<PAGE> 1
As filed with the Securities and Exchange Commission on October 16, 1997
Registration No. 333-_____________
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
-----------------
NATIONAL ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
-----------------
<TABLE>
<S> <C> <C>
DELAWARE 1311 58-1922764
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
4925 GREENVILLE AVENUE
SUITE 1400
DALLAS, TEXAS 75206
(214) 692-9211
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MILES D. BENDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
4925 GREENVILLE AVENUE, SUITE 1400
DALLAS, TEXAS 75206
(214) 692-9211
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE OF AGENT FOR SERVICE)
-----------------
Copies to:
DIANE B. MUSE
AKIN, GUMP, STRAUSS,
HAUER & FELD, L.L.P.
1700 PACIFIC AVENUE, SUITE 4100
DALLAS, TEXAS 75201-4675
(214) 969-2800
Approximate date of commencement of proposed sale to public: As soon as
practicable after the registration statement becomes effective.
-----------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
-----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED(1) AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED PER UNIT(1) OFFERIng price(1) fee(1)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 3/4% Series D Senior
Notes Due 2006 ................. $165,000,000 100% $165,000,000 $50,000
===========================================================================================================
</TABLE>
(1) The registration fee has been computed pursuant to Rule 457(f)(2) under
the Securities Act of 1933, as amended (the "Securities Act"), based on the
stated principal amount of each Outstanding Note and Series B Note which may be
received by the Registrant in the exchange transaction in which the Exchange
Notes will be offered.
-------------------
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, 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 ANY SUCH STATE.V
SUBJECT TO COMPLETION, DATED OCTOBER 16, 1997
PROSPECTUS
NATIONAL ENERGY GROUP, INC.
OFFER TO EXCHANGE
10 3/4% SERIES C SENIOR NOTES DUE 2006
($65,000,000 PRINCIPAL AMOUNT OUTSTANDING)
AND ALL OUTSTANDING 10 3/4% SERIES B SENIOR NOTES DUE 2006
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
10 3/4% SERIES D SENIOR NOTES DUE 2006,
($165,000,000 PRINCIPAL AMOUNT)
----------------
The Exchange Offer will expire at 5:00 p.m., E.S.T., on [___ ], 1997,
unless extended.
National Energy Group, Inc., a Delaware corporation (the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), to exchange up to an aggregate
principal amount of $65,000,000 of its outstanding 10 3/4% Series C Senior
Notes due 2006 (the "Outstanding Notes") and up to an aggregate principal
amount of $100,000,000 of its outstanding 10 3/4% Series B Senior Notes due
2006 (the "Series B Notes") for an equal principal amount of its 10 3/4% Series
D Senior Notes due 2006 in integral multiples of $1,000 (the "Exchange Notes"
and, together with the Outstanding Notes, the "Notes"). The Exchange Notes will
be senior unsecured obligations of the Company and are substantially identical
(including principal amount, interest rate, maturity and redemption rights) to
the Outstanding Notes and the Series B Notes for which they may be exchanged
pursuant to this Exchange Offer, except for certain transfer restrictions and
registration rights relating to the Outstanding Notes. The Series B Notes have
been issued under an Indenture dated as of November 1, 1996 (the "Series A/B
Indenture") between the Company and Bank One, Columbus, N.A. as trustee (the
"Series A/B Trustee"). See "Description of the Series A/B Notes." The
Outstanding Notes have been, and the Exchange Notes will be, issued under an
Indenture dated as of August 21, 1997 (the "Indenture"), between the Company
and Bank One, N.A. as trustee (the "Trustee"). See "Description of the Exchange
Notes." There will be no proceeds to the Company from the Exchange Offer;
however, pursuant to a Registration Rights Agreement dated as of August 21,
1997 (the "Registration Rights Agreement") among the Company and the Initial
Purchasers (as defined) of the Outstanding Notes, the Company will bear certain
offering expenses.
(Cover text continued on next page)
-------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN
RISKS TO BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND IN EVALUATING
AN INVESTMENT IN THE EXCHANGE NOTES.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is [__________], 1997.
<PAGE> 3
The Company will accept for exchange any and all validly tendered
Outstanding Notes and/or Series B Notes on or prior to 5:00 p.m., E.S.T., on
[________], 1997, unless extended (the "Expiration Date"). Tenders of
Outstanding Notes and/or Series B Notes may be withdrawn at any time prior to
5:00 p.m., E.S.T., on the Expiration Date; otherwise such tenders are
irrevocable. Bank One, N.A. is acting as Exchange Agent (the "Exchange Agent")
in connection with the Exchange Offer. The minimum period of time that the
Exchange Offer will remain open is ____ days from the date the Registration
Statement is declared effective. The Exchange Offer is not conditioned upon any
minimum principal amount of Outstanding Notes or Series B Notes being tendered
for exchange, but is otherwise subject to certain customary conditions.
The Exchange Notes will bear interest from the date of issuance at a
rate equal to 10 3/4% per annum on the same terms as the Outstanding Notes and
the Series B Notes. Interest on the Exchange Notes will be payable semiannually
on May 1 and November 1 of each year commencing [________________], 1997.
Accrued interest on the Outstanding Notes and/or the Series B Notes that are
tendered in exchange for the Exchange Notes will be payable on or before
[____________], 199__. Outstanding Notes and the Series B Notes that are
accepted for exchange will cease to accrue interest upon issuance of the
Exchange Notes.
The Outstanding Notes in an aggregate principal amount of $65 million
were sold by the Company on August 21, 1997 to the Initial Purchasers in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption provided in Section 4(2) of
the Securities Act. The Initial Purchasers subsequently placed the Outstanding
Notes with qualified institutional buyers in reliance upon Rule 144A under the
Securities Act. Accordingly, the Outstanding Notes may not be re-offered,
resold or otherwise transferred in the United States unless so registered or
unless an applicable exemption from the registration requirements of the
Securities Act is available. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Registration Rights
Agreement. See "The Exchange Offer."
On November 1, 1996, the Company issued $100 million aggregate
principal amount of unregistered 10 3/4% Senior Notes due 2006 (the "Series A
Notes") which were exchanged in February 1997 for the registered Series B Notes
due 2006 (the Series A Notes together with the Series B Notes the "Series A/B
Notes"). As such, the Series B Notes are freely tradeable. THE COMPANY HAS
INCLUDED THE SERIES B NOTES IN THE EXCHANGE OFFER IN ORDER TO ALLOW THE
OUTSTANDING NOTES AND THE SERIES B NOTES TO TRADE AS A SINGLE ISSUE, WHICH THE
COMPANY BELIEVES WILL INCREASE THE LIQUIDITY OF THE EXCHANGE NOTES. SEE "RISK
FACTORS - EXCHANGE OFFER PROCEDURES" AND "RISK FACTORS - ABSENCE OF A PUBLIC
MARKET FOR THE EXCHANGE NOTES."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties (including Exxon Capital Holdings (available April 13, 1989), Morgan
Stanley & Co, Inc. (available June 5, 1991) and Mary Kay Cosmetics, Inc.
(available June 5, 1991)), the Company believes that Exchange Notes issued
pursuant to this Exchange Offer may be offered for resale, resold and otherwise
transferred by a holder who is not an affiliate of the Company without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the Exchange Notes in its
ordinary course of business and is not participating in and has no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes. Persons wishing to
exchange Outstanding Notes in the Exchange Offer must represent to the Company
that such conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
Exchange Notes. The Letter of Transmittal for the Exchange Offer states that by
so acknowledging and 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 and/or Series B Notes where
such Outstanding Notes and/or Series B Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed to make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale for a
period of up to one
2
<PAGE> 4
year from the date on which the registration statement, of which this
Prospectus forms a part, is declared effective. See "Plan of Distribution."
The Company does not intend to list the Exchange Notes on any national
securities exchange or to seek the admission thereof to trading on the National
Association of Securities Dealers automatic quotation system ("NASDAQ"). The
Initial Purchasers have advised the Company that they intend to make a market
in the Exchange Notes; however, they are not obligated to do so and any
market-making may be discontinued at any time without notice. Accordingly, no
assurance can be given that an active public or other market will develop for
the Exchange Notes or as to the liquidity of or the trading market for the
Exchange Notes.
ANY OUTSTANDING NOTES AND/OR SERIES B NOTES NOT TENDERED AND ACCEPTED
IN THE EXCHANGE OFFER WILL REMAIN OUTSTANDING. TO THE EXTENT THAT ANY
OUTSTANDING NOTES AND/OR SERIES B NOTES OF OTHER HOLDERS ARE TENDERED AND
ACCEPTED IN THE EXCHANGE OFFER, A HOLDER'S ABILITY TO SELL UNTENDERED
OUTSTANDING NOTES AND/OR SERIES B NOTES COULD BE ADVERSELY AFFECTED. FOLLOWING
CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF UNTENDERED OUTSTANDING NOTES
WILL CONTINUE TO BE SUBJECT TO THE EXISTING RESTRICTIONS UPON TRANSFER THEREOF.
The Company expects that the Exchange Notes issued pursuant to this
Exchange Offer will be issued in the form of a Global Exchange Note (as defined
herein), which will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") and registered in its name or in the name of Cede & Co., its
nominee. Beneficial interests in the Global Exchange Note representing the
Exchange Notes will be shown on, and transfers thereof to qualified
institutional buyers will be effected through, records maintained by DTC and
its participants. After the initial issuance of the Global Exchange Note,
Exchange Notes in certificated form will be issued in exchange for the Global
Exchange Note on the terms set forth in the Indenture. See "Description of
Exchange Notes-Global Exchange Note; Book-Entry Form."
No dealer, salesperson or other person has been authorized to give
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the Exchange Notes offered hereby, nor does it constitute an offer
to sell or the solicitation of an offer to buy any of the Exchange Notes to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any date subsequent to the
date hereof.
AVAILABLE INFORMATION
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-4 (the "Registration Statement") under the
Securities Act with respect to the securities offered by this Prospectus.
Certain of the information contained in the Registration Statement is omitted
from this Prospectus, and reference is hereby made to the Registration
Statement and exhibits and schedules relating thereto for further information
with respect to the Company and the securities offered by this Prospectus. The
Company is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information are available for inspection
at, and copies of such materials may be obtained upon payment of the fees
prescribed therefor by the rules and regulations of the Commission from the
Commission at its principal offices located at Judiciary Plaza, 450 Fifth
Street, Room 1024, Washington, D.C. 20549, and at the Regional Offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and at 7 World Trade Center, Suite
1300, New York, New York 10048. The Commission maintains a World Wide Web site
on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission. In addition, the
Common Stock of the Company ("Common Stock") is traded on The Nasdaq National
Market under the symbol NEGX, and such reports, proxy statements and other
3
<PAGE> 5
information may be inspected at the offices of The Nasdaq National Market, 1735
K Street N.W., Washington, D.C. 20006.
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it is required to furnish the information
required to be filed with the Commission to the Trustee and the holders of the
Exchange Notes. The Company has agreed that, even if it is entitled under the
Exchange Act not to furnish such information to the Commission, it will
nonetheless continue to furnish information that would be required to be
furnished by the Company by Section 13 of the Exchange Act to the Trustee and
the holders of the Exchange Notes as if it were subject to such periodic
reporting requirements.
In addition, the Company has agreed that for so long as any of the
Outstanding Notes are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, they will 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)(i) under the Securities Act.
INFORMATION INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH DOCUMENTS, OTHER
THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE THEREIN, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST TO SECRETARY, 4925
GREENVILLE AVENUE, SUITE 1400, DALLAS, TEXAS 75206, TELEPHONE NUMBER (214)
692-9211. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY ______________, 1997. [5 DAYS PRIOR TO THE EXPIRATION DATE]
The Company's Annual Report on Form 10-K for the year ended December
31, 1996, the Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1997 and June 30, 1997, and the Company's Current Reports on Form 8-K
and Form 8-K/A dated August 29, 1996, and filed with the Commission pursuant to
the Exchange Act, are incorporated by reference in this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14, or 15(d) of the Exchange Act, after the date of this Prospectus and prior
to the termination of the Registration Statement of which this Prospectus is a
part with respect to registration of the Exchange Notes, shall be deemed to be
incorporated by reference in this Prospectus and 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 in this Prospectus shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus, or in any other subsequently filed
document that also is or is deemed to be incorporated by reference, modifies or
replaces such statement.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference herein
include "forward-looking statements" within the meaning of various provisions
of the Securities Act and the Exchange Act. All statements, other than
statements of historical facts, included in this Prospectus and the documents
incorporated by reference herein that address activities, events or
developments that the Company expects or anticipates will or may occur in the
future, including such things as estimated future net revenues from oil and
natural gas reserves and the present value thereof, future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Company's business and operations, plans, references to future success,
references to intentions as to future matters and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by
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<PAGE> 6
the Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate under the circumstances. However, whether actual
results and developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, including the
risk factors discussed in this Prospectus, general economic, market or business
conditions, the opportunities (or lack thereof) that may be presented to and
pursued by the Company, competitive actions by other oil and natural gas
companies, changes in laws or regulations, and other factors, many of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Prospectus and the documents incorporated by reference
herein are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on the Company or its business or
operations.
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<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be
read in connection with, the more detailed information and financial statements
and notes thereto included elsewhere or incorporated by reference in this
Prospectus. Unless the context otherwise requires, all references to "NEG" or
the "Company" are to National Energy Group, Inc.
THE COMPANY
NEG is an independent energy company engaged in the acquisition,
exploitation, development, exploration and production of oil and natural gas.
Through the acquisition of oil and natural gas properties with significant
reserve and production enhancement potential, and the subsequent exploitation
and development of those properties, the Company has substantially increased
its reserves and geographically diversified its property holdings. In its
acquisitions of oil and natural gas properties, the Company targets major
producing basins in Texas, Oklahoma, Arkansas, Louisiana, Mississippi, Alabama
and offshore in the Gulf of Mexico, and seeks to acquire reserves that are
balanced between oil and natural gas with a mix of both short and long reserve
lives. While continuing to pursue attractive acquisition opportunities, the
Company has increased its focus upon implementing a comprehensive exploitation
and development program for its existing properties. This program is designed
to enhance proved producing reserves and convert proved undeveloped reserves to
proved producing reserves through development drilling, workovers,
recompletions and other production enhancement activities. As a complement to
these efforts, the Company has developed an exploration program concentrating
primarily on onshore Gulf of Mexico prospects in Texas, Louisiana, Mississippi
and Alabama, and offshore Gulf of Mexico prospects in shallow state waters in
offshore Texas.
As a result of its acquisition, exploitation, development and
exploration activities, NEG has substantially increased its reserves,
production and cash flow since 1991. The Company's estimated net proved
reserves and PV10% have grown from 6.8 Bcfe and $6.1 million, respectively, on
December 31, 1991, to 181.7 Bcfe (71% natural gas) and $291.7 million (62%
proved developed), respectively, at December 31, 1996, as determined from
reserve reports prepared by Netherland, Sewell & Associates, Inc., independent
petroleum engineers. NEG's average net daily production has increased from 1.2
Mmcfe for 1991 to 54.5 Mmcfe for the second quarter of 1997. As a result of
increases in reserves and production, the Company has increased cash flow from
operations before changes in operating assets and liabilities from $0.2 million
for 1991 to $13.8 million for 1996 and $13.7 million for the first six months
of 1997.
The Company estimates it has a backlog of approximately 206
development opportunities (including recompletions, drilling locations and
proposed waterfloods) on its existing properties, which the Company believes
will provide at least a three-year inventory of development projects. The
Company has established an aggregate development and exploration capital budget
for its existing properties of approximately $57 million for 1997 consisting of
approximately $45 million for development and exploitation projects and
approximately $12 million for selective exploratory activities primarily on its
onshore Texas, Louisiana, Mississippi, Alabama and offshore Gulf of Mexico
properties, of which $34.9 million was spent during the first half of 1997
consisting of $32.8 million for development and exploitation projects and $2.1
million for exploratory activities. Actual amounts expended by the Company for
development and exploration activities will be dependent on a number of
factors, including oil and natural gas prices, seismic and drilling costs,
future drilling results and the availability of capital.
The Company's principal executive offices are located at 4925
Greenville Avenue, Suite 1400, Dallas, Texas 75206, and its telephone number is
(214) 692-9211.
BUSINESS STRATEGY
NEG strives to increase reserves, production and cash flow from
operations through a strategy of (i) focusing on development and exploitation
activities to maximize production and ultimate reserve recovery, (ii) acquiring
oil and natural gas properties with significant exploitation, development or
exploration potential, (iii)
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<PAGE> 8
obtaining operational control of its properties, (iv) maintaining a low
operating cost structure, and (v) selectively exploring and developing
properties with significant reserve potential.
Development and Exploitation. In 1994, 1995 and 1996, the Company
participated in the drilling of 9 gross (6.4 net) development wells, 25 gross
(21.3 net) development wells and 29 gross (25.8 net) development wells,
respectively. All but two of the development wells drilled since 1994 have been
commercially productive. The Company intends to intensify development and
exploitation of its existing properties through development drilling,
workovers, redrills, recompletions, and other production enhancement techniques
to maximize its production and reserves. As of December 31, 1996, the Company
has identified approximately 206 development opportunities (including
recompletions and drilling locations) on the Company's existing properties. NEG
has a development and exploitation capital expenditure budget of approximately
$45 million for 1997, a major portion of which is targeted to develop proved
undeveloped reserves, of which $32.8 million was spent during the first six
months of 1997.
Property Acquisitions. Acquisitions of producing oil and gas
properties have contributed significantly to the Company's historical growth in
reserves. During the period from January 1, 1991 through December 31, 1996, the
Company has acquired, through fifteen transactions, 202.1 Bcfe of estimated net
proved reserves. While NEG expects to generate future growth in reserves and
production through its increased emphasis on development and exploratory
drilling, the Company will continue to seek to opportunistically acquire
properties that complement and enhance its inventory of development,
exploitation and exploration projects. Consistent with its historical
acquisition strategy, the Company expects to focus on purchases of
underdeveloped properties in its core areas of expertise either through
negotiated property acquisitions or acquisitions of companies with oil and
natural gas properties.
Operational Control. The Company generally prefers to operate and,
except for its exploratory prospects, own a majority working interest in its
oil and natural gas properties. This operating philosophy enables the Company
to control the nature, timing and costs of exploration and development of its
properties, as well as the marketing of the resulting production. At December
31, 1996, the Company operated 506 of the 833 producing wells in which it owns
an interest.
Low Operating Cost Structure. The Company seeks to increase cash flow
by maintaining a low unit operating cost structure through its focus on
increasing production while limiting its field operating and corporate overhead
expenses. Through these efforts, the Company has reduced historical unit lease
operating expenses 44% from $0.70 per Mcfe in 1991 to $0.39 per Mcfe for the
six months ended June 30, 1997. During these same periods, the Company
decreased historical unit general and administrative expenses 70% from $0.80
per Mcfe to $0.24 per Mcfe.
Selective Exploration Program. To balance its relatively lower risk
development and exploitation activities, the Company expects that exploration
drilling will become a more important aspect of its business in the future. The
Company seeks to reduce the risks normally associated with exploratory drilling
by (i) allocating only a limited portion of its capital expenditure budget to
exploration activities, (ii) limiting its working interests in exploratory
prospects through participation by industry partners, (iii) obtaining
operational control of its prospects and (iv) utilizing advanced technologies,
including 3-D seismic surveys, where cost-effective. The Company's exploration
program targets prospects with significant reserve potential, focusing
primarily on its inventory of exploratory prospects in onshore Texas,
Louisiana, Mississippi and Alabama and offshore Gulf of Mexico, including the
Mustang Island Properties and Bayou Sorrel Properties. To provide additional
expertise in prospect generation and analysis for its exploration program and
to control prospect generation costs, the Company has entered into an agreement
with Sandefer Oil and Gas, Inc. ("Sandefer") under which prospects in
Louisiana, Texas and Mississippi are generated for NEG's consideration and
Sandefer participates with the Company in the evaluation, marketing and sale of
such prospects ("Sandefer Exploration Venture"). The agreement with Sandefer
also involves an arrangement with two geologists associated with Sandefer, who
have substantial exploration experience in the Gulf Coast region. The
geologists have access to the extensive engineering and licensed geological and
geophysical data bases for Louisiana, Texas and Mississippi owned or licensed
by Sandefer.
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<PAGE> 9
THE EXCHANGE OFFER
The Outstanding Notes . . . . The Outstanding Notes were sold by the Company on
August 21, 1997 (the "Initial Offering"), to
Jefferies & Company, Inc. and Prudential
Securities Incorporated (collectively, the
"Initial Purchasers") pursuant to a Purchase
Agreement dated August 21, 1997 (the "Purchase
Agreement"). The Initial Purchasers subsequently
resold the Outstanding Notes to qualified
institutional buyers pursuant to Rule 144A under
the Securities Act.
Registration Requirements . . Pursuant to the Purchase
Agreement, the Company and the Initial Purchasers
entered into a Registration Rights Agreement
dated August 21, 1997 (the "Registration Rights
Agreement"), which grants the holders of the
Outstanding Notes certain exchange and
registration rights. The Exchange Offer is
intended to satisfy such exchange and
registration rights, which terminate upon the
consummation of the Exchange Offer. If applicable
law or applicable interpretations of the staff of
the Commission do not permit the Company to
effect the Exchange Offer, the Company has agreed
to file a shelf registration (the "Shelf
Registration Statement") covering resales of the
Outstanding Notes. See "The Exchange Offer-Resale
of Exchange Notes" and "The Exchange Offer- Shelf
Registration Statement."
The Series B Notes . . . . . On November 1, 1996 the Company sold Series A
Notes to Bear, Stearns, Co. Inc., Smith Barney
Inc. and Jefferies & Company, Inc. (collectively,
the "Series A Initial Purchasers"). Pursuant to a
Registration Rights Agreement dated November 1,
1996, an exchange offer was made by the Company
in January, 1997 to exchange all outstanding
Series A Notes for registered Series B Notes.
Pursuant to such exchange offer, all outstanding
Series A Notes were exchanged for registered
Series B Notes. The Company is not required to
include the Series B Notes in the Exchange Offer
but has voluntarily chosen to include the Series
B Notes in the Exchange Offer.
The Exchange Offer . . . . . The Company is offering to exchange $1,000
principal amount of the Exchange Notes for each
$1,000 principal amount of (i) Outstanding Notes
and (ii) Series B Notes. As of the date hereof,
$65,000,000 aggregate principal amount of
Outstanding Notes are outstanding and
$100,000,000 aggregate principal amount of Series
B Notes are outstanding. The Company will issue
the Exchange Notes to holders on [________], 1997
(the "Exchange Date").
Based on an interpretation of the staff of the
Commission set forth in no action letters issued
to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Outstanding Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than any
such holder which 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 holder's business and that such
holder does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes.
8
<PAGE> 10
Each Participating Broker-Dealer must acknowledge
that it will deliver a prospectus in connection
with any resale of Exchange Notes. The Letter of
Transmittal for the Exchange Offer 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 and/or Series B Notes where
such Outstanding Notes and/or Series B Notes were
acquired by such broker-dealer as a result of
market-making activities or other trading
activities. The Company has agreed to make this
Prospectus available to any Participating
Broker-Dealer for use in connection with any such
resale for a period of up to one year from the
date the registration statement, of which this
Prospectus forms a part, is declared effective.
See "Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the
Exchange Notes could not rely on the position of
the staff of the Commission enunciated in Exxon
Capital Holdings Corporation (available April 13,
1989) or similar no- action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with the resale transaction. Failure to comply
with such requirements in such instance may
result in such holder incurring liability under
the Securities Act for which the holder is not
indemnified by the Company.
Expiration Date . . . . . . . 5:00 p.m., E.S.T., on [________],1997.
Interest on the
Exchange Notes . . . . . . . The Exchange Notes will bear interest from the
date of issuance of the Exchange Notes at a rate
equal to 10 3/4% per annum and will be payable
semi-annually on May 1 and November 1 of each
year commencing [_____________], 199__. Interest
on the Outstanding Notes that are tendered in
exchange for the Exchange Notes that has accrued
from the date of issuance of the Outstanding
Notes (or the most recent Interest Payment Date
to which interest on the Outstanding Notes has
been paid), through the Exchange Date and
interest on the Series B Notes that are tendered
in exchange for the Exchange Notes since the most
recent date to which interest on the Series B
Notes has been paid through the Exchange Date
will be payable on or before [____________],
1997.
Procedures for Tendering
Outstanding Notes and/or
Series B Notes. . . . . . . Each holder of Outstanding Notes and/or Series B
Notes wishing to accept the Exchange Offer must
complete, sign and date the accompanying Letter
of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Outstanding Notes and/or Series
B Notes and any other required documentation to
the Exchange Agent at the address set forth
herein. By executing the Letter of Transmittal,
each
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<PAGE> 11
holder will represent to the Company that, among
other things, the holder or the person receiving
such Exchange Notes, whether or not such person
is the holder, is acquiring the Exchange Notes in
the ordinary course of business and that neither
the holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. In lieu of physical delivery of the
certificates representing Outstanding Notes
and/or Series B Notes, tendering holders may
transfer Outstanding Notes and/or Series B Notes
pursuant to the procedure for book-entry transfer
as set forth under "The Exchange Offer Procedures
for Tendering."
Special Procedures for
Beneficial Owners . . . . . Any beneficial owner whose Outstanding Notes
and/or Series B Notes are registered in the name
of a broker-dealer, commercial bank, trust
company or other nominee and who wishes to tender
should contact such registered holder promptly
and instruct such registered holder to tender on
such beneficial owner's behalf.
If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of
Transmittal and delivering its Outstanding Notes
and/or Series B Notes, either make appropriate
arrangements to register ownership of the
Outstanding Notes and/or Series B Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
record ownership may take considerable time.
Guaranteed Delivery
Procedures . . . . . . . . Holders of Outstanding Notes and/or Series B
Notes who wish to tender their Outstanding Notes
and/or Series B Notes and whose Outstanding Notes
and/or Series B Notes are not immediately
available or who cannot deliver their Outstanding
Notes and/or Series B Notes, the Letter of
Transmittal or any other documents required by
the Letter of Transmittal to the Exchange Agent
(or comply with the procedures for book-entry
transfer) prior to the Expiration Date must
tender their Outstanding Notes and/or Series B
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
5:00 p.m., E.S.T., on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer - Withdrawal of Tenders."
Acceptance of Outstanding
Notes and/or Series B Notes
and Delivery of Exchange
Notes . . . . . . . . . . . . Subject to certain conditions, the Company will
accept for and exchange any and all Outstanding
Notes and any and all Series B Notes that are
properly tendered in the Exchange Offer prior to
5:00 p.m., E.S.T., on the Expiration Date. The
Exchange Notes issued pursuant to the Exchange
Offer will be delivered on the Exchange Date. See
"The Exchange Offer - Terms of the Exchange
Offer."
Federal Income Tax
Consequences . . . . . . . . The exchange pursuant to the Exchange Offer
should not be a taxable event for federal income
tax purposes. See "Certain Federal Income Tax
Consequences."
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<PAGE> 12
Effect on Holders of
Outstanding Notes . . . . . . As a result of the making of this Exchange Offer,
the Company will have fulfilled one of its
obligations under the Registration Rights
Agreement and, with certain exceptions noted
below, holders of Outstanding Notes who do not
tender their Outstanding Notes will not have any
further registration rights under the
Registration Rights Agreement or otherwise. Such
holders will continue to hold the untendered
Outstanding Notes and will be entitled to all the
rights and subject to all the limitations
applicable thereto under the Indenture, except to
the extent such rights or limitations, by their
terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
All untendered Outstanding Notes will continue to
be subject to certain restrictions on transfer.
Accordingly, if any Outstanding Notes are
tendered and accepted in the Exchange Offer, the
trading market of the untendered Outstanding
Notes could be adversely affected. See "Risk
Factors - Exchange Offer Procedures" and "Risk
Factors - Absence of a Public Market for the
Exchange Notes."
Effect on Holders of
Series B Notes . . . . . . . Holders of Series B Notes who do not tender their
Series B Notes will continue to hold untendered
Series B Notes and will be entitled to all the
rights and subject to all the limitations
applicable thereto under the Series A/B
Indenture. If any holders of the Series B Notes
tender such notes, the trading market of
untendered Series B Notes could adversely be
affected. See "Risk Factors - Exchange Offer
Procedures" and "Risk Factors - Absence of a
Public Market for the Exchange Notes."
Exchange Agent . . . . . . . Bank One, N.A.
SUMMARY OF TERMS OF THE EXCHANGE NOTES
Securities Offered . . . . . $165,000,000 aggregate principal amount of 10
3/4% Series D Senior Notes due 2006.
Maturity Date . . . . . . . . November 1, 2006.
Interest Payment Dates. . . . May 1 and November 1 of each year, commencing
[_____________], 199__.
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 1, 2001 at the
redemption prices set forth herein or, if
redeemed prior to November 1, 2001, at the
Make-Whole Price, plus, in each case, accrued and
unpaid interest to the date of redemption. In
addition, the Company may, at its option, redeem
up to 35% of the aggregate principal amount of
the Exchange Notes at 110.75% of the principal
amount thereof, plus accrued and unpaid interest
to the date of redemption, with the net proceeds
of one or more Equity Offerings consummated on or
before November 1, 1999, provided at least 65% of
the aggregate principal amount of the Exchange
Notes remains outstanding following such
redemption. See "Description of the Exchange
Notes - Optional Redemption."
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<PAGE> 13
Ranking . . . . . . . . . . . The Exchange Notes will be senior unsecured
obligations of the Company ranking pari passu
with all existing and future senior indebtedness
of the Company, and senior in right of payment to
all future subordinated indebtedness of the
Company. The Exchange Notes will rank pari passu
with the Company's Outstanding Notes and Series B
Notes not otherwise exchanged for Exchange Notes
pursuant to this Exchange Offer. As of
[___________], 1997, after giving effect to the
Initial Offering and the application of the net
proceeds therefrom, the Company has no secured
indebtedness outstanding that effectively ranks
senior to the Exchange Notes. Subject to certain
limitations set forth in the Indenture, the
Company may incur additional senior indebtedness
and other indebtedness. See "Description of the
Exchange Notes - Ranking."
Guarantee . . . . . . . . . . The Company currently has no Restricted
Subsidiaries (as defined). In the event the
Company in the future acquires or creates a
Subsidiary, such Subsidiary shall be a Restricted
Subsidiary of the Company, and the Indenture
provides that such Restricted Subsidiary (a
"Guarantor"), will unconditionally guarantee (the
"Guarantee") the Exchange Notes. Any such
Guarantee will be a general unsecured senior
obligation of the Guarantor, ranking pari passu
with all existing and future senior indebtedness
of the Guarantor, and senior in right of payment
to all future subordinated indebtedness of the
Guarantor. See "Description of the Exchange Notes
- Guarantee."
Change of Control . . . . . . Upon a Change of Control (as defined), the
Company will be required, subject to certain
conditions, to offer to repurchase all
outstanding Exchange Notes at 101% of the
principal amount thereof, plus accrued and unpaid
interest to the date of purchase. See
"Description of the Exchange Notes - Change of
Control."
Certain Covenants . . . . . . The Indenture contains certain covenants,
including, but not limited to, covenants limiting
the Company and its Restricted Subsidiaries with
respect to the following: (i) asset sales; (ii)
restricted payments; (iii) the incurrence of
additional indebtedness and the issuance of
certain redeemable preferred stock; (iv) liens;
(v) sale and leaseback transactions; (vi) lines
of business; (vii) dividend and other payment
restrictions affecting subsidiaries; (viii)
mergers and consolidations; (ix) transactions
with affiliates; and (x) the filing of certain
periodic reports. See "Description of the
Exchange Notes - Certain Covenants."
RISK FACTORS
For a discussion of certain factors that should be considered by
prospective purchasers in evaluating an investment in the Notes, see "Risk
Factors."
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<PAGE> 14
RISK FACTORS
In addition to the other information set forth elsewhere in this
Prospectus and incorporated by reference herein, the following factors relating
to the Company and this Exchange Offer should be considered by prospective
investors when evaluating an investment in the Exchange Notes offered hereby.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Outstanding Notes and/or
Series B Notes pursuant to the Exchange Offer will be made only after a timely
receipt by the Company of such Outstanding Notes and/or Series B Notes, a
properly completed and duly executed Letter of Transmittal and all other
required documents. Therefore, holders of the Outstanding Notes and/or Series B
Notes desiring to tender such Outstanding Notes and/or Series B 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 the tenders of Outstanding Notes and/or Series B
Notes for exchange. Outstanding Notes that are not tendered or are tendered but
not accepted will, following the consummation of the Exchange Offer, continue
to be subject to the existing restrictions upon transfer thereof. Upon
consummation of the Exchange Offer, the registration rights under the
Registration Rights Agreement will terminate. In addition, any holder of
Outstanding Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Outstanding Notes and/or
Series B Notes, where such Outstanding Notes and/or Series B 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 sale of such Exchange Notes. See "Plan of Distribution. "TO
THE EXTENT THAT SOME OF THE OUTSTANDING NOTES OR SERIES B NOTES ARE TENDERED
AND ACCEPTED IN THE EXCHANGE OFFER, THE TRADING MARKET FOR UNTENDERED AND
TENDERED BUT UNACCEPTED OUTSTANDING NOTES OR SERIES B NOTES, AS THE CASE MAY
BE, COULD BE ADVERSELY AFFECTED.
Substantial Indebtedness
At June 30, 1997, on a pro forma basis giving effect to the Initial
Offering and the application of the net proceeds therefrom, the Company had
approximately $165 million of indebtedness (including current maturities of
long- term indebtedness) as compared to the Company's stockholders' equity of
$82 million. The Company may incur additional indebtedness under the Company's
Revised Credit Facility (as defined in "Description of Certain Indebtedness -
Revised Credit Facility"). See "Description of Certain Indebtedness
- - Revised Credit Facility" and "Description of the Exchange Notes - Certain
Covenants."
This level of indebtedness may pose substantial risks to holders of the
Exchange Notes, including the possibility that the Company might not generate
sufficient cash flow to make the principal and interest payments on the
Exchange Notes. If the Company is unsuccessful in increasing its proved
reserves or realizing production from its proved undeveloped reserves, the
future net revenue from existing proved reserves may not be sufficient to make
such principal and interest payments on the Exchange Notes in accordance with
their terms. Such indebtedness may also adversely affect the Company's ability
to finance its future operations and capital needs, and may limit its ability
to pursue other business opportunities.
FUTURE CAPITAL REQUIREMENTS
The Company has made, and will continue to make, substantial capital
expenditures for acquisition, development and production of oil and natural gas
reserves, particularly since a significant portion of the proved reserves of
the Company consist of proved undeveloped reserves, which require substantial
capital expenditures to
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<PAGE> 15
prove and develop. The Company has budgeted capital expenditures of
approximately $57 million for the year ending 1997, of which $34.9 million was
spent during the first six months of 1997. The Company is not contractually
committed to expend the budgeted funds. The Company currently expects that
available cash, cash flows from operations, proceeds from the Initial Offering
and available borrowings under the Revised Credit Facility will be sufficient
to fund planned capital expenditures for its existing properties through
December 31, 1997. However, the Company may need to raise additional capital to
fund acquisitions which may become available to the Company in the future, and
to fund the development of any such acquisitions.
For periods after 1997, the Company may seek additional capital, if
required, from traditional reserve-based borrowing, equity and debt offerings
or joint ventures to further develop and explore its properties and to acquire
additional properties. The Company's ability to access additional capital will
depend on its continued success in exploring for and developing its oil and
natural gas reserves and the status of the capital markets at the time such
capital is sought. Accordingly, there can be no assurance that capital will be
available to the Company from any source or that, if available, it will be at
prices or on terms acceptable to the Company. Should the Company be unable to
access the capital markets or should sufficient capital not be available, the
development and exploration of the Company's properties could be delayed or
reduced and, accordingly, oil and natural gas revenues and operating results
may be adversely affected.
RANKING OF THE EXCHANGE NOTES; EFFECTIVE SUBORDINATION
The Exchange Notes will be senior unsecured obligations of the Company
ranking pari passu with any of the Outstanding Notes and the Series B Notes
remaining outstanding after the Exchange Offer and all existing and future
senior indebtedness of the Company. Holders of secured indebtedness of the
Company and its subsidiaries, including the Revised Credit Facility, however,
will have claims with respect to the assets constituting collateral for such
indebtedness that are prior to the claims of holders of the Exchange Notes. The
obligations of the Company under the Revised Credit Facility are secured by a
substantial portion of the assets of the Company.
In the event of a default on the Exchange Notes, or a bankruptcy,
liquidation or reorganization of the Company, such assets will be available to
satisfy obligations with respect to the indebtedness secured by the Revised
Credit Facility before any payment therefrom could be made on the Exchange
Notes. Accordingly, the Exchange Notes will be effectively subordinated to
claims of secured creditors of the Company to the extent of such pledged
collateral. At June 30, 1997, after giving effect to the Initial Offering and
the application of the net proceeds therefrom, the Company had no outstanding
secured indebtedness effectively ranked senior to the Exchange Notes in right
of payment, and no other indebtedness other than the Outstanding Notes and the
Series B Notes. The Indenture limits the amount of Liens (as defined in
"Description of the Exchange Notes - Certain Definitions") securing the Revised
Credit Facility to the greater of (i) $40 million or (ii) $10 million plus 15%
of Adjusted Consolidated Net Tangible Assets (as defined in "Description of the
Exchange Notes - Certain Definitions").
RESTRICTIONS IMPOSED BY LENDERS
The instruments governing the indebtedness of the Company impose
significant operating and financial restrictions on the Company. Such
restrictions will affect, and in many respects significantly limit or prohibit,
among other things, the ability of the Company to incur additional
indebtedness, pay dividends, repay indebtedness prior to its stated maturity,
sell assets or engage in mergers or acquisitions. These restrictions could also
limit the ability of the Company to effect future financings, make needed
capital expenditures, withstand a future downturn in the Company's business or
the economy in general, or otherwise conduct necessary corporate activities. A
failure by the Company to comply with these restrictions could lead to a
default under the terms of such indebtedness and the Notes. In the event of
default, the holders of such indebtedness could elect to declare all of the
funds borrowed pursuant thereto to be due and payable together with accrued and
unpaid interest. In such event, there can be no assurance that the Company
would be able to make such payments or borrow sufficient funds from alternative
sources to make any such payment. Even if additional financing could be
obtained, there can be no assurance that it would be on terms that are
favorable or acceptable to the Company. In addition, the Company's indebtedness
under the Revised Credit Facility is secured by a substantial portion of the
assets of the Company. The pledge of such
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<PAGE> 16
collateral to existing lenders could impair the Company's ability to obtain
favorable financing. See "Description of Certain Indebtedness - Revised Credit
Facility."
REPURCHASE OF EXCHANGE NOTES UPON A CHANGE OF CONTROL
The Company must offer to repurchase the Exchange Notes upon the
occurrence of certain events. In the event of a Change of Control (as defined
in the Indenture) the Company must offer to repurchase all Exchange Notes then
outstanding at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the date of purchase. See "Description of
the Exchange Notes - Change of Control."
Prior to repurchasing such Exchange Notes, the Company may be required to
(i) repay all or a portion of indebtedness under the Revised Credit Facility or
(ii) obtain any requisite consent to permit the repurchase. If the Company is
unable to repay all of such indebtedness or is unable to obtain the necessary
consents, then the Company will be unable to offer to purchase the Exchange
Notes and such failure will constitute an Event of Default under the Indenture.
There can be no assurance that the Company will have sufficient funds available
at the time of any Change of Control to make any debt payment (including
repurchases of Exchange Notes) as described above.
The events that constitute a Change of Control under the Indenture may
also be events of default under the Revised Credit Facility or other senior
indebtedness of the Company. Such events may permit the lenders under such debt
instruments to reduce the borrowing base thereunder or accelerate the debt and
if the debt is not paid, to enforce security interests on, or commence
litigation which could ultimately result in a sale of, substantially all the
assets of the Company, thereby limiting the Company's ability to raise cash to
repurchase the Exchange Notes and reducing the practical benefit of the offer
to purchase provisions to the holders of the Exchange Notes. See "Description
of Certain Indebtedness - Revised Credit Facility."
ABSENCE OF A PUBLIC MARKET FOR THE EXCHANGE NOTES
The Outstanding Notes and the Series B Notes, respectively, are currently
owned by a relatively small number of beneficial owners. The Outstanding Notes
have not been registered under the Securities Act and are subject to
significant restrictions on resale. The Exchange Notes will constitute a new
issue of securities with no established trading market. The Company does not
intend to list the Outstanding Notes, the Series B Notes or the Exchange Notes
on any national securities exchange or to seek the admission thereof to trading
in the National Association of Securities Dealers Automated Quotation System.
The Company has been advised by the Initial Purchasers that, following
completion of the Exchange Offer, they 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 in the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and may be limited during the
Exchange Offer or the pendency of a shelf registration statement. While an
application to have the Exchange Notes accepted for trading in the PORTAL
market will be made, no assurance can be given that an active public or other
market will develop for the Exchange Notes or as to the liquidity of or the
trading market for the Exchange Notes. Future trading prices of the Exchange
Notes will depend upon many factors, including, among others, prevailing
interest rates, the Company's operating results and the market for similar
securities.
If all of the holders of the Series B Notes and the Outstanding Notes
tender such notes, the liquidity of the Exchange Notes would be increased as a
result of the larger size of the issue. However, there can be no assurance that
any or all holders of Series B Notes or the Outstanding Notes will accept the
Exchange Offer. Failure of holders of Outstanding Notes and Series B Notes to
accept the Exchange Offer could result in a decrease in the liquidity of the
Exchange Notes. In addition, wide acceptance of the Exchange Offer will affect
and could decrease the liquidity of the Series B Notes and the Outstanding Notes
held by non-tendering holders.
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<PAGE> 17
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to any Restricted Subsidiary of the Company that guarantees the
Exchange Notes. To the extent that a court were to find that (x) a Guarantee
was incurred by a Guarantor with intent to hinder, delay or defraud any present
or future creditor or the Guarantor contemplated insolvency with a design to
prefer one or more creditors to the exclusion in whole or in part of others or
(y) a Guarantor did not receive fair consideration or reasonably equivalent
value for issuing its Guarantee and such Guarantor (i) was insolvent, (ii) was
rendered insolvent by reason of the issuance of such Guarantee, (iii) was
engaged or about to engage in a business or transaction for which the remaining
assets of such Guarantor constituted unreasonably small capital to carry on its
business or (iv) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, the court could avoid or
subordinate such Guarantee in favor of the Guarantor's creditors. Among other
things, a legal challenge of a Guarantee on fraudulent conveyance grounds may
focus on the benefits, if any, realized by a Guarantor as a result of the
issuance by the Company of the Exchange Notes. The Indenture contains a savings
clause, which generally limits the obligations of each Guarantor under its
Guarantee to the maximum amount as will, after giving effect to all of the
liabilities of such Guarantor, result in such obligations not constituting a
fraudulent conveyance. To the extent a Guarantee of any Guarantor was avoided
as a fraudulent conveyance or held unenforceable for any other reason, holders
of the Exchange Notes would cease to have any claim against such Guarantor and
would be creditors solely of the Company and any Guarantor whose Guarantee was
not avoided or held unenforceable. In such event, the claims of the holders of
the Exchange Notes against the issuer of an invalid Guarantee would be subject
to the prior payment of all liabilities of such Guarantor. There can be no
assurance that, after providing for all prior claims, there would be sufficient
assets to satisfy the claims of the holders of the Exchange Notes relating to
any avoided portions of any of the Guarantees.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law applied in any such proceeding. Generally,
however, a Guarantor may be considered insolvent if the sum of its debts,
including contingent liabilities, was greater than the fair marketable value of
all of its assets at a fair valuation or if the present fair marketable value
of its assets was less than the amount that would be required to pay its
probable liability on its existing debts, including contingent liabilities, as
they become absolute and mature.
Based upon financial and other information, the Company believes that any
Guarantee will be incurred for proper purposes and in good faith and that the
Company is solvent, will have sufficient capital for carrying on its business
and will be able to pay its debts as they mature. There can be no assurance,
however, that a court passing on such standards would agree with the Company.
See "Description of the Notes - Guarantee."
INCREASE IN SCOPE OF OPERATIONS
The Company believes that the completion of several acquisitions during
1996, including the merger (the "Merger") of Alexander Energy Corporation with
and into National Energy Group of Oklahoma, Inc. ("NEG-OK") and the subsequent
merger (the "Subsequent Merger") of NEG-OK with and into the Company, offer
opportunities for long-term efficiencies in operations that should positively
affect future operating results of the Company. However, the increased scope of
operations will continue to present challenges to the Company due to the
increased time and resources required in the management effort. Management and
the Board of Directors of the Company believe that the combinations will
continue to be effected in a manner that will achieve the maximum value to the
Company's stockholders. However, although a majority of the members of
management and the Board of Directors individually have had experience in
combinations of this size, the Company has not. Accordingly, there can be no
assurance that the operations of the merged companies can be effectively
managed to realize the operational efficiencies anticipated to result from the
Merger and the Subsequent Merger. In addition, the continued growth and
expansion of the Company will depend, among other factors, on the Company's
ability to recruit and retain skilled and experienced management and technical
personnel. There can be no assurance that the Company will be successful in
such efforts.
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<PAGE> 18
CONTROL BY CERTAIN EQUITY STOCKHOLDERS IN THE CASE OF INSOLVENCY AND CERTAIN
OTHER EVENTS
As the holder of the Convertible Preferred Stock, Series D, of the Company
(the "Series D Preferred Stock"), High River Limited Partnership ("High River")
and its affiliates, Riverdale Investors Corp., Inc. and Carl C. Icahn, will
have certain rights if certain events occur that may indicate that the Company
is insolvent or is financially distressed. The member of the Board of Directors
appointed by the holders of the Series D Preferred Stock has the right to veto
any voluntary bankruptcy filing by the Company. The holders of the Series D
Preferred Stock also have the right to choose to elect one-half of the members
of the Board of Directors plus one member if certain events occur indicating
insolvency of the Company, such as an involuntary bankruptcy filing or a
default on indebtedness of the Company in excess of $10 million, which is not
cured within certain time periods of less than 30 days, including any such
event with respect to the Exchange Notes.
The owners of the 10% Cumulative Convertible Preferred Stock, Series B, of
the Company (the "Series B Preferred Stock") and the 10.5% Cumulative
Convertible Preferred Stock, Series C, of the Company (the "Series C Preferred
Stock") each have the right to elect one-third of the Board of Directors if,
with respect to four dividend payments for that series, the Company does not
pay dividends or pays the dividends in shares of Series B Preferred Stock or
Series C Preferred Stock, as the case may be. If the holders of the Series B
Preferred Stock and Series C Preferred Stock are each entitled to exercise this
right, the holders of Series C Preferred Stock may not exercise their rights
until the rights of the holders of the Series B Preferred Stock terminate. One
payment on the Series B Preferred Stock has been paid in shares of Series B
Preferred Stock.
The holders of the Convertible Preferred Stock, Series E (the "Series E
Preferred Stock") of the Company have the same voting rights as holders of the
Company's common stock with respect to the election of the Board of Directors.
If the Company experiences financial difficulties for a prolonged period
of time so that all of these voting rights are triggered and exercised, the
holders of the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock and the Series E Preferred Stock (collectively the
"Preferred Stock"), will have the right to elect at least 83% of the Board of
Directors.
FINANCIAL REPORTING IMPACT OF FULL COST METHOD OF ACCOUNTING
The Company follows the full cost method of accounting for oil and natural
gas properties. Under such method, the net book value of such properties, less
related deferred income taxes, may not exceed a calculated "ceiling." The
ceiling is the estimated after-tax future net revenues from proved oil and
natural gas properties, discounted at 10% per year. In calculating future net
revenues, prices and costs in effect at the time of the calculation are held
constant indefinitely, except for changes which are fixed and determinable by
existing contracts. The net book value is compared to the ceiling on a
quarterly and yearly basis. The excess, if any, of the net book value above the
ceiling is required to be written off as a non-cash expense. As a result of
allocating additional cost, under the purchase method of accounting, to the oil
and natural gas properties in connection with the Merger, the Company
recognized a non-cash writedown of its oil and natural gas properties of
approximately $28.3 million, net of deferred taxes. The amount of the actual
writedown was charged to expense in the third quarter of 1996, the period in
which the Merger was consummated. At June 30, 1997, the Company was near the
ceiling and there can be no assurances that there will not be any future
writedowns under the full cost method of accounting. Any further decrease in
oil and natural gas prices could result in additional writedowns.
VOLATILITY OF OIL AND NATURAL GAS PRICES AND MARKETS
The Company's profitability will be substantially dependent on prevailing
prices for oil and natural gas. The amounts of and prices obtainable for the
Company's oil and natural gas production will be affected by market factors
beyond the Company's control. Such factors include the extent of domestic
production, the level of imports of foreign oil and natural gas, the general
level of market demand on a regional, national and worldwide basis, domestic
and foreign economic conditions that determine levels of industrial production,
political events in foreign oil-producing regions, and variations in
governmental regulations and tax laws or the imposition of new
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<PAGE> 19
governmental requirements upon the oil and natural gas industry. Prices for oil
and natural gas are subject to wide fluctuation in response to relatively minor
changes in supply of and demand for oil and natural gas, market uncertainty and
a variety of additional factors that are beyond the control of the Company. A
substantial and prolonged decline in oil and natural gas prices could have a
material adverse effect upon the Company, including the inability of the
Company to fund planned operations and capital expenditures, writedowns of the
carrying value of its oil and natural gas properties, and the Company's
inability to meet debt service requirements resulting in defaults under the
Revised Credit Facility, the Series A/B Indenture and the Indenture, as well as
defaults in the payment of dividends on the Preferred Stock. In addition, the
marketability of the Company's production will depend in part upon the
availability, proximity and capacity of gathering systems, pipelines and
processing facilities.
UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET REVENUES; SIGNIFICANT
UNDEVELOPED RESERVES
There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company. The
reserve information set forth or incorporated by reference in this Prospectus
represents estimates based on reports prepared by the Company's independent
petroleum engineers, as well as internally generated reports. Petroleum
engineering is not an exact science. Information relating to the Company's
proved oil and natural gas reserves is based upon engineering estimates.
Estimates of economically recoverable oil and natural gas reserves and of
future net cash flows necessarily depend upon a number of variable factors and
assumptions, such as historical production from the area compared with
production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions concerning future oil and natural gas
prices, future operating costs, severance and excise taxes, capital
expenditures and workover and remedial costs, all of which may vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers at different times may
vary substantially. Actual production, revenues and expenditures with respect
to the Company's reserves will likely vary from estimates, and such variances
may be material. Approximately one-half of the Company's estimated proved
reserves are classified as undeveloped. Either inaccuracies in estimates of
proved undeveloped reserves or the inability to fund development could result
in substantially reduced reserves. In addition, the timing of receipt of
estimated future net revenues from proved undeveloped reserves will be
dependent upon the timing and implementation of drilling and development
activities estimated by the Company for purposes of the reserve report.
EXPLORATION AND DEVELOPMENT RISKS; LIMITED EXPLORATION HISTORY
Exploration and development of oil and natural gas properties involve a
high degree of risk that no commercial production will be obtained or that the
production will be insufficient to recover drilling and completion costs. The
cost of drilling, completing and operating wells is often uncertain. The
Company's drilling operations may be curtailed, delayed or canceled as a result
of numerous factors, including title problems, weather conditions, compliance
with governmental requirements and shortages or delays in the delivery of
equipment. Furthermore, completion of a well does not assure a profit on the
investment or a recovery of drilling, completion and operating costs. The
Company has had limited experience in exploratory prospect generation and
drilling. The Company intends to engage consultants or contract operators with
experience in the particular areas targeted for exploration by the Company. The
Company has entered into the Sandefer Exploration Venture for such purpose in
the Louisiana, Mississippi and Texas Gulf Coast region.
OPERATING HAZARDS AND UNINSURED RISKS
In addition to the substantial risk that wells drilled will not be
productive, hazards such as unusual or unexpected geologic formations,
pressures, downhole fires, mechanical failures, blowouts, cratering,
explosions, uncontrollable flows of oil, natural gas or well fluids, pollution
and other physical and environmental risks are inherent in oil and natural gas
exploration and production. These hazards could result in substantial losses to
the Company due to injury and loss of life, severe damage to and destruction of
property and equipment, pollution and other environmental damage and suspension
of operations. The Company carries insurance which it believes is in
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<PAGE> 20
accordance with customary industry practices, but, as is common in the oil and
natural gas industry, the Company does not fully insure against all risks
associated with its business either because such insurance is not available or
because the cost thereof is considered prohibitive.
REPLACEMENT OF RESERVES
The Company's success will be largely dependent on its ability to replace
and expand its oil and natural gas reserves through the acquisition of
producing properties and the exploration for and development of oil and natural
gas reserves, both of which involve substantial risks. Without successful
acquisition or drilling ventures, the Company will be unable to replace the
reserves being depleted by production, and its assets and revenues, including
the reserves, will decline. There can be no assurance that the Company's
acquisition and exploration and development activities will result in the
replacement of, or additions to, the Company's reserves. Similarly, there can
be no assurance that the Company will have sufficient capital to engage in its
acquisition, exploration or development activities. Successful acquisition of
producing properties generally requires accurate assessments 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 as estimates their accuracy is inherently uncertain.
GOVERNMENTAL REGULATION
The Company's operations are affected by extensive regulation pursuant to
various federal, state and local laws and regulations relating to the
exploration for and development, production, gathering and marketing of oil and
natural gas and the release of materials into the environment or otherwise
relating to protection of the environment. In particular, the Company's oil and
natural gas exploration, development and production, and its activities in
connection with storage and transportation of liquid hydrocarbons are subject
to stringent environmental regulation by governmental authorities in the United
States and in foreign jurisdictions. Such regulations have increased the costs
of planning, designing, drilling, installing, operating and abandoning oil and
natural gas wells and other related facilities.
The Company has expended significant resources, both financial and
managerial, to comply with environmental regulations and permitting
requirements and anticipates that it will continue to do so in the future.
Although the Company believes that its operations are in general compliance
with all such existing laws and regulations, including applicable environmental
laws and regulations, risks of substantial costs and liabilities are inherent
in oil and natural gas operations, and there can be no assurance that
significant costs and liabilities will not be incurred in the future. Moreover,
it is possible that other developments, such as increasingly strict
environmental laws, regulations and enforcement policies thereunder, and claims
for damages to property, employees, other persons and the environment resulting
from the Company's operations, could result in substantial costs and
liabilities in the future.
COMPETITION
The oil and natural gas industry is highly competitive. The Company will
compete in 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. Many of these competitors
have substantially greater financial and other resources than the Company.
Furthermore, the oil and natural gas industry competes with other industries in
supplying the energy and fuel needs of industrial, commercial and other
consumers.
Ratio of Earnings to Fixed Charges
The following table sets forth the Company's ratio of earnings to fixed
charges or the deficiency of earnings to fixed charges for each of the five
years in the period ended December 31, 1996 and for the six month periods ended
June 30, 1996 and 1997 (in thousands, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
---------------------------------------------------------- --------------------------------------
Pro Forma Pro Forma
1992 1993 1994 1995 1996 1996 1996 1997 1997
----- ----- ----- ---- -------- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of
earnings to
fixed charges(1),(2)......... -- -- -- 1.2x -- -- 1.9x 1.5x --
Deficiency of
Earnings to
fixed charges(1),(2),(3)..... $(221) $(299) $(489) -- ($40,061) $(6,711) -- -- $(474)
</TABLE>
- -------------------
(1) For the purpose of calculating the ratio of earnings to fixed charges,
fixed charges consist of interest expense, capitalized interest, the
interest component of rental expense and the amortization of debt discount
and financing costs. Earnings consist of income before extraordinary items
and income taxes plus fixed charges, excluding capitalized interest.
(2) The Pro Forma ratio of earnings or deficiency of earnings have been
prepared as if the Merger with Alexander and the sale of the Series A/B
Notes and the Outstanding Notes, and the application of the proceeds
therefrom, had been consummated on January 1, 1996.
(3) The deficiency of earnings to fixed charges for the year ended December 31
1996 includes a noncash writedown of approximately $43 million (before tax
benefits of approximately $15 million) of the Company's oil and gas
properties, in accordance with the full cost method of accounting, which
was charged to expense in the third quarter of 1996, the period in which
the Merger was consummated.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Outstanding Notes were sold by the Company on August 21, 1997, to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently placed the Outstanding Notes with qualified
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<PAGE> 21
institutional buyers in reliance on Rule 144A under the Securities Act. As a
condition of the purchase of the Outstanding Notes by the Initial Purchasers,
the Company entered into the Registration Rights Agreement with the Initial
Purchasers, which requires, among other things, that the Company file with the
Commission a registration statement under the Securities Act with respect to an
offer by the Company to the holders of the Outstanding Notes to issue and
deliver to such holders, in exchange for Outstanding Notes, a like principal
amount of Exchange Notes. The Company is required to use its best efforts to
cause the Registration Statement relating to the Exchange Offer to be declared
effective by the Commission under the Securities Act and commence the Exchange
Offer. The Exchange Notes are to be issued without a restrictive legend and may
be reoffered and resold by the holder without restrictions or limitations under
the Securities Act (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act). A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
On November 1, 1996 the Company sold Series A Notes to the Series A
Initial Purchasers. The Series A Initial Purchasers subsequently placed the
Series A Notes with qualified institutional buyers in reliance on Rule 144A
under the Securities Act. As a condition to the purchase of the Series A Notes
by the Series A Initial Purchasers, the Company entered into a Registration
Rights Agreement with the Series A Initial Purchasers which required the
Company to file with the Commission a Registration Statement of the Securities
Act with respect to an offer by the Company to the holders of the Series A
Notes to issue and deliver to such holders, in exchange for the Series A Notes,
a like principal amount of Series B Notes. In January, 1997 the Company filed a
Registration Statement with respect to the Series B Notes and all Series A
Notes were exchanged for registered Series B Notes in an exchange offer
pursuant thereto. The Series B Notes are identical in all material respects to
the Exchange Notes. The Company is including the Series B Notes in the Exchange
Offer (to combine both series of notes in order to enhance the liquidity of the
Exchange Notes.
The term "Holder" with respect to the Exchange Offer means any person in
whose name the Outstanding Notes or the Series B 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.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all
Outstanding Notes and any and all Series B Notes validly tendered and not
withdrawn prior to 5:00 p.m., E.S.T., on the Expiration Date. On the Exchange
Date, the Company will issue $1,000 principal amount of Exchange Notes in
exchange for $1,000 principal amount of Outstanding Notes or Series B Notes, as
the case may be, accepted in the Exchange Offer. Holders may tender some or all
of their Outstanding Notes and/or Series B Notes pursuant to the Exchange
Offer. However, Outstanding Notes and/or Series B Notes may be tendered only in
integral multiples of $1,000.
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 hence will not bear legends restricting
the transfer thereof and (ii) the holders of the Exchange Notes will not be
entitled to certain rights under the Registration Rights Agreement. The form
and terms of the Exchange Notes are substantially the same as the form and
terms of the Series B Notes. The Exchange Notes will evidence the same debt as
the Outstanding Notes, in addition to the debt evidenced by the Series B Notes,
and will be entitled the benefits of the Indenture.
As of the date of this Prospectus, $65,000,000 aggregate principal amount
of the Outstanding Notes and $100,000,000 aggregate principal amount of the
Series B Notes was outstanding and registered in the name of Cede & Co., as
nominee for the Depository Trust Company. The Company has fixed the close of
business of [_______], 1997, as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially.
Holders of Outstanding Notes and Series B Notes do not have any appraisal
or dissenters' rights under the General Corporation Law of Delaware, the
Indenture or the Series A/B Indenture in connection with the Exchange
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<PAGE> 22
Offer. The Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of
the Commission thereunder, including Rule 14e-1 thereunder.
The Company shall be deemed to have accepted validly tendered Outstanding
Notes and/or Series B Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of receiving the Exchange Notes
from the Company.
