Notes.
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 November 27,
1996.
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 amend the Exchange Offer, if any of the following conditions
have occurred or exist or have not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Outstanding Notes to be offered for
resale, resold and otherwise transferred by holders thereof (other than
broker-dealers and
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<PAGE> 28
any such holder 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 such
Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes; 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 which, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer; or
(c) any law, statute, rule or regulation shall have been adopted or
enacted which, in the Company's judgment, would reasonably be expected to
impair the ability of the Company to proceed with the Exchange Offer; or
(d) a banking moratorium shall have been declared by United States
federal authorities that, in the Company's judgment, would reasonably be
expected to impair the ability of the Company to proceed with the Exchange
Offer; 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 which, in the Company's
judgment, would reasonably be expected to impair the ability of the Company
to proceed with the Exchange Offer; or
(f) a stop order shall have been issued by the Commission suspending
the effectiveness of the Registration Statement or proceedings shall have
been initiated or, to the knowledge of the Company, threatened for that
purpose; or
(g) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby; or
(h) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred that, in the sole judgment of the Company, might materially
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, 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
Harris Trust Company of New York, has been appointed as Exchange Agent for
the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
<TABLE>
<C> <C> <C>
By Mail: By Overnight Courier: By Hand:
Wall Street Station 77 Water Street, 4th Floor Receive Window
P.O. Box 1010 New York, NY 10005 77 Water Street, 5th Floor
New York, NY 10268-1010 New York, NY
By Facsimile Transmission:
(for Eligible Institutions
Only)
(212) 701-7636
(212) 701-7637
Confirm by Telephone:
(212) 701-7624
</TABLE>
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
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<PAGE> 29
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 are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of the Outstanding Notes tendered, 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.
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
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<PAGE> 30
USE OF PROCEEDS
The net proceeds from the sale of the Outstanding Notes, approximately
$144.9 million, were used to retire a portion of the outstanding indebtedness
under the Company's credit facility (as amended, the "Chase Facility") with The
Chase Manhattan Bank ("Chase"). Chase, which is the agent and a lender under the
Chase Facility, is an affiliate of Chase Securities Inc., one of the Initial
Purchasers. At December 31, 1996, $174.0 million was outstanding under the Chase
Facility, which has a final maturity in June 2001. Borrowings under the Chase
Facility bear interest at either the Base Rate (as defined) plus 0% to 0.5% or
LIBOR plus 0.75% to 1.5%, as determined by the Company. The weighted average
interest rate under the Chase Facility on December 31, 1996, (including the
effects of interest rate hedging arrangements covering $80 million in principal
amount of indebtedness) was 8.07%. The borrowings under the Chase Facility to be
repaid with the proceeds of the offering of the Outstanding Notes were used to
finance the Acquisitions and the Merger and for other corporate purposes. For
additional information regarding the Chase Facility, see "Description of Other
Indebtedness" herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, which is incorporated herein by reference.
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 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 Exchange Notes." The Outstanding Notes surrendered in exchange for the
Exchange Notes will be retired and cancelled 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> 31
DESCRIPTION OF OTHER INDEBTEDNESS
The following summaries of the Chase Facility and the Existing Indenture do
not purport to be complete and are subject to and qualified in their entirety by
reference to the applicable credit agreement and indenture, which are filed as
exhibits with the Commission.
CHASE FACILITY
On June 14, 1996, the Company entered into an Amended and Restated Credit
Agreement pursuant to the Chase Facility with Chase, as agent (the "Agent"), and
the lenders signatory thereto (the "Lenders") maturing on June 14, 2001. Amounts
borrowed under the Chase Facility are secured by a first lien on certain of the
Company's Wattenberg Field properties. Loans under the Chase Facility are
unconditionally guaranteed by Orion Acquisition, Inc., a Delaware corporation,
and HSRTW, Inc., a Delaware corporation, wholly owned subsidiaries of the
Company.
Interest and Fees
Outstanding borrowings under the Chase Facility bear interest at the option
of the Company at either (i) the Base Rate (defined as the higher of one-half of
one percent over the applicable federal funds rate, or the prime rate as
announced by Chase) plus the Applicable Margin or (ii) LIBOR plus the Applicable
Margin. The Applicable Margin ranges from 0.75% to 1.5% on EuroDollar loans and
0% to 0.5% on Base Rate loans depending on the percentage of the Threshold
Amount (as defined in the Chase Facility) utilized by the Company from time to
time. As of December 31, 1996, the Company had utilized 64.71% of the Borrowing
Base (as defined in the Chase Facility), and therefore, the Applicable Margin
was 1.125% for EuroDollar loans and 0.125% for Base Rate loans. The weighted
average interest rate under the Chase Facility on December 31, 1996, (including
the effects of interest rate hedging arrangements covering $80 million in
principal amount of indebtedness) was 8.07%. Commitment fees under the Chase
Facility range from 0.3% to 0.375% of the unutilized portion of the available
Borrowing Base, depending upon the percentage of the Borrowing Base utilized. As
of December 31, 1996, the applicable commitment fee was 0.375%.
Borrowing Base
The amount of credit available at any time under the Chase Facility is the
lesser of the Aggregate Maximum Credit Amount (initially $350 million) or the
Borrowing Base. The Borrowing Base was redetermined as of November 27, 1996, to
be $275 million. The Borrowing Base may be redetermined by the Agent and each
Lender from time to time.
Covenants
The Chase Facility contains customary affirmative and restrictive covenants
that, among other things, limit the Company and its subsidiaries with respect to
indebtedness, liabilities, liens, dividends, loans, investments and purchases
and sales of assets, unless certain consents are received from the Lenders
holding two-thirds of the outstanding borrowings under the Chase Facility.
Events of Default
The Chase Facility contains customary events of default, including, among
other things, and subject to applicable grace periods, payment defaults,
material misrepresentations, covenant defaults, certain bankruptcy events and
judgment defaults.
9 7/8% SENIOR SUBORDINATED NOTES DUE 2003
In November 1993, the Company publicly offered and sold $75,000,000
aggregate principal amount at maturity of 9 7/8% Senior Subordinated Notes due
2003 (the "9 7/8% Notes"). Interest on the 9 7/8% Notes is payable on June 1 and
December 1 of each year, and such payments commenced on June 1, 1994. The 9 7/8%
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after December 1,
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<PAGE> 32
1998, at the redemption prices set forth in the Existing Indenture, plus accrued
interest to the date of redemption. The 9 7/8% Notes are not subject to any
mandatory sinking fund.
Each holder of the 9 7/8% Notes may require the Company to repurchase such
holder's 9 7/8% Notes in the event of a Change of Control (as defined in the
Existing Indenture) at 101% of the principal amount thereof, plus accrued
interest to the date of repurchase.
The 9 7/8% Notes are general unsecured obligations of the Company
subordinated in right of payment to all existing and future senior indebtedness
of the Company. The 9 7/8% Notes are unconditionally guaranteed on a joint and
several basis by the Initial Subsidiary Guarantors. As of December 31, 1996,
there was approximately $75.0 million principal amount outstanding and
approximately $0.6 million accrued interest payable on the 9 7/8% Notes.
The Existing Indenture contains certain covenants that, among other things,
limit the ability of the Company and certain of its subsidiaries to pay
dividends or make certain other restricted payments, incur additional
indebtedness, enter into transactions with affiliates, incur liens, engage in
certain sale and leaseback arrangements, make certain asset dispositions and
merge or consolidate with, or transfer substantially all of their assets to, any
other person. The Existing Indenture also contains certain covenants that limit
the ability of certain subsidiaries to incur additional indebtedness, issue
preferred stock and restrict their ability to make payments to the Company. In
addition, the Company is obligated, under certain circumstances, to offer to
repurchase the 9 7/8% Notes at a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of repurchase, with the
net cash proceeds of certain sales or other dispositions of assets. Such
repurchase obligation is required to be satisfied prior to the satisfaction of
any similar obligation contained in the Indenture.
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<PAGE> 33
DESCRIPTION OF THE EXCHANGE NOTES
The Exchange Notes will be issued under an indenture (the "Indenture")
entered into among the Company, the Initial Subsidiary Guarantors and Harris
Trust and Savings Bank, as trustee (the "Trustee"). The Exchange Notes will be
issued under the same Indenture as the Outstanding Notes and the Exchange Notes
and the Outstanding Notes will constitute a single series of debt securities
under the Indenture. In the event that 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 amount of Notes (as defined herein) have
taken certain actions or exercised certain rights under the Indenture. The
Exchange Notes and the Outstanding Notes are sometimes collectively referred to
herein as the "Notes."
The terms of the Notes will 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 "1939 Act"). The following summary of certain terms and provisions
of the Notes and the Indenture does not purport to be complete and is qualified
in its entirety by reference to the 1939 Act, the Notes and the Indenture,
including the definitions therein of certain terms used below. A copy of the
Indenture and the form of Notes is available upon request to the Company at the
address set forth below under "Available Information."
The definitions of certain capitalized terms used in the following summary
are set forth below under "-- Certain Definitions." Capitalized terms used in
this summary and not otherwise defined below have the meanings assigned to them
in the Indenture. For purposes of this Section, references to the "Company"
shall mean HS Resources, Inc., excluding its Subsidiaries.
GENERAL
The Notes will mature on November 15, 2006, and will be limited to an
aggregate principal amount of $150,000,000. The Notes will bear interest at a
rate of 9 1/4% per annum from November 27, 1996 (the "Issue Date"), or from the
most recent interest payment date to which interest has been paid, payable
semiannually on May 15 and November 15 of each year, beginning on May 15, 1997,
to the person in whose name the Note (or any predecessor Note) is registered at
the close of business on the immediately preceding May 1 or November 1, as the
case may be.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at an office or agency of
the Company, one of which will be maintained for such purpose in The City of New
York (which initially will be the Corporate Trust Office of the Trustee) or such
other office or agency permitted under the Indenture. At the option of the
Company, payment of interest may be made by check mailed to the person entitled
thereto as shown on the Security Register. The Notes will be issued in
denominations of $1,000 and integral multiples thereof.
The payment of principal, premium, if any, and interest on the Notes is
unconditionally guaranteed on a senior subordinated and unsecured basis by the
Subsidiary Guarantors. Any Restricted Subsidiary that is a Significant
Subsidiary is required to be a Subsidiary Guarantor. See "-- Subsidiary
Guaranties."
SUBORDINATION
The Notes will be subordinated in right of payment to the prior payment in
full in cash of all existing and future Senior Indebtedness, pari passu in right
of payment with existing and any future Pari Passu Indebtedness (including the
9 7/8% Notes and amounts owed for goods, materials and services purchased in the
ordinary course of business), and senior in right of payment to any future
Subordinated Indebtedness of the Company. The Notes will be structurally
subordinated to all existing and future liabilities of Subsidiaries of the
Company other than the Subsidiary Guarantors. The Subsidiary Guaranties will be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of Subsidiary Guarantors, pari passu in right of payment with
existing and any future Pari Passu Indebtedness of Subsidiary Guarantors
(including any guaranties of the 9 7/8% Notes), and senior in right of payment
to any future Subordinated Indebtedness of the
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<PAGE> 34
Subsidiary Guarantors. The Subsidiary Guaranties will be structurally
subordinated to all existing and future liabilities of Subsidiaries of
Subsidiary Guarantors that are not also Subsidiary Guarantors.
As of December 31, 1996, the Company's outstanding Senior Indebtedness was
approximately $174.7 million, the Company's outstanding Pari Passu Indebtedness
(not including approximately $0.6 million of accrued interest on the 9 7/8%
Notes) was approximately $225.0 million (including $75.0 million aggregate
principal amount of outstanding 9 7/8% Notes), the Company had no outstanding
Subordinated Indebtedness, the total consolidated indebtedness of the Company
was approximately $399.7 million and the total liabilities and indebtedness of
the Company's Subsidiaries other than the Initial Subsidiary Guarantors
(including trade payables, deferred taxes and accrued liabilities) was
approximately $5.5 million. The Company and its Subsidiaries have other
liabilities, including contingent liabilities, which may be significant.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company and its Restricted Subsidiaries may Incur, the
amounts of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness or Pari Passu Indebtedness. See "Risk
Factors -- Subordination of the Notes and the Subsidiary Guaranties" and
"-- Certain Covenants -- Limitation on Indebtedness."
Upon any payment or distribution to creditors (whether in cash, property,
debt, equity or other securities, a combination thereof or otherwise) of the
Company in a voluntary or involuntary liquidation or dissolution of the Company,
whether total or partial, or in a bankruptcy, reorganization, insolvency,
receivership, assignment for the benefit of creditors, marshalling of assets or
similar proceeding relating to the Company or its property:
(i) holders of Senior Indebtedness shall be entitled to receive
payment in full in cash of all amounts due or to become due on or in
respect of all Senior Indebtedness before holders of the Notes shall be
entitled to receive any Note Payment (as defined); and
(ii) until all Senior Indebtedness is paid in full in cash, any Note
Payment to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture shall be made to holders of
Senior Indebtedness, as their interests may appear.
Upon any Senior Indebtedness becoming due and payable, whether at the
Stated Maturity thereof or by acceleration or otherwise, such Senior
Indebtedness shall be paid in full in cash, or the immediate payment thereof
duly provided for in cash, before the Company or any Person acting on behalf of
the Company shall directly or indirectly pay, prepay, redeem, retire, repurchase
or otherwise acquire for value, or make any deposits in respect of the discharge
or defeasance of, or make other payment or distribution (whether in cash,
property, securities or a combination thereof) on account of principal of (or
premium, if any) or interest on, any Notes (collectively, a "Note Payment").
No Note Payment shall be made if at the time of such Note Payment there
exists a default in payment of all or any portion of any Senior Indebtedness,
and such default shall not have been cured or waived in writing or the benefits
of this provision waived in writing by or on behalf of the holders of such
Senior Indebtedness. In addition, during the continuance of any event of default
(other than a default in payment of all or any portion of any Senior
Indebtedness) with respect to any Specified Senior Indebtedness, as such event
of default is defined therein or in the instrument under which it is
outstanding, permitting the holders of such Specified Senior Indebtedness to
accelerate the maturity thereof, and upon written notice thereof given by the
Principal Agent to the Trustee, with a copy to the Company (the delivery of
which shall not affect the validity of the notice thereof to the Trustee), then,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist, no Note Payment shall be made; provided that if the
holders of the Specified Senior Indebtedness to which the default related have
not declared such Specified Senior Indebtedness to be immediately due and
payable within 179 days after the occurrence of such default (or have declared
such Specified Senior Indebtedness to be immediately due and payable and within
such period have rescinded such declaration of acceleration), then the Company
shall resume making any and all unpaid scheduled Note Payments. In no event
shall such a payment blockage period described in the preceding sentence extend
beyond 179 days from the date on which such payment blockage period commenced.
Not more than one payment blockage period may be commenced within any
consecutive 365-day period with respect to the Notes. No event of default that
existed or was continuing on the date of the commencement of any payment
blockage period with respect to the Specified Senior Indebtedness initiating
such payment blockage period
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shall be, or be made, the basis for the commencement of a second payment
blockage period by the holder or holders of such Specified Senior Indebtedness
at any time after the 365-day period referred to in the preceding sentence
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days. A failure to make any payment with respect to the
Notes as a result of the rights of the holders of Senior Indebtedness described
in this paragraph will not have any effect on the right of the holders of the
Notes to accelerate the maturity thereof as a result of such payment default.
The Subsidiary Guaranties will be subordinated to Senior Indebtedness of a
Subsidiary Guarantor to the same extent and in the same manner as the Notes are
subordinated to Senior Indebtedness. In addition, the holders of Specified
Senior Indebtedness of a Subsidiary Guarantor will have rights corresponding to
those of holders of Specified Senior Indebtedness of the Company.
As a result of the subordination provisions described above, in the event
of insolvency of the Company, funds that would otherwise be payable to Holders
of Notes will be paid or turned over to the holders of Senior Indebtedness or
Senior Indebtedness of a Subsidiary Guarantor, as applicable, to the extent
necessary to pay such Senior Indebtedness or Senior Indebtedness of a Subsidiary
Guarantor, as applicable, in full.
The Indenture will provide that the subordination provisions of the
Indenture applicable to the Notes and the Subsidiary Guaranties may not be
amended, waived or modified in a manner that would adversely affect the rights
of the holders of any Specified Senior Indebtedness of the Company or any
Specified Senior Indebtedness of a Subsidiary Guarantor unless the holders of
such Indebtedness consent in writing (in accordance with the provisions of such
Indebtedness) to such amendment, waiver or modification.
SUBSIDIARY GUARANTIES
Under the circumstances described below, the Company's payment obligations
under the Notes will be jointly and severally guaranteed by the Subsidiary
Guarantors. The Subsidiary Guaranty of each Subsidiary Guarantor will be an
unsecured, senior subordinated obligation of such Subsidiary Guarantor. See
"-- Subordination." The only Subsidiary Guarantors of the Notes will be the
Initial Subsidiary Guarantors.
The Indenture will require the Company to cause any Restricted Subsidiary
that becomes a Significant Subsidiary (and any Significant Subsidiary that was
previously an Unrestricted Subsidiary which becomes a Restricted Subsidiary)
after the issuance of the Notes to execute and deliver to the Trustee a
supplemental indenture pursuant to which such Significant Subsidiary will become
a Subsidiary Guarantor. Subject to the preceding sentence, any Subsidiary
Guarantor that is no longer a Significant Subsidiary may, by execution and
delivery to the Trustee of a supplemental indenture satisfactory to the Trustee,
be released from its Subsidiary Guaranty and cease to be a Subsidiary Guarantor.
In addition, certain mergers, consolidations and dispositions of Property may
result in the addition of additional Subsidiary Guarantors and/or the release of
Subsidiary Guarantors. See "-- Merger, Consolidation and Sale of Substantially
All Assets." Any Subsidiary Guarantor that is designated an Unrestricted
Subsidiary in accordance with the terms of the Indenture shall be released from
and relieved of its obligations under its Subsidiary Guaranty pursuant to a
supplemental indenture satisfactory to the Trustee.
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 payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guaranty or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Subsidiary Guarantor under its
Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent
transfer under federal, state or foreign law. Each Subsidiary Guarantor that
makes a payment or distribution under a Subsidiary Guaranty shall be entitled to
a contribution from each other Subsidiary Guarantor in a pro rata amount based
on the Adjusted Net Assets of each Subsidiary Guarantor. See "Risk
Factors -- Fraudulent Conveyance."
Each Subsidiary Guarantor may merge or consolidate with or dispose of its
assets to the Company or a Wholly Owned Restricted Subsidiary that is a
Subsidiary Guarantor except to the extent any such transaction is limited by the
covenant described under "-- Merger, Consolidation and Sale of Substantially All
Assets."
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<PAGE> 36
In addition, each Subsidiary Guarantor may merge or consolidate with or dispose
of its assets to any Person (other than the Company or a Wholly Owned Restricted
Subsidiary that is a Subsidiary Guarantor), regardless of whether such Person is
an Affiliate of such Subsidiary Guarantor, if (i) immediately after such
transaction, and giving effect thereto, no Default or Event of Default has
occurred and is continuing;(ii) such transaction was subject to, and consummated
in compliance with, as appropriate, either the covenant described under the
caption "Certain Covenants -- Limitation on Asset Sales" or the covenant
described under the caption "Merger, Consolidation and Sale of Substantially All
Assets"; and (iii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such transaction
complies with the above provisions and that all conditions precedent relating to
such transaction have been complied with.