If any tendered Outstanding Notes and/or Series B Notes are not accepted
for exchange because of an invalid tender, the occurrence of certain other
events set forth herein or otherwise, the certificates for any such unaccepted
Outstanding Notes and/or Series B Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Outstanding Notes and/or Series B Notes in 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 and/or Series B Notes pursuant to the
Exchange Offer. The Company will pay all charges and expenses, other than
transfer taxes in certain circumstances, in connection with the Exchange Offer.
See "--Fees and Expenses."
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the date of issuance of the
Exchange Notes. Interest on (i) the Outstanding Notes that are tendered in
exchange for the Exchange Notes that has accrued from August 21, 1997, the date
of issuance of the Outstanding Notes (or the most recent Interest Payment Date
to which interest on the Outstanding Notes has been paid) and (ii) the Series B
Notes that are tendered in exchange for the Exchange Notes that has accrued
from the most recent Interest Payment Date to which interest on the Series B
Notes has been paid, through the Exchange Date will be payable on or before on
or before [ ], 199__. Interest on the Exchange Notes will be payable
semi-annually on each May l and November l, commencing [ ], 199__.
PROCEDURES FOR TENDERING
Only a Holder of Outstanding Notes and/or Series B Notes may tender such
Outstanding Notes and/or Series B Notes in the Exchange Offer. To tender in the
Exchange Offer, a Holder must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal and mail or otherwise deliver such Letter
of Transmittal or such facsimile, together with the Outstanding Notes and/or
Series B Notes and any other required documents, to the Exchange Agent prior to
5:00 p.m., E.S.T., on the Expiration Date. The Company is not asking any Holder
for a proxy, and no Holder is requested to send the Company a proxy. To be
tendered effectively, the Outstanding Notes and/or Series B Notes, Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth below under "Exchange Agent" prior to 5:00 p.m.,
E.S.T., on the Expiration Date. Delivery of the Outstanding Notes and/or Series
B Notes may be made by book-entry transfer in accordance with the procedures
described below. Confirmation of such book-entry transfer must be received by
the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each Holder will make to the
Company the representations set forth below in the second paragraph under the
heading "--Resale of Exchange Notes."
The tender by a Holder and the acceptance thereof by the Company will
constitute agreement between such Holder and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO
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<PAGE> 23
LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Outstanding Notes and/or Series B Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered Holder
promptly and instruct such registered Holder to tender on such beneficial
owner's behalf.
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Outstanding Notes or the Series B Notes, as the case may be,
tendered pursuant thereto are tendered (i) by a registered Holder who has not
completed the box entitled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be by a member
firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange
Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Outstanding Notes and/or Series B Notes listed
therein, such Outstanding Notes and/or Series B Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
Holder as such registered Holder's name appears on such Outstanding Notes
and/or Series B Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Outstanding Notes and/or Series B
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect
to the Exchange Notes at DTC (the "Book-Entry Transfer Facility") for the
purpose of facilitating the Exchange Offer, and subject to the establishment
thereof, any financial institution that is a participant in the Book-Entry
Transfer Facility's system may make book-entry delivery of the Outstanding
Notes by causing such Book-Entry Transfer Facility to transfer such Outstanding
Notes and/or Series B Notes into the Exchange Agent's account with respect to
the Outstanding Notes and/or Series B Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
Outstanding Notes and/or Series B Notes may be effected through book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility,
an appropriate Letter of Transmittal properly completed and duly executed with
any required signature guarantee and all other required documents must in each
case be transmitted to and received or confirmed by the Exchange Agent at its
address set forth below on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures; provided, however, that a
participant in DTC's book-entry system may, in accordance with DTC's Automated
Tender Offer Program procedures and in lieu of physical delivery to the
Exchange Agent of a Letter of Transmittal, electronically acknowledge its
receipt of, and agreement to be bound by, the terms of the Letter of
Transmittal. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Outstanding Notes and/or Series
B Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Outstanding Notes and/or Series B Notes not
properly tendered or any Outstanding Notes and/or Series B Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Outstanding Notes
and/or Series B Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the
22
<PAGE> 24
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Outstanding Notes and/or Series B Notes must be cured within such
time as the Company shall determine. Although the Company intends to notify
Holders of defects or irregularities with respect to tenders of Outstanding
Notes and/or Series B Notes, neither the Company, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Outstanding Notes and/or Series B Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Outstanding Notes and/or Series B Notes received by the Exchange Agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the Exchange Agent to the tendering
Holders, unless otherwise provided in the Letter of Transmittal, as soon as
practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Outstanding Notes and/or Series B Notes
and (i) whose Outstanding Notes and/or Series B Notes are not immediately
available, (ii) who cannot deliver their Outstanding Notes and/or Series B
Notes, the Letter of Transmittal or any other required documents to the
Exchange Agent or (iii) who cannot complete the procedures for book-entry
transfer, prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice
of-Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate
number(s) of such Outstanding Notes and/or Series B Notes and the
principal amount of Outstanding Notes and/or Series B Notes tendered,
stating that the tender is being made thereby and guaranteeing that,
within five Nasdaq Stock Market trading days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof), together with the
certificate(s) representing the Outstanding Notes (or a confirmation of
book-entry transfer of such Outstanding Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility) and any other documents
required by the Letter of Transmittal, will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all
tendered Outstanding Notes and/or Series B Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Outstanding
Notes and/or Series B Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility) and all other documents required by the
Letter of Transmittal, are received by the Exchange Agent within five
Nasdaq Stock Market trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will
be sent to Holders who wish to tender their Outstanding Notes and/or Series B
Notes according to the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Outstanding Notes and/or
Series B Notes may be withdrawn at any time prior to 5:00 p.m., E.S.T., on the
Expiration Date.
To withdraw a tender of Outstanding Notes and/or Series B Notes in the
Exchange Offer, a written or facsimile transmission notice of withdrawal must
be received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., E.S.T., on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Outstanding Notes and/or
Series B Notes to be withdrawn (the "Depositor"), (ii) identify the Outstanding
Notes and/or Series B Notes to be withdrawn (including the certificate
number(s) and principal amount of such Outstanding Notes and/or Series B Notes,
or, in the case of Outstanding Notes and/or Series B Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer
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<PAGE> 25
Facility to be credited), (iii) be signed by the Holder in the same manner as
the original signature on the Letter of Transmittal by which such Outstanding
Notes and/or Series B Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Outstanding Notes register the transfer of such
Outstanding Notes and/or Series B Notes into the name of the person withdrawing
the tender, (iv) specify the name in which any such Outstanding Notes and/or
Series B Notes are to be registered, if different from that of the Depositor
and (v) if applicable because the Outstanding Notes and/or Series B Notes have
been tendered pursuant to book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Outstanding Notes
and/or Series B Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be
issued with respect thereto unless the Outstanding Notes and/or Series B Notes
so withdrawn are validly retendered. Any Outstanding Notes and/or Series B
Notes which have been tendered but which are not accepted for exchange, will be
returned to the Holder thereof without cost to such Holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Outstanding Notes and/or Series B Notes may
be retendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration Date.
EXCHANGE AGENT
Bank One, N.A. has been appointed as Exchange Agent for the Exchange
Offer. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notice of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<CAPTION>
By Registered or By Overnight
Certified Mail: Mail or Hand: By Facsimile:
<S> <C> <C>
Bank One, N.A. Bank One, N.A. Bank One, N.A.
Corporate Trust Operations Corporate Trust Operations Attn: Lora Marsch
235 West Schrock Road 235 West Shrock Road Facsimile No. (614) 248-7234
Columbus, Ohio 43271-0184 Westerville, Ohio 43081 Confirm by Telephone No.(614) 248-4856
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation is being made by mail;
however, additional solicitation may be made by telegraph, telephone, facsimile
or in person by officers and regular employees of the Company and its
affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers or others soliciting
acceptances of the Exchange Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and registration expenses,
including fees and expenses of the Trustee, filing fees, blue sky fees and
printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Outstanding Notes pursuant to the Exchange Offer. If, however,
certificates representing the Exchange Notes or the Outstanding Notes for the
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be issued in the name of, any person other than the person signing
the Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of the Outstanding Notes and/or Series B Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered Holder or any other person) will be payable by the tendering
Holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Outstanding Notes and/or Series B Notes, which is face value, as reflected in
the Company's accounting records on the date of exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer will be amortized over the term of the Exchange Notes.
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<PAGE> 26
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes
may be offered for resale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder which 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 holder's business and such holder does not intend to participate
and has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Any holder who tenders in the Exchange
Offer with the intention to participate, or for the purpose of participating,
in a distribution of the Exchange Notes may not rely on the position of the
staff of the Commission enunciated in Exxon Capital Holdings Corporation and
Morgan Stanley & Co., Incorporated, or similar no-action letters, but rather
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. In addition, any such
resale transaction should be covered by an effective registration statement
containing the selling security holders information required by Item 507 of
Regulation S-K of the Securities Act. 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."
By tendering in the Exchange Offer, each Holder will represent to the
Company that, among other things, (i) the Exchange Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is a Holder,
(ii) neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and (iii) the Holder and such other person acknowledge that if
they participate in the Exchange Offer for the purpose of distributing the
Exchange Notes (a) they must, in the absence of an exemption therefrom, comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale of the Exchange Notes and cannot rely on the
no-action letters referenced above and (b) failure to comply with such
requirements in such instance could result in such Holder incurring liability
under the Securities Act for which such Holder is not indemnified by the
Company. Further, by tendering in the Exchange Offer, each Holder that may be
deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of the
Company will represent to the Company that such Holder understands and
acknowledges that the Exchange Notes may not be offered for resale, resold or
otherwise transferred by that Holder without registration under the Securities
Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the Commission with respect to
resales of the Exchange Notes without compliance with the registration and
prospectus delivery requirements of the Securities Act.
SHELF REGISTRATION STATEMENT
If the Company is not permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by any applicable law or applicable
interpretation of the Commission or the staff of the Commission, the Company
has agreed to file with the Commission and use its best efforts to have
declared effective and keep continuously effective for up to three years a
registration statement that would allow resales of Outstanding Notes owned by
such holders.
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<PAGE> 27
OTHER
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Outstanding Notes and/or
Series B Notes are urged to consult their financial and tax advisors in making
their own decision on what action to take.
The Company may in the future seek to acquire untendered Outstanding Notes
and/or Series B Notes in open market or privately negotiated transactions,
through subsequent exchange offers or otherwise. The Company, however, has no
present plans to acquire any Outstanding Notes and/or Series B Notes that are
not tendered in the Exchange Offer or to file a registration statement to
permit resales of any untendered Outstanding Notes.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement
with respect to the Outstanding Notes. The Company will not receive any cash
proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes contemplated in this Prospectus,
the Company will receive Outstanding Notes or Series B Notes, as the case may
be, in like principal amount, the form and terms of which are substantially
similar to the form and terms of the Exchange Notes, except as otherwise
described herein. The Outstanding Notes and the Series B Notes surrendered in
exchange for Exchange Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the Exchange Notes will not result in any
increase or decrease in the indebtedness of the Company.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summaries of the Revised Credit Facility, the Series A/B
Indenture and the Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, the applicable agreements.
REVISED CREDIT FACILITY
The Company has a revolving credit agreement (the "Revised Credit
Facility") with Bank One, Texas, N.A., as Bank and Administrative Agent, and
Credit Lyonnais New York Branch, as Bank and Syndication Agent (collectively,
the "Banks"). The current borrowing base under the Revised Credit Facility, as
amended on August 21, 1997, is $20 million. Borrowings under the Revised Credit
Facility are to be used for development drilling expenditures and acquisition
of producing oil and gas properties. The borrowing base will be redetermined at
least semiannually and may require mandated monthly principal reductions by an
amount determined by the Banks from time to time. The principal is due at
maturity, August 29, 2000. Interest is payable monthly and is calculated at the
Bank One Base Rate, as determined from time to time by Bank One (which
increases by .25% if the outstanding loan balance is greater than 75% of the
borrowing base). The Company may elect to calculate interest under the
EuroDollar Rate (as defined in the Revised Credit Facility) which increases by
(i) 0.50% if the outstanding loan balance is greater than 75% of the borrowing
base, and (ii) .25% plus 1.75% if the outstanding loan balance is greater than
50% but less than 75% of the borrowing base. At June 30, 1997, the Company had
approximately $33 million of outstanding indebtedness under the Revised Credit
Facility of which $10 million was repaid on July 3, 1997 and the remaining $23
million was repaid with the proceeds of the Initial offering on August ___,
1997.
The Company is required to pay a commitment fee on the unused portion of
the borrowing base equal to 1% per annum under the Revised Credit Facility.
The Company granted to the Banks liens on substantially all of the
Company's oil and natural gas properties, whether currently owned or hereafter
acquired, and a negative pledge on all other oil and natural gas properties.
The Revised Credit Facility requires, among other things, semiannual
engineering reports covering oil and natural gas properties, and maintenance of
certain financial ratios, including the maintenance of a minimum interest
coverage, a current ratio and a minimum tangible net worth.
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The Revised Credit Facility includes other covenants prohibiting cash
dividends, distributions, loans or advances to third parties, except that cash
dividends on Preferred Stock will be allowed so long as no event of default
exists or would exist as a result of the payment thereof. In addition, if the
Company is required to purchase or redeem any portion of the Notes, or if any
portion of the Notes becomes due, the borrowing base is automatically reduced
to zero, provided that certain redemptions of the Notes related to the sale of
assets or a change in control will result in only a proportionate reduction in
the borrowing base. At [June 30,] 1997, the Company was not in violation of any
covenants of the Revised Credit Facility, as amended.
SERIES A/B NOTES
In November 1996, the Company issued $100 million aggregate principal
amount of unregistered 10 3/4% Senior Notes due 2006, which were exchanged for
the registered 10 3/4% Senior Notes due 2006 in an exchange offering commenced
in January 1997 (the "Series A/B Notes"). The terms of the Notes are
substantially identical to the terms of the Series A/B Notes. The Company is a
party to an Indenture (the "Series A/B Indenture") dated as of November 1, 1996
with Bank One, Columbus N.A. as trustee, governing the Series A/B Notes. The
Series A/B Indenture is substantially similar to the Indenture. See
"Description of the Exchange Notes."
DESCRIPTION OF THE EXCHANGE NOTES
The Outstanding Notes were and the Exchange Notes will be issued pursuant
to the Indenture dated as of August 21, 1997 between the Company and Bank One,
N.A., as trustee (the "Trustee"). The terms of the Exchange Notes are identical
in all material respects to the Outstanding Notes, except the Exchange Notes
have been registered under the Securities Act, and therefore, will not bear
legends restricting their transfer. The following summaries of certain
provisions of the Exchange Notes and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the Exchange Notes and the Indenture. Capitalized terms used herein but not
otherwise defined shall have the meaning assigned to them in the Indenture.
GENERAL
The aggregate principal amount of the Exchange Notes will be limited to
$165 million. Each Exchange Note will mature on November 1, 2006 and will bear
interest at an annual rate of 10 3/4% per annum from the date of issuance of
the Exchange Notes, payable semiannually in arrears on May 1 and November 1 of
each year, commencing November 1, 1997, to the Person in whose name the
Exchange Note is registered at the close of business on April 15 or October 15
preceding such interest payment date. Interest will be computed on the basis of
a 360-day year of twelve 30-day months. Interest (i) on the Outstanding Notes
that has accrued from August 21, 1997, the date of issuance of the Outstanding
Notes (or the most recent Interest Payment Date to which interest has been
paid) and (ii) on the Series B Notes the most recent date to which interest on
such notes has been paid, through the Exchange Date, will be paid on
[_______________], 199___. Principal, premium, if any, and interest will be
payable at the offices of the Trustee and the Paying Agent, provided that, at
the option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it appears in the register of the
Notes maintained by the Registrar.
Under certain circumstances, the Company will be able to designate
existing or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to most of the restrictive covenants set forth
in the Indenture.
Any Outstanding Notes that remain outstanding after the Expiration Date of
the Exchange Offer, together with the Exchange Notes issued in connection with
the Exchange Offer, will be treated as a single class of securities under the
Indenture.
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RANKING
The Indebtedness evidenced by the Notes will be general senior unsecured
obligations of the Company. The Notes rank pari passu with all existing and
future Senior Indebtedness of the Company and senior in right of payment to all
future subordinated indebtedness of the Company. Holders of secured
indebtedness of the Company and its subsidiaries, including the Revised Credit
Facility, will have claims with respect to assets constituting collateral for
such indebtedness that are prior to the claims of the Holders of the Exchange
Notes. To the extent of pledged collateral, such indebtedness will have
priority over the Notes. As of June 30, 1997, on a pro forma basis after giving
effect to the Initial Offering and the application of the proceeds therefrom,
the Company would have had no outstanding secured indebtedness that effectively
would rank senior to the Notes, $100 million of indebtedness under the Series
A/B Notes, which would rank pari passu with the Notes, and no other
indebtedness other than the Notes. There is currently no indebtedness of the
Company or any Restricted Subsidiaries which would constitute subordinated
indebtedness.
GUARANTEE
The Indenture provides that each Person that becomes a Restricted
Subsidiary on or after the Issue Date will jointly and severally guarantee the
payment of the Note obligations in the manner described herein. There is
currently no Restricted Subsidiary of the Company and no outstanding Guarantee
of the Notes. A Guarantor will guarantee to each Holder and the Trustee, the
full and prompt performance of the Note obligations of the Company, including
the payment of principal of (premium, if any, on) and interest on the Notes
pursuant to its Guarantee. The obligations of a Guarantor under its Guarantee
will be general senior unsecured obligations of the Guarantor, which will rank
pari passu with all existing and future Senior Indebtedness of the Guarantor
and senior in right of payment to all future Subordinated Indebtedness of the
Guarantor. To the extent a Guarantor pledges oil and gas collateral to secure
Senior Indebtedness of such Guarantor, such indebtedness effectively will have
priority over the Guarantee.
In the event the obligations of the Notes are guaranteed by a Guarantor,
the obligations of the Guarantor under its Guarantee will be limited to the
amount as will, after giving effect to all other contingent and fixed
liabilities of the Guarantor and after giving effect to any collections from or
payments made by or on behalf of any other Restricted Subsidiaries that become
Guarantors in respect of the obligations of such other Restricted Subsidiary
under its Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of the Guarantor under its Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal,
state or foreign law. In the event of more than one Guarantor, a Guarantor that
makes a payment or distribution under a Guarantee shall be entitled to a
contribution from each other Restricted Subsidiary that has become a Guarantor
in a pro rata amount based on the Adjusted Net Assets of the Guarantor.
The Indenture provides that, subject to the following paragraph, any
future Restricted Subsidiary that becomes a Guarantor may not consolidate or
merge with or into (whether or not the Guarantor is the surviving Person)
another Person unless (i) the Person formed by or surviving any such
consolidation or merger (if other than the Guarantor) is a corporation
organized and existing under the laws of the United States of America, any
state thereof, or the District of Columbia and expressly assumes all the
obligations of the Guarantor pursuant to a supplemental indenture, in a form
reasonably satisfactory to the Trustee, under the Notes and the Indenture, (ii)
immediately before and after giving effect to such transaction, no Default or
Event of Default exists, (iii) the Guarantor or the Person formed by or
surviving any such consolidation or merger on a pro forma basis will have
Consolidated Net Worth (immediately after the transaction) equal to or greater
than the Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (iv) the Company will at the time of such transaction after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable Reference Period, be permitted to incur at least
$1.00 of additional Indebtedness as described in the first paragraph under
"Certain Covenants - Limitation on Incurrence of Additional Indebtedness." The
foregoing will not prohibit a merger between Guarantors or a merger between the
Company and any Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of a Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
capital stock or other ownership interests of the Guarantor, then the Guarantor
(in the event of a sale or other disposition, by way
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of such a merger, consolidation or otherwise, of all of the capital stock or
other ownership interests of the Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of the Guarantor) will be released and relieved of any
obligations under its Guarantee; provided that the Net Cash Proceeds of such
sale or other disposition are applied in accordance with the provisions of the
Indenture described under "Certain Covenants - Limitation on Sale of Assets."
OPTIONAL REDEMPTION
At any time on or after November 1, 2001, the Company may, at its option,
redeem all or any portion of the Notes at the redemption prices (expressed as
percentages of the principal amount of the Notes) set forth below, plus, in
each case, accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the 12-month period beginning November 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.688%
2003 and thereafter . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to November 1, 2001, the
Company may, at its option, redeem all or any portion of the Notes at the
Make-Whole Price plus accrued and unpaid interest to the date of redemption. In
addition, in the event the Company consummates one or more Equity Offerings on
or prior to November 1, 1999, the Company, at its option, may redeem up to 35%
of the aggregate principal amount of the Notes with all or a portion of the
aggregate net proceeds received by the Company from such Equity Offering or
Equity Offerings at a redemption price of 110.75% of the aggregate principal
amount of the Notes so redeemed, plus accrued and unpaid interest thereon to
the redemption date; provided, however, that following such redemption, at
least 65% of the aggregate principal amount of the Notes remains outstanding.
Except as set forth under "Change of Control" and "Certain Covenants
Limitation on Sale of Assets," the Company is not required to make any
mandatory redemption or sinking fund payments with respect to the Notes.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee on a pro rata basis, by lot or
by any other method that the Trustee considers fair and appropriate and that
complies with the requirements of any securities exchange on which the Notes
may be listed, provided that no Notes with a principal amount of $1,000 or less
will be redeemed in part. Notice of redemption will be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note will
state the portion of the principal amount thereof to be redeemed. A new Note in
a principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest ceases to accrue on Notes or portions of
them called for redemption.
CHANGE OF CONTROL
The Indenture provides that, following the occurrence of any Change of
Control, the Company will offer (a "Change of Control Offer") to repurchase all
outstanding Notes at a purchase price equal to 101% of the aggregate principal
amount of the Notes, plus accrued and unpaid interest to the date of
repurchase. The Change of Control Offer will be deemed to have commenced upon
mailing of a notice pursuant to the Indenture and will terminate 20 Business
Days after its commencement, unless a longer offering period is required by
law. Promptly after the termination of the Change of Control Offer, the Company
will repurchase and mail or deliver payment for all Notes tendered in response
to the Change of Control Offer.
On the Change of Control payment date, the Company will, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent an amount equal
to the Change of Control payment in respect of all Notes or portions thereof so
tendered and (iii)
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deliver to the Trustee the Notes so accepted together with an officers'
certificate stating the amount of the Notes or portions thereof tendered to the
Company. The Paying Agent will promptly mail to each Holder of Notes so
accepted payment in an amount equal to the repurchase price for such Notes, and
the Trustee will promptly authenticate and mail to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered, if
any; provided, that each such new Note will be in a principal amount of $1,000
or an integral multiple thereof.
Change of Control means the occurrence of any of the following: (i) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the Company's assets to any Person or group (as such term
is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company; (iii) the
acquisition, directly or indirectly, by any Person or group (as such term is
used in Section 13(d)(3) of the Exchange Act) of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate
voting power of the Voting Stock of the Company (for the purposes of this
definition, such other Person shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation, if such other
Person is the beneficial owner (as defined above), directly or indirectly, of
more than 35% of the voting power of the Voting Stock of such parent
corporation); or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of 662/3% of the directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office.
The Company will comply with Section 14 of the Exchange Act and the
provisions of Regulation 14E and any other tender offer rules under the
Exchange Act and any other federal and state securities laws, rules and
regulations which may then be applicable to any Change of Control Offer.
The Borrowing Base under the Revised Credit Facility may be subject to
reduction if the Company becomes obligated to repurchase the Notes except upon
the scheduled maturity date, including if the Company becomes obligated to
extend a Change of Control Offer or any other offer to repurchase, including a
Net Proceeds Offer. See "Revised Credit Facility." Even if the Company's banks
consented to an offer to repurchase without a reduction in the Borrowing Base,
the Company's ability to pay cash to the Holders of the Notes upon a repurchase
may be limited by the Company's then existing financial resources.
The Series A/B Indenture provides that upon the occurrence of a Change of
Control (as defined therein), the Company shall be required to make an offer to
the holders of the Series A/B Notes to repurchase any or all of the outstanding
Series A/B Notes at a purchase price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. Such event would result in an event of default under the Revised
Credit Facility.
CERTAIN COVENANTS
Limitation on Incurrence of Additional Indebtedness. The Indenture
provides that the Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, issue, incur, assume, guarantee,
become liable, contingently or otherwise, with respect to or otherwise become
responsible for the payment of (collectively, incur) any Indebtedness (other
than Permitted Indebtedness); provided, however, that if no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence
of the incurrence of such Indebtedness, the Company or its Restricted
Subsidiaries may incur Indebtedness if, on a pro forma basis, after giving
effect to such incurrence and the application of the proceeds therefrom, both
of the following tests shall have been satisfied: (i) the Consolidated Interest
Coverage Ratio for the last four fiscal quarter Reference Period immediately
preceding the incurrence of such Indebtedness is at least (a) 2.25-to-1.0 with
respect to any date of incurrence of additional Indebtedness occurring on or
before the first anniversary date of the Series A/B Issue Date or (b)
2.50-to-1.0 with respect to any date of incurrence of additional Indebtedness
occurring after the first
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anniversary date of the Series A/B Issue Date and (ii) Adjusted Consolidated
Net Tangible Assets would have been equal to or greater than 125% of
Indebtedness of the Company and its Restricted Subsidiaries.
Notwithstanding the foregoing, if no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, the Company and its Restricted Subsidiaries
may incur Permitted Indebtedness.
Any Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary (whether by merger, consolidation, acquisition or
otherwise) shall be deemed to be incurred by such Restricted Subsidiary at the
time it becomes a Restricted Subsidiary.
Limitation on Restricted Payments. 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, unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
(ii) at the time of and immediately after giving effect to such
Restricted Payment, the Company would be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
first paragraph of the covenant captioned "Limitation on Incurrence of
Additional Indebtedness;" and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Series A/B
Issue Date does not exceed the sum of (a) 50% of the Consolidated Net Income of
the Company and its Restricted Subsidiaries (or in the event such Consolidated
Net Income shall be a deficit, minus 100% of such deficit) during the period
(treated as one accounting period) subsequent to September 30, 1996 and ending
on the last day of the fiscal quarter for which financial information is
available immediately preceding the date of such Restricted Payment (less the
aggregate amount of dividends described in clauses (i) and (ii) of the
following paragraph that are either (x) paid after the last day of the fiscal
quarter for which financial information is available immediately preceding the
date of such Restricted Payment or (y) declared but not yet paid as of such
date); (b) the aggregate Net Cash Proceeds received by the Company during such
period from any Person other than a Subsidiary of the Company as a result of
the issuance or sale of Capital Stock of the Company (other than any
Disqualified Stock), other than in connection with the conversion of
Indebtedness or Disqualified Stock; (c) the aggregate Net Cash Proceeds
received by the Company during such period from any Person other than a
Subsidiary of the Company as a result of the issuance or sale of any
Indebtedness or Disqualified Stock to the extent that at the time the
determination is made such Indebtedness or Disqualified Stock, as the case may
be, has been converted into or exchanged for Capital Stock of the Company
(other than Disqualified Stock); (d) (i) in case any Unrestricted Subsidiary
has been redesignated a Restricted Subsidiary, an amount equal to the lesser of
(x) the book value (determined in accordance with GAAP) at the date of such
redesignation of the aggregate Investments made by the Company and its
Restricted Subsidiaries in such Unrestricted Subsidiary and (y) the fair market
value of such Investments in such Unrestricted Subsidiary at the time of such
redesignation, as determined in good faith by the Company's Board of Directors,
including a majority of the Company's Disinterested Directors, whose
determination shall be conclusive and evidenced by a resolution of such Board
(less, in the case of each of clauses (x) and (y), the amount of original
Investment (based upon book value determined in accordance with GAAP at the
time of such Investment) made by the Company or any Restricted Subsidiary
pursuant to clause (x) of the definition of "Permitted Business Investment"
minus the aggregate cash dividends paid by such Unrestricted Subsidiary to the
Company or any other Restricted Subsidiary since the date of such original
Investment, provided that the result of the foregoing shall not be less than
zero); or (ii) in case any Restricted Subsidiary has been redesignated an
Unrestricted Subsidiary, minus the greater of (x) the book value (determined in
accordance with GAAP) at the date of redesignation of the aggregate Investments
made by the Company and its Restricted Subsidiaries and (y) the fair market
value of such Investments in such Restricted Subsidiary at the time of such
redesignation, as determined in good faith by the Company's Board of Directors,
including a majority of the Company's Disinterested Directors, whose
determination shall be conclusive and evidenced by a resolution of such Board;
and (e) $5.0 million.
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Notwithstanding the foregoing, the above limitations will not prevent (i)
the payment of any dividend within 60 days after the date of declaration
thereof, if at such date of declaration such payment complied with the
provisions hereof; (ii) the payment of any dividend on any shares of Preferred
Stock of the Company issued and outstanding as of the Series A/B Issue Date in
accordance with the terms of such Preferred Stock in effect at the Series A/B
Issue Date; (iii) any dividend on shares of Capital Stock of the Company or any
Restricted Subsidiary payable solely in shares of Capital Stock (other than
Disqualified Stock); (iv) any dividend or other distribution payable from a
Subsidiary to the Company or any Restricted Subsidiary that is wholly-owned
directly or indirectly by the Company; and (v) the repurchase, redemption or
other acquisition or retirement of any shares of any class of Capital Stock of
the Company or any Restricted Subsidiary, in exchange for, or out of the
aggregate net proceeds of a substantially concurrent issue and sale (other than
to a Restricted Subsidiary) of shares of Capital Stock of the Company (other
than Disqualified Stock).
Limitation on Sale of Assets. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, make any Asset Sale
unless:
(i) the Company (or its Restricted Subsidiary as the case may be)
receives consideration at the time of such sale or other disposition at least
equal to the fair market value thereof (as determined in good faith by the
Company, which determination, with respect to Asset Sales or series of related
Asset Sales with proceeds valued at greater than $5.0 million, shall be
evidenced by a resolution duly adopted by the Company's Board of Directors,
including a majority of the Company's Disinterested Directors);
(ii) at least 75% of the proceeds from such Asset Sale consist of
cash or U.S. dollar denominated Cash Equivalents; and
(iii) the Net Cash Proceeds received by the Company (or its Restricted
Subsidiary, as the case may be) from such Asset Sale are applied in accordance
with the following two paragraphs.
The Company may apply such Net Cash Proceeds, within 365 days from the
date of the receipt of Net Cash Proceeds from any Asset Sale, to: (a) the
repayment of Indebtedness of the Company under a Bank Credit Facility or other
Senior Indebtedness of the Company or Senior Indebtedness of a Guarantor, that
results in a permanent reduction in any revolving credit or other commitment
relating thereto or the maximum principal amount that may be borrowed
thereunder in an amount equal to the principal amount so repaid, (b) make an
Investment in assets used in the Oil and Gas Business in replacement of the
assets that were the subject of the Asset Sale giving rise to such Net Cash
Proceeds, or (c) develop by drilling, completing and producing reserves from
the oil and gas properties of the Company and the Restricted Subsidiaries.
If, upon completion of the 365-day period, the Net Cash Proceeds of any
Asset Sale less the aggregate amount applied by the Company during such period
as described in clauses (a), (b) or (c) in the immediately preceding paragraph,
together with any Net Cash Proceeds in excess of amounts similarly applied by
the Company from any prior Asset Sale after the date of receipt of such Net
Cash Proceeds (such aggregate constituting "Excess Proceeds"), exceeds $5.0
million, then the Company will be obligated to make an offer (the "Net Proceeds
Offer") to repurchase the Notes (including any Additional Series D Notes) and
any other Senior Indebtedness including, without limitation, the Series A/B
Notes in respect of which such an offer to repurchase is also required to be
made concurrently with the Net Proceeds Offer, having an aggregate principal
amount equal to the Excess Proceeds (such repurchase to be made on a pro rata
basis if the amount available for such repurchase is less than the principal
amount of the Notes and other Senior Indebtedness including, without
limitation, the Series A/B Notes tendered in such Net Proceeds Offer) at a
repurchase price of 100% of the principal amount thereof plus accrued interest,
if any, to the date of repurchase. Upon the completion of the Net Proceeds
Offer, the amount of Excess Proceeds will be reset to zero, subject to further
increase resulting from subsequent Asset Sales.
Any Net Proceeds Offer will be conducted in substantially the same manner
as a Change of Control Offer. The Company will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14E and any other tender offer
rules under the Exchange Act and any other federal and state securities laws,
rules and regulations which may then be applicable to any Net Proceeds Offer.
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During the period between any Asset Sale and the application of the Net
Cash Proceeds therefrom in accordance with this covenant, all Net Cash Proceeds
shall be either (i) maintained in a segregated account and shall be invested in
Permitted Financial Investments or (ii) applied to temporarily reduce
borrowings under any revolving credit facility constituting Senior Indebtedness
of the Company or Senior Indebtedness of a Guarantor.
Notwithstanding the foregoing, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, make any Asset Sale of
any of the Capital Stock of a Restricted Subsidiary except pursuant to an Asset
Sale of all of the Capital Stock of such Restricted Subsidiary.
Limitation on Liens Securing Indebtedness. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
create, incur, assume or suffer to exist any Liens (other than Permitted Liens)
upon any of their respective properties securing (i) any Indebtedness of the
Company, unless the Notes are equally and ratably secured or (ii) any
Indebtedness of any Guarantor, unless the Guarantees are equally and ratably
secured; provided, that if such Indebtedness is expressly subordinated to the
Notes or the Guarantees, the Lien securing such Indebtedness will be
subordinated and junior to any Lien securing the Notes or the Guarantees, with
the same relative priority as such Subordinated Indebtedness of the Company or
Subordinated Indebtedness of a Restricted Subsidiary that is a Guarantor will
have with respect to the Notes or the Guarantees, as the case may be.
Limitation on Mergers and Consolidations. The Indenture provides that the
Company will not consolidate with or merge with any Person or convey, transfer
or lease all or substantially all of its assets to any Person, unless: (i) the
Company survives such merger or the Person formed by such consolidation or into
which the Company is merged or that acquires by conveyance or transfer, or
which leases, all or substantially all of the assets of the Company is a
corporation organized and existing under the laws of the United States of
America, any state thereof or the District of Columbia and expressly assumes,
by supplemental indenture, the due and punctual payment of the principal of,
premium, if any, and interest on, all the Notes and the performance of every
other covenant and obligation of the Company under the Indenture; (ii)
immediately before and after giving effect to such transaction, no Default or
Event of Default exists; (iii) immediately after giving effect to such
transaction on a pro forma basis, the Consolidated Net Worth of the Company (or
the surviving or transferee entity) is equal to or greater than the
Consolidated Net Worth of the Company immediately before such transaction; and
(iv) immediately after giving effect to such transaction on a pro forma basis,
the Company (or the surviving or transferee entity) would be able to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the first paragraph of the covenant captioned "Certain Covenants
Limitation on Incurrence of Additional Indebtedness." Upon any such
consolidation, merger, lease, conveyance or transfer in accordance with the
foregoing, the successor Person formed by such consolidation or into which the
Company is merged or to which such lease, conveyance or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture with the same effect as if such successor had
been named as the Company herein and thereafter the predecessor corporation
will be relieved of all further obligations and covenants under the Indenture
and the Notes.
Limitation on Sale/Leaseback Transactions. The Indenture provides that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any Sale/Leaseback Transaction unless (i) the Company or such
Restricted Subsidiary, as the case may be, would be able to incur Indebtedness
in an amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction or (ii) the Company or such Restricted Subsidiary
receives proceeds from such Sale/Leaseback Transaction at least equal to the
fair market value thereof (as determined in good faith by the Company's Board
of Directors, whose determination in good faith, evidenced by a resolution of
such Board shall be conclusive) and such proceeds are applied in the same
manner and to the same extent as Net Cash Proceeds and Excess Proceeds from an
Asset Sale.
Limitation on Payment Restrictions Affecting Subsidiaries. The Indenture
provides that the Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary of the Company to (i) pay dividends
or make any other distributions on its Capital Stock or on any other interest
or participation in the Company or a Restricted Subsidiary; (ii) pay any
Indebtedness owed to the Company or a Restricted Subsidiary of the Company;
(iii) make loans or advances to the Company or a Restricted
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Subsidiary of the Company; or (iv) transfer any of its properties or assets to
the Company or a Restricted Subsidiary of the Company (each, a "Payment
Restriction"), except for (a) encumbrances or restrictions under a Bank Credit
Facility; provided, that no encumbrance or restriction shall limit the ability
of any Restricted Subsidiary to transfer cash to the Company except upon the
occurrence of an event of default under the Bank Credit Facility; (b)
consensual encumbrances or consensual restrictions binding upon any Person at
the time such Person becomes a Restricted Subsidiary of the Company (unless the
agreement creating such consensual encumbrances or consensual restrictions was
entered into in connection with, or in contemplation of, such entity becoming a
Restricted Subsidiary); (c) consensual encumbrances or consensual restrictions
under any agreement that refinances or replaces any agreement described in
clauses (a) and (b) above, provided that the terms and conditions of any such
restrictions are in the aggregate no less favorable to the Holders of the Notes
than those under the agreement so refinanced or replaced; (d) customary
non-assignment provisions in leases, purchase money financings and any
encumbrance or restriction due to applicable law; and (e) consensual
encumbrances or consensual restrictions existing under the Series A/B
Indenture.
Limitation on Issuances and Sales of Restricted Subsidiary Stock. The
Indenture provides that the Company (i) will not permit any Restricted
Subsidiary to issue any Preferred Stock (other than to the Company or a
Restricted Subsidiary) and (ii) will not permit any Person (other than the
Company and/or one or more Restricted Subsidiaries) to own any Capital Stock of
any Restricted Subsidiary; provided, however, that this covenant shall not
prohibit (a) the issuance or sale of all, but not less than all, of the issued
and outstanding Capital Stock of any Restricted Subsidiary owned by the Company
or any of its Restricted Subsidiaries in compliance with the other provisions
of the Indenture, (b) the issuance or sale of (A) not more than 5 percent in
the aggregate of the issued and outstanding Capital Stock of any Restricted
Subsidiary (calculated on a fully diluted basis) by the Company or any
Restricted Subsidiary or (B) more than 5 percent of the issued and outstanding
Capital Stock of any Restricted Subsidiary if immediately following such
issuance and sale (calculated on a fully diluted basis) the Company and all
Subsidiaries will collectively own 95 percent or more of the Consolidated Total
Assets of the Company, and in the case of either (A) or (B), immediately
following such issuance and sale, the Company or one or more Restricted
Subsidiaries will collectively hold the voting power to elect a majority of the
directors of the Restricted Subsidiary and such power is not subject to
dilution or limitation, by the terms of such Capital Stock, by agreement, by
passage of time or the occurrence of any future event, (c) the ownership by
directors of directors' qualifying shares or the ownership by foreign nationals
of Capital Stock of any Restricted Subsidiary, to the extent mandated by
applicable law or (d) customary non-assignment provisions in leases or purchase
money financings and any customary encumbrance or restriction relating to same.
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 any transaction or series of
transactions (including, without limitation, the sale, purchase or lease of any
assets or properties or the rendering of any services) with any Affiliate or
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act)
of 10% or more of the Company's common stock (other than with a Wholly Owned
Restricted Subsidiary of the Company) (an "Affiliate Transaction"), on terms
that are less favorable to the Company or such Restricted Subsidiary, as the
case may be, than would be available in a comparable transaction with an
unrelated Person. In addition, the Company will not, and will not permit any
Restricted Subsidiary of the Company to, enter into an Affiliate Transaction,
or any series of related Affiliate Transactions having a value of (a) more than
$1.0 million, unless a majority of the Board of Directors of the Company
(including a majority of the Company's Disinterested Directors) determines in
good faith, as evidenced by a resolution of such Board, that such Affiliate
Transaction or series of related Affiliate Transactions is fair to the Company
and in compliance with the first sentence of this paragraph; or (b) more than
$10.0 million, unless the Company receives a written opinion from a nationally
recognized investment banking firm that such transaction or series of
transactions is fair to the Company from a financial point of view.
Limitation on Line of Business. The Indenture provides that the Company
and the Subsidiaries will be operated in a manner such that their business
activities will be the Oil and Gas Business, or an Investment in a business or
Person engaged in the Oil and Gas Business.
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SEC Reports. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the SEC (if the SEC will so accept)
and provide the Trustee and Holders with annual reports and such information,
documents and other reports specified in Sections 13 and 15(d) of the Exchange
Act.
Future Designation of Restricted and Unrestricted Subsidiaries. The
foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may
be affected by the designation by the Company of any existing or future
Subsidiary of the Company as an Unrestricted Subsidiary. Generally, a
Restricted Subsidiary includes any Subsidiary of the Company, whether existing
on or after the date of the Indenture, unless the Subsidiary of the Company is
designated as an Unrestricted Subsidiary pursuant to the terms of the
Indenture. The definition of "Unrestricted Subsidiary" set forth under the
caption "Certain Definitions" describes the circumstances under which a future
Subsidiary of the Company may be designated as an Unrestricted Subsidiary by
the Board of Directors of the Company.
Limitation on Restrictive Covenants. The Indenture will provide that,
notwithstanding any other provision of the Indenture, the restrictive covenants
set forth in the Indenture, including, without limitation, those described
under "--Limitation on Restricted Payments," "--Limitation on Sales of Assets,"
"--Limitation on Liens Securing Indebtedness," "--Limitation on Mergers and
Consolidations," "--Limitation on Sale/Leaseback Transactions" and "--
Limitation on Transactions with Affiliates," shall be and shall be deemed
limited to the extent necessary so that the creation, existence and
effectiveness of such restrictive covenants shall not result in a breach of the
covenant of the Series A/B Indenture relating to "Limitation on Payment
Restrictions Affecting Subsidiaries."
CERTAIN DEFINITIONS
The following is a summary of certain defined terms to be used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms and for the definitions of capitalized terms used herein and not
defined below.
"Adjusted Consolidated Net Tangible Assets" or "ACNTA" means (without
duplication), as of the date of determination, (a) the sum of (i) discounted
future net revenue from proved oil and gas reserves of the Company and its
Restricted Subsidiaries calculated in accordance with SEC guidelines before any
state or federal income taxes, as estimated by independent petroleum engineers
in a reserve report prepared as of the end of the Company's most recently
completed fiscal year, as increased by, as of the date of determination, the
discounted future net revenue of (A) estimated proved oil and gas reserves of
the Company and its Restricted Subsidiaries attributable to any acquisition
consummated since the effective date of such year-end reserve reports and (B)
estimated oil and gas reserves of the Company and its Restricted Subsidiaries
attributable to extensions, discoveries and other additions and upward
revisions of estimates of proved oil and gas reserves due to exploration,
development or exploitation, production or other activities conducted or
otherwise occurring since the effective date of such year-end reserve reports
which, in the case of sub-clauses (A) and (B), would, in accordance with
standard industry practice, result in such increases, in each case calculated
in accordance with SEC guidelines (utilizing the prices utilized in such
year-end reserve reports), and decreased by, as of the date of determination,
the discounted future net revenue of (C) estimated proved oil and gas reserves
of the Company and its Restricted Subsidiaries produced or disposed of since
the effective date of such year- end reserve report and (D) reductions in the
estimated oil and gas reserves of the Company and its Restricted Subsidiaries
since the effective date of such year-end reserve reports attributable to
downward revisions of estimates of proved oil and gas reserves due to
exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the effective date of such year-end
reserve reports which would, in accordance with standard industry practice,
result in such revisions, in each case calculated in accordance with SEC
guidelines (utilizing the prices utilized in such year-end reserve reports);
provided that, in the case of each of the determinations made pursuant to
sub-clauses (A) through (D) above, such increases and decreases shall be as
estimated by the Company's engineers, except that if as a result of such
acquisitions, dispositions, discoveries, extensions or revisions, there is a
Material Change and in connection with the incurrence of Indebtedness under the
covenant captioned "Certain Covenants - Limitation on Incurrence of Additional
Indebtedness," all or any part of an increase in discounted future net revenue
resulting from the matters described in sub-clauses (A) and (B) above are
needed to permit the incurrence of such Indebtedness, then the discounted
future
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net revenue utilized for purposes of this clause (a)(i) shall be confirmed in
writing by independent petroleum engineers, provided that, in the event that
the determinations made pursuant to sub-clauses (C) and (D) above, when taken
alone, would not cause a Material Change, then such written confirmation need
only cover the incremental additions to discounted future net revenues
resulting from the determinations made pursuant to sub-clauses (A) and (B)
above to the extent needed to permit the incurrence of such Indebtedness, (ii)
the capitalized costs that are attributable to oil and gas properties of the
Company and its Restricted Subsidiaries to which no proved oil and gas reserves
are attributed, based on the Company's books and records as of a date no
earlier than the date of the Company's latest annual or quarterly financial
statements, (iii) the Net Working Capital on a date no earlier than the date of
the Company's latest annual or quarterly financial statements and (iv) the
greater of (A) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (B) the appraised
value, as estimated by independent appraisers, of other tangible assets
(including Investments in unconsolidated Subsidiaries) of the Company and its
Restricted Subsidiaries, as of a date no earlier than the date of the Company's
latest audited financial statements, minus (b) the sum of (i) minority
interests, (ii) any non-current portion of gas balancing liabilities of the
Company and its Restricted Subsidiaries reflected in the Company's latest
annual or quarterly financial statements, (iii) the discounted future net
revenue, calculated in accordance with SEC guidelines (utilizing the prices
utilized in the Company's year-end reserve reports), attributable to reserves
which are required to be delivered to third parties to fully satisfy the
obligations of the Company and its Restricted Subsidiaries with respect to
Volumetric Production Payments on the schedules specified with respect thereto,
(iv) the discounted future net revenue, calculated in accordance with SEC
guidelines, attributable to reserves subject to Dollar-Denominated Production
Payments which, based on the estimates of production included in determining
the discounted future net revenue specified in (a) (i) above (utilizing the
same prices utilized in the Company's year-end reserve reports), would be
necessary to fully satisfy the payment obligations of the Company and its
Restricted Subsidiaries with respect to Dollar-Denominated Production Payments
on the schedules specified with respect thereto and (v) the discounted future
net revenue, calculated in accordance with SEC guidelines (utilizing the same
prices utilized in the Company's year-end reserve reports), attributable to
reserves subject to participation interests, overriding royalty interests or
other interests of third parties, pursuant to participation, partnership,
vendor financing or other agreements then in effect, or which otherwise are
required to be delivered to third parties. If the Company changes its method of
accounting from the full cost method to the successful efforts method or a
similar method of accounting, Adjusted Consolidated Net Tangible Assets will
continue to be calculated as if the Company was still using the full cost
method of accounting.
Discounted future net revenue attributable to reserves subject to
Production Payments or other third party interests are excluded from the
definition of Adjusted Consolidated Net Tangible Assets to the extent
indicated, thereby limiting the amount of Indebtedness that may be incurred
pursuant to the test set forth in clause (ii) of the first paragraph of the
covenant captioned "Certain Covenants - Limitation on Incurrence of Additional
Indebtedness." However, certain estimated volumes of reserves in excess of the
delivery requirements under such Production Payments or with respect to
commitments to third party interests that are available for sale by the Company
are included in the definition of Adjusted Consolidated Net Tangible Assets,
thereby increasing the amount of Indebtedness that may be incurred under such
test.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
(i) the amount by which the fair value of the property of such 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 Guarantee of such Guarantor at such date and (ii) the amount by which the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under the Guarantee), excluding debt in respect of the
Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
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
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terms controlling and controlled have meanings correlative to the foregoing;
provided that a corporation shall not be deemed an Affiliate of the Company
solely by reason of having a single common director with the Company who
constitutes less than a majority of the directors of either the Company and the
other corporation.
"Asset Sale" means any sale, lease, transfer, exchange or other
disposition having a fair market value of $1.0 million or more (or series of
sales, leases, transfers, exchanges or dispositions during any fiscal year
having an aggregate fair market value of such amount) of shares of Capital
Stock of a Restricted Subsidiary (other than directors' Qualifying Shares), or
of property or assets (including the creation of Dollar-Denominated Production
Payments and Volumetric Production Payments, other than Dollar-Denominated
Production Payments and Volumetric Production Payments created or sold in
connection with the financing of, and within 30 days after, the acquisition of
the properties subject thereto) or any interests therein (each referred to for
purposes of this definition as a disposition) by the Company or any of its
Restricted Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (other than (a) by the Company to a Wholly
Owned Restricted Subsidiary or by a Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary, (b) a sale of oil, gas or other hydrocarbons or other
mineral products in the ordinary course of business of the Company's oil and
gas production operations, (c) any abandonment, farm-in, farm-out, lease and
sub-lease of developed and/or undeveloped properties made or entered into in
the ordinary course of business (but excluding (x) any sale of a net profits or
overriding royalty interest, in each case conveyed from or burdening proved
developed or proved undeveloped reserves and (y) any sale of hydrocarbons or
other mineral products as a result of the creation of Dollar-Denominated
Production Payments or Volumetric Production Payments, other than
Dollar-Denominated Production Payments and Volumetric Production Payments
created or sold in connection with the financing of, and within 30 days after,
the acquisition of the properties subject thereto), (d) the disposition of all
or substantially all of the assets of the Company in compliance with the
covenant captioned "Certain Covenants -Limitation on Mergers and
Consolidations" and "Limitations on Sale/Leaseback Transactions," (e) the
provision of services and equipment for the operation and development of the
Company's oil and gas wells, in the ordinary course of the Company's oil and
gas service businesses, notwithstanding that such transactions may be recorded
as asset sales in accordance with full cost accounting guidelines, (f) the
issuance by the Company of shares of its Capital Stock, (g) any trade or
exchange by the Company or any Restricted Subsidiary of oil and gas properties
for other oil and gas properties owned or held by another Person provided that
(x) the fair market value of the properties traded or exchanged by the Company
or such Restricted Subsidiary (including any cash or Cash Equivalents, not to
exceed 15% of such fair market value, to be delivered by the Company or such
Restricted Subsidiary) is reasonably equivalent to the fair market value of the
properties (together with any cash or Cash Equivalents, not to exceed 15% of
such fair market value) to be received by the Company or such Restricted
Subsidiary as determined in good faith by the Board of Directors of the
Company, which determination shall be certified by a resolution of the Board of
Directors delivered to the Trustee if such fair market value is in excess of $5
million, provided that if such resolution indicates that such fair market value
is in excess of $10 million such resolution shall be accompanied by a written
appraisal by a nationally recognized investment banking firm or appraisal firm,
in each case specializing or having a specialty in oil and gas properties, and
(y) such exchange is approved by a majority of Disinterested Directors of the
Company and (h) the sale, transfer or other disposition in the ordinary course
of business of oil and natural gas properties, or interests therein, provided
that such properties either (i) do not have proved reserves attributed to them
or (ii) were purchased for the purpose of offering such properties for resale
or participations by other Persons).
"Attributable Indebtedness" means, with respect to any particular lease
under which any Person is at the time liable and at any date as of which the
amount thereof is to be determined, the present value of the total net amount
of rent required to be paid by such Person under the lease during the primary
term thereof, without giving effect to any renewals at the option of the
lessee, discounted from the respective due dates thereof to such date at the
rate of interest per annum implicit in the terms of the lease. As used in the
preceding sentence, the net amount of rent under any lease for any such period
shall mean the sum of rental and other payments required to be paid with
respect to such period by the lessee thereunder excluding any amounts required
to be paid by such lessee on account of maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges. In the case of any lease
which is terminable by the lessee upon payment of a penalty, such net amount of
rent shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.
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"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (i) the product of (x) the
number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (y) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means a revolving credit, term credit and/or letter
of credit facility, the proceeds of which are used for working capital and
other general corporate purposes to be entered into by one or more of the
Company and/or its Restricted Subsidiaries and certain financial institutions,
as amended, extended or refinanced from time to time. The Revised Credit
Facility will constitute a Bank Credit Facility.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of
corporate stock or partnership interests and any and all warrants, options and
rights with respect thereto (whether or not currently exercisable), including
each class of common stock and Preferred Stock of such Person.
"Capitalized Lease Obligations" of any Person means the obligations 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 obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity
of 90 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided
that the full faith and credit of the United States of America is pledged in
support thereof); (ii) demand and time deposits and certificates of deposit or
acceptances with a maturity of 90 days or less of any financial institution
that is a member of the Federal Reserve System having combined capital and
surplus and undivided profits of not less than $500 million; (iii) commercial
paper with a maturity of 90 days or less issued by a corporation that is not an
Affiliate of the Company and is organized under the laws of any state of the
United States or the District of Columbia and rated at least A-1 by Standard &
Poor's Ratings Services or at least P-1 by Moody's Investors Service, Inc.;
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any commercial bank meeting the specifications of clause (ii) above; and
(v) overnight bank deposits and bankers' acceptances at any commercial bank
meeting the qualifications specified in clause (ii) above.
"Consolidated Interest Coverage Ratio" means, for any Reference Period,
the ratio on a pro forma basis of (a) the sum of (i) Consolidated Net Income,
(ii) Consolidated Interest Expense, (iii) Consolidated Tax Expense, (iv)
depreciation and depletion of the Company and its Restricted Subsidiaries, as
determined in accordance with GAAP on a consolidated basis plus (v)
amortization of the Company and its Restricted Subsidiaries including, without
limitation, amortization of capitalized debt issuance costs, as determined in
accordance with GAAP on a consolidated basis, in each case as determined for
the Reference Period to (b) Consolidated Interest Expense for such Reference
Period; provided, that, in calculating each of the items set forth in the
foregoing (i) acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date") shall be assumed to have occurred on
the first day of the Reference Period (provided further, that nonrecurring
expenses incurred by NEG-OK prior to the date NEG-OK became a Subsidiary shall
be excluded from any calculation of Consolidated Interest Coverage Ratio), (ii)
the incurrence of any Indebtedness (including the issuance of the Notes) or
issuance of any Disqualified Stock during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date shall be assumed
to have occurred on the first day of such Reference Period, (iii) any
Indebtedness that had been outstanding during the Reference Period that has
been repaid on or prior to the Transaction Date shall be assumed to have been
repaid as of the first day of such Reference Period, (iv) the Consolidated
Interest Expense attributable to interest on any Indebtedness or dividends on
any Disqualified Stock
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bearing a floating interest (or dividend) rate shall be computed on a pro forma
basis as if the rate in effect on the Transaction Date was the average rate in
effect during the entire Reference Period and (v) in determining the amount of
Indebtedness pursuant to the covenant captioned "Certain Covenants - Limitation
on Incurrence of Additional Indebtedness," the incurrence of Indebtedness or
issuance of Disqualified Stock giving rise to the need to calculate the
Consolidated Interest Coverage Ratio and, to the extent the net proceeds from
the incurrence or issuance thereof are used to retire Indebtedness, the
application of the proceeds therefrom shall be assumed to have occurred on the
first day of the Reference Period.
"Consolidated Interest Expense" means, with respect to the Company and its
Restricted Subsidiaries, for the Reference Period, the aggregate amount
(without duplication) of (a) interest expensed in accordance with GAAP
(including, in accordance with the following sentence, interest attributable to
Capitalized Lease Obligations, but excluding interest attributable to
Dollar-Denominated Production Payments and amortization of deferred debt
expense) during such period in respect of all Indebtedness of the Company and
its Restricted Subsidiaries (including (i) amortization of original issue
discount on any Indebtedness (other than with respect to the Notes), (ii) the
interest portion of all deferred payment obligations, calculated in accordance
with GAAP and (iii) all commissions, discounts and other fees and charges owed
with respect to bankers' acceptance financings and currency and interest rate
swap arrangements, in each case to the extent attributable to such period), and
(b) dividend requirements of the Company and its Restricted Subsidiaries with
respect to any Preferred Stock or Disqualified Stock dividends (whether in cash
or otherwise (except dividends paid solely in shares of Capital Stock other
than Disqualified Stock)) paid (other than to the Company or any of its
Restricted Subsidiaries), declared, accrued or accumulated during such period,
divided by one minus the applicable actual combined federal, state, local and
foreign income tax rate of the Company and its Subsidiaries (expressed as a
decimal), on a consolidated basis, for the Reference Period preceding the date
of the transaction giving rise to the need to calculate Consolidated Interest
Expense, in each case to the extent attributable to such period and excluding
items eliminated in consolidation. For purposes of this definition, (a)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Company to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (b)
interest expense attributable to any Indebtedness represented by the guarantee
by the Company or a Restricted Subsidiary of the Company of an obligation of
another Person (other than the Company or any other Restricted Subsidiary)
shall be deemed to be the interest expense attributable to the Indebtedness
guaranteed.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided, however, that there shall not be included in such Consolidated Net
Income: (a) any net income of any Person if such Person is not the Company or a
consolidated Restricted Subsidiary, except that (i) subject to the limitations
contained in clause (d) below, the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net Income
up to the aggregate amount of cash or Cash Equivalents actually distributed by
such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(c) below) and (ii) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (b) any net income (or loss) of any
Person acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition; (c) the net
income of any Restricted Subsidiary to the extent that the payment of dividends
or the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, is prohibited; (d) any gain (but not loss) realized
upon the sale or other disposition of any property, plant or equipment of the
Company or any Restricted Subsidiary (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of in the ordinary course
of business and any gain (but not loss) realized upon the sale or other
disposition of any Capital Stock of any Person; (e) any gain (but not loss)
from currency exchange transactions not in the ordinary course of business
consistent with past practice; (f) the cumulative effect of a change in
accounting principles; (g) to the extent deducted in the calculation of net
income, the non-cash charges associated with the repayment of Indebtedness with
the proceeds from the sale of the Outstanding Notes and the Series A/B Notes
and the prepayment of any of the Outstanding Notes and the Series A/B Notes;
(h) any writedowns of noncurrent assets; provided, however, that any ceiling
limitation writedowns under SEC guidelines shall be treated as capitalized
costs, as if such writedowns had not occurred; and (i) any gain (but not loss)
attributable to extraordinary items.
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"Consolidated Net Worth" means, with respect to the Company and its
Restricted Subsidiaries, as at any date of determination, the sum of Capital
Stock (other than Disqualified Stock) and additional paid-in capital plus
retained earnings (or minus accumulated deficit) minus all intangible assets,
including, without limitation, organization costs, patents, trademarks,
copyrights, franchises, research and development costs, and any amount
reflected in treasury stock, of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Tax Expense" means, for any period, the provisions for
federal, state, local and foreign income taxes (including state franchise taxes
accounted for as income taxes in accordance with GAAP) of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP.
"Disinterested Director" means, with respect to an Affiliate Transaction
or series of related Affiliate Transactions, a member of the Board of Directors
of the Company who has no financial interest, and whose employer has no
financial interest, in such Affiliate Transaction or series of related
Affiliate Transactions.
"Disqualified Stock" means any Capital Stock of the Company or any
Restricted Subsidiary of the Company which, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable), or
upon the happening of any event or with the passage of time, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date or which is exchangeable or convertible into debt
securities of the Company or any Restricted Subsidiary of the Company, except
to the extent that such exchange or conversion rights cannot be exercised prior
to the Maturity Date.
"Dollar-Denominated Production Payments" mean production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Equity Offering" means any underwritten public offering of common stock
of the Company pursuant to a registration statement filed pursuant to the
Securities Act or any private placement of Capital Stock (other than
Disqualified Stock) of the Company (other than to any Person who, prior to such
private placement, was a Subsidiary of the Company or any other Person
controlled by the Company) which offering or placement is consummated after the
Series A/B Issue Date.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of the Series A/B Issue Date.
"Guarantee" or "Guarantees" means any Guarantee issued by existing or
future Restricted Subsidiaries pursuant to Article X of the Indenture.
"Guarantor" means (i) each of the Subsidiaries that becomes a guarantor of
the Notes in compliance with the provisions of Article X of the Indenture and
(ii) each of the Subsidiaries executing a supplemental indenture in which such
Subsidiary agrees to be bound by the terms of the Indenture; in each case until
such time, if any, as such Subsidiary is released from the Guarantee pursuant
to Section 10.04 of the Indenture.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, without duplication, with respect to any Person, (a)
all obligations of such Person (i) in respect of borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof), (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) representing the balance deferred and unpaid of the purchase
price of any property or services (other than accounts
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<PAGE> 42
payable or other obligations arising in the ordinary course of business), (iv)
evidenced by bankers' acceptances or similar instruments issued or accepted by
banks, (v) for the payment of money relating to a Capitalized Lease Obligation,
or (vi) evidenced by a letter of credit or a reimbursement obligation of such
Person with respect to any letter of credit; (b) all net obligations of such
Person under interest rate swap obligations, commodity swap obligations and
foreign currency hedges, except to the extent such net obligations are taken
into account in the determination of future net revenues from proved oil and
gas reserves for purposes of the calculation of Adjusted Consolidated Net
Tangible Assets; (c) all liabilities of others of the kind described in the
preceding clauses (a) or (b) that such Person has guaranteed or that are
otherwise its legal liability (including, with respect to any Production
Payment, any warranties or guaranties of production or payment by such Person
with respect to such Production Payment but excluding other contractual
obligations of such Person with respect to such Production Payment); (d)
Indebtedness (as otherwise defined in this definition) of another Person
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, the amount of such obligations being deemed to be
the lesser of (1) the full amount of such obligations so secured and (2) the
fair market value of such asset, as determined in good faith by the Board of
Directors of such Person, which determination shall be evidenced by a
resolution of such Board; (e) with respect to such Person, the liquidation
preference or any mandatory redemption payment obligations in respect of
Disqualified Stock; (f) the aggregate preference in respect of amounts payable
on the issued and outstanding shares of Preferred Stock of any of the Company's
Restricted Subsidiaries in the event of any voluntary or involuntary
liquidation, dissolution or winding up (excluding any such preference
attributable to such shares of Preferred Stock that are owned by such Person or
any of its Restricted Subsidiaries; provided, that if such Person is the
Company, such exclusion shall be for such preference attributable to such
shares of Preferred Stock that are owned by the Company or any of its
Restricted Subsidiaries); and (g) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c), (d), (e), (f) or this clause (g), whether
or not between or among the same parties. Subject to clause (c) of the
preceding sentence, neither Dollar-Denominated Production Payments nor
Volumetric Production Payments shall be deemed to be Indebtedness.
"Investment" of any Person means (i) all investments by such Person in any
other Person in the form of loans, advances or capital contributions, (ii) all
guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of assets, Indebtedness, Capital Stock or other securities of any other
Person and (iv) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary course
of business) or advances on a balance sheet of such Person prepared in
accordance with GAAP.
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statute or statutes) of any jurisdiction).
"Make-Whole Amount" with respect to a Note means an amount equal to the
excess, if any, of (i) the present value of the remaining interest, premium and
principal payments due on such Note as if such Note were redeemed on November
1, 2001, computed using a discount rate equal to the Treasury Rate plus 75
basis points, over (ii) the outstanding principal amount of such Note.
"Treasury Rate" is defined as the yield to maturity at the time of the
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical
Release H.15(519), which has become publicly available at least two Business
Days prior to the date of the redemption notice or, if such Statistical Release
is no longer published, any publicly available source of similar market data)
most nearly equal to the then remaining maturity of the Notes assuming
redemption of the Notes on November 1, 2001; provided, however, that if the
Make-Whole Average Life of such Note is not equal to the constant maturity of
the United States Treasury securities for which a weekly average yield is
given, the Treasury Rate shall be obtained by linear interpolation (calculated
to the nearest one-twelfth
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<PAGE> 43
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Make-Whole Average Life of
such Notes is less than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant maturity of one year
shall be used.
"Make-Whole Average Life" means the number of years (calculated to the
nearest one-twelfth) between the date of redemption and November 1, 2001.
"Make-Whole Price" with respect to a Note means the greater of (i) the sum
of the outstanding principal amount and the Make-Whole Amount of such Note, and
(ii) the redemption price of such Note on November 1, 2001, determined pursuant
to the Indenture (105.375% of the principal amount).
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than either (i) 10% from the end
of the immediately preceding fiscal quarter in the estimated discounted future
net revenue from proved oil and gas reserves of the Company and its Restricted
Subsidiaries, or (ii) 20% from the end of the immediately preceding year in the
estimated discounted future net revenue from proved oil and gas reserves of the
Company and its Restricted Subsidiaries, in each case calculated in accordance
with clause (a)(i) of the definition of Adjusted Consolidated Net Tangible
Assets; provided, however, that the following will be excluded from the
calculation of Material Change: (a) any acquisitions of oil and gas reserves
made after the end of the immediately preceding year for which the discounted
future net revenues have been estimated by independent petroleum engineers
since the end of the preceding year and on which a report or reports exist and
(b) any disposition of properties existing at the beginning of the current
year, as the case may be, for purposes of clause (i) or clause (ii) above, that
have been disposed of as provided in the covenant captioned "Certain Covenants
- - Limitation on Sale of Assets."
"Maturity Date" means November 1, 2006.
"NEG-OK" means National Energy Group of Oklahoma, Inc., a Delaware
corporation and former wholly-owned Subsidiary of the Company that was merged
with and into the Company effective December 31, 1996.
"Net Cash Proceeds" means (a) with respect to any Asset Sale or
Sale/Leaseback Transaction of any Person, an amount equal to aggregate cash
proceeds received (including 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 excluding any other consideration until such
time as such consideration is converted into cash) therefrom, in each case net
of all legal, title and recording tax expenses, commissions and other fees and
expenses incurred, and all federal, state or local taxes required to be accrued
as a liability as a consequence of such Asset Sale or Sale/Leaseback
Transaction, and in each case net of all Indebtedness which is secured by such
assets, in accordance with the terms of any Lien upon or with respect to such
assets, or which must, by its terms or in order to obtain a necessary consent
to such Asset Sale or Sale/Leaseback Transaction or by applicable law, be
repaid out of the proceeds from such Asset Sale or Sale/Leaseback Transaction
and which is actually so repaid and (b) in the case of any sale by the Company
of securities pursuant to clauses (b) or (c) of section (iii) of the covenant
captioned "Certain Covenants - Limitation on Restricted Payments," the amount
of aggregate net cash proceeds received by the Company, after payment of
expenses, commissions, discounts and any other transaction costs incurred in
connection therewith.
"Net Working Capital" means (i) all current assets of the Company and its
Restricted Subsidiaries, minus (ii) all current liabilities of the Company and
its Restricted Subsidiaries (including the current portion of gas balancing
liabilities), except current liabilities included in Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of a Person as to which (a) neither the Company nor any Restricted
Subsidiary (i) provides credit support including any undertaking, agreement or
instrument which would constitute Indebtedness or (ii) is directly or
indirectly liable for such Indebtedness and (b) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against such Person) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than Non-Recourse
Indebtedness) of the Company or its Restricted
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Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"Oil and Gas Business" means the business of the exploration for, and
exploitation, development, production, processing (but not refining),
marketing, storage and transportation of, hydrocarbons, and other related
energy and natural resources businesses (including oil and gas services
businesses related to the foregoing).
"Oil and Gas Securities" means the Voting Stock of a Person primarily
engaged in the Oil and Gas Business, provided that such Voting Stock shall
constitute a majority of the Voting Stock of such Person in the event that such
Voting Stock is not registered under Section 12 of the Exchange Act.
"Permitted Business Investments" means (i) Investments in assets used in
the Oil and Gas Business; (ii) the acquisition of Oil and Gas Securities; (iii)
the entry into operating agreements, joint ventures, processing agreements,
farmout agreements, development agreements, area of mutual interest agreements,
contracts for the sale, transportation or exchange of oil and natural gas,
unitization agreements, pooling arrangements, joint bidding agreements, service
contracts, partnership agreements (whether general or limited) or other similar
or customary agreements, transactions, properties, interests or arrangements,
and Investments and expenditures in connection therewith or pursuant thereto,
in each case made or entered into in the ordinary course of the Oil and Gas
Business, excluding solely for purposes of this clause (iii), however,
Investments in corporations; (iv) the acquisition of working interests, royalty
interests or mineral leases relating to oil and gas properties; (v) Investments
by the Company or any Wholly Owned Restricted Subsidiary in any Person which,
immediately prior to the making of such Investment, is a Wholly Owned
Restricted Subsidiary; (vi) Investments in the Company by any Wholly Owned
Restricted Subsidiary; (vii) Investments permitted under the covenant captioned
"Certain Covenants - Limitation on Sales of Assets" and "Limitations on
Sale/Leaseback Transactions;" (viii) Investments in any Person the
consideration for which consists of Capital Stock (other than Disqualified
Stock); (ix) Investments constituting obligations under hedging arrangements
described in clause (viii) of the definition of "Permitted Indebtedness;" and
(x) Investments in Unrestricted Subsidiaries the assets of which consist of
assets used in the Oil and Gas Business (other than cash and Cash Equivalents)
received by the Company from any Person other than a Subsidiary of the Company
solely as a result of the issuance or sale of Capital Stock of the Company
(other than Disqualified Stock) provided that such Investment is made within 30
days of the issuance or sale of such Capital Stock.
"Permitted Company Refinancing Indebtedness" means Indebtedness of the
Company, the net proceeds of which are used to renew, extend, refinance, refund
or repurchase outstanding Indebtedness of the Company (other than any
Indebtedness incurred in reliance upon clause (ii) or clause (v) of the
definition of Permitted Indebtedness), provided that (i) if the Indebtedness
(including the Notes) being renewed, extended, refinanced, refunded or
repurchased is pari passu with or subordinated in right of payment to the
Notes, then such Indebtedness is pari passu with or subordinated in right of
payment to, as the case may be, the Notes at least to the same extent as the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, (ii)
such Indebtedness is scheduled to mature no earlier than the Indebtedness being
renewed, extended, refinanced, refunded or repurchased, and (iii) such
Indebtedness has an Average Life at the time such Indebtedness is incurred that
is equal to or greater than the Average Life of the Indebtedness being renewed,
extended, refinanced, refunded or repurchased; provided, further, that such
Indebtedness (to the extent that such Indebtedness constitutes Permitted
Company Refinancing Indebtedness) is in an aggregate principal amount (or, if
such Indebtedness is issued at a price less than the principal amount thereof,
the aggregate amount of gross proceeds therefrom is) not in excess of the
aggregate principal amount then outstanding of the Indebtedness being renewed,
extended, refinanced, refunded or repurchased (or if the Indebtedness being
renewed, extended, refinanced, refunded or repurchased was issued at a price
less than the principal amount thereof, then not in excess of the amount of
liability in respect thereof determined in accordance with GAAP).
"Permitted Financial Investments" means the following kinds of instruments
if, in the case of instruments referred to in clauses (i) through (iv) below,
on the date of purchase or other acquisition of any such instrument by the
Company or any Subsidiary, the remaining term to maturity is not more than one
year: (i) readily marketable obligations issued or unconditionally guaranteed
as to principal of and interest on by the United States of America or by any
agency or authority controlled or supervised by and acting as an
instrumentality of the United States of
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<PAGE> 45
America; (ii) repurchase obligations for instruments of the type described in
clause (i) for which delivery of the instrument is made against payment; (iii)
obligations (including, but not limited to, demand or time deposits, bankers'
acceptances and certificates of deposit) issued by a depository institution or
trust company incorporated or doing business under the laws of the United
States of America, any state thereof or the District of Columbia or a branch or
subsidiary of any such depository institution or trust company operating
outside the United States, provided, that such depository institution or trust
company has, at the time of the Company's or such Subsidiary's investment
therein or contractual commitment providing for such investment, capital
surplus or undivided profits (as of the date of such institution's most
recently published financial statements) in excess of $500 million; (iv)
commercial paper issued by any corporation, if such commercial paper has, at
the time of the Company's or any Subsidiary's investment therein or contractual
commitment providing for such investment, credit ratings of A-1 (or higher) by
Standard & Poor's Ratings Services and P-1 (or higher) by Moody's Investors
Services, Inc.; and (v) money market mutual or similar funds having assets in
excess of $500 million.
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries outstanding as of the Series A/B Issue Date; (ii)
Indebtedness of the Company and its Restricted Subsidiaries under a Bank Credit
Facility, in a principal amount outstanding at any time not to exceed a
principal amount equal to the greater of (a) $40 million and (b) $10 million
plus 15% of Adjusted Consolidated Net Tangible Assets plus related accrued
interest and costs, less any Net Cash Proceeds applied pursuant to the covenant
"Limitation on Sale of Assets" to repay or prepay such Indebtedness that
results in a permanent reduction in any revolving credit or other commitment
relating thereto or the maximum amount that may be borrowed thereunder provided
that the aggregate amount of applied Net Cash Proceeds shall not permanently
reduce the amount of Permitted Indebtedness under this clause (ii) below $10
million principal amount plus related accrued interest and costs; (iii) other
Indebtedness of the Company and its Restricted Subsidiaries in a principal
amount not to exceed $10 million at any one time outstanding; (iv) Non-Recourse
Indebtedness; (v) Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary of the Company and Indebtedness of any Restricted Subsidiary of the
Company to the Company or another Wholly Owned Restricted Subsidiary of the
Company; (vi) Permitted Company Refinancing Indebtedness; (vii) Permitted
Subsidiary Refinancing Indebtedness; (viii) obligations under hedging
arrangements that the Company and its Subsidiaries enter into in the ordinary
course of business for the purpose of protecting their production against
fluctuations in oil and natural gas prices; (ix) Indebtedness under the Notes
and the Series A/B Notes; and (x) Indebtedness of a Subsidiary pursuant to a
Guarantee of the Notes pursuant to Article X of the Indenture or of the Series
A/B Notes pursuant to the Series A/B Indenture.
"Permitted Investments" means Permitted Business Investments and Permitted
Financial Investments.
"Permitted Liens" means (i) Liens outstanding as of the Series A/B Issue
Date; (ii) Liens now or hereafter securing a Bank Credit Facility; provided,
however, such Liens are limited to securing Indebtedness in an amount not in
excess of that permitted to be incurred in accordance with clause (ii) of the
definition of Permitted Indebtedness; (iii) Liens now or hereafter securing any
interest rate hedging obligations so long as the related Indebtedness (a)
constitutes Senior Indebtedness or (b) is, or is permitted to be under the
Indenture, secured by a Lien on the same property securing such interest rate
obligations; (iv) Liens now or hereafter securing any interest rate hedging
obligations so long as the related Indebtedness (a) constitutes the Notes or
the Series A/B Notes (or any Permitted Company Refinancing Indebtedness in
respect thereof) or (b) is, or is permitted to be under the Indenture, secured
by a Lien on the same property securing such interest rate hedging obligations;
(v) Liens securing Indebtedness, the proceeds of which are used to refinance
secured Indebtedness of the Company or its Restricted Subsidiaries; provided,
that such Liens extend to or cover only the property or assets currently
securing the Indebtedness being refinanced; (vi) Liens for taxes, assessments
and governmental charges not yet delinquent or being contested in good faith
and for which adequate reserves have been established to the extent required by
GAAP; (vii) mechanics', workmen's, materialmen's, operators' or similar Liens
arising in the ordinary course of business; (viii) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations; (ix) Liens, deposits or pledges to
secure the performance of bids, tenders, contracts (other than contracts for
the payment of money), leases, public or statutory obligations, surety, stay,
appeal indemnity, performance or other similar bonds, or other similar
obligations arising in the ordinary course of business; (x) survey exceptions,
encumbrances, easements or reservations of, or rights of others for, rights of
way, zoning or other restrictions as to the use of real properties, and minor
defects in title which, in the case of
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<PAGE> 46
any of the foregoing, were not incurred or created to secure the payment of
borrowed money or the deferred purchase price of property or services, and in
the aggregate do not materially adversely affect the value of such properties
or materially impair use for the purposes of which such properties are held by
the Company or any Restricted Subsidiaries; (xi) Liens on, or related to,
properties to secure all or part of the costs incurred in the ordinary course
of business of exploration, drilling, development or operation thereof; (xii)
Liens on pipeline or pipeline facilities which arise out of operation of law;
(xiii) 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 and for
which adequate reserves have been made; (xiv) (a) Liens upon any property of
any Person existing at the time of acquisition thereof by the Company or a
Restricted Subsidiary, (b) Liens upon any property of a Person existing at the
time such Person is merged or consolidated with the Company or any Restricted
Subsidiary or existing at the time of the sale or transfer of any such property
of such Person to the Company or any Restricted Subsidiary, or (c) Liens upon
any property of a Person existing at the time such Person becomes a Restricted
Subsidiary; provided, that in each case such Lien has not been created in
contemplation of such sale, merger, consolidation, transfer or acquisition, and
provided that in each such case no such Lien shall extend to or cover any
property of the Company or any Restricted Subsidiary other than the property
being acquired and improvements thereon; (xv) Liens on deposits to secure
public or statutory obligations or in lieu of surety or appeal bonds entered
into in the ordinary course of business; (xvi) Liens in favor of collecting or
payor banks having a right of setoff, revocation, refund or chargeback with
respect to money or instruments of the Company or any Subsidiary on deposit
with or in possession of such bank; (xvii) purchase money security interests
granted in connection with the acquisition of assets in the ordinary course of
business and consistent with past practices, 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 100% of the purchase price of such assets; (xviii) Liens reserved in
oil and gas mineral leases for bonus or rental payments and for compliance with
the terms of such leases; (xix) Liens arising under partnership agreements, oil
and gas leases, farm-out agreements, division orders, contracts for the sale,
purchase, exchange, transportation or processing (but not refining) of oil, gas
or other hydrocarbons, unitization and pooling declarations and agreements,
development agreements, operating agreements, area of mutual interest
agreements, and other similar agreements which are customary in the Oil and Gas
Business; (xx) Liens securing obligations under hedging arrangements that the
Company enters into in the ordinary course of business for the purpose of
protecting its production against fluctuations in oil and natural gas prices;
and (xxi) Liens to secure Dollar-Denominated Production Payments and Volumetric
Production Payments.
"Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of any
Restricted Subsidiary, the net proceeds of which are used to renew, extend,
refinance, refund or repurchase outstanding Indebtedness of such Restricted
Subsidiary (other than any Indebtedness incurred in reliance upon clause (ii)
or clause (v) of the definition of Permitted Indebtedness), provided that (i)
if the Indebtedness (including any Guarantee) being renewed, extended,
refinanced, refunded or repurchased is pari passu with or subordinated in right
of payment to the Guarantee, then such Indebtedness is pari passu with or
subordinated in right of payment to, as the case may be, the Guarantee at least
to the same extent as the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, (ii) such Indebtedness is scheduled to mature no
earlier than the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, and (iii) such Indebtedness has an Average Life at the time such
Indebtedness is incurred that is equal to or greater than the Average Life of
the Indebtedness being renewed, extended, refinanced, refunded or repurchased,
provided, further, that such Indebtedness (to the extent that such Indebtedness
constitutes Permitted Subsidiary Refinancing Indebtedness) is in an aggregate
principal amount (or, if such Indebtedness is issued at a price less than the
principal amount thereof, the aggregate amount of gross proceeds therefrom is)
not in excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased (or
if the Indebtedness being renewed, extended, refinanced, refunded or
repurchased was issued at a price less than the principal amount thereof, then
not in excess of the amount of liability in respect thereof determined in
accordance with GAAP); provided, however, that a Restricted Subsidiary shall
not incur refinancing Indebtedness to renew, extend, refinance, refund or
repurchase outstanding Indebtedness of another Subsidiary unless such other
Subsidiary is a Guarantor.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
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"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated), which is
preferred as to the payment of dividends, or upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation.
"Production Payments" means, collectively, Dollar-Denominated Production
Payments and Volumetric Production Payments.
"Reference Period" means, with respect to any Person, the four full
consecutive fiscal quarters ended with the last full fiscal quarter for which
financial information is available immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Restricted Payment" means, with respect to any Person, any of the
following: (i) any dividend or other distribution in respect of such Person's
Capital Stock (other than (a) dividends or distributions payable solely in
Capital Stock (other than Disqualified Stock) and (b) in the case of Restricted
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Restricted Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock, or any option,
warrant, or other right to acquire shares of Capital Stock, of the Company or
any of its Restricted Subsidiaries (but excluding (a) any cashless exercise of
warrants or options or (b) payments in respect of cash elections or phantom
stock or similar awards under any director or employee benefit plan or
arrangement provided such payment is recorded as a compensation expense); (iii)
the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment,
of any Indebtedness which is subordinated in right of payment to the Notes; and
(iv) the making by such Person of any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that, immediately
after giving effect to such designation, the Company could incur at least $1.00
in additional Indebtedness pursuant to the first paragraph of the covenant
captioned "Certain Covenants - Limitation on Incurrence of Additional
Indebtedness."
"Sale/Leaseback Transaction" means with respect to the Company or any of
its Restricted Subsidiaries, any arrangement with any Person providing for the
leasing by the Company or any of its Restricted Subsidiaries of any principal
property, acquired or placed into service more than 180 days prior to such
arrangement, whereby such property has been or is to be sold or transferred by
the Company or any of its Restricted Subsidiaries to such Person.
"Senior Indebtedness" means any Indebtedness of the Company (whether
outstanding on the Series A/B Issue Date or thereafter incurred), unless such
Indebtedness is contractually subordinate or junior in right of payment of
principal, premium and interest to the Notes.
"Senior Indebtedness of a Guarantor" means any Indebtedness of such
Guarantor (whether outstanding on the Series A/B Issue Date or thereafter
incurred), unless such Indebtedness is contractually subordinate or junior in
right of payment of principal, premium and interest to the Guarantees.
"Series A/B Indenture" means the Indenture dated as of November 1, 1996,
among the Company, NEG-OK, and Bank One, Columbus, N.A., as trustee, providing
for the issuance of the Series A/B Notes in the aggregate principal amount of
$100 million, as such may be amended or supplemented from time to time.
"Series A/B Issue Date" means the date on which the Series A/B Notes were
originally issued under the Series A/B Indenture.
"Series A/B Notes" means the Company's 10 3/4% Senior Notes due 2006
issued pursuant to the Series A/B Indenture, as such may be amended or
supplemented from time to time.
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"Subordinated Indebtedness of a Guarantor" means any Indebtedness of such
Guarantor (whether outstanding on the Series A/B Issue Date or thereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Guarantees.
"Subordinated Indebtedness of the Company" means any Indebtedness of the
Company (whether outstanding on the Series A/B Issue Date or thereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Notes.
"Subsidiary" means any subsidiary of the Company. A subsidiary of any
Person means (i) a corporation a majority of whose Voting Stock is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, (ii)
a partnership in which such Person or a subsidiary of such Person is, at the
date of determination, a general or limited partner of such partnership, but
only if such Person or its subsidiary is entitled to receive more than 50
percent of the assets of such partnership upon its dissolution, or (iii) any
other Person (other than a corporation or partnership) in which such Person,
directly or indirectly, at the date of determination thereof, has (x) at least
a majority ownership interest or (y) the power to elect or direct the election
of a majority of the directors or other governing body of such Person.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary or (ii) any Subsidiary of the Company or of a Restricted Subsidiary
that is designated as an Unrestricted Subsidiary by a resolution adopted by the
Board of Directors in accordance with the requirements of the following
sentence. The Company may designate any Subsidiary of the Company or of a
Restricted Subsidiary (including a newly acquired or newly formed Subsidiary or
any Restricted Subsidiary of the Company), to be an Unrestricted Subsidiary by
a resolution of the Board of Directors of the Company, as evidenced by written
notice thereof delivered to the Trustee, if after giving effect to such
designation, (i) the Company could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of the covenant captioned "Certain
Covenants - Limitation on Incurrence of Additional Indebtedness," (ii) the
Company could make an additional Restricted Payment of at least $1.00 pursuant
to the first paragraph of the covenant captioned "Certain Covenants Limitation
on Restricted Payments," (iii) such Subsidiary does not own or hold any Capital
Stock of, or any lien on any property of, the Company or any Restricted
Subsidiary and (iv) such Subsidiary is not liable, directly or indirectly, with
respect to any Indebtedness other than Non-Recourse Indebtedness.
"U.S. Government Securities" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clauses (i) or (ii) are not callable or redeemable at the option of the
issuer thereof.
"U.S. Legal Tender" means such coin or currency of the United States as at
the time of payment shall be legal tender for the payment of public and private
debts.
"Volumetric Production Payments" mean production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of contingency) to vote in the election of members of the Board
of Directors or other governing body of such person, provided that, for
purposes of the definition of Change in Control, the Series D Preferred Stock
of the Company outstanding at the Series A/B Issue Date shall not be deemed
Voting Stock unless and until the holders of such class take any action, by
vote, consent or otherwise, to exercise any right of such class to elect or
appoint more than one member to the Board of Directors of the Company.
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"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary 95% or
more of the Capital Stock (other than directors' qualifying shares if
applicable) of which is owned by the Company or another Wholly Owned Restricted
Subsidiary.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default by the Company or any Guarantor in the payment of principal of
or premium, if any, on the Notes when due and payable at maturity, upon
repurchase pursuant to a Change of Control Offer or a Net Proceeds Offer, upon
acceleration or otherwise; or
(ii) default by the Company or any Guarantor for 30 days in payment of any
interest on the Notes; or
(iii) default by the Company or any Guarantor in the deposit of any
optional redemption payment; or
(iv) default by the Company or any Guarantor in the performance of the
covenants discussed under "Certain Covenants - Limitation on Mergers and
Consolidations;" or
(v) default by the Company or any Guarantor in the performance of any
other covenant or agreement in the Indenture (other than those described in
clauses (i) through (iv) above) which shall not have been remedied within 30
days after written notice by the Trustee or by the Holders of at least 25% in
principal amount of the Notes then outstanding; or
(vi) the occurrence and continuation beyond any grace period of any
default in the payment when due, whether by acceleration or otherwise, of the
principal of (premium, if any, on) and interest on any other Indebtedness
(other than Non-Recourse Indebtedness) of the Company or any Subsidiary (other
than an Unrestricted Subsidiary) of the Company having an outstanding principal
amount of $5.0 million or more, individually or in the aggregate; or
(vii) the commencement of proceedings, or the taking of any enforcement
action (including by way of set-off), by any holder of at least $5.0 million in
aggregate principal amount of Indebtedness (including any amounts owed pursuant
to a judgment or order) of the Company or any Subsidiary (other than an
Unrestricted Subsidiary provided that neither the Company nor any Restricted
Subsidiary is liable, directly or indirectly, for such Indebtedness), after a
default under such Indebtedness, to retain in satisfaction of such Indebtedness
or to collect or seize, dispose of or apply in satisfaction of such
Indebtedness, property or assets of the Company or its Restricted Subsidiaries
having a fair market value in excess of $5.0 million individually or in the
aggregate; provided that if any such proceedings or actions are terminated or
rescinded, or such Indebtedness is repaid or settled, such Event of Default
under the Indenture and any consequential acceleration of the Notes shall be
automatically rescinded, so long as (a) such rescission does not conflict with
any judgment or decree and (b) the holder of such Indebtedness shall not have
applied any such property or assets in satisfaction of such Indebtedness; or
(viii) the entry by a court of one or more judgments or orders for the
payment in cash or other assets of $5.0 million or more individually or in the
aggregate (net of applicable insurance coverage acknowledged in writing by the
insurance carrier) having been rendered against the Company or any Subsidiary
(other than an Unrestricted Subsidiary; provided that neither the Company nor
any Restricted Subsidiary is liable, directly or indirectly, for such judgment
or order) and such judgment or order shall continue unsatisfied and unstayed
for a period of 60 days; or
(ix) the occurrence of certain events giving rise to ERISA liability; or
(x) the failure of a Guarantee by a Guarantor to be in full force and
effect (other than a release of a Guarantee in accordance with the Indenture),
or the denial or disaffirmance by such entity thereof; or
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(xi) certain events involving bankruptcy, insolvency or reorganization of
the Company or any Subsidiary (other than an Unrestricted Subsidiary) of the
Company.
The Indenture provides that the Trustee may withhold notice to the Holders
of the Notes of any default (except in payment of principal of, or premium, if
any, or interest on the Notes) if the Trustee considers it in the interest of
the Holders of the Notes to do so.
The Indenture provides that if an Event of Default occurs and is
continuing with respect to the Indenture, the Trustee or the Holders of not
less than 25% in principal amount of the Notes outstanding may declare the
principal of and premium, if any, and accrued but unpaid interest on all Notes
to be due and payable. Upon such a declaration, such principal, premium, if
any, and interest will be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or any Subsidiary of the Company occurs and is continuing, the
principal of, and premium, if any, and interest on all the Notes will become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders of the Notes. The amount due and payable on
the acceleration of any Note will be equal to 100% of the principal amount of
such Note, plus accrued interest to the date of payment. Under certain
circumstances, the Holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences.
The Indenture provides that no Holder of a Note may pursue any remedy
under the Indenture unless (i) the Trustee shall have received written notice
of a continuing Event of Default, (ii) the Trustee shall have received a
request from Holders of at least 25% in principal amount of the Notes to pursue
such remedy, (iii) the Trustee shall have been offered indemnity reasonably
satisfactory to it, (iv) the Trustee shall have failed to act for a period of
60 days after receipt of such notice, request and offer of indemnity and (v) no
direction inconsistent with such written request has been given to the Trustee
during such 60-day period by the Holders of a majority in principal amount of
the Notes; provided, however, such provision does not affect the right of a
Holder of a Note to sue for enforcement of any overdue payment thereon.
The Holders of a majority in principal amount of the Notes then
outstanding will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee
under the Indenture, subject to certain limitations specified in the Indenture.
The Indenture requires the annual filing by the Company with the Trustee of a
written statement as to compliance with the covenants contained in the
Indenture.
MODIFICATION AND WAIVER
The Indenture provides that modifications and amendments to the Indenture
or the Notes may be made by the Company, the Guarantors and the Trustee with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding; provided that no such modification or amendment may, without the
consent of the Holder of each Note then outstanding affected thereby, (i)
reduce the percentage of principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver; (ii) reduce the rate or change the time
for payment of interest, including defaulted interest, on any Note; (iii)
reduce the principal amount of any Note or change the Maturity Date of the
Notes; (iv) reduce the redemption price, including premium, if any, payable
upon redemption of any Note or change the time at which any Note may or shall
be redeemed; (v) reduce the repurchase price, including premium, if any,
payable upon the repurchase of any Note or change the time at which any Note
may or shall be repurchased; (vi) make any Note payable in money other than
that stated in the Note; (vii) impair the right to institute suit for the
enforcement of any payment of principal of, or premium, if any, or interest on,
any Note; (viii) make any change in the percentage of principal amount of Notes
necessary to waive compliance with certain provisions of the Indenture; or (ix)
waive a continuing Default or Event of Default in the payment of principal of,
premium, if any, or interest on the Notes. The Indenture provides that
modifications and amendments of the Indenture may be made by the Company and
the Trustee without the consent of any holders of Notes in certain limited
circumstances, including (a) to cure any ambiguity, omission, defect or
inconsistency, (b) to provide for the assumption of the obligations of the
Company or any Guarantor under the Indenture upon the merger, consolidation or
sale or other disposition of all or substantially all of the assets of the
Company or such Guarantor, (c) to reflect the release of any Guarantor from its
Guarantee, or the addition of any Subsidiary of the Company as a
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Guarantor, in the manner provided in the Indenture, (d) to comply with any
requirement of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act of 1939 or (e) to make any change that
would provide any additional benefit to the Holders or that does not adversely
affect the rights of any Holder of Notes in any material respect.
The Indenture provides that neither the Company nor any of its
Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fees or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any
terms or provisions of the Notes or the Indenture unless such consideration is
offered to be paid or agreed to be paid to all Holders of the Notes which so
consent, waive or agree to amend in the time period set forth in any
solicitation documents relating to such consent.
The Indenture provides that the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive any past default under
the Indenture, except a default in the payment of principal, premium, if any,
or interest.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company will be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders of such Notes to receive payments
in respect of the principal of, premium, if any, and interest on such Notes
when such payments are due, (ii) the Company's obligations with respect to such
Notes concerning the issuance of temporary Notes, transfers and exchanges of
Notes, replacement of mutilated, destroyed, lost or stolen Notes, the
maintenance of an office or agency where Notes may be surrendered for transfer
or exchange or presented for payment, and duties of paying agents, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants described under "Certain Covenants" ("Covenant Defeasance"), and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee or other qualifying
trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S.
Legal Tender, U.S. Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Notes on the Maturity Date or on the applicable
mandatory redemption date, as the case may be; of such principal or installment
of principal, premium, if any, or interest; (ii) in the case of Legal
Defeasance, the Company must deliver to the Trustee an opinion of counsel
reasonably acceptable to the Trustee confirming that (a) the Company has
received from or there has been published by, the Internal Revenue Service a
ruling or (b) 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, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel reasonably acceptable to the Trustee to the
effect that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit or insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under any other material agreement or
instrument to which the Company is a party or by which the Company is bound;
(vi) the Company shall have delivered to the Trustee an
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Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over other creditors of the
Company or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (vii) the Company shall have delivered
to the Trustee an Officers' Certificate and an opinion of counsel each stating
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
GOVERNING LAW
The Indenture provides that it will be governed by, and construed in
accordance with, the laws of the State of New York, but without giving effect
to principles of conflicts of law to the extent that the application of the law
of another jurisdiction would be required thereby.
THE TRUSTEE
Bank One, N.A. is the Trustee under the Indenture. Its address is 100 East
Broad Street, Columbus, Ohio 43271. The Company has also appointed the Trustee
as the initial Registrar, Transfer Agent and Paying Agent under the Indenture.
The Trustee is permitted to become an owner or pledgee of Notes and may
otherwise deal with the Company or its Subsidiaries or Affiliates with the same
rights it would have if it were not Trustee. If, however, the Trustee acquires
any conflicting interest (as defined in the Trust Indenture Act of 1939), it
must eliminate such conflict or resign.
The Indenture provides that in case an Event of Default shall occur (and
be continuing), the Trustee will be required to use the degree of care and
skill of a prudent person in the conduct of such person's own affairs. The
Trustee will be under no obligation to exercise any of its powers under the
Indenture at the request of any of the Holders of the Notes, unless such
Holders have offered the Trustee indemnity reasonably satisfactory to it.
GLOBAL NOTE; BOOK-ENTRY FORM
The Exchange Notes initially exchanged by qualified institutional buyers
(as defined in Rule 144A under the Securities Act) will be represented by a
Global Exchange Note. The Global Exchange Note will be deposited on the
Exchange Date with DTC and registered in the name of DTC or its nominee (the
"Global Exchange Note Registered Owner"). Except as set forth below, the Global
Exchange Note may be transferred, in whole and not in part, only to another
nominee of DTC or to a successor of DTC or its nominee.
DTC is a limited-purpose trust company created to hold securities for its
participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in those securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. Access
to DTC's system is also available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
Pursuant to procedures established by DTC, (i) upon deposit of the
Exchange Global Note, DTC will credit on its internal system, the principal
amounts of the Exchange Notes of the individual beneficial interests
represented by such Global Exchange Note to the respective accounts of
exchanging Holders who have accounts with DTC and (ii) ownership of such
interests in the Global Exchange Note will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC
(with respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interests in the
Global Exchange Note). The
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laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Exchange Notes will be limited to that extent.
Except as described below, owners of interests in the Global Note will not
have Exchange Notes registered in their names, will not receive physical
delivery of Exchange Notes in definitive form and will not be considered the
registered owners thereof under the Indenture for any purpose.
None of the Company, the Trustee, nor any agent of the Company or the
Trustee will have any responsibility or liability for (i) any aspect of DTC's
records or any Participant's or Indirect Participant's records relating to or
payments made on account of beneficial ownership interests in the Global
Exchange Note, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Exchange Note or (ii) any other
matter relating to the actions and practices of DTC or any of its Participants
or Indirect Participants.
Payments in respect of the principal of, premium, if any, and interest on
any Exchange Notes registered in the name of the Global Exchange Note
Registered Owner on any relevant record date will be payable by the Trustee to
the Global Exchange Note Registered Owner in its capacity as the registered
holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee will treat the persons in whose names the Notes, including the
Global Exchange Note, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company, the Trustee, nor any agent of the Company or
the Trustee has or will have any responsibility or liability for the payment of
such amounts to beneficial owners of the Exchange Notes or for any other matter
relating to actions or practices of DTC or any of its Participants or Indirect
Participants. The Company understands that DTC's current practice, upon receipt
of any payment in respect of securities such as the Exchange Notes (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date, in amounts proportionate to their
respective holdings in principal amount of beneficial interests in the relevant
security as shown on the records of DTC (unless DTC has reason to believe it
will not receive payment on such payment date). Payments by the Participants
and the Indirect Participants to the beneficial owners of Exchange Notes will
be governed by standing instructions and customary practices and will not be
the responsibility of DTC, the Trustee or the Company. Neither the Company nor
the Trustee will be liable for any delay by DTC or any of its Participants or
Indirect Participants in identifying the beneficial owners of the Exchange
Notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from the Global Exchange Note Registered
Owner for all purposes.
The Global Exchange Note is exchangeable for definitive certificated
Exchange Notes if (i) DTC notifies the Company that it is unwilling or unable
to continue as depositary for the Global Exchange Note or if the Company
determines that DTC is unable to continue as depositary and the Company
thereupon fails to appoint a successor depositary, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
the Exchange Notes in definitive certificated form, (iii) there shall have
occurred and be continuing an Event of Default or an event which after notice
or lapse of time would be an Event of Default with respect to the Exchange
Notes, or (iv) as provided in the last paragraph hereunder. Such definitive
certificated Exchange Notes shall be registered in the names of the owners of
the beneficial interests in the Global Exchange Note as provided by the
Participants. Exchange Notes in definitive certificated form will be fully
registered, without coupons, in minimum denominations of $1,000 and integral
multiples of $1,000 above the amount. Upon issuance of Exchange Notes in
definitive certificated form, the Trustee is required to register the Exchange
Notes in the name of, and cause the Exchange Notes to be delivered to, the
Person or Persons (or the nominee thereof) identified as the beneficial owner
as DTC shall direct.
Although DTC has agreed to the foregoing procedures to facilitate
transfers of interest in the Global Exchange Note among Participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under the
rules and procedures governing their operations.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof.
Exchange Note in definitive form will be issued upon the resale, pledge or
other transfer of any Exchange Note or interest therein to any Person or entity
that is not a Qualified Institutional Buyer or that does not participate in
DTC.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain United States federal income tax
consequences resulting from the acquisition, ownership, and disposition of the
Exchange Notes which may be relevant to a holder or prospective purchaser of
one or more of such Exchange Notes. This summary does not purport to cover all
the material tax consequences of the acquisition, ownership and disposition of
Exchange Notes, and it is not intended as tax advice. IN ADDITION, PERSONS
CONSIDERING THE ACQUISITION OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS, AS WELL AS THE LAWS
OF ANY STATE, LOCAL, OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR
SITUATIONS AND THE POSSIBLE EFFECT OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
The legal conclusions expressed in this summary are based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations ("Regulations"), judicial authority and
administrative rulings and practice, all as in effect as of the date of this
Prospectus, and all of which are subject to change, either prospectively or
retroactively. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no rulings from the Service have
been or will be sought with respect to any matter involving the tax aspects of
the purchase, ownership or exchange or other disposition of the Prospectus
Notes. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conclusions set
forth herein. Any such changes or interpretations may or may not be retroactive
and could affect the tax consequences to holders.
This summary deals only with persons who will hold the Exchange Notes as
capital assets, and does not address tax considerations applicable to investors
who may be subject to special tax rules, such as financial institutions,
tax-exempt organizations, foreign corporations, foreign individuals, insurance
companies, dealers in securities or currencies, persons who hold Notes as a
hedge or as a position in a "straddle" for tax purposes, and persons who have a
"functional currency" other than the U.S. dollar. The following discussion is
limited to the United States federal income tax consequences relevant to a
holder of the Notes that is a citizen or resident of the United States, or any
political subdivision thereof, an estate the income of which is subject to
United States federal income tax regardless of source or that is otherwise
subject to United States federal income tax on a net income basis in respect of
the Notes, or a trust the administration of which is subject to the primary
supervision of a United States court and which has one or more United States
persons who have the authority to control all substantial decisions of the
trust. Under newly enacted legislation, the Secretary of the Treasury has the
authority to issue Regulations allowing certain trusts in existence on August
20, 1996 (other than a grantor trust within the meaning of subpart E of part I
of subchapter J of chapter 1 of the Internal Revenue Code of 1986) and which
was treated as a United States person before August 20, 1996, to elect to
continue to be treated as a United States person. However, such Regulations
have not yet been promulgated.
In addition, the description does not consider the effect of any
applicable foreign, state, local or other tax laws or estate or gift tax
considerations.
THE EXCHANGE OFFER
Pursuant to recently finalized Regulations, the exchange of Outstanding
Notes and/or Series B Notes for Exchange Notes pursuant to the Exchange Offer
should not constitute a significant modification of the terms of the Outstanding
and/or Series B Notes and, accordingly, such exchange should be treated as a
"non-event" for federal income tax purposes. Therefore, such exchange should
have no federal income tax consequences to holders of the Outstanding Notes
and/or the Series B Notes, the holding period of an Exchange Note will include
the holding period of the Outstanding Notes and/or the Series B Notes for which
it was exchanged, and each holder of Outstanding Notes and/or Series B Notes
would continue to be required to included interest on the Outstanding Notes
and/or Series B Notes in its gross income in accordance with its method of
accounting for federal income tax purposes.
EFFECT OF CHANGE OF CONTROL
Upon a Change of Control, the Company is required to offer to redeem all
outstanding Notes for a price equal to 101% of the principal amount thereof
plus accrued and unpaid interest. Under the Regulations, such Change of Control
redemption requirements will not affect the yield or maturity date of the Notes
unless, based on
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all the facts and circumstances as of the Issue Date, it was more likely than
not that a Change of Control giving rise to the redemption would occur. The
Company will not treat the Change of Control redemption provisions of the Notes
as affecting the calculation of the yield to maturity of any Note.
OPTIONAL REDEMPTION
The Company, at its option, may redeem part or all of the Notes at any
time on or after November 1, 2001, for specified percentages of the original
principal amount of the Notes, depending upon the time period in which any such
option is exercised or, if redeemed prior to November 1, 2001, for the
Make-Whole Price plus, in each case, accrued and unpaid interest to the date of
redemption. In addition, the Company may, at its option, redeem up to 35% of
the aggregate principal amount of the Notes at 110.75% of the principal amount
thereof from the net proceeds of one or more Equity Offerings that occur prior
to November 1, 1999, provided that at least 65% of the aggregate principal
amount of the Notes remains outstanding. The Regulations provide that, for
purposes of calculating yield and maturity, an issuer will be treated as
exercising any such option if its exercise would lower the yield of the debt
instrument. A redemption of Notes at the optional redemption prices, however,
would increase the effective yield of the debt instrument as calculated from
the Issue Date. The Company does not currently intend to exercise such options
with respect to the Notes and, in accordance with the Regulations, as of the
Issue Date, the optional redemption provisions will not be taken into account
in calculating the yield to maturity of the Notes.
PAYMENT OF INTEREST
Interest on an Exchange Note generally will be includable in the income of
a holder as ordinary income at the time such interest is received or accrued,
in accordance with such holder's method of accounting for United States federal
income tax purposes.
MARKET DISCOUNT
If a holder purchases a Note for less than the stated redemption price at
maturity (the "Note Issue Price") (the sum of all payments on the Note other
than qualified stated interest), the difference is considered "market
discount," unless such difference is "de minimis," i.e., less than one-fourth
of one percent of the Note Issue Price multiplied by the number of complete
years to maturity (after the holder acquires the Note). Under the market
discount rules, any gain realized by the holder on a taxable disposition of a
Note having "market discount," as well as on any partial principal payment made
with respect to such Note, will be treated as ordinary income to the extent of
the then "accrued market discount" of the Note. An overview of the rules
concerning the calculation of "accrued market discount" is set forth in the
paragraph immediately below. In addition, a holder of such Note may be required
to defer the deduction of all or a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry a Note.
Any market discount will accrue ratably from the date of acquisition to
the maturity date of the Note, unless the holder elects, irrevocably, to accrue
market discount on a constant interest rate method. The constant interest rate
method generally accrues interest at times and in amounts equivalent to the
result which would have occurred had the market discount been original issue
discount computed from the holder's acquisition of the Note through the
maturity date. The election to accrue market discount on a constant interest
rate method is irrevocable but may be made separately as to each Note held by
the holder. Accrual of market discount will not cause the accrued amounts to be
included currently in a holder's taxable income, in the absence of a
disposition of, or principal payment on, the Note. However, a holder of a Note
may elect to include market discount in income currently as it accrues on
either a ratable or constant interest rate method. In such event, interest
expense relating to the acquisition of a Note which would otherwise be deferred
would be currently deductible to the extent otherwise permitted by the Code.
The election to include market discount in income currently, once made, applies
to all market discount obligations acquired by such 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 Service. Accrued market discount which is
included in a Holder's gross income will increase the adjusted tax basis of the
Note in the hands of the Holder.
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AMORTIZABLE BOND PREMIUM
If a subsequent holder acquires a Note for an amount which is greater than
the amount payable at maturity, such holder will be considered to have
purchased such Note with "amortizable bond premium" equal to the amount of such
excess. The Holder may elect to amortize the premium, using a constant yield
method employing six-month compounding, over the period from the acquisition
date to the maturity date of the Note. The "amount payable at maturity" will be
determined as of an earlier call date, using the call price payable on such
earlier date, if the combination of such earlier date and call price will
produce a smaller amortizable bond premium than would result from using the
scheduled maturity date and its amount payable. If an earlier call date is used
and the Note is not called, the Note will be treated as having matured on such
earlier call date and then as having been reissued on such date for the amount
so payable. Amortized amounts may be offset only against interest payments due
under the Note and will reduce the Holder's adjusted tax basis in the Note to
the extent so used.
Once made, an election to amortize and offset interest on bonds, such as
the Notes, will apply to all bonds in respect of which the election was made
that were owned by the taxpayer on the first day of the taxable year to which
the election relates and to all bonds of such class or classes subsequently
acquired by such taxpayer. Such election may only be revoked with the consent
of the Service. If a Holder of a Note does not elect to amortize the premium,
the premium will decrease the gain or increase the loss which would otherwise
be recognized upon disposition of the Note.
SALE, EXCHANGE, OR RETIREMENT OF NOTES
Upon the sale, exchange or retirement (including redemption) of a Note,
other than the exchange of an Outstanding Note or a Series B Note for an
Exchange Note (see "The Registered Exchange Offer" above), a holder of a Note
generally will recognize gain or loss in an amount equal to the difference
between the amount of cash and the fair market value of any property received
on the sale, exchange or retirement of the Note (other than in respect of
accrued and unpaid interest on the Note, which such amounts are treated as
ordinary interest income) and such holder's adjusted tax basis in the Note. If
a holder holds the Note as a capital asset, such gain or loss will be capital
gain or loss, except to the extent of any accrued market discount (see "Market
Discount" above), and will be long-term capital gain or loss if the Note has a
holding period of more than one year at the time of sale, exchange or
retirement (and may be subject to lower tax rates applicable to capital gains
depending on the holder's status and the length of the holding period of the
Note).
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to interest
payments on the Notes made to holders other than certain exempt recipients
(such as corporations) and to proceeds realized by such holders on dispositions
of Notes. A 31% backup withholding tax will apply to such amounts only if the
holder (i) fails to furnish its social security or other taxpayer
identification number ("TIN") within a reasonable time after request therefor,
(ii) furnishes an incorrect TIN, (iii) fails to report properly interest or
dividend income, or (iv) fails, under certain circumstances, to provide a
certified statement, signed under penalty of perjury, that the TIN provided is
its correct number and that it is not subject to backup withholding. Any amount
withheld from a payment to a holder under the backup withholding rules is
allowable as a refund or as a credit against such holder's federal income tax
liability, provided that the required information is furnished to the Service.
Holders of Notes should consult their tax advisors as to their qualification
for exemption from backup withholding and the procedure for obtaining such an
exemption.
Once made, an election to amortize and offset interest on bonds, such as
the Notes, will apply to all bonds in respect of which the election was made
that were owned by the taxpayer on the first day of the taxable year to which
the election relates and to all bonds of such class or classes subsequently
acquired by such taxpayer. Such election may only be revoked with the consent
of the Service.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
Prospectus in connection with any resale of such Exchange Notes. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Outstanding Notes where such Outstanding Notes were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that for a period of one year after the date the registration statement,
of which this Prospectus forms a part, is declared effective, 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 sales of the 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 purchase 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 the 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 on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal for the Exchange Offer 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.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay certain expenses
incident to the Exchange Offer, other than commissions or concession of any
brokers or dealers, and will indemnify the holders of the Securities (including
any broker-dealers) against certain liabilities, including liabilities under
the Securities Act.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer agrees that,
upon receipt of notice from the Company of the happening of any event which
makes any statement in the Prospectus untrue in any material respect or which
request the making of any changes in the Prospectus in order to make the
statements therein not misleading (which notice the Company agrees to deliver
promptly to such broker-dealer), such broker-dealer will suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended
or supplemental Prospectus to such broker-dealer. If the Company shall give any
such notice to suspend the use of the Prospectus, it shall extend the 90-day
period referred to above by the number of days during the period from and
including the date of the giving of such notice to and including when
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the Exchange Notes.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Akin, Gump,
Strauss, Hauer & Feld, L.L.P., Dallas, Texas.
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EXPERTS
The financial statements of the Company appearing in the Company's Annual
Report (Form 10-K) for the year ended december 31, 1996 have been audited by
Ernst & Young LLP independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial statements
are incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Alexander Energy Corporation
("Alexander") (subsequently National Energy Group of Oklahoma, Inc.) at
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 incorporated by reference in this Prospectus have been
audited by Ernst & Young LLP, independent auditors, to the extent indicated in
their report incorporated by reference herein. The separate financial
statements of American National Energy Corporation ("ANEC") for the year ended
December 31, 1993 (not presented herein), prior to the merger of ANEC and
National Energy Group of Oklahoma, were audited by Coopers & Lybrand, L.L.P.
independent accountants, to the extent indicated in their report incorporated
herein by reference. The financial statements referred to above are
incorporated by reference herein in reliance upon such reports given upon the
authority of such firms as experts in accounting and auditing.
The estimates of the Company's proved oil and natural gas reserves and
related future net revenues and the present value thereof for certain periods
incorporated by reference herein have been derived from the reserve report of
Netherland & Sewell & Associates, Inc., independent petroleum engineers. All of
such information has been so included herein in reliance upon the authority of
such firm as experts in such matters.
GLOSSARY
Wherever used herein, the following terms shall have the meanings
specified.
Bbl -- One stock tank barrel, or 42 US gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.
Bcf -- One billion cubic feet.
Bcfe -- One billion cubic feet of natural gas equivalent.
Behind the Pipe -- Hydrocarbons in a potentially producing horizon
penetrated by a well bore the production of which has been postponed pending
the production of hydrocarbons from another formation penetrated by the well
bore. These hydrocarbons are classified as proved by non-producing reserves.
Boe -- Barrels of oil equivalent (converting six Mcf of natural gas to one
Bbl of oil).
Developed Acreage -- Acres which are allocated or assignable to producing
wells or wells capable of production.
Development Well -- A well drilled within the proved area of an oil and
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.
Dry Well -- A well found to be incapable of producing either oil or
natural gas in sufficient quantities to justify completion as an oil or natural
gas well.
EBITDA -- Earnings (excluding discontinued operations, extraordinary
items, charges resulting from changes in accounting and significant
nonrecurring revenues and expenses) before interest expense, income taxes,
depletion, depreciation and amortization, and the provision for impairment of
oil and natural gas properties. EBITDA is not a measure of cash flow as
determined by generally accepted accounting principles. EBITDA
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information has been included in this Prospectus because EBITDA is a measure
used by certain investors in determining historical ability to service
indebtedness. EBITDA should not be considered as an alternative to, or more
meaningful than, net income or cash flows as determined in accordance with
generally accepted accounting principles as an indicator of operating
performance or liquidity.
Exploratory Well -- A well drilled to find and produce oil or natural gas
in an unproved area, to find a new reservoir in a field previously found to be
productive of oil or natural gas in another reservoir, or to extend a known
reservoir.
Gross Acres or Gross Wells -- The total acres or wells, as the case may
be, in which a working interest is owned.
Infill Well -- A well drilled between known producing wells to better
exploit the reservoir.
Mbbl -- One thousand Bbl.
Mmbbl -- One million Bbl.
Mboe -- One thousand barrels of oil equivalent.
Mcf -- One thousand cubic feet.
Mcfe -- One thousand cubic feet of natural gas equivalent, using the ratio
of one Bbl of crude oil to six Mcf of natural gas.
Mmcf -- One million cubic feet.
Mmcfe -- One million cubic feet of natural gas equivalent.
Net Acres or Net Wells -- The sum of the fractional working interests
owned in gross acres or gross wells.
NYMEX -- New York Mercantile Exchange.
Oil and Natural Gas Lease -- An instrument by which a mineral fee owner
grants to a lessee the right for a specific period of time to explore for oil
and natural gas underlying the lands covered by the lease and the right to
produce any oil and natural gas so discovered generally for so long as there is
production in economic quantities from such lands.
Overriding Royalty Interest -- A fractional undivided interest in an oil
and natural gas property entitling the owner to a share of oil and natural gas
production, in addition to the usual royalty paid to the owner, free of costs
of production.
PDNP -- Proved developed, nonproducing or behind the pipe reserves.
Productive Well -- A well that is producing oil or natural gas or that is
capable of production.
Proved Developed Reserves -- Reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
Proved Reserves -- The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
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Proved Undeveloped Reserves or PUD -- Reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for completion.
PV10% -- The discounted future net cash flows for proved oil and natural
gas reserves computed on the same basis as the Standardized Measure, but
without deducting income taxes, which is not in accordance with generally
accepted accounting principles. PV10% is an important financial measure for
evaluating the relative significance of oil and natural gas properties and
acquisitions, but should not be construed as an alternative to the Standardized
Measure (as determined in accordance with generally accepted accounting
principles).
Royalty Interest -- An interest in an oil and natural gas property
entitling the owner to a share of oil and natural gas production free of costs
of production.
SEC -- Securities and Exchange Commission.
Secondary Recovery -- A method of oil and natural gas extraction in which
energy sources extrinsic to the reservoir are utilized.
Standardized Measure -- The estimated future net cash flows from proved
oil and natural gas reserves computed using prices and costs, at the dates
indicated, after income taxes and discounted at 10%.
Undeveloped Acreage -- Lease acreage on which wells have not been drilled
or completed to a point that would permit the production of commercial
quantities of oil and natural gas regardless of whether such acreage contains
proved reserves.
Working Interest -- The operating interest which gives the owner the right
to drill, produce and conduct operating activities on the property and a share
of production, subject to all royalties, overriding royalties and other burdens
and to all costs of exploration, development and operations and all risks in
connection therewith.
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===============================================================================
ALL TENDERED OUTSTANDING NOTES, AND SERIES B NOTES EXECUTED LETTERS OF
TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD BE DIRECTED TO THE EXCHANGE
AGENT. QUESTIONS AND REQUESTS FOR ASSISTANCE AND REQUESTS FOR ADDITIONAL COPIES
OF THE PROSPECTUS, THE LETTER OF TRANSMITTAL AND OTHER RELATED DOCUMENTS SHOULD
BE ADDRESSED TO THE EXCHANGE AGENT AS FOLLOWS:
BY REGISTERED OR CERTIFIED MAIL:
BANK ONE, N.A.
CORPORATE TRUST OPERATIONS
235 WEST SCHROCK ROAD
COLUMBUS, OHIO 43271-0184
BY OVERNIGHT MAIL OR HAND DELIVERY:
BANK ONE, N.A.
CORPORATE TRUST OPERATIONS
235 WEST SCHROCK ROAD
WESTERVILLE, OHIO 43081
BY FASCIMILE:
(614) 248-7234
ATTENTION: LORA MARSCH
CONFIRM BY TELEPHONE: (614) 248-4856
(ORIGINALS OF ALL DOCUMENTS SUBMITTED BY FACSIMILE SHOULD BE SENT PROMPTLY BY
HAND, OVERNIGHT DELIVERY, OR REGISTERED OR CERTIFIED MAIL.)
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. NEITHER THE PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL
NOR BOTH TOGETHER CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THE PROSPECTUS RELATES
OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR THE LETTER OF TRANSMITTAL OR BOTH TOGETHER NOR
ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREIN OR THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
$165,000,000
NATIONAL ENERGY GROUP, INC.
10 3/4% SERIES D SENIOR NOTES
DUE 2006
PROSPECTUS
_________, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Information Incorporated by Reference . . . . . . . . . . . . . . . . . . 4
Disclosure Regarding Forward-Looking Statements . . . . . . . . . . . . . 4
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Description of Certain Indebtedness . . . . . . . . . . . . . . . . . . . 26
Description of the Exchange Notes . . . . . . . . . . . . . . . . . . . . 27
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . 53
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
Subject to Completion
Dated October 16, 1997
===============================================================================
<PAGE> 62
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
As authorized by Section 145 of the General Corporation Law of Delaware
(the "Delaware Corporation Law"), each director and officer of the Registrant
may be indemnified by the Registrant against expenses (including attorney's
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened,
pending or completed legal proceedings in which he is involved by reason of the
fact that he is or was a director or officer of the Registrant if he acted in
good faith and in a manner that he reasonably believed to be in or not opposed
to the best interests of the Registrant, and, with respect to any criminal
action or proceeding, if he had no reasonable cause to believe that his conduct
was unlawful. In each case, such indemnity shall be to the fullest extent
authorized by the Delaware Corporation Law, as amended, to the extent such
amendment permits the Registrant to provide broader indemnification rights. If
the legal proceeding, however, is by or in the right of the Registrant, the
director or officer may not be indemnified in respect of any claim, issue or
matter as to which he shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Registrant unless a court
determines otherwise.
Article Eighth of the Certificate of Incorporation of the Registrant
provides that no Director of the Registrant shall be personally liable to the
Registrant or its shareholders for monetary damages for any breach of fiduciary
duty as a Director except for liability: (1) for any breach of duty of loyalty
to the Registrant or its shareholders, (2) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(3) under Section 174 of the Delaware Corporation Law, or (4) for any
transaction from which the Director derived an improper personal benefit. In
addition, Article Ninth of the Certificate of Incorporation and Section 7.4 of
the Bylaws of the Registrant require the Registrant to indemnify to the fullest
extent authorized by law any person made or threatened to be made a party to
any action, suit or proceeding, whether criminal, civil, administrative, or
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director, officer, employee or agent of the Registrant
or serves or served at the request of the Registrant any other enterprise as a
director, officer, employee or agent.
The Registrant has agreed to indemnify the officers and directors of the
Registrant against any and all damages to which such indemnified individuals
may become subject, pursuant to any securities, corporate or other laws, which
damages arise in connection with this Registration Statement or any amendment
thereto, or from the inaccuracy or omission of any information in connection
with this Registration Statement. In the event that the foregoing indemnity is
unavailable or insufficient, then the indemnifying party shall contribute to
amounts paid or payable by the indemnified party in respect to the damages of
the indemnified party in such proportion as is appropriate to reflect the
relative fault of the indemnified and indemnifying parties.
<PAGE> 63
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
4.1 Note Agreement dated as of April 25, 1989, by and among AEJH 1989
Limited Partnership, Alexander Energy Corporation ("Alexander") and
John Hancock Mutual Life Insurance (Incorporated by reference to
Alexander's Form 10-K for the fiscal year ended December 31, 1994).
4.2 Letter dated August 29, 1996 between Alexander and John Hancock
Mutual Life Insurance Company relating to the payment of the 1989
Notes (Incorporated by reference to Alexander's Form 10-K for the
fiscal year ended December 31, 1994.)
4.3 Indenture dated as of November 1, 1996, among the Registrant,
National Energy Group of Oklahoma, Inc., formerly NEG-OK, Inc.
("NEG-OK"), and Bank One, Columbus, N.A. (Incorporated by reference
to the Registrant's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1996.)
4.4 Indenture dated August 21, 1997, among the Registrant and Bank One,
N.A.