OPTIONAL REDEMPTION
The Notes are not redeemable prior to November 15, 2001. At any time on or
after November 15, 2001, the Notes are redeemable at the option of the Company,
in whole or in part, on not less than 30 nor more than 60 days' notice, at the
following redemption prices (expressed as percentages of principal amount), plus
accrued and unpaid interest (if any) to the date of redemption.
If redeemed during the 12-month period commencing November 15 of the years
indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2001........................................................ 104.625%
2002........................................................ 103.083%
2003........................................................ 101.542%
2004 and thereafter......................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to November 15, 1999, the Company may
redeem up to 33 1/3% of the aggregate principal amount of the Notes originally
outstanding at a redemption price of 109.25% of the principal amount thereof,
plus accrued and unpaid interest (if any) thereon to the redemption 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 immediately after the occurrence of such redemption;
and provided, further, that such redemption shall occur not later than 75 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.
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such holder's Exchange Notes pursuant to the
offer described below (the "Change of Control Offer") at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon to the purchase date (the "Change of Control
Payment").
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder stating, among other things: (i) that a Change of Control
has occurred and a Change of Control Offer is being made pursuant to the
Indenture and that all Notes (or portions thereof) properly tendered will be
accepted for payment; (ii) the purchase price and the purchase date, which shall
be, subject to any contrary requirements of applicable law, no fewer than 30
days nor more than 60 days from the date the Company notifies the Holders of the
occurrence of the Change of Control (the "Change of Control Payment Date");
(iii) that any Notes (or portions thereof) accepted for payment (and duly paid
on the Change of Control Payment Date) pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment
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<PAGE> 37
Date; (iv) that any Notes (or portions thereof) not properly tendered will
continue to accrue interest; (v) a description of the transaction or
transactions constituting the Change of Control; (vi) the procedures that
Holders of Notes must follow in order to tender their Notes (or portions
thereof) for payment and the procedures that Holders of Notes must follow in
order to withdraw an election to tender Notes (or portions thereof) for payment;
and (vii) all other instructions and materials necessary to enable Holders to
tender Notes pursuant to the Change of Control Offer.
The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 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 purchase of Notes in connection with 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 above by virtue thereof.
There can be no assurance that the Company will be able to fund any such
repurchase of the Notes. Certain existing credit agreements (including the Bank
Credit Facility) contain and any future credit agreements or other agreements
relating to indebtedness of the Company may contain prohibitions or restrictions
on the Company's ability to effect a Change of Control Payment. In the event a
Change of Control occurs at a time when such prohibitions or restrictions are in
effect, 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 be effectively prohibited from purchasing Notes. In
addition, the indenture governing the 9 7/8% Notes contains a provision that
grants to each holder of the 9 7/8% Notes, upon the occurrence of a change of
control as defined in such indenture, the right to require the Company to
repurchase all or any part of such holder's 9 7/8% Notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, thereon to the purchase date. Under the terms of the Indenture and the
indenture governing the 9 7/8% Notes, the Change of Control Offer and a change
of control offer under the 9 7/8% Notes might be made substantially
contemporaneously, which could negatively impact the Company's ability to fund
the Change of Control Offer. The Company's failure to purchase tendered Notes
would constitute an Event of Default under the Indenture that would, in turn,
constitute a default under the Bank Credit Facility and the 9 7/8% Notes. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of the Notes. See "Risk Factors -- Effects of
Leverage; Existing Indebtedness" and "-- Subordination."
A "Change of Control" shall be deemed to occur if (i) any "person" or
"group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than any one or
more of the Permitted Holders, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of 40% or more of the total voting power of
all classes of the Voting Stock of the Company and/or warrants or options to
acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale,
lease, conveyance or transfer of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole (other than to any
Wholly Owned Restricted Subsidiary) shall have occurred, (iii) the stockholders
of the Company shall have approved any plan of liquidation or dissolution of the
Company, (iv) the Company consolidates with or merges into another Person or any
Person consolidates with or merges into the Company in any such event pursuant
to a transaction in which the outstanding Voting Stock of the Company is
reclassified into or exchanged for cash, securities or other property, other
than any such transaction where (A) the outstanding Voting Stock of the Company
is reclassified into or exchanged for Voting Stock of the surviving corporation
that is Capital Stock and (B) the holders of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving corporation immediately after
such transaction or (v) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Company's Board of Directors
(together with any new directors whose election or appointment by such board 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
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<PAGE> 38
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
Company's Board of Directors then in office.
The definition of Change of Control includes a phrase relating to the sale,
lease, conveyance or transfer of "all or substantially all" of the Company's
assets. The Indenture will be governed by New York law, and there is no
established quantitative definition under New York law of "substantially all" of
the assets of a corporation. Accordingly, if the Company and its Restricted
Subsidiaries were to engage in a transaction in which they disposed of less than
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole, a question of interpretation could arise as to whether such disposition
was of "substantially all" of their assets and whether the Company was required
to make a Change of Control Offer.
Except as described above with respect to a Change of Control, the
Indenture will not contain any other 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. See "Risk
Factors -- Risks Relating to a Change of Control."
BOOK-ENTRY SYSTEM
The Outstanding Notes (other than those referred to in the next succeeding
paragraph) have been and the Exchange Notes will initially be issued in the form
of one or more Global Securities (as defined in the Indenture) held in
book-entry form. Such Notes will be deposited with the Trustee as custodian for
the Depository, and the Depository or its nominee will initially be the sole
registered holder of the Notes for all purposes under the Indenture. Except as
set forth below, a Global Security may not be transferred except as a whole by
the Depository to a nominee of the Depository or by a nominee of the Depository
to the Depository.
The Outstanding Notes that were originally issued to institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not QIBs were issued in definitive form. Upon the tender
of an Outstanding Note in definitive form, such Note will, unless the Global
Security has previously been exchanged for Exchange Notes in definitive form, be
exchanged for an interest in the Global Security representing the principal
amount of the Exchange Notes being exchanged. The Exchange Notes that are issued
as described below under "-- Certificated Notes" will be issued in definitive
form. Upon the transfer of an Exchange Note in definitive form, such Note will,
unless the Global Security has been exchanged for Exchange Notes in definitive
form, be exchanged for an interest in the Global Security representing the
principal amount of the Exchange Notes being transferred.
Upon the issuance of a Global Security in the Exchange Offer, the
Depository or its nominee will credit, on its internal system, the accounts of
persons holding through it with the respective principal amounts of the
individual beneficial interests represented by such Global Security exchanged in
the Exchange Offer. Ownership of beneficial interests in a Global Security will
be limited to persons that have accounts with the Depository ("participants") or
persons that may hold interests through participants. Ownership of beneficial
interests by participants in a Global Security will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by the Depository or its nominee for such Global Security. Ownership
of beneficial interests in such Global Security by persons that hold through
participants will be shown on, and the transfer of that ownership interest
within such participant will be effected only through, records maintained by
such participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
Payment of principal of, premium, if any, on and interest on Notes
represented by any such Global Security will be made to the Depository or its
nominee, as the case may be, as the sole registered owner and the sole Holder of
the Notes represented thereby for all purposes under the Indenture. None of the
Company, the Trustee, any agent of the Company or the Initial Purchasers will
have any responsibility or liability for any aspect of the Depository's reports
relating to or payments made on account of beneficial ownership interests in a
Global Security representing any Notes or for maintaining, supervising or
reviewing any of the Depository's records relating to such beneficial ownership
interests.
The Company has been advised by the Depository that upon receipt of any
payment of principal of, premium, if any, on or interest on, any Global
Security, the Depository will immediately credit, on its book-
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<PAGE> 39
entry registration and transfer system, the accounts of participants with
payments in amounts proportionate to their respective beneficial interests in
the principal or face amount of such Global Security, as shown on the records of
the Depository. The Company expects that payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name" and will
be the sole responsibility of such participants.
So long as the Depository or its nominee, is the registered owner or holder
of such Global Security, the Depository or such nominee, as the case may be,
will be considered the sole owner or holder of the Notes represented by such
Global Security for the purposes of receiving payment on the Notes, receiving
notices and for all other purposes under the Indenture and the Notes. Beneficial
interests in Notes will be evidenced only by, and transfers thereof will be
effected only through, records maintained by the Depository and its
participants. Except as provided above, owners of beneficial interests in a
Global Security will not be entitled to and will not be considered the holders
of such Global Security for any purposes under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Security must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Company understands
that under existing industry practices, in the event that the Company requests
any action of holders or that an owner of a beneficial interest in a Global
Security desires to give or take any action that a Holder is entitled to give or
take under the Indenture, the Depository would authorize the participants
holding the relevant beneficial interest to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Transfers between participants in the Depository will be effected in the
ordinary manner in accordance with Depository rules and will be settled in
same-day funds. If a holder requires physical delivery of a certificated
security for any reason, including to sell Notes to persons in states which
require physical delivery of the Notes, or to pledge such securities such holder
may transfer its interest in the Global Security, in accordance with normal
procedures set forth in the Indenture.
The Depository has advised the Company that it will take any action
permitted to be taken by a Holder of Notes (including the presentation of Notes
for exchange as described below) only at the direction of one or more
participants to whose account with the Depository interests in the Global
Security are credited and only in respect of such portion of the aggregate
principal amount of the Notes as to which such participant or participants has
or have given such direction. However, if there is an Event of Default under the
Indenture, the Depositary will exchange the Global Security for certificated
Notes, which it will distribute to its participants.
The Depository has advised the Company that the Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depository was created to hold the
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (including the
Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations some of whom (and/or their representatives) own the
Depository. Access to the Depository'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.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interest in the Global Security among its participants,
it is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by the Depository or its participants,
whether direct or indirect, of their respective obligations under the rules and
procedures governing their operations.
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<PAGE> 40
CERTIFICATED NOTES
The Exchange Notes represented by a Global Security are transferable,
registrable and exchangeable for certificated Exchange Notes only if (i) the
Depository notifies the Company that it is unwilling or unable to continue as a
depository for such Global Security or if at any time the Depository ceases to
be a clearing agency registered under the Exchange Act, and a successor
depository is not appointed by the Company within 90 days, (ii) the Company
executes and delivers to the Trustee a notice that such Global Security shall be
so transferable, registrable and exchangeable, and such transfer shall be
registrable or (iii) there shall have occurred and be continuing an Event of
Default or an event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default with respect to the Notes represented by
such Global Security. Any Global Security that is exchangeable for certificated
Notes pursuant to the preceding sentence will be transferred to, and registered
and exchanged for, certificated Notes in authorized denominations and registered
in such names as the Depository or its nominee holding such Global Security may
direct. Subject to the foregoing, a Global Security is not exchangeable for
certificated Exchange Notes, except for a Global Security of like denomination
to be registered in the name of the Depository or its nominee. In the event that
a Global Security becomes exchangeable for certificated Exchange Notes, (i)
certificated Exchange Notes will be issued only in fully registered form in
denominations of $1,000 or integral multiples thereof, (ii) payment of
principal, any repurchase price, and interest on the certificated Notes will be
payable, and the transfer of the certificated Notes will be registrable, at the
office or agency of the Company maintained for such purposes and (iii) no
service charge will be made for any issuance of the certificated Notes, although
the Company may require payment of a sum sufficient to cover any tax or
governmental charge imposed in connection therewith.
CERTAIN COVENANTS
Limitation on Indebtedness
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness) unless, after giving pro forma
effect to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or be continuing
following such Incurrence and either (i) after giving pro forma effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Consolidated Interest Coverage Ratio would be at least 2.5 to 1.0
or (ii) such Indebtedness is Permitted Indebtedness.
"Permitted Indebtedness" means any and all of the following: (i)
Indebtedness under the Bank Credit Facility, provided that the aggregate
principal amount of all such Indebtedness under the Bank Credit Facility at any
one time outstanding does not exceed the greater of (A) $275 million and (B) an
amount equal to the sum of (1) $170 million and (2) 15% of Adjusted Consolidated
Net Tangible Assets determined as of the date of the Incurrence of such
Indebtedness; provided, however, that the maximum amount available to be
outstanding under the Bank Credit Facility shall be permanently reduced by the
amount of Net Available Cash from Asset Sales used to permanently repay
Indebtedness under the Bank Credit Facility and not subsequently reinvested in
Additional Assets or used to permanently reduce other Indebtedness to the extent
permitted pursuant to the "Limitation on Asset Sales" covenant; (ii)
Indebtedness arising under the Indenture, including without limitation the Notes
and the Subsidiary Guaranties; (iii) Indebtedness owed to the Company or any of
its Wholly Owned Restricted Subsidiaries by any of its Restricted Subsidiaries
or Indebtedness owed by the Company to any of its Wholly Owned Restricted
Subsidiaries (but only so long as such Indebtedness is held by the Company or a
Wholly Owned Restricted Subsidiary); (iv) Indebtedness under Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries (including guaranties
thereof by the Company or another Restricted Subsidiary, as applicable); (v)
Indebtedness in connection with one or more standby letters of credit,
Guarantees, performance bonds or other reimbursement obligations issued in the
ordinary course of business of the Company and its Restricted Subsidiaries and
not in connection with the borrowing of money or the obtaining of advances or
credit (other than advances or credit on open account, includable in current
liabilities, for goods and services in the ordinary course of business of the
Company and its Restricted Subsidiaries and on terms and conditions which are
customary in the Oil and Gas Business and other than the extension of credit
represented by such letter of credit, Guarantee or performance
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<PAGE> 41
bond itself); (vi) obligations relating to net oil or gas balancing positions
arising in the ordinary course of business of the Company and its Restricted
Subsidiaries which are customary in the Oil and Gas Business; (vii) Permitted
Non-Recourse Indebtedness of the Company or any of its Restricted Subsidiaries;
(viii) Indebtedness outstanding on the Issue Date that is not repaid with the
proceeds of the offering of the Outstanding Notes and not otherwise permitted in
clauses (i) through (vii) above; (ix) Indebtedness not otherwise permitted to be
Incurred pursuant to this paragraph, provided that the aggregate principal
amount of all Indebtedness incurred pursuant to this clause (ix), together with
all Indebtedness Incurred pursuant to clause (x) of this paragraph in respect of
Indebtedness previously Incurred pursuant to this clause (ix), at any one time
outstanding does not exceed $25 million; (x) Permitted Refinancing Indebtedness
Incurred in exchange for, or the proceeds of which are used to refinance, (A)
Indebtedness referred to in clauses (ii), (viii) and (ix) of this paragraph
(including Indebtedness previously incurred pursuant to this clause (x)) or (B)
Indebtedness Incurred pursuant to clause (i) of the first paragraph of the
"Limitation on Indebtedness" covenant; and (xi) accounts payable or other
obligations of the Company or any Restricted Subsidiary to trade creditors
created or assumed by the Company or such Restricted Subsidiary in the ordinary
course of business in connection with the obtaining of goods or services.
Limitation on Liens
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, enter into, create, incur,
assume or suffer to exist any Lien on or with respect to any Property of the
Company or such Restricted Subsidiary, whether owned on the Issue Date or
acquired after the Issue Date, or any interest therein or any income or profits
therefrom, unless the Notes (and, in the case of a Restricted Subsidiary, a
Subsidiary Guaranty from such Subsidiary) are secured equally and ratably with
(or prior to) any and all other obligations secured by such Lien, except that
the Company and its Restricted Subsidiaries may enter into, create, incur,
assume or suffer to exist Liens securing Senior Indebtedness, Liens securing
Senior Indebtedness of a Subsidiary Guarantor, Liens securing Indebtedness of a
Restricted Subsidiary that is not a Subsidiary Guarantor and Permitted Liens.
Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries
The Indenture provides that the Company will not (i) permit any Restricted
Subsidiary to issue any Capital Stock (including, without limitation, pursuant
to any merger, consolidation, recapitalization or similar transaction) other
than to the Company or a Wholly Owned Restricted Subsidiary or (ii) permit any
Person other than the Company or a Restricted Subsidiary to own any Capital
Stock of any other Restricted Subsidiary (other than directors' qualifying
shares), except for (A) a sale to a Person of the Capital Stock of a Restricted
Subsidiary, which sale was made by the Company or a Restricted Subsidiary
subject to, and in compliance with, as appropriate, either the "Limitation on
Asset Sales" covenant or the "Limitation on Restricted Payments" covenant, and
such Person's subsequent ownership of such Capital Stock of such Restricted
Subsidiary, (B) the issuance of Capital Stock by a Restricted Subsidiary to a
Person other than the Company or a Wholly Owned Restricted Subsidiary, which
issuance was made subject to and in compliance with the "Limitation on Asset
Sales" covenant, and such Person's subsequent ownership of such Capital Stock
and (C) the ownership of 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 (and in the case of the formation of such Restricted Subsidiary, the
issuance of such Capital Stock). If a Person (other than a Material Restricted
Subsidiary) whose Capital Stock was issued or sold in a transaction described in
this paragraph is, as a result of such transaction, no longer a Restricted
Subsidiary, then any Capital Stock of such Person retained by the Company or a
Restricted Subsidiary shall be treated as a Restricted Payment made at the time
of such transaction in an amount equal to that portion of the Fair Market Value
of such Person represented by such retained Capital Stock.
Limitation on Restricted Payments
(i) The Indenture provides that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment if, at the time of and after giving effect to
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the proposed Restricted Payment (A) any Default or Event of Default would have
occurred and be continuing, (B) the Company could not incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Indebtedness" covenant or (C) the aggregate amount expended or
declared for all Restricted Payments from the Issue Date would exceed the sum
(without duplication) of the following:
(1) 50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis commencing on the last day of the fiscal
quarter immediately preceding the Issue Date, and ending on the last day of
the fiscal quarter ending on or immediately preceding the date of such
proposed Restricted Payment (or, if such aggregate Consolidated Net Income
shall be a loss, minus 100% of such loss), plus
(2) the aggregate net cash proceeds or the Fair Market Value of
Property other than cash received by the Company on or after the Issue
Date, from the issuance or sale (other than to a Subsidiary of the Company)
of Capital Stock of the Company or any options, warrants or rights to
purchase Capital Stock of the Company, plus
(3) the aggregate net cash proceeds received by the Company as capital
contributions to the Company (other than from a Subsidiary of the Company)
on or after the Issue Date, plus
(4) the aggregate net cash proceeds received by the Company upon the
exercise of any options, warrants or rights to purchase shares of Capital
Stock of the Company (other than from a Subsidiary of the Company) on or
after the Issue Date, plus
(5) the aggregate net cash proceeds received on or after the Issue
Date by the Company from the issuance or sale (other than to any Subsidiary
of the Company) of convertible debt or convertible Redeemable Stock that
has been converted into or exchanged for Capital Stock of the Company,
together with the aggregate cash received by the Company at the time of
such conversion or exchange, plus
(6) to the extent not otherwise included in the Company's Consolidated
Net Income, an amount equal to the net reduction in any Investment made by
the Company and its Restricted Subsidiaries subsequent to the Issue Date in
any Person resulting from (a) payments of interest on debt, dividends,
repayments of loans or advances, or other transfers or distributions of
Property, in each case to the Company or any Restricted Subsidiary from any
Person, and in an amount not to exceed the book value of such Investment
previously made in such Person that were treated as Restricted Payments, or
(b) the designation of any Unrestricted Subsidiary as a Restricted
Subsidiary, in each case in an amount not to exceed the lesser of (x) the
book value of such Investment previously made in such Unrestricted
Subsidiary that were treated as Restricted Payments, and (y) the Fair
Market Value of such Unrestricted Subsidiary, plus
(7) $15 million.