4.5 Registration Rights Agreement dated August 21, 1997, by and among
the Registrant and the Initial Purchasers
5.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Coopers & Lybrand L.L.P., independent accountants
23.3 Consent of Netherland, Sewell & Associates, Inc., independent
petroleum engineers
23.4 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1)
24.1 Powers of Attorney (Included in signature pages to this Registration
Statement)
25.1 Form T-1 of Bank One, N.A.
99.1 Letter of Transmittal
(b) Financial Statement Schedules:
None.
3
<PAGE> 64
Item 22. Undertakings.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
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 this 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 hereof.
Insofar as indemnification for liabilities arising under the Securities
Act 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 it the Securities
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
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 and Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
4
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dallas, State of Texas
on this 15th day of October, 1997.
NATIONAL ENERGY GROUP, INC.
BY: /s/ Miles D. Bender
------------------------------
Miles D. Bender
President and Chief Executive Officer
The undersigned directors and officers of National Energy Group, Inc.,
hereby constitute and appoint Miles D. Bender, with full power to act and with
full power or substitution and resubstitution, our true and lawful
attorney-in-fact with full power to execute in our name and behalf in the
capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this Registration Statement and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission and hereby ratify and
confirm all that such attorney-in-fact or his substitute shall lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by or on behalf of the following person
in the capacities and on the dates indicated.
/s/ Miles D. Bender Dated: October 15, 1997
---------------------------------------------
Miles D. Bender
President, Chief Executive
Officer and Director
/s/ Robert A. Imel Dated: October 15, 1997
---------------------------------------------
Robert A. Imel
Chief Financial Officer and
Senior Vice President
/s/ Melissa H. Rutledge Dated: October 15, 1997
---------------------------------------------
Melissa H. Rutledge
Controller and Chief Accounting Officer
/s/ George B. McCullough Dated: October 15, 1997
---------------------------------------------
George B. McCullough
Chairman of the Board and Director
5
<PAGE> 66
/s/ Norman C. Miller Dated: October 15, 1997
-------------------------------------------
Norman C. Miller
Chairman, Executive Committee
and Director
/s/ Robert H. Kite Dated: October 15, 1997
-------------------------------------------
Robert H. Kite
Director
/s/ George McDonald Dated: October 15, 1997
-------------------------------------------
George McDonald
Director
/s/ Robert V. Sinnott Dated: October 15, 1997
-------------------------------------------
Robert V. Sinnott
Director
/s/ Elwood W. Schafer Dated: October 15, 1997
-------------------------------------------
Elwood W. Schafer
Director
/s/ Jim L. David Dated: October 15, 1997
-------------------------------------------
Jim L. David
Vice President - Exploitation and
Director
/s/ Bob G. Alexander Dated: October 15, 1997
-------------------------------------------
Bob G. Alexander
Director
/s/ Robert J. Mitchell Dated: October 15, 1997
-------------------------------------------
Robert J. Mitchell
Director
6
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
4.1 Note Agreement dated as of April 25, 1989, by and among AEJH 1989
Limited Partnership, Alexander Energy Corporation ("Alexander") and
John Hancock Mutual Life Insurance (Incorporated by reference to
Alexander's Form 10-K for the fiscal year ended December 31, 1994).
4.2 Letter dated August 29, 1996 between Alexander and John Hancock
Mutual Life Insurance Company relating to the payment of the 1989
Notes (Incorporated by reference to Alexander's Form 10-K for the
fiscal year ended December 31, 1994.)
4.3 Indenture dated as of November 1, 1996, among the Registrant,
National Energy Group of Oklahoma, Inc., formerly NEG-OK, Inc.
("NEG-OK"), and Bank One, Columbus, N.A. (Incorporated by reference
to the Registrant's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1996.)
4.4 Indenture dated August 21, 1997, among the Registrant and Bank One,
N.A.
4.5 Registration Rights Agreement dated August 21, 1997, by and among
the Registrant and the Initial Purchasers
5.1 Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP, independent auditors
23.2 Consent of Coopers & Lybrand L.L.P., independent accountants
23.3 Consent of Netherland, Sewell & Associates, Inc., independent
petroleum engineers
23.4 Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P. (included in
Exhibit 5.1)
24.1 Powers of Attorney (Included in signature pages to this Registration
Statement)
25.1 Form T-1 of Bank One, N.A.
99.1 Letter of Transmittal
</TABLE>
7
<PAGE> 1
EXHIBIT 4.4
===============================================================================
NATIONAL ENERGY GROUP, INC.
as Issuer,
AND
BANK ONE, N.A.
as Trustee
____________________________
INDENTURE
DATED AS OF AUGUST 21, 1997
____________________________
$165,000,000.00
10 3/4% SERIES C SENIOR NOTES DUE 2006
===============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA SECTION INDENTURE SECTION
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02; 4.03; 11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.02; 6.04; 9.02
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.04
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
318(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
- -------------------------
</TABLE>
N.A. means Not Applicable
NOTE: This Cross-Reference table shall not, for any purpose, be deemed part of
this Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
Definitions And Incorporation By Reference
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . 24
SECTION 1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE II
The Securities
SECTION 2.01 Principal Amount; Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 2.04 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.07 Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.08 Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.09 Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.10 Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.13 Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE III
Redemption
SECTION 3.01 Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.02 Selection of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.06 Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
SECTION 3.07 Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.08 Equity Offering Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV
Covenants
SECTION 4.01 Payment of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.02 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.03 Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.04 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.05 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.06 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.07 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.08 Maintenance of Properties and Insurance . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.09 Limitation on Incurrence of Additional Indebtedness . . . . . . . . . . . . . . . . . . 44
SECTION 4.10 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.11 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.12 Limitation on Liens Securing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.13 Limitation on Sale/Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 4.14 Limitation on Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . . 49
SECTION 4.15 Limitation on Issuances and Sales of Restricted Subsidiary Stock . . . . . . . . . . . 50
SECTION 4.16 Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.17 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.18 Limitation on Line of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 4.19 Limitation on Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE V
Successor Corporation
SECTION 5.01 When Company May Merge, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.02 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VI
Defaults And Remedies
SECTION 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
SECTION 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.06 Limitation on Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 6.07 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VII
Trustee
SECTION 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.06 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 7.09 Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.11 Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII
Discharge Of Indenture
SECTION 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . 66
SECTION 8.02 Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 8.03 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 8.04 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 8.05 Deposited Money and U.S. Government Securities to be Held in Trust; Other
Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.06 Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.07 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
ARTICLE IX
Amendments, Supplements And Waivers
SECTION 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 9.02 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 9.05 Notation on or Exchange of Securities . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.06 Trustee Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE X
Guarantees
SECTION 10.01 Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 10.02 Guarantors May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . 75
SECTION 10.03 Addition of Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 10.04 Release of a Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.05 Limitation of Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.06 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.07 Execution and Delivery of Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 10.08 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE XI
Miscellaneous
SECTION 11.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 11.03 Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . 80
SECTION 11.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . 80
SECTION 11.06 Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.09 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . 81
SECTION 11.10 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 11.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 11.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
</TABLE>
iv
<PAGE> 7
<TABLE>
<S> <C> <C>
SIGNATURES
EXHIBIT A FORM OF SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT A-1 FORM OF NOTATION ON SECURITY RELATING
TO GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A1-1
EXHIBIT B CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR TRANSFER OF SERIES C SENIOR NOTES . . . . . B-1
EXHIBIT C FORM OF LEGAL OPINION ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D FORM OF COMPLIANCE CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E FORM OF TRANSFEREE LETTER OF REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . E-1
- -----------------
</TABLE>
NOTE: This Table of Contents shall not, for any purpose, be deemed to be
a part of this Indenture.
v
<PAGE> 8
INDENTURE, dated as of August 21, 1997, between NATIONAL ENERGY GROUP,
INC., a Delaware corporation (the "Company"), and Bank One, N.A., a national
banking association, as Trustee. Each party agrees as follows for the benefit
of the other parties and for the equal and ratable benefit of the holders of
the Company's 10 3/4% Series C Senior Notes due 2006 (the "Series C Notes") and
the 10 3/4% Series D Senior Notes due 2006 (the "Series D Notes" and, together
with the Series C Notes, the "Securities") issued pursuant to this Indenture:
ARTICLE I
Definitions And Incorporation By Reference
SECTION 1.01 Definitions.
"Adjusted Consolidated Net Tangible Assets" or "ACNTA" means (without
duplication), as of the date of determination, (a) the sum of (i) discounted
future net revenue from proved oil and gas reserves of the Company and its
Restricted Subsidiaries calculated in accordance with SEC guidelines before any
state or federal income taxes, as estimated by independent petroleum engineers
in a reserve report prepared as of the end of the Company's most recently
completed fiscal year as increased by, as of the date of determination, the
discounted future net revenue of (A) estimated proved oil and gas reserves of
the Company and its Restricted Subsidiaries attributable to any acquisition
consummated since the effective date of such year-end reserve reports and (B)
estimated oil and gas reserves of the Company and its Restricted Subsidiaries
attributable to extensions, discoveries and other additions and upward
revisions of estimates of proved oil and gas reserves due to exploration,
development or exploitation, production or other activities conducted or
otherwise occurring since the effective date of such year-end reserve reports
which, in the case of sub-clauses (A) and (B), would, in accordance with
standard industry practice, result in such increases, in each case calculated
in accordance with SEC guidelines (utilizing the prices utilized in such
year-end reserve reports), and decreased by, as of the date of determination,
the discounted future net revenue of (C) estimated proved oil and gas reserves
of the Company and its Restricted Subsidiaries produced or disposed of since
the effective date of such year- end reserve reports and (D) reductions in the
estimated oil and gas reserves of the Company and its Restricted Subsidiaries
since the effective date of such year-end reserve reports attributable to
downward revisions of estimates of proved oil and gas reserves due to
exploration, development or exploitation, production or other activities
conducted or otherwise occurring since the effective date of such year-end
reserve reports which would, in accordance with standard industry practice,
result in such revisions, in each case calculated in accordance with SEC
guidelines (utilizing the prices utilized in such year-end reserve reports);
provided that, in the case of each of the determinations made pursuant to
sub-clauses (A) through (D) above, such increases and decreases shall be as
estimated by the Company's engineers, except that if as a result of such
acquisitions, dispositions, discoveries, extensions or revisions, there is a
Material Change and in connection with the incurrence of Indebtedness under
Section 4.09, all or any part of an increase in discounted future net revenue
resulting from the matters described in sub-clauses (A) and (B) above are
needed to permit the incurrence of such Indebtedness, then the discounted
future net revenue utilized for purposes of this clause (a) (i) shall be
confirmed in writing
<PAGE> 9
by independent petroleum engineers provided that, in the event that the
determinations made pursuant to sub-clauses (C) and (D) above, when taken
alone, would not cause a Material Change, then such written confirmation need
only cover the incremental additions to discounted future net revenues
resulting from the determinations made pursuant to sub-clauses (A) and (B)
above to the extent needed to permit the incurrence of such Indebtedness, (ii)
the capitalized costs that are attributable to oil and gas properties of the
Company and its Restricted Subsidiaries to which no proved oil and gas reserves
are attributed, based on the Company's books and records as of a date no
earlier than the date of the Company's latest annual or quarterly financial
statements, (iii) the Net Working Capital on a date no earlier than the date of
the Company's latest annual or quarterly financial statements and (iv) the
greater of (A) the net book value on a date no earlier than the date of the
Company's latest annual or quarterly financial statements and (B) the appraised
value, as estimated by independent appraisers, of other tangible assets
(including Investments in unconsolidated Subsidiaries) of the Company and its
Restricted Subsidiaries, as of a date no earlier than the date of the Company's
latest audited financial statements, minus (b) the sum of (i) minority
interests, (ii) any non-current portion of gas balancing liabilities of the
Company and its Restricted Subsidiaries reflected in the Company's latest
annual or quarterly financial statements, (iii) the discounted future net
revenue, calculated in accordance with SEC guidelines (utilizing the prices
utilized in the Company's year-end reserve reports), attributable to reserves
which are required to be delivered to third parties to fully satisfy the
obligations of the Company and its Restricted Subsidiaries with respect to
Volumetric Production Payments on the schedules specified with respect thereto,
(iv) the discounted future net revenue, calculated in accordance with SEC
guidelines, attributable to reserves subject to Dollar-Denominated Production
Payments which, based on the estimates of production included in determining
the discounted future net revenue specified in (a) (i) above (utilizing the
same prices utilized in the Company's year-end reserve reports), would be
necessary to fully satisfy the payment obligations of the Company and its
Restricted Subsidiaries with respect to Dollar-Denominated Production Payments
on the schedules specified with respect thereto and (v) the discounted future
net revenue, calculated in accordance with SEC guidelines (utilizing the same
prices utilized in the Company's initial or year-end reserve reports),
attributable to reserves subject to participation interests, overriding royalty
interests or other interests of third parties, pursuant to participation,
partnership, vendor financing or other agreements then in effect, or which
otherwise are required to be delivered to third parties. If the Company
changes its method of accounting from the full cost method to the successful
efforts method or a similar method of accounting, Adjusted Consolidated Net
Tangible Assets will continue to be calculated as if the Company was still
using the full cost method of accounting.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser
of (i) the amount by which the fair value of the property of such 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 Guarantee of such Guarantor at such date and (ii) the amount by which the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable
2
<PAGE> 10
liability of such Guarantor on its debts (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date and after
giving effect to any collection from any Subsidiary of such Guarantor in
respect of the obligations of such Subsidiary under the Guarantee), excluding
debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
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; provided that a corporation shall not be deemed an Affiliate of the
Company solely by reason of having a single common director with the Company
who constitutes less than a majority of the directors of either the Company and
the other corporation.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means any sale, lease, transfer, exchange or other
disposition having a fair market value of $1,000,000 or more (or series of
sales, leases, transfers, exchanges or dispositions during any fiscal year
having an aggregate fair market value of such amount) of shares of Capital
Stock of a Restricted Subsidiary (other than directors' Qualifying Shares), or
of property or assets (including the creation of Dollar-Denominated Production
Payments and Volumetric Production Payments, other than Dollar-Denominated
Production Payments and Volumetric Production Payments created or sold in
connection with the financing of, and within 30 days after, the acquisition of
the properties subject thereto) or any interests therein (each referred to for
purposes of this definition as a disposition) by the Company or any of its
Restricted Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (other than (a) by the Company to a Wholly
Owned Restricted Subsidiary or by a Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary, (b) a sale of oil, gas or other hydrocarbons or other
mineral products in the ordinary course of business of the Company's oil and
gas production operations, (c) any abandonment, farm-in, farm-out, lease and
sub-lease of developed and/or undeveloped properties made or entered into in
the ordinary course of business (but excluding (x) any sale of a net profits or
overriding royalty interest, in each case conveyed from or burdening proved
developed or proved undeveloped reserves and (y) any sale of hydrocarbons or
other mineral products as a result of the creation of Dollar-Denominated
Production Payments or Volumetric Production Payments, other than
Dollar-Denominated Production Payments and Volumetric Production Payments
created or sold in connection with the financing of, and within 30 days after,
the acquisition of the properties subject thereto), (d) the disposition of all
or substantially all of the assets of the Company in compliance with Article V
and Sale/Leaseback Transactions in compliance with Section 4.13, (e) the
provision of services and equipment for the operation and development of the
Company's oil and gas wells, in the ordinary course of the Company's oil and
gas service businesses, notwithstanding that such transactions may be recorded
as asset sales in accordance with full cost accounting guidelines, (f)
3
<PAGE> 11
the issuance by the Company of shares of its Capital Stock, (g) any trade or
exchange by the Company or any Restricted Subsidiary of oil and gas properties
for other oil and gas properties owned or held by another Person provided that
(i) the fair market value of the properties traded or exchanged by the Company
or such Restricted Subsidiary (including any cash or Cash Equivalents, not to
exceed 15% of such fair market value, to be delivered by the Company or such
Restricted Subsidiary) is reasonably equivalent to the fair market value of the
properties (together with any cash or Cash Equivalents, not to exceed 15% of
such fair market value) to be received by the Company or such Restricted
Subsidiary as determined in good faith by the Board of Directors of the
Company, which determination shall be certified by a resolution of the Board of
Directors delivered to the Trustee if such fair market value is in excess of
$5,000,000, provided that if such resolution indicates that such fair market
value is in excess of $10,000,000 such resolution shall be accompanied by a
written appraisal by a nationally recognized investment banking firm or
appraisal firm, in each case specializing or having a speciality in oil and gas
properties, and (ii) such exchange is approved by a majority of Disinterested
Directors of the Company, and (h) the sale, transfer or other disposition in
the ordinary course of business of oil and natural gas properties, or interests
therein, provided that such properties either (i) do not have proved reserves
attributed to them or (ii) were purchased for the purpose of offering such
properties for resale or participations by other Persons).
"Attributable Indebtedness" means, with respect to any particular
lease under which any Person is at the time liable and at any date as of which
the amount thereof is to be determined, the present value of the total net
amount of rent required to be paid by such Person under the lease during the
primary term thereof, without giving effect to any renewals at the option of
the lessee, discounted from the respective due dates thereof to such date at
the rate of interest per annum implicit in the terms of the lease. As used in
the preceding sentence, the net amount of rent under any lease for any such
period shall mean the sum of rental and other payments required to be paid with
respect to such period by the lessee thereunder excluding any amounts required
to be paid by such lessee on account of maintenance and repairs, insurance,
taxes, assessments, water rates or similar charges. In the case of any lease
which is terminable by the lessee upon payment of a penalty, such net amount of
rent shall also include the amount of such penalty, but no rent shall be
considered as required to be paid under such lease subsequent to the first date
upon which it may be so terminated.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness, the quotient obtained by dividing (i) the product of (x) the
number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (y) the amount of such
principal payment by (ii) the sum of all such principal payments.
"Bank Credit Facility" means a revolving credit, term credit and/or
letter of credit facility, the proceeds of which are used for working capital
and other general corporate purposes to be entered into by one or more of the
Company and/or its Restricted Subsidiaries and certain financial
4
<PAGE> 12
institutions, as amended, extended or refinanced from time to time. The
Revised Credit Facility will constitute a Bank Credit Facility.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized to act on behalf of the Board of Directors of such
Person.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors or the managing partner(s)
of such Person and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means any day on which the New York Stock Exchange,
Inc. is open for trading and which is not a Legal Holiday.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of
corporate stock or partnership interests and any and all warrants, options and
rights with respect thereto (whether or not currently exercisable), including
each class of common stock and Preferred Stock of such Person.
"Capitalized Lease Obligations" of any Person means the obligations 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 obligations shall be the
capitalized amount thereof determined in accordance with GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 90 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) demand and time deposits and certificates of
deposit or acceptances with a maturity of 90 days or less of any financial
institution that is a member of the Federal Reserve System having combined
capital and surplus and undivided profits of not less than $500,000,000; (iii)
commercial paper with a maturity of 90 days or less issued by a corporation
that is not an Affiliate of the Company and is organized under the laws of any
state of the United States or the District of Columbia and rated at least A-1
by Standard & Poor's Ratings Services at least P-1 by Moody's Investors
Service, Inc.; (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any commercial bank meeting the specifications of clause (ii)
above; and (v) overnight bank deposits and bankers' acceptances at any
commercial bank meeting the qualifications specified in clause (ii) above.
5
<PAGE> 13
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease or transfer, in one or a series of related transactions, of all
or substantially all of the Company's assets to any Person or group (as such
term is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company; (iii) the
acquisition, directly or indirectly, by any Person or group (as such term is
used in Section 13(d)(3) of the Exchange Act) of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate
voting power of the Voting Stock of the Company (for the purposes of this
definition, such other Person shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation, if such other
Person is the beneficial owner (as defined above), directly or indirectly, of
more than 35% of the voting power of the Voting Stock of such parent
corporation); or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of the
Company (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company
was approved by a vote of 66-2/3% of the directors of the Company then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors of the Company then
in office.
"Company" means the party named as such above, until a successor
replaces such Person in accordance with the terms of this Indenture, and
thereafter means such successor.
"Consolidated Interest Coverage Ratio" means, for any Reference
Period, the ratio on a pro forma basis of (a) the sum of (i) Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) Consolidated Tax Expense,
(iv) depreciation and depletion of the Company and its Restricted Subsidiaries,
as determined in accordance with GAAP on a consolidated basis plus (v)
amortization of the Company and its Restricted Subsidiaries including, without
limitation, amortization of capitalized debt issuance costs, as determined in
accordance with GAAP on a consolidated basis, in each case as determined for
the Reference Period to (b) Consolidated Interest Expense for such Reference
Period; provided, that, in calculating each of the items set forth in the
foregoing (i) acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date") shall be assumed to have occurred on
the first day of the Reference Period, (provided further that nonrecurring
expenses incurred by NEG-OK prior to the date NEG-OK became a Subsidiary shall
be excluded from any calculation of Consolidated Interest Coverage Ratio), (ii)
the incurrence of any Indebtedness (including the issuance of the Securities)
or issuance of any Disqualified Stock during the Reference Period or subsequent
to the Reference Period and on or prior to the Transaction Date shall be
assumed to have occurred on the first day of such Reference Period, (iii) any
Indebtedness that had been outstanding during the Reference Period that has
been repaid on or prior to the Transaction Date shall be assumed to have been
repaid as of the first day of such Reference Period, (iv) the Consolidated
Interest Expense attributable to interest on any Indebtedness or dividends on
any Disqualified Stock bearing a floating interest (or dividend)
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<PAGE> 14
rate shall be computed on a pro forma basis as if the rate in effect on the
Transaction Date was the average rate in effect during the entire Reference
Period and (v) in determining the amount of Indebtedness pursuant to Section
4.09, the incurrence of Indebtedness or issuance of Disqualified Stock giving
rise to the need to calculate the Consolidated Interest Coverage Ratio and, to
the extent the net proceeds from the incurrence or issuance thereof are used to
retire Indebtedness, the application of the proceeds therefrom shall be assumed
to have occurred on the first day of the Reference Period.
"Consolidated Interest Expense" means, with respect to the Company and
its Restricted Subsidiaries, for the Reference Period, the aggregate amount
(without duplication) of (a) interest expensed in accordance with GAAP
(including, in accordance with the following sentence, interest attributable to
Capitalized Lease Obligations, but excluding interest attributable to
Dollar-Denominated Production Payments and amortization of deferred debt
expense) during such period in respect of all Indebtedness of the Company and
its Restricted Subsidiaries (including (i) amortization of original issue
discount on any Indebtedness (other than with respect to the Securities), (ii)
the interest portion of all deferred payment obligations, calculated in
accordance with GAAP and (iii) all commissions, discounts and other fees and
charges owed with respect to bankers' acceptance financings and currency and
interest rate swap arrangements, in each case to the extent attributable to
such period), and (b) dividend requirements of the Company and its Restricted
Subsidiaries with respect to any Preferred Stock or Disqualified Stock
dividends (whether in cash or otherwise (except dividends paid solely in shares
of Capital Stock other than Disqualified Stock)) paid (other than to the
Company or any of its Restricted Subsidiaries), declared, accrued or
accumulated during such period, divided by one minus the applicable actual
combined federal, state, local and foreign income tax rate of the Company and
its Subsidiaries (expressed as a decimal), on a consolidated basis, for the
Reference Period preceding the date of the transaction giving rise to the need
to calculate Consolidated Interest Expense, in each case to the extent
attributable to such period and excluding items eliminated in consolidation.
For purposes of this definition, (a) interest on a Capitalized Lease Obligation
shall be deemed to accrue at an interest rate reasonably determined by the
Company to be the rate of interest implicit in such Capitalized Lease
Obligation in accordance with GAAP and (b) interest expense attributable to any
Indebtedness represented by the guarantee by the Company or a Restricted
Subsidiary of the Company of an obligation of another Person (other than the
Company or any other Restricted Subsidiary) shall be deemed to be the interest
expense attributable to the Indebtedness guaranteed.
"Consolidated Net Income" of the Company means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided, however, that there shall not be included in such Consolidated Net
Income: (a) any net income of any Person if such Person is not the Company or a
consolidated Restricted Subsidiary, except that (i) subject to the limitations
contained in clause (d) below, the Company's equity in the net income of any
such Person for such period shall be included in such Consolidated Net Income
up to the aggregate amount of cash or Cash Equivalents actually
7
<PAGE> 15
distributed by such Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (c) below) and (ii) the Company's equity in a net loss of
any such Person (other than an Unrestricted Subsidiary) for such period shall
be included in determining such Consolidated Net Income; (b) any net income (or
loss) of any Person acquired by the Company or a Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition; (c)
the net income of any Restricted Subsidiary to the extent that the payment of
dividends or the making of distributions by such Restricted Subsidiary,
directly or indirectly, to the Company, is prohibited; (d) any gain (but not
loss) realized upon the sale or other disposition of any property, plant or
equipment of the Company or any Restricted Subsidiary (including pursuant to
any Sale/Leaseback Transaction) which is not sold or otherwise disposed of in
the ordinary course of business and any gain (but not loss) realized upon the
sale or other disposition of any Capital Stock of any Person; (e) any gain (but
not loss) from currency exchange transactions not in the ordinary course of
business consistent with past practice; (f) the cumulative effect of a change
in accounting principles; (g) to the extent deducted in the calculation of net
income, the non-cash charges associated with the repayment of Indebtedness with
the proceeds from the sale of the Securities and the Series A/B Notes and the
prepayment of any of the Securities and the Series A/B Notes; (h) any
writedowns of noncurrent assets; provided, however, that any ceiling limitation
writedowns under SEC guidelines shall be treated as capitalized costs, as if
such writedowns had not occurred; and (i) any gain (but not loss) attributable
to extraordinary items.
"Consolidated Net Worth" means, with respect to the Company and its
Restricted Subsidiaries, as at any date of determination, the sum of Capital
Stock (other than Disqualified Stock) and additional paid-in capital plus
retained earnings (or minus accumulated deficit) minus all intangible assets,
including, without limitation, organization costs, patents, trademarks,
copyrights, franchises, research and development costs, and any amount
reflected in treasury stock, of the Company and its Restricted Subsidiaries
determined on a consolidated basis in accordance with GAAP.
"Consolidated Tax Expense" means, for any period, the provisions for
federal, state, local and foreign income taxes (including state franchise taxes
accounted for as income taxes in accordance with GAAP) of the Company and its
Restricted Subsidiaries for such period as determined on a consolidated basis
in accordance with GAAP.
"Default" means any event which is, or after notice or passage of time
would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of the
Securities attached hereto as Exhibit A, that do not include the information
called for by footnotes 1 and 2 thereof, and do not have attached the
additional schedule referred to in footnote 3 thereof.
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<PAGE> 16
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Securities, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disinterested Director" means, with respect to an Affiliate
Transaction or series of related Affiliate Transactions, a member of the Board
of Directors of the Company who has no financial interest, and whose employer
has no financial interest, in such Affiliate Transaction or series of related
Affiliate Transactions.
"Disqualified Stock" means any Capital Stock of the Company or any
Restricted Subsidiary of the Company which, by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable), or
upon the happening of any event or with the passage of time, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the Maturity Date or which is exchangeable or convertible into debt
securities of the Company or any Restricted Subsidiary of the Company, except
to the extent that such exchange or conversion rights cannot be exercised prior
to the Maturity Date.
"Dollar-Denominated Production Payments" mean production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Effective Registration" means the Company shall have (i) commenced a
Registered Exchange Offer for the Securities pursuant to an effective
registration statement under the Securities Act or (ii) filed and caused to
become effective the Notes Shelf Registration under the Securities Act for the
sale of Securities by Holders.
"Equity Offering" means any underwritten public offering of common
stock of the Company pursuant to a registration statement filed pursuant to the
Securities Act or any private placement of Capital Stock (other than
Disqualified Stock) of the Company (other than to any Person who, prior to such
private placement, was a Subsidiary of the Company or any other Person
controlled by the Company) which offering or placement is consummated after the
Series A/B Issue Date.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America as of the Series A/B Issue Date.
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<PAGE> 17
"Global Security" means a Security that contains the language referred
to in footnotes 1 and 2 and the additional schedule referred to in footnote 3
to the form of the Securities attached hereto as Exhibit A.
"Guarantee" or "Guarantees" means any Guarantee issued by existing or
future Restricted Subsidiaries pursuant to Article X hereof.
"Guarantor" means (i) each of the Subsidiaries that becomes a
guarantor of the Securities in compliance with the provisions of Article X
hereof and (ii) each of the Subsidiaries executing a supplemental indenture in
which such Subsidiary agrees to be bound by the terms of this Indenture; in
each case until such time, if any, such Subsidiary is released from the
Guarantee pursuant to Section 10.04 hereof.
"Holder" means a Person in whose name a Security is registered on the
Registrar's books.
"Indebtedness" means, without duplication, with respect to any Person,
(a) all obligations of such Person (i) in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), (ii) evidenced by bonds, notes, debentures or
similar instruments, (iii) representing the balance deferred and unpaid of the
purchase price of any property or services (other than accounts payable or
other obligations arising in the ordinary course of business), (iv) evidenced
by bankers' acceptances or similar instruments issued or accepted by banks, (v)
for the payment of money relating to a Capitalized Lease Obligation, or (vi)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (b) all net obligations of such Person
under interest rate swap obligations, commodity swap obligations and foreign
currency hedges, except to the extent such net obligations are taken into
account in the determination of future net revenues from proved oil and gas
reserves for purposes of the calculation of Adjusted Consolidated Net Tangible
Assets; (c) all liabilities of others of the kind described in the preceding
clauses (a) or (b) that such Person has guaranteed or that are otherwise its
legal liability (including, with respect to any Production Payment, any
warranties or guaranties of production or payment by such Person with respect
to such Production Payment but excluding other contractual obligations of such
Person with respect to such Production Payment); (d) Indebtedness (as otherwise
defined in this definition) of another Person secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person, the
amount of such obligations being deemed to be the lesser of (1) the full amount
of such obligations so secured and (2) the fair market value of such asset, as
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a resolution of such Board; (e) with
respect to such Person, the liquidation preference or any mandatory redemption
payment obligations in respect of Disqualified Stock; (f) the aggregate
preference in respect of amounts payable on the issued and outstanding shares
of Preferred Stock of any of the Company's Restricted Subsidiaries in the event
of any voluntary or involuntary liquidation, dissolution or winding up
(excluding any such preference attributable to such shares of Preferred Stock
that are owned by such Person or any
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<PAGE> 18
of its Restricted Subsidiaries; provided, that if such Person is the Company,
such exclusion shall be for such preference attributable to such shares of
Preferred Stock that are owned by the Company or any of its Restricted
Subsidiaries); and (g) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c), (d), (e), (f) or this clause (g), whether
or not between or among the same parties. Subject to clause (c) of the
preceding sentence, neither Dollar-Denominated Production Payments nor
Volumetric Production Payments shall be deemed to be Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Securities" means the Series C Notes issued pursuant to this
Indenture.
"Investment" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of assets, Indebtedness, Capital Stock or other securities of any other
Person and (iv) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary course
of business) or advances on a balance sheet of such Person prepared in
accordance with GAAP.
"Issue Date" means the date on which the Initial Securities are
originally issued under this Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statute or statutes) of any jurisdiction).
"Make-Whole Amount" with respect to a Security means an amount equal
to the excess, if any, of (i) the present value of the remaining interest,
premium and principal payments due on such Security as if such Security were
redeemed on November 1, 2001, computed using a discount rate equal to the
Treasury Rate plus 75 basis points, over (ii) the outstanding principal amount
of such Security. "Treasury Rate" is defined as the yield to maturity at the
time of the computation of United States Treasury securities with a constant
maturity (as compiled by and published in the most recent Federal Reserve
Statistical Release H.15(519), which has become publicly available at least two
Business Days prior to the date of the redemption notice or, if such
Statistical Release is no
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<PAGE> 19
longer published, any publicly available source of similar market data) most
nearly equal to the then remaining maturity of the Securities assuming
redemption of the Securities on November 1, 2001; provided, however, that if
the Make-Whole Average Life of such Security is not equal to the constant
maturity of the United States Treasury securities for which a weekly average
yield is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average
yields of United States Treasury securities for which such yields are given,
except that if the Make-Whole Average Life of such Securities is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Make-Whole Average Life" means the number of years (calculated to the
nearest one-twelfth) between the date of redemption and November 1, 2001.
"Make-Whole Price" with respect to a Security means the greater of (i)
the sum of the outstanding principal amount and the Make-Whole Amount of such
Security, and (ii) the redemption price of such Security on November 1, 2001,
determined pursuant to this Indenture (105.375 % of the principal amount).
"Material Change" means an increase or decrease (excluding changes
that result solely from changes in prices) of more than either (i) 10% from the
end of the immediately preceding fiscal quarter in the estimated discounted
future net revenue from proved oil and gas reserves of the Company and its
Restricted Subsidiaries, or (ii) 20% from the end of the immediately preceding
year in the estimated discounted future net revenue from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, in each case
calculated in accordance with clause (a) (i) of the definition of Adjusted
Consolidated Net Tangible Assets; provided, however, that the following will be
excluded from the calculation of Material Change: (a) any acquisitions of oil
and gas reserves made after the end of the immediately preceding year for which
the discounted future net revenues have been estimated by independent petroleum
engineers since the end of the preceding year and on which a report or reports
exist and (b) any disposition of properties existing at the beginning of the
current quarter or current year, as the case may be, for purposes of clause (i)
or clause (ii) above, that have been disposed of as provided in Section 4.11.
"Maturity Date" means November 1, 2006.
"NEG-OK" means National Energy Group of Oklahoma, Inc., a Delaware
corporation and former wholly-owned Subsidiary of the Company that was merged
with and into the Company effective December 31, 1996.
"Net Cash Proceeds" means (a) with respect to any Asset Sale or
Sale/Leaseback Transaction of any Person, an amount equal to aggregate cash
proceeds received (including any cash proceeds received by way of deferred
payment of principal pursuant to a note or installment
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<PAGE> 20
receivable or otherwise, but only as and when received, and excluding any other
consideration until such time as such consideration is converted into cash)
therefrom, in each case net of all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all federal, state or
local taxes required to be accrued as a liability as a consequence of such
Asset Sale or Sale/Leaseback Transaction, and in each case net of all
Indebtedness which is secured by such assets, in accordance with the terms of
any Lien upon or with respect to such assets, or which must, by its terms or in
order to obtain a necessary consent to such Asset Sale or Sale/Leaseback
Transaction or by applicable law, be repaid out of the proceeds from such Asset
Sale or Sale/Leaseback Transaction and which is actually so repaid and (b) in
the case of any sale by the Company of securities pursuant to clauses (B) or
(C) of Section 4.10(a)(iii), the amount of aggregate net cash proceeds received
by the Company, after payment of expenses, commissions, discounts and any other
transaction costs incurred in connection therewith.
"Net Working Capital" means (i) all current assets of the Company and
its Restricted Subsidiaries, minus (ii) all current liabilities of the Company
and its Restricted Subsidiaries (including the current portion of gas balancing
liabilities), except current liabilities included in Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness of a Person as to which (a) neither the Company nor any Restricted
Subsidiary (i) provides credit support including any undertaking, agreement or
instrument which would constitute Indebtedness or (ii) is directly or
indirectly liable for such Indebtedness and (b) no default with respect to such
Indebtedness (including any rights which the holders thereof may have to take
enforcement action against such Person) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness (other than Non-Recourse
Indebtedness) of the Company or its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
"Notes Liquidated Damages" shall have the meaning given such term in
the Registration Rights Agreement.
"Notes Shelf Registration" shall have the meaning given such term in
the Registration Rights Agreement.
"Officer" means, with respect to any Person, the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer or the
Treasurer of such Person.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either a Secretary,
Assistant Secretary or Assistant Treasurer of such Person. One of the Officers
signing an Officers' Certificate given pursuant to Section 4.03(a) shall be the
principal executive, financial or accounting Officer of the Person delivering
such certificate.
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<PAGE> 21
"Oil and Gas Business" means the business of the exploration for, and
exploitation, development, production, processing (but not refining),
marketing, storage and transportation of, hydrocarbons, and other related
energy and natural resources businesses (including oil and gas services
businesses related to the foregoing).
"Oil and Gas Securities" means the Voting Stock of a Person primarily
engaged in the Oil and Gas Business, provided that such Voting Stock shall
constitute a majority of the Voting Stock of such Person in the event that such
Voting Stock is not registered under Section 12 of the Exchange Act.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company (or any Guarantor, if applicable) or the Trustee.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PBGC Plan" shall mean any employee pension benefit plan as defined in
Section 3(2) of ERISA sponsored by the Company or an ERISA Affiliate (excluding
any Multiemployer Plan and any Multiple Employer Plan) and which is subject to
Title IV of ERISA or Section 412 of the Code.
"Permitted Business Investments" means (i) Investments in assets used
in the Oil and Gas Business; (ii) the acquisition of Oil and Gas Securities;
(iii) the entry into operating agreements, joint ventures, processing
agreements, farmout agreements, development agreements, area of mutual interest
agreements, contracts for the sale, transportation or exchange of oil and
natural gas, unitization agreements, pooling arrangements, joint bidding
agreements, service contracts, partnership agreements (whether general or
limited) or other similar or customary agreements, transactions, properties,
interests or arrangements, and Investments and expenditures in connection
therewith or pursuant thereto, in each case made or entered into in the
ordinary course of the Oil and Gas Business, excluding solely for purposes of
this clause (iii), however, Investments in corporations; (iv) the acquisition
of working interests, royalty interests or mineral leases relating to oil and
gas properties; (v) Investments by the Company or any Wholly Owned Restricted
Subsidiary in any Person which, immediately prior to the making of such
Investment, is a Wholly Owned Restricted Subsidiary; (vi) Investments in the
Company by any Wholly Owned Restricted Subsidiary; (vii) Investments permitted
under Section 4.11 and Section 4.13; (viii) Investments in any Person the
consideration for which consists of Capital Stock (other than Disqualified
Stock); (ix) Investments constituting obligations under hedging arrangements
described in clause (viii) of the definition of "Permitted Indebtedness;" and
(x) Investments in Unrestricted Subsidiaries the assets of which consist of
assets used in the Oil and Gas Business (other than cash and Cash Equivalents)
received by the Company from any Person other than a Subsidiary of the Company
solely as a result of the issuance or sale of Capital Stock of the Company
(other than Disqualified Stock) provided that such Investment is made within 30
days of the issuance or sale of such Capital Stock.
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<PAGE> 22
"Permitted Company Refinancing Indebtedness" means Indebtedness of the
Company, the net proceeds of which are used to renew, extend, refinance, refund
or repurchase outstanding Indebtedness of the Company (other than any
Indebtedness incurred in reliance upon clause (ii) or clause (v) of the
definition of Permitted Indebtedness), provided that (i) if the Indebtedness
(including the Securities) being renewed, extended, refinanced, refunded or
repurchased is pari passu with or subordinated in right of payment to the
Securities, then such Indebtedness is pari passu with or subordinated in right
of payment to, as the case may be, the Securities at least to the same extent
as the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, (ii) such Indebtedness is scheduled to mature no earlier than the
Indebtedness being renewed, extended, refinanced, refunded or repurchased, and
(iii) such Indebtedness has an Average Life at the time such Indebtedness is
incurred that is equal to or greater than the Average Life of the Indebtedness
being renewed, extended, refinanced, refunded or repurchased; provided,
further, that such Indebtedness (to the extent that such Indebtedness
constitutes Permitted Company Refinancing Indebtedness) is in an aggregate
principal amount (or, if such Indebtedness is issued at a price less than the
principal amount thereof, the aggregate amount of gross proceeds therefrom is)
not in excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased (or
if the Indebtedness being renewed, extended, refinanced, refunded or
repurchased was issued at a price less than the principal amount thereof, then
not in excess of the amount of liability in respect thereof determined in
accordance with GAAP).
"Permitted Financial Investments" means the following kinds of
instruments if, in the case of instruments referred to in clauses (i) through
(iv) below, on the date of purchase or other acquisition of any such instrument
by the Company or any Subsidiary, the remaining term to maturity is not more
than one year: (i) readily marketable obligations issued or unconditionally
guaranteed as to principal of and interest on by the United States of America
or by any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America; (ii) repurchase obligations
for instruments of the type described in clause (i) for which delivery of the
instrument is made against payment; (iii) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued by a depository institution or trust company incorporated or
doing business under the laws of the United States of America, any state
thereof or the District of Columbia or a branch or subsidiary of any such
depository institution or trust company operating outside the United States,
provided, that such depository institution or trust company has, at the time of
the Company's or such Subsidiary's investment therein or contractual commitment
providing for such investment, capital surplus or undivided profits (as of the
date of such institution's most recently published financial statements) in
excess of $500,000,000; (iv) commercial paper issued by any corporation, if
such commercial paper has, at the time of the Company's or any Subsidiary's
investment therein or contractual commitment providing for such investment,
credit ratings of A-1 (or higher) by Standard & Poor's Ratings Services and P-1
(or higher) by Moody's Investors Services, Inc.; and (v) money market mutual or
similar funds having assets in excess of $500,000,000.
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<PAGE> 23
"Permitted Indebtedness" means (i) Indebtedness of the Company and its
Restricted Subsidiaries outstanding as of the Series A/B Issue Date; (ii)
Indebtedness of the Company and its Restricted Subsidiaries under a Bank Credit
Facility in a principal amount outstanding at any time not to exceed a
principal amount equal to the greater of (a) $40,000,000 and (b) $10,000,000
plus 15% of Adjusted Consolidated Net Tangible Assets plus related accrued
interests and costs, less any Net Cash Proceeds applied in accordance with
Section 4.11(b) to repay or prepay such Indebtedness that results in a
permanent reduction in any revolving credit or other commitment relating
thereto or the maximum amount that may be borrowed thereunder provided that the
aggregate amount of applied Net Cash Proceeds shall not permanently, reduce the
amount of Permitted Indebtedness under this clause (ii) below $10,000,000
principal amount plus related accrued interest and costs; (iii) other
Indebtedness of the Company and its Restricted Subsidiaries in a principal
amount not to exceed $10,000,000 at any one time outstanding; (iv) Non-Recourse
Indebtedness; (v) Indebtedness of the Company to any Wholly Owned Restricted
Subsidiary of the Company and Indebtedness of any Restricted Subsidiary of the
Company to the Company or another Wholly Owned Restricted Subsidiary of the
Company; (vi) Permitted Company Refinancing Indebtedness; (vii) Permitted
Subsidiary Refinancing Indebtedness; (viii) obligations under hedging
arrangements that the Company and its Subsidiaries enter into in the ordinary
course of business for the purpose of protecting their production against
fluctuations in oil and natural gas prices; (ix) Indebtedness under the
Securities and the Series A/B Notes; and (x) Indebtedness of a Subsidiary
pursuant to a Guarantee of the Securities pursuant to Article X of this
Indenture or of the Series A/B Notes pursuant to the Series A/B Indenture.
"Permitted Investments" means Permitted Business Investments and
Permitted Financial Investments.
"Permitted Liens" means (i) Liens outstanding as of the Series A/B
Issue Date; (ii) Liens now or hereafter securing a Bank Credit Facility;
provided, however, such Liens are limited to securing Indebtedness in an amount
not in excess of that permitted to be incurred in accordance with clause (ii)
of the definition of Permitted Indebtedness; (iii) Liens now or hereafter
securing any interest rate hedging obligations so long as the related
Indebtedness (a) constitutes Senior Indebtedness or (b) is, or is permitted to
be under this Indenture, secured by a Lien on the same property securing such
interest rate obligations; (iv) Liens now or hereafter securing any interest
rate hedging obligations so long as the related Indebtedness (a) constitutes
the Securities or the Series A/B Notes (or any Permitted Company Refinancing
Indebtedness in respect thereof) or (b) is, or is permitted to be under this
Indenture, secured by a Lien on the same property securing such interest rate
hedging obligations; (v) Liens securing Indebtedness, the proceeds of which are
used to refinance secured Indebtedness of the Company or its Restricted
Subsidiaries; provided, that such Liens extend to or cover only the property or
assets currently securing the Indebtedness being refinanced; (vi) Liens for
taxes, assessments and governmental charges not yet delinquent or being
contested in good faith and for which adequate reserves have been established
to the extent required by GAAP; (vii) mechanics', workmen's, materialmen's,
operators' or similar Liens arising in the
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<PAGE> 24
ordinary course of business; (viii) Liens in connection with workers'
compensation, unemployment insurance or other social security, old age pension
or public liability obligations; (ix) Liens, deposits or pledges to secure the
performance of bids, tenders, contracts (other than contracts for the payment
of money), leases, public or statutory obligations, surety, stay, appeal
indemnity, performance or other similar bonds, or other similar obligations
arising in the ordinary course of business; (x) survey exceptions,
encumbrances, easements or reservations of, or rights of others for, rights of
way, zoning or other restrictions as to the use of real properties, and minor
defects in title which, in the case of any of the foregoing, were not incurred
or created to secure the payment of borrowed money or the deferred purchase
price of property or services, and in the aggregate do not materially adversely
affect the value of such properties or materially impair use for the purposes
of which such properties are held by the Company or any Restricted
Subsidiaries; (xi) Liens on, or related to, properties to secure all or part of
the costs incurred in the ordinary course of business of exploration, drilling,
development or operation thereof; (xii) Liens on pipeline or pipeline
facilities which arise out of operation of law; (xiii) 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 and for which adequate reserves have been
made; (xiv) (a) Liens upon any property of any Person existing at the time of
acquisition thereof by the Company or a Restricted Subsidiary, (b) Liens upon
any property of a Person existing at the time such Person is merged or
consolidated with the Company or any Restricted Subsidiary or existing at the
time of the sale or transfer of any such property of such Person to the Company
or any Restricted Subsidiary, or (c) Liens upon any property of a Person
existing at the time such Person becomes a Restricted Subsidiary; provided,
that in each case such Lien has not been created in contemplation of such sale,
merger, consolidation, transfer or acquisition, and provided that in each such
case no such Lien shall extend to or cover any property of the Company or any
Restricted Subsidiary other than the property being acquired and improvements
thereon; (xv) Liens on deposits to secure public or statutory obligations or in
lieu of surety or appeal bonds entered into in the ordinary course of business;
(xvi) Liens in favor of collecting or payor banks having a right of setoff,
revocation, refund or chargeback with respect to money or instruments of the
Company or any Subsidiary on deposit with or in possession of such bank; (xvii)
purchase money security interests granted in connection with the acquisition of
assets in the ordinary course of business and consistent with past practices,
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 100% of the purchase price of such
assets; (xviii) Liens reserved in oil and gas mineral leases for bonus or
rental payments and for compliance with the terms of such leases; (xix) Liens
arising under partnership agreements, oil and gas leases, farm-out agreements,
division orders, contracts for the sale, purchase, exchange, transportation or
processing (but not refining) of oil, gas or other hydrocarbons, unitization
and pooling declarations and agreements, development agreements, operating
agreements, area of mutual interest agreements, and other similar agreements
which are customary in the Oil and Gas Business; (xx) Liens securing
obligations under hedging arrangements that the Company enters into in the
ordinary course of business for the purpose of protecting its
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<PAGE> 25
production against fluctuations in oil and natural gas prices; and (xxi) Liens
to secure Dollar-Denominated Production Payments and Volumetric Production
Payments.
"Permitted Subsidiary Refinancing Indebtedness" means Indebtedness of
any Restricted Subsidiary, the net proceeds of which are used to renew, extend,
refinance, refund or repurchase outstanding Indebtedness of such Restricted
Subsidiary (other than any Indebtedness incurred in reliance upon clause (ii)
or clause (v) of the definition of Permitted Indebtedness), provided that (i)
if the Indebtedness (including any Guarantee) being renewed, extended,
refinanced, refunded or repurchased is pari passu with or subordinated in right
of payment to the Guarantee, then such Indebtedness is pari passu with or
subordinated in right of payment to, as the case may be, the Guarantee at least
to the same extent as the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, (ii) such Indebtedness is scheduled to mature no
earlier than the Indebtedness being renewed, extended, refinanced, refunded or
repurchased, and (iii) such Indebtedness has an Average Life at the time such
Indebtedness is incurred that is equal to or greater than the Average Life of
the Indebtedness being renewed, extended, refinanced, refunded or repurchased,
provided, further, that such Indebtedness (to the extent that such Indebtedness
constitutes Permitted Subsidiary Refinancing Indebtedness) is in an aggregate
principal amount (or, if such Indebtedness is issued at a price less than the
principal amount thereof, the aggregate amount of gross proceeds therefrom is)
not in excess of the aggregate principal amount then outstanding of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased (or
if the Indebtedness being renewed, extended, refinanced, refunded or
repurchased was issued at a price less than the principal amount thereof, then
not in excess of the amount of liability in respect thereof determined in
accordance with GAAP); provided, however, that a Restricted Subsidiary shall
not incur refinancing Indebtedness to renew, extend, refinance, refund or
repurchase outstanding Indebtedness of another Subsidiary unless such
Subsidiary is a Guarantor.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated), which is
preferred as to the payment of dividends, or upon any voluntary or involuntary
liquidation or dissolution of such corporation, over shares of Capital Stock of
any other class of such corporation.
"Production Payments" means, collectively, Dollar-Denominated
Production Payments and Volumetric Production Payments.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of this Indenture, a calculation in accordance
with Article XI of Regulation S-X under the Securities Act.
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<PAGE> 26
"Reference Period" means, with respect to any Person, the four full
consecutive fiscal quarters ended with the last full fiscal quarter for which
financial information is available immediately preceding any date upon which
any determination is to be made pursuant to the terms of the Securities or this
Indenture.
"Registered Exchange Offer" shall have the meaning given such term in
the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 21, 1997, by and between the Company and the
purchasers named therein, as such agreement may be amended, modified or
supplemented from time to time.
"Restricted Payment" means, with respect to any Person, any of the
following: (i) any dividend or other distribution in respect of such Person's
Capital Stock (other than (a) dividends or distributions payable solely in
Capital Stock (other than Disqualified Stock) and (b) in the case of Restricted
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Restricted Subsidiary of the Company); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock, or any option,
warrant, or other right to acquire shares of Capital Stock, of the Company or
any of its Restricted Subsidiaries (but excluding (a) any cashless exercise of
warrants or options or (b) payments in respect of cash elections or phantom
stock or similar awards under any director or employee benefit plan or
arrangement provided such payment is recorded as a compensation expense under
GAAP); (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for
value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness which is subordinated in right of
payment to the Securities; and (iv) the making by such Person of any Investment
other than a Permitted Investment.
"Restricted Securities" mean Securities that bear or are required to
bear the Restricted Securities Legend.
"Restricted Securities Legend" means the legend set forth on the face
of the form of Security attached hereto as Exhibit A, pursuant to Section 2.06.
"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that,
immediately after giving effect to such designation, the Company could incur at
least $1.00 in additional Indebtedness pursuant Section 4.09(a).
"Revised Credit Facility" means the Restated Loan Agreement between
the Company and Bank One, Texas, N.A. and Credit Lyonnais, New York, as amended
from time to time, including but not limited to the First Amendment dated as of
October 31, 1996, the Second Amendment dated
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<PAGE> 27
as of March 7, 1997, and the Third Amendment dated as of May 12, 1997, and the
Fourth Amendment dated as of August 21, 1997.
"Sale/Leaseback Transaction" means with respect to the Company or any
of its Restricted Subsidiaries, any arrangement with any Person providing for
the leasing by the Company or any of its Restricted Subsidiaries of any
principal property, acquired or placed into service more than 180 days prior to
such arrangement, whereby such property has been or is to be sold or
transferred by the Company or any of its Restricted Subsidiaries to such
Person.
"SEC" means the Securities and Exchange Commission.
"Securities" or "Security" means the Initial Securities and the Senior
Exchange Securities, as either may be amended or supplemented from time to time
in accordance with the terms hereof, that are issued pursuant to this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Securities Custodian" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"Senior Exchange Securities" means the Series D Notes issued in
exchange for the Initial Securities pursuant to a Registered Exchange Offer and
shall also include any Series D Notes issued in exchange for the Series B
Notes.
"Senior Indebtedness" means any Indebtedness of the Company (whether
outstanding on the Series A/B Issue Date or thereafter incurred), unless such
Indebtedness is contractually subordinate or junior in right of payment of
principal, premium and interest to the Securities.
"Senior Indebtedness of a Guarantor" means any Indebtedness of such
Guarantor (whether outstanding on the Series A/B Issue Date or thereafter
incurred), unless such Indebtedness is contractually subordinate or junior in
right of payment of principal, premium and interest to the Guarantees.
"Series A/B Indenture" means the Indenture dated as of November 1,
1996 among the Company, NEG-OK, and Bank One, Columbus, N.A., as trustee, and
providing for the issuance of the Series A/B Notes in the aggregate principal
amount of $100 million, as such may be amended or supplemented from time to
time.
"Series A/B Issue Date" means the date on which the Series A/B Notes
were originally issued under the Series A/B Indenture.
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<PAGE> 28
"Series A/B Notes" means the Company's 10 3/4% Senior Notes due 2006
issued pursuant to the Series A/B Indenture, as such may be amended or
supplemented from time to time.
"Series A/B Registration Rights Agreement" means the Registration
Rights Agreement dated as of October 29, 1996, by and among the Company, NEG-OK
and each of the purchasers named therein, as such agreement may be amended,
modified or supplemented from time to time.
"Series B Notes" means the Company's Series A/B Notes registered
pursuant to the Series A/B Registration Rights Agreement.
"Stated Maturity" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and, when used with respect to any other
Indebtedness or any installment of interest thereon, means the date specified
in the instrument evidencing or governing such Indebtedness as the fixed date
on which the principal of such Indebtedness or such installment of interest is
due and payable.
"Subordinated Indebtedness of a Guarantor" means any Indebtedness of
such Guarantor (whether outstanding on the Series A/B Issue Date or thereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Guarantees.
"Subordinated Indebtedness of the Company" means any Indebtedness of
the Company (whether outstanding on the Series A/B Issue Date or thereafter
incurred) which is contractually subordinate or junior in right of payment of
principal, premium and interest to the Securities.
"Subsidiary" means any subsidiary of the Company. A subsidiary of any
Person means (i) a corporation a majority of whose Voting Stock is at the time,
directly or indirectly, owned by such Person, by one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person, (ii)
a partnership in which such Person or a subsidiary of such Person is, at the
date of determination, a general or limited partner of such partnership, but
only if such Person or its subsidiary is entitled to receive more than 50
percent of the assets of such partnership upon its dissolution, or (iii) any
other Person (other than a corporation or partnership) in which such Person,
directly or indirectly, at the date of determination thereof, has (x) at least
a majority ownership interest or (y) the power to elect or direct the election
of a majority of the directors or other governing body of such Person.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.03.
"Trust Officer" means any officer or assistant officer within the
corporate trust department of the Trustee assigned by the Trustee to administer
its corporate trust matters.
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"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of an Unrestricted
Subsidiary or (ii) any Subsidiary of the Company or of a Restricted Subsidiary
that is designated as an Unrestricted Subsidiary by a resolution adopted by the
Board of Directors in accordance with the requirements of the following
sentence. The Company may designate any Subsidiary of the Company or of a
Restricted Subsidiary (including a newly acquired or newly formed Subsidiary or
any Restricted Subsidiary of the Company), to be an Unrestricted Subsidiary by
a resolution of the Board of Directors of the Company, as evidenced by written
notice thereof delivered to the Trustee, if after giving effect to such
designation, (i) the Company could incur at least $1.00 of additional
Indebtedness pursuant to Section 4.09(a), (ii) the Company could make an
additional Restricted Payment of at least $1.00 pursuant to Section 4.10(a),
(iii) such Subsidiary does not own or hold any Capital Stock of, or any lien on
any property of, the Company or any Restricted Subsidiary and (iv) such
Subsidiary is not liable, directly or indirectly, with respect to any
Indebtedness other than Unrestricted Subsidiary Indebtedness. Notwithstanding
the foregoing, as of the date of this Indenture, Boomer Marketing Corporation,
an Oklahoma corporation, and Energy and Environmental Services Limited
Partnership, an Oklahoma limited partnership, are designated by the Company as
Unrestricted Subsidiaries.
"Unrestricted Subsidiary Indebtedness" of any Person means
Indebtedness of such Person (i) as to which neither the Company nor any
Restricted Subsidiary is directly or indirectly liable (by virtue of the
Company's or such Restricted Subsidiary's being the primary obligor, or
guarantor of, or otherwise liable in any respect on, such Indebtedness), (ii)
which, with respect to Indebtedness incurred after the Issue Date by the
Company or any Restricted Subsidiary, upon the occurrence of a default with
respect thereto, does not result in, or permit any holder of any Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such
Indebtedness of the Company or any Restricted Subsidiary and (iii) which is not
secured by any assets of the Company or of any Restricted Subsidiary.
"U.S. Government Securities" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States
of America the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America, which, in either case
under clauses (i) or (ii) are not callable or redeemable at the option of the
issuer thereof.
"U.S. Legal Tender" means such coin or currency of the United States
as at the time of payment shall be legal tender for the payment of public and
private debts.
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<PAGE> 30
"Volumetric Production Payments" mean production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of contingency) to vote in the election of members of the Board
of Directors or other governing body of such person, provided that, for
purposes of the definition of Change in Control, the Series D Preferred Stock
of the Company outstanding at the Series A/B Issue Date shall not be deemed
Voting Stock unless and until the holders of such class take any action, by
vote, consent or otherwise, to exercise any right of such class to elect or
appoint more than one member to the Board of Directors of the Company.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary 95%
or more of the Capital Stock (other than directors' qualifying shares if
applicable) of which is owned by the Company or another Wholly Owned Restricted
Subsidiary.
Section 1.02 Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.16
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.17
"Change of Control Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.17
"Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . 4.17
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.03
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Defaulted Interest" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"Funding Guarantor" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.06
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.02
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.07
"Net Proceeds Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"Net Proceeds Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"Net Proceeds Payment Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Payment Restriction" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14
"QIB" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
"Registrar". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
</TABLE>
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<PAGE> 31
SECTION 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms, if used in this Indenture, have the following
meanings:
"Commission" means the SEC.
"indenture securities" means the Securities and the Guarantees.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Guarantors and any other obligor on the Securities or the Guarantees.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have
the meanings assigned to them therein.
SECTION 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
words in the plural include the singular;
(5) any gender used in this Indenture shall be
deemed to include the neuter, masculine or feminine genders;
24
<PAGE> 32
(6) provisions apply to successive events and
transactions; and
(7) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any particular
Article, Section or other Subdivision.
ARTICLE II
The Securities
SECTION 2.01 Principal Amount; Form and Dating.
(a) Principal Amount
The aggregate principal amount of Securities which may be issued,
executed, authenticated and outstanding under this Indenture is $165,000,000;
provided that $100,000,000 shall be reserved for issuance and shall be
available for issuance only in connection with a possible exchange of Series B
Notes for Senior Exchange Securities if such an exchange offer is made by the
Company.
(b) Form and Dating
The Securities and the certificate of authentication, and the notation
on the Securities relating to the Guarantee and the certificate of
authentication relating to the Guarantee, shall be substantially in the forms
of Exhibits A and A-1, respectively. The Securities may also have such
insertions, omissions, substitutions and variations as are required or as may
be permitted by or consistent with this Indenture and, in this regard, Senior
Exchange Securities issued pursuant to a Registered Exchange Offer in
accordance with Section 2.06(c) and Section 2.06(i)(iii) may be referred to as
Series D Notes on the face and reverse of the certificate and bear a CUSIP
number different from that applicable to Securities bearing a Restricted
Securities Legend. The provisions of Exhibits A and A-1 are part of this
Indenture. The Securities may have notations, legends and endorsements
required by law or stock exchange rule or usage. Restricted Securities shall
bear the Restricted Securities Legend, unless removed in accordance with
Section 2.06. The Company shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the date
of its authentication.
The terms and provisions contained in the Securities and the Guarantee
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Guarantors, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions
and to be bound thereby.
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<PAGE> 33
Securities offered and sold in reliance on Rule 144A under the
Securities Act will initially be issued only in the form of one or more Global
Securities. Securities offered and sold in reliance on any other exemption
from registration under the Securities Act will be issued only in the form of
Definitive Securities.
Securities issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 2
thereto and the additional schedule referred to in footnote 3 thereto).
Securities issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto and the additional schedule referred to in footnote 3
thereto). Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Securities from time to time
endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee or the
Securities Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
Subject to the provisions of Section 2.06, any Person having a beneficial
interest in a Global Security may exchange such beneficial interest, upon
request to the Trustee, for fully certificated Definitive Securities in
registered form.
SECTION 2.02 Execution and Authentication.
Two Officers of the Company shall sign the Securities on behalf of the
Company, and one Officer of each Guarantor shall sign the notation on the
Securities relating to the Guarantee of such Guarantor on behalf of such
Guarantor, in each case by manual or facsimile signature. The Company's seal
shall be reproduced on the Securities.
If an Officer of the Company or any Guarantor whose signature is on a
Security no longer holds that office at the time the Security is authenticated,
the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee or an authenticating agent manually signs the certificate of
authentication on the Security and the Guarantee. These signatures shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee or an authenticating agent shall authenticate Securities
for original issue in the aggregate principal amount of $165,000,000 upon a
written order of the Company signed by two Officers of the Company. Subject to
Section 2.01 and Section 2.07, the aggregate principal amount of Securities
outstanding at any time may not exceed $165,000,000. Each Security
authenticated for original issuance shall bear the Restricted Securities
Legend.
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<PAGE> 34
The Trustee may appoint an authenticating agent to authenticate
Securities. An authenticating agent may authenticate Securities whenever the
Trustee may do so except on original issuance. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent and each reference to authentication of the Securities includes
authentication of the Guarantee. An authenticating agent has the same rights
as an Agent to deal with the Company or its Affiliates.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03 Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where Securities may be presented for payment (the "Paying
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange. Where the Trustee is acting as or has been appointed
Registrar and/or Paying Agent, the Company may appoint one or more
co-registrars and one or more additional paying agents with the prior consent
of the Trustee, whose consent shall not be unreasonably withheld. The term
"Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. Such agency agreement shall provide for
reasonable compensation for such services. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent and shall furnish
the Trustee with an executed counterpart of any such agency agreement. If the
Company fails to maintain or act as Registrar or Paying Agent, the Trustee
shall act as such and shall be duly compensated therefor.
The Registrar or a co-registrar and a Paying Agent shall be maintained
by the Company in the Borough of Manhattan, the City of New York. The Company
initially designates the Trustee as the Registrar and Paying Agent.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Securities Custodian with respect to the Global
Securities.
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<PAGE> 35
SECTION 2.04 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
hold in trust for the benefit of Holders or the Trustee all money held by such
Paying Agent for the payment of principal of, premium, if any, or interest on
the Securities (whether such money shall have been paid to it by the Company or
any Guarantor), and to notify the Trustee of any Default by the Company or any
Guarantor in making any such payment. While any such Default continues, the
Trustee may require the Paying Agent to pay all money held by it to the
Trustee. Except as provided in the immediately preceding sentence, the Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed and, if the Company requires
such payment, the Company shall give prior notice to the Trustee and provide
appropriate money transfer instructions to the Paying Agent. Upon such payment
over to the Trustee and accounting for any funds disbursed, such Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold as separate trust funds for the benefit of the Holders all
money held by it as Paying Agent.
SECTION 2.05 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish or cause to be furnished to the
Trustee at least ten Business Days prior to each semiannual interest payment
date, and at such other times as the Trustee may request in writing, a list in
such form and as of such date as the Trustee may reasonably require of the
names and addresses of Holders, and the Company shall otherwise comply with TIA
Section 312(a).
SECTION 2.06 Transfer and Exchange.
(a) Transfer and Exchange of Definitive Securities. When
a Definitive Security is presented to the Registrar or a co-registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of the Registrar are met; provided, however, that
the Definitive Security presented or surrendered for register of transfer (i)
shall be duly endorsed or accompanied by a written instruction of transfer in
form satisfactory to the Registrar duly executed by the Holder thereof or by
his attorney, duly authorized in writing; and (ii) in the case of a Definitive
Security that is a Restricted Security, such request shall be accompanied by
(A) a certificate substantially in the form set forth as Exhibit B hereto,
given by the Holder and the transferee of such Restricted Security, to the
effect set forth therein and (B) an opinion of counsel substantially in the
form of Exhibit C hereto from such Holder or the transferee satisfactory to the
Trustee and the Registrar, to the effect set forth therein.
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<PAGE> 36
(b) Securities Selected for Redemption; Registrar
Requirements; Authentication; Fees. The Registrar need not transfer or
exchange any Securities selected for redemption, except the unredeemed portion
of any Security being redeemed in part. Also, it need not transfer or exchange
any Securities for a period of 15 days before a selection of Securities to be
redeemed. When Securities are presented to the Registrar or a co-registrar
with a request to exchange them for an equal principal amount of Securities of
other authorized denominations, the Registrar shall make the exchange as
requested if the requirements of the Registrar are met. The Company shall
cooperate with the Registrar in meeting its requirements. To permit transfers,
registration and exchanges, the Trustee shall authenticate Securities at the
Registrar's request. The Company may charge a reasonable fee for any transfer,
registration or exchange and may require payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto,
but not for any exchange pursuant to Sections 2.10, 3.06 or 9.05.
(c) Restricted Securities Legend. If Securities are
issued upon the transfer, exchange or replacement of Securities bearing the
Restricted Securities Legend, or if a request is made to remove such Restricted
Securities Legend on Securities, the Securities so issued shall bear the
Restricted Securities Legend, or the Restricted Securities Legend shall not be
removed, as the case may be, unless there is delivered to the Company (with
copies to the Registrar) such satisfactory evidence, which may include an
opinion of counsel, as may be reasonably required by the Company that (i)
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of the
Securities Act or, with respect to Restricted Securities, that such Securities
upon transfer to the transferee will not be "restricted" within the meaning of
Rule 144 under the Securities Act or (ii) there is an Effective Registration
involving the Notes Shelf Registration with respect to the Securities then in
effect or the Security as to which the Restricted Securities Legend is sought
to be removed has been disposed of in accordance with the Notes Shelf
Registration. Upon (i) provision of such satisfactory evidence, or (ii)
notification by the Company to the Trustee of an Effective Registration with
respect to the Notes Shelf Registration, the Trustee, at the written order of
the Company signed by two Officers, shall authenticate and deliver Securities
that do not bear the Restricted Securities Legend in exchange for Securities
bearing the Restricted Securities Legend. If the Effective Registration is
with respect to a Registered Exchange Offer for the Securities, the Company
shall notify the Trustee, and the Trustee, at the Company's request, thereafter
shall notify the Holders of receipt of such notice and, after receipt of a
written order of the Company signed by two Officers for the authentication and
delivery of Securities that do not bear the Restricted Securities Legend and a
properly completed letter of transmittal or other requested documents from a
Holder as specified in the exchange offer documents, shall exchange such
Holder's Securities for Securities that do not bear the Restricted Securities
Legend upon the terms set forth in the exchange offer documents.
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(d) Transfer of a Definitive Security for a Beneficial
Interest in a Global Security. A Definitive Security may not be exchanged for
a beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Restricted
Security, a certification from the Holder thereof (in substantially
the form of Exhibit B hereto) to the effect that such Holder is a
"qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) (a "QIB") or, if such Holder is transferring same,
that such transferee is a Person that such Holder reasonably believes
to be to a QIB in accordance with Rule 144A under the Securities Act;
and
(ii) whether or not such Definitive Security is a
Restricted Security, written instructions from the Holder thereof
directing the Trustee to make, or to direct the Security Custodian to
make, an endorsement on the Global Security to reflect an increase in
the aggregate principal amount of the Securities represented by the
Global Security,
the Trustee shall cancel such Definitive Security in accordance with Section
2.11 hereof and cause, or direct the Security Custodian to cause, in accordance
with the standing instructions and procedures existing between the Depositary
and the Security Custodian, the aggregate principal amount of Securities
represented by the Global Security to be increased accordingly. If no Global
Securities are then outstanding, the Company shall issue and, upon receipt of
an authentication order in accordance with Section 2.02 hereof, the Trustee
shall authenticate a new Global Security in the appropriate principal amount.
(e) Transfer and Exchange of Global Securities. The
transfer and exchange of Global Securities or beneficial interests therein
shall be effected through the Depositary, in accordance with this Indenture and
the procedures of the Depositary therefor, which shall include restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act.
(f) Transfer of a Beneficial Interest in a Global
Security for a Definitive Security.
(i) Any Person having a beneficial interest in a
Global Security may upon request exchange such beneficial interest for
a Definitive Security. Upon receipt by the Trustee of written
instructions or such other form of instructions as is customary for
the Depositary, from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global Security, and, in the
case of a Restricted Security, the following additional information
and documents (all of which may be submitted by facsimile):
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<PAGE> 38
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as
being the beneficial owner, a certification to that effect
from such Person (in substantially the form of Exhibit B
hereto); or
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B hereto); or
(C) if such beneficial interest is being
transferred in reliance on Rule 144 or Rule 904 or another
exemption from the registration requirements of the Securities
Act, a certification to that effect from the transferor (in
substantially the form of Exhibit B hereto) and an opinion of
counsel substantially in the form of Exhibit C hereto from the
transferee or transferor reasonably acceptable to the Company
and to the Registrar to the effect that such transfer is in
compliance with the Securities Act,
the Trustee or the Security Custodian, at the direction of the
Trustee, shall, in accordance with the standing instructions and
procedures existing between the Depositary and the Security Custodian,
cause the aggregate principal amount of Global Securities to be
reduced accordingly and, following such reduction, the Company shall
execute and, upon receipt of an authentication order in accordance
with Section 2.02 hereof, the Trustee shall authenticate and deliver
to the transferee a Definitive Security in the appropriate principal
amount.
(ii) Definitive Securities issued in exchange for
a beneficial interest in a Global Security pursuant to this Section
2.06(f) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Definitive Securities to the
Persons in whose names such Securities are so registered.
(g) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provision of this Indenture (other than
the provisions set forth in subsection (f) of this Section 2.06), a Global
Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
(h) Authentication of Definitive Securities in Absence of
Depositary. If at any time:
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(i) the Depositary for the Securities notifies
the Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Securities and a successor Depositary for
the Global Securities is not appointed by the Company within 90 days
after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to cause the issuance of
Definitive Securities under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Securities in an aggregate principal amount equal to the
principal amount of the Global Securities in exchange for such Global
Securities.
(i) Legends.
(i) Except as permitted by the following
paragraphs (ii) and (iii), each Security certificate evidencing Global
Securities and Definitive Securities (and all Securities issued in
exchange therefor or substitution thereof) shall bear legends in
substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED TO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHICH IS AN
INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT
IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER
PERIOD AS COMPLIES WITH RULE 144 UNDER THE SECURITIES ACT) AFTER THE
LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST
DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") RESELL,
PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER,
(B) TO A PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE
PROVISIONS
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OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE A WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY,
(D) PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
OF THE SECURITIES ACT, (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (G) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED
TRANSFEREE IS NOT A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING
RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE
RESTRICTION TERMINATION DATE.
(ii) Subject to Section 2.06(c), upon any sale or
transfer of a Restricted Security (including any Restricted Security
represented by a Global Security) pursuant to Rule 144 under the
Securities Act or pursuant to an Effective Registration:
(A) in the case of any Restricted
Security that is a Definitive Security, the Registrar shall
permit the Holder thereof to exchange such Restricted Security
for a Definitive Security that does not bear the legend set
forth in (i) above and rescind any restriction on the transfer
of such Restricted Security; and
(B) in the case of any Restricted
Security represented by a Global Security, such Restricted
Security shall not be required to bear the legend set forth in
(i) above, but shall continue to be subject to the other
provisions hereof; provided, however, that with respect to
any request for an exchange of a Restricted Security
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<PAGE> 41
that is represented by a Global Security for a Definitive
Security that does not bear the legend set forth in (i) above,
which request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar that such
request is being made pursuant to Rule 144 (such certification
to be substantially in the form of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Registered Exchange Offer, the Company shall issue
and, upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate Senior Exchange
Securities issued in exchange for Restricted Securities in the
Registered Exchange Offer and/or in exchange for the Series B Notes,
which Senior Exchange Securities shall not bear the legend set forth
in (i) above, and the Registrar shall rescind any restriction on the
transfer of such Securities, in each case unless the Holder of such
Securities is either (A) a broker-dealer, (B) a Person participating
in the distribution of the Securities, (C) a Person who is an
affiliate (as defined in Rule 144A) of the Company or (D) a Person who
is not acquiring Senior Exchange Securities in the ordinary course of
business.
(j) Cancellation and/or Adjustment of Global Securities.
At such time as all beneficial interests in Global Securities have been
exchanged for Definitive Securities, redeemed, repurchased or canceled, all
Global Securities shall be returned to or retained and canceled by the Trustee
in accordance with Section 2.11 hereof. At any time prior to such
cancellation, if any beneficial interest in a Global Security is exchanged for
Definitive Securities, redeemed, repurchased or canceled, the principal amount
of Securities represented by such Global Security shall be reduced accordingly
and an endorsement shall be made on such Global Security, by the Trustee or the
Securities Custodian, at the direction of the Trustee, to reflect such
reduction.
(k) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate in accordance with Section 2.02 Definitive Securities and
Global Securities at the Registrar's request.
(ii) The Registrar may require a Holder to furnish
appropriate endorsements and transfer documents.
(iii) All Definitive Securities and Global
Securities issued upon any registration of transfer or exchange of
Definitive Securities or Global Securities shall be the valid
obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Definitive Securities
or Global Securities surrendered upon such registration of transfer or
exchange.
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SECTION 2.07 Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the requirements of the Trustee are met. An indemnity bond may be
required by the Trustee, the Company or any Guarantor that is sufficient in the
judgment of the Company, the Guarantors and the Trustee to protect the Company,
the Guarantors, the Trustee or any Agent from any loss which any of them may
suffer if a Security is replaced. The Company may charge for its expenses
(including fees and expenses of the Trustee) in replacing a Security.
SECTION 2.08 Outstanding Securities.
Securities outstanding at any time are all Securities authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee in accordance with the provisions hereof, and those described in
this Section 2.08 as not outstanding. Except as set forth in Section 2.09, a
Security does not cease to be outstanding because the Company, the Guarantors
or any of their respective Subsidiaries or Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 4.01, it ceases to be outstanding and interest on it ceases to accrue.
SECTION 2.09 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, any Guarantor or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities which the Trustee knows are so
owned shall be so disregarded.
SECTION 2.10 Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and, upon written order of the Company, the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate and deliver definitive
Securities in exchange for a like
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principal amount of temporary Securities surrendered to it. Until so
exchanged, temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
SECTION 2.11 Cancellation.
The Company or any Guarantor at any time may deliver Securities to the
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee shall cancel all Securities surrendered for registration, transfer,
exchange, payment or cancellation and shall destroy canceled Securities unless
the Company directs their return to the Company. Except as provided in Section
2.07, the Company may not issue new Securities to replace Securities that it
has paid or delivered to the Trustee for cancellation.
Securities that are redeemed by the Company, that are repurchased by
the Company pursuant to Section 4.11 or Section 4.17, or that are otherwise
acquired by the Company, will be surrendered to the Trustee for cancellation.
SECTION 2.12 Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay, or cause the Paying Agent to pay, the defaulted interest in any
lawful manner (plus interest on such defaulted interest to the extent lawful)
(taken together, the "Defaulted Interest") to the persons who are Holders on a
subsequent special record date, in each case at the rate provided in the
Securities and in Section 4.01 hereof. At least 15 days before the special
record date, the Company shall mail to each Holder to be paid thereon a notice
stating the special record date, the payment date and the amount of Defaulted
Interest to be paid. In the event that the Company has elected to cause a
Paying Agent to pay the Defaulted Interest, the Company shall so notify the
Paying Agent at least 15 days before the special record date, which notice
shall also set forth the special record date, the payment date and the
aggregate amount of Defaulted Interest to be paid. At least five days before
such payment date, the Company shall deposit with the Paying Agent money
sufficient to pay all of the Defaulted Interest on the payment date therefor
and instruct the Paying Agent in writing to pay to specified Holders on the
payment date. On the payment date, the Paying Agent shall make the payments in
accordance with the Company's written instructions from funds deposited with
the Paying Agent for the purpose of making such Defaulted Interest payments.
SECTION 2.13 Persons Deemed Owners.
The Company, the Trustee, any Paying Agent and any authenticating
agent may treat the Person in whose name any Security is registered as the
owner of such Security for the purpose of receiving payments of principal of,
premium, if any, or interest on such Security and for all other
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purposes. None of the Company, the Trustee, any Paying Agent or any
authenticating agent shall be affected by any notice to the contrary.
ARTICLE III
Redemption
SECTION 3.01 Notice to Trustee.
If the Company elects to redeem Securities pursuant to the optional
redemption provisions of paragraph 6 or 7 of the Securities, it shall furnish
to the Trustee and the Registrar, at least 45 days but not more than 60 days
before the redemption date (unless the Trustee consents to a shorter period in
writing), an Officers' Certificate setting forth the redemption date, the
principal amount of Securities to be redeemed and the redemption price.
SECTION 3.02 Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed in multiples of $1,000 pro rata, by
lot or, if the Securities are listed on any securities exchange, by any other
method that the Trustee considers fair and appropriate and that complies with
the requirements of such exchange. The Trustee shall make the selection from
outstanding Securities not previously called for redemption not less than 30
nor more than 60 days prior to the redemption date. The Trustee may select for
redemption portions of the principal of Securities that have denominations
larger than $1,000. Securities and portions of them it selects shall be in
amounts of $1,000 or whole multiples of $1,000. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption. The Trustee shall notify the Company promptly
of the Securities or portions of Securities selected for redemption.
SECTION 3.03 Notice of Redemption.
(a) At least 30 days but not more than 60 days before a
redemption date, the Company shall mail a notice of redemption by first-class
mail to each Holder of Securities to be redeemed at such Holder's registered
address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the aggregate principal amount of Securities being
redeemed;
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(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be
surrendered to the Paying Agent at the address specified in such
notice to collect the redemption price;
(6) that, unless the Company defaults in the payment of
the redemption price or accrued interest, interest on Securities
called for redemption ceases to accrue on and after the redemption
date and the only remaining right of the Holders is to receive payment
of the redemption prices in respect of the Securities upon surrender
to the Paying Agent of the Securities;
(7) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and
that, after the redemption date, upon surrender of such Security, a
new Security or Securities in principal amount equal to the unredeemed
portion will be issued;
(8) the paragraph of the Securities pursuant to which the
Securities called for redemption are being redeemed; and
(9) the CUSIP number of the Securities.
(b) At the Company's request, the Trustee shall give the
notice of redemption required in Section 3.03(a) in the Company's name and at
the Company's expense; provided, however, that the Company shall deliver to the
Trustee, at least 45 days prior to the redemption date (unless the Trustee
consents to a shorter notice period in writing), an Officers' Certificate
requesting that the Trustee give such notice and setting forth the information
to be stated in such notice as provided in Section 3.03(a).
SECTION 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the redemption date
at the redemption price. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price, plus accrued interest to the redemption
date.
SECTION 3.05 Deposit of Redemption Price.
Prior to the redemption date, the Company shall deposit with the
Paying Agent funds available on the redemption date sufficient to pay the
redemption price of, and accrued interest on, the Securities to be redeemed on
that date. The Paying Agent shall promptly return to the Company
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any money so deposited which is not required for that purpose upon the written
request of the Company, except with respect to monies owed as obligations to
the Trustee pursuant to Article VII.
If any Security called for redemption shall not be so paid upon
redemption because of the failure of the Company to comply with the preceding
paragraph, interest will continue to be payable on the unpaid principal and
premium, if any, including from the redemption date until such principal and
premium, if any, is paid, and, to the extent lawful, on any interest not paid
on such unpaid principal, in each case at the rate provided in the Securities
and in Section 4.01 hereof.
SECTION 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Company shall issue and the Trustee shall authenticate for the Holder, at the
expense of the Company, a new Security equal in aggregate amount to the
unredeemed portion of the Security surrendered.
SECTION 3.07 Optional Redemption.
The Securities may be redeemed at the option of the Company, in whole
or from time to time in part:
(i) at any time on or after November 1, 2001, at
the redemption prices set forth below (expressed as a percentage of
the principal amount of the Securities to be redeemed), together with
accrued and unpaid interest on the Securities so redeemed to the
redemption date, if redeemed during the 12-month period commencing on
November 1, of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . . . . . . . . . . . 102.688%
2003 and thereafter . . . . . . . . . . . . . . . 100.000%
</TABLE>
or
(ii) at any time prior to November 1, 2001, at the
Make-Whole Price plus accrued and unpaid interest to the date of
redemption.
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Any redemption pursuant to this Section 3.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06
hereof.
SECTION 3.08 Equity Offering Redemption.
In the event the Company consummates one or more Equity Offerings on
or prior to November 1, 1999, the Company may redeem, in its sole discretion,
up to 35% of the aggregate principal amount of the Securities with all or a
portion of the aggregate net proceeds received by the Company from any such
Equity Offering or Equity Offerings at a redemption price of 110.75% of the
aggregate principal amount of Securities so redeemed, plus accrued and unpaid
interest on the Securities so redeemed to the redemption date; provided,
however, that following such redemption, at least 65% of the aggregate
principal amount of the Securities remains outstanding. Any redemption
pursuant to this Section 3.08 shall be made pursuant to the provisions of
Section 3.01 through 3.06 hereof.
ARTICLE IV
Covenants
SECTION 4.01 Payment of Securities.
The Company shall pay the principal of, premium, if any, and interest
on, the Securities in New York, New York on the dates and in the manner
provided in the Securities and this Indenture. Principal, premium and interest
shall be considered paid on the date due if the Trustee or Paying Agent holds
on that date money deposited by the Company designated for and sufficient to
pay all principal, premium and interest then due. All references to interest
in this Indenture shall for all purposes be deemed to include any additional
interest payable as Notes Liquidated Damages pursuant to the Registration
Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal, and premium, if
any, at the rate borne by the Securities to the extent lawful; and it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
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SECTION 4.02 SEC Reports.
(a) The Company, within 15 days after it files the same
with the SEC, shall deliver to Holders, copies of the annual reports and the
information, documents and other reports (or copies of any such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC (if the SEC will so accept) and
provide the Trustee and the Holders with such annual reports and such
information, documents and other reports specified in Sections 13 and 15(d) of
the Exchange Act. The Company and each Guarantor shall also comply with the
provisions of TIA Section 314(a).
(b) The Company may request the Trustee on behalf of the
Company at the Company's expense to mail the foregoing to Holders. In such
case, the Company shall provide the Trustee with a sufficient number of copies
of all reports and other documents and information that the Trustee may be
required to deliver to Holders under this Section.
SECTION 4.03 Compliance Certificates.
(a) The Company shall deliver to the Trustee, within 90
days after the end of each fiscal year of the Company, an Officers' Certificate
substantially in the form of Exhibit D hereto, stating that a review of the
activities of the Company and the Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that, to the best of such Officer's knowledge, the
Company and each Guarantor has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such Officer may have knowledge and what
action the Company is taking or proposes to take with respect thereto). Such
Officers' Certificate shall comply with TIA Section 314(a)(4). The Company
hereby represents that, as of the Issue Date, its fiscal year ends December 31,
and hereby covenants that it shall notify the Trustee at least 30 days in
advance of any change in its fiscal year.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.02 shall be
accompanied by a written statement of the Company's independent public
accountants (which shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Section 4.07 through Section
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4.18 of this Indenture (to the extent such provisions relate to accounting
matters) or, if any such violation has occurred, specifying the nature and
period of existence thereof. Where such financial statements are not
accompanied by such a written statement, the Company shall furnish the Trustee
with an Officers' Certificate stating that any such written statement would be
contrary to the then current recommendations of the American Institute of
Certified Public Accountants.
(c) The Company and the Guarantors will, so long as any
of the Securities are outstanding, deliver to the Trustee within 10 Business
Days of any Officer becoming aware of any Default or Event of Default or
default in the performance of any covenant, agreement or condition contained in
this Indenture, an Officers' Certificate specifying such Default or Event of
Default and what action the Company or any Guarantor proposes to take with
respect thereto.
SECTION 4.04 Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.02. If at any time the Company
shall fail to maintain any required office or agency or shall fail to furnish
the Trustee with the address thereof, such surrenders, presentations, notices
and demands may be made or served at the corporate trust office of the Trustee.
Subject to Section 2.03, the Company may also from time to time
designate one or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in the Borough of Manhattan, The City of New York, for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 4.05 Corporate Existence.
Subject to Section 5.01 and Section 10.02, the Company will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other
existence of each Subsidiary and all rights (charter and statutory) and
franchises of the Company and the Subsidiaries; provided, that the Company
shall not be required to preserve the corporate existence of any Subsidiary, or
any such right or franchise, if the Board of
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Directors of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and that the
loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 4.06 Waiver of Stay, Extension or Usury Laws.
The Company and each Guarantor covenants (to the extent that each may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay,
extension, or usury law or other law, which would prohibit or forgive the
Company or any Guarantor from paying all or any portion of the principal of,
premium, if any, or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company and each Guarantor hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.07 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a Lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 4.08 Maintenance of Properties and Insurance.
(a) The Company shall cause all properties used or held
for use in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order (ordinary wear
and tear excepted) and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that there is no material adverse effect to the Company and its Subsidiaries,
taken as a whole; provided, however, that nothing in this Section shall prevent
the Company from discontinuing the operation or maintenance of any such
property, or disposing of it, if such discontinuance or disposal is, in the
judgment of the Company, desirable in the conduct of its business and not
disadvantageous in any material respect to the Holders.
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(b) The Company shall provide or cause to be provided,
for itself and each of its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the Company, are adequate and appropriate for the conduct
of the business of the Company and such Subsidiaries in a prudent manner, with
reputable insurers or with the government of the United States or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the reasonable, good faith opinion of the
Company, for corporations similarly situated in the industry.
SECTION 4.09 Limitation on Incurrence of Additional Indebtedness.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries, directly or indirectly, to issue, incur, assume,
guarantee, become liable, contingently or otherwise, with respect to or
otherwise become responsible for the payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if no
Default or Event of Default shall have occurred and be continuing at the time
or as a consequence of the incurrence of such Indebtedness, the Company or its
Restricted Subsidiaries may incur Indebtedness if, on a pro forma basis, after
giving effect to such incurrence and the application of the proceeds therefrom,
both of the following tests shall have been satisfied: (i) the Consolidated
Interest Coverage Ratio for the Reference Period immediately preceding the
incurrence of such Indebtedness is at least (a) 2.25-to-1.0 with respect to any
date of incurrence of additional Indebtedness occurring on or before the first
anniversary date of the Series A/B Issue Date or (b) 2.50-to-1.0 with respect
to any date of incurrence of additional Indebtedness occurring after the first
anniversary date of the Series A/B Issue Date and (ii) Adjusted Consolidated
Net Tangible Assets would have been equal to or greater than 125% of
Indebtedness of the Company and its Restricted Subsidiaries.
(b) Notwithstanding the foregoing, if no Default or Event
of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Company and its
Restricted Subsidiaries may incur Permitted Indebtedness.
(c) Any Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be incurred by such Restricted
Subsidiary at the time it becomes a Restricted Subsidiary.
SECTION 4.10 Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless:
(i) no Default or Event of Default shall have
occurred and be continuing at the time of or immediately after giving
effect to such Restricted Payment;
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(ii) at the time of and immediately after giving
effect to such Restricted Payment, the Company would be able to incur
at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to Section 4.09(a); and
(iii) immediately after giving effect to such
Restricted Payment, the aggregate of all Restricted Payments declared
or made after the Series A/B Issue Date does not exceed the sum of (A)
50% of the Consolidated Net Income of the Company and its Restricted
Subsidiaries (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) during the period (treated as one
accounting period) subsequent to September 30, 1996 and ending on the
last day of the fiscal quarter for which financial information is
available immediately preceding the date of such Restricted Payment
(less the aggregate amount of dividends described in clauses (i) and
(ii) of the following paragraph that are either (x) paid after the
last day of the fiscal quarter for which financial information is
available immediately preceding the date of such Restricted Payment or
(y) declared but not yet paid as of such date); (B) the aggregate Net
Cash Proceeds received by the Company during such period from any
Person other than a Subsidiary of the Company as a result of the
issuance or sale of Capital Stock of the Company (other than any
Disqualified Stock), other than in connection with the conversion of
Indebtedness or Disqualified Stock; (C) the aggregate Net Cash
Proceeds received by the Company during such period from any Person
other than a Subsidiary of the Company as a result of the issuance or
sale of any Indebtedness or Disqualified Stock to the extent that at
the time the determination is made such Indebtedness or Disqualified
Stock, as the case may be, has been converted into or exchanged for
Capital Stock of the Company (other than Disqualified Stock); (D) (i)
in case any Unrestricted Subsidiary has been redesignated a Restricted
Subsidiary, an amount equal to the lesser of (x) the book value
(determined in accordance with GAAP) at the date of such redesignation
of the aggregate Investments made by the Company and its Restricted
Subsidiaries in such Unrestricted Subsidiary and (y) the fair market
value of such Investments in such Unrestricted Subsidiary at the time
of such redesignation, as determined in good faith by the Company's
Board of Directors, including a majority of the Company's
Disinterested Directors, whose determination shall be conclusive and
evidenced by a resolution of such Board (less, in the case of each of
clauses (x) and (y), the amount of original Investment (based upon
book value determined in accordance with GAAP at the time of such
Investment) made by the Company or any Restricted Subsidiary pursuant
to clause (x) of the definition of "Permitted Business Investment" set
forth in Section 1.01 minus the aggregate cash dividends paid by such
Unrestricted Subsidiary to the Company or any other Restricted
Subsidiary since the date of such original Investment, provided that
the result of the foregoing shall not be less than zero); or (ii) in
case any Restricted Subsidiary has been redesignated an Unrestricted
Subsidiary, minus the greater of (x) the book value (determined in
accordance with GAAP) at the date of redesignation of the aggregate
Investments made by the Company and its Restricted Subsidiaries and
(y) the fair market value of such Investments in such Restricted
Subsidiary at the time of such
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redesignation, as determined in good faith by the Company's Board of
Directors, including a majority of the Company's Disinterested
Directors, whose determination shall be conclusive and evidenced by a
resolution of such Board; and (E) $5.0 million.
(b) Notwithstanding the foregoing, the above limitations
will not prevent (i) the payment of any dividend within 60 days after the date
of declaration thereof, if at such date of declaration such payment complied
with the provisions hereof; (ii) the payment of any dividend on any shares of
Preferred Stock of the Company issued and outstanding as of the Series A/B
Issue Date in accordance with the terms of such Preferred Stock in effect at
the Series A/B Issue Date; (iii) any dividend on shares of Capital Stock of the
Company or any Restricted Subsidiary payable solely in shares of Capital Stock
(other than Disqualified Stock); (iv) any dividend or other distribution
payable from a Subsidiary to the Company or any Restricted Subsidiary that is
wholly-owned directly or indirectly by the Company; and (v) the repurchase,
redemption or other acquisition or retirement of any shares of any class of
Capital Stock of the Company or any Restricted Subsidiary, in exchange for, or
out of the aggregate net proceeds of a substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of shares of Capital Stock of the
Company (other than Disqualified Stock).
SECTION 4.11 Limitation on Sale of Assets.
(a) The Company will not, and will not permit any
Restricted Subsidiary to, make any Asset Sale unless:
(i) the Company (or its Restricted Subsidiary, as
the case may be) receives consideration at the time of such sale or
other disposition at least equal to the fair market value thereof (as
determined in good faith by the Company, which determination, with
respect to Asset Sales or series of related Asset Sales with proceeds
valued at greater than $5 million, shall be evidenced by a resolution
duly adopted by the Company's Board of Directors, including a majority
of the Company's Disinterested Directors);
(ii) at least 75% of the proceeds from such Asset
Sale consist of cash or U.S. dollar denominated Cash Equivalents; and
(iii) the Net Cash Proceeds received by the Company
(or its Restricted Subsidiary, as the case may be) from such Asset
Sale are applied in accordance with paragraphs (b) or (c) hereof.
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(b) The Company may apply such Net Cash Proceeds, within
365 days after receipt of Net Cash Proceeds from any Asset Sale, to: (i) the
repayment of Indebtedness of the Company under a Bank Credit Facility or other
Senior Indebtedness of the Company or Senior Indebtedness of a Guarantor, that
results in a permanent reduction in any revolving credit or other commitment
relating thereto or the maximum principal amount that may be borrowed
thereunder in an amount equal to the principal amount so repaid; (ii) make an
Investment in assets used in the Oil and Gas Business in replacement of the
assets that were the subject of the Asset Sale giving rise to such Net Cash
Proceeds, or (iii) develop by drilling, completing and producing reserves from
the oil and gas properties of the Company and the Restricted Subsidiaries.
(c) If, upon completion of the 365-day period, the Net
Cash Proceeds of any Asset Sale less the aggregate amount applied by the
Company during such period as described in clauses (b) (i), (ii) or (iii)
above, together with any Net Cash Proceeds in excess of amounts similarly
applied by the Company from any prior Asset Sale after the date of receipt of
such Net Cash Proceeds (such aggregate constituting "Excess Proceeds"), exceeds
$5,000,000, then the Company will be obligated to make an offer (the "Net
Proceeds Offer") to repurchase the Securities (and any other Senior
Indebtedness including, without limitation, the Series A/B Notes in respect of
which such an offer to repurchase also is required to be made concurrently with
the Net Proceeds Offer) having an aggregate principal amount equal to the
Excess Proceeds (such repurchase to be made on a pro rata basis if the amount
available for such repurchase is less than the principal amount of the
Securities and other Senior Indebtedness, including, without limitation, the
Series A/B Notes tendered in such Net Proceeds Offer) at a repurchase price of
100% of the principal amount thereof plus accrued interest, if any, to the date
of repurchase. Upon the completion of the Net Proceeds Offer, the amount of
Excess Proceeds will be reset to zero, subject to further increase resulting
from subsequent Asset Sales.
(d) The Company shall commence a Net Proceeds Offer by
preparing and mailing a notice to the Trustee, the Paying Agent and each Holder
as of such record date as the Company shall establish (upon written notice to
the Trustee). Notice of a Net Proceeds Offer to purchase the Securities will
be made on behalf of the Company not less than 25 Business Days nor more than
60 Business Days before the payment date of the Net Proceeds Offer (the "Net
Proceeds Payment Date"), and shall set forth the Net Proceeds Offer Amount and
the Net Proceeds Payment Date and refer to and summarize the material points
contained in Sections 4.11(d) and (e) hereof. Securities tendered to the
Company pursuant to a Net Proceeds Offer will cease to accrue interest after
the Net Proceeds Payment Date. For purposes of this covenant, the term "Net
Proceeds Offer Amount" means the principal of outstanding Securities in an
aggregate principal amount equal to any remaining Net Cash Proceeds (rounded to
the next lowest $1,000). If the Net Proceeds Payment Date is on or after an
interest payment record date and on or before the related interest payment
date, any accrued interest will be paid to the Person in whose name a Security
is registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Securities pursuant to the Net
Proceeds Offer.
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(e) On the Net Proceeds Payment Date, the Company will
(i) accept for payment Securities and any other Senior Indebtedness in respect
of which such an offer to repurchase is required to be made concurrently with
the Net Proceeds Offer or portions thereof pursuant to the Net Proceeds Offer
in an aggregate principal amount equal to the Net Proceeds Offer Amount or such
lesser amount as has been tendered, (ii) deposit with the Paying Agent money
sufficient to pay the repurchase price of all Securities and such other Senior
Indebtedness or portions thereof so tendered in an aggregate principal amount
equal to the Net Proceeds Offer Amount or such lesser amount, and (iii) deliver
or cause to be delivered to the Trustee, Securities so accepted together with
an Officers' Certificate stating the amount of the Securities or portions
thereof tendered to the Company. If the aggregate principal amount of
Securities and such other Senior Indebtedness tendered exceeds the Net Proceeds
Offer Amount, the Trustee will select the Securities and other Senior
Indebtedness to be repurchased (in integral multiples of $1,000) on a pro rata
basis based on the principal amount of Securities and other Senior Indebtedness
so tendered and notify the Company, the Registrar and the Paying Agent. The
Paying Agent, upon instruction of the Company, will promptly mail or deliver to
Holders of Securities so accepted payment in an amount equal to the repurchase
price (representing those funds received pursuant to clause (ii) of this
Section 4.11(e)), and the Company will execute and the Trustee will promptly
authenticate and mail or make available for delivery to Holders a new Security
equal in principal amount to any unpurchased portion of the Security
surrendered. Any Securities not so accepted will be promptly mailed or
delivered to the Holder thereof by the Company, or, if the Company so directs
the Trustee, by the Trustee on behalf of the Company at the Company's expense.
The Company will publicly announce the results of the Net Proceeds Offer on or
as soon as practicable after the Net Proceeds Payment Date. For purposes of
this Section 4.11, the Trustee will act as the Paying Agent.
(f) The Company will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14E and any other tender offer
rules under the Exchange Act and any other federal and state securities laws,
rules and regulations which may then be applicable to any Net Proceeds Offer.
(g) During the period between any Asset Sale and the
application of the Net Cash Proceeds therefrom in accordance with this
covenant, all Net Cash Proceeds shall be either (i) maintained in a segregated
account and shall be invested in Permitted Financial Investments or (ii)
applied to temporarily reduce borrowings under any revolving credit facility
constituting Senior Indebtedness of the Company or Senior Indebtedness of a
Guarantor.
(h) Notwithstanding the foregoing, the Company will not
and will not permit any Restricted Subsidiary to, directly or indirectly, make
any Asset Sale of any of the Capital Stock of a Restricted Subsidiary except
pursuant to an Asset Sale of all of the Capital Stock of such Restricted
Subsidiary.
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SECTION 4.12 Limitation on Liens Securing Indebtedness.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens (other than
Permitted Liens) upon any of their respective properties securing (i) any
Indebtedness of the Company, unless the Securities are equally and ratably
secured or (ii) any Indebtedness of any Guarantor, unless the Guarantees are
equally and ratably secured; provided, that if such Indebtedness is expressly
subordinated to the Securities or the Guarantees, the Lien securing such
Indebtedness will be subordinated and junior to any Lien securing the
Securities or the Guarantees, with the same relative priority as such
Subordinated Indebtedness of the Company or Subordinated Indebtedness of a
Restricted Subsidiary that is a Guarantor will have with respect to the
Securities or the Guarantees, as the case may be.
SECTION 4.13 Limitation on Sale/Leaseback Transactions.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale/Leaseback Transaction unless (i) the
Company or such Restricted Subsidiary, as the case may be, would be able to
incur Indebtedness in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction or (ii) the Company or such
Restricted Subsidiary receives proceeds from such Sale/Leaseback Transaction at
least equal to the fair market value thereof (as determined in good faith by
the Company's Board of Directors, whose determination in good faith, evidenced
by a resolution of such Board shall be conclusive) and such proceeds are
applied in the same manner and to the same extent as Net Cash Proceeds and
Excess Proceeds from an Asset Sale.
SECTION 4.14 Limitation on Payment Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary of the Company to (i) pay dividends
or make any other distributions on its Capital Stock or on any other interest
or participation in the Company or a Restricted Subsidiary; (ii) pay any
Indebtedness owed to the Company or a Restricted Subsidiary of the Company;
(iii) make loans or advances to the Company or a Restricted Subsidiary of the
Company; or (iv) transfer any of its properties or assets to the Company or a
Restricted Subsidiary of the Company (each, a "Payment Restriction"), except
for (a) encumbrances or restrictions under a Bank Credit Facility; provided,
that no encumbrance or restriction shall limit the ability of any Restricted
Subsidiary to transfer cash to the Company except upon the occurrence of an
event of default under the Bank Credit Facility; (b) consensual encumbrances or
consensual restrictions binding upon any Person at the time such Person becomes
a Restricted Subsidiary of the Company (unless the agreement creating such
consensual encumbrances or consensual restrictions was entered into in
connection with, or in contemplation of, such entity becoming a Restricted
Subsidiary); (c) consensual encumbrances or consensual
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restrictions under any agreement that refinances or replaces any agreement
described in clauses (a) and (b) above, provided that the terms and conditions
of any such restrictions are in the aggregate no less favorable to the holders
of the Securities than those under the agreement so refinanced or replaced; (d)
customary non-assignment provisions in leases, purchase money financings and
any encumbrance or restriction due to applicable law; and (e) consensual
encumbrances or consensual restrictions existing under the Series A/B
Indenture.
SECTION 4.15 Limitation on Issuances and Sales of Restricted Subsidiary
Stock.
The Company (i) will not permit any Restricted Subsidiary to issue any
Preferred Stock (other than to the Company or a Restricted Subsidiary) and (ii)
will not permit any Person (other than the Company and/or one or more
Restricted Subsidiaries) to own any Capital Stock of any Restricted Subsidiary;
provided, however, that this covenant shall not prohibit (a) the issuance or
sale of all, but not less than all, of the issued and outstanding Capital Stock
of any Restricted Subsidiary owned by the Company or any of its Restricted
Subsidiaries in compliance with the other provisions of this Indenture, (b) the
issuance or sale of (A) not more than 5 percent in the aggregate of the issued
and outstanding Capital Stock of any Restricted Subsidiary (calculated on a
fully diluted basis) by the Company or any Restricted Subsidiary or (B) more
than 5 percent of the issued and outstanding Capital Stock of any Restricted
Subsidiary if immediately following such issuance and sale (calculated on a
fully diluted basis) the Company and all Subsidiaries will collectively own 95
percent or more of the Consolidated Total Assets of the Company, and in the
case of either (A) or (B), immediately following such issuance and sale, the
Company or one or more Restricted Subsidiaries will collectively hold the
voting power to elect a majority of the directors of the Restricted Subsidiary
and such power is not subject to dilution or limitation, by the terms of such
Capital Stock, by agreement, by passage of time or the occurrence of any future
event, (c) the ownership by directors of directors' qualifying shares or the
ownership by foreign nationals of Capital Stock of any Restricted Subsidiary,
to the extent mandated by applicable law or (d) customary non-assignment
provisions in leases or purchase money financings and any customary encumbrance
or restriction relating to same.
SECTION 4.16 Limitation on Transactions with Affiliates.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series
of transactions (including, without limitation, the sale, purchase or lease of
any assets or properties or the rendering of any services) with any Affiliate
or beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of 10% or more of the Company's common stock (other than with a Wholly
Owned Restricted Subsidiary of the Company) (an "Affiliate Transaction"), on
terms that are less favorable to the Company or such Restricted Subsidiary, as
the case may be, than would be available in a comparable transaction with an
unrelated Person. In addition, the Company will not, and will not permit any
Restricted Subsidiary of the Company to, enter into an Affiliate Transaction,
or any series of related Affiliate
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Transactions having a value of (a) more than $1,000,000, unless a majority of
the Board of Directors of the Company (including a majority of the Company's
Disinterested Directors) determines in good faith, as evidenced by a resolution
of such Board, that such Affiliate Transaction or series of related Affiliate
Transactions is fair to the Company and in compliance with the first sentence
of this Section 4.16; or (b) more than $10,000,000, unless the Company receives
a written opinion from a nationally recognized investment banking firm that
such transaction or series of transactions is fair to the Company from a
financial point of view.
SECTION 4.17 Change of Control.
(a) Following the occurrence of any Change of Control,
the Company shall offer (a "Change of Control Offer") to repurchase all
outstanding Securities at a repurchase price equal to 101% of the aggregate
principal amount of the Securities, plus accrued and unpaid interest to the
date of repurchase. The Change of Control Offer shall be deemed to have
commenced upon mailing of the notice described in the next succeeding paragraph
and shall terminate 20 Business Days after its commencement, unless a longer
offering period is required by law. Promptly after the termination of the
Change of Control Offer (the "Change of Control Payment Date"), the Company
shall repurchase and mail or deliver payment for all Securities tendered in
response to the Change of Control Offer. If the Change of Control Payment Date
is on or after an interest payment record date and on or before the related
interest payment date, any accrued interest payable on such interest payment
date will be paid to the Person in whose name a Security is registered at the
close of business on such record date, and no additional interest will be
payable to Holders who tender Securities pursuant to the Change of Control
Offer.
(b) Within 10 Business Days after any Change of Control,
the Company (with notice to the Trustee and the Paying Agent), or the Trustee
at the Company's request and expense, will mail or cause to be mailed to all
Holders on the date of the Change of Control a notice prepared by the Company
(the "Change of Control Notice") of the occurrence of such Change of Control
and of the Holders' rights arising as a result thereof. The Change of Control
Notice will contain all instructions and materials necessary to enable Holders
to tender their Securities to the Company. The Change of Control Notice, which
shall govern the terms of the Change of Control Offer, shall state: (1) that
the Change of Control Offer is being made pursuant to this Section 4.17; (2)
the repurchase price and the Change of Control Payment Date; (3) that any
Security not tendered will continue to accrue interest at the stated rate; (4)
that any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest on the Change of Control Payment Date; (5) that
Holders electing to have a Security repurchased pursuant to any Change of
Control Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Repurchase" on the reverse of the Security
completed, to the Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice prior to termination of the
Change of Control Offer; (6) that Holders will be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the case may be,
receives, not later than the expiration of the Change
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of Control Offer, or such longer period as may be required by law, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Security delivered for repurchase and a statement
that such Holder is withdrawing his election to have the Security repurchased;
and (7) that Holders whose Securities are repurchased only in part will be
issued Securities equal in principal amount to the unrepurchased portion of the
Securities surrendered.
(c) On the Change of Control Payment Date, the Company
shall (i) accept for payment Securities or portions thereof tendered pursuant
to the Change of Control Notice, (ii) if the Company appoints a depositary or
Paying Agent, deposit with such depositary or Paying Agent money sufficient to
pay the repurchase price of all Securities or portions thereof so tendered and
(iii) deliver to the Trustee Securities so accepted together with an Officers'
Certificate stating the amount of the Securities or portions thereof tendered
to the Company. The depositary, the Company or the Paying Agent, as the case
may be, shall promptly mail to the Holders of Securities so accepted payment in
an amount equal to the repurchase price (representing those funds received
pursuant to clause (ii) of this Section 4.17(c)), and the Trustee shall
promptly authenticate and mail to each such Holder a new Security equal in
principal amount to any unrepurchased portion of the Security surrendered, if
any. The Company will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
For purposes of this Section 4.17, the Trustee shall act as the Paying Agent.
(d) The Company will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14E and any other tender offer
rules under the Exchange Act and any other federal and state securities laws,
rules and regulations which may then be applicable to any Change of Control
Offer.
SECTION 4.18 Limitation on Line of Business.
The Company and the Subsidiaries will be operated in a manner such
that their business activities will be the Oil and Gas Business and Investment
in any business or Person engaged in the Oil and Gas Business.
SECTION 4.19 Limitation on Restrictive Covenants.
Notwithstanding any other provision of this Indenture, the restrictive
covenants set forth herein, including, without limitation, Sections 4.10, 4.11,
4.12, 4.13, 4.16 and 5.01, shall be and shall be deemed limited to the extent
necessary so that the creation, existence and effectiveness of such restrictive
covenants shall not result in a breach of the covenant set forth in Section
4.14 of the Series A/B Indenture.
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ARTICLE V
Successor Corporation
SECTION 5.01 When Company May Merge, etc.
The Company will not consolidate with or merge with any Person or
convey, transfer or lease all or substantially all of its assets to any Person,
unless:
(1) the Company survives such merger or the Person formed
by such consolidation or into which the Company is merged or that
acquires by conveyance or transfer, or which leases, all or
substantially all of the assets of the Company is a corporation
organized and existing under the laws of the United States of America,
any state thereof or the District of Columbia and expressly assumes,
by supplemental indenture, the due and punctual payment of the
principal of, premium, if any, and interest on, all the Securities and
the performance of every other covenant and obligation of the Company
under this Indenture;
(2) immediately before and after giving effect to such
transaction no Default or Event of Default exists;
(3) immediately after giving effect to such transaction
on a pro forma basis, the Consolidated Net Worth of the Company (or
the surviving or transferee entity) is equal to or greater than the
Consolidated Net Worth of the Company immediately before such
transaction; and
(4) immediately after giving effect to such transaction
on a pro forma basis, the Company (or the surviving or transferee
entity) would be able to incur $1.00 of additional Indebtedness under
the test described in Section 4.09(a).
In connection with any consolidation, merger, conveyance, transfer or
lease contemplated by this Section 5.01, the Company shall deliver to the
Trustee prior to the consummation of the proposed transaction an Officers'
Certificate to the foregoing effect and an Opinion of Counsel stating that all
conditions precedent to the proposed transaction and the execution and delivery
of such supplemental indenture have been complied with.
SECTION 5.02 Successor Corporation Substituted.
Upon any consolidation, merger, lease, conveyance or transfer in
accordance with Section 5.01, the Trustee shall be notified by the Company and
the successor Person, and the successor Person formed by such consolidation or
into which the Company is merged or to which such lease,
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conveyance or transfer is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture with
the same effect as if such successor had been named as the Company herein and
thereafter (except in the case of a lease) the predecessor corporation will be
relieved of all further obligations and covenants under this Indenture and the
Securities.
ARTICLE VI
Defaults And Remedies
SECTION 6.01 Events of Default.
An "Event of Default" occurs upon:
(1) default by the Company or any Guarantor in the
payment of principal of, or premium, if any, on the Securities when
due and payable at maturity, upon repurchase pursuant to Section 4.11
or 4.17, upon acceleration or otherwise;
(2) default by the Company or any Guarantor in the
payment of any installment of interest on the Securities when due and
payable and continuance of such default for 30 days;
(3) default by the Company or any Guarantor in the
deposit of any optional redemption payment, when and as due and
payable pursuant to Article III;
(4) default on any other Indebtedness (other than
Non-Recourse Indebtedness) of the Company or any Subsidiary (other
than an Unrestricted Subsidiary) if either (A) such default results in
the acceleration of the maturity of any such Indebtedness having a
principal amount of $5,000,000 or more individually or, taken together
with the principal amount of any other such Indebtedness in default or
the maturity of which has been so accelerated, in the aggregate, or
(B) such default results from the failure to pay when due principal
of, premium, if any, or interest on, any such Indebtedness, after
giving effect to any applicable grace period (a "Payment Default"),
having a principal amount of $5,000,000 or more individually or, taken
together with the principal amount of any other Indebtedness under
which there has been a Payment Default, in the aggregate;
(5) default in the performance, or breach of, the
covenants set forth in Section 4.10 and Article V;
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(6) default in the performance, or breach of, any other
covenant or agreement of the Company or any Guarantor in this
Indenture and failure to remedy such default within a period of 30
days after written notice thereof from the Trustee or Holders of 25%
in principal amount of the outstanding Securities;
(7) the commencement of proceedings, or the taking of any
enforcement action (including by way of set-off), by any holder of at
least $5,000,000 in aggregate principal amount of Indebtedness
(including any amounts owed pursuant to a judgment or order) of the
Company or any Subsidiary (other than an Unrestricted Subsidiary
provided that neither the Company nor any Restricted Subsidiary is
liable, directly or indirectly, for such Indebtedness), after a
default under such Indebtedness, to retain in satisfaction of such
Indebtedness or to collect or seize, dispose of or apply in
satisfaction of such Indebtedness, property or assets of the Company
or its Restricted Subsidiaries having a fair market value in excess of
$5,000,000 individually or in the aggregate; provided that if any such
proceedings or actions are terminated or rescinded, or such
Indebtedness is repaid or settled, such Event of Default under this
Indenture and any consequential acceleration of the Securities shall
be automatically rescinded, so long as (a) such rescission does not
conflict with any judgment or decree and (b) the holder of such
Indebtedness shall not have applied any such property or assets in
satisfaction of such Indebtedness;
(8) the entry by a court of one or more judgments or
orders against the Company or any Subsidiary (other than an
Unrestricted Subsidiary provided that neither the Company nor any
Restricted Subsidiary is liable, directly or indirectly, for such
judgment or order) in an aggregate amount equal to or in excess of
$5,000,000 individually or in the aggregate (net of applicable
insurance coverage by a third party insurer which is acknowledged in
writing by the insurance carrier) that has not been vacated,
discharged, satisfied or stayed pending appeal within 60 days from the
entry thereof;
(9) the failure of a Guarantee by a Guarantor to be in
full force and effect (other than a release of a Guarantee in
accordance with Section 10.04) or any Guarantor shall deny or
disaffirm its obligations with respect thereto;
(10) if (i) any material "accumulated funding deficiency"
(as defined in Section 302 of ERISA or Section 412 of the Code), shall
exist with respect to any PBGC Plan or Multiple Employer Plan (unless
a waiver or extension is obtained under Section 412(d) or (e) of the
Code and Sections 303 and 304 of ERISA), if such accumulated funding
deficiency is a material liability of the Company, (ii) a Reportable
Event shall occur with respect to any PBGC Plan or Multiple Employer
Plan, which Reportable Event results in the non-appealable termination
of such PBGC Plan or Multiple Employer Plan for purposes of Title IV
of ERISA and gives rise to a material liability of the Company, (iii)
proceedings to have a trustee appointed have resulted in a trustee
being appointed to terminate or administer a
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PBGC Plan or Multiple Employer Plan which proceeding results in the
non-appealable termination of such PBGC Plan or Multiple Employer Plan
and gives rise to a material liability of the Company with respect to
such termination, (iv) a PBGC Plan or Multiple Employer Plan has been
terminated in a distress termination under Section 4041(c) of ERISA
and the Company no longer may appeal such termination, (v) any
Multiemployer Plan is in reorganization or is insolvent and the
circumstances are such that such reorganization or insolvency results
in a material liability to the Company, (vi) there is a complete or
partial withdrawal from a Multiemployer Plan under circumstances that
subjects the Company to material liability, or (vii) any event or
condition described in (i) through (vi) above (determined without
regard to whether the event or condition taken alone would or could
result in a material liability) shall occur or exist with respect to a
PBGC Plan, Multiple Employer Plan or Multiemployer Plan which in
combination with one or more of any events described in (i) through
(vi) above (determined without regard to whether the event or
condition taken alone would or could result in a material liability)
that subjects the Company, any Guarantor or any other Restricted
Subsidiary to any material tax, penalty or other liability (for
purposes of this paragraph (10) the term "material" and "material
liability" shall mean any tax, penalty or liability in excess of
$5,000,000); or
(11) the Company or any Subsidiary (other than an
Unrestricted Subsidiary) pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or
proceeding,
(B) consents to the entry of an order
for relief against it in an involuntary case or proceeding,
(C) consents to the appointment of a
Custodian of it or for all or substantially all of its
property,
(D) makes a general assignment for the
benefit of its creditors, or
(E) admits in writing that it generally
is unable to pay its debts as the same become due; or
(12) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief (with respect to the
petition commencing such case) against the Company or any
Subsidiary (other than an Unrestricted Subsidiary) in an
involuntary case or proceeding,
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(B) appoints a Custodian of the Company
or any Subsidiary (other than an Unrestricted Subsidiary) or
for all or substantially all of its respective property, or
(C) orders the liquidation of the
Company or any Subsidiary (other than an Unrestricted
Subsidiary),
and the order or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
SECTION 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (11) and (12)) under Section 6.01 occurs and is continuing, then and in
every such case the Trustee or the Holders of not less than 25% in principal
amount of the outstanding Securities may declare the unpaid principal of (or
the Change of Control purchase price if the Event of Default includes failure
to pay the Change of Control purchase price), and accrued and unpaid interest
on, all the Securities then outstanding to be due and payable, by a notice in
writing to the Company (and to the Trustee, if given by Holders), and upon any
such declaration such principal, premium, if any, and accrued and unpaid
interest shall become immediately due and payable, notwithstanding anything
contained in this Indenture or the Securities to the contrary. If an Event of
Default specified in clauses (11) or (12) above occurs, all unpaid principal
of, and accrued interest on, the Securities then outstanding will become due
and payable, without any declaration or other act on the part of the Trustee or
any Holder.
The Holders of a majority in principal amount of the then outstanding
Securities, by written notice to the Company, the Guarantors and the Trustee,
may rescind and annul a declaration of acceleration and its consequences if (1)
the Company or any Guarantor has paid or deposited with such Trustee a sum
sufficient to pay (A) all overdue installments of interest on all the
Securities, (B) the principal of, and premium, if any, on any Securities that
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in the Securities, (C) to the
extent that payment of such interest is lawful, interest on the defaulted
interest at the rate or rates prescribed therefor in the Securities, and (D)
all money paid or advanced by the Trustee thereunder and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel; (2) all Events of Default, other than the non-payment of the
principal of any Securities that have become due solely by such declaration of
acceleration, have been cured or waived as provided in this Indenture; and (3)
the rescission would not conflict with any judgment
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or decree of a court of competent jurisdiction. No such rescission will affect
any subsequent Event of Default or impair any right consequent thereon.
SECTION 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may, but
is not obligated to, pursue, in its own name and as trustee of an express
trust, any available remedy by proceeding at law or in equity to collect the
payment of principal or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture. If an Event
of Default specified under clauses (11) or (12) of Section 6.01 occurs with
respect to the Company at a time when the Company is the Paying Agent, the
Trustee shall automatically assume the duties of Paying Agent.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04 Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of at least a majority
in principal amount of Securities then outstanding by notice to the Trustee may
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default in payment of principal or interest on the
Securities, including any optional redemption payments or Change of Control or
Net Proceeds Offer payments.
SECTION 6.05 Control by Majority.
The Holders of a majority in principal amount of the Securities 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 such Trustee, provided that (1) such direction is not in
conflict with any rule of law or with this Indenture and (2) the Trustee may
take any other action deemed proper by such Trustee that is not inconsistent
with such direction.
SECTION 6.06 Limitation on Remedies.
No Holder of any of the Securities will have any right to institute
any proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under this Indenture, unless:
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(1) such Holder has previously given notice to the
Trustee of a continuing Event of Default,
(2) the Holders of not less than 25% in principal amount
of the outstanding Securities have made written request to such
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee under this Indenture,
(3) such Holder or Holders have offered to such Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request,
(4) such Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
proceeding, and
(5) no direction inconsistent with such written request
has been given to such Trustee during such 60-day period by the
Holders of a majority in principal amount of the outstanding
Securities.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over other Holders.
SECTION 6.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the Holder of
any Securities will have the right, which is absolute and unconditional, to
receive payment of the principal of and interest on such Securities on the
stated maturity therefor and to institute suit for the enforcement of any such
payment, and such right may not be impaired without the consent of such Holder.
SECTION 6.08 Collection Suit by Trustee.
If an Event of Default in payment of principal, premium, if any, or
interest specified in Section 6.01(1), (2) or (3) occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any Guarantor for the whole amount of principal,
premium, if any, and interest remaining unpaid with respect to the Securities,
and interest on overdue principal and premium, if any, and, to the extent
lawful, interest on overdue interest, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation and expenses of the Trustee, its agents and counsel.
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SECTION 6.09 Trustee May File Proofs of Claim.
(a) The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee and the Holders allowed in any judicial proceedings
relative to the Company, the Guarantors, their creditors or their property and
may collect and receive any money or securities or other property payable or
deliverable on any such claims and to distribute the same.
(b) Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this Article VI, it
shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Securities.
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ARTICLE VII
Trustee
SECTION 7.01 Duties of Trustee.
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such rights and powers vested in it by
this Indenture and use the same degree of care and skill in such exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth (or incorporated by reference) in this
Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph (c) does not limit the effect of
paragraph (b) of this Section.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by an officer of the Trustee, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(3) The Trustee shall not be liable with respect to
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05, and the Trustee
shall be entitled from time to time to request such a direction.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c) of this
Section.
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(e) The Trustee shall be under no obligation and may
refuse to perform any duty or exercise any right or power unless it receives
indemnity satisfactory to it against any loss, liability or expense. No
provision of this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or powers, if it shall
have reasonable grounds to believe that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) Subject to Sections 7.01 and 7.02, the Trustee shall
not be required to take notice, and shall not be deemed to have notice, of any
Default or Event of Default hereunder, except Events of Default described in
paragraphs (1), (2) and (3) of Section 6.01 hereof, unless the Trustee shall be
notified specifically of the Default or Event of Default in a written
instrument or document delivered to it by the Company or any Guarantor, or by
the Holders of at least 10% of the aggregate principal amount of the Notes then
outstanding. In the absence of delivery of a notice satisfying those
requirements, the Trustee may assume that there is no Default or Event of
Default, except as noted above.