(ii) The limitations set forth in paragraph (i) above do not prevent the
Company or any Restricted Subsidiary from making the following Restricted
Payments 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 (A) below under
which a Restricted Payment may be made even if a Default or Event of Default has
occurred and is continuing):
(A) the payment of any dividend on Capital Stock of the Company or any
Restricted Subsidiary within 60 days after the declaration thereof, if at
such declaration date such dividend could have been paid in compliance with
paragraph (i) above;
(B) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any Restricted Subsidiary, in
exchange for, or out of the aggregate net cash proceeds of, a substantially
concurrent issuance and sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company;
(C) the making of any principal payment on or the repurchase,
redemption, defeasance or other acquisition or retirement for value, prior
to any scheduled principal payment, scheduled sinking fund payment or
maturity, of any Pari Passu Indebtedness or Subordinated Indebtedness
(other than
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Redeemable Stock) in exchange for, or out of the aggregate net cash
proceeds of, a substantially concurrent issuance and sale (other than to a
Subsidiary of the Company) of Capital Stock of the Company;
(D) the making of any principal payment on or the repurchase,
redemption, defeasance or other acquisition or retirement for value of Pari
Passu Indebtedness or Subordinated Indebtedness in exchange for, or out of
the aggregate net cash proceeds of, a substantially concurrent Incurrence
(other than a sale to a Subsidiary of the Company) of Pari Passu
Indebtedness or Subordinated Indebtedness so long as such new Indebtedness
is Permitted Refinancing Indebtedness and such new Indebtedness (1) has an
Average Life to Stated Maturity that is longer than the Average Life to
Stated Maturity of the Notes and (2) has a Stated Maturity for its final
scheduled principal payment that is at least 91 days later than the Stated
Maturity of the final scheduled principal payment of the Notes; and
(E) loans made to officers, directors and employees of the Company or
any Restricted Subsidiary approved by the Board of Directors (or a duly
authorized officer), the proceeds of which are used (1) to purchase common
stock of the Company in connection with a restricted stock or employee
stock purchase plan, or to exercise stock options received pursuant to an
employee or director stock option plan or other incentive plan, in a
principal amount not to exceed the exercise price of such stock options and
(2) to refinance loans, together with accrued interest thereon, made
pursuant to item (1) of this clause (E), provided, however, that such loans
do not exceed $7.5 million at any one time outstanding.
The actions described in clauses (A), (B), (C) and (E) of this paragraph
(ii) shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph (ii) but shall reduce the amount that would
otherwise be available for Restricted Payments under paragraph (i) (provided
that any dividend paid pursuant to clause (A) of this paragraph (ii) shall
reduce the amount that would otherwise be available under paragraph (i) when
declared, but not also when subsequently paid pursuant to such clause (A)), and
the actions described in clause (D) of paragraph (ii) shall be Restricted
Payments that shall be permitted to be taken in accordance with this paragraph
(ii) but shall not reduce the amount that would otherwise be available for
Restricted Payments under paragraph (i).
"Permitted Investments" means any and all of the following: (i) Permitted
Short-Term Investments; (ii) Investments in property, plant and equipment used
in the ordinary course of business and Permitted Business Investments; (iii)
Investments by a Restricted Subsidiary in the Company; (iv) Investments by the
Company or any Restricted Subsidiary in any Restricted Subsidiary; (v)
Investments by the Company or any Restricted Subsidiary in a Person, if such
Person or a Subsidiary of such Person will, as a result of the making of such
Investment and all other contemporaneous related transactions, become a
Restricted Subsidiary or be merged or consolidated with or transfer or convey
all or substantially all of its assets to the Company or a Restricted
Subsidiary; (vi) Investments in Persons in the Oil and Gas Business (other than
Restricted Subsidiaries) intended to promote the Company's strategic business
objectives in an amount not to exceed $20 million at any one time outstanding
(which Investments shall be deemed to be no longer outstanding only upon the
return of capital thereof); (vii) Investments in the form of securities received
from Asset Sales, provided that such Asset Sales are made in compliance with the
"Limitation on Asset Sales" covenant; (viii) Investments in negotiable
instruments held for collection, lease, utility and other similar deposits, and
stock, obligations or other securities received in settlement of debts
(including, without limitation, under any bankruptcy or other similar
proceeding) owing to the Company or any of its Restricted Subsidiaries as a
result of foreclosure, perfection or enforcement of any Liens or Indebtedness,
in each of the foregoing cases in the ordinary course of business of the Company
or such Restricted Subsidiary; (ix) Investments in the form of Permitted Hedging
Agreements of the Company and its Restricted Subsidiaries; (x) relocation
allowances, advances and loans to officers, directors and employees of the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, provided such items do not exceed $2.5 million at any one time
outstanding; and (xi) Investments not otherwise permitted to be made pursuant to
this paragraph in an amount not to exceed $5 million at any one time
outstanding.
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Limitation on Asset Sales
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, consummate 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 Property
subject to such Asset Sale and (ii) all of the consideration paid to the Company
or such Restricted Subsidiary in connection with such Asset Sale is in the form
of cash, Permitted Short-Term Investments, Exchanged Properties, Liquid
Securities or the assumption by the purchaser of liabilities of the Company
(other than liabilities of the Company that are by their terms subordinated to
the Notes), liabilities of any Subsidiary Guarantor that made such Asset Sale
(other than liabilities of a Subsidiary Guarantor that are by their terms
subordinated to such Subsidiary Guarantor's Subsidiary Guaranty), or liabilities
of any Restricted Subsidiary that made such Asset Sale and which is not a
Subsidiary Guarantor, in each case as a result of which the Company and its
Restricted Subsidiaries are no longer liable ("Permitted Consideration");
provided, however, that the Company and its Restricted Subsidiaries shall be
permitted to receive Property other than Permitted Consideration if, after
giving pro forma effect to such Asset Sale, the aggregate Fair Market Value
(evaluated at the time of such Asset Sale) of all such Property other than
Permitted Consideration received from Asset Sales made after the Issue Date,
which Property is held by the Company or any Restricted Subsidiary at the time
of such Asset Sale, shall not exceed 10% of Adjusted Consolidated Net Tangible
Assets.
The Net Available Cash from Asset Sales may be applied by the Company or a
Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary
elects (or is required by the terms of any Senior Indebtedness), (i) to prepay,
repay or purchase Senior Indebtedness of the Company or a Subsidiary Guarantor
or Indebtedness of a Restricted Subsidiary (in each case excluding Indebtedness
owed to the Company or an Affiliate of the Company) in a manner that results in
the permanent reduction in the balance of such Indebtedness and, if applicable,
a permanent reduction in any outstanding commitment for future Incurrences of
Indebtedness thereunder; (ii) to reinvest in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another Restricted Subsidiary); (iii)
to purchase Notes or 9 7/8% Notes pursuant to a 9 7/8% Notes Asset Sale Offer
(as defined) (excluding Notes or 9 7/8% Notes owned by the Company or an
Affiliate of the Company); or (iv) in such other manner as the Company or such
Restricted Subsidiary may elect in compliance with the other provisions of the
Indenture.
Any Net Available Cash from an Asset Sale not applied in accordance with
clauses (i), (ii) and (iii) of the preceding paragraph within 360 days from the
date of such Asset Sale shall constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10 million, the Company will be required to
make an offer to purchase Exchange Notes having an aggregate principal amount
equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer") at a
purchase price equal to 100% of the principal amount of such Notes plus accrued
and unpaid interest thereon (if any) to the Purchase Date (as defined) in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture, but, if the terms of any Pari
Passu Indebtedness require that a Pari Passu Offer (as defined) be made
contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be
prorated between the Prepayment Offer and such Pari Passu Offer in accordance
with the aggregate outstanding principal amounts of the Notes and such Pari
Passu Indebtedness, and the aggregate principal amount of Notes for which the
Prepayment Offer is made shall be reduced accordingly. If the aggregate
principal amount of Notes tendered by Holders thereof exceeds the amount of
available Excess Proceeds, then such Excess Proceeds will be allocated pro rata
according to the principal amount of the Notes tendered and the Trustee will
select the Notes to be purchased in accordance with the Indenture. To the extent
that any portion of the amount of Excess Proceeds remains after compliance with
the second sentence of this paragraph and provided that all Holders of Notes
have been given the opportunity to tender their Notes for purchase as described
in the following paragraph in accordance with the Indenture, the Company or such
Restricted Subsidiary may use such remaining amount for general corporate
purposes otherwise permitted under the Indenture and the amount of Excess
Proceeds will be reset to zero.
To the extent required by any Pari Passu Indebtedness, and provided there
is a permanent reduction in the principal amount of such Pari Passu
Indebtedness, the Company may make an offer to purchase the 9 7/8%
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Notes (a "9 7/8% Notes Asset Sale Offer") or any other such Pari Passu
Indebtedness (a "Pari Passu Offer") using Net Available Cash. The indenture
governing the 9 7/8% Notes requires the Company to make an offer to purchase the
9 7/8% Notes in the event of certain types of asset sales. Although similar in
concept to the Prepayment Offer, the specific terms of the 9 7/8% Notes asset
sale purchase offer differ materially from the terms of the Prepayment Offer,
including, without limitation, the requirement that reinvestment or repayment of
Indebtedness must be completed within 180 days after the asset sale giving rise
to such obligation. Accordingly, it is likely that any 9 7/8% Notes Asset Sale
Offer would be made prior to the Prepayment Offer. In addition, future Pari
Passu Indebtedness could provide for Pari Passu Offers to be made simultaneously
with the Prepayment Offer. In the event of a Pari Passu Offer made
simultaneously with the Prepayment Offer, the Excess Proceeds shall be prorated
between the Pari Passu Offer and the Prepayment Offer in accordance with the
outstanding principal amount of the Notes and such Pari Passu Indebtedness as
noted above. In either case, the existence of a Pari Passu Offer could result in
a decrease in the amount of Excess Proceeds available for the Prepayment Offer.
See "Risk Factors -- Effects of Leverage; Existing Indebtedness."
The Company will comply, to the extent applicable, with the requirements of
Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws or
regulations thereunder to the extent such laws and regulations are applicable in
connection with the purchase of Notes as described above. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
relating to the Prepayment 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.
Incurrence of Layered Indebtedness
The Indenture provides that (i) the Company will not Incur any Indebtedness
that is subordinated or junior in right of payment to any Senior Indebtedness
unless such Indebtedness constitutes Indebtedness that is junior to, or pari
passu with, the Notes in right of payment, and (ii) no Subsidiary Guarantor
shall Incur any Indebtedness that is subordinated or junior in right of payment
to any other Indebtedness of such Subsidiary Guarantor unless such Indebtedness
is, by its terms, pari passu with or subordinated in right of payment to such
Subsidiary Guarantor's Subsidiary Guaranty.
Limitation on Transactions with Affiliates
The Indenture provides 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 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 million in the aggregate, the
Company delivers an Officers' Certificate to the Trustee certifying that such
transaction complies with clause (i) above, and (iii) with respect to a
transaction or series of transactions involving payments in excess of $5 million
in the aggregate, the Company delivers an Officers' Certificate to the Trustee
certifying that (A) such transaction complies with clause (i) above and (B) such
transaction or series of related transactions has been approved by a majority of
the disinterested directors of the Board of Directors of the Company.
The limitations of the preceding paragraph do not apply to:
(i) 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 of its Restricted Subsidiaries;
(ii) indemnities of officers and directors of the Company or any
Subsidiary consistent with such Person's bylaws and applicable statutory
provisions;
(iii) any employee compensation and other benefit arrangements entered
into by the Company or any of its Subsidiaries in the ordinary course of
business;
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(iv) relocation allowances, advances and loans made to officers,
directors and employees of the Company and its Restricted Subsidiaries
provided such items do not exceed $2.5 million in the aggregate at any one
time outstanding;
(v) transactions among the Company and its Restricted Subsidiaries;
(vi) loans constituting Restricted Payments made pursuant to and in
compliance with paragraph (ii), clause (E) of the "Limitation on Restricted
Payments" covenant; and
(vii) the gas gathering agreement between the Company and the Existing
Unrestricted Subsidiary as in effect on the Issue Date and oil and gas
operating agreements entered into in the ordinary course of business by the
Company and its Restricted Subsidiaries in a manner consistent with the
current practice of the Company and its Restricted Subsidiaries so long as
such operating agreements are in a form customary in the Oil and Gas
Business.
Limitation on Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, create, assume or otherwise cause or suffer to exist
or to become effective any consensual encumbrance or restriction on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on its Capital Stock or Redeemable Stock held by the Company or a
Restricted Subsidiary, (ii) make payments in respect of any Indebtedness owed to
the Company or any of its Restricted Subsidiaries, (iii) make loans or advances
to the Company or any of its Restricted Subsidiaries or (iv) transfer any of its
assets to the Company or any of its Restricted Subsidiaries, other than (A)
consensual encumbrances or restrictions required by the Bank Credit Facility
that are not more restrictive than those in effect under the Bank Credit
Facility on the Issue Date, (B) with respect to clause (iv) above, customary
provisions restricting subletting, assignment, pledging or transfer of any
Property that is a lease, license, contract or similar type of Property, (C)
consensual encumbrances or restrictions in instruments governing Indebtedness of
a Person acquired by the Company or any Restricted Subsidiary at the time of
such acquisition, provided that such Indebtedness was not Incurred in
anticipation of such acquisition, (D) with respect to clause (iv) above,
purchase money obligations for property acquired in the ordinary course of
business, (E) with respect to clause (iv) above, customary restrictions
contained in asset sale agreements limiting the transfer of such assets pending
the closing of such sale and (F) consensual encumbrances or restrictions in
instruments governing Indebtedness Incurred to refinance, refund, extend or
renew Indebtedness referred to in clauses (C) and (D) above, provided that the
payment restrictions contained therein are not more restrictive taken as a whole
than those provided for in the Indebtedness being refinanced, refunded, extended
or renewed.
MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL ASSETS
The Indenture provides that (i) the Company will not merge or consolidate
with or into any other Person (whether or not the Company is the surviving
entity), and (ii) the Company will not and will not permit its Restricted
Subsidiaries to, directly or indirectly, sell, transfer, assign, lease, convey
or otherwise dispose of all or substantially all of the Property of the Company
and its Restricted Subsidiaries taken as a whole in any one transaction or a
series of transactions (including, without limitation, dispositions pursuant to
mergers, consolidations, Investments and Production Payments and Reserve Sales),
in each case unless: (A) the Surviving Entity shall be a corporation organized
and existing under the laws of the United States of America or a State thereof
or the District of Columbia; (B) if the Company is not the Surviving Entity, the
Surviving Entity expressly assumes, by supplemental indenture satisfactory to
the Trustee, executed and delivered to the Trustee by the Surviving Entity, the
due and punctual payment of the principal of, premium, if any, and interest on
all the Notes, according to their tenor, and the due and punctual performance
and observance of all of the covenants and conditions of the Indenture to be
performed by the Company (and in the case of clause (ii) above, the Company and
the Surviving Entity shall both be considered as the issuer of the Notes); (C)
in the case of the sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all of the Property of the Company and its
Restricted Subsidiaries taken as a whole, such Property shall have been
transferred as an entirety or virtually as an entirety to one Person; (D)
immediately before and after giving
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effect to such transaction or series of transactions on a pro forma basis, no
Default or Event of Default shall have occurred and be continuing; (E) except in
the case of a merger of the Company with a Restricted Subsidiary, immediately
after giving effect to such transaction or series of transactions on a pro forma
basis, the Surviving Entity would be able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the "Limitation on
Indebtedness" covenant; (F) except in the case of a merger of the Company with a
Restricted Subsidiary, immediately after giving effect to such transaction or
series of transactions on a pro forma basis, the Surviving Entity shall have a
Consolidated Net Worth equal to or greater than the Consolidated Net Worth of
the Company immediately prior to the transaction or series of transactions; (G)
if the Company is not the Surviving Entity, then (1) each Subsidiary Guarantor
(unless it is the Surviving Entity) shall have executed and delivered to the
Trustee a supplemental indenture satisfactory to the Trustee confirming that
such Subsidiary Guarantor's Subsidiary Guaranty remains in full force and effect
and guarantees the Surviving Entity's obligations under the Indenture and the
Exchange Notes, (2) each Significant Subsidiary of the Surviving Entity
(determined immediately after giving effect to such transaction or series of
transactions on a pro forma basis) shall have executed and delivered to the
Trustee a supplemental indenture satisfactory to the Trustee pursuant to which
such Person becomes a Subsidiary Guarantor and guarantees the Notes pursuant to
the terms of a Subsidiary Guaranty and (3) in the case of clause (ii) above, the
Company shall have executed and delivered to the Trustee a supplemental
indenture satisfactory to the Trustee pursuant to which the Company confirms its
obligations for the due and punctual payment of the principal of, premium, if
any, and interest on all the Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions of
the Indenture to be performed by the Company; and (H) the Company and, if the
Company is not the Surviving Entity, the Surviving Entity, each shall have
delivered to the Trustee Officers' Certificates (attaching the calculations to
demonstrate compliance with clauses (E) and (F) above) and an Opinion of
Counsel, each stating that such merger, consolidation or disposition and any
such supplemental indentures comply with the above provisions and that all
conditions precedent relating to such transaction or transactions have been
complied with. The term "Surviving Entity" shall mean the Person referred to in
clauses (i) and (ii) above (1) formed by or surviving any such merger or
consolidation involving the Company or (2) to which any such sale, transfer,
assignment, lease, conveyance or other disposition is made.
In addition to, and not in limitation of the preceding paragraph, the
Indenture further provides that (i) the Company will not permit any Material
Restricted Subsidiary to merge or consolidate with or into any other Person
(whether or not such Material Restricted Subsidiary survives such merger or
consolidation) and (ii) the Company will not permit any Material Restricted
Subsidiary to directly or indirectly issue Capital Stock or Redeemable Stock in
a single transaction or a series of transactions (including, without limitation,
engaging in any recapitalization or similar transaction) if, after giving effect
to such issuance (and all possible conversions, exercises and similar events
with respect to any such stock (whether or not then convertible or exercisable)
in order to reach a fully diluted, fully converted basis), such Material
Restricted Subsidiary would no longer be a Subsidiary of the Company, in each
case unless: (A) immediately before and after giving effect to such transaction
or series of transactions on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing; (B) except in the case of a merger of a
Material Restricted Subsidiary with the Company or a Wholly Owned Restricted
Subsidiary, immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company would be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) under the
"Limitation on Indebtedness" covenant; (C) except in the case of a merger of a
Material Restricted Subsidiary with the Company or a Wholly Owned Restricted
Subsidiary, immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to the transaction or series of transactions; (D) the Material
Restricted Subsidiary Survivor shall have executed and delivered to the Trustee,
as appropriate, either (1) a supplemental indenture satisfactory to the Trustee
confirming that such Material Restricted Subsidiary Survivor's Subsidiary
Guaranty remains in full force and effect and guarantees the Company's
obligations under the Indenture and the Notes, or (2) a supplemental indenture
satisfactory to the Trustee pursuant to which such Material Restricted
Subsidiary Survivor becomes a Subsidiary Guarantor and guarantees the Notes
pursuant to the terms of a Subsidiary Guaranty, and (E) the Company and such
Material Restricted
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Subsidiary Survivor each shall have delivered to the Trustee Officers'
Certificates (in the case of the Company, attaching the calculations to
demonstrate compliance with clauses (B) and (C) above) and an Opinion of
Counsel, each stating that such merger, consolidation or issuance and any such
supplemental indentures comply with the above provisions and that all conditions
precedent relating to such transaction or transactions have been complied with.
The term "Material Restricted Subsidiary Survivor" shall mean (1) in the case of
clause (i) above, the Person surviving any such merger or consolidation or (2)
in the case of clause (ii) above, such Material Restricted Subsidiary.
With respect to each transaction or series of transactions described above,
giving effect to such transaction or series of transactions on a pro forma basis
shall include, without limitation, (i) treating any Indebtedness not previously
the obligation of the Company or any of its Restricted Subsidiaries which
becomes an obligation of the Company or any of its Restricted Subsidiaries in
connection with or as a result of such transaction or series of transactions as
having been Incurred at the time of such transaction or series of transactions,
and (ii) giving effect to any Indebtedness Incurred or anticipated to be
Incurred in connection with such transaction or series of transactions.
REGISTRATION RIGHTS AGREEMENT
The Company entered into the Registration Agreement on November 27, 1996,
which required the Company, among other things, to commence this Exchange Offer
and maintain its effectiveness on the terms set forth herein. In addition to its
obligations in connection herewith (and assuming the Exchange Offer is
consummated prior to April 25, 1997), the Company will have a continuing
obligation to register Outstanding Notes or Exchange Notes for resale under Form
S-3 (the "Shelf Registration") in the following circumstances: (i) upon the
request of an Initial Purchaser following consummation of the Exchange Offer,
(ii) upon the request of any other holder of Outstanding Notes that is
ineligible to participate in the Exchange Offer (see "The Exchange
Offer -- Resales of Exchange Notes") or (iii) upon the request of an Initial
Purchaser that received Exchange Notes pursuant to the Exchange Offer or
otherwise that are not freely tradeable. If the Company is required to file a
Shelf Registration, it must keep such registration statement effective to permit
resales thereunder for three years (or one year if filed at the request of an
Initial Purchaser).
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means, with respect to the Company, Indebtedness of
a Person existing at the time such Person becomes a Restricted Subsidiary.
"Additional Assets" means (i) any Property (other than cash, Permitted
Short-Term Investments or securities) used in the Oil and Gas Business or any
business ancillary thereto, (ii) Investments in any other Person engaged in the
Oil and Gas Business or any business ancillary thereto (including the
acquisition from third parties of Capital Stock of such Person) as a result of
which such other Person becomes a Restricted Subsidiary made in compliance with
the definition of the term "Restricted Subsidiary" and the "Limitation on
Restricted Payments" covenant, (iii) the acquisition from third parties of
Capital Stock of a Restricted Subsidiary, (iv) the costs of acquiring,
exploiting, developing, exploring, producing or operating in respect of oil and
gas properties or (v) Permitted Business Investments.
"Adjusted Consolidated Net Tangible Assets" means, without duplication, as
of the date of determination, (i) the sum of (A) discounted future net cash
flows from proved oil and gas reserves of the Company and its Restricted
Subsidiaries, calculated in accordance with Commission guidelines (before any
state or Federal income tax), as estimated by the Company and reviewed by
independent petroleum engineers as of a date no earlier than the date of the
Company's latest annual consolidated financial statements (or, in the case that
the date of determination is after the end of the first fiscal quarter of the
fiscal year of the Company, as estimated by the Company's engineers as of a date
no earlier than the end of the most recent fiscal quarter, which estimates shall
be confirmed by independent petroleum engineers in accordance with Commission
guidelines
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in the event of a Material Change), (B) the Net Working Capital on a date no
earlier than the date of the Company's latest consolidated annual or quarterly
financial statements and (C) with respect to each other tangible asset
(including undeveloped acreage) of the Company or its Restricted Subsidiaries,
the greater of (1) the net book value of such other tangible asset on a date no
earlier than the date of the Company's latest consolidated annual or quarterly
financial statements and (2) the appraised value, as estimated by a qualified
independent appraiser, of such other tangible asset, as of a date no earlier
than the date of the Company's latest audited financial statements, minus (ii)
minority interests and, to the extent not otherwise taken into account in
determining Adjusted Consolidated Net Tangible Assets, any gas balancing
liabilities of the Company and its Restricted Subsidiaries.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
amount by which the fair value of the Property 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
the Subsidiary Guaranty, of such Subsidiary Guarantor at such date.
"Affiliate" of any specified Person means any other Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person or (ii)
which beneficially owns or holds directly or indirectly 10% or more of any class
of the Voting Stock of such specified Person or of any Subsidiary of such
specified Person. For the purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct the management and
policies of such Person directly or indirectly, whether through the ownership of
Voting Stock, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Asset Sale" means (i) any direct or indirect sale, transfer, assignment,
lease, conveyance or other disposition (including, without limitation,
dispositions pursuant to any merger, consolidation, Investment or Production
Payment and Reserve Sale) by the Company or any of its Restricted Subsidiaries
in any single transaction or series of transactions having a Fair Market Value
in excess of $1 million of (A) shares of Capital Stock or other ownership
interests of another Person (including Capital Stock of Unrestricted
Subsidiaries) or (B) any other Property of the Company or any of its Restricted
Subsidiaries, and (ii) the issuance of Capital Stock (including, without
limitation, pursuant to any merger, consolidation, recapitalization or similar
transaction) by a Restricted Subsidiary to a Person other than the Company or a
Wholly Owned Restricted Subsidiary in any single transaction or series of
transactions having a Fair Market Value in excess of $1 million. Notwithstanding
the preceding sentence, the term "Asset Sale" shall not include: (i) the sale or
transfer of Permitted Short-Term Investments, inventory, accounts receivable or
other Property (excluding the sale or transfer of oil and gas in place and other
interests in real property) in the ordinary course of business; (ii) the lease,
farm-out or abandonment of any oil and gas property in the ordinary course of
business of the Company and its Restricted Subsidiaries and in a manner
customary in the Oil and Gas Business; (iii) the disposition of Property
received in settlement of debts (including, without limitation, under any
bankruptcy or similar proceeding) 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; (iv)
the transfer of Property to an Unrestricted Subsidiary or other Person to the
extent that such transfer constitutes a Restricted Payment made pursuant to and
in compliance with the "Limitation on Restricted Payments" covenant; (v) any
disposition of all or substantially all of the Property of the Company and its
Restricted Subsidiaries taken as a whole made subject to and in compliance with
the "Merger, Consolidation and Sale of Substantially All Assets" covenant; (vi)
the disposition of any Property by the Company or a Restricted Subsidiary to the
Company or a Restricted Subsidiary; (vii) any issuance of Capital Stock made by
a Material Restricted Subsidiary that results in such Material Restricted
Subsidiary no longer being a Subsidiary of the Company, which issuance was made
subject to and in compliance with the "Merger, Consolidation and Sale of
Substantially All Assets" covenant; and (viii) any Production Payment and
Reserve Sale created, incurred, issued, assumed or guaranteed in connection with
the financing of, and within 60 days after, the acquisition of the Property that
is subject thereto.
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"Assigned Restricted Subsidiary Indebtedness" means Indebtedness of a
Restricted Subsidiary to the Company that the Company has assigned to the
lenders under the Bank Credit Facility, as collateral securing Indebtedness of
the Company under the Bank Credit Facility.
"Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (i) the sum of the products of
(A) 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 (B) the amount of each such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means collectively, one or more senior credit
facilities or commercial paper facilities with banks or other institutional
lenders (including, without limitation, the credit facility pursuant to the
Amended and Restated Credit Agreement, dated June 14, 1996, as amended, among
the Company, The Chase Manhattan Bank, as Agent, and certain banks), together
with any security and related documents, as all such credit facilities and
documents may be amended, supplemented, extended, increased, refinanced or
replaced from time to time. For purposes of determining whether Indebtedness
under the Bank Credit Facility constitutes Permitted Indebtedness and only for
such purposes, Indebtedness Incurred in reliance on clause (i) of the first
paragraph of the "Limitation on Indebtedness" covenant shall not be deemed to
constitute Indebtedness Incurred in reliance on clause (i) of the definition of
the term "Permitted Indebtedness."
"Capitalized Lease Obligation" of any Person means the obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such obligation shall be the capitalized
amount thereof determined in accordance with GAAP. For purposes of the
"Limitation on Liens" covenant, a Capitalized Lease Obligation shall be deemed
to be secured by a Lien on the Property being leased.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; provided, however, that "Capital Stock" shall not
include Redeemable Stock.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount
of EBITDA of the Company and its consolidated Restricted Subsidiaries for the
four full fiscal quarters immediately prior to the Transaction Date to (ii) the
aggregate Consolidated Interest Expense of the Company and its Restricted
Subsidiaries that is anticipated to accrue during a period consisting of the
fiscal quarter in which the Transaction Date occurs and the three fiscal
quarters immediately subsequent thereto (based upon the pro forma amount and
maturity of, and interest payments in respect of, Indebtedness of the Company
and its Restricted Subsidiaries expected by the Company to be outstanding on the
Transaction Date), assuming for the purposes of this measurement the
continuation of market interest rates prevailing on the Transaction Date and
base interest rates in respect of floating interest rate obligations equal to
the base interest rates on such obligations in effect as of the Transaction
Date, provided, that if the Company or any of its Restricted Subsidiaries is a
party to any Interest Rate Protection Agreement which would have the effect of
changing the interest rate on any Indebtedness of the Company or any of its
Restricted Subsidiaries for such four quarter period (or a portion thereof), the
resulting rate shall be used for such four quarter period or portion thereof;
provided, further, that any Consolidated Interest Expense with respect to
Indebtedness incurred or retired by the Company or any of its Restricted
Subsidiaries during the fiscal quarter in which the Transaction Date occurs
shall be calculated as if such Indebtedness was so incurred or retired on the
first day of the fiscal quarter in which the Transaction Date occurs. In
addition, if since the beginning of the four full fiscal quarter period
preceding the Transaction Date, (i) the Company or any of its Restricted
Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall
be reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale for such period calculated on a pro
forma basis as if such Asset Sale and any related retirement of Indebtedness had
occurred on the first day of such period or (ii) the
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Company or any of its Restricted Subsidiaries shall have acquired any material
assets, EBITDA shall be calculated on a pro forma basis as if such asset
acquisitions had occurred on the first day of such four fiscal quarter period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, (i) the sum of (A) the aggregate amount of cash and
noncash interest expense (including capitalized interest) of such Person and its
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP in respect of Indebtedness (including, without limitation,
(1) any amortization of debt discount, (2) net costs associated with Interest
Rate Protection Agreements (including any amortization of discounts), (3) the
interest portion of any deferred payment obligation, (4) all accrued interest,
and (5) all commissions, discounts, commitment fees, origination fees and other
fees and charges owed with respect to any Bank Credit Facility and other
Indebtedness paid, accrued or scheduled to be paid or accrued during such
period; (B) Preferred Stock and Redeemable Stock dividends of such Person and of
its Restricted Subsidiaries (if such dividends are paid to a Person other than
such Person or its Wholly Owned Restricted Subsidiaries) declared and payable
other than in kind; (C) the portion of any rental obligation of such Person or
its Restricted Subsidiaries in respect of any Capitalized Lease Obligation
allocable to interest expense in accordance with GAAP; (D) the portion of any
rental obligation of such Person or its Restricted Subsidiaries in respect of
any Sale and Leaseback Transaction that is Indebtedness allocable to interest
expense (determined as if such obligation were treated as a Capitalized Lease
Obligation); and (E) to the extent any Indebtedness of any other Person (other
than Restricted Subsidiaries) is Guaranteed by such Person or any of its
Restricted Subsidiaries, the aggregate amount of interest paid, accrued or
scheduled to be paid or accrued by such other Person during such period
attributable to any such Indebtedness; less (ii) to the extent included in (i)
above, amortization or write-off of deferred financing costs of such Person and
its Restricted Subsidiaries during such period; in the case of both (i) and (ii)
above, after elimination of intercompany accounts among such Person and its
Restricted Subsidiaries and as determined in accordance with GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with GAAP; provided that there shall be excluded therefrom, without
duplication, (i) items classified as extraordinary (other than the tax benefit
of the utilization of net operating loss carry-forwards and alternative minimum
tax credits); (ii) any gain or loss, net of taxes, on the sale or other
disposition of assets (including the Capital Stock of any other Person) in
excess of $1 million, from any sale or disposition, or series of related sales
or dispositions (but in no event shall this clause (ii) apply to the sale of oil
and gas inventories in the ordinary course of business); (iii) the net income of
any Subsidiary of such specified Person to the extent the transfer to that
Person of that income is restricted by contract or otherwise, except for any
cash dividends or cash distributions actually paid by such Subsidiary to such
Person during such period; (iv) the net income (or net loss) of any other Person
in which such specified Person or any of its Restricted Subsidiaries has an
ownership interest (which ownership interest does not cause the net income of
such other Person to be consolidated with the net income of such specified
Person in accordance with GAAP or is an interest in a consolidated Unrestricted
Subsidiary), except to the extent of the amount of cash dividends or other cash
distributions actually paid to such Person or its Restricted Subsidiaries by
such other Person during such period; (v) the net income (or net loss) of any
Person acquired by such specified Person or any of its Restricted Subsidiaries
in a pooling-of-interests transaction for any period prior to the date of such
acquisition; (vi) any gain or loss, net of taxes, realized on the termination of
any employee pension benefit plan; (vii) any adjustments of a deferred tax
liability or asset pursuant to Statement of Financial Accounting Standards No.
109 which result from changes in enacted tax laws or rates; and (viii) the
cumulative effect of a change in accounting principles.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with GAAP, less (to the extent included in stockholders'
equity) amounts attributable to Redeemable Stock of such Person or its
Restricted Subsidiaries.
"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
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"EBITDA" means with respect to any Person for any period, the Consolidated
Net Income of such Person and its consolidated Restricted Subsidiaries for such
period, plus (i) the sum of, to the extent reflected in the consolidated income
statement of such Person and its Restricted Subsidiaries for such period from
which Consolidated Net Income is determined and deducted in the determination of
such Consolidated Net Income, without duplication, (A) income tax expense (but
excluding income tax expense relating to (1) sales or other disposition of
assets (including the Capital Stock of any other Person) resulting in a net gain
in excess of $1 million and (2) the redemption or retirement of any Indebtedness
prior to its Stated Maturity), (B) Consolidated Interest Expense, (C)
depreciation and depletion expense, (D) amortization expense, (E) exploration
expense, (F) any loss, net of taxes, in connection with the redemption or
retirement of any Indebtedness prior to its Stated Maturity, and (G) any other
noncash charges, including, without limitation, unrealized foreign exchange
losses; less (ii) the sum of, to the extent reflected in the consolidated income
statement of such Person and its Restricted Subsidiaries for such period from
which Consolidated Net Income is determined and added in the determination of
such Consolidated Net Income, without duplication, (A) income tax recovery (but
excluding income tax recovery relating to (1) sales or other dispositions of
assets (including the Capital Stock of any other Person) resulting in a net loss
in excess of $1 million and (2) the redemption or retirement of any Indebtedness
prior to its Stated Maturity), (B) any gain, net of taxes, in connection with
the redemption or retirement of any Indebtedness prior to its Stated Maturity
and (C) unrealized foreign exchange gains.
"Equity Offering" means a bona fide underwritten sale to the public of
Capital Stock of the Company pursuant to a registration statement (other than a
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 and resulting in aggregate gross proceeds to the
Company of at least $30 million.
"Event of Default" has the meaning set forth under the caption "-- Events
of Default and Notice."
"Exchanged Properties" means oil and gas properties received by the Company
or a Restricted Subsidiary in trade or as a portion of the total consideration
for other such properties.
"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or any combination thereof, designed and entered
into in order to provide protection against fluctuations in currency exchange
rates, and entered into in the ordinary course of business of such Person.
"Existing Unrestricted Subsidiary" means Resource Gathering Systems, Inc.,
a California corporation.
"Fair Market Value" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash
consideration or property transferred or received by any Person, the fair market
value of such consideration or property as determined in good faith by (i) any
officer of the Company if such fair market value is less than $10 million and
(ii) the Board of Directors of the Company as evidenced by a certified
resolution delivered to the Trustee if such fair market value is equal to or in
excess of $10 million.
"GAAP" means United States generally accepted accounting principles as in
effect on the date of the Indenture, unless stated otherwise.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any Lien on the
assets of such Person securing obligations of the primary obligor and any
obligation of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase or payment of) any security for the payment of
such Indebtedness, (ii) to purchase Property, securities or services for the
purpose of assuring the holder of such Indebtedness of the payment of such
Indebtedness, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); provided,
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however, that a Guarantee by any Person shall not include (A) endorsements by
such Person for collection or deposit, in either case, in the ordinary course of
business or (B) a contractual commitment by one Person to invest in another
Person for so long as such Investment is reasonably expected to constitute a
Permitted Investment under clause (ii) of the definition of Permitted
Investments.
"Holder" means the Person in whose name a Note is registered on the
Security Register.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition,
Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned
Restricted Subsidiary shall be deemed to be Incurred by the Company or such
Restricted Subsidiary in the event such Wholly Owned Restricted Subsidiary
ceases to be a Wholly Owned Restricted Subsidiary or in the event such
Indebtedness is transferred to a Person other than the Company or a Wholly Owned
Restricted Subsidiary. For purposes of this definition, any non-interest bearing
or other discount Indebtedness shall be deemed to have been Incurred only on the
date of the original issuance thereof.
"Indebtedness" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent, (i) any Obligation of such Person for borrowed
money, (ii) any Obligation of such Person evidenced by bonds, debentures, notes,
Guarantees or other similar instruments, including, without limitation, any such
Obligations incurred in connection with the acquisition of Property, assets or
businesses, (iii) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such Person, (iv) any Obligation of such Person issued or assumed as
the deferred purchase price of Property or services, (v) any Capital Lease
Obligation of such Person, (vi) the maximum fixed redemption or repurchase price
of Redeemable Stock of such Person at the time of determination, (vii) any
payment obligation of such Person under Permitted Hedging Agreements at the time
of determination, (viii) any obligation to pay rent or other payment amounts of
such Person with respect to any Sale and Leaseback Transaction to which such
Person is a party and (ix) any obligation of the type referred to in clauses (i)
through (viii) of this paragraph of another Person and all dividends of another
Person the payment of which, in either case, such Person has Guaranteed or is
responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise; provided that Indebtedness shall not include Production Payments and
Reserve Sales. For purposes of this definition, the maximum fixed repurchase
price of any Redeemable Stock that does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Redeemable Stock as if such
Redeemable Stock were repurchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture; provided, however, that if
such Redeemable Stock is not then permitted to be repurchased, the repurchase
price shall be the book value of such Redeemable Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional Obligations as described above and the maximum
liability at such date in respect of any contingent Obligations described above.