SECTION 7.02 Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on and shall be protected in
acting or refraining from acting upon any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee shall
not be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Company, personally
or by agent or attorney, to the extent reasonably required by such inquiry or
investigation.
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
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(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers.
SECTION 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Subsidiaries or Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee
must comply with Sections 7.10 and 7.11.
SECTION 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities or any offering memorandum or
solicitation documents, and it shall not be responsible for any statement in
the Securities other than its certificate of authentication.
SECTION 7.05 Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee pursuant to Section 7.01(g), the Trustee shall mail to each Holder
pursuant to Section 11.02 a notice of the Default within 90 days after it
occurs. Except in the case of a Default in any payment on any Security, the
Trustee may withhold the notice if and so long as the board of directors,
executive committee or a trust committee of officers in good faith determines
that withholding the notice is in the interests of Holders.
SECTION 7.06 Reports by Trustee to Holders.
Within 60 days after each November 1, beginning with the November 1
following the date of this Indenture, the Trustee shall mail to each Holder a
brief report dated as of such November 1, that complies with TIA Section
313(a), but only if such report is required in any year under TIA Section
313(a). The Trustee also shall comply with TIA Sections 313(b) and 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Securities are listed.
The Company shall notify the Trustee in writing when the Securities become
listed on any national securities exchange or of any delisting thereof.
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SECTION 7.07 Compensation and Indemnity.
The Company and the Guarantors jointly and severally agree to pay the
Trustee from time to time reasonable compensation for its services (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust). The Company and the Guarantors
jointly and severally agree to reimburse the Trustee upon request for all
reasonable out-of-pocket expenses, disbursements and advances incurred by it.
Such expenses shall include when applicable the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company and the Guarantors jointly and severally agree to
indemnify the Trustee against any loss, liability or expenses incurred by it
arising out of or in connection with the acceptance and administration of the
trust and its duties hereunder as Trustee, Registrar and/or Paying Agent,
including the costs and expenses of enforcing this Indenture against the
Company (including with respect to this Section 7.07) and of defending itself
against any claim or liability in connection with the exercise or performance
of any of its powers or duties hereunder. The Trustee shall notify the Company
and the Guarantors of any claim for which it may seek indemnity; however,
unless the position of the Company is prejudiced by such failure, the failure
of the Trustee to promptly notify the Company shall not limit its right to
indemnification. The Company shall defend each such claim and the Trustee
shall cooperate in the defense. The Trustee may retain separate counsel and
the Company shall reimburse the Trustee for the reasonable fees and expenses of
such counsel if the Company is advised by an Opinion of Counsel that the
Trustee has separate defenses and that separate representation is appropriate.
The Company need not pay for any settlement made without its consent.
Neither the Company nor the Guarantors shall be obligated to reimburse
any expense or indemnify against any loss or liability incurred by the Trustee
through the Trustee's breach of the applicable standard of care for its conduct
under Section 7.01.
To secure the payment obligations of the Company and the Guarantors in
this Section, the Trustee shall have a claim prior to that of the Holders of
the Securities on all money or property held or collected by the Trustee,
except that held in trust to pay principal of and interest on particular
Securities.
When the Trustee incurs expenses or renders services after the
occurrence of any Event of Default specified in Sections 6.01(11) or (12), the
expenses and the compensation for the services are intended to constitute
expenses of administration under any Bankruptcy Law.
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SECTION 7.08 Replacement of Trustee.
The Trustee may resign by so notifying the Company and the Guarantors.
The Holders of a majority in principal amount of the Securities may remove the
Trustee by so notifying the Trustee, in writing. The Company may remove the
Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee becomes incapable of acting as Trustee
hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company and the Guarantors.
Immediately after that, the retiring Trustee shall transfer all property held
by it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of a majority in principal amount of the Securities may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee. Any successor Trustee shall comply
with TIA Section 310(a)(5).
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SECTION 7.09 Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust assets to, another corporation, the
successor corporation without any further act shall be the successor Trustee;
provided such corporation or association shall be otherwise eligible and
qualified under this Article.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee which satisfies the
requirements of TIA Section 310(a)(1) and (5). The Trustee shall always have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall also comply
with TIA Section 310(b).
SECTION 7.11 Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE VIII
Discharge Of Indenture
SECTION 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, with respect
to the Securities, elect to exercise its rights pursuant to either Section 8.02
or 8.03 with respect to all outstanding Securities upon compliance with the
conditions set forth below in this Article VIII.
SECTION 8.02 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.02, the Company shall be deemed to have been
discharged from its obligations with respect to all outstanding Securities on
the date all conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire Indebtedness represented
by the outstanding Securities, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Securities and this Indenture (and the Trustee, on
demand of and at the
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expense of the Company, shall execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (a) the rights of Holders of outstanding Securities to
receive solely from the trust fund described in Section 8.04, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Securities when such payments are due, (b) the
Company's obligations with respect to such Securities under Sections 2.03,
2.04, 2.06, 2.07, 2.10 and 4.04, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith (including, but not limited to, Section 7.07) and (d) this Article
VIII. Subject to compliance with this Article VIII, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 with respect to the Securities.
SECTION 8.03 Covenant Defeasance.
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03, the Company shall be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and 4.18 and Article V with respect to
the outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Securities shall not be deemed outstanding for accounting purposes). For this
purpose, such Covenant Defeasance means that, with respect to the outstanding
Securities, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01(5) or
Section 6.01(6), but, except as specified above, the remainder of this
Indenture and such Securities shall be unaffected thereby. In addition, upon
the Company's exercise under Section 8.01 of the option applicable to this
Section 8.03, Sections 6.01(4) through 6.01(12) shall not constitute Events of
Default.
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SECTION 8.04 Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to application of either Section
8.02 or Section 8.03 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or cause
to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the provisions of
this Article VIII applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (a) cash in
U.S. Legal Tender in an amount, or (b) U.S. Government Securities which through
the scheduled payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day before the due
date of any payment, cash in U.S. Legal Tender in an amount, or (c) a
combination thereof, in such amounts, as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and discharge
and which shall be applied by the Trustee (or other qualifying trustee) to pay
and discharge the principal of, premium, if any, and interest on the
outstanding Securities on the Maturity Date or on the applicable redemption
date, as the case may be, in accordance with the terms of this Indenture and of
such Securities; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Securities to said payments with respect to the Securities;
(b) In the case of an election under Section 8.02, the
Company shall have delivered to the Trustee an Opinion of Counsel confirming
that (i) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (ii) since the date hereof, there has been
a change in the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the Holders of the
outstanding Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(c) In the case of an election under Section 8.03, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Securities will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
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(d) No Default or Event of Default with respect to the
Securities shall have occurred and be continuing on the date of such deposit
or, insofar as Subsection 6.01(11) or 6.01(12) is concerned, at any time in the
period ending on the 91st day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period);
(e) Such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under, any
other material agreement or instrument to which the Company is a party or by
which the Company is bound;
(f) In the case of any election under Section 8.02 or
8.03, the Company shall have delivered to the Trustee an Officers' Certificate
stating that the deposit made by the Company pursuant to its election under
Section 8.02 or 8.03 was not made by the Company with the intent of preferring
the Holders over other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or
others; and
(g) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for relating to either the Legal Defeasance under
Section 8.02 or the Covenant Defeasance under Section 8.03 (as the case may be)
have been complied with as contemplated by this Section 8.04.
SECTION 8.05 Deposited Money and U.S. Government Securities to be Held in
Trust; Other Miscellaneous Provisions.
Subject to Section 8.06, all money and U.S. Government Securities
(including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 in respect of the outstanding Securities
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company or a Guarantor, if
any, acting as Paying Agent) as the Trustee may determine, to the Holders of
such Securities of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or U.S. Government
Securities deposited pursuant to Section 8.04 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Securities.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the
Company's request any money or U.S. Government Securities held by it as
provided in Section 8.04 which, in the opinion of a nationally recognized firm
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of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a)), are in excess of the amount thereof which would then be required to
be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06 Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security which is not subject to the last paragraph of
Section 8.05 and has remained unclaimed for one year after such principal, and
premium, if any, or interest has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 8.07 Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Securities in accordance with Section 8.02 or 8.03,
as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining, or otherwise prohibiting such
application, then the Company's and the Guarantors' obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or 8.03, as the case may be; provided, however, that, if the
Company or any Guarantor makes any payment of principal of, premium, if any, or
interest on any Security following the reinstatement of its obligations, the
Company or such Guarantor shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Securities held by the Trustee or Paying Agent.
ARTICLE IX
Amendments, Supplements And Waivers
SECTION 9.01 Without Consent of Holders.
The Company, the Guarantors and the Trustee may amend or supplement
this Indenture or the Securities without notice to or consent of any Holder:
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(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Section 5.01;
(3) to reflect the addition or release of any Guarantor,
as provided for by this Indenture;
(4) to comply with any requirements of the SEC in order
to effect or maintain the qualification of this Indenture under the
TIA; or
(5) to make any change that would provide any additional
benefit or rights to the Holders or that does not adversely affect the
rights of any Holder in any material respect.
Upon the request of the Company and the Guarantors, accompanied by a
Board Resolution of the Company and of each Guarantor authorizing the execution
of any such supplemental indenture, and upon receipt by the Trustee of the
documents described in Section 9.06, the Trustee shall join with the Company
and the Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and make any further appropriate
agreements and stipulations that may be therein contained. After an amendment
or waiver under this Section becomes effective, the Company shall mail to the
Holders of each Security affected thereby a notice briefly describing the
amendment or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
SECTION 9.02 With Consent of Holders.
Except as provided below in this Section 9.02, the Company, the
Guarantors and the Trustee may amend this Indenture or the Securities with the
written consent (including consents obtained in connection with a tender offer
or exchange offer for Securities or a solicitation of consents in respect of
Securities, provided that in each case such offer or solicitation is made to
all Holders of then outstanding Securities on equal terms) of the Holders of at
least a majority in principal amount of the then outstanding Securities.
Upon the request of the Company and the Guarantors, accompanied by a
Board Resolution of the Company and each Guarantor authorizing the execution of
any such supplemental indenture, and upon the filing with the Trustee of
evidence of the consent of the Holders as aforesaid, and upon receipt by the
Trustee of the Opinion of Counsel described in Section 9.06, the Trustee shall
join with the Company and the Guarantors in the execution of such supplemental
indenture.
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It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
The Holders of a majority in principal amount of the then outstanding
Securities may waive compliance in a particular instance by the Company or the
Guarantors with any provision of this Indenture or the Securities (including
waivers obtained in connection with a tender offer or exchange offer for
Securities or a solicitation of consents in respect of Securities, provided
that in each case such offer or solicitation is made to all Holders of the then
outstanding Securities on equal terms). However, without the consent of each
Holder affected, an amendment or waiver under this Section may not:
(1) reduce the percentage of principal amount of
Securities whose Holders must consent to an amendment, supplement or
waiver of any provision of this Indenture or the Securities;
(2) reduce the rate or change the time for payment of
interest, including defaulted interest, on the Securities;
(3) reduce the principal amount of any Security or change
the Maturity Date of the Securities;
(4) reduce the redemption price, including premium, if
any, payable upon the redemption of any Security or change the time at
which any Security may be redeemed;
(5) reduce the repurchase price, including premium, if
any, payable upon the repurchase of any Security pursuant to Sections
4.11 or 4.17, or change the time at which any Security may or shall be
repurchased thereunder;
(6) waive a Default or Event of Default in the payment of
the principal of, premium, if any, or interest on the Securities;
(7) make any Security payable in money other than that
stated in the Security;
(8) impair the right to institute suit for the
enforcement of principal of, premium, if any, or interest on any
Security pursuant to Sections 6.07 or 6.08, except as limited by
Section 6.06; or
(9) make any change in Section 6.04 or Section 6.07 or in
this sentence of this Section 9.02.
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The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of
record of any Securities with respect to which such consent is required or
sought as of a date identified by the Trustee in a notice furnished to Holders
in accordance with the terms of this Indenture.
SECTION 9.03 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 9.04 Revocation and Effect of Consents.
A consent to an amendment, supplement or waiver by a Holder of a
Security shall bind the Holder and every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the consenting Holder's
Security, even if notation of the consent is not made on any Security.
However, until an amendment, supplement or waiver becomes effective, any such
Holder or subsequent Holder may revoke the consent as to its Security or
portion of a Security. For such revocation to be effective, the Trustee must
receive the notice of revocation before the date the amendment, supplement or
waiver becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If the Company elects to fix a record date for such purpose, the
record date shall be fixed at (i) the later of 30 days prior to the first
solicitation of such consent or the date of the most recent list of Holders
furnished to the Trustee prior to such solicitation pursuant to Section 2.05,
or (ii) such other date as the Company shall designate. If a record date is
fixed, then notwithstanding the provisions of the immediately preceding
paragraph, those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent to
such amendment or waiver or to revoke any consent previously given, whether or
not such Persons continue to be Holders after such record date. No consent
shall be valid or effective for more than 90 days after such record date unless
consent from the Holders of the principal amount of Securities required
hereunder for such amendment or waiver to be effective also shall have been
given and not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder unless it makes a change described in any of clauses (1)
through (9) of Section 9.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security.
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SECTION 9.05 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company
or the Trustee so determines, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms.
SECTION 9.06 Trustee Protected.
The Trustee shall sign any amendment or supplement or waiver
authorized pursuant to this Article if the amendment or supplement or waiver
does not adversely affect the rights of the Trustee. If it does adversely
affect the rights of the Trustee, the Trustee may but need not sign it. In
signing such amendment or supplement or waiver the Trustee shall be entitled to
receive, and (subject to Article VII) shall be fully protected in relying upon,
an Opinion of Counsel stating that such amendment or supplement or waiver is
authorized or permitted by and complies with this Indenture. The Company may
not sign an amendment or supplement until the Boards of Directors of the
Company and the Guarantors approve it.
SECTION 9.07 Restrictions on Payments for Amendments, Waivers and
Modifications.
Notwithstanding any provision to the contrary in this Indenture
neither the Company nor any of its Subsidiaries shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fees or
otherwise, to any Holder of any Security for or as an inducement to any
consent, waiver or amendment of any terms or provisions of the Security or the
Indenture unless such consideration is offered to be paid or agreed to be paid
to all Holders of the Securities which so consent, waive or agree to amend in
the time period set forth in any solicitation documents relating to such
consent.
ARTICLE X
Guarantees
SECTION 10.01 Unconditional Guarantee.
Each person who becomes a Guarantor under this Indenture pursuant to
Section 10.03, jointly and severally, unconditionally guarantees (such
guarantee to be referred to herein as the "Guarantee") to each Holder and to
the Trustee the due and punctual payment of the principal of, premium, if any,
and interest on the Securities and all other amounts due and payable under this
Indenture and the Securities by the Company whether at maturity, by
acceleration, redemption, repurchase or otherwise, including, without
limitation, interest on the overdue principal of, premium,
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if any, and interest on the Securities, to the extent lawful, all in accordance
with the terms hereof and thereof; subject, however, to the limitations set
forth in Section 10.05.
Failing payment when due of any amount so guaranteed for whatever
reason, the Guarantors will be jointly and severally obligated to pay the same
immediately. Each Guarantor hereby agrees that its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the
same, any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. To the
fullest extent permitted by law, each Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands whatsoever and
covenants that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities, this Indenture and
in this Guarantee. If any Holder or the Trustee is required by any court or
otherwise to return to the Company, any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or any
Guarantor, any amount paid by the Company or any Guarantor to the Trustee or
such Holder with respect to the Securities, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor agrees it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Guarantor further
agrees that, as between each Guarantor, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article VI for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article VI,
such obligations (whether or not due and payable) shall forthwith become due
and payable by each Guarantor for the purpose of this Guarantee.
SECTION 10.02 Guarantors May Consolidate, etc., on Certain Terms.
(a) Subject to paragraph (b) of this Section 10.02, no
Guarantor may consolidate or merge with or into (whether or not such Guarantor
is the surviving Person) another corporation or Person unless (i) the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) is a corporation organized and existing under the laws of the United
States of America, any state thereof, or the District of Columbia and expressly
assumes all the obligations of such Guarantor pursuant to a supplemental
indenture, in a form reasonably satisfactory to the Trustee, under the
Securities and the Indenture, (ii) immediately before and after giving effect
to such transaction, no Default or Event of Default exists, (iii) such
Guarantor or the entity or Person formed by or surviving any such consolidation
or merger on a pro forma basis will have
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Consolidated Net Worth (immediately after the transaction) equal to or greater
than the Consolidated Net Worth of such Guarantor immediately preceding the
transaction and (iv) the Company will, at the time of such transaction after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable Reference Period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to Section 4.09(a). In connection
with any consolidation or merger contemplated by this Section 10.02, the
Company shall deliver to the Trustee prior to the consummation of the proposed
transaction an Officers' Certificate to the foregoing effect and an Opinion of
Counsel stating that all conditions precedent to the proposed transaction and
to execution and delivery of such supplemental indenture have been complied
with. This Section 10.02(a) will not prohibit a merger between Guarantors or a
merger between the Company and a Guarantor.
(b) In the event of a sale or other disposition of all or
substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of such Guarantor, then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) will be released and relieved of any
obligations under its Guarantees; provided that the Net Cash Proceeds of such
sale or other disposition are applied in accordance with the provisions of the
Indenture described under Section 4.11.
SECTION 10.03 Addition of Guarantors.
(a) The Company agrees to cause each Subsidiary that
shall become a Restricted Subsidiary after the date of this Indenture to
execute and deliver a supplemental indenture pursuant to which such Restricted
Subsidiary shall guarantee the payment of the Securities pursuant to the terms
hereof.
(b) Any Person that was not a Guarantor on the date of
this Indenture may become a Guarantor by executing and delivering to the
Trustee (i) a supplemental indenture in form and substance satisfactory to the
Trustee, which subjects such Person to the provisions (including the
representations and warranties) of this Indenture as a Guarantor and (ii) an
Opinion of Counsel and Officers' Certificate to the effect that such
supplemental indenture has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable obligation of such Person
(subject to such customary exceptions concerning creditors' rights and
equitable principles as may be acceptable to the Trustee in its discretion and
provided that no opinion need be rendered concerning the enforceability of the
Guarantee).
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SECTION 10.04 Release of a Guarantor.
Upon the sale or disposition of a Guarantor (or substantially all of
its assets) or the designation of a Guarantor as an Unrestricted Subsidiary,
which in each case otherwise is effected in compliance with the terms of this
Indenture, including but not limited to the provisions of Section 10.02, such
Guarantor shall be deemed released from all of its Guarantee and related
obligations in this Indenture. The Trustee shall deliver an appropriate
instrument evidencing such release upon receipt of a request by the Company
accompanied by an Officers' Certificate and an Opinion of Counsel certifying
that such sale or other disposition was made by the Company in accordance with
the provisions of this Indenture. Any Guarantor not so released remains liable
for the full amount of principal of and interest on the Securities as provided
in this Article X.
SECTION 10.05 Limitation of Guarantor's Liability.
Each Guarantor and by its acceptance of Securities under this
Indenture each Holder hereby confirms that it is the intention of all such
parties that the guarantee by such Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of any federal or
state law. To effectuate the foregoing intention, the Holders and each
Guarantor hereby irrevocably agree that the obligations of each Guarantor under
the Guarantee shall be limited to the maximum amount as will, after giving
effect to all other contingent and fixed liabilities of such Guarantor and
after giving effect to any collections from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to Section 10.06, result in the obligations of such
Guarantor under the Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. This Section 10.05 is for the
benefit of the creditors of each Guarantor, and, for purposes of applicable
fraudulent transfer and fraudulent conveyance law, any Indebtedness of a
Guarantor pursuant to a Bank Credit Facility shall be deemed to have been
incurred prior to the incurrence by such Guarantor of its liability under the
Guarantee.
SECTION 10.06 Contribution.
In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by the Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to the Guarantee.
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SECTION 10.07 Execution and Delivery of Guarantee.
To further evidence the Guarantees set forth in Section 10.01, each
Guarantor hereby agrees that a notation relating to such Guarantee, in
substantially the form of Exhibit A-1, shall be endorsed on each Security
authenticated and delivered by the Trustee and executed by either manual or
facsimile signature of one Officer of each Guarantor.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation relating to such Guarantee.
If an Officer of a Guarantor whose signature is on this Indenture or a
Security no longer holds that office at the time the Trustee authenticates such
Security or at any time thereafter, such Guarantor's Guarantee of such Security
shall be valid nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
SECTION 10.08 Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, that portion of such provision that is not invalid, illegal or
unenforceable shall remain in effect, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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ARTICLE XI
Miscellaneous
SECTION 11.01 Trust Indenture Act Controls.
Whether prior to or following the qualification of this Indenture
under the TIA, if any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of TIA Section 318(c) upon an
Indenture qualified under the TIA, the imposed duties shall control under this
Indenture.
SECTION 11.02 Notices.
Any notice or communication shall be sufficiently given if in writing
and delivered in person or mailed by certified or registered mail (return
receipt requested), facsimile, telecopier or overnight air courier guaranteeing
next day delivery, addressed as follows:
If to the Company or any Guarantor:
National Energy Group, Inc.
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206
Attention: Chief Financial Officer
If to the Trustee:
Bank One, N.A.
100 East Broad Street
Columbus, Ohio 43271-0181
Attention: Corporate Trust Department
The Company, any Guarantor or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if faxed or telecopied; and the next Business
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Day after timely delivery to the courier, if sent by overnight air courier
guaranteeing next Business Day delivery.
Any notice or communication mailed to a Holder shall be mailed by
first-class mail to the address for such Holder appearing on the registration
books of the Registrar and shall be sufficiently given to such Holder if so
mailed within the time prescribed. Failure to mail a notice or communication
to a Holder or any defect in it shall not affect its sufficiency with respect
to other Holders.
If a notice or communication is mailed in the manner provided above,
it is duly given, whether or not the addressee receives it. If the Company or
any Guarantor mails notice or communications to Holders, it shall mail a copy
to the Trustee and each Agent at the same time.
SECTION 11.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The Company, the Guarantors, the Trustee, the Registrar and anyone else shall
have the protection of TIA Section 312(c).
SECTION 11.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or any Guarantor to the
Trustee to take any action under this Indenture, the Company or such Guarantor,
as the case may be, shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05) stating that, in the opinion of
the signers, the conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with;
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, such conditions precedent have been complied with; and
(3) any Opinion of Counsel may assume the existence or
non-existence of facts necessary to support such Opinion unless such
counsel has actual knowledge that such assumption would be contrary to
the actual facts.
SECTION 11.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
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<PAGE> 88
(1) a statement that each person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such person,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
each such person, such covenant or condition has been complied with.
SECTION 11.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules for its
functions.
SECTION 11.07 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday, or a day on which banks and
trust companies in the City of New York and the City of Columbus, Ohio are not
required by law or executive order to be open. If a payment date is a Legal
Holiday at a place of payment, payment may be made at the place on the next
succeeding day that is not a Legal Holiday, without additional interest.
SECTION 11.08 Governing Law.
THIS INDENTURE AND THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THAT
THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.09 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, any Guarantor or any other Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
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<PAGE> 89
SECTION 11.10 No Recourse Against Others.
All liability described in paragraph 18 of the Securities of any
director, officer, employee or stockholder, as such, of the Company, the
Guarantors or the Trustee is waived and released.
SECTION 11.11 Successors.
All agreements of the Company and the Guarantors in this Indenture,
the Securities and the Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 11.12 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
instrument.
SECTION 11.13 Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, as of the date first written above.
NATIONAL ENERGY GROUP, INC.
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
BANK ONE, N.A., as Trustee
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 90
EXHIBIT A
FACE OF SECURITY
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York ("DTC")), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.(1)
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED TO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHICH IS
AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT
WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD AS
COMPLIES WITH RULE 144 UNDER THE SECURITIES ACT) AFTER THE LATER OF THE DATE OF
ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (THE "RESALE RESTRICTION
TERMINATION DATE") RESELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT
(A) TO THE ISSUER, (B) TO A PERSON THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE
PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D) PURSUANT TO THE
RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 OF THE SECURITIES ACT, (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (G) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
__________________________________
(1) This paragraph should be included only if the Security is issued in global
form.
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<PAGE> 91
SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF
LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT
ALL TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHICH THIS SECURITY
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE
PROPOSED TRANSFEREE IS NOT A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL
NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE.
NATIONAL ENERGY GROUP, INC.
10 3/4% [SERIES C] [SERIES D] SENIOR NOTE DUE 2006
NO. $_________
CUSIP NO.________
National Energy Group, Inc., a Delaware corporation, promises to pay
to __________________________ or registered assigns the principal sum of
$__________ on November 1, 2006.
Interest Payment Dates: May 1, and November 1, commencing November 1,
1997
Record Dates: April 15 and October 15
Reference is hereby made to the further provisions of this Security set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
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IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
Dated:
NATIONAL ENERGY GROUP, INC.
By:
-----------------------------------------
Certificate of Authentication:
Bank One, N.A.
as Trustee, certifies that this is one of the Definitive Global(2)
Securities referred to in the within-mentioned Indenture.
By
------------------------------
Authorized Signatory
__________________________________
(2) If the Security is issued in global form, the term "Global" replaces the
term "Definitive."
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REVERSE OF SECURITY
NATIONAL ENERGY GROUP, INC.
10 3/4% [SERIES C] [SERIES D] SENIOR NOTES DUE 2006
1. Interest. National Energy Group, Inc. a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at 10 3/4% per annum from the Issue Date until maturity and shall pay
additional interest, if any, payable pursuant to the Registration Rights
Agreement referred to in the Indenture. The Company will pay interest
semiannually on May 1 and November 1 of each year (each an "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Securities will accrue from the most recent
Interest Payment Date on which interest has been paid or, if no interest has
been paid, from the Issue Date; provided, that if there is no existing Default
in the payment of interest, and if this Security is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be November
1, 1997. The Company shall pay interest on overdue principal and premium, if
any, from time to time on demand at a rate equal to the interest rate on the
Securities then in effect; it shall pay interest on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. All references herein to
interest shall include additional interest, if any, payable as Notes Liquidated
Damages pursuant to the Registration Rights Agreement.
2. Method of Payment. The Company will pay interest on the
Securities to the persons who are registered holders of Securities at the close
of business on the record date immediately preceding the Interest Payment Date,
even if such Securities are canceled after the record date and on or before the
Interest Payment Date. Holders must surrender Securities to the Paying Agent to
collect principal payments. The Company will pay principal of, premium, if
any, and interest on the Securities in money of the United States of America
that at the time of payment is legal tender for payment of public and private
debts. However, the Company may pay such amounts by check payable in such
money. It may mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice. The Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
4. Indenture. The Company issued the Securities under an
Indenture, dated as of August 21, 1997 (as such may be amended, the
"Indenture"), between the Company and the Trustee. Capitalized terms herein
are used as defined in the Indenture unless otherwise defined herein. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by
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reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbb) as in effect on the date of the Indenture. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Holders are referred to the Indenture and such Act for a complete statement
of such terms. The Securities are limited to $165,000,000 aggregate principal
amount.
5. Ranking and Guarantees. The Securities are general senior
unsecured obligations of the Company. The Company's obligation to pay
principal, premium, if any, and interest with respect to the Securities is
unconditionally guaranteed on a senior basis, jointly and severally, by the
Guarantors pursuant to Article X of the Indenture. Certain limitations to the
obligations of the Guarantors are set forth in further detail in the Indenture.
6. Optional Redemption. Securities are subject to redemption, at
the option of the Company, in whole in part, upon not less than 30 or more than
60 days' notice:
(i) or at any time on or after November 1, 2001 at the following
Redemption Prices (expressed as percentages of principal amount) if redeemed
during the 12-month period beginning November 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 105.375%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 102.688%
2003 and thereafter . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
or (ii) at any time prior to November 1, 2001, at the Make-Whole Price
(as defined in the Indenture),
together in the case of any such redemption with accrued and unpaid interest,
if any, to the Redemption Date (subject to the right of Holders of record on
the relevant Record Date to receive interest due on an Interest Payment Date
that is on or prior to the Redemption Date), all as provided in the Indenture.
In addition, in the event the Company consummates one or more Equity
Offerings on or prior to November 1, the Company may, in its sole discretion,
redeem up to 35% of the aggregate principal amount of the Securities with all
or a portion of the aggregate net proceeds received by the Company from any
such Equity Offering or Equity Offerings at a redemption price of 110.75% of
the aggregate principal amount of the Securities so redeemed, plus accrued and
unpaid interest on the Securities so redeemed to the Redemption Date; provided,
however, that following such redemption, at least 65% of the aggregate
principal amount of the Securities remains outstanding.
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<PAGE> 95
Any redemption pursuant to this paragraph shall be made pursuant to the
provisions of Sections 3.01 through 3.06 of the Indenture.
In the case of any redemption of Securities, interest installments
whose Stated Maturity is on or prior to the Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of
record at the close of business on the relevant Record Date referred to on the
face hereof. Securities (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear interest
from and after the Redemption Date. In the event of redemption or purchase of
this Security in part only, a new Security or Securities for the unredeemed or
unpurchased portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof.
The Securities do not have the benefit of any sinking fund
obligations.
7. Notice of Redemption. Notice of redemption will be mailed to
the Holder's registered address at least 30 days but not more than 60 days
before the redemption date to each Holder of Securities to be redeemed. If
less than all Securities are to be redeemed, the Trustee shall select pro rata,
by lot or in accordance with the rules of any securities exchange the
Securities to be redeemed in multiples of $1,000. Securities in denominations
larger than $1,000 may be redeemed in part. On and after the redemption date,
interest ceases to accrue on Securities or portions of them called for
redemption (unless the Company shall default in the payment of the redemption
price or accrued interest).
8. Change of Control Offer. In the event of a Change of Control
of the Company, and subject to certain conditions and limitations provided in
the Indenture, the Company will be obligated to make an offer to purchase, not
more than 10 Business Days or less than 30 Business Days following the
occurrence of a Change of Control of the Company, all of the then outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest to the Change of Control Purchase
Date, all as provided in the Indenture.
9. Net Proceeds Offer. In the event of Asset Sales, under certain
circumstances, the Company will be obligated to make a Net Proceeds Offer to
purchase all or a specified portion of each Holder's Securities at a purchase
price equal to 100% of the principal amount of the Securities, together with
accrued and unpaid interest to the Net Proceeds Payment Date.
10. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to merge or
consolidate with any other Person or sell, lease or otherwise transfer all or
substantially all of its properties or assets, the ability of the Company or
the Restricted Subsidiaries to dispose of certain assets, to pay dividends and
make certain other distributions and payments, to make certain investments or
redeem, retire, repurchase or acquire for value shares of Capital Stock, to
incur additional Indebtedness or incur encumbrances against certain
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property and to enter into certain transactions with Affiliates, all subject to
certain limitations described in the Indenture.
11. Defaults and Remedies. As set forth in the Indenture, an
Event of Default is generally (i) failure to pay principal upon maturity,
redemption or otherwise (including pursuant to a Change of Control Offer or a
Net Proceeds Offer), (ii) default for 30 days in payment of interest on any of
the Securities, (iii) default in the performance of agreements relating to
mergers, consolidations and sales of all or substantially all assets or the
failure to make or consummate a Change of Control Offer or a Net Proceeds
Offer, (iv) failure for 30 days after notice to comply with any other covenants
in the Indenture or the Securities; (v) certain payment defaults under, the
acceleration prior to the maturity of, and the exercise of certain enforcement
rights with respect to, certain Indebtedness of the Company or any Guarantor in
an aggregate principal amount in excess of $5,000,000; (vi) the failure of any
Guarantee to be in full force and effect or otherwise to be enforceable (except
as permitted by the Indenture); (vii) certain events giving rise to material
ERISA liability; (viii) certain final judgments against the Company, any
Guarantor or other Restricted Subsidiary in an aggregate amount of $5,000,000
or more which remain unsatisfied and either become subject to commencement or
enforcement proceedings or remain unstayed for a period of 60 days; and (ix)
certain events of bankruptcy, insolvency or reorganization of the Company or
any Subsidiary (other than an Unrestricted Subsidiary). If any Event of
Default occurs and is continuing, the Trustee or the holders of at least 25% in
aggregate principal amount of the Outstanding Securities may declare the
principal amount of all the Securities to be due and payable immediately,
except that (i) in the case of an Event of Default arising from certain events
of bankruptcy, insolvency or reorganization of the Company or any Restricted
Subsidiary, the principal amount of the Securities will become due and payable
immediately without further action or notice, and (ii) in the case of an Event
of Default which relates to certain payment defaults, acceleration or the
exercise of certain enforcement rights with respect to certain Indebtedness,
any acceleration of the Securities will be automatically rescinded if any such
Indebtedness is repaid or if the default relating to such Indebtedness is cured
or waived and if the holders thereof have accelerated such Indebtedness then
such holders have rescinded their declaration of acceleration or if in certain
circumstances the proceedings or enforcement action with respect to the
Indebtedness that is the subject of such Event of Default is terminated or
rescinded. No Holder may pursue any remedy under the Indenture unless the
Trustee shall have failed to act after notice of an Event of Default and
written request by Holders of at least 25% in principal amount of the
Outstanding Securities, and the offer to the Trustee of indemnity reasonably
satisfactory to it; however, such provision does not affect the right to sue
for enforcement of any overdue payment on a Security by the Holder thereof.
Subject to certain limitations, Holders of a majority in principal amount of
the Outstanding Securities may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders notice of any continuing
default (except default in payment of principal, premium or interest) if it
determines in good faith that, withholding the notice is in the interest of the
Holders. The Company is required to file annual reports with the Trustee as to
the absence or existence of defaults.
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<PAGE> 97
12. Defeasance. The Indenture contains provisions for defeasance
at any time of (i) the entire indebtedness of the Company on this Security and
(ii) certain restrictive covenants and the related Defaults and Events of
Default, upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Security.
13. Amendment, Modification and Waiver. The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the Guarantor and
the rights of the Holders under the Indenture at any time by the Company, the
Guarantor and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities at the time
Outstanding, on behalf of the Holders of all the Securities, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by or on behalf of the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of
any Security issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent or waiver is
made upon this Security. Without the consent of any Holder, the Company, the
Guarantors and the Trustee may amend or supplement the Indenture or the
Securities to cure any ambiguity, defect or inconsistency and to make certain
other specified changes and other changes that do not materially adversely
affect the rights of any Holder.
14. Obligation Absolute and Unconditional. No reference herein to
the Indenture and no provision of this Security or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay the principal of (and premium, if any, on) and interest on this Security
at the times, place, and rate, and in the coin or currency, herein prescribed.
15. Registration and Transfer. As provided in the Indenture and
subject to certain limitations therein set forth, the transfer of this Security
is registerable on the Security register of the Company, upon surrender of this
Security for registration of transfer at the office or agency of the Company
maintained for such purpose in the City of New York, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Securities, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
16. Form. The Securities shall be issued either in global form or
in definitive registered form, without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Securities are exchangeable for a
like aggregate principal amount of Securities of a different authorized
denomination, as requested by the Holder surrendering the same.
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<PAGE> 98
17. Taxes. No service charge shall be made for any registration
of transfer or exchange of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
18. No Recourse Against Others. A director, officer,
incorporator, or stockholder of the Company or any Guarantor, as such, shall
not have any personal liability under this Security or the Indenture by reason
of his or its status as such director, officer, incorporator or stockholder.
Each Holder, by accepting this Security with the notation of Guarantee endorsed
hereon, waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of this Security with the notation
of Guarantee endorsed hereon.
19. Registered Owners. Prior to the time of due presentment of
this Security for registration of transfer, the Company, the Guarantors, the
Trustee and any agent of the Company or the Trustee may treat the Person in
whose name this Security is registered as the owner hereof for all purposes,
whether or not this Security is overdue, and neither the Company, the
Guarantors, the Trustee nor any agent shall be affected by notice to the
contrary.
20. Definitions. All terms used in this Security which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Securities as a convenience to the
Holders thereof. No representation is made as to the accuracy of such numbers
as printed on the Securities and reliance may be placed only on the other
identifying information printed hereon.
22. Governing Law. This Security shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to applicable principles of conflicts of laws to the extent that the
application of the law of another jurisdiction would be required thereby.
23. Successor Corporation. When a successor corporation assumes
all the obligations of its predecessor under the Securities and the Indenture,
the predecessor corporation will be released from those obligations.
24. Trustee Dealings with Company and Guarantors. The Trustee
under the Indenture, in its individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal with the Company, the
Guarantors or their respective Subsidiaries or Affiliates with the same rights
it would have if it were not Trustee.
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The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to: National Energy Group, Inc., 4925
Greenville Avenue, Suite 1400, Dallas, Texas 75206 Attention: Secretary.
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ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to:
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________________ as agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Your Signature: ________________________________________________________________
(Sign exactly as your name appears on the other side of this
Security)
Date: __________________________________
Signature Guarantee: ____________________________________________
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FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.11 or Section 4.17 of the Indenture, check the
appropriate box:
Section 4.11 [ ] Section 4.17 [ ]
If you want to have only part of this Security purchased by the
Company pursuant to Section 4.11 or Section 4.17 of the Indenture, state the
amount in integral multiples of $1,000:
$________________
Date:_____________________
Signature:____________________________
(Sign exactly as your name
appears on the other side of
this Security)
Signature
Guarantee:______________________________________________________________________
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SCHEDULE OF EXCHANGES OF GLOBAL SECURITY FOR
DEFINITIVE SECURITY(3)
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
AMOUNT OF DECREASE PRINCIPAL AMOUNT OF SIGNATURE OF
IN PRINCIPAL AMOUNT OF INCREASE THIS GLOBAL SECURITY AUTHORIZED OFFICER
AMOUNT IN PRINCIPAL FOLLOWING SUCH OF TRUSTEE OR
OF THIS GLOBAL AMOUNT OF THIS DECREASE (OR SECURITIES
DATE OF EXCHANGE SECURITY GLOBAL SECURITY INCREASE) CUSTODIAN
---------------- ------------------- ------------------- --------------------- -------------------
<S> <C> <C> <C> <C>
</TABLE>
__________________________________
(3) This should be included only if the Security is issued in global form.
A-13
<PAGE> 103
EXHIBIT A-1
FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE
Subject to the limitations and provisions set forth in the Indenture,
the Guarantors (as defined in the Indenture referred to in the Security upon
which this notation is endorsed and each hereinafter referred to as a
"Guarantor," which term includes any successor or additional Guarantor under
the Indenture) have, jointly and severally, unconditionally guaranteed (a) the
due and punctual payment of the principal of, premium, if any, and interest on
the Securities, and all other amounts payable under the Indenture and the
Securities by the Company whether at maturity, acceleration, redemption,
repurchase or otherwise, (b) the due and punctual payment of interest on the
overdue principal of, premium, if any, and interest on the Securities, to the
extent lawful, (c) the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee, all in accordance with the terms set
forth in the Indenture, and (d) in case of any extension of time of payment or
renewal of any Securities or any of such other obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at Stated Maturity, by acceleration or otherwise.
Capitalized terms used herein shall have the meanings assigned to them in the
Indenture unless otherwise indicated.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities and
after giving effect to any collections from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantors shall have any personal liability under
the Guarantee by reason of his or its status as such stockholder, officer,
director or incorporator.
Any Guarantor may be released from its Guarantee upon the terms and
subject to the conditions provided in the Indenture.
All terms used in this notation of Guarantee which are defined in the
Indenture referred to in this Security upon which this notation of Guarantee is
endorsed shall have the meanings assigned to them in such Indenture.
The Guarantee shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of the Trustee and the Holders and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges herein conferred upon that party shall
A-14
<PAGE> 104
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof and in the Indenture.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Security upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
NAME OF EACH GUARANTOR
Attest:___________________________ By:____________________________________
Secretary President
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the notation of the Guarantee of the 10 3/4% [Series C]
[Series D] Senior Notes due 2006 referred to in the within-mentioned Indenture.
Authenticated:
Dated:____________________________ Bank One, N.A.
Trustee
By:_____________________________________
Authorized Signatory
A-15
<PAGE> 105
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR TRANSFER OF SENIOR NOTES
______________, 199__
Bank One, N.A.
c/o Bank One Trust Company, N.A.
235 West Shrock Road
Westerville, Ohio 43081
Attention: Corporate Trust Operations
Re: National Energy Group, Inc.
10 3/4% Series C Senior Notes due 2006 (the "Securities")
Reference is hereby made to the Indenture dated as of August 21, 1997
(the "Indenture") between National Energy Group, Inc., and Bank One, N.A.
Capitalized terms used but not defined herein shall have the meanings given
them in the Indenture.
This certificate relates to $_______________ aggregate principal
amount of Securities which are held in*
[ ] book-entry
or
[ ] definitive form
in the name of ______________________________________________ (the
"Transferor"). The Transferor hereby requests that the Securities be
transferred to _____________________________________ (the "Transferee").
The Transferor hereby certifies that the Transferor is familiar with
the Indenture relating to the above-captioned Securities and further certifies
that*:
[ ] such Securities (constituting either a Definitive Security in the
amount indicated above that is being exchanged for a beneficial
interest in the Global Security pursuant to Section 2.06(d) of the
Indenture or a beneficial interest in the amount indicated above in
the Global Security that is being transferred pursuant to Section
2.06(e) of the Indenture) are being
______________________________
* Check applicable box.
B-1
<PAGE> 106
transferred to a Person that the Transferor reasonably believes is a
Qualified Institutional Buyer in accordance with Rule 144A under the
Securities Act; or
[ ] the Transferor has requested by written order that the Trustee
deliver to the Transferee in exchange for a beneficial interest in the
Global Security held by the Depositary a Definitive Security or
Securities in an aggregate principal amount equal to such beneficial
interest in the Global Security (or the portion thereof indicated
above) in accordance with Section 2.06(f) of the Indenture, and*
[ ] the Transferee is the Person designated by the
Depositary as being the beneficial owner of the
interest in the Global Security; or
[ ] the Transferor reasonably believes the
Transferee to be a Qualified Institutional Buyer; or
[ ] such transfer is being made in reliance on Rule
144 or Rule 904 or another exemption (specify:
______________________________________) from the
registration requirements of the Securities Act, and
an opinion of counsel accompanies this Certificate;
or
[ ] the Transferor has requested by written order that the Trustee
exchange or register the transfer of a Definitive Security or
Securities for a Definitive Security or Securities:
[ ] to a Person the Transferor reasonably believes to be a
Qualified Institutional Buyer; or
[ ] in reliance on Rule 144 or Rule 904 or another exemption
(specify: __________________________________) from the
registration requirements of the Securities Act, and an
opinion of counsel accompanies the Certificate.
In connection with such request, and in respect of such Securities,
the Transferee confirms that:
1. The Transferee understands that the Securities have not been
and may not be registered under the Securities Act, and are being sold to it in
a transaction that is exempt from the registration requirements of the
Securities Act.
2. The Transferee hereby represents that it is a corporation,
partnership or other entity or person having such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Securities, and the Transferee is (or any account
for which it is purchasing is) (check box, if applicable):
______________________________
* Check applicable box.
B-2
<PAGE> 107
[ ] an Institutional Accredited Investor or
[ ] a Qualified Institutional Buyer,
as such terms are defined in the Securities Act, able to bear the economic risk
of investment in the Securities.
3. The Transferee undertakes that it is acquiring the Securities
for its own account (or for accounts as to which the Transferee exercises sole
investment discretion and has authority to make, and does make, the statements
contained in this certificate) and not with a view to any distribution of the
Securities, subject, nevertheless, to the understanding that the disposition of
its property shall at all times be and remain within the Transferee's control.
4. The Transferee acknowledges that it understands that the
Securities will be issued either as (a) a Global Security** and the Transferee
will own a beneficial interest therein or (b) a Definitive Security under which
the Securities will be delivered to the Transferee in registered form only and,
in either case, the Security will bear a legend substantially to the following
effect:
THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED TO OR FOR THE ACCOUNT OR BENEFIT OF ANY PERSON
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHICH IS AN
INSTITUTION (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT
IT WILL NOT PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER
PERIOD AS COMPLIES WITH RULE 144 UNDER THE SECURITIES ACT) AFTER THE
LATER OF THE DATE OF ORIGINAL ISSUANCE OF THIS SECURITY AND THE LAST
DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER
OF THIS SECURITY (THE "RESALE RESTRICTION TERMINATION DATE") RESELL,
PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE ISSUER,
(B) TO A PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE
PROVISIONS OF RULE 144A UNDER THE
___________________________________
* Check applicable box.
** If book entry, each beneficial owner must be a Qualified Institutional
Buyer.
B-3
<PAGE> 108
SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN
CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY, (D)
PURSUANT TO THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (E) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
OF THE SECURITIES ACT, (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (G) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO ANY
REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE
PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND TO
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, AND (3) AGREES THAT
IT WILL DELIVER TO EACH PERSON TO WHICH THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED
TRANSFEREE IS NOT A QUALIFIED INSTITUTIONAL BUYER, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING
RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE
RESTRICTION TERMINATION DATE.
and (c) such certificates will be reissued without the foregoing legend only in
the event of a disposition of the Securities in accordance with the provisions
of paragraph 5(c) or (d) below, or at the Transferee's request at such times as
the Transferee would be permitted to dispose of the Securities in accordance
with paragraph 5(d) below.
5. The Transferee agrees that in the event that at some future
time it wishes to dispose of any of the Securities, it will not do so unless:
(a) the Securities are sold to the Company or any
Subsidiary thereof;
B-4
<PAGE> 109
(b) the Securities are sold to an Institutional
Accredited Investor or Qualified Institutional Buyer, that, prior to such
transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Securities (the form of which letter can be obtained from such Trustee);
(c) the Securities are sold pursuant to Rule 144 under
the Securities Act; or
(d) the Securities are sold pursuant to an effective
registration statement under the Securities Act.
Very truly yours,
---------------------------------------
[Insert Name of Transferor]
By:
------------------------------------
Name:
----------------------------------
Dated: , Title:
-------------------- ----- ---------------------------------
---------------------------------------
[Insert Name of Transferee]
By:
------------------------------------
Name:
----------------------------------
Dated: , Title:
-------------------- ----- ---------------------------------
cc: National Energy Group, Inc.
B-5
<PAGE> 110
EXHIBIT C
FORM OF LEGAL OPINION ON TRANSFER
___________, _____
(Date)
National Energy Group, Inc.
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206
Bank One, N.A.
c/o Bank One Trust Company, N.A.
235 West Shrock Road
Westerville, Ohio 43081
Attention: Corporate Trust Operations
Re: National Energy Group, Inc.
10 3/4% Series C Senior Notes due 2006
Ladies and Gentlemen:
This opinion is being furnished to you in connection with the
sale by _____________ (the "Transferor") to _____________ (the "Transferee") of
$_______________ aggregate principal amount of 10 3/4% Series C Senior Notes
due 2006 of (the "Securities").
We have examined such documents and records as we have deemed
appropriate. In our examination of the foregoing, we have assumed the
authenticity of all documents, the genuineness of all signatures and the due
authorization, execution and delivery of the aforementioned by each of the
parties thereto. We have further assumed the accuracy of the representations
of the Transferee contained in the Certificate Delivered Upon Exchange or
Transfer of Senior Notes executed and delivered by the Transferee and the
Transferor in connection with the sale of the Securities. We have also assumed
that the sale of the Securities to the Transferor was exempt from the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Securities Act").
Based on the foregoing, we are of the opinion that the sale to
the Transferee of the Securities does not require registration of such
Securities under the Securities Act and is authorized and permitted under the
terms of the Indenture.
Very truly yours,
C-1
<PAGE> 111
EXHIBIT D
OFFICERS' CERTIFICATE OF NONDEFAULT
NATIONAL ENERGY GROUP, INC.
This Officers' Certificate is provided pursuant to Section
4.03(a) of the Indenture dated as of August 21, 1997 between National Energy
Group, Inc. (the "Company") and Bank One, N.A., as Trustee (the "Indenture").
A review of the activities of the Company and the Subsidiaries
during the preceding fiscal year ending [ , ], has been
made under the supervision of the Officers signing below with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under the Indenture. In addition, each such Officer signing this
certificate states that, to the best of such Officer's knowledge, the Company
and each Guarantor has kept, observed, performed and fulfilled each and every
covenant contained in the Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions of the Indenture.
This Officers' Certificate is intended to comply with TIA Section 314(a)(4).
Additionally, each Officer signing below has read each
covenant or condition set forth in the Indenture and has made such examination
or investigation as is necessary, in the opinion of each such Officer, to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with, which examination or investigation was
conducted in the course of the Officers' routine operational management of the
Company. In the opinion of each such Officer, each such covenant or condition
has been complied with.
EXECUTED THIS __________ day of ______________________, _____.
NATIONAL ENERGY GROUP, INC.,
a Delaware corporation
*By:___________________________________
By:___________________________________
* This certificate must be signed by the principal executive, financial or
accounting Officer (as well as one other Officer).
D-1
<PAGE> 112
EXHIBIT E
TRANSFEREE LETTER OF REPRESENTATION
National Energy Group, Inc.
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206
Bank One, N.A.
c/o Bank One Trust Company, N.A.
235 West Shrock Road
Westerville, Ohio 43081
Attention: Corporate Trust Operations
Ladies and Gentlemen:
1. We understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and unless
so registered, may not be sold except as permitted in the following sentence.
We agree on our own behalf and on behalf of any investor account for which we
are purchasing Securities to offer, sell or otherwise transfer such Securities
prior to the date which is two years after the later of the date of original
issue and the last date on which the Company or any affiliate or the Company
was the owner of such Securities (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to the issuer of such Securities, (b)
for so long as the Securities are eligible for resale pursuant to Rule 144A
under the Securities Act, to a person we reasonably believe is a Qualified
Institutional Buyer under Rule 144A that purchases for its own account or for
the account of a Qualified Institutional Buyer to whom notice is given that the
transfer is being made in reliance on Rule 144A, (c) to an "Accredited
Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) which is an institution (an "Institutional Accredited Investor") that is
purchasing for his own account or for the account of such an Institutional
Accredited Investor, (d) pursuant to the resale limitations provided by Rule
144 under the Securities Act (if available), (e) pursuant to a registration
statement which has been declared effective under the Securities Act, (f)
outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 of the Securities Act, or (g) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or
accounts be at all times within our or their control and to compliance with any
applicable state securities law. The foregoing restrictions on sale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (c)
above prior to the Resale Restriction Termination Date, the transferor
E-1
<PAGE> 113
shall deliver a letter from the transferee substantially in the form of this
letter to the Company and the Trustee which shall provide, among other things,
that the transferee is an Institutional Accredited Investor and that it is
acquiring such Securities for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Company
and the Trustee reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Securities pursuant to
clauses (d), (e), (f) or (g) above to require the delivery of an opinion of
counsel, certifications and/or other information satisfactory to the Company
and the Trustee.
2. We are an Institutional Accredited Investor or, if the
transfer is of a beneficial interest in the Global Security, a "qualified
institutional buyer" in accordance with Rule 144A under the Securities Act, in
either case purchasing for our own account or for the account of such an
Institutional Accredited Investor as to each of which we exercise sole
investment discretion and we are acquiring the Securities for investment
purposes and not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act and we have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of our investment in the Securities, and we and any accounts
for which we are acting are each able to bear the economic risk of our or its
investments for an indefinite period.
3. All of you are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
--------------------------------------------
(Name of Purchaser)
By:
-----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Date:
-------------------------------------
E-2
<PAGE> 114
Upon transfer, the Securities should be registered in the name of the new
beneficial owner as follows:
Name: __________________________________________________________
Address: ____________________________________________________
____________________________________________________
____________________________________________________
Taxpayer ID Number: ____________________________________________
E-3
<PAGE> 1
EXHIBIT 4.5
$65,000,000
National Energy Group, Inc.
10 3/4% Series C Senior Notes due 2006
REGISTRATION RIGHTS AGREEMENT
August 21, 1997
JEFFERIES & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
c/o Jefferies & Company, Inc.
11100 Santa Monica Blvd., 10th Floor
Los Angeles, California 90025
Attention: Corporate Finance Department
Ladies and Gentlemen:
National Energy Group, Inc., a Delaware corporation (the "Company")
proposes to issue and sell to you (the "Initial Purchasers"), upon the terms
set forth in a purchase agreement dated August 15, 1997 (the "Purchase
Agreement"), $65,000,000 principal amount of the Company's 10 3/4% Series C
Senior Notes due 2006 (the "Notes"). The Notes will be issued pursuant to an
indenture, to be dated as of August 21, 1996 (the "Indenture") by and between
the Company and Bank One, N.A., as trustee (the "Trustee"), substantially in
the form previously furnished to you.
Capitalized terms used but not specifically defined herein are defined
in the Purchase Agreement and used herein as so defined. As used herein,
"Registrable Notes" shall mean each Note, until the earliest to occur of (a)
the date on which a Registered Exchange Offer is completed for the Notes
pursuant to which such Note may be exchanged in the Registered Exchange Offer
for an Exchange Note (each as defined below) and entitled to be resold to the
public by the holder thereof without complying with the prospectus delivery
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
(b) the date on which such Note has been effectively registered under the
Securities Act and disposed of pursuant to a Notes Shelf Registration (as
defined below), (c) the date on which such Note is distributed to the public
pursuant to Rule 144 under the Securities Act or by a Broker-Dealer (as defined
below) pursuant to the "Plan of Distribution" contemplated by the registration
statement relating to the Registered Exchange Offer (including delivery of the
prospectus contained therein) or (d) the date such Note ceases to be
outstanding.
<PAGE> 2
In consideration of the premises, and the mutual covenants,
representations, warranties and agreements herein contained, the parties hereby
agree as follows:
1. Registered Exchange Offer.
(a) Promptly (and in any event not more than 60 days)
following the closing date of the sale of the Notes (the "Closing Date"), the
Company shall file with the Commission a registration statement on an
appropriate form under the Securities Act with respect to a proposed offer (the
"Registered Exchange Offer") to the holders of the Registrable Notes to issue
and deliver to such holders, in exchange for the Registrable Notes, a like
principal amount of debt securities of the Company identical in all material
respects to the Registrable Notes (the "Exchange Notes"), shall use its best
efforts to cause such registration statement to become effective under the
Securities Act no later than 120 days after the Closing Date and, upon the
effectiveness of that registration statement, shall commence the Registered
Exchange Offer and shall cause the same to remain open for such period of time
to be determined by the Company (but not less than 30 nor more than 60 days
after the commencement of the Registered Exchange Offer), and to be conducted
in accordance with such procedures, as may be required by the applicable
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), it being the objective of such Registered Exchange Offer to enable each
holder of Registrable Notes electing to exchange Registrable Notes for Exchange
Notes (assuming that such holder is not an affiliate of the Company within the
meaning of the Securities Act, acquires the Exchange Notes in the ordinary
course of such holder's business and has no arrangements with any person to
participate in the distribution of the Exchange Notes) to trade such
Registrable Notes for Exchange Notes from and after their receipt without any
limitations or restrictions under the Securities Act, subject as to a Broker-
Dealer to the provisions of Section 1(b) hereof, or the Exchange Act and
without material restrictions under the securities laws of a substantial
proportion of the several states of the United States. Each holder of
Registrable Notes who participates in the Exchange Offer and who desires to
receive Exchange Notes that will not be subject to any limitations or
restrictions on resale under the Securities Act will be required to represent
in writing to the Company that any Exchange Notes received by it will be
acquired in the ordinary course of its business, that at the time of
consummation of the Exchange Offer such holder of Registrable Notes will have
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, and that such holder of the Registrable
Notes is not an affiliate of the Company within the meaning of the Securities
Act. Upon consummation of the Exchange Offer in accordance with this Section
1, the Company shall have no further obligation to register Registrable Notes
pursuant to Section 2 of this Agreement.
(b) The Company shall indicate in a "Plan of Distribution"
section contained in the final prospectus constituting a part of the
registration statement relating to the Registered Exchange Offer that any
broker or dealer registered under the Exchange Act (each a "Broker-Dealer") who
holds Registrable Notes that were acquired for its own account as a result of
market-making activities or other trading activities (other than Registrable
Notes acquired directly from the
-2-
<PAGE> 3
Company), may exchange such Registrable Notes for Exchange Notes pursuant to
the Registered Exchange Offer; however, such Broker-Dealer may be deemed an
"underwriter" within the meaning of the Securities Act and, therefore, must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of the Exchange Notes received by it in the
Registered Exchange Offer, which prospectus delivery requirement may be
satisfied by the delivery by such Broker-Dealer of the final prospectus
contained in the registration statement relating to the Registered Exchange
Offer. Such "Plan of Distribution" section also shall state that the delivery
by a Broker-Dealer of the final prospectus relating to the Registered Exchange
Offer in connection with resales of Exchange Notes shall not be deemed to be an
admission by such Broker-Dealer that it is an "underwriter" within the meaning
of the Securities Act, and shall contain all other information with respect to
resales of the Exchange Notes by Broker-Dealers that the Commission may require
in connection therewith, but such "Plan of Distribution" shall not name any
such Broker-Dealer or disclose the amount of Exchange Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
(c) In connection with such Registered Exchange Offer and the
offer and sale of Exchange Notes by Broker-Dealers as contemplated above, the
Company shall take such other and further action, including making appropriate
filings under state securities laws and delivering such number of final
prospectuses relating to the Registered Exchange Offer as any Broker-Dealer
proposing to deliver the same in connection with its resales of Exchange Notes
may reasonably request, as may be necessary to realize the foregoing
objectives. The Company shall cause the registration statement relating to the
Registered Exchange Offer to remain continuously effective for a period of one
year from the date on which such registration statement is first declared
effective, and shall supplement or amend the prospectus contained therein, in
each case, to the extent necessary to permit such prospectus (as supplemented
or amended) to be delivered by Broker-Dealers in connection with their resales
of Exchange Notes as aforesaid.
2. Notes Shelf Registration. The following provisions shall apply,
only if, because of any change in currently prevailing interpretations of the
Commission's staff, the Company is not permitted to effect a Registered
Exchange Offer, as contemplated by Section 1 hereof:
(a) Promptly (and in any event not more than 60 days)
following the date of closing (the "Closing Date") of the sale of the Notes,
the Company shall file with the Commission, and thereafter use its best efforts
to have declared effective not later than 120 days after the Closing Date, a
registration statement on an appropriate form under the Securities Act relating
to the offer and sale of the Registrable Notes by the holders thereof, from
time to time in accordance with the methods of distribution set forth in such
registration statement and Rule 415 under the Securities Act (the "Notes Shelf
Registration").
(b) The Company agrees to use its best efforts to keep the
registration statement relating to the Notes Shelf Registration continuously
effective in order to permit the prospectus
-3-
<PAGE> 4
included therein to be usable by the holders of the Registrable Notes for a
period of two years from the Closing Date or such shorter period that will
terminate when all the Registrable Notes covered by the registration statement
have been sold pursuant to such registration statement; provided, that the
Company shall be deemed not to have used its best efforts to keep the
registration statement effective during the requisite period if it voluntarily
takes any action that would result in holders of the Registrable Notes covered
thereby not being able to offer and sell such Registrable Notes during that
period, unless such action is required by applicable law, and provided,
further, that the foregoing shall not apply if the Company determines, in its
reasonable judgment, upon advice of counsel, as authorized by a resolution of
its Board of Directors, that the continued effectiveness and usability of such
registration statement would (i) require the disclosure of material
information, which the Company has a bona fide business reason for preserving
as confidential, or (ii) interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or any of
its Affiliates (as defined in the rules and regulations adopted under the
Exchange Act); provided, however, that the failure to keep the registration
statement effective and usable for offers and sales of Registrable Notes for
such reasons shall last no longer than 60 days in any 12-month period
(whereafter Notes Liquidated Damages (as defined in Section 6) shall accrue and
be payable), so long as the Company promptly thereafter complies with the
requirements of Section 3(h) hereof, if applicable. Any such period during
which the Company fails to keep the registration statement effective and usable
for offers and sales of Registrable Notes is referred to as a "Suspension
Period." A Suspension Period shall commence on and include the date that the
Company gives notice that the registration statement is no longer effective or
the prospectus included therein is no longer usable for offers and sales of
Registrable Notes and shall end on the date when each seller of Registrable
Notes covered by such registration statement either receives the copies of the
supplemented or amended prospectus contemplated by Section 3(h) hereof or is
advised in writing by the Company that use of the prospectus may be resumed.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company will cause the Notes Shelf Registration and the
related prospectus and any amendment or supplement thereto, as of the effective
date of such registration statement, amendment or supplement, (i) to comply in
all material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
3. Registration Procedures. In connection with, to the extent
applicable, any Registered Exchange Offer pursuant to Section 1 hereof, or any
Notes Shelf Registration pursuant to Section 2 hereof, the following provisions
shall apply:
(a) If requested by any holder of Registrable Notes or the
managing underwriter, if any, with respect to the Notes Shelf Registration, the
Company shall furnish to each such holder of Registrable Notes or such managing
underwriter, prior to the filing thereof with the Commission,
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<PAGE> 5
a copy of the applicable registration statement and each amendment thereof and
each supplement, if any, to the prospectus included therein. The Company shall
use its best efforts to reflect in each such document, when so filed with the
Commission, such comments as such holder or managing underwriter reasonably may
propose.