Notwithstanding the foregoing, so long as any principal of, premium, if
any, on or interest on the 9 7/8% Notes remains outstanding, for purposes of the
subordination provisions of the Indenture, the Notes and any Subsidiary
Guaranties (and to the extent used therein, any applicable definitions and other
provisions, if any), and only for such purposes, "Indebtedness" means (without
duplication), with respect to any Person, (i) any liability or obligation,
contingent or otherwise, of such Person (A) for borrowed money, (B) evidenced by
bonds, notes, debentures or similar instruments, (C) with respect to the
reimbursement of any letter of credit or banker's acceptance, (D) representing
the balance deferred and unpaid of the purchase price of any property (except
any such balance that constitutes a trade payable or accrued liability in the
ordinary course of business that is not overdue by more than 120 days or is
being contested in good faith), (E) for the payment of money relating to a
Capitalized Lease Obligation or (F) in respect of Interest Rate Protection
Agreements; (ii) direct and indirect Guarantees or similar agreements,
contingent or otherwise, in respect of any Obligation
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of others of the types described in the preceding clause (i); (iii) any
Obligation or liability secured by a consensual Lien to which the property or
assets of such Person are subject, regardless of whether the Obligations secured
thereby shall have been assumed by or shall otherwise be such Person's legal
liability; (iv) with respect to such Person, the liquidation preference and any
mandatory redemption payment obligations in respect of Redeemable Stock; and (v)
any and all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (i), (ii), (iii) and (iv).
"Initial Subsidiary Guarantors" means HSRTW, Inc., a Delaware corporation,
and Orion Acquisition Inc., a Delaware corporation.
"Interest Rate Protection Agreement" means, with respect to any Person, any
interest rate swap agreement, forward rate agreement, interest rate cap or other
rate hedge arrangement to or under which such Person is a party or a
beneficiary, and, in the case of the Company and its Restricted Subsidiaries,
only to the extent such agreements are related to payment obligations on
Indebtedness of the Company and its Restricted Subsidiaries permitted by the
terms of the "Limitation on Indebtedness" covenant and are entered into in the
ordinary course of business of the Company and its Restricted Subsidiaries.
"Investment" means, with respect to any Person (i) any amount paid by such
Person, directly or indirectly (such amount to be the Fair Market Value of such
Capital Stock, securities or Property at the time of transfer), to any other
Person for Capital Stock or other securities of, or as a capital contribution
to, any other Person or (ii) any direct or indirect loan or advance to any other
Person (other than accounts receivable of such Person arising in the ordinary
course of business); provided, however, that Investments shall not include
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices and any increase in the equity ownership in any Person
resulting from retained earnings of such Person.
"Issue Date" means the date upon which the Outstanding Notes first were
issued and authenticated under the Indenture.
"Lien" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing). For purposes of
the "Limitation on Liens" covenant, a Capitalized Lease Obligation shall be
deemed to be secured by a Lien on the property being leased.
"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 or the Nasdaq National Market and (iii) as
to which the Company is not subject to any restrictions on sale or transfer
(including any volume restrictions under Rule 144 under the Securities Act or
any other restrictions imposed by the Securities Act) or as to which a
registration statement under the Securities Act covering the resale thereof is
in effect for as long as the securities are held; provided that securities
meeting the requirements of clauses (i), (ii) and (iii) 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 are sold or exchanged for cash
or Permitted Short-Term Investments and (y) 180 days following the date of
receipt of such securities. In the event 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
"Limitation on Asset Sales" covenant, such securities shall be deemed not to
have been Liquid Securities at any time.
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 20% during a fiscal quarter
in the estimated discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (i)(A) of the definition of Adjusted Consolidation 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
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reserves with respect to which the Company's estimate of the discounted future
net cash flows from proved oil and gas reserves has been confirmed by
independent petroleum engineers and (ii) any dispositions of Properties existing
at the beginning of such quarter that have been disposed of in compliance with
the "Limitation on Asset Sales" covenant.
"Material Restricted Subsidiary" means any Restricted Subsidiary that
directly or indirectly (including through its Subsidiaries) owns or controls
Property constituting all or substantially all of the Property of the Company
and its Restricted Subsidiaries taken as a whole.
"Net Available Cash" from an Asset Sale means cash proceeds received
therefrom (including (i) any cash proceeds received by way of deferred payment
of principal pursuant to a note or installment receivable or otherwise, but only
as and when received, and (ii) the Fair Market Value of Liquid Securities and
Permitted Short-Term Investments, and excluding (A) any consideration received
in the form of assumption of Indebtedness of the Company or any Restricted
Subsidiary, and (B) except to the extent subsequently converted to cash, Liquid
Securities or Permitted Short-Term Investments, consideration constituting
Exchanged Properties or consideration other than Permitted Consideration), in
each case net of (i) all legal, title and recording expenses, commissions and
other fees and expenses incurred, and all Federal, state, foreign and local
taxes required to be paid or accrued as a liability under GAAP as a consequence
of such Asset Sale, (ii) all payments (which payments are made in a manner that
results in the permanent reduction in the balance of such Indebtedness and, if
applicable, a permanent reduction in any outstanding commitment for future
Incurrences of Indebtedness thereunder) made by the Company and its Restricted
Subsidiaries on any Indebtedness (but specifically excluding Indebtedness of the
Company and its Restricted Subsidiaries assumed in connection with such Asset
Sale) which is secured by any assets subject to such Asset Sale, in accordance
with the terms of any Lien upon such assets, or which must by its terms, or in
order to obtain a necessary consent to such Asset Sale or by applicable law, be
repaid out of the proceeds from such Asset Sale, (iii) all distributions and
other payments required to be made to minority interest holders in Restricted
Subsidiaries or joint ventures as a result of such Asset Sale, and (iv) the
deduction of appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the assets
disposed of in such Asset Sale and retained by the Company or any Restricted
Subsidiary after such Asset Sale (to the extent such reserves are not
subsequently reversed); provided, however, that (A) in the event that any
consideration for an Asset Sale (which would otherwise constitute Net Available
Cash) is required to be held in escrow pending determination of whether a
purchase price adjustment will be made, such consideration (or any portion
thereof) shall become Net Available Cash only at such time as it is released to
the Company or its Restricted Subsidiaries from escrow; and (B) any Exchanged
Properties and any consideration other than Permitted Consideration received in
connection with an Asset Sale which are subsequently converted to cash, Liquid
Securities or Permitted Short-Term Investments shall be deemed to be Net
Available Cash at such time and shall thereafter be applied in accordance with
the "Limitation on Asset Sales" covenant.
"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 financial statements of the Company
prepared in accordance with GAAP.
"Obligation" means any principal, interest, premium, penalty, fee and any
other liability payable under the documentation governing any Indebtedness.
"Oil and Gas Business" means the business of exploiting, exploring for,
developing, acquiring, producing, processing, gathering, marketing, storing,
transporting, selling, hedging or swapping hydrocarbons or trading positions
with respect thereto and/or with respect to transportation rates or basis
differentials and other related energy businesses.
"Oil and Gas Liens" means (i) Liens on a specific oil or gas property or
any interest therein, construction thereon or improvement thereto to secure all
or any part of the costs incurred for surveying, exploration, drilling,
extraction, development, operation, production, construction, alteration, repair
or improvement of, in, under or on such property and the plugging and
abandonment of wells located thereon (it being understood
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that, in the case of oil and gas producing properties, or any interest therein,
costs incurred for "development" shall include costs incurred for all facilities
relating to such properties or to projects, ventures or other arrangements of
which such properties form a part or which relate to such properties or
interests); (ii) Liens on an oil and/or gas producing property to secure
obligations incurred or guarantees of obligations incurred in connection with or
necessarily incidental to commitments for the purchase or sale of, or the
transportation or distribution of, the products derived from such property;
(iii) Liens arising under partnership agreements, oil and gas leases, overriding
royalty agreements, net profits agreements, production payment agreements,
royalty trust agreements, partnership agreements, limited liability company
agreements, farm-out agreements, division orders, contracts for the sale,
purchase, exchange, transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations, declarations, orders and
agreements, development agreements, operating agreements, production sales
contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt
water or other disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil and Gas
Business, provided in all instances that such Liens are limited to the assets
that are the subject of the relevant agreement; (iv) Liens arising in connection
with Production Payments and Reserve Sales; and (v) Liens on pipelines or
pipeline facilities that arise by operation of law.
"Oil and Gas Purchase, Sale and/or Swap Contract" means, with respect to
any Person, any oil and gas purchase, sale and/or swap agreements and other
agreements or arrangements, or any combination thereof, financially tied to oil
and gas prices, transportation or basis fluctuations or differentials that are
customary in the Oil and Gas Business and, in the case of the Company and its
Restricted Subsidiaries, which are entered into by the Company and its
Restricted Subsidiaries in the ordinary course of their business.
"Pari Passu Indebtedness" means any Indebtedness of the Company (or a
Subsidiary Guarantor) that is pari passu in right of payment with the Notes (or
a Subsidiary Guaranty, as appropriate).
"Permitted Business Investments" means Investments and expenditures made in
the ordinary course of, and of a nature that is or shall have become customary
in, the Oil and Gas Business as a means of actively exploiting, exploring for,
acquiring, developing, processing, gathering, storing, marketing or transporting
oil and gas through agreements, transactions, interests or arrangements which
permit one 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, (i) ownership interests in oil and gas properties
or gathering, transportation, processing, storage or related systems and (ii)
Investments and expenditures in the form of or pursuant to operating agreements,
process 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, limited liability company agreements,
subscription agreements, stock purchase agreements and other similar agreements
with third parties (including Unrestricted Subsidiaries).
"Permitted Consideration" has the meaning assigned to such term in the
"Limitation on Asset Sales" covenant.
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts whose sole beneficiaries are Permitted Holders or spouses or
children of Permitted Holders, (iii) in the event of the death or incompetence
of a Permitted Holder, his estate, heirs, executor, administrator, committee or
other personal representative or (iv) any Person so long as a Permitted Holder
owns at least 51% of the voting power of all classes of the Voting Stock of such
Person.
"Permitted Hedging Agreements" means Interest Rate Protection Agreements,
Exchange Rate Contracts and Oil and Gas Purchase, Sale and/or Swap Contracts.
"Permitted Holders" means Nicholas J. Sutton, P. Michael Highum and their
Permitted Designees.
"Permitted Liens" means any and all of the following: (i) Liens existing as
of the Issue Date; (ii) Liens securing the Notes, the Subsidiary Guaranties and
other obligations arising under the Indenture; (iii) any Lien existing on any
Property of a Person at the time such Person is merged or consolidated with or
into the
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Company or a Subsidiary Guarantor or becomes a Restricted Subsidiary that is a
Subsidiary Guarantor (and not incurred in anticipation of such transaction),
provided that such Liens are not extended to other Property of the Company or
the Subsidiary Guarantors; (iv) any Lien existing on any Property at the time of
the acquisition thereof (and not incurred in anticipation of such transaction),
provided that such Liens are not extended to other Property of the Company or
the Subsidiary Guarantors; (v) any Lien incidental to the normal conduct of the
business of the Company or the Subsidiary Guarantors, the ownership of their
Property or the conduct in the ordinary course of their business (including,
without limitation, (A) easements, rights of way and similar encumbrances, (B)
rights or title of lessors under leases (other than Capitalized Lease
Obligations), (C) rights of collecting banks having rights of setoff,
revocation, refund or chargeback with respect to money or instruments of the
Company or the Subsidiary Guarantors or on deposit with or in the possession of
such banks, (D) Liens imposed by law, including without limitation, Liens under
workers' compensation or similar legislation and mechanics', carriers',
warehousemen's, materialmen's, suppliers' and vendors' Liens, (E) Liens incurred
to secure performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or other
obligations of a like nature and incurred in a manner consistent with industry
practice, and (F) Liens on deposits made in the ordinary course of business), in
each case which are not incurred in connection with the borrowing of money, the
obtaining of advances or credit or the payment of the deferred purchase price of
Property and which do not in the aggregate impair in any material respect the
use of Property in the operation of the business of the Company and its
Restricted Subsidiaries taken as a whole; (vi) Liens for taxes, assessments and
governmental charges not yet due or the validity of which are being contested in
good faith by appropriate proceedings, promptly instituted and diligently
conducted, and for which adequate reserves have been established to the extent
required by GAAP; (vii) judgment and attachment Liens not giving rise to an
Event of Default or Liens created by or existing from any litigation or legal
proceeding that are currently being contested in good faith by appropriate
proceedings, promptly instituted and diligently conducted, and for which
adequate reserves have been made to the extent required by GAAP; (viii) Liens
securing Permitted Hedging Agreements of the Company and its Restricted
Subsidiaries; (ix) Oil and Gas Liens Incurred in the ordinary course of the
business of the Company and its Restricted Subsidiaries; (x) purchase money
security interests (including, without limitation, Capitalized Lease
Obligations) granted in connection with the acquisition of fixed assets in the
ordinary course of business of the Company and its Restricted Subsidiaries,
provided, that (A) such Liens attach only to the Property so acquired with the
purchase money Indebtedness secured thereby and (B) such Liens secure only
Indebtedness that is not in excess of the purchase price of such Property; (xi)
Liens to secure Permitted Non-Recourse Indebtedness; (xii) Liens resulting from
the deposit of funds or evidences of Indebtedness in trust for the purpose of
decreasing Indebtedness of the Company or any of its Subsidiaries so long as
such deposit of funds is permitted under the "Limitation on Restricted Payments"
covenant; (xiii) Liens resulting from a pledge of Capital Stock of a Person that
is not a Restricted Subsidiary; (xiv) Liens to secure any permitted extension,
renewal, refinancing, refunding or exchange (or successive extensions, renewals,
refinancings, refundings or exchanges), in whole or in part, of or for any
Indebtedness secured by Liens referred to in clauses (i), (ii), (iii), (iv) and
(x) above; provided, however, that (A) such new Lien shall be limited to all or
part of the same Property that secured the original Lien, plus improvements on
such Property and (B) the Indebtedness secured by such Lien at such time is not
increased to any amount greater than the sum of (1) the outstanding principal
amount of the Indebtedness secured by such original Lien immediately prior to
such extension, renewal, refinancing, refunding or exchange and (2) an amount
necessary to pay any fees and expenses, including premiums, related to such
refinancing, refunding, extension, renewal or replacement; and (xv) Liens in
favor of the Company. Notwithstanding anything in this paragraph to the
contrary, the term "Permitted Liens" does not include Liens resulting from the
creation, incurrence, issuance, assumption or Guarantee of any Production
Payment and Reserve Sale other than (1) Production Payments and Reserve Sales in
connection with the acquisition of Properties after the Issue Date, provided
that any such Liens created in connection therewith are created, incurred,
issued, assumed or guaranteed in connection with the financing of, and within 60
days after, the acquisition of the Property that is subject thereto, or (2)
Production Payments and Reserve Sales other than those described in clause (1)
of this sentence to the extent such Production Payments and Reserve Sales
constitute Asset Sales made pursuant to and in compliance with the "Limitation
on Asset Sales" covenant.
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"Permitted Non-Recourse Indebtedness" means Indebtedness of the Company or
any Restricted Subsidiary Incurred in connection with the acquisition by the
Company or such Restricted Subsidiary of any Property with respect to which (i)
the holders of such Indebtedness agree that they will look solely to the
Property so acquired and securing such Indebtedness, and neither the Company nor
any Restricted Subsidiary (A) provides direct or indirect credit support,
including any undertaking, agreement or instrument that would constitute
Indebtedness (other than the grant of a Lien on such acquired Property) or (B)
is directly or indirectly liable for such Indebtedness, and (ii) no default with
respect to such Indebtedness would cause, or permit (after notice or passage of
time or otherwise), according to the terms thereof, any holder (or any
representative of any such holder) of any other Indebtedness of the Company or a
Restricted Subsidiary to declare, a default on such other Indebtedness or cause
the payment, repurchase, redemption, defeasance or other acquisition or
retirement for value thereof to be accelerated or payable prior to any scheduled
principal payment, scheduled sinking fund payment or maturity.
"Permitted Refinancing Indebtedness" means Indebtedness ("new
Indebtedness") Incurred in exchange for, or the proceeds of which are used to
refinance, other Indebtedness ("old Indebtedness"), provided, however, that (i)
such new Indebtedness is in an aggregate principal amount not in excess of the
sum of (A) the aggregate principal amount then outstanding of the old
Indebtedness (or, if such old Indebtedness 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), and
(B) an amount necessary to pay any fees and expenses, including premiums related
to such exchange or refinancing, (ii) such new Indebtedness has a Stated
Maturity no earlier than the Stated Maturity of the old Indebtedness, (iii) such
new Indebtedness has an Average Life to Stated Maturity at the time such new
Indebtedness is Incurred that is equal to or greater than the Average Life to
Stated Maturity of the old Indebtedness at such time and (iv) such new
Indebtedness is subordinated in right of payment to Senior Indebtedness of the
Company (or, if applicable, a Subsidiary Guarantor) and the Notes to at least
the same extent, if any, as the old Indebtedness.
"Permitted Short-Term Investments" means (i) Investments in U.S. Government
Obligations maturing within one year of the date of acquisition thereof, (ii)
Investments in demand accounts, time deposit accounts, certificates of deposit,
bankers acceptances and money market deposits maturing within one year of the
date of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America or any State thereof that is a
member of the Federal Reserve System having capital, surplus and undivided
profits aggregating in excess of $500 million and whose long-term indebtedness
is rated "A" (or higher) according to Moody's Investors Service Inc., (iii)
Investments in demand accounts, time deposit accounts, certificates of deposit,
bankers acceptances and money market deposits maturing within one year of the
date of acquisition thereof issued by a Canadian bank to which the Bank Act
(Canada) applies having capital, surplus and undivided profits aggregating in
excess of U.S. $500 million, (iv) investments in deposits available for
withdrawal on demand with any commercial bank 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 have been made in such accounts in the ordinary course of business and
(B) such deposits do not at any one time exceed $10 million in the aggregate,
(v) repurchase and reverse repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
entered into with a bank meeting the qualifications described in either clause
(ii) or (iii), (vi) Investments in commercial paper, maturing not more than 270
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any State thereof with a rating at the time as of
which any Investment therein is made of "P-1" (or higher) according to Moody's
Investors Service Inc. or "A-1" (or higher) according to Standard & Poor's
Ratings Group, and (vii) Investments in any money market mutual fund having
assets in excess of $250 million substantially all of which consist of
obligations of the types described in clauses (i), (ii), (v) and (vi) hereof.
"Person" means any individual, corporation, partnership, joint venture,
trust, limited liability company, unincorporated organization or government or
any agency or political subdivision thereof or other entity.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends and/or as to the distribution of assets upon any
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voluntary or involuntary liquidation, dissolution or winding up of such Person,
to shares of capital stock of at least one other class of such Person; provided,
however, that "Preferred Stock" shall not include Redeemable Stock.
"Principal Agent" means, on any date, (i) if the Bank Credit Facility shall
remain in effect on such date, the administrative agent(s) (or the
institution(s) performing similar functions) under the Bank Credit Facility and
(ii) if the Bank Credit Facility is no longer in effect on such date, the
administrative agent(s) (or the institution(s) performing similar functions)
with respect to the Specified Senior Indebtedness (or, if applicable, Specified
Senior Indebtedness of such Subsidiary Guarantor) having the highest principal
amount (including all revolving credit, letter of credit and other working
capital commitments) on such date.
"Production Payments and Reserve Sales" means the grant or transfer to any
Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar denominated), partnership interest or
other interest in oil and gas properties, reserves or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such properties where the holder of such interest has recourse
solely to such production or proceeds of production, subject to the obligation
of the grantor or transferor to operate and maintain, or cause the subject
interests to be operated and maintained, in a reasonably prudent manner or other
customary standard or subject to the obligation of the grantor or transferor to
indemnify for environmental, title or other matters customary in the Oil and Gas
Business.
"Property" means, with respect to any person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed or tangible or
intangible, including, without limitation, Capital Stock and other securities
issued by any other Person (but excluding Capital Stock or other securities
issued by such first mentioned Person).
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could become required to be redeemed for cash or other Property or
is or could become redeemable for cash or other Property at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of the
Stated Maturity of the Notes; or is or could become exchangeable at the option
of the holder thereof for Indebtedness at any time in whole or in part, on or
prior to the first anniversary of the Stated Maturity of the Notes; provided,
however, that Redeemable Stock shall not include any security by virtue of the
fact that it may be exchanged or converted at the option of the holder for
Capital Stock of the Company having no preferences as to dividends or
liquidation over any other Capital Stock of the Company.
"Restricted Payment" means any or all of the following actions: (i) the
declaration or payment of any dividend on, or any distribution to holders of,
any shares of the Company's Capital Stock or Redeemable Stock (other than
dividends or distributions payable solely in shares of Capital Stock of the
Company or in options, warrants or other rights to purchase or acquire Capital
Stock of the Company); (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock or Redeemable Stock of the Company or
any Affiliate thereof (other than a Restricted Subsidiary) or any options,
warrants or other rights to acquire such Capital Stock or Redeemable Stock;
(iii) any principal payment on or repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to any scheduled principal payment,
scheduled sinking fund payment or maturity, of any Pari Passu Indebtedness or
Subordinated Indebtedness, except (A) a 9 7/8% Notes Asset Sale Offer, (B) a
Pari Passu Offer other than a 9 7/8% Notes Asset Sale Offer, (C) to the extent
of Excess Proceeds remaining after compliance with the "Limitation on Asset
Sales" covenant, and to the extent required by the indenture or other agreement
or instrument pursuant to which any Subordinated Indebtedness was issued, an
offer to purchase such Subordinated Indebtedness upon a disposition of assets,
and (D) upon a "Change of Control" (even if such event is not a Change of
Control under the Indenture) to the extent required by the indenture or other
agreement or instrument pursuant to which any Pari Passu Indebtedness or
Subordinated Indebtedness was issued, provided the Company is then in compliance
with the covenant described under "--Repurchase at the Option of Holders Upon a
Change of Control"; (iv) the making of any Investment (other than any Permitted
Investment); or (v) the occurrence of any deemed Restricted Payment under (A)
the "Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant, or (B) the definition of the term "Unrestricted
Subsidiary."
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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. The Company will not, and
will not permit any of its Restricted Subsidiaries to, take any action or enter
into any transaction or series of transactions that would result in a Person
becoming a Restricted Subsidiary (whether through an acquisition or otherwise)
unless immediately after giving effect to such transaction or transactions on a
pro forma basis, (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the "Limitation on Indebtedness"
covenant.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Wholly Owned Restricted Subsidiary of such Person or between
one or more Wholly Owned Restricted Subsidiaries of such Person) pursuant to
which Property is sold or transferred by such Person or a Restricted Subsidiary
of such Person and is thereafter leased back from the purchaser or transferee
thereof by such Person or one of its Restricted Subsidiaries.
"Senior Indebtedness" means the Obligations of the Company with respect to
(i) Indebtedness of the Company under the Bank Credit Facility and any renewal,
refunding, refinancing, replacement or extension thereof and (ii) any other
Indebtedness of the Company (other than the Notes), whether outstanding on the
date of the Indenture or thereafter created, incurred or assumed, and any
renewal, refunding, refinancing, replacement or extension thereof, 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 shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, Senior Indebtedness shall not include (i)
Indebtedness of the Company to a Subsidiary of the Company, (ii) amounts owed
for goods, materials or services purchased in the ordinary course of business,
(iii) Indebtedness (other than Indebtedness under the Bank Credit Facility)
incurred in violation of the Indenture, (iv) amounts payable or any other
Indebtedness to employees of the Company or any Subsidiary of the Company, (v)
any liability for Federal, state, local or other taxes owed or owing by the
Company, (vi) any Indebtedness of the Company that, when incurred and without
regard to any election under Section 1111(b) of the United States Bankruptcy
Code, was without recourse to the Company, (vii) Indebtedness evidenced by the
9 7/8% Notes and (viii) Indebtedness evidenced by the Notes.
"Senior Indebtedness of a Subsidiary Guarantor" means the Obligations of a
Subsidiary Guarantor with respect to (i) Indebtedness under the Bank Credit
Facility and any renewal, refunding, refinancing, replacement or extension
thereof, (ii) Assigned Restricted Subsidiary Indebtedness and (iii) any other
Indebtedness of a Subsidiary Guarantor (other than the Subsidiary Guaranties),
whether outstanding on the date of the Indenture or thereafter created, incurred
or assumed, and any renewal, refunding, refinancing, replacement or extension
thereof, 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 shall not be senior in right of
payment to the Subsidiary Guaranties. Notwithstanding the foregoing, Senior
Indebtedness of a Subsidiary Guarantor shall not include (i) Indebtedness of a
Subsidiary Guarantor to the Company or a Subsidiary of the Company, (ii) amounts
owed for goods, materials or services purchased in the ordinary course of
business, (iii) Indebtedness (other than Indebtedness under the Bank Credit
Facility) incurred in violation of the Indenture, (iv) amounts payable or any
other Indebtedness to employees of the Company or any Subsidiary of the Company,
(v) any liability for Federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (vi) any Indebtedness of a Subsidiary Guarantor that, when
incurred and without regard to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to such Subsidiary Guarantor, (vii)
Indebtedness evidenced by the 9 7/8% Notes and any guaranties thereof and (viii)
Indebtedness evidenced by the Notes and the Subsidiary Guaranties.
"Significant Subsidiary" means, at any date of determination, (i) any
Subsidiary (other than TWTTC) of a Person that, together with its Subsidiaries,
(A) for the most recent fiscal year of the Company, accounted for more than 5%
of the consolidated revenues of such Person and its Subsidiaries or (B) as of
the end of such fiscal year, was the owner of more than 5% of the consolidated
assets of such Person and its Subsidiaries, and
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(ii) TWTTC if TWTTC, together with its Subsidiaries, as of the end of the most
recent fiscal year of the Company, was the owner of more than 10% of the
consolidated assets of the Company and its Subsidiaries, in each case all as set
forth on the most recently available consolidated financial statements of such
Person for such fiscal year.
"Specified Senior Indebtedness" means (i) Indebtedness of the Company under
the Bank Credit Facility and (ii) so long as no Indebtedness under the Bank
Credit Facility is outstanding, on any date of determination, any Senior
Indebtedness if the sum of (A) the outstanding principal amount of all Senior
Indebtedness plus (B) the amount of unused revolving credit, letter of credit
and working capital commitments of lenders included in such Senior Indebtedness,
is not less than $20 million on such date.
"Specified Senior Indebtedness of a Subsidiary Guarantor" means (i)
Assigned Restricted Subsidiary Indebtedness of such Subsidiary Guarantor, (ii)
Indebtedness of such Subsidiary Guarantor under the Bank Credit Facility and
(iii) so long as no Assigned Restricted Subsidiary Indebtedness of such
Subsidiary Guarantor under the Bank Credit Agreement is outstanding, on any date
of determination, any Senior Indebtedness of such Subsidiary Guarantor if the
sum of (A) the outstanding principal amount of all such Senior Indebtedness of
such Subsidiary Guarantor plus (B) the amount of unused revolving credit, letter
of credit and working capital commitments of lenders included in such Senior
Indebtedness of such Subsidiary Guarantor, is not less than $20 million on such
date.
"Stated Maturity," when used with respect to any security or any
installment of principal thereof or interest thereon, means the date specified
in such security as the fixed date on which the principal of such security or
such installment of principal or interest is due and payable, including pursuant
to any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means Indebtedness of the Company (or a
Subsidiary Guarantor) that is expressly subordinated in right of payment to the
Notes (or a Subsidiary Guaranty, as appropriate).
"Subsidiary" of a Person means (i) another Person which is a corporation a
majority of whose Voting Stock is at the time, directly or indirectly, owned or
controlled by (A) the first Person, (B) the first Person and one or more of its
Subsidiaries or (C) one or more of the first Person's Subsidiaries or (ii)
another Person which is not a corporation (A) at least 50% of the ownership
interest of which and (B) the power to elect or direct the election of a
majority of the directors or other governing body of which are controlled by
Persons referred to in clause (i)(A), (i)(B) or (i)(C) above.
"Subsidiary Guarantor" means (i) as of the Issue Date, the Initial
Subsidiary Guarantors, and (ii) thereafter, unless released from such Subsidiary
Guaranties as permitted by the Indenture, the Initial Subsidiary Guarantors and
any other Restricted Subsidiary that becomes a guarantor of the Notes in
compliance with the provisions of the Indenture and executes a supplemental
indenture agreeing to be bound by the terms of the Indenture.
"Subsidiary Guaranty" means an unconditional guaranty of the Notes given by
any Restricted Subsidiary pursuant to the terms of the Indenture.
"TWTTC" means Tide West Trading & Transport Company, an Oklahoma
corporation.
"Unrestricted Subsidiary" means (i) the Existing Unrestricted Subsidiary,
(ii) any Subsidiary of the Company that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors in the manner
provided below and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board
of Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary of the Company) to be an Unrestricted
Subsidiary unless such Subsidiary (i) owns any Capital Stock, Redeemable Stock
or Indebtedness of, or owns or holds any Lien on any Property of, the Company or
any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary
to be so designated or (ii) is obligated, directly or indirectly, with respect
to any Indebtedness other than Unrestricted Subsidiary Indebtedness; provided,
however, that either (A) the Subsidiary to be so designated has total assets of
$1,000 or less or (B) if such Subsidiary has assets greater than $1,000, then
such designation would be permitted
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under "Limitation on Restricted Payments" as a "Restricted Payment." The
designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be
deemed to cause a Restricted Payment to be made at the time of such designation
in an amount equal to that portion of the Fair Market Value of such Restricted
Subsidiary represented by the Company's direct and indirect ownership interest
in such Subsidiary. Unless so designated as an Unrestricted Subsidiary, any
Person that becomes a Subsidiary of the Company or of any Restricted Subsidiary
will be classified as a Restricted Subsidiary. Notwithstanding the foregoing
sentence, the Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary; provided, however, that immediately after giving pro
forma effect to such designation (i) the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the "Limitation on
Indebtedness" covenant, and (ii) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of a resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying such resolution and certifying that such designation
complies with the foregoing provisions.
"Unrestricted Subsidiary Indebtedness" means Indebtedness of an
Unrestricted Subsidiary (i) as to which neither the Company nor any Restricted
Subsidiary is directly or indirectly liable (by virtue of the Company or any
such Restricted Subsidiary being the primary obligor on, guarantor of, or
otherwise liable in any respect for such Indebtedness) and (ii) which, upon the
occurrence of a default with respect thereto, does not result in, or permit any
holder (or any representative of any such holder) of any Indebtedness of the
Company or a Restricted Subsidiary to declare (with the passage of time or the
giving of notice or otherwise), a default on any Indebtedness of the Company or
any Restricted Subsidiary or cause the payment, repurchase, redemption,
defeasance or other acquisition or retirement for value thereof to be
accelerated or payable prior to any scheduled principal payment, scheduled
sinking fund payment or maturity.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Restricted Subsidiary" means, at any time, a Restricted
Subsidiary all of the Voting Stock of which (except directors' qualifying
shares) is at the time owned, directly or indirectly, by the Company and its
other Wholly Owned Restricted Subsidiaries.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company and the Subsidiary Guarantors will
be discharged from all their obligations with respect to the Notes (except for
certain obligations to exchange or register the transfer of Notes, to replace
stolen, lost or mutilated Notes, to maintain paying agencies and to hold moneys
for payment in trust) upon the deposit in trust for the benefit of the Holders
of the Notes of money or U.S. Government Obligations, or a combination thereof,
which, through the payment of principal, premium, if any, and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity or on earlier redemption in accordance with the terms of the
Indenture and the Notes. Such defeasance or discharge may occur only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the Company has received from, or there has been published
by, the United States Internal Revenue Service a ruling or (ii) since the date
of the Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that Holders of the Notes will not recognize
gain or loss for Federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would have been the case if
such deposit, defeasance and discharge were not to occur; and that the resulting
trust will not be an "Investment Company" within the meaning of the Investment
Company Act of 1940 unless such trust is qualified thereunder or exempt from
regulation thereunder.
The Indenture provides that the Company may omit to comply with certain
covenants, including those described under "-- Certain Covenants" and in clauses
(E) and (F) under the first paragraph of "-- Merger, Consolidation and Sale of
Substantially All Assets," and that the occurrence of certain Events of Default,
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which are described below in clause (iii) (with respect to such covenants) and
clauses (iv) and (v) under "-- Events of Default and Notice" will be deemed not
to be or result in an Event of Default. The Company, in order to exercise such
option, will be required to deposit, in trust for the benefit of the Holders of
the Notes, money or U.S. Government Obligations, or a combination thereof,
which, through the payment of principal, premium, if any, and interest in
respect thereof in accordance with their terms, will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Notes at
Stated Maturity or on earlier redemption in accordance with the terms of the
Indenture and the Notes. The Company will also be required, among other things,
to deliver to the Trustee an Opinion of Counsel to the effect that Holders of
the Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit and defeasance of certain obligations and will be subject
to Federal income tax on the same amount, in the same manner and at the same
times as would have been the case if such deposit and defeasance were not to
occur; and that the resulting trust will not be an "Investment Company" within
the meaning of the Investment Company Act of 1940 unless such trust is qualified
thereunder or exempt from regulation thereunder. In the event the Company were
to exercise this option and the Notes were declared due and payable because of
the occurrence of any Event of Default, the amount of money and U.S. Government
Obligations so deposited in trust would be sufficient to pay amounts due on the
Notes at the time of their Stated Maturity but may not be sufficient to pay
amounts due on the Notes upon any acceleration resulting from such Event of
Default. In such case, the Company would remain liable for such payments.
EVENTS OF DEFAULT AND NOTICE
The following are summaries of Events of Default under the Indenture with
respect to the Notes: (i) failure to pay any interest on the Notes when due,
continued for 30 days; (ii) failure to pay principal of (or premium, if any, on)
the Notes when due; (iii) failure to perform any other covenant of the Company
or any Subsidiary Guarantor in the Indenture, continued for 60 days after
written notice as provided in the Indenture; (iv) 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 (other
than Permitted Non-Recourse Indebtedness) of the Company (other than the Notes)
or any Restricted Subsidiary for money borrowed when due (whether resulting from
maturity, acceleration, mandatory redemption or otherwise), or any other default
causing acceleration of any Indebtedness (other than Permitted Non-Recourse
Indebtedness) of the Company or any Restricted Subsidiary for money borrowed,
provided that the aggregate principal amount of such Indebtedness shall exceed
$5 million; and specifically including, without limitation, any such default
under or acceleration of any Indebtedness (other than Permitted Non-Recourse
Indebtedness) directly or indirectly resulting or derived from, or caused by, a
default under or acceleration of any Permitted Non-Recourse Indebtedness; or (v)
one or more final judgments or orders by a court of competent jurisdiction are
entered against the Company or any Restricted Subsidiary in an uninsured or
unindemnified aggregate amount in excess of $5 million and such judgments or
orders are not discharged, waived, stayed, satisfied or bonded for a period of
60 consecutive days; (vi) certain events of bankruptcy, insolvency or
reorganization; or (vii) a Subsidiary Guaranty ceases to be in full force and
effect (other than in accordance with the terms of the Indenture and such
Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty.
The Indenture provides that if an Event of Default (other than an Event of
Default described in clause (vi) above) with respect to the Notes at the time
outstanding shall occur and be continuing, either the Trustee or the Holders of
at least 25% in aggregate principal amount of the Notes then outstanding by
notice as provided in the Indenture may declare the principal amount of the
Notes to be due and payable immediately. If an Event of Default described in
clause (vi) above with respect to the Notes at the time Outstanding shall occur,
the principal amount of all the Notes will automatically, and without any action
by the Trustee or any Holder, become immediately due and payable. After any such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of the Notes then outstanding may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the nonpayment of accelerated principal (or other
specified amount), have been cured or waived as provided in the Indenture.
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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 be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of the Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the Notes then outstanding 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 with respect to the Notes.
No Holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless (i) such Holder has previously given to
the Trustee written notice of a continuing Event of Default with respect to the
Notes, (ii) the Holders of at least 25% in aggregate principal amount of the
then outstanding Notes have made written request, and such Holder or Holders
have offered reasonable indemnity, to the Trustee to institute such proceeding
as trustee and (iii) the Trustee has failed to institute such proceeding, and
has not received from the Holders of a majority in aggregate principal amount of
the then outstanding Notes a direction inconsistent with such request, within 60
days after such notice, request and offer. However, such limitations do not
apply to a suit instituted by a Holder of Notes for the enforcement of payment
of the principal of or any premium or interest on such Notes on or after the
applicable due date specified in such Notes.
MODIFICATION OF THE INDENTURE; WAIVER
The Indenture provides that modifications and amendments of the Indenture
may be made by the Company, the Subsidiary Guarantors and the Trustee without
the consent of any Holders of Notes in certain limited circumstances, including
(i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide
for the assumption of the obligations of the Company under the Indenture upon
the merger, consolidation or sale or other disposition of all or substantially
all of the assets of the Company and its Restricted Subsidiaries taken as a
whole and certain other events specified in the "Merger, Consolidation and Sale
of Substantially All Assets" covenant, (iii) to provide for uncertificated Notes
in addition to or in place of certificated Notes, (iv) to comply with any
requirement of the Commission in order to effect or maintain the qualification
of the Indenture under the 1939 Act, (v) to make any change that does not
adversely affect the rights of any Holder of Notes in any material respect, (vi)
to add or remove Subsidiary Guarantors pursuant to the procedure set forth in
the Indenture, and (vii) certain other modifications and amendments as set forth
in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the written consent of the Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding, to execute supplemental
indentures or amendments adding any provisions to or changing or eliminating any
of the provisions of the Indenture or modifying the rights of the Holders of the
Notes, except that no such supplemental indenture, amendment or waiver may,
without the consent of all the Holders of Notes then outstanding, among other
things, (i) reduce the principal amount of Notes whose Holders must consent to
an amendment or waiver, (ii) reduce the rate of or change the time for payment
of interest on any Notes, (iii) change the currency in which any amount due in
respect of the Notes is payable, (iv) reduce the principal of or any premium on
or change the Stated Maturity of any Notes or alter the redemption or repurchase
provisions with respect thereto, (iv) reduce the relative ranking of any Notes
(vi) release any security that may have been granted in respect of the Notes or
(v) make certain other significant amendments or modifications as specified in
the Indenture.