(b) The Company shall advise the holders of Registrable Notes
or the Exchange Notes, and the managing underwriter, if any, and, if requested
by any such person, confirm such advice in writing:
(i) when the applicable registration statement and any
amendment thereto has been filed with the Commission and when the
registration statement or any post-effective amendment thereto has
become effective;
(ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the applicable registration statement or
the initiation of any proceedings for that purpose;
(iii) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Registrable
Notes or the Exchange Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; and
(iv) of the happening of any event that requires the
making of any changes in the registration statement or the prospectus in
order to make the statements therein not misleading (which advice shall
be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made).
(c) The Company will make every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible time.
(d) The Company will furnish to each holder of the Registrable
Notes or the Exchange Notes included within the coverage of the Registered
Exchange Offer or the Notes Shelf Registration, as appropriate, without charge,
at least one copy of the registration statement in the form in which it was
declared effective by the Commission and any post-effective amendment thereto,
including financial statements and schedules, and, if the holder so requests in
writing, all exhibits (including those incorporated by reference).
(e) The Company will deliver to each holder of the Registrable
Notes or the Exchange Notes included within the coverage of the Registered
Exchange Offer or the Notes Shelf Registration, as appropriate, without charge,
as many copies of the prospectus (including each preliminary prospectus)
included in the registration statement and any amendment or supplement thereto
as such persons may reasonably request; the Company consents to the use of the
prospectus
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<PAGE> 6
or any amendment or supplement thereto by each of the selling holders of the
Registrable Notes or the Exchange Notes in connection with the offering and
sale of the Registrable Notes or the Exchange Notes covered by the prospectus
or any amendment or supplement thereto.
(f) Prior to any public offering of the Registrable Notes or
the Exchange Notes pursuant to the Registered Exchange Offer or the Notes Shelf
Registration, as the case may be, the Company will use its best efforts to
register or qualify, or cooperate with the holders of the Registrable Notes or
the Exchange Notes covered thereby and their respective counsel in connection
with the registration or qualification of, such Registrable Notes or Exchange
Notes for offer and sale under the securities or blue sky laws of such
jurisdictions as any seller reasonably requests in writing and do any and all
other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions, of the Registrable Notes or the Exchange Notes covered by
the Registered Exchange Offer or the Notes Shelf Registration, as the case may
be; provided, that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action which would subject it to general service of process or to taxation in
any such jurisdiction where it is not then so subject.
(g) The Company will cooperate with the holders of the
Registrable Notes and the Exchange Notes to facilitate the timely preparation
and delivery of certificates representing the Registrable Notes and the
Exchange Notes to be sold in the Registered Exchange Offer or the Notes Shelf
Registration, as the case may be, free of any restrictive legends and in such
denominations and registered in such names as the holders may request provided
such request complies with the Indenture, prior to sales of the Registrable
Notes or the Exchange Notes, pursuant to the Registered Exchange Offer or the
Notes Shelf Registration, as the case may be.
(h) Upon the occurrence of any event contemplated by paragraph
(b)(iv) above, the Company will prepare a post-effective amendment to the
registration statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Registrable Notes or the Exchange Notes, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading.
(i) Not later than the effective date of the applicable
registration statement, the Company will provide a CUSIP number for the
Registrable Notes or the Exchange Notes, as the case may be, and provide the
Trustee with printed certificates for the Registrable Notes or the Exchange
Notes, as the case may be, in a form eligible for deposit with The Depository
Trust Company.
(j) The Company will use its best efforts to comply with all
applicable rules and regulations of the Commission and will make generally
available to its security holders an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45 days after
the end of the 12-month period (or 90 days, if such period is a fiscal year)
beginning with the first
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<PAGE> 7
month of the Company's first fiscal quarter commencing after the effective date
of each of the Registered Exchange Offer and the Notes Shelf Registration,
which statements shall cover such 12-month period.
(k) The Company will cause the Indenture to be qualified under
the Trust Indenture Act of 1939 upon effectiveness of the registration
statement contemplated by Section 1(a) or Section 2(a).
(l) The Company may require each holder of Registrable Notes
to be sold pursuant to the Notes Shelf Registration, to furnish to the Company
such information regarding the holder and the distribution of such Registrable
Notes as the Company may from time to time reasonably require for inclusion in
the registration statement. The Company may exclude from such registration the
Registrable Notes of any holder who unreasonably fails to furnish such
information in writing to the Company within ten business days (or longer time
period if agreed by the Company in writing) after receiving such request. Each
holder of Registrable Notes included within the coverage of any Registration
Statement shall furnish promptly to the Company all information required by
applicable law to be disclosed by such party in order to make the information
previously furnished to the Company not materially misleading.
(m) Each holder of Registrable Notes agrees by acquisition of
such Registrable Notes or Exchange Notes to be sold that, upon receipt of any
notice from the Company of the happening of any Suspension Period of the kind
described in Section 2(b), such holder will forthwith discontinue disposition
of such Registrable Notes or Exchange Notes covered by such registration
statement or prospectus until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(h) hereof or is
advised in writing by the Company that use of the prospectus may be resumed.
4. Registration Expenses. The Company will bear all expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof and will bear or reimburse the holders of the Registrable
Notes for the reasonable fees and disbursements of one firm of counsel
designated by the holders of a majority in principal amount of the Registrable
Notes to act as counsel for the holders of the Registrable Notes in connection
therewith; provided that in any underwritten offering the Company shall not be
obligated to pay any underwriters' discounts and commissions nor any transfer
tax related to such offering.
5. Indemnification.
(a) Indemnification by Company. The Company shall indemnify
and hold harmless (i) the Initial Purchasers, (ii) in the case of the Notes
Shelf Registration, each holder of Registrable Notes, and (iii) in the case of
the Registered Exchange Offer, each Broker-Dealer who holds Exchange Notes
acquired for its own account pursuant to the Registered Exchange Offer, and,
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<PAGE> 8
in any such case, the Initial Purchasers' and such holder's officers,
directors, employees and agents and each person who controls an Initial
Purchaser, now or hereafter, and each such holder within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each such
person being sometimes hereinafter referred to as an "Indemnified Person") from
and against any and all losses, claims, damages, liabilities and judgments
arising out of or based upon any untrue statement or alleged untrue statement
of a material fact contained in any registration statement or prospectus or in
any amendment or supplement thereto relating to the Notes Shelf Registration or
the Registered Exchange Offer, as the case may be, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or allegation thereof based upon information relating to
such Indemnified Person furnished in writing to the Company by such Indemnified
Person expressly for use therein and used in conformity therewith; provided,
however, that in the event the Initial Purchasers or a Broker-Dealer are
required by law to deliver a final prospectus in connection with a Registered
Exchange Offer or a Note Shelf Registration and the indemnity obligations
arising under this Section 5(a) arise with respect to untrue statements or
omissions or untrue alleged statements or omissions made in a preliminary
prospectus, such indemnity obligations arising under this Section 5(a) shall
not inure to the benefit of the Initial Purchasers or any Broker-Dealer and its
controlling persons and their respective directors, officers and employees if
the person asserting any such Losses purchased the Notes from the Initial
Purchasers or such Broker-Dealer and if a copy of the final prospectus (as then
amended or supplemented if the Company shall have timely furnished any
amendments thereof or supplements thereto), was not sent or given by the
Initial Purchasers or such Broker-Dealer or on its behalf to such person at or
prior to the time such delivery was required by law, and if the final
prospectus (as then amended or supplemented if the Company shall have timely
furnished any amendments thereof or supplements thereto) would have cured the
defect giving rise to such Losses. The indemnity will be in addition to any
liability which the Company may otherwise have.
If any action or proceeding (including any governmental
investigation or inquiry) shall be brought or asserted against an Indemnified
Person, or notice of any such claim is received, in respect of which indemnity
may be sought from the Company, such Indemnified Person shall promptly notify
the Company in writing, and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person and the payment of all reasonable fees and expenses of such defense;
provided that the failure by any such Indemnified Person to so notify the
Company shall not relieve the Company of its indemnification obligations under
Section 5(a) hereof, except to the extent that the Company is materially
prejudiced or forfeits substantive rights and defenses by reason of such
failure. Such Indemnified Person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of such Indemnified
Person unless (A) the Company has agreed in writing to pay such fees and
expenses or (B) the Company shall have failed to assume the defense of such
action or proceeding and to employ counsel reasonably
-8-
<PAGE> 9
satisfactory to such Indemnified Person in any such action or proceeding within
a reasonable time after notice of commencement of such action or proceeding or
(C) the named parties to any such action or proceeding (including any impleaded
parties) include such Indemnified Person and the Company, and such Indemnified
Person shall have been advised in writing by counsel that there may be one or
more legal defenses available to such Indemnified Person that are different
from or additional to those available to the Company and in the reasonable
judgment of such counsel it is advisable for such Indemnified Party to employ
separate counsel (in which case, if such Indemnified Person notifies the
Company in writing that it elects to employ separate counsel at the expense of
the Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Person, it being understood,
however, that the Company shall not, in connection with any one such action or
separate but substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm
of attorneys (in addition to local counsel) at any time for such Indemnified
Person and any other Indemnified Persons, which firm shall be designated in
writing by such Indemnified Persons (which shall be reasonably satisfactory to
the Company), and that all such fees and expenses shall be reimbursed as they
are billed). The Company shall not be liable for any settlement of any such
action or proceeding effected without their written consent (which consent
shall not be unreasonably withheld), but if settled with their written consent,
or if there be a final, unappealable judgment for the plaintiff in any such
action or proceeding, the Company agrees to indemnify and hold harmless such
Indemnified Persons from and against any loss or liability by reason of such
settlement or judgment. The Company shall not, without the prior written
consent of the Indemnified Person (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is a party and indemnity has been
sought hereunder by such Indemnified Person; provided however, that the Company
may effect such a settlement without the consent of such Indemnified Person if
such settlement includes an unconditional release of such Indemnified Person
from all lability for claims that are the subject matter of such proceeding or
the Company indemnifies such Indemnified Person in writing and post a bond for
an amount equal to the maximum liability for all such claims as contemplated
above or provide other security for such indemnity as shall be reasonably
satisfactory to such Indemnified Person.
(b) Indemnification by Holders. Each holder of Registrable
Notes agrees to indemnify and hold harmless the Company, its directors and
officers, employees and agents and each person, if any, controlling the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such holder, but only with respect to information relating to such holder or
the distribution furnished in writing by such holder expressly for use in any
registration statement or prospectus or any amendment or supplement thereto or
any preliminary prospectus relating thereto, provided, however, that no such
holder shall be liable for any indemnity claims hereunder in excess of the
amount of net proceeds received by such holder from the sale of Registrable
Notes pursuant
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<PAGE> 10
to the Notes Shelf Registration. If any action or proceeding shall be brought
against the Company or its directors, officers, employees or agents or any such
controlling person, in respect of which indemnity may be sought against a
holder of Registrable Notes, such holder shall have the rights and duties given
the Company and the Company or their directors, officers, employees or agents
or such controlling person shall have the rights and duties given to each
holder by Section 5(a) hereof. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the
same extent as provided above with respect to information so furnished in
writing by such persons specifically for inclusion in any prospectus or
registration statement or any amendment or supplement thereto.
(c) Contribution. If the indemnification provided for in
this Section 5 is unavailable to an indemnified party under Section 5(a) or
Section 5(b) hereof (other than by reason of exceptions provided in those
Sections) in respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or judgments in such proportion as is appropriate to reflect not
only the relative benefits but also the relative fault of the Company on the
one hand and of the Indemnified Person on the other in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Indemnified Person on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Indemnified Person and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 5(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company and the holders of the Registrable Notes and Exchange
Notes agree that it would not be just and equitable if contribution pursuant to
this Section 5(c) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
6. Additional Interest Under Certain Circumstances; Remedies.
If the Company fails to file within 60 days, or cause to become
effective within 120 days, the registration statement relating to the
Registered Exchange Offer or the Notes Shelf Registration, as applicable, or
(subject to Section 2(b)) the Notes Shelf Registration is declared
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<PAGE> 11
effective but thereafter ceases to be effective in connection with resales of
the Registrable Notes (each such event, a "Registration Default"), then the
Company agrees to pay to each holder of Registrable Notes, accruing from the
date of the first such Registration Default (except in the event of the
commencement of a Suspension Period, in which case occurring from the 60th day
therefrom), liquidated damages in an amount equal to one-half of one percent
(.5%) per annum of the principal amount of Registrable Notes held by such
holder during the first 180-day period immediately following the occurrence of
the first such Registration Default, increasing by an additional one-half of
one percent (0.5%) per annum of the principal amount of such Registrable Notes
during each subsequent 180-day period, up to a maximum amount of liquidated
damages equal to two percent (2.0%) per annum of the principal amount of such
Registrable Notes ("Notes Liquidated Damages"), and ceasing to accrue on the
date such Registration Default has been cured by, as applicable, the filing,
declaration of effectiveness or withdrawal of suspension of effectiveness of
the applicable registration statement. The Company shall notify the Trustee
within one business day after (i) each and every Registration Default and (ii)
the date the Registration Default has been so cured. Until the Trustee and the
Paying Agent have received an Officers' Certificate from the Company to the
effect that all Notes Liquidated Damages then due have been paid in full, the
Company (in respect of any payment date) shall pay Notes Liquidated Damages
then due by depositing with the Trustee, in trust, for the benefit of the
affected holders of Registrable Notes, on or before the applicable semi-annual
interest payment date, immediately available funds in sums sufficient to pay
the liquidated damages then due and provide to the Trustee and the Paying Agent
a list of holders entitled to Notes Liquidated Damages together with the amount
of cash such holder is due. The Notes Liquidated Damages amount due shall be
payable as additional interest (from funds received pursuant to such deposit)
on each interest payment date to the record holder of Registrable Notes
entitled to receive the interest payment to be made on such date as set forth
in the Indenture.
7. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of holders of a majority in aggregate principal
amount of the Registrable Notes (insofar as such matters relate to the
Registrable Notes) or the Exchange Notes (insofar as such matters relate to the
Exchange Notes).
(b) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery, first-
class mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Notes or Exchange
Notes, at the most current address given by such holder to the Company
in accordance with the provisions of this Section 7(b), which address
initially is, with respect to each holder, the address of such holder to
which confirmation of the sale of the Notes was first sent by the
Initial Purchasers,
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<PAGE> 12
with a copy in like manner to Jefferies & Company, Inc., 11100 Santa
Monica Blvd., 10th Floor, Los Angeles, California 90025, Attention:
Corporate Finance Department;
(ii) if to the Initial Purchasers, to the address set
forth in clause (b)(i) above; and
(iii) if to the Company, initially at its address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged by recipient's
telecopy operator, if telecopied; and on the day delivered, if sent by
overnight air courier guaranteeing next day delivery.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of the Registrable Notes.
(d) Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of laws to the extent the application of the
law of another jurisdiction would be required thereby.
(g) Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
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<PAGE> 13
REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above:
Very truly yours,
NATIONAL ENERGY GROUP, INC.
By:
-------------------------------
Name:
------------------------------
Title:
-----------------------------
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<PAGE> 14
REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE
Accepted and agreed to as of
the first date written above
JEFFERIES & COMPANY, INC.
PRUDENTIAL SECURITIES INCORPORATED
By: Jefferies & Company, Inc.
By:
-------------------------------
Name:
------------------------------
Title:
-----------------------------
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<PAGE> 1
EXHIBIT 5.1
[AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P. LETTERHEAD]
August 16, 1997
National Energy Group Inc.
4925 Greenville Avenue
Suite 1400
Dallas, Texas 75206
Ladies and Gentlemen:
We have acted as counsel for National Energy Group, Inc. a Delaware
corporation (the "Company") in connection with the proposed offer by the
Company to exchange (the "Exchange Offer") all outstanding 10 3/4% Series C
Senior Notes Due 2006 ($65 million principal amount outstanding) (the
"Outstanding Notes") and all outstanding 10 3/4% Series B Senior Notes due 2006
($100 million principal amount) (the "Series B Notes') for 10 3/4% Series D
Senior Notes Due 2006 ($165 million principal amount) (the "Exchange Notes").
The Series B Notes have been issued pursuant to an Indenture dated as of
November 1, 1996 (the "Series B Indenture"). The Outstanding Notes have been,
and the Exchange Notes will be, issued pursuant to an Indenture dated as of
August 21, 1997, (the "Indenture"), among the Company and Bank One, N.A., as
trustee (the "Trustee"). Unless otherwise defined herein capitalized terms used
in this opinion shall have the meanings set forth in the Indenture.
The law covered by the opinions expressed herein is limited to the
Federal laws of the United States, the laws of the State of New York and the
State of Texas and the General Corporation Law of the State of Delaware. This
firm is a registered limited liability partnership organized under the laws of
the State of Texas.
We have examined the Indenture and the form of Exchange Notes, which
are filed as Exhibit 4.4 to the Registration Statement, the Registration
Statement on Form S-4, filed by the Company with the Securities and Exchange
Commission, for the registration of the Exchange Notes under the Securities Act
of 1933 (the Registration Statement as amended at the time it becomes effective
being referred to as the "Registration Statement") and such corporate records
of the Company, certificates of public officials and such other documents as we
have deemed necessary or appropriate for the purpose of this opinion.
Based upon such examination and review, we are of the opinion that:
The Exchange Notes proposed to be issued by the Company pursuant to
the Exchange Offer have been duly authorized for issuance and, subject
to the Registration Statement becoming effective under the Securities
Act of 1933, and to compliance with any applicable state securities
laws, the Exchange Notes when issued, delivered by the Company,
authenticated by the Trustee and delivered and sold in accordance with
the Indenture, will be valid and binding obligations of the Company.
<PAGE> 2
The opinion expressed herein as to the valid, binding and enforceable
nature of the Notes is subject to the exceptions that (i) enforcement may be
limited by bankruptcy, insolvency (including without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or similar laws
affecting enforcement of creditors' rights generally, and (ii) enforcement is
subject to general principle of equity (regardless of whether enforcement is
considered a proceeding in equity or at law). In addition, the foregoing
opinion is subject to the qualifications that certain remedial, waiver and
other similar provisions of the Indenture may not be enforceable in whole or in
part under the laws of the State of New York or the United States, but such
provisions do not void the Indenture or frustrate the basic purpose thereof,
and, subject to the other qualifications set forth in this opinion the
Indenture contains adequate provisions for the practical realization of the
rights and benefits afforded thereby, except for the economic consequences of
any judicial, administrative or other delay or procedure which may be imposed
by applicable federal and state law, rules, regulations and court decisions and
by constitutional requirements in and of the State of New York or the United
States. In addition, we express no opinion as to (i) the enforceability of any
provisions contained in the Indenture purporting to waive the benefits of any
stay, extension or usury law or waive any rights under any applicable statutes
or rules thereafter enacted or promulgated or (ii) the validity, legally
binding effect or enforceability of any provision of any agreement that
requires or relates to payment of any interest at a rate or in an amount which
a court would determine in the circumstances under applicable law to the
commercially unreasonable or a penalty or a forfeiture. In addition, the rights
to indemnification contained in the Indenture may be limited by Federal or New
York State laws or the policies underlying such laws.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to the firm under "Legal Matters"
in the Prospectus forming a part of the Registration Statement.
Sincerely,
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
<PAGE> 1
Exhibit 12.1
NATIONAL ENERGY GROUP, INC.
COMPUTATION OF HISTORICAL RATIO OF EARNINGS
TO FIXED CHARGES
(IN THOUSANDS, EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
Pro Forma
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income
taxes and extraordinary Items $ (221) $ (299) $ (489) $ 206 $(40,061) $ (7,640)
Interest expense 131 137 498 995 3,621 18,589
Amortization of debt issuance
cost 43 51 19 37 151 213
Interest portion of rental
expense 8 8 21 34 37 37
-------- -------- -------- -------- -------- ---------
Earnings (loss) $ (39) $ (103) $ 49 $ 1,272 $(36,252) $ 11,199
======== ======== ======== ======== ======== =========
Fixed charges:
Interest, including capitalized
portion $ 131 $ 137 $ 498 $ 995 $ 3,621 $ 18,589
Amortization of debt issuance 43 51 19 37 151 213
cost
Interest portion of rental
expense 8 8 21 34 37 37
-------- -------- -------- -------- -------- ---------
Fixed charges $ 182 $ 196 $ 538 $ 1,066 $ 3,809 $ 18,839
======== ======== ======== ======== ======== ==========
Ratio of earnings to fixed charges -- -- 1.2x -- --
======== ======== ======== ======== ======== ==========
Deficiency of earnings to fixed
charges $ (221) $ (299) $ (489) -- $(40,061) $ (7,640)
======== ======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------------
Pro Forma
1996 1997 1997
-------- -------- ---------
<S> <C> <C> <C>
Earnings:
Income (loss) before income
taxes and extraordinary Items $ 869 $ 2,815 $ 252
Interest expense 896 5,454 7,624
Amortization of debt issuance
cost 45 270 44
Interest portion of rental
expense 26 45 45
-------- -------- ---------
Earnings (loss) $ 1,836 $ 8,584 $ 7,965
======== ======== =========
Fixed charges:
Interest, including capitalized
portion $ 896 $ 5,454 $ 8,350
Amortization of debt issuance 45 270 44
cost
Interest portion of rental
expense 26 45 45
-------- -------- ---------
Fixed charges $ 967 $ 5,769 $ 8,439
======== ======== =========
Ratio of earnings to fixed charges 1.9x 1.5x --
======== ======== =========
Deficiency of earnings to fixed
charges -- -- (474)
======== ======== =========
</TABLE>
8
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the caption Experts and
to the use of our report dated March 18, 1997, in the Registration Statement
(Form S-4) and related Prospectus of National Energy Group, Inc. for the
registration of $165 million of 10 3/4% Series D Senior Notes due 2006. We also
consent to the incorporation by reference therein of our report dated March 30,
1996, except Notes 4 and 13 for which date is May 10, 1996 with respect to the
consolidated financial statements of Alexander Energy Corporation included in
the Company's Proxy Statement filed, as part of, or in conjunction with, the
Registration Statement on Form S-4, as amended, declared effective August 3,
1996.
ERNST & YOUNG LLP
Dallas, Texas
October 14, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of National Energy Group, Inc. (File No. 333- ) of our report,
which includes an explanatory paragraph relating to the Company's adoption of
different methods of accounting for its oil and gas properties and income
taxes, dated February 22, 1994, on our audit of the consolidated financial
statements of American Natural Energy Corporation and Subsidiaries, (the
"Company") for the year ended December 31, 1993.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
October 14, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our reserve report to the interest of National Energy
Group, Inc. dated March 6, 1997, relating to the estimated quantities of
certain of the Company's proved reserves of oil and gas and the related
estimates of future net revenue and present values thereof, included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, as
well as in the Notes to the Consolidated Financial Statements of the Company in
such Annual Report. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ CLARENCE M. NETHERLAND
------------------------------
Clarence M. Netherland
Chairman
Dallas, Texas
October 14, 1997
<PAGE> 1
EXHIBIT 25.1
Registration No. ____________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE, N.A. f/k/a BANK ONE, COLUMBUS, N.A.
Not Applicable 31-4148768
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 East Broad Street, Columbus, Ohio 43271-0181
(Address of trustee's principal (Zip Code) executive offices)
Jon Beacham
c/o Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43271-0181
(614) 248-6229
(Name, address and telephone number of agent for service)
National Energy Group, Inc.
(Exact name of obligor as specified in its charter)
Delaware 58-1922764
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4925 Greenville Avenue 75206
Suite 1400, Dallas, Texas (Zip Code)
(Address of principal executive
office)
10 3/4% Series D Senior Notes
(Title of the Indenture securities)
<PAGE> 2
GENERAL
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.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
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.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
16. List of Exhibits
List below all exhibits filed as a part of this statement of
eligibility and qualification. (Exhibits identified in parentheses,
on file with the Commission, are incorporated herein by reference as
exhibits hereto.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business, see Exhibit 2 to Form T-1, filed in connection with Form S-3 relating
to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003, Securities and
Exchange Commission File No. 33-50709.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers, see Exhibit 3 to Form T-1, filed in connection with Form S-3
relating to Wheeling-Pittsburgh Corporation 9 3/8% Senior Notes due 2003,
Securities and Exchange Commission File No. 33-50709.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE> 3
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - Report of Condition of the trustee as of the close of business on
June 30, 1997, published pursuant to the requirements of the Comptroller of the
Company, see attached.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the National Banking Act, has duly caused this statement of eligibility
and qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, all in Columbus, Ohio, on October 10, 1997.
Bank One, NA
By: /s/ Jon Beacham
-----------------------------
Jon Beacham
Authorized Signer
<PAGE> 4
Exhibit 1
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLES OF ASSOCIATION
For the purpose of organizing an association to carry on the business of
banking under the laws of the United States, the following Articles of
Association are entered into:
FIRST. The title of this Association shall be BANK ONE, COLUMBUS, NATIONAL
ASSOCIATION.
SECOND. The main office of the Association shall be in Columbus, County
of Franklin, State of Ohio. The general business of the Association shall be
conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five Directors, the exact number of
Directors within such minimum and maximum limits to be fixed and determined
from time-to- time by resolution of the shareholders at any annual or special
meeting thereof, provided, however, that the Board of Directors, by resolution
of a majority thereof, shall be authorized to increase the number of its
members by not more than two between regular meetings of the shareholders.
Each Director, during the full term of his directorship, shall own, as
qualifying shares, the minimum number of shares of either this Association or
of its parent bank holding company in accordance with the provisions of
applicable law. Unless otherwise provided by the laws of the United States,
any vacancy in the Board of Directors for any reason, including an increase in
the number thereof, may be filled by action of the Board of Directors.
-4-
<PAGE> 5
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office of this Association or such other
place as the Board of Directors may designate, on the day of each year
specified therefor in the By-Laws, but if no election is held on that day, it
may be held on any subsequent business day according to the provisions of law;
and all elections shall be held according to such lawful regulations as may be
prescribed by the Board of Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be 2,073,750 shares of common stock of the par value of Ten Dollars ($10) each;
but said capital stock may be increased or decreased from time-to-time, in
accordance with the provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
Association shall have the preemptive or preferential right of subscription to
any share of any class of stock of this Association, whether now or hereafter
authorized or to any obligations convertible into stock of this Association,
issued or sold, nor any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, may from time-to-time
determine and at such price as the Board of Directors may from time-to-time
fix.
This Association, at any time and from time-to-time, may authorize
and issue debt obligations, whether or not subordinated, without the approval
of the shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of the Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall
have the power to appoint one or more Vice Presidents and to appoint a
Secretary and such other officers and employees as may be required to transact
the business of this Association.
-5-
<PAGE> 6
The Board of Directors shall have the power to define the duties
of the officers and employees of this Association; to fix the salaries to be
paid to them; to dismiss them; to require bonds from them and to fix the
penalty thereof; to regulate the manner in which any increase of the capital of
this Association shall be made; to manage and administer the business and
affairs of this Association; to make all By-Laws that it may be lawful for them
to make; and generally to do and perform all acts that it may be legal for a
Board of Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, Ohio, without the approval of the shareholders but subject to the
approval of the Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of this Association
to any other location, without the approval of the shareholders but subject to
the approval of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time.
Unless otherwise provided by the laws of the United States, a notice of the
time, place and purpose of every annual and special meeting of the shareholders
shall be given by first-class mail, postage prepaid, mailed at least ten days
prior to the date of such meeting to each shareholder of record at his address
as shown upon the books of this Association.
-6-
<PAGE> 7
TENTH. Every person who is or was a Director, officer or employee of the
Association or of any other corporation which he served as a Director, officer
or employee at the request of the Association as part of his regularly assigned
duties may be indemnified by the Association in accordance with the provisions
of this paragraph against all liability (including, without limitation,
judgments, fines, penalties and settlements) and all reasonable expenses
(including, without limitation, attorneys' fees and investigative expenses)
that may be incurred or paid by him in connection with any claim, action, suit
or proceeding, whether civil, criminal or administrative (all referred to
hereafter in this paragraphs as "Claims") or in connection with any appeal
relating thereto in which he may become involved as a party or otherwise or
with which he may be threatened by reason of his being or having been a
Director, officer or employee of the Association or such other corporation, or
by reason of any action taken or omitted by him in his capacity as such
Director, officer or employee, whether or not he continues to be such at the
time such liability or expenses are incurred, provided that nothing contained
in this paragraph shall be construed to permit indemnification of any such
person who is adjudged guilty of, or liable for, willful misconduct, gross
neglect of duty or criminal acts, unless, at the time such indemnification is
sought, such indemnification in such instance is permissible under applicable
law and regulations, including published rulings of the Comptroller of the
Currency or other appropriate supervisory or regulatory authority, and provided
further that there shall be no indemnification of directors, officers, or
employees against expenses, penalties, or other payments incurred in an
administrative proceeding or action instituted by an appropriate regulatory
agency which proceeding or action results in a final order assessing civil
money penalties or requiring affirmative action by an individual or individuals
in the form of payments to the Association. Every person who may be
indemnified under the provisions of this paragraph and who has been wholly
successful on the merits with respect to any Claim shall be entitled to
indemnification as of right. Except as provided in the preceding sentence, any
indemnification under this paragraph shall be at the sole discretion of the
Board of Directors and shall be made only if the Board of Directors or the
Executive Committee acting by a quorum consisting of
-7-
<PAGE> 8
Directors who are not parties to such Claim shall find or if independent legal
counsel (who may be the regular counsel of the Association) selected by the
Board of Directors or Executive Committee whether or not a disinterested quorum
exists shall render their opinion that in view of all of the circumstances then
surrounding the Claim, such indemnification is equitable and in the best
interests of the Association. Among the circumstances to be taken into
consideration in arriving at such a finding or opinion is the existence or
non-existence of a contract of insurance or indemnity under which the
Association would be wholly or partially reimbursed for such indemnification,
but the existence or non-existence of such insurance is not the sole
circumstance to be considered nor shall it be wholly determinative of whether
such indemnification shall be made. In addition to such finding or opinion, no
indemnification under this paragraph shall be made unless the Board of
Directors or the Executive Committee acting by a quorum consisting of Directors
who are not parties to such Claim shall find or if independent legal counsel
(who may be the regular counsel of the Association) selected by the Board of
Directors or Executive Committee whether or not a disinterested quorum exists
shall render their opinion that the Director, officer or employee acted in good
faith in what he reasonably believed to be the best interests of the
Association or such other corporation and further in the case of any criminal
action or proceeding, that the Director, officer or employee reasonably
believed his conduct to be lawful. Determination of any Claim by judgment
adverse to a Director, officer or employee by settlement with or without Court
approval or conviction upon a plea of guilty or of nolo contendere or its
equivalent shall not create a presumption that a Director, officer or employee
failed to meet the standards of conduct set forth in this paragraph. Expenses
incurred with respect to any Claim may be advanced by the Association prior to
the final disposition thereof upon receipt of an undertaking satisfactory to
the Association by or on behalf of the recipient to repay such amount unless it
is ultimately determined that he is entitled to indemnification under this
paragraph. The rights of indemnification provided in this paragraph shall be
in addition to any rights to which any Director, officer or employee may
otherwise be entitled by contract or as a matter of law.
-8-
<PAGE> 9
Every person who shall act as a Director, officer or employee of this
Association shall be conclusively presumed to be doing so in reliance upon the
right of indemnification provided for in this paragraph.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
-9-
<PAGE> 10
Exhibit 4
BY-LAWS
OF
BANK ONE, COLUMBUS, NATIONAL ASSOCIATION
ARTICLE I
MEETING OF SHAREHOLDERS
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the Shareholders
of the Bank for the election of Directors and for the transaction of such
business as may properly come before the meeting shall be held at its main
banking house, or other convenient place duly authorized by the Board of
Directors, on the third Monday of January of each year, or on the next
succeeding banking day, if the day fixed falls on a legal holiday. If from any
cause, an election of directors is not made on the day fixed for the regular
meeting of shareholders or, in the event of a legal holiday, on the next
succeeding banking day, the Board of Directors shall order the election to be
held on some subsequent day, as soon thereafter as practicable, according to
the provisions of law; and notice thereof shall be given in the manner herein
provided for the annual meeting. Notice of such annual meeting shall be given
by or under the direction of the Secretary or such other officer as may be
designated by the Chief Executive Officer by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as
shown upon the books of the Bank mailed not less than ten days prior to the
date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of this
Bank may be called at any time by the Board of Directors or by any three or
more shareholders owning, in the aggregate, not less than ten percent of the
stock of this Bank. The notice of any special meeting of the shareholders
called by the Board of Directors, stating the time, place and purpose of the
meeting, shall be given by or under the direction of the Secretary, or such
other officer as is designated by the Chief Executive Officer, by first-class
mail, postage prepaid, to all shareholders of
-10-
<PAGE> 11
record of the Bank at their respective addresses as shown upon the books of the
Bank, mailed not less than ten days prior to the date fixed for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF SHAREHOLDERS' MEETING. The Board of Directors may
designate a person to be the Secretary of the meetings of shareholders. In the
absence of a presiding officer, as designated in these By-Laws, the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a Secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as Secretary
of the meeting.
The Secretary of the meetings of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded in the
minute book of the Bank. The presiding officer shall notify the
directors-elect of their election and to meet forthwith for the organization of
the new board.
The minutes of the meeting shall be signed by the presiding officer and
the Secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many
as three shareholders to be judges of the election, who shall hold and conduct
the same, and who shall, after the election has been held, notify, in writing
over their signatures, the secretary of the shareholders' meeting of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election at
the request of the chairman of the
-11-
<PAGE> 12
meeting, shall act as tellers of any other vote by ballot taken at such
meeting, and shall notify, in writing over their signatures, the secretary of
the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall
have the right to vote the number of shares of record in his name for as many
persons as there are Directors to be elected, or to cumulate such shares as
provided by Federal Law. In deciding all other questions at meetings of
shareholders, each shareholder shall be entitled to one vote on each share of
stock of record in his name. Shareholders may vote by proxy duly authorized in
writing. All proxies used at the annual meeting shall be secured for that
meeting only, or any adjournment thereof, and shall be dated, and if not dated
by the shareholder, shall be dated as of the date of receipt thereof. No
officer or employee of this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to
time until a quorum is obtained. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
-12-
<PAGE> 13
ARTICLE II
DIRECTORS
SECTION 2.01. MANAGEMENT OF THE BANK. The business of the Bank shall be
managed by the Board of Directors. Each director of the Bank shall be the
beneficial owner of a substantial number of shares of BANC ONE CORPORATION and
shall be employed either in the position of Chief Executive Officer or active
leadership within his or her business, professional or community interest which
shall be located within the geographic area in which the Bank operates, or as
an executive officer of the Bank. A director shall not be eligible for
nomination and re-election as a director of the Bank if such person's executive
or leadership position within his or her business, professional or community
interests which qualifies such person as a director of Bank terminates. The
age of 70 is the mandatory retirement age as a director of the Bank. When a
person's eligibility as director of the Bank terminates, whether because of
change in share ownership, position, residency or age, within 30 days after
such termination, such person shall submit his resignation as a director to be
effective at the pleasure of the Board provided, however, that in no event
shall such person be nominated or elected as a director. Provided, however,
following a person's retirement or resignation as a director because of the age
limitations herein set forth with respect to election or re-election as a
director, such person may, in special or unusual circumstances, and at the
discretion of the Board, be elected by the directors as a Director Emeritus of
the Bank for a limited period of time. A Director Emeritus shall have the
right to participate in board meetings but shall be without the power to vote
and shall be subject to re-election by the Board at its organizational meeting
following the Bank's annual meeting of shareholders.
SECTION 2.02. QUALIFICATIONS. Each director shall have the qualification
prescribed by law. No person elected a director may exercise any of the powers
of his office until he has taken the oath of such office.
-13-
<PAGE> 14
SECTION 2.03. TERM OF OFFICE/VACANCIES. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to his prior
death, resignation, or removal from office. Whenever any vacancy shall occur
among the directors, the remaining directors shall constitute the directors of
the Bank until such vacancy is filled by the remaining directors, and any
director so appointed shall hold office for the unexpired term of his or her
successor. Notwithstanding the foregoing, each director shall hold office and
serve at the pleasure of the Board.
SECTION 2.04. ORGANIZATION MEETING. The directors elected by the share-
holders shall meet for organization of the new board at the time fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time
to time until a quorum is obtained. A majority of the number of Directors
elected by the shareholders shall constitute a quorum for the transaction of
business.
SECTION 2.05. REGULAR MEETINGS. The regular meetings of the Board of
Directors shall be held on the third Monday of each calendar month excluding
March and July, which meeting will be held at 4:00 p.m. When any regular
meeting of the Board falls on a holiday, the meeting shall be held on such
other day as the Board may previously designate or should the Board fail to so
designate, on such day as the Chairman of the Board of President may fix.
Whenever a quorum is not present, the directors in attendance shall adjourn the
meeting to a time not later than the date fixed by the Bylaws for the next
succeeding regular meeting of the Board.
SECTION 2.06. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held at the call of the Chairman of the Board or President, or at the
request of two or more Directors. Any special meeting may be held at such
place in Franklin County, Ohio, and at such time as may be fixed in the call.
Written or oral notice shall be given to each Director not later than the day
next preceding the day on which special meeting is to be held, which notice may
be waived in writing.
-14-
<PAGE> 15
The presence of a Director at any meeting of the Board shall be deemed a waiver
of notice thereof by him. Whenever a quorum is not present the Directors in
attendance shall adjourn the special meeting from day to day until a quorum is
obtained.
SECTION 2.07. QUORUM. A majority of the Directors shall constitute a quorum
at any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held, as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank
may be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.08. COMPENSATION. Each member of the Board of Directors shall
receive such fees for, and transportation expenses incident to, attendance at
Board and Board Committee Meetings and such fees for service as a Director
irrespective of meeting attendance as from time to time are fixed by resolution
of the Board; provided, however, that payment hereunder shall not be made to a
Director for meetings attended and/or Board service which are not for the
Bank's sole benefit and which are concurrent and duplicative with meetings
attended or board service for an affiliate of the Bank for which the Director
receives payment; and provided further, that payment hereunder shall not be
made in the case of any Director in the regular employment of the Bank or of
one of its affiliates.
SECTION 2.09. EXECUTIVE COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all powers of the Board that may
lawfully be delegated. The Executive Committee shall also exercise the powers
of the Board of Directors in accordance with the Provisions of the "Employees
Retirement Plan" and the "Agreement and Declaration of Trust" as the same now
-15-
<PAGE> 16
exist or may be amended hereafter. The Executive Committee shall consist of
not fewer than four board members, including the Chairman of the Board and
President of the Bank, one of whom, as hereinafter required by these By-laws,
shall be the Chief Executive Officer. The other members of the Committee shall
be appointed by the Chairman of the Board or by the President, with the
approval of the Board and shall continue as members of the Executive Committee
until their successors are appointed, provided, however, that any member of the
Executive Committee may be removed by the Board upon a majority vote thereof at
any regular or special meeting of the Board. The Chairman or President shall
fill any vacancy in the Committee by the appointment of another Director,
subject to the approval of the Board of Directors. The regular meetings of the
Executive Committee shall be held on a regular basis as scheduled by the Board
of Directors. Special meetings of the Executive Committee shall be held at the
call of the Chairman or President or any two members thereof at such time or
times as may be designated. In the event of the absence of any member or
members of the Committee, the presiding member may appoint a member or members
of the Board to fill the place or places of such absent member or members to
serve during such absence. Not fewer than three members of the Committee must
be present at any meeting of the Executive Committee to constitute a quorum,
provided, however that with regard to any matters on which the Executive
Committee shall vote, a majority of the Committee members present at the
meeting at which a vote is to be taken shall not be officers of the Bank and,
provided further, that if, at any meeting at which the Chairman of the Board
and President are both present, Committee members who are not officers are not
in the majority, then the Chairman of the Board or President, which ever of
such officers is not also the Chief Executive Officer, shall not be eligible to
vote at such meeting and shall not be recognized for purposes of determining if
a quorum is present at such meeting. When neither the Chairman of the Board
nor President are present, the Committee shall appoint a presiding officer.
The Executive Committee shall keep a record of its proceedings and report its
proceedings and the action taken by it to the Board of Directors.
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<PAGE> 17
SECTION 2.10 COMMUNITY REINVESTMENT ACT AND COMPLIANCE POLICY COMMITTEE.
There shall be a standing committee of the Board of Directors known as the
Community Reinvestment Act and Compliance Policy Committee the duties of which
shall be, at least once in each calendar year, to review, develop and recommend
policies and programs related to the Bank's Community Reinvestment Act
Compliance and regulatory compliance with all existing statutes, rules and
regulations affecting the Bank under state and federal law. Such Committee
shall provide and promptly make a full report of such review of current Bank
policies with regard to Community Reinvestment Act and regulatory compliance in
writing to the Board, with recommendations, if any, which may be necessary to
correct any unsatisfactory conditions. Such Committee may, in its discretion,
in fulfilling its duties, utilize the Community Reinvestment Act officers of
the Bank, Banc One Ohio Corporation and Banc One Corporation and may engage
outside Community Reinvestment Act experts, as approved by the Board, to
review, develop and recommend policies and programs as herein required. The
Community Reinvestment Act and regulatory compliance policies and procedures
established and the recommendations made shall be consistent with, and shall
supplement, the Community Reinvestment Act and regulatory compliance programs,
policies and procedures of Banc One Corporation and Banc One Ohio Corporation.
The Community Reinvestment Act and Compliance Policy Committee shall consist of
not fewer than four board members, one of whom shall be the Chief Executive
Officer and a majority of whom are not officers of the Bank. Not fewer than
three members of the Committee, a majority of whom are not officers of the
Bank, must be present to constitute a quorum. The Chairman of the Board or
President of the Bank, whichever is not the Chief Executive Officer, shall be
an ex officio member of the Community Reinvestment Act and Compliance Policy
Committee. The Community Reinvestment Act and Compliance Policy Committee,
whose chairman shall be appointed by the Board, shall keep a record of its
proceedings and report its proceedings and the action taken by it to the Board
of Directors.
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<PAGE> 18
SECTION 2.11. TRUST COMMITTEES. There shall be two standing Committees known
as the Trust Management Committee and the Trust Examination Committee appointed
as hereinafter provided.
SECTION 2.12. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
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<PAGE> 19
ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary and
Security Officer and may include a Chairman of the Board, one or
more Vice Chairmen, one or more Vice Presidents (which may include
one or more Executive Vice Presidents and/or Senior Vice
Presidents) and one or more Assistant Secretaries, all of whom
shall be elected by the Board. All other officers may be elected
by the Board or appointed in writing by the Chief Executive
Officer. The salaries of all officers elected by the Board shall
be fixed by the Board. The Board from time-to-time shall
designate the President or Chairman of the Board to serve as the
Bank's Chief Executive Officer.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and
Chairman of the Board shall be re-elected by the Board annually at
the organizational meeting of the Board of Directors following the
Annual Meeting of Shareholders. Such officers as the Board shall
elect from their own number shall hold office from the date of
their election as officers until the organization meeting of the
Board of Directors following the next Annual Meeting of
Shareholders, provided, however, that such officers may be
relieved of their duties at any time by action of the Board in
which event all the powers incident to their office shall
immediately terminate.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed,
shall hold office at the pleasure of the Board. Except as
otherwise limited by law or these By-laws, the Board assigns to
Chief Executive Officer and/or his
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<PAGE> 20
designees the authority to appoint and dismiss any elected or
appointed officer or other member of the Bank's management staff
and other employees of the Bank, as the person in charge of and
responsible for any branch office, department, section, operation,
function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and
such other persons in the employment of the Bank who, pursuant to
written appointment and authorization by a duly authorized officer
of the Bank, perform management functions and have management
responsibilities. Any two or more offices may be held by the same
person except that no person shall hold the office of Chairman of
the Board and/or President and at the same time also hold the
office of Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of
the Bank, to the extent that such officer is authorized in writing
by the Chief Executive Officer, may appoint persons other than
officers who are in the employment of the Bank to serve in
management positions and in connection therewith, the appointing
officer may assign such title, salary, responsibilities and
functions as are deemed appropriate by him, provided, however,
that nothing contained herein shall be construed as placing any
limitation on the authority of the Chief Executive Officer as
provided in this and other sections of these By-Laws.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Bank shall have general and active management of the business of the Bank and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. Except as otherwise prescribed or limited by these By-Laws, the
Chief Executive Officer shall have full right, authority and power to control
all personnel, including elected and appointed officers, of the Bank, to employ
or direct the
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<PAGE> 21
employment of such personnel and officers as he may deem necessary, including
the fixing of salaries and the dismissal of them at pleasure, and to define and
prescribe the duties and responsibility of all Officers of the Bank, subject to
such further limitations and directions as he may from time-to-time deem
proper. The Chief Executive Officer shall perform all duties incident to his
office and such other and further duties, as may, from time-to-time, be
required of him by the Board of Directors or the shareholders. The
specification of authority in these By-Laws wherever and to whomever granted
shall not be construed to limit in any manner the general powers of delegation
granted to the Chief Executive Officer in conducting the business of the Bank.
The Chief Executive Officer or, in his absence, the Chairman of the Board or
President of the Bank, as designated by the Chief Executive Officer, shall
preside at all meetings of shareholders and meetings of the Board. In the
absence of the Chief Executive Officer, such officer as is designated by the
Chief Executive Officer shall be vested with all the powers and perform all the
duties of the Chief Executive Officer as defined by these By-Laws. When
designating an officer to serve in his absence, the Chief Executive Officer
shall select an officer who is a member of the Board of Directors whenever such
officer is available.
SECTION 3.03. POWERS OF OFFICERS AND MANAGEMENT STAFF. The Chief Executive
Officer, the Chairman of the Board, the President, and those officers so
designated and authorized by the Chief Executive Officer are authorized for an
on behalf of the Bank, and to the extent permitted by law, to make loans and
discounts; to purchase or acquire drafts, notes, stock, bonds, and other
securities for investment of funds held by the Bank; to execute and purchase
acceptances; to appoint, empower and direct all necessary agents and attorneys;
to sign and give any notice required to be given; to demand payment and/or to
declare due for any default any debt or obligation due or payable to the Bank
upon demand or authorized to be declared due; to foreclose any mortgages, to
exercise any option, privilege or election to forfeit, terminate, extend or
renew any lease; to authorize and direct any proceedings for the collection of
any money or for the enforcement
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<PAGE> 22
of any right or obligation; to adjust, settle and compromise all claims of
every kind and description in favor of or against the Bank, and to give
receipts, releases and discharges therefor; to borrow money and in connection
therewith to make, execute and deliver notes, bonds or other evidences of
indebtedness; to pledge or hypothe- cate any securities or any stocks, bonds,
notes or any property real or personal held or owned by the Bank, or to
rediscount any notes or other obligations held or owned by the Bank, to employ
or direct the employment of all personnel, including elected and appointed
officers, and the dismissal of them at pleasure, and in furtherance of and in
addition to the powers hereinabove set forth to do all such acts and to take
all such proceedings as in his judgment are necessary and incidental to the
operation of the Bank.
Other persons in the employment of the Bank, including but not limited to
officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer being a member of the Bank's management
staff who is also a person in charge of and responsible for any department
within the Bank and any other officer to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of the
Board, the President, or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
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<PAGE> 23
the Bank, are hereby authorized on behalf of the Bank to sell, assign, lease,
mortgage, transfer, deliver and convey any real or personal property now or
hereafter owned by or standing in the name of the Bank or its nominee, or held
by this Bank as collateral security, and to execute and deliver such deeds,
contracts, leases, assignments, bills of sale, transfers or other papers or
documents as may be appropriate in the circumstances; to execute any loan
agreement, security agreement, commitment letters and financing statements and
other documents on behalf of the Bank as a lender; to execute purchase orders,
documents and agreements entered into by the Bank in the ordinary course of
business, relating to purchase, sale, exchange or lease of services, tangible
personal property, materials and equipment for the use of the Bank; to execute
powers of attorney to perform specific or general functions in the name of or
on behalf of the Bank; to execute promissory notes or other instruments
evidencing debt of the Bank; to execute instruments pledging or releasing
securities for public funds, documents submitting public fund bids on behalf of
the Bank and public fund contracts; to purchase and acquire any real or
personal property including loan portfolios and to execute and deliver such
agreements, contracts or other papers or documents as may be appropriate in the
circumstances; to execute any indemnity and fidelity bonds, proxies or other
papers or documents of like or different character necessary, desirable or
incidental to the conduct of its banking business; to execute and deliver
settlement agreements or other papers or documents as may be appropriate in
connection with a dismissal authorized by Section 3.01(c) of these By-laws; to
execute agreements, instruments, documents, contracts or other papers of like
or difference character necessary, desirable or incidental to the conduct of
its banking business; and to execute and deliver partial releases from and
discharges or assignments of mortgages, financing statements and assignments or
surrender of insurance policies, now or hereafter held by this Bank.
The Chief Executive Officer, Chairman of the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive
Officer, Chairman of the
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<PAGE> 24
Board, President or any officer who is a member of the Bank's management staff
who is in charge of and responsible for any department within the Bank are
authorized for and on behalf of the Bank to sign and issue checks, drafts, and
certificates of deposit; to sign and endorse bills of exchange, to sign and
countersign foreign and domestic letters of credit, to receive and receipt for
payments of principal, interest, dividends, rents, fees and payments of every
kind and description paid to the Bank, to sign receipts for property acquired
by or entrusted to the Bank, to guarantee the genuineness of signatures on
assignments of stocks, bonds or other securities, to sign certifications of
checks, to endorse and deliver checks, drafts, warrants, bills, notes,
certificates of deposit and acceptances in all business transactions of the
Bank.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management
staff, may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall
be bonded for the honest and faithful performance of their duties for such
amount as may be prescribed by the Board of Directors.
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ARTICLE IV
TRUST DEPARTMENT
SECTION 4.01. TRUST DEPARTMENT. Pursuant to the fiduciary powers granted to
this Bank under the provisions of Federal Law and Regulations of the
Comptroller of the Currency, there shall be maintained a separate Trust
Department of the Bank, which shall be operated in the manner specified herein.
SECTION 4.02. TRUST MANAGEMENT COMMITTEE. There shall be a standing Committee
known as the Trust Management Committee, consisting of at least five members, a
majority of whom shall not be officers of the Bank. The Committee shall
consist of the Chairman of the Board who shall be Chairman of the Com- mittee,
the President, and at least three other Directors appointed by the Board of
Directors and who shall continue as members of the Committee until their
successors are appointed. Any vacancy in the Trust Management Committee may be
filled by the Board at any regular or special meeting. In the event of the
absence of any member or members, such Committee may, in its discretion,
appoint members of the Board to fill the place of such absent members to serve
during such absence. Three members of the Committee shall constitute a quorum.
Any member of the Committee may be removed by the Board by a majority vote at
any regular or special meeting of the Board. The Committee shall meet at such
times as it may determine or at the call of the Chairman, or President or any
two members thereof.
The Trust Management Committee, under the general direction of the Board
of Directors, shall supervise the policy of the Trust Department which shall be
formulated and executed in accordance with Law, Regulations of the Comptroller
of the Currency, and sound fiduciary principles.
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<PAGE> 26
SECTION 4.03. TRUST EXAMINATION COMMITTEE. There shall be a standing Commit-
tee known as the Trust Examination Committee, consisting of three directors
appointed by the Board of Directors and who shall continue as members of the
committee until their successors are appointed. Such members shall not be
active officers of the Bank. Two members of the Committee shall constitute a
quorum. Any member of the Committee may be removed by the Board by a majority
vote at any regular or special meeting of the Board. The Committee shall meet
at such times as it may determine or at the call of two members thereof.
This Committee shall, at least once during each calendar year and within
fifteen months of the last such audit, or at such other time(s) as may be
required by Regulations of the Comptroller of the Currency, make suitable
audits of the Trust Department or cause suitable audits to be made by auditors
responsible only to the Board of Directors, and at such time shall ascertain
whether the Department has been administered in accordance with Law,
Regulations of the Comptroller of the Currency and sound fiduciary principles.
The Committee shall promptly make a full report of such audits in writing
to the Board of Directors of the Bank, together with a recommendation as to
what action, if any, may be necessary to correct any unsatisfactory condition.
A report of the audits together with the action taken thereon shall be noted in
the Minutes of the Board of Directors and such report shall be a part of the
records of this Bank.
SECTION 4.04. MANAGEMENT. The Trust Department shall be under the management
and supervision of an officer of the Bank or of the trust affiliate of the Bank
designated by and subject to the advice and direction of the Chief Executive
Officer. Such officer having supervisory responsibility over the Trust
Department shall do or cause to be done all things necessary or proper in
carrying on the business of the Trust Department in accordance with provisions
of law and applicable regulations.
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<PAGE> 27
SECTION 4.05. HOLDING OF PROPERTY. Property held by the Trust Department may
be carried in the name of the Bank in its fiduciary capacity, in the name of
Bank, or in the name of a nominee or nominees.
SECTION 4.06. TRUST INVESTMENTS. Funds held by the Bank in a fiduciary
capacity awaiting investment or distribution shall not be held uninvested or
undistributed any longer than is reasonable for the proper management of the
account and shall be invested in accordance with the instrument establishing a
fiduciary relationship and local law. Where such instrument does not specify
the character or class of investments to be made and does not vest in the Bank
any discretion in the matter, funds held pursuant to such instrument shall be
invested in any investment which corporate fiduciaries may invest under local
law.
The investments of each account in the Trust Department shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank or of
the trust affiliate of the Bank designated for the purpose by the Trust
Management Committee.
SECTION 4.07. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman
of the Board, President, any officer of the Trust Department, and such other
officers of the trust affiliate of the Bank as are specifically designated and
authorized by the Chief Executive Officer, the President, or the officer in
charge of the Trust Department, are hereby authorized, on behalf of this Bank,
to sell, assign, lease, mortgage, transfer, deliver and convey any real
property or personal property and to purchase and acquire any real or personal
property and to execute and deliver such agreements, contracts, or other papers
and documents as may be appropriate in the circumstances for property now or
hereafter owned by or standing in the name of this Bank, or its nominee, in any
fiduciary capacity, or in the name of any principal for whom this Bank may now
or hereafter be acting under a power of attorney, or as agent and to execute
and deliver partial releases from
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any discharges or assignments or mortgages and assignments or surrender of
insurance policies, to execute and deliver deeds, contracts, leases,
assignments, bills of sale, transfers or such other papers or documents as may
be appropriate in the circumstances for property now or hereafter held by this
Bank in any fiduciary capacity or owned by any principal for whom this Bank may
now or hereafter be acting under a power of attorney or as agent; to execute
and deliver settlement agreements or other papers or documents as may be
appropriate in connection with a dismissal authorized by Section 3.01(c) of
these By-laws; provided that the signature of any such person shall be attested
in each case by any officer of the Trust Department or by any other person who
is specifically authorized by the Chief Executive Officer, the President or the
officer in charge of the Trust Department.
The Chief Executive Officer, Chairman of the Board, President, any
officer of the Trust Department and such other officers of the trust affiliate
of the Bank as are specifically designated and authorized by the Chief
Executive Officer, the President, or the officer in charge of the Trust
Department, or any other person or corporation as is specifically authorized by
the Chief Executive Officer, the President or the officer in charge of the
Trust Department, are hereby authorized on behalf of this Bank, to sign any and
all pleadings and papers in probate and other court proceedings, to execute any
indemnity and fidelity bonds, trust agreements, proxies or other papers or
documents of like or different character necessary, desirable or incidental to
the appointment of the Bank in any fiduciary capacity and the conduct of its
business in any fiduciary capacity; also to foreclose any mortgage, to execute
and deliver receipts for payments of principal, interest, dividends, rents,
fees and payments of every kind and description paid to the Bank; to sign
receipts for property acquired or entrusted to the Bank; also to sign stock or
bond certificates on behalf of this Bank in any fiduciary capacity and on
behalf of this Bank as transfer agent or registrar; to guarantee the
genuineness of signatures on assignments of stocks, bonds or other securities,
and to authenticate bonds, debentures, land or lease trust certificates or
other forms of security issued pursuant to any indenture under which this Bank
now or hereafter is acting as
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<PAGE> 29
Trustee. Any such person, as well as such other persons as are specifically
authorized by the Chief Executive Officer or the officer in charge of the Trust
Department, may sign checks, drafts and orders for the payment of money
executed by the Trust Department in the course of its business.
SECTION 4.08. VOTING OF STOCK. The Chairman of the Board, President, any
officer of the Trust Department, any officer of the trust affiliate of the Bank
and such other persons as may be specifically authorized by Resolution of the
Trust Management Committee or the Board of Directors, may vote shares of stock
of a corporation of record on the books of the issuing company in the name of
the Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock of the granting if same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law
applicable to such fiduciary account. In the case of shares of stock which are
held by a nominee of the Bank, such shares may be voted by such person(s)
authorized by such nominee.
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ARTICLE V
STOCKS AND STOCK CERTIFICATES
SECTION 5.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its fact
that the stock represented thereby is transferable only upon the books of the
Bank properly endorsed and shall recite such other information as is required
by law and deemed appropriate by the Board. The corporate seal may be
facsimile engraved or printed.
SECTION 5.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall
be transferable only upon the stock transfer books of the Bank and except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of any affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory to the Chairman of the
Board, the President, or a Vice President. The Board of Directors, or the
Chief Executive Officer, may authorize the issuance of a new certificate
therefor without the furnishing of indemnity. Stock Transfer Books, in which
all transfers of stock shall be recorded, shall be provided.
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<PAGE> 31
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such
dividends or to be treated as shareholders for such other purpose.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.01. SEAL. The impression made below is an impression of the seal
adopted by the Board of Directors of BANK ONE, NA f/k/a Bank One, Columbus, NA.
The Seal may be affixed by any officer of the Bank to any document executed by
an authorized officer on behalf of the Bank, and any officer may certify any
act, proceedings, record, instrument or authority of the Bank.
SECTION 6.02. BANKING HOURS. Subject to ratification by the Executive
Committee, the Bank and each of its Branches shall be open for business on such
days and during such hours as the Chief Executive Officer of the Bank shall,
from time to time, prescribe.
SECTION 6.03. MINUTE BOOK. The organization papers of this Bank, the Articles
of Association, the returns of the judges of elections, the By-Laws and any
amendments thereto, the proceedings of all regular and special meetings of the
shareholders and of the Board of Directors, and reports of the committees of
the Board of Directors shall be recorded in the minute book of the Bank. The
minutes of each such meeting shall be signed by the presiding Officer and
attested by the secretary of the meetings.
SECTION 6.04. AMENDMENT OF BY-LAWS. These By-Laws may be amended by vote of a
majority of the Directors.