The Holders of a majority in principal amount of the Notes then outstanding
may waive compliance by the Company with certain restrictive provisions of the
Indenture. The Holders of a majority in principal amount of the Notes then
outstanding may waive any past default under the Indenture, except a default in
the payment of principal, premium or interest and certain covenants and
provisions of the Indenture that cannot be amended without the consent of the
Holders of each Note then outstanding.
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REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission so long as any Notes are outstanding, the Company
will file with the Commission and furnish to the holders of Notes all quarterly
and annual financial information required to be contained in a filing with the
Commission on Forms 10-Q and 10-K, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual consolidated financial statements only, a report thereon by the
Company's independent auditors.
NOTICES
Notices to Holders of the Notes will be given by mail to the addresses of
such Holders as they may appear in the Security Register.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance
with the internal laws of the State of New York without reference to principles
of conflicts of law.
TRUSTEE
The Trustee is the Trustee under the Indenture. The Trustee maintains
normal banking relationships with the Company and its Subsidiaries and may
perform certain services for and transact other business with the Company and
its Subsidiaries from time to time in the ordinary course of business.
DESCRIPTION OF THE OUTSTANDING NOTES
The terms of the Outstanding Notes are identical in all material respects
to the Exchange 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) (see "Description of the Exchange
Note -- Registration Agreement"). The Exchange Notes will not provide for any
increase in the interest rate thereon. In that regard, the Outstanding Notes
provide that if an exchange offer registration statement is (i) not filed by
January 24, 1997 or (ii) not declared effective by March 27, 1997, Special
Interest 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.
In addition, (i) if an exchange offer is not consummated or a resale shelf
registration statement is not declared effective by April 25, 1997 or (ii) if
either the exchange offer registration statement or the resale shelf
registration statement has been declared effective and such registration
statement ceases to be effective or usable (subject to certain exceptions) in
connection with resale of Exchange Notes or Outstanding Notes during periods
specified in the Registration Agreement, Special Interest will accrue and be
payable semi-annually until such time as an exchange offer is consummated or a
resale shelf registration statement is declared effective, as the case may be,
or until the exchange offer registration statement or resale registration
statement may again be used. Special Interest will accrue at a rate of 0.5% per
annum during the 90-day period immediately following the occurrence of any
failure to comply with the requirements set forth above 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 1.50% per annum. The Exchange Notes are not entitled to
any such Special Interest. In addition, the Outstanding Notes and the Exchange
Notes will constitute a single series of debt securities under the Indenture.
See "Description of the Exchange Notes."
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
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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.
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, 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.
TREATMENT OF INTEREST
In general, interest on an Outstanding Note or Exchange Note will be
taxable to a beneficial owner who or which is (i) a citizen or resident of the
United States, (ii) a corporation created or organized under the laws of the
United States or any State thereof (including the District of Columbia) or (iii)
a person otherwise subject to United States Federal income taxation on its
worldwide income (a "U.S. Holder") as ordinary income at the time it is received
or accrued, depending on the U.S. Holder's method of accounting for 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 income prior to the receipt or 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 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.
OPTIONAL REDEMPTION OR REPURCHASE
The Outstanding Notes and the Exchange Notes are subject to (i) redemption
at the option of the Company, on or before November 15, 2001, at a predetermined
redemption price plus any accrued and unpaid interest, and (ii) repurchase at
the option of each Holder thereof upon a Change of Control for 101% of the
principal amount plus any accrued and unpaid interest. See "Description of the
Exchange Notes" and
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"Description of the Outstanding 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 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.
AMORTIZABLE BOND PREMIUM
If a U.S. Holder pays an amount (exclusive of accrued and unpaid interest
through the acquisition date) in excess of the Outstanding Note's or the
Exchange Note's stated redemption price at maturity at the time of its
acquisition ("Bond Premium"), the U.S. Holder will not be required to include
original issue discount, if any, in his income and may elect to amortize Bond
Premium. If Bond Premium is amortized, the amount of interest that must be
included in the U.S. Holder's income from each period ending on an interest
payment date or stated maturity, as the case may be, will be reduced by the
portion of the Bond Premium allocable to such period based on the Outstanding
Note's or the Exchange Note's yield to maturity and the U.S. Holder's adjusted
basis in the Outstanding Notes or the Exchange Notes will be reduced
accordingly. This election applies to all notes acquired by the U.S. Holder
during the year of election and thereafter.
MARKET DISCOUNT
A U.S. Holder, other than an initial holder, will be treated as holding an
Outstanding Note or an Exchange Note at a market discount (a "Market Discount
Note") if the amount for which such U.S. Holder purchased the Outstanding Note
or the Exchange Note is less than the Outstanding Note's or the Exchange Note's,
respectively, stated redemption price at maturity, or, in the case of an
Outstanding Note issued with original issue discount, the "revised issue price,"
as defined in Section 1278 of the Code, subject in both cases to a de minimis
rule. An initial holder of an Outstanding Note will be treated as holding a
Market Discount Note if the initial holder purchased such Outstanding Note for
less than its issue price.
In general, any partial payment of principal on, or gain recognized on the
maturity, optional redemption or repurchase, or disposition of, a Market
Discount Note will be treated as ordinary interest income to the extent of
accrued market discount on such Market Discount Note. Alternatively, a U.S.
Holder of a Market Discount Note may elect to include market discount in income
currently over the life of the Market Discount Note. Such an election applies to
all debt instruments with market discount acquired by the electing U.S. Holder
on or after the first day of the first taxable year to which the election
applies and may not be revoked without the consent of the IRS.
Market discount accrues on a straight-line basis, unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Market Discount Note with respect to which it
is made and is irrevocable. A U.S. Holder of a Market Discount Note that does
not elect to include market discount in income currently generally will be
required to defer deductions for interest on borrowings allocable to such Market
Discount Note, in an amount not exceeding the accrued market discount
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on such Market Discount Note, until the maturity or disposition of such Market
Discount Note. If such Market Discount Note is disposed of in a non-taxable
transaction (other than a nonrecognition transaction described in Section
1276(c) of the Code) accrued market discount will be includable as ordinary
income to the U.S. Holder as if such U.S. Holder had sold the Market Discount
Note at its then fair market value.
NON-U.S. HOLDERS
Under present United States Federal income and estate tax law and subject
to the discussion of backup withholding below:
(a) payments of interest on an Outstanding Note or Exchange Note by
the Company or any agent of the Company to any holder of an Outstanding
Note or an Exchange Note that is not a U.S. Holder (a "Non-U.S. Holder")
will not be subject to United States federal withholding tax, provided that
(i) the Non-U.S. Holder does not actually or constructively own 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 through stock ownership, and
(iii) either (A) the beneficial owner of the Outstanding Notes or the
Exchange Notes certifies to the Company or its agent, under penalties of
perjury, that it is not a "United States person" (as defined in the Code)
and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Outstanding Notes on behalf of the beneficial
owner certifies to the Company or its agent, under penalties of perjury,
that such statement has been received from the beneficial owner and
furnishes the payor with a copy thereof;
(b) a Non-U.S. Holder will not be subject to United States Federal
withholding tax on gain realized on the sale, exchange or redemption of an
Outstanding Note or an Exchange Note; and
(c) an Outstanding Note or an Exchange Note held by an individual who
at the time of death is not a citizen or resident of the United States will
not be subject to United States Federal estate tax as a result of such
individual's death if, at the time of such death, the individual did not
actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote and the
income on the Outstanding Notes or the Exchange Notes would not have been
effectively connected with the conduct of a trade or business by the
individual in the United States.
Recently proposed regulations that would be effective January 1, 1998,
provide for several alternative methods for Non-U.S. Holders or "qualified
intermediaries" who hold the Outstanding Notes or the Exchange Notes on behalf
of Non-U.S. Holders to obtain an exemption from withholding on interest
payments.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the Outstanding Notes or the Exchange Notes is effectively
connected with the conduct of such trade or business, the Non-U.S. Holder,
although exempt from the withholding tax discussed in the preceding paragraph
(provided that such Non-U.S. Holder furnishes a properly executed IRS Form 4224
on or before any payment date to claim such exemption), may be subject to U.S.
Federal income tax on such interest in the same manner as if it were a U.S.
Holder.
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
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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 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.
PLAN OF DISTRIBUTION
Based on interpretations of the staff of the Corporate Finance Division of
the Commission set forth in no-action letters issued to third parties, the
Company believes that, except as described below, Exchange Notes issued pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by respective holders thereof without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that (i) such Exchange Notes are acquired in the ordinary course of
such holder's business and (ii) such holder does not intend to participate in,
and is not engaged in and does not intend to engage in, a distribution of the
Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or that is a
broker-dealer that purchased Outstanding Notes from the Company to resell
pursuant to an exemption from registration (a) cannot rely on such
interpretations by the staff of the Division of Corporate Finance of the
Commission, (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 transfer of such Outstanding Notes. Any holder who tenders Outstanding
Notes in the Exchange Offer with the intention or for the purpose of
participating in a distribution of the Exchange Notes cannot rely on such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing selling security
holders information required by Item 507 of Regulation S-K under the Securities
Act. To date, the staff of the Commission has taken the position that a
broker-dealer that has acquired securities in exchange for securities that were
acquired by such broker-dealer as a result of market making activities or other
trading activities (a "Participating Broker-Dealer") may fulfill its prospectus
delivery requirements with the prospectus contained in an exchange offer
registration statement.
Each holder of Outstanding Notes who wishes to exchange its Outstanding
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company set forth in "The Exchange Offer -- Procedures
for Tendering."
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. 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, starting on the date the Exchange Offer is consummated and ending
on the close of business on the first anniversary of such date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale.
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
68
<PAGE> 70
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the date the Exchange Offer is consummated,
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 Outstanding Notes, but excluding any expenses relating to
the printing of this Prospectus, which printing expenses will be paid by the
Initial Purchasers) 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.
LEGAL MATTERS
The validity of the Exchange Notes issued in the Exchange Offer will be
passed upon for the Company by Davis, Graham & Stubbs LLP, Denver, Colorado.
69
<PAGE> 71
HS RESOURCES, INC.
INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Pro Forma Combined Statements of Operations for
the Year Ended December 31, 1995.......................... P-2
Unaudited Pro Forma Combined Statements of Operations for
the Year Ended December 31, 1996.......................... P-3
Notes to Unaudited Pro Forma Combined Financial
Statements................................................ P-4
</TABLE>
P-1
<PAGE> 72
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
The accompanying Unaudited Pro Forma Combined Statements of Operations for
the years ended December 31, 1995 and 1996 include pro forma adjustments that
give effect to the Acquisitions and the Merger as if such transactions had
occurred at the beginning of each such period. The Unaudited Pro Forma Combined
Statements of Operations are based on the assumptions set forth in the notes to
such statements. Such pro forma information should be read in conjunction with
the Consolidated Financial Statements and related notes thereto and is not
necessarily indicative of the results that actually would have occurred had the
transactions been in effect on the date or for the periods indicated, or of
results that may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------------------
PRO FORMA
COMPANY ACQUISITIONS MERGER ADJUSTMENTS PRO FORMA
----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas sales..................... $53,394,029 $25,277,214 $ 36,508,000 $ $115,179,243
Other natural gas revenues.................... 1,782,349 -- -- 2,051,944(A) 3,834,293
Trading and transportation.................... -- -- 82,927,000 82,927,000
Interest income............................... 95,361 -- 305,000 400,361
Other......................................... 68,149 -- 961,000 37,125(B) 1,066,274
----------- ----------- ------------ ------------ ------------
Total revenues.............................. 55,339,888 25,277,214 120,701,000 2,089,069 203,407,171
----------- ----------- ------------ ------------ ------------
EXPENSES:
Production taxes.............................. 4,050,483 1,929,195 2,517,000 8,496,678
Lease operating............................... 9,935,809 4,259,531 7,747,000 21,942,340
Cost of trading and transportation............ -- -- 80,642,000 80,642,000
Depreciation, depletion and amortization...... 26,608,885 -- 11,365,000 (11,365,000)(C) 61,302,536
34,693,651(C)
General and administrative.................... 4,075,581 -- 4,557,000 (1,060,000)(D) 7,572,581
Interest...................................... 10,218,555 -- 3,186,000 13,999,191(E) 27,403,746
----------- ----------- ------------ ------------ ------------
Total expenses.............................. 54,889,313 6,188,726 110,014,000 36,267,842 207,359,881
----------- ----------- ------------ ------------ ------------
Income (loss) before income taxes............. 450,575 19,088,488 10,687,000 (34,178,773) (3,952,710)
Provision (benefit) for income taxes.......... 176,419 -- 4,016,000 (5,698,402)(F) (1,505,983)
----------- ----------- ------------ ------------ ------------
Net income (loss)............................. $ 274,156 $19,088,488 $ 6,671,000 $(28,480,371) $ (2,446,727)
=========== =========== ============ ============ ============
EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share..................... $ 0.02 $ (0.14)
=========== ============
Earnings (loss) per share, assuming full
dilution.................................... $ 0.02 $ (0.14)
=========== ============
Weighted average number of common and common
equivalent shares............................. 11,440,000 6,161,312(G) 17,601,312
=========== ============ ============
Weighted average number of common and common
equivalent shares assuming
full dilution................................. 11,450,000 6,161,312(G) 17,611,312
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the Unaudited
Pro Forma Combined Statements of Operations.
P-2
<PAGE> 73
HS RESOURCES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------------
PRO FORMA
COMPANY ACQUISITIONS MERGER ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Oil and natural gas sales..................... $107,280,873 $7,161,191 $22,123,709 $136,565,773
Other natural gas revenues.................... 2,720,423 -- -- 822,533(A) 3,542,956
Trading and transportation.................... 46,372,707 -- 49,035,299 95,408,006
Interest income............................... 270,411 -- 105,541 375,952
Other......................................... 311,656 -- 246,344 558,000
------------ ---------- ----------- ------------ ------------
Total revenues.......................... 156,956,070 7,161,191 71,510,893 822,533 236,450,687
------------ ---------- ----------- ------------ ------------
EXPENSES
Production taxes.............................. 8,195,389 668,037 1,451,733 10,315,159
Lease operating............................... 17,691,502 886,193 3,862,938 22,440,633
Cost of trading and transportation............ 45,699,154 -- 47,223,300 92,922,454
Other expenses................................ 123,775 -- -- 123,775
Depreciation, depletion and amortization...... 42,334,882 -- 5,425,149 (47,760,031)(C)
54,497,846(C) 54,497,846
General and administrative.................... 5,642,393 -- 2,041,180 7,683,573
Interest...................................... 22,812,065 -- 1,402,519 2,851,476(E) 27,066,060
------------ ---------- ----------- ------------ ------------
Total expenses.......................... 142,499,160 1,554,230 61,406,819 9,589,291 215,049,500
------------ ---------- ----------- ------------ ------------
Income (loss) before income taxes............. 14,456,910 5,606,961 10,104,074 (8,766,758) 21,401,187
Provision for income taxes.................... 5,508,083 2,645,769(F) 8,153,852
------------ ---------- ----------- ------------ ------------
Net income (loss)............................. $ 8,948,827 $5,606,961 $10,104,074 $(11,412,527) $ 13,247,335
============ ========== =========== ============ ============
EARNINGS PER SHARE:
Earnings per share............................ $ 0.61 $ 0.75
============ ============
Earnings per share, assuming full dilution.... $ 0.61 $ 0.75
============ ============
Weighted average number of common and equivalent
shares........................................ 14,568,000 3,000,000(G) 17,568,000
============ ============ ============
Weighted average number of common and common
equivalent shares assuming full dilution...... 14,769,000 2,856,000(G) 17,625,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Unaudited
Pro Forma Combined Statements of Operations.
P-3
<PAGE> 74
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) Record estimated income from the monetization of Section 29 tax credits
generated from the assets acquired in the Acquisitions. The estimated
qualifying production is approximately 4,725,000 Mcf and 1,894,000 Mcf for
the Acquisitions for the years ended December 31, 1995, and 1996,
respectively. No tax credits were generated by or anticipated from Tide West
production. The adjustment is based on the monetization of the Section 29
tax credits available from the Acquisitions pursuant to arrangements the
Company has with two financial institutions under the same terms as
currently apply to the monetization of the Company's other Section 29 tax
credits. Tax credit income is accrued monthly based on production sold. Cash
payments are made quarterly as stipulated in the applicable agreement.
(B) Adjust for Tide West successful efforts expenses capitalized under full
cost accounting.
(C) Record the elimination of Tide West's depreciation, depletion and
amortization ("DD&A") expense and record consolidated DD&A expense on the
assets acquired. Pro forma DD&A expense on proved oil and natural gas
properties is computed by combining the Company's net unamortized costs of
proved properties plus the portion of the purchase price and transaction
costs allocated to proved properties and using the units-of-production
amortization method based on estimates of total pro forma proved reserves.
The combined DD&A rate per BOE for the assets acquired is $5.70 and $5.33
for the years ended December 31, 1995 and 1996, respectively. The
depreciation expense recorded for the Tide West corporate fixed assets is
$332,000 and $230,728 for the years ended December 31, 1995 and 1996,
respectively.
(D) General and administrative expenses have been adjusted to reflect savings in
salary and bonus expense that would have occurred if the Merger had taken
place at the beginning of the period. The adjustment reflects the salary and
bonuses paid to three senior executives of Tide West who were terminated
effective upon the closing of the Merger and who were not replaced.
(E) Record elimination of Tide West interest expense and record interest
expense related to debt necessary to finance the Merger and the
Acquisitions, using the Company's average LIBOR rates of 7.32% and 6.88%
for the years ended December 31, 1995 and 1996, respectively. Interest was
calculated on new debt of approximately $218,000,000, which is composed of
$125,100,000 for the Acquisitions, and $92,900,000 for the Merger. Interest
was capitalized on undeveloped property costs as appropriate.
(F) Record the tax effect of the Merger and the Acquisitions assuming a
combined federal and state effective tax rate of 38.1%.
(G) To reflect the impact of the issuance of additional shares of HSR Common
Stock on the weighted average number of common and common equivalent shares
as if such additional shares had been issued at the beginning of the period.
P-4
<PAGE> 75
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits, subject to certain conditions, a corporation to indemnify its
directors, officers, employees and agents against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such director, officer, employee or agent in connection with
threatened, pending or completed actions, suits and proceeding (other than
actions by or in the right of the corporation) in or to which any of such
persons is a party or is threatened to be made a party.
Article 12 of the Company's Amended and Restated Certificate of
Incorporation and Article VI, Section 2 of the Company's Third Amended and
Restated Bylaws provide that HSR may indemnify its directors, officers,
employees and agents to the fullest extent permitted by Delaware Law.
The Company currently maintains a policy insuring, subject to certain
exceptions, its directors and officers and the directors and officers of its
subsidiaries against liabilities that may be incurred by such persons acting in
such capacities.
Pursuant to indemnification agreements, the Company has agreed to indemnify
its directors and certain officers against all costs, charges and expenses
incurred by reason of being a director or officer of the Company, provided that
indemnification is not prohibited in whole or in part under applicable law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the
Company. (Incorporated herein by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-1, No.
33-52774, filed October 2, 1992.)
3.2+ Third Amended and Restated Bylaws of the Company adopted
December 16, 1996.
4.1 Form of Indenture dated December 1, 1993, entered into
between the Company and the Trustee. (Incorporated by
reference to Exhibit 4.7 to Amendment No. 3 to the Company's
Registration Statement on Form S-3, No. 33-70354, filed
November 23, 1993.)
4.2+ Indenture dated November 27, 1996, among the Company, Orion
Acquisition, Inc., HSRTW, Inc., and Harris Trust and Savings
Bank as Trustee.
4.3+ First Supplemental Indenture dated November 25, 1996 among
the Company, Orion Acquisition, Inc., HSRTW, Inc., and
Harris Trust and Savings Bank as Trustee.
10.1 Amended Note and Warrant Purchase Agreement dated January
15, 1991, among NGP, Resolute Resources, Inc., and the
Company. (Incorporated by reference to Exhibit 4.4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1990, filed February 14, 1991.)
10.1.1 Amendment No. 1 to Note and Warrant Purchase Agreement dated
June 28, 1991, between the Company and NGP. (Incorporated by
reference to Exhibit 4.4.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991, filed
September 30, 1991.)
10.1.2 Second Amendment to Note and Warrant Purchase Agreement
dated August 17, 1992, between the Company and NGP.
(Incorporated by reference to Exhibit 4.2.2 to Amendment No.
2 to the Company's Registration Statement on Form S-1, No.
33-52774, filed November 19, 1992.)
10.1.3 Third Amendment to Note and Warrant Purchase Agreement dated
October 21, 1993, between the Company and NGP. (Incorporated
by reference to Exhibit 4.1.3 to Amendment No. 2 to the
Company's Registration Statement on Form S-3, No. 33-70354,
filed November 23, 1993.)
</TABLE>
II-1
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.2 Amended and Restated Warrant Agreement dated January 15,
1991, between NGP and the Company. (Incorporated by
reference to Exhibit 4.5.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1990, filed
February 14, 1991.)
10.3 Amended Warrant No. W-1, dated January 15, 1991, and issued
by the Company to NGP. (Incorporated by reference to Exhibit
4.6.1 to the Form 8, Second Amendment to Form 10, filed
April 8, 1991.)
10.3.1 Amendment No. 1 to Amended Warrant No. W-1, dated December
30, 1991, and issued by the Company to NGP. (Incorporated by
reference to Exhibit 4.6.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1991, filed
on February 14, 1991.)
10.4 Form of Warrant No. W-10, dated January 28, 1992, and issued
by the Company to NGP. (Incorporated by reference to Exhibit
4.16 to Amendment No. 1 to the Company's Registration
Statement on Form S-1, No. 33-52774, filed November 9,
1992.)
10.5 1987 Stock Incentive Plan, as amended December 2, 1996
(Incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed on March 19, 1997).
10.6 Common Stock Purchase Warrant dated July 12, 1990 by the
Company to James E. Duffy. (Incorporated by reference to
Exhibit 10.5 to the Form 8, Second Amendment to Form 10,
filed April 8, 1991.)
10.7 HS Resources, Inc. Rule 701 Compensatory Benefit Plan.
(Incorporated by reference to Exhibit 10.5.2 to the Form 8,
Second Amendment to Form 10 filed April 8, 1991.)
10.8 1992 Directors' Stock Option Plan. (Incorporated by
reference to Exhibit 10.10 to Amendment No. 1 to the
Company's Registration Statement on Form S-1, No. 33-52774,
filed November 9, 1992.)
10.8.1 1993 Directors' Stock Option Plan. (Incorporated by
reference to Exhibit 10.8.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993,
filed March 31, 1994 (as amended by Form 10-K/A-1 on April
8, 1994.))
10.9 Form of Indemnification Agreement for Directors of the
Company. (Incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, filed March 25, 1996.)
10.10 Lease Agreement dated October 6, 1993, between the Company
and JMB Group Trust IV and Endowment and Foundation Realty,
Ltd. -- JMB III for the premises at One Maritime Plaza, San
Francisco, California. (Incorporated by reference to Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, filed March 31, 1994
(as amended by Form 10-K/A-1 on April 8, 1994.))
10.11 Lease Agreement dated March 28, 1994, between the Company
and 1999 Broadway Partnership for the premises at 1999
Broadway, Denver, Colorado. (Incorporated by reference to
Exhibit 10.15 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, filed August 12, 1994.)
10.12 Interest exchange agreement between The Chase Manhattan
Bank, N.A. and the Company dated May 9, 1995. (Incorporated
by reference to Exhibit 10.19 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995,
filed August 14, 1995.)
10.13 Amended and Restated Agreement and Plan of Merger, dated as
of April 29, 1996, among the Company, HSR Acquisition, Inc.
and Tide West Oil Co. (Incorporated by reference as Annex A
to Amendment No. 2 to the Company's Registration Statement
on Form S-4, No. 333-01991, filed on May 2, 1996.)
</TABLE>
II-2
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.14 Agreement for Purchase and Sale of Assets [Monetization],
dated as of February 24, 1996, among the Company, Basin
Exploration, Inc. ("Basin") and Orion Acquisition, Inc.
("Orion"). (Incorporated by reference to Exhibit 2.3 to the
Company's Form 8-K, filed March 12, 1996.)
10.15 Agreement for Purchase and Sale of Assets [Wattenberg],
dated as of February 24, 1996, among the Company, Orion and
Basin. (Incorporated by reference to Exhibit A to the
Company's Schedule 13D relating to Basin Exploration, Inc.
filed on March 6, 1996.)
10.16 Purchase and Sale Agreement, dated December 1, 1995, between
the Company and Wattenberg Gas Investments, LLC.
(Incorporated by reference to Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, filed March 25, 1996.)
10.17 Rights Agreement, dated as of February 28, 1996, between the
Company and Harris Trust Company of California as Rights
Agent. (Incorporated by reference to Exhibit 1 to the
Company's Form 8-A, filed March 11, 1996.)
10.18 Purchase and Sale Agreement dated March 25, 1996 between
Orion Acquisition, Inc., the Company and Wattenberg
Resources Land, L.L.C. (Incorporated by reference to Exhibit
10.28 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, filed May 15, 1996.)
10.19 Credit Agreement, dated as of June 7, 1996, among the
Company and The Chase Manhattan Bank, N.A. ("Chase"), as
agent of the Banks signatory thereto. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed August 14, 1996.)
10.20 Amended and Restated Credit Agreement dated as of June 14,
1996, among the Company, Chase as agent, and the Banks
signatory thereto. (Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, filed August 14, 1996.)
10.21 First Amendment to Amended and Restated Credit Agreement
dated as of June 17, 1996, by and among the Company and
Chase in its individual capacity and as agent for the
Lenders. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed August 14, 1996.)
10.22+ Second Amendment to Amended and Restated Credit Agreement
dated as of November 27, 1996 among the Company and Chase in
its individual capacity and as agent for the Lenders.
10.23 Assignment of Liens and Amendment of Amended, Restated and
Consolidated Mortgage, Assignment of Production, Security
Agreement and Financing Statement, dated June 14, 1996,
among Chase (Assignor), Chase (Assignee) and the Company.
(Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.24 Guaranty Agreement by HSR Acquisition, Inc. in favor of
Chase, as Agent, dated June 14, 1996. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed August 14, 1996.)
10.25 Guaranty Agreement by Orion Acquisition, Inc. in favor of
Chase, as Agent, dated June 14, 1996. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed August 14, 1996.)
10.26 First Amendment to Guaranty Agreement dated as of June 17,
1996, by and among Orion Acquisition, Inc. and Chase, in its
individual capacity and as agent for the Lenders.
(Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
</TABLE>
II-3
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.27 First Amendment to Guaranty Agreement dated as of June 17,
1996, by and among HSRTW, Inc. (formerly HSR Acquisition,
Inc.) and Chase, in its individual capacity and as agent for
the Lenders. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed August 14, 1996.)
10.28 Third Amendment and Supplement to Amended, Restated and
Consolidated Mortgage, Assignment of Production, Security
Agreement and Financing Statement, dated as of July 15,
1996, by and between the Company and Chase. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, filed August 14, 1996.)
10.29 Hedging Agreement between Chase and the Company dated May 1,
1996. (Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996,
filed August 14, 1996.)
10.30 Hedging Agreement between Chase and the Company dated May 1,
1996. (Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996,
filed August 14, 1996.)
10.31 Hedging Agreement between Chase and the Company dated June
1, 1996. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed August 14, 1996.)
10.32 Purchase and Sale Agreement between the Company and
Wattenberg Gas Investments, LLC dated April 25, 1996.
(Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.33 Purchase and Sale Agreement between Wattenberg Resources
Land L.L.C. and Wattenberg Gas Investments, LLC dated May
21, 1996. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed August 14, 1996.)
10.34 Purchase and Sale Agreement between Orion Acquisition, Inc.
and Wattenberg Gas Investments, LLC dated June 14, 1996.
(Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.35 Purchase and Sale Agreement between Wattenberg Resources
Land L.L.C. and Wattenberg Gas Investments, LLC dated June
14, 1996. (Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1996, filed August 14, 1996.)
10.36 Purchase and Sale Agreement between Orion Acquisition, Inc.
and Wattenberg Gas Investments, LLC dated June 14, 1996.
(Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.37 Purchase and Sale Agreement between the Company and
Wattenberg Gas Investments, LLC dated June 28, 1996.
(Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed
August 14, 1996.)
10.38 Purchase and Sale Agreement between HSRTW, Inc. and Westtide
Investments, LLC dated August 9, 1996. (Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, filed November 7,
1996.)
10.39 Acquisition Agreement between the Company and TCW Portfolio
No. 1555 DR V Sub-Custody Partnership, L.P. dated August 30,
1996. (Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1996, filed November 7, 1996.)
10.40+ Purchase Agreement dated November 27, 1996 among the
Company, Orion Acquisition, Inc., HSRTW, Inc., Salomon
Brothers Inc, Chase Securities Inc., Lehman Brothers Inc.,
and Prudential Securities Incorporated.
</TABLE>
II-4
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <S>
10.41+ Registration Agreement dated November 27, 1996 among the
Company, Orion Acquisition, Inc., HSRTW, Inc. and Salomon
Brothers Inc in its individual capacity and as agent for
Chase Securities Inc., Lehman Brothers Inc., and Prudential
Securities Incorporated.
10.42 Employment Agreement between James Piccone and the Company
dated April 21, 1995. (Incorporated by reference to Exhibit
10.42 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, filed on March 19,
1997).
25.1* Statement of Eligibility of Trustee on Form T-1 with respect
to the Exchange Notes.
</TABLE>
- ---------------
* Filed herewith
+ Previously filed
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, 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 registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form (Form S-4), within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
The undersigned registrants hereby undertake 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.
The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
registrants has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, California, on this 20th day of March, 1997.
HS Resources, Inc.
a Delaware corporation
By: /s/ NICHOLAS J. SUTTON*
------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer
HSRTW, Inc.
a Delaware corporation
By: /s/ NICHOLAS J. SUTTON*
------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer
Orion Acquisition, Inc.
a Delaware corporation
By: /s/ NICHOLAS J. SUTTON*
------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief
Executive Officer
*By: /s/ P. MICHAEL HIGHUM
-------------------------------
Attorney-in-Fact
II-6
<PAGE> 81
HS RESOURCES, INC.
Pursuant to the requirements of the Securities Act, this registration
statement on Form S-4 has been signed by the following persons in the capacities
and on the date indicated.
<TABLE>
<S> <C>
March 20, 1997 By: /s/ NICHOLAS J. SUTTON*
Date -----------------------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
March 20, 1997 By: /s/ P. MICHAEL HIGHUM
Date -----------------------------------------------------
P. Michael Highum
President and Director (Principal Executive Officer)
March 20, 1997 By: /s/ JAMES E. DUFFY*
Date -----------------------------------------------------
James E. Duffy
Vice President -- Finance and Chief Financial
Officer and Director (Principal Financial Officer)
March 20, 1997 By: /s/ ANNETTE M. MONTOYA*
Date -----------------------------------------------------
Annette M. Montoya
Vice President -- Accounting and Controller
(Principal Accounting Officer)
March 20, 1997 By: /s/ KENNETH A. HERSH*
Date -----------------------------------------------------
Kenneth A. Hersh
Director
March 20, 1997 By: /s/ MICHAEL J. SAVAGE*
Date -----------------------------------------------------
Michael J. Savage
Director
March 20, 1997 By: /s/ PHILIP B. SMITH*
Date -----------------------------------------------------
Philip B. Smith
Director
</TABLE>
*By: /s/ P. MICHAEL HIGHUM
-------------------------------
Attorney-in-Fact
II-7
<PAGE> 82
HSRTW, INC.
Pursuant to the requirements of the Securities Act, this registration
statement on Form S-4 has been signed by the following persons in the capacities
and on the date indicated.
<TABLE>
<S> <C>
March 20, 1997 By: /s/ NICHOLAS J. SUTTON*
Date ------------------------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
March 20, 1997 By: /s/ P. MICHAEL HIGHUM
Date ------------------------------------------------------
P. Michael Highum
President and Director (Principal Executive Officer)
March 20, 1997 By: /s/ JAMES E. DUFFY*
Date ------------------------------------------------------
James E. Duffy
Vice President -- Finance and Chief Financial
Officer and Director (Principal Financial Officer)
March 20, 1997 By: /s/ ANNETTE M. MONTOYA*
Date ------------------------------------------------------
Annette M. Montoya
Vice President -- Accounting and Controller
(Principal Accounting Officer)
</TABLE>
*By: /s/ P. MICHAEL HIGHUM
-------------------------------
Attorney-in-Fact
II-8
<PAGE> 83
ORION ACQUISITION, INC.
Pursuant to the requirements of the Securities Act, this registration
statement on Form S-4 has been signed by the following persons in the capacities
and on the date indicated.
<TABLE>
<S> <C>
March 20, 1997 By: /s/ NICHOLAS J. SUTTON*
Date -------------------------------------------------------
Nicholas J. Sutton
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
March 20, 1997 By: /s/ P. MICHAEL HIGHUM
Date -------------------------------------------------------
P. Michael Highum
President and Director (Principal Executive Officer)
March 20, 1997 By: /s/ JAMES E. DUFFY*
Date -------------------------------------------------------
James E. Duffy
Vice President -- Finance and Chief Financial
Officer and Director (Principal Financial Officer)
March 20, 1997 By: /s/ ANNETTE M. MONTOYA*
Date -------------------------------------------------------
Annette M. Montoya
Vice President -- Accounting and Controller
(Principal Accounting Officer)
</TABLE>
*By: /s/ P. MICHAEL HIGHUM
-------------------------------
Attorney-in-Fact
II-9
<PAGE> 84
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- ------- -----------------------
25.1 Statement of Eligibility of Trustee on Form T-1 with respect to the
Exchange Notes.
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
36-1194448
Illinois (I.R.S. Employer
(State of Incorporation) Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Daniel G. Donovan, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2908
(Name, address and telephone number for agent for service)
HS RESOURCES, INC.
(Name of Obligor)
94-3036864
Delaware (I.R.S. Employer
(State of Incorporation) Identification No.)
One Maritime Plaza
Fifteenth Floor
San Francisco, CA 94111
(Address of principal executive offices)
Senior Subordinated Notes
(Title of indenture securities)
<PAGE> 2
1. GENERAL INFORMATION. Furnish the following information as to the
Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of
Governors of the Federal Reserve System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise
corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the
Trustee, describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as
now in effect and includes the authority of the Trustee to
commence business and to exercise corporate trust powers was filed
in connection with the Registration Statement of Louisville Gas
and Electric Company, File No. 2-44295, and is incorporated herein
by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of C-Cube Microsystems,
Inc., File No. 33-97166, and is incorporated herein by reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
(included as Exhibit B on page 3 of this statement)
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 27th day of February, 1997.
HARRIS TRUST AND SAVINGS BANK
By: /s/ D.G. Donovan
-------------------------------
D.G. Donovan
Assistant Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents
that reports of examinations of said trustee by Federal and State authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /s/ D.G. Donovan
-------------------------------
D.G. Donovan
Assistant Vice President
2
<PAGE> 4
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of September 30, 1996, as published in accordance
with a call made by the State Banking Authority and by the Federal Reserve Bank
of the Seventh Reserve District.
[HARRIS BANK LOGO]
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on September 30, 1996, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 071000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin................ $ 1,751,494
Interest bearing balances.......................................... $ 839,856
Securities:.................................................................
a. Held-to-maturity securities $ 0
b. Available-for-sale securities $ 3,137,919
Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement
subsidiaries, and in IBF's:
Federal funds sold................................................. $ 478,625
Securities purchased under agreements to resell.................... $ 0
Loans and lease financing receivables:
Loans and leases, net of unearned income........................... $ 7,897,067
LESS: Allowance for loan and lease losses......................... $ 108,949
-----------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b)............................................... $ 7,788,118
Assets held in trading accounts............................................. $ 74,302
Premises and fixed assets (including capitalized leases).................... $ 172,267
Other real estate owned..................................................... $ 142
Investments in unconsolidated subsidiaries and associated companies......... $ 60
Customer's liability to this bank on acceptances outstanding................ $ 100,950
Intangible assets........................................................... $ 299,478
Other assets................................................................ $ 563,022
-----------
TOTAL ASSETS $15,206,233
===========
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES
Deposits:
In domestic offices.................................................................. $ 8,013,146
Non-interest bearing............................................................ $ 3,248,897
Interest bearing................................................................ $ 4,764,249
In foreign offices, Edge and Agreement subsidiaries, and IBF's....................... $ 2,055,520
Non-interest bearing............................................................ $ 32,775
Interest bearing................................................................ $ 2,022,745
Federal funds purchased and securities sold under agreements to repurchase in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased.............................................................. $ 886,457
Securities sold under agreements to repurchase....................................... $ 1,841,475
Trading Liabilities $ 40,157
Other borrowed money:....................................................................
a. With remaining maturity of one year or less $ 606,331
b. With remaining maturity of more than one year $ 9,434
Bank's liability on acceptances executed and outstanding $ 100,950
Subordinated notes and debentures........................................................ $ 310,000
Other liabilities........................................................................ $ 186,408
-----------
TOTAL LIABILITIES $14,049,878
===========
EQUITY CAPITAL
Common stock............................................................................. $ 100,000
Surplus.................................................................................. $ 600,295
a. Undivided profits and capital reserves............................................... $ 486,054
b. Net unrealized holding gains (losses) on available-for-sale securities $ (29,994)
-----------
TOTAL EQUITY CAPITAL $ 1,156,355
===========
Total liabilities, limited-life preferred stock, and equity capital...................... $15,206,233
===========
</TABLE>
I, Steve Neudecker, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
STEVE NEUDECKER
10/30/96
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and, to the
best of our knowledge and belief, has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
the Commissioner of Banks and Trust Companies of the State of Illinois and is
true and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
MARIBETH S. RAHE
Directors.
4