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EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
The undersigned, designated to act as Trustee under the Indenture for National
Energy Group, Inc. described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such
authorities to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One, NA
Dated: October 10, 1997
By: /s/ Jon Beacham
----------------------------
Jon Beacham
Authorized Signer
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<TABLE>
<S> <C>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-0052
Office of the Comptroller of the Currency
OMB Number: 1557-0081
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL Expires March 31, 2000
- -------------------------------------------------------------------------------------------------------------------------
[1]
[LOGO] Please refer to page i,
Table of Contents, for
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR
A BANK WITH DOMESTIC AND FOREIGN OFFICES - FFIEC 031
(970630)
REPORT AT THE CLOSE OF BUSINESS JUNE 30, 1997 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State This report form is to be filed by banks with
member banks); 12 U.S.C. Section 1817 (State nonmember branches and consolidated subsidiaries in U.S.
banks); and 12 U.S.C. Section 161 (National banks). territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated
foreign subsidiaries, or International Banking
Facilities.
- -------------------------------------------------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by The Reports of Condition and Income are to be
an authorized officer and the Report of Condition must be prepared in accordance with Federal regulatory
attested to by not less than two directors (trustees) for authority instructions. NOTE: These instructions may
State nonmember banks and three directors for State member in some cases differ from generally accepted
and National banks. accounting principles.
I, Richard D. Nadler, Controller We, the undersigned directors (trustees), attest to
-------------------------------------------------------- the correctness of this Report of Condition
Name and Title of Officer Authorized to Sign Report (including the supporting schedules) and declare that
it has been examined by us and to the best of our
of the named bank do hereby declare that these Reports of knowledge and belief has been prepared in conformance
Condition and Income (including the supporting schedules) with the instructions issued by the appropriate
have been prepared in conformance with the instructions Federal regulatory authority and is true and correct.
issued by the appropriate Federal regulatory authority and
are true to the best of my knowledge and belief. /s/
-----------------------------------------------------
Director (Trustee)
/s/ R. D. NADLER
- ------------------------------------------------------------- /s/ ALEX SHUMATE
Signature of Officer Authorized to Sign Report -----------------------------------------------------
Director (Trustee)
July 29, 1997 /s/ [ILLEGIBLE]
- ------------------------------------------------------------- -----------------------------------------------------
Date of Signature Director (Trustee)
/s/ DAVID P. RAUER
- -------------------------------------------------------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the NATIONAL BANKS: Return the original only in the
appropriate Federal Reserve District Bank. special return address envelope provided. If express
mail is used in lieu of the special return address
STATE NONMEMBER BANKS: Return the original only in the envelope, return the original only to the FDIC, c/o
special return address envelope provided. If express mail is Quality Data Systems, 2127 Espey Court, Suite 204,
used in lieu of the special return address envelope, return Crofton, MD 21114.
the original only to the FDIC, c/o Quality Data Systems,
2127 Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------------------------------------------------
FDIC Certificate Number 06559
--------- Banks should affix the address label in this space.
(RCRI 9050) Bank One, N.A.
---------------------------------------------------------
Legal Title of Bank (TEXT 9010)
100 East Broad Street, OH1-1066
---------------------------------------------------------
City (TEXT 9130)
Columbus, OH 43271-1066
---------------------------------------------------------
State Abbrev. (TEXT 9200) ZIP Code (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C>
FFIEC 031
Page i
[2]
Consolidated Reports of Condition and Income for
A Bank With Domestic and Foreign Offices
- ---------------------------------------------------------------------------------------------------------------------
TABLE OF CONTENTS
SIGNATURE PAGE Cover REPORT OF CONDITION
REPORT OF INCOME
Schedule RI--Income Statement . . . . . . . . . . RI-1, 2, 3 Schedule RC--Balance Sheet . . . . . . . . . . RC-1, 2
Schedule RI-A--Changes in Equity Capital . . . . . . . . RI-4 Schedule RC-A--Cash and Balances Due
Schedule RI-B--Charge-offs and Recoveries and From Depository Institutions . . . . . . . . RC-3
Changes in Allowance for Loan and Lease Schedule RC-B--Securities . . . . . . . . RC-3, 4, 5
Losses . . . . . . . . . . . . . . . . . . . . . RI-4, 5 Schedule RC-C--Loans and Lease Financing
Schedule RI-D--Income from Receivables:
International Operations . . . . . . . . . . . . . . RI-6 Part I. Loans and Leases . . . . . . . RC-6, 7, 8
Schedule RI-E--Explanations . . . . . . . . . . . . RI-7, 8 Part II. Loans to Small Businesses and
Small Farms (included in the forms for
June 30 only) . . . . . . . . . . . . . RC-8a, 8b
Schedule RC-D--Trading Assets and Liabilities
(to be completed only by selected banks) . . RC-8
Schedule RC-E--Deposit Liabilities. . . RC-9, 10, 11
Schedule RC-F--Other Assets . . . . . . . . . . RC-11
Schedule RC-G--Other Liabilities. . . . . . . . RC-11
Schedule RC-H--Selected Balance Sheet Items
for Domestic Offices . . . . . . . . . . . . RC-12
Schedule RC-I--Selected Assets and Liabilities
DISCLOSURE OF ESTIMATED BURDEN of IBFs . . . . . . . . . . . . . . . . . . . RC-13
Schedule RC-K--Quarterly Averages . . . . . . . RC-13
The estimated average burden associated with this Schedule RC-L--Off-Balance Sheet
information collection is 34.1 hours per respondent and is Items . . . . . . . . . . . . . . . . RC-14, 15, 16
estimated to vary from 15 to 400 hours per response, Schedule RC-M--Memoranda . . . . . . . . . .RC-17, 18
depending on individual circumstances. Burden estimates Schedule RC-N--Past Due and Nonaccrual
include the time for reviewing instructions, gathering and Loans, Leases, and Other Assets . . . . . RC-19, 20
maintaining data in the required form, and completing the Schedule RC-O--Other Data for Deposit
information collection, but exclude the time for compiling Insurance Assessments . . . . . . . . . . RC-21, 22
and maintaining business records in the normal course of a Schedule RC-R--Risk-Based Capital . . . . .RC-23, 24
respondent's activities. A Federal agency may not conduct Optional Narrative Statement Concerning the
or sponsor, and an organization (or a person) is not Amounts Reported in the Reports
required to respond to a collection of information, unless of Condition and Income . . . . . . . . . . . RC-25
it displays a currently valid OMB control number.
Comments concerning the accuracy of this burden estimate SPECIAL REPORT (TO BE COMPLETED BY ALL BANKS)
and suggestions for reducing this burden should be
directed to the Office of Information and Regulatory Affairs,
Office of Management and Budget, Washington, D.C. 20503,
and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For information or assistance, National and State nonmember banks should contact the FDIC's Call Reports Analysis
Unit, 550 17th Street, NW, Washington D.C. 20429, toll free on (800) 688-FDIC (3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their Federal Reserve District Bank.
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-1
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [3]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1997 -- JUNE 30, 1997
All Report of Income schedules are to be reported on a calendar year-to-date
basis in thousands of dollars.
SCHEDULE RI -- INCOME STATEMENT
<TABLE>
<CAPTION>
-------
I480 <-
------------------
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income:
a. Interest and fee income on loans:
(1) In domestic offices:
(a) Loans secured by real estate............................................... 4011 254,674 1.a.(1)(a)
(b) Loans to depository institutions........................................... 4019 0 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers........ 4024 43,938 1.a.(1)(c)
(d) Commercial and industrial loans............................................ 4012 106,558 1.a.(1)(d)
(e) Acceptances of other banks................................................. 4026 0 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expenditures:
(1) Credit cards and related plans......................................... 4054 572,499 1.a.(1)(f)(1)
(2) Other.................................................................. 4055 195,982 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions..................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political
subdivisions in the U.S.:
(1) Taxable obligations.................................................... 4503 1,700 1.a.(1)(h)(1)
(2) Tax-exempt obligations................................................. 4504 642 1.a.(1)(h)(2)
(i) All other loans in domestic offices........................................ 4058 8,311 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................. 4059 0 1.a.(2)
b. Income from lease financing receivables:
(1) Taxable leases................................................................. 4505 69,072 1.b.(1)
(2) Tax-exempt leases.............................................................. 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions:(1)
(1) In domestic offices............................................................ 4105 47 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................. 4106 1,072 1.c.(2)
d. Interest and dividend income on securities:
(1) U.S. Treasury securities and U.S. Government agency and corporation
obligations.................................................................... 4027 71,277 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.:
(a) Taxable securities......................................................... 4506 57 1.d.(2)(a)
(b) Tax-exempt securities...................................................... 4507 9,090 1.d.(2)(b)
(3) Other domestic debt securities................................................. 3657 2,433 1.d.(3)
(4) Foreign debt securities........................................................ 3658 166 1.d.(4)
(5) Equity securities (including investments in mutual funds)...................... 3659 694 1.d.(5)
e. Interest income from assets held in trading accounts............................... 4069 0 1.e.
</TABLE>
- ---------------
(1) Includes interest income on time certificates of deposit not held for
trading.
3
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-2
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [4]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI--Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------
Year-to-date
------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Interest income (continued)
f. Interest income on 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 IBFs.................................. 4020 11,826 1.f
g. Total interest income (sum of items 1.a through 1.f)..................... 4107 1,350,038 1.g
2. Interest expense:
a. Interest on deposits:
(1) Interest on deposits in domestic offices:
(a) Transaction accounts (NOW accounts, ATS accounts, and telephone
and preauthorized transfer accounts)........................... 4508 3,346 2.a.(1)(a)
(b) Nontransaction accounts:
(1) Money market deposit accounts (MMDAs)...................... 4509 84,811 2.a.(1)(b)(1)
(2) Other savings deposits..................................... 4511 31,196 2.a.(1)(b)(2)
(3) Time deposits of $100,000 or more.......................... 4174 42,777 2.a.(1)(b)(3)
(4) Time deposits of less than $100,000........................ 4512 117,581 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement
subsidiaries, and IBFs............................................. 4172 32,468 2.a.(2)
b. Expense of federal funds purchased and securities sold under
agreements to repurchase .............................................. 4180 91,259 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading
liabilities, and on other borrowed money............................... 4185 89,756 2.c.
d. Not applicable
e. Interest on subordinated notes and debentures.......................... 4200 14,993 2.e.
f. Total interest expense (sum of items 2.a through 2.e).................. 4073 508,187 2.f.
3. Net interest income (item 1.g minus 2.f).................................... RIAD 4074 841,851 3.
4. Provisions:
a. Provision for loan and lease losses.................................... RIAD 4230 322,540 4.a.
b. Provision for allocated transfer risk.................................. RIAD 4243 0 4.b.
5. Noninterest income:
a. Income from fiduciary activities....................................... 4070 27,508 5.a.
b. Service charges on deposit accounts in domestic offices................ 4080 56,194 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum
items 8.a through 8.d)................................................. A220 512 5.c.
d.-e. Not applicable
f. Other noninterest income:
(1) Other fee income................................................... 5407 223,449 5.f.(1)
(2) All other noninterest income*...................................... 5408 41,472 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f)................ RIAD 4079 349,135 5.g.
6. a. Realized gains (losses) on held-to-maturity securities................. RIAD 3521 (51) 6.a.
b. Realized gains (losses) on available-for-sale securities............... RIAD 3196 3,124 6.b.
7. Noninterest expense:
a. Salaries and employee benefits......................................... 4135 157,550 7.a.
b. Expenses of premises and fixed assets (net of rental income)
(excluding salaries and employee benefits and mortgage interest)....... 4217 43,199 7.b.
c. Other noninterest expense*............................................. 4092 460,339 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c)............... RIAD 4093 661,088 7.d.
8. Income (loss) before income taxes and extraordinary items and other
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d)... RIAD 4301 210,431 8.
9. Applicable income taxes (on item 8)......................................... RIAD 4302 68,331 9.
10. Income (loss) before extraordinary items and other adjustments
(item 8 minus 9)............................................................ RIAD 4300 142,100 10.
11. Extraordinary items and other adjustments, net of income taxes* ............ RIAD 4320 0 11.c
12. Net income (loss) (sum of items 10 and 11).................................. RIAD 4340 142,100 12.
</TABLE>
- ---------------
*Describe on Schedule RI-E -- Explanations.
4
<PAGE> 38
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-3
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [5]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI -- Continued
<TABLE>
<CAPTION>
1481 <-
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
Memoranda
<S> <C> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases RIAD Year-to-Date
acquired after August 7, 1986, that is not deductible for federal income ----
tax purposes.................................................................... 4513 568 M.1
2. Income from the sale and servicing of mutual funds and annuities in domestic
offices (included in Schedule RI, item 8)....................................... 8431 4,193 M.2.
3.-4. Not applicable
5. Number of full-time equivalent employees on payroll at end of current Number
period (round to nearest whole number).......................................... 4150 8,404 M.5.
6. Not applicable
7. If the reporting bank has restated its balance sheet as a result of applying
push down accounting this calendar year, report the date of the bank's CCYY / MM / DD
acquisition..................................................................... 9106 NA M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative
instruments) (sum of Memorandum items 8.a through 8.d must equal Schedule RI,
item 5.c.):
a. Interest rate exposures...................................................... 8757 0 M.8.a.
b. Foreign exchange exposures................................................... 8758 512 M.8.b.
c. Equity security and index exposures.......................................... 8759 0 M.8.c.
d. Commodity and other exposures................................................ 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than
trading:
a. Net increase (decrease) to interest income................................... 8761 (2,560) M.9.a.
b. Net (increase) decrease to interest expense.................................. 8762 (120) M.9.b.
c. Other (noninterest) allocations.............................................. 8763 1,609 M.9.c.
10.Credit losses on off-balance sheet derivatives (see instructions)............... A251 0 M.10
11.Does the reporting bank have a Subchapter S election in effect for federal Yes / No
income tax purposes for the current tax year ?.................................. A530 N/A M.11
12.Deferred portion of total applicable income taxes included in Schedule RI, items
9 and 11 (to be reported with the December Report of Income).................... 4772 N/A M.12
</TABLE>
- ------------
(1) For example, a bank acquired on June 1, 1997, would report 1997/06/01
*Describe on Schedule RI-E--Explanations.
<PAGE> 39
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-4
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037 [6]
FDIC Certificate No.: 06559
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI-A -- Changes in Equity Capital
Indicate decreases and losses in parentheses.
I483 <-
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD
1. Total equity capital originally reported in the December 31, 1994, Reports of ----
Condition and Income.............................................................. 3215 1,984,336 1.
2. Equity capital adjustments from amended Reports of Income, net*................... 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2).............. 3217 1,984,336 3.
4. Net income (loss) (must equal Schedule RI, item 12)............................... 4340 142,100 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net................ 4346 0 5.
6. Changes incident to business combinations, net.................................... 4356 0 6.
7. LESS: Cash dividends declared on preferred stock.................................. 4470 0 7.
8. LESS: Cash dividends declared on common stock..................................... 4460 51,500 8.
9. Cumulative effect of changes in accounting principles from prior years* (see
instructions for this schedule)................................................... 4411 156,964 9.
10. Corrections of material accounting errors from prior years* (see instructions
for this schedule)................................................................ 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale
securities........................................................................ 8433 (4,235) 11.
12. Foreign currency translation adjustments.......................................... 4414 0 12.
13. Other transactions with parent holding company* (not included in item 5, 7, or
8 above).......................................................................... 4415 98,618 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must
equal Schedule RC, item 28)....................................................... 3210 2,326,283 14.
------------------
</TABLE>
- ---------------
* Describe on Schedule RI-E -- Explanations.
Schedule RI-B -- Charge-offs and Recoveries and Changes in Allowance for Loan
and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
I486 <-
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------
----Calendar year-to-date----
(Column A) (Column B)
RIAD Charge-offs RIAD Recoveries
---- ----
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate:
a. To U.S. addressees (domicile).................................... 4651 5,426 4661 2,236 1.a.
b. To non-U.S. addressees (domicile)................................ 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks:
a. To U.S. banks and other U.S. depository institutions............. 4653 0 4663 0 2.a.
b. To foreign banks................................................. 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to
farmers............................................................. 4655 50 4665 52 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile).................................... 4645 8,814 4617 1,457 4.a.
b. To non-U.S. addressees (domicile)................................ 4646 0 4618 0 4.b.
5. Loans to individuals for household, family, and other personal
expenditures:
a. Credit cards and related plans................................... 4656 258,297 4666 42,765 5.a.
b. Other (includes single payment, installment, and all student
loans)........................................................... 4657 56,069 4667 21,650 5.b.
6. Loans to foreign governments and official institutions.............. 4643 0 4627 0 6.
7. All other loans..................................................... 4644 15 4628 99 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile).................................... 4658 5,425 4668 1,412 8.a.
b. Of non-U.S. addressees (domicile)................................ 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8).................................... 4635 334,096 4605 69,671 9.
--------------------------------------
</TABLE>
<PAGE> 40
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-5
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [7]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI-B -- Continued
Part I. Continued
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
(Column A) (Column B)
RIAD Charge-offs RIAD Recoveries
---- ----
<S> <C> <C> <C> <C> <C>
1.-3. Not applicable.
4. Loans to finance commercial real estate, construction, and land
development activities (not secured by real estate) included in
Schedule RI-B, part I, items 4 and 7, above......................... 5409 22 5410 3 M.4.
5. Loans secured by real estate in domestic offices (included in
Schedule RI-B, part 1, item 1, above):
a. Construction and land development................................ 3582 224 3583 76 M.5.a.
b. Secured by farmland.............................................. 3584 0 3585 5 M.5.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential
properties and extended under lines of credit................ 5411 3833 5412 871 M.5.c.(1)
(2) All other loans secured by 1-4 family residential
properties................................................... 5413 1019 5414 343 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties........ 3588 154 3589 251 M.5.d.
e. Secured by nonfarm nonresidential properties..................... 3590 196 3591 690 M.5.e.
------------------------------------
</TABLE>
Part II. Changes In Allowance For Loan And Lease Losses
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------
RIAD
----
<S> <C> <C> <C>
1. Balance originally reported in the December 31, 1996, Reports of Condition and Income........ 3124 254,594 1.
2. Recoveries (must equal part I, item 9, column B above)....................................... 4605 69,671 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above)................................ 4635 334,096 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)....................... 4230 322,540 4.
5. Adjustments * (see instructions for this schedule)........................................... 4815 241,181 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC,
item 4.b).................................................................................. 3123 553,890 6.
</TABLE>
- --------------
*Describe on Schedule RI-E-Explanations.
<PAGE> 41
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-6
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [8]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement subsidiaries, or IBFs
where international operations account for more than 10 percent of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492 <-
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement RIAD Year-to-Date
Subsidiaries, and IBFs: ----
a. Interest income booked .................................................................... 4837 N/A 1.a.
b. Interest expense booked ................................................................... 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries,
and IBFs (item 1.a minus 1.b) ............................................................. 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
a. Net interest income attributable to international operations booked at domestic offices ... 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices ........... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b) ...................................... 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations:
a. Noninterest income attributable to international operations ............................... 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations .............. 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations ........................ 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a minus
3.b and 3.c)............................................................................... 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital allocation
adjustment (sum of items 1.c, 2.c, and 3.d) .................................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to reflect
the effects of equity capital on overall bank funding costs .................................. 4845 N/A 5.
6. Estimated pretax income attributable to international operations after capital allocation
adjustment (sum of items 4 and 5) ............................................................ 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in Item 6 ..... 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7) ............... 4341 N/A 8.
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD
----
1. Intracompany interest income included in item 1.a above ...................................... 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above ..................................... 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International Operations Required
by the Departments of Commerce and Treasury for Purposes of the U.S.
International Accounts and the U.S. National Income and Product Accounts
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RIAD Year-to-Date
----
1. Interest income booked at IBFs ............................................................... 4849 N/A 1.
2. Interest expense booked at IBFs............................................................... 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic offices
(excluding IBFs):
a. Gains (losses) and extraordinary items .................................................... 5491 N/A 3.a.
b. Fees and other noninterest income ......................................................... 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at
domestic offices (excluding IBFs) ............................................................ 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic
offices (excluding IBFs) ..................................................................... 4853 N/A 5.
--------------------------
</TABLE>
<PAGE> 42
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-7
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [9]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI-E -- Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all extraordinary items and
other adjustments in Schedule RI, and all significant items of other noninterest
income and other noninterest expense in Schedule RI. (See instructions for
details.)
<TABLE>
<CAPTION>
I495 <-
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) RIAD Year-to-date
Report amounts that exceed 10% of Schedule RI, item 5.f.(2): ----
a. Net gains (losses) on other real estate owned................................... 5415 N/A 1.a.
b. Net gains (losses) on sales of loans............................................ 5416 10,229 1.b.
c. Net gains (losses) on sales of premises and fixed assets........................ 5417 N/A 1.c.
Itemize and describe the three largest other amounts that exceed 10% of Schedule
RI, item 5.f.(2):
TEXT RIAD
----
d. 4461: Card Processing Income.................................................... 4461 13,522 1.d.
e. 4462: Corporate Owned Life Insurance............................................ 4462 9,061 1.e.
f. 4463: .................................................... 4463 N/A 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c: Year-to-date
a. Amortization expense of intangible assets....................................... 4531 9,954 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
b. Net (gains) losses on other real estate owned................................... 5418 0 2.b.
c. Net (gains) losses on sales of loans............................................ 5419 0 2.c.
d. Net (gains) losses on sales premises and fixed assets........................... 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed 10% of Schedule
RI, item 7.c:
TEXT RIAD
----
e. 4464: Data Processing Expense................................................... 4464 140,205 2.e.
f. 4467: Holding Company Management Fees........................................... 4467 128,103 2.f.
g. 4468: .................................................... 4468 N/A 2.g.
3. Extraordinary items and other adjustments and applicable income tax effect (from
Schedule RI, item 11.b) (itemize and describe all extraordinary items and other
adjustments):
TEXT RIAD
RIAD ----
a. (1) 4469: ---- 4469 0 3.a.(1)
(2) Applicable income tax effect..................... 4486 0 3.a.(2)
b. (1) 4487: 4487 0 3.b.(1)
(2) Applicable income tax effect..................... 4488 0 3.b.(2)
c. (1) 4489 4489 0 3.c.(1)
(2) Applicable income tax effect..................... 4491 0 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A,
item 2) (itemize and describe all adjustments):
TEXT RIAD
----
a. 4492: .................................................... 4492 N/A 4.a.
b. 4493: .................................................... 4493 N/A 4.b.
5. Cumulative effect of changes in accounting principles from prior years (from
Schedule RI-A, item 9) (itemize and describe all changes in accounting principles):
TEXT RIAD
----
a. A546: Effect of change to GAAP from previous non-GAAP instructions.............. A546 159,964 5.a.
b. 4495: .................................................... 4495 N/A 5.b.
6. Corrections of material accounting errors from prior years (from Schedule RI-A,
item 10) (itemize and describe all corrections):
TEXT RIAD
----
a. 4496: .................................................... 4496 N/A 6.a.
b. 4497: .................................................... 4497 N/A 6.b.
</TABLE>
<PAGE> 43
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RI-8
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [10]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RI-E -- Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13)
(itemize and describe all such transactions):
TEXT RIAD Year-to-Date
----
a. 4498: Capital Contribution ......................................... 4498 53,500 7.a
b. 4499: Goodwill Pushdown Adjustment ......................................... 4499 45,118 7.b
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part
II, item 5) (itemize and describe all adjustments):
TEXT RIAD
----
a. 4521: Reserves of Acquired Banks ................................. 4521 233,711 8.a
b. 4522: Reserves of Acquired Loan Portfolios ................................. 4522 7,470 8.b
1498 1499 <-
9. Other explanations (the space below is provided for the bank to briefly
describe, at its option, any other significant items affecting the Report of In RIAD
----
x = No Comment - Y = Comment ----- 4769 [X]
Other explanations (please type or print clearly):
</TABLE>
TEXT 4769 (70 characters per line)
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
<PAGE> 44
<TABLE>
<S> <C> <C>
BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
100 EAST BROAD STREET, OH1-1066 Vendor ID: D Cert #: 06559 Page RC-1
COLUMBUS, OH 43271 Transit #: 04400037
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST [11]
</TABLE>
Consolidated Report of Condition for Insured
Commercial and State-Chartered Savings Banks for March 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC -- Balance Sheet
<TABLE>
<CAPTION>
C400 <-
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCF
---
a. Noninterest-bearing balances and currency and coin(1)................................. 0081 1,159,899 1.a.
b. Interest bearing balances(2).......................................................... 0071 3,271 1.b.
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)............................ 1754 195,434 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D).......................... 1773 2,251,738 2.b.
3. Federal funds sold and securities purchased under agreements to resell .................... 1350 60,000 3.
4. Loans and lease financing receivables: RCF
---
a. Loans and leases, net of unearned income (from Schedule RC-C)... 2122 20,916,120 4.a.
b. LESS: Allowance for loan and lease losses....................... 3123 553,890 4.b.
c. LESS: Allocated transfer risk reserve........................... 3128 0 RCF 4.c.
d. Loans and leases, net of unearned income, ---
allowance, and reserve (item 4.a minus 4.b and 4.c).................................. 2125 20,362,230 4.d.
5. Trading assets (from Schedule RC-D)........................................................ 3545 0 5.
6. Premises and fixed assets (including capitalized leases)................................... 2145 213,756 6.
7. Other real estate owned (from Schedule RC-M)............................................... 2150 8,893 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)... 2130 6,860 8.
9. Customers' liability to this bank on acceptances outstanding............................... 2155 5,632 9.
10. Intangible assets (from Schedule RC-M)..................................................... 2143 143,282 10.
11. Other assets (from Schedule RC-F).......................................................... 2160 1,786,632 11.
12. Total assets (sum of items 1 through 11)................................................... 2170 26,197,627 12.
</TABLE>
- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 45
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-2
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [12]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC -- Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of columns A and ---
C from Schedule RC-E, part I)....................... CON 2200 15,454,482 13.a.
----
(1) Noninterest-bearing(1).......................... 6631 3.849,114 13.a.1
(2) Interest-bearing................................ 6636 11,605,368 RCF 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, RCF ---
and IBFs (from Schedule RC-E, part II).............. ---- 2200 706,589 13.b
(1) Noninterest-bearing............................. 6631 0 13.b.1
(2) Interest-bearing................................ 6636 706,589 13.b.2
14. Federal funds purchased and securities sold under
agreements to repurchase RCF
----
2800 3,263,740 14
RCON
----
15. a. Demand notes issued to the U.S. Treasury.................................... 2840 87,530 15.a.
RCF
----
b. Trading liabilities (from Schedule RC-D).................................... 3548 0 15.b.
16. Other borrowed money (includes mortgage indebtedness and
obligations under capitalized leases):
a. With a remaining maturity of one year or less............................... 2332 2,648,366 16.a.
b. With a remaining maturity of more than one year through three years......... A547 769,983 16.b.
c. With a remaining maturity of more than three years.......................... A548 145,258 16.c.
17. Not applicable
18. Bank's liability on acceptances executed and outstanding....................... 2920 5,632 18.
19. Subordinated notes and debentures.............................................. 3200 547,015 19.
20. Other liabilities (from Schedule RC-G)......................................... 2930 242,749 20.
21. Total liabilities (sum of items 13 through 20)................................. 2948 23,871,344 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.................................. 3838 0 23.
24. Common stock................................................................... 3230 127,043 24.
25. Surplus (exclude all surplus related to preferred stock)....................... 3839 738,352 25.
26. a. Undivided profits and capital reserves...................................... 3632 1,466,861 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities...... 8434 (5,973) 26.b.
27. Cumulative foreign currency translation adjustments............................ 3284 0 27.
28. Total equity capital (sum of items 23 through 27).............................. 3210 2,326,283 28.
29. Total liabilities and equity capital (sum of items 21 and 28).................. 3300 26,197,627 29.
MEMORANDUM
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best RCF
describes the most comprehensive level of auditing work performed for the bank ---- Number
by independent external auditors as of any date during 1996 ---------------------------- 6724 [ N/A] M.1.
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which submits a report on the consolidated holding company (but
not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a
certified public accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering
authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
</TABLE>
- ---------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<PAGE> 46
<TABLE>
<S> <C> <C> <C>
Bank One, NA Call Date: 06/30/97 State #: FFIEC 031
100 East Broad Street, OH1-1066 Vendor ID: D Cert #: 06559 RC-3
Columbus, OH 43271 Transit #: 04400037 [13]
Transmitted to EDS as 0054682 on 7/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-A -- Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
<TABLE>
<CAPTION>
C405 <-
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RCF CON
--- ---
1. Cash items in process of collection, unposted debits, and
currency and coin.................................................... 0022 1,123,939 1.
a. Cash items in process of collection and unposted debits........... 0020 884,071 1.a.
b. Currency and coin................................................. 0080 239,868 1.b.
2. Balances due from depository institutions in the U.S................. 0082 29,628 2.
a. U.S. branches and agencies of foreign banks
(including their IBFs)............................................ 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository
institutions in the U.S (including their IBFs).................... 0085 29,628 2.b.
3. Balances due from banks in foreign countries and foreign central
banks................................................................ 0070 1,520 3.
a. Foreign branches of other U.S. banks.............................. 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks........ 0074 1,520 3.b.
4. Balances due from Federal Reserve Banks.............................. 0090 8,083 0090 8,083 4.
5. Total (sum of items 1 through 4) (total of column A must equal
Schedule RC, sum of items 1.a and 1.b)............................... 0010 1,163,170 0010 1,163,170 5.
-------------------------------------------
</TABLE>
Memorandum
<TABLE>
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------
RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in item
2, column B above)............................................................................ 0050 26,357 M.1
------------------
</TABLE>
Schedule RC-B -- Securities
Exclude assets held for trading.
<TABLE>
<CAPTION>
C410 <-
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
-------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
-------------------------------------------------------------------------------
RCFD RCFD RCFD RCFD
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. U.S. Treasury securities.......... 0211 0 0213 0 1286 1,126,448 1287 1,110,154 1.
2. U.S. Government agency and
corporation obligations (exclude
mortgage-backed securities):
a. Issued by U.S. Government
agencies(2).................... 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government-
sponsored agencies(3).......... 1294 0 1295 0 1297 95,313 1298 95,550 2.b.
-------------------------------------------------------------------------------
</TABLE>
- ---------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Import Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan
Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
13
<PAGE> 47
<TABLE>
<S> <C> <C> <C>
BANK ONE, NA Call Date: 06/30/97 State # FFIEC 031
100 East Broad Street, OH1-1066 Vendor ID: D Cert # 06559 RC-4
Columbus, OH 43271 Transit #: 04400037
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST [ 14]
</TABLE>
Schedule RC-B -- Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------------
------- HELD-TO-MATURITY -------- --- AVAILABLE-FOR-SALE -----
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states and political RCF RCF RCF RCF
subdivisions in the U.S.: --- --- --- ---
a. General obligations.............................. 1676 71,746 1677 81,205 1678 3,954 1679 4,065 3.a
b. Revenue obligations.............................. 1681 100,907 1686 106,401 1690 3,700 1691 3,764 3.b
c. Industrial development and similar obligations... 1694 10,675 1695 10,808 1696 0 1697 0 3.c
4. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Guaranteed by GNMA........................... 1698 0 1699 0 1701 226,943 1702 228,715 4.a
(2) Issued by FNMA and FHLMC..................... 1703 0 1705 0 1706 239,375 1707 241,145 4.a
(3) Other pass-through securities................ 1709 7,781 1710 7,698 1711 15,459 1713 15,655 4.a
b. Other mortgage-backed securities (include CMOs,
REMICs, and stripped MBS): RCF RCF RCF RCF
(1) Issued or guaranteed by FNMA, --- --- --- ---
FHLMC, or GNMA............................... 1714 0 1715 0 1716 470,000 1717 472,718 4.b
(2) Collateralized by MBS issued or guaranteed by
FNMA, FHLMC, or GNMA......................... 1718 0 1719 0 1731 0 1732 0 4.b
(3) All other mortgage-backed securities......... 1733 0 1734 0 1735 16,345 1736 16,339 4.b
5. Other debt securities:
a. Other domestic debt securities................... 1737 0 1738 0 1739 37,428 1741 37,671 5.a
b. Foreign debt securities.......................... 1742 4,325 1743 4,325 1744 0 1746 0 5.b
6. Equity securities:
a. Investments in mutual funds and RCF RCF
other equity securities with readily determinable --- ---
fair values...................................... A510 0 A511 0 6.a
b. All other equity securities(1)................... 1752 25,962 1753 25,962 6.c
7. Total (sum of items 1 through 6)(total of column A RCF RCF RCF RCF
must equal Schedule RC, item 2.a) (total of column D --- --- --- ---
must equal Schedule RC, item 2.b)................... 1754 195,434 1771 210,437 1772 2,260,927 1773 2,251,738 7
--------------------------------------------------------------------
</TABLE>
- -----------------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
<PAGE> 48
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-5
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [15]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-B -- Continued
Memoranda
<TABLE>
<CAPTION>
Memoranda C412 <-
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCF
----
1. Pledged securities(2)........................................................... 0416 2,378,131 M.1
2. Maturity and repricing data for debt securities (1,2) (excluding those in
nonaccrual status):
a. Securities issued by the U.S. Treasury, U.S. Government agencies, and
states and political subdivisions in the U.S.; other non-mortgage debt
securities; and mortgage pass-through securities other than those backed
by closed-end first lien 1-4 family residential mortgages with a remaning
maturity or repricing frequency of: (3,4)
(1) Three months or less................................................... A549 105,607 M.2.a.(1)
(2) Over three months through 12 months.................................... A550 20,059 M.2.a.(2)
(3) Over one year through three years...................................... A551 195,924 M.2.a.(3)
(4) Over three years through five years.................................... A552 362,528 M.2.a.(4)
(5) Over five years through 15 years....................................... A553 749,044 M.2.a.(5)
(6) over 15 years.......................................................... A554 6,057 M.2.a.(6)
b. Mortgage pass-through securities backed by closed-end first lien 1-4 family
residential mortgages with a remaining maturity or repricing frequency
of: (3,5)
(1) Three months or less................................................... A555 24,502 M.2.b.(1)
(2) Over three months through 12 months.................................... A556 60 M.2.b.(2)
(3) Over one year through three years...................................... A557 198 M.2.b.(3)
(4) Over three years through five years.................................... A558 3,278 M.2.b.(4)
(5) Over five years through 15 years....................................... A559 128,533 M.2.b.(5)
(6) Over 15 years.......................................................... A560 336,363 M.2.b.(6)
c. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS;
exclude mortgage pass-through securities) with an expected average life of:
(6)
(1) Three years or less.................................................... A561 75,082 M.2.c.1
(2) Over three years....................................................... A562 413,975 M.2.c.2
d. Fixed rate AND floating rate debt securities with a REMAINING MATURITY of
one year or less (included in Memorandum items 2.a through 2.c above)...... A248 41,561 M.2.d
3. -6. Not applicable.
7. Amortized cost of held-to-maturity securities sold or transferred to
available-for-sale or trading securities during the calendar year-to-date
(report the amortized cost at date of sale or transfer)......................... 1778 26,546 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and
available-for-sale accounts in Schedule RC-B, item 4.b):
a. Amortized cost............................................................. 8780 0 M.8.a.
b. Fair value................................................................. 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale
accounts in Schedule RC-B, items 2, 3, and 5):
a. Amortized cost............................................................. 8782 0 M.9.a.
b. Fair value................................................................. 8783 0 M.9.b.
</TABLE>
- ---------------
(1) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(3) Report fixed rate debt securities by remaining maturity and floating rate
debt securities by repricing frequency.
(4) Sum of Memorandum items 2.1.(1) through 2.a.(6) plus any nonaccrual debt
securities reported in Memorandum item 2.a. that are included in Schedule
RC-N, item 9, column C, must equal Schedule RC-B, sum of items 1,2,3 and
5, columns A and D, plus mortgage pass-through securities other than those
backed by closed-end first lien 1-4 family residential mortgages included
in Schedule RC-B, item 4.a, columns A and D.
(5) Sum of Memorandum items 2.b.(1) through 2.b.(6) plus any nonaccrual
mortgage pass-through securities backed by closed-end first lien 1-4 family
residential mortgages included in Schedule RC-N, item 9, column C, must
equal Schedule RC-b, item 4.a., sum of columns A and D, less the amount
of mortgage pass-through securities other than those backed by closed-end
first lien 1-4 family residential mortgages included in Schedule Rc-B, item
4.a, columns A and D.
(6) Sum of Memorandum items 2.c.(1) and 2.c.(2) plus any nonaccrual "Other
mortgage-backed securities" included in Schedule RC-N, item 9, column
c, must equal Schedule RC-B, item 4.b, sum of columns A and D.
<PAGE> 49
<TABLE>
<S> <C> <C> <C> <C>
BANK ONE, NA Call Date: 06/30/97 State #; FFIEC 031
100 BROAD STREET, OH1-1066 Vendor ID: D Cert #: RC-6
COLUMBUS, OH 43271 Transit #: 04400037
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 cst 16
</TABLE>
SCHEDULE RC-C -- LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts reported in
this schedule. Report total loans and leases, net of unearned income. Exclude
assets held for trading and commercial paper.
<TABLE>
<CAPTION>
-------
C415<
----------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
----------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate................................................... 1410 5,576,939 1.
a. Construction and land development........................................... 1415 334,232 1.a.
b. Secured by farmland (including farm residential and other improvements)..... 1420 26,533 1.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 family residential properties
and extended under lines of credit...................................... 1797 1,729,567 1.c.(1)
(2) All other loans secured by 1-4 family residential properties:
(a) Secured by first liens.............................................. 5367 1,199,797 1.c.(2)(a)
(b) Secured by junior liens............................................. 5368 535,868 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties................... 1460 196,447 1.d.
e. Secured by nonfarm nonresidential properties................................ 1480 1,734,495 1.e.
2. Loans to depository institutions:
a. To commercial banks in the U.S.............................................. 1505 11,919 2.a.
(1) To U.S. branches and agencies of foreign banks.......................... 1506 0 2.a.(1)
(2) To other commercial banks in the U.S.................................... 1507 11,919 2.a.(2)
b. To other depository institutions in the U.S................................. 1517 0 1517 0 2.b.
c. To banks in foreign countries............................................... 1510 0 2.c.
(1) To foreign branches of other U.S. banks................................. 1513 0 2.c.(1)
(2) To other banks in foreign countries..................................... 1516 0 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers............ 1590 40,224 1590 40,224 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)............................................... 1763 1,898,536 1763 1,898,536 4.a.
b. To non-U.S. addressees (domicile)........................................... 1764 0 1764 0 4.b.
5. Acceptances of other banks:
a. Of U.S. banks............................................................... 1756 3,473 1756 3,473 5.a.
b. Of foreign banks............................................................ 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal expenditures
(i.e., consumer loans) (includes purchased paper).............................. 1975 9,274,420 6.
a. Credit cards and related plans (includes check credit and other revolving
credit plans)............................................................... 2008 5,874,298 6.a.
b. Other (includes single payment, installment, and all student loans)......... 2011 3,400,122 6.b.
7. Loans to foreign governments and official institutions (including foreign
central banks)................................................................. 2081 0 2081 0 7.
8. Obligations (other than securities and leases) of states and political
subdivisions in the U.S. (includes nonrated industrial development
obligations)................................................................... 2107 67,838 2107 67,838 8.
9. Other loans.................................................................... 1563 1,851,534 9.
a. Loans for purchasing or carrying securities (secured and unsecured)......... 1545 24,104 9.a.
b. All other loans (exclude consumer loans).................................... 1564 1,827,430 9.b.
10. Lease financing receivables (net of unearned income)........................... 2165 2,319,872 10.
a. Of U.S. addressees (domicile)............................................... 2182 2,319,872 10.a.
b. Of non-U.S. addressees (domicile)........................................... 2183 0 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above................ 2123 308,635 2123 308,635 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10
minus item 11) (total of column A must equal Schedule RC, item 4.a)............ 2122 20,916,120 2122 20,916,120 12.
</TABLE>
16
<PAGE> 50
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-7
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [17]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-C - Continued
Part I. Continued
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Not applicable..................................................................
2. Loans and leases restructured and in compliance with modified terms (included in
Schedule RC-C, part I, above and not reported as past due or nonaccrual in
Schedule RC-N, Memorandum item 1):
a. Loans secured by real estate: RCF
----
(1) To U.S. addressees (domicile)........................................... 1687 0 M.2.a.(1)
(2) To non-U.S. addressees (domicile)....................................... 1689 0 M.2.a.(2)
b. All other loans and all lease financing receivables (exclude loans to
individuals for household, family, and other personal expenditures).......... 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables of
non-U.S. addressees (domicile) included in Memorandum item 2.b above......... 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases (excluding those in
nonaccrual status):
a. Closed-end loans secured by first liens on 1-4 family residential
properties with a remaining maturity or repricing frequency of: (1,2)
(1) Three months or less.................................................... A564 121,312 M.3.a.(1)
(2) Over three months through 12 months..................................... A565 166,383 M.3.a.(2)
(3) Over one year through three years....................................... A566 175,219 M.3.a.(3)
(4) Over three years through five years..................................... A567 52,054 M.3.a.(4)
(5) over five years through 15 years........................................ A568 295,424 M.3.a.(5)
(6) over 15 years........................................................... A569 365,120 M.3.a.(6)
b. All loans and leases other than closed-end loans secured by first liens on
1-4 family residential properties with a remaining maturity or repricing of:
(1,3)
(1) Three months or less.................................................... A570 10,128,025 M.3.b.(1)
(2) Over three months through 12 months..................................... A571 2,678,425 M.3.b.(2)
(3) Over one year through three years....................................... A572 2,909,562 M.3.b.(3)
(4) Over three years through five years..................................... A573 2,351,822 M.3.b.(4)
(5) Over five years through 15 years........................................ A574 1,571,593 M.3.b.(5)
(6) Over 15 years........................................................... A575 321,780 M.3.b.(6)
c. Fixed rate AND floating loans and leases with a REMAINING MATURITY of one
year or less (included in Memorandum items 3.a and 3.b above)................ A247 2,883,987 M.3.c
d. Fixed rate AND floating rate loans secured by nonfarm nonresidential
properties in domestic offices (4) with a REMAINING MATURITY of over five
years (included in Memorandum item 3.b above)................................ A577 248,137 M.3.d
e. Fixed rate AND floating rate commercial and industrial loans (5) with
a REMAINING MATURITY of over three years (included in Memorandum items 3.b
above)....................................................................... A578 421,200 M.3.e
</TABLE>
- ---------------
(1) Report fixed rate loans and leases by remaining maturity and floating rate
loans by repricing frequency.
(2) Sum of Memorandum items 3.a(1) through 3.a.(6) plus total nonaccrual
closed-end loans secured by first liens on 1-4 family residential
properties included in Schedule RC-N, Memorandum item 3.c.(2), column
C, must equal total closed-end loans secured by first liens on 1-4
family residential properties from Schedule RC-C, par 1 item 1.c.(2)(a),
column B.
(3) Sum of Memorandum items 3.b.(1) through 3.b.(6) plus total nonaccrual
loans and leases from Schedule RC-N, sum of items 1 through 8, column C,
minus nonaccrual closed-end loans secured by first liens on 1-4 family
residential properties in domestic offices included in Schedule RC-N,
Memorandum item 3.c.(2), column C, must equal total loans and leases
from Schedule RC-C, Part 1, sum or items 1 through 10, column A, minus
total closed-end loans secured by first liens on 1-4 family residential
properties in domestic offices from Schedule RC-C, part 1, item 1.c(2)(a),
column B.
(4) As defined for Schedule RC-C, part 1, item 1.e, column B.
(5) As defined for schedule RC-C, part 1, item 4, cloumn A.
<PAGE> 51
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-8
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [18]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-C - Continued
Part I. Continued
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4. Loans to finance commercial real estate, construction, and land development RCF
activities (not secured by real estate) included in Schedule RC-C, part I, ----
items 4 and 9, column A, page RC-6(1)........................................... 2746 311,443 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, page RC-6)... 5369 0 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family RCON
residential properties in domestic offices (included in Schedule RC-C, part I, ----
item 1.c.(2)(a), column B, page RC-6)........................................... 5370 39,798 M.6.
</TABLE>
- ---------
(1) Exclude loans secured by real estate that are included in Schedule RC-C,
Part I, item 1, column A.
Schedule RC-D -- Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion or more in total
assets or with $2 billion or more in par/notional amount of off-balance sheet
derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e,
columns A through D).
<TABLE>
<CAPTION>
C420 <-
ASSETS
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS RCON
----
1. U.S. Treasury securities in domestic offices......................................... 3531 N/A 1.
2. U.S. Government agency and obligations in domestic offices (exclude mortgage-
backed securities)................................................................... 3532 N/A 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic
offices.............................................................................. 3533 N/A 3.
4. Mortgage-backed securities (MBS) in domestic offices:
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA.............. 3534 N/A 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA
(include CMOs, REMICs, and stripped MBS).......................................... 3535 N/A 4.b.
c. All other mortgage-backed securities.............................................. 3536 N/A 4.c.
5. Other debt securities in domestic offices............................................ 3537 N/A 5.
6. Certificates of deposit in domestic offices.......................................... 3538 N/A 6.
7. Commercial paper in domestic offices................................................. 3539 N/A 7.
8. Bankers acceptances in domestic offices.............................................. 3540 N/A 8.
9. Other trading assets in domestic offices............................................. 3541 N/A 9.
RCF
----
10. Trading assets in foreign offices.................................................... 3542 N/A 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and
equity contracts:
RCON
----
a. In domestic offices............................................................... 3543 N/A 11.a
RCF
----
b. In foreign offices................................................................ 3543 N/A 11.b
RCF
----
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5).... 3545 N/A 12.
LIABILITIES RCF
----
13. Liability for short positions........................................................ 3546 N/A 13.
RCF
----
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and
equity contracts..................................................................... 3547 N/A 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item
15.b)................................................................................ 3548 N/A 15.
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-8a
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [18a]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-C - Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June Report of Condition.
Report the number and amount currently outstanding as of June 30 of business
loans with "original amounts" of $1,000,000 or less and farm loans with
"original amounts" of $500,000 or less. The following guidelines should be
used to determine the "original amount" of a loan: (1) For loans drawn down
under lines of credit or loan commitments, the "original amount" of the loan is
the size of the line of credit or loan commitment when the line of credit or
loan commitment was most recently approved, extended, or renewed prior to the
report date. However, if the amount currently outstanding as of the report
date exceeds this size, the "original amount" is the amount currently
outstanding on the report date. (2) For loan participations and syndications,
the "original amount" of the loan participation or syndication is the entire
amount of credit originated by the lead lender. (3) For all other loans, the
"original amount" is the total amount of the loan at origination or the amount
currently outstanding as of the report date, whichever is larger.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Loans to Small Businesses C418 <-
1. Indicate in the appropriate box at the right whether all of the dollar volume of your bank's
"Loans secured by nonfarm nonresidential properties" reported in Schedule RC-C, part 1, item
1.e, and all or substantially all of the dollar volume of your bank's Commercial and industrial
loans to U.S. addressees" reported in Schedule RC-C, part 1, item 4.a, have original amounts CO YES / NO
of $100,000 or less (If your bank has no loans outstanding in BOTH of these two loan categories, -- --------
place an "X" in the box marked "NO")............................................................ 6999 NO 1.
If YES, complete items 2.a. and 2.b below, skip items 3 and 4, and go to item 5.
If NO, and your bank has loans outstanding in either loan category, skip items 2.a and 2.b,
complete items 3 and 4 below, and go to item 5. If NO and your bank has no loans outstanding
in both loan categories, skip items 2 through 4, and go to item 5:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
2. Report the total number of loans currently outstanding for each of the following NUMBER
Schedule RC-C, part 1, loan categories: OF
a. "Loans secured by nonfarm nonresidential properties" in domestic offices CO LOANS
reported in Schedule RC-C, part 1, item 1.e, column B, (Note: Item 1.e, column B, ---- -----
divided by the number of loans should NOT exceed $100,000.)................... 5562 N/A 2.a
b. "Commercial and industrial loans to U.S. addressees" in domestic offices
reported in Schedule RC-C, part 1, item 4.a, Column B (Note: Item 4.a,
Column B, divided by the number of loans should NOT exceed $100,000)........... 5563 N/A 2.b
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------
(Column B)
(Column A) Amount
Number Currently
RCON of Loans CO Outstanding
---- ---------- -- -----------
a. With original amounts of $100,000 or less............................ 5564 2,576 5565 92,494 3.a
b. With original amounts of more than $100,000 through $250,000................... 5566 1,585 5567 192,607 3.b
c. With original amounts of more than $250,000 through $1,000,000................. 5568 1,402 5569 506,261 3.c
4. Number and amount currently outstanding of "Commercial and industrial loans to U.S.
addressees" in domestic officers reported in Schedule RC-C, part 1, item 4.a,
column B (sum of items 4.a through 4.c must be less than or equal to Schedule RC-C,
part 1, item 4.a column B):
a. With original amounts of $100,000 or less...................................... 5570 24,284 5571 434,195 4.a
b. With original amounts of more than $100,000 through $250,000................... 5572 2,586 5573 276,174 4.b
c. With original amounts of more than $250,000 through $1,000,000................. 5574 1,896 5575 534,298 4.c
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-8b
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [18b]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-C - Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5. Indicate in the appropriate box at the right whether all or substantially all of the dollar
volume of your bank's "Loans secured by farmland (including farm residential and other
improvements)" reported in Schedule RC-C, part 1, item 1.b, and all or substantially all of
the dollar volume of your bank's "Loans to finance agricultural production and other loans
to farmers" reported in Schedule RC-C, part 1, item 3, have original amounts of $100,000 or CO YES / NO
less (If your bank has no loans outstanding in BOTH of these two loan categories, place an -- --------
"X" in the box marked "NO")....................................................................... 6860 NO 5.
If YES, complete items 6.a. and 6.b below, and do not complete items 7 and 8.
If NO, and your bank has loans outstanding in either loan category, skip items 6.a
and 6.b, and complete items 7 and 8 below. If NO and your bank has no loans
outstanding in both loan categories, do not complete items 6 through 8.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
6. Report the total number of loans currently outstanding for each of the following NUMBER
Schedule RC-C, part 1, loan categories: OF
a. "Loans secured by farmland (including farm residential and other RCO LOANS
improvements)" in domestic offices reported in Schedule RC-C, ---- -----
part 1, item 1.b, Column B (Note: Item 1.b, Column B divided by the number
of loans should NOT exceed $100,000).......................................... 5576 N/A 6.a
b. "Loans to finance agricultural production and other loans to farmers" in
domestic offices reported in Schedule RC-C, part 1, item 3, Column B
(Note: Item 3, Column B divided by the number of loans
should NOT exceed $100,000)................................................... 5577 N/A 6.b
Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------
7. Number and amount currently outstanding of "Loans secured by farmland (including (Column A) (Column B)
farm residential and other improvements)" in domestic offices reported in Schedule Number Amount
RC-C, part 1, item 1.b., column B (sum of items 7.a through 7.c must be less than or Of Loans Currently
equal to Schedule RC-C, part 1, item 1.b, column B): Outstanding
RCON CO
---- --
a. With original amounts of $100,000 or less...................................... 5578 214 5579 7,124 7.a
b. With original amounts of more than $100,000 through $250,000................... 5580 80 5581 7,965 7.b
c. With original amounts of more than $250,000 through $500,000................... 5582 15 5583 3,668 7.c
8. Number and amount currently outstanding of "Loans to finance agricultural production
and other loans to farmers" in domestic offices reported in Schedule RC-C, part 1,
item 3 (sum of items 8.a through 8.c must be less than or equal to Schedule RC-C
part 1, item 3 column B):
a. With original amounts of $100,000 or less...................................... 5584 679 5585 15,371 8.a
b. With original amounts of more than $100,000 through $250,000................... 5586 92 5587 11,064 8.b
c. With original amounts of more than $250,000 through $500,000................... 5588 24 5589 6,540 8.c
</TABLE>
<PAGE> 54
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-9
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [19]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-E -- Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425 <-
---Transaction Accounts--- -Nontransaction-
Accounts
(Column A) (Column B) (Column C)
Total Total
transaction Memo: Total nontransaction
accounts demand deposits accounts
(including total (included in (including
demand deposits) column A) MMDAs)
Dollar Amounts in Thousands
- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RCON CON CON
---- ---- ----
Deposits of:
1. Individuals, partnerships and corporations... 2201 3,266,460 2240 2,994,343 2346 10,670,531 1.
2. U.S. Government.............................. 2202 28,178 2280 28,178 2520 0 2.
3. States and political subdivisions in the
U.S.......................................... 2203 132,376 2290 119,008 2530 204,985 3.
4. Commercial banks in the U.S.................. 2206 602,615 2310 602,615 2550 444,367 4.
5. Other depository institutions in the U.S..... 2207 7,599 2312 7,599 2349 0 5.
6. Banks in foreign countries................... 2213 149 2320 149 2236 0 6.
7. Foreign governments and official institutions
(including foreign central banks)............ 2216 0 2300 0 2377 0 7.
8. Certified and official checks................ 2330 97,222 2330 97,222 8.
9. Total (sum of items 1 through 8) (sum of
columns A and C must equal Schedule RC, item
13.a)........................................ 2215 4,134,599 2210 3,849,114 2385 11,319,883 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): RCON
----
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts............. 6835 883,343 M.1.a.
b. Total brokered deposits......................................................... 2365 2,615 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above):
(1) Issued in denominations of less than $100,000............................... 2343 102 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than
$100,000 and participated out by the broker in shares of $100,000 or less... 2344 2,513 M.1.c.(2)
d. Maturity data for brokered deposits:
(1) Brokered deposits issued in denominations of less than $100,000 with a
remaining maturity of one year or less
(included in Memorandum item 1.c.(1) above)................................. A243 102 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a
remaining maturity of one year or less (included in Memorandum item 1.b
above)...................................................................... A244 100 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in
the U.S. reported in item 3 above which are secured or collateralized as
required under state law)....................................................... 5590 336,367 M.1.e
2. Components of total nontransaction accounts (sum of Memoranda items 2.a through 2.c
must equal item 9, column C, above): RCON
a. Savings deposits: ----
(1) Money market deposit accounts (MMDAs)....................................... 6810 4,766,334 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs)..................................... 0352 1,788,735 M.2.a.(2)
b. Total time deposits of less than $100,000....................................... 6648 4,218,516 M.2.b.
c. Total time deposits of $100,000 or more......................................... A512 546,298 M.2.c.
3. All NOW accounts (included in column A above)...................................... 2398 285,485 M.3.
4. Not applicable
</TABLE>
<PAGE> 55
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-10
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [20]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
SCHEDULE RC-E -- Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 RCON
a. Time deposits of less than $100,000 with a remaining maturity or repricing ----
frequency of: (1,2)
(1) Three months or less...................................................... A579 807,576 M.5.a.(1)
(2) Over three months through 12 months....................................... A580 1,676,155 M.5.a.(2)
(3) Over one year through three years......................................... A581 1,353,074 M.5.a.(3)
(4) Over three years.......................................................... A582 381,711 M.5.a.(4)
b. Fixed rate AND floating rate time deposits of less than $100,000 with a
REMAINING MATURITY of one year or less (included in Memorandum items
5.a.(1) through 5.a.(4) above)................................................ A241 2,482,649 M.5.b
6. Maturity and repricing data for time deposits of $100,000 or more:
a. Time deposits of $100,000 or more with a remaining maturity or repricing
requency of: (1,3)
(1) Three months or less...................................................... A584 206,554 M.6.a.(1)
(2) Over three months through 12 months....................................... A585 199,114 M.6.a.(2)
(3) Over one year through three years......................................... A586 94,528 M.6.a.(3)
(4) Over three years.......................................................... A587 46,102 M.6.a.(4)
b. Fixed rate AND floating rate time deposits of $100,000 or more with a
REMAINING MATURITY of one year or less (included in Memorandum items 6.a.(1)
through 6.a.(4) above)........................................................ A242 405,668 M.6.b
</TABLE>
- ---------------
(1) Report fixed rate time deposits by remaining maturity and floating rate
time deposits by repricing frequency.
(2) Sum of Memorandum items 5.a.(1) through 5.a.(4) must equal Schedule RC-E
Memorandum item 2.b above.
(3) Sum of Memorandum items 6.a.(1) through 6.a.(4) must equal Schedule RC-E
Memorandum item 2.c above.
<PAGE> 56
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-11
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [21]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-E -- Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
Deposits of: Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCF
----
1. Individuals, partnerships, and corporations............................................. 2621 706,589 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks).......................... 2623 0 2.
3. Foreign banks (including U.S. branches and
agencies of foreign banks, including their IBFs)........................................ 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks)......... 2650 0 4.
5. Certified and official checks........................................................... 2330 0 5.
6. All other deposits...................................................................... 2668 0 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b).................... 2200 706,589 7.
Memorandum Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------
RCF
1. Time deposits with a remaining maturity of one year or less ----
(included in Part II, item 7 above)..................................................... A245 702,958 M.1
Schedule RC-F -- Other Assets
<CAPTION>
C430 <-
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RCF
----
1. Income earned, not collected on loans.............................................. 2164 152,490 1.
2. Net deferred tax assets(1)......................................................... 2148 7,390 2.
3. Interest-only strips receivable (not in the form of a security)(2) on:
a. Mortgage loans.................................................................. A519 0 3.a
b. Other financial assets.......................................................... A520 26,343 3.b
4. Other (itemize amounts that exceed 25% of this item)............................... 2168 1,600,409 4.
RCF
TEXT ----
a. 3549 Accounts Receivable........................................ 3549 799,145 4.a
b. 3550 Cash Surrender Value-Life Insurance........................ 3550 339,082 4.b
c. 3551 ........................ 3551 N/A 4.c
RCF
----
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11)................. 2160 1,786,632 5.
<CAPTION>
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------
Memorandum
<S> <C> <C> <C>
RCF
----
1. Deferred tax assets disallowed for regulatory capital purposes..................... 5610 0 M.1
Schedule RC-G -- Other Liabilities
<CAPTION>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RCON
----
1. a. Interest accrued and unpaid on deposits in domestic offices(3).................. 3645 91,524 1.a
RCF
----
b. Other expenses accrued and unpaid (includes accrued income taxes payable)....... 3646 125,998 1.b
2. Net deferred tax liabilities(1).................................................... 3049 0 2.
3. Minority interest in consolidated subsidiaries..................................... 3000 120 3.
4. Other (itemize amounts that exceed 25% of this item)............................... 2938 25,107 4.
RCF
TEXT ----
a. 3552 Deferred Fees on Swaps......................................3552 12,229 4.a
b. 3553 ......................................3553 N/A 4.b
c. 3554 ......................................3554 N/A 4.c
RCF
----
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20)................. 2930 242,749 5.
</TABLE>
- ---------------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) Report interest-only strips receivable in the form of a security as
available-for sale securities in Schedule RC, item 2.b, or as trading
assets in Schedule RC, item 5, as appropriate.
(3) For savings banks, includes 'dividends' accrued and unpaid on deposits.
<PAGE> 57
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-12
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [22]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440 <-
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
Domestic Offices
<S> <C> <C> <C>
RCON
----
1. Customers' liability to this bank on acceptances outstanding ............................ 2155 5,632 1.
2. Bank's liability on acceptances executed and outstanding ................................ 2920 5,632 2.
3. Federal funds sold and securities purchased under agreements to resell .................. 1350 60,000 3.
4. Federal funds purchased and securities sold under agreements to repurchase .............. 2800 3,263,740 4.
5. Other borrowed money .................................................................... 3190 3,563,607 5.
EITHER
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs ............. 2163 N/A 6.
OR
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs ............... 2941 707,025 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries,
and IBFs) ............................................................................... 2192 26,197,627 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement subsidiaries,
and IBFs) ............................................................................... 3129 23,164,319 9.
Items 10-17 include held-to maturity and available-for-sale securities in domestic offices.
10. U.S. Treasury securities ................................................................ 1779 1,110,154 10.
11. U.S. Government agency obligations (exclude mortgage-backed securities).................. 1785 95,550 11.
12. Securities issued by states and political subdivisions in the U.S. ...................... 1786 191,157 12.
13. Mortgage-backed securities (MBS):
a. Pass-through securities:
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA .................................... 1787 469,860 13.a.(1)
(2) Other pass-through securities .................................................... 1869 23,436 13.a.(2)
b. Other mortgage-backed securities (include CNOs, REMICs, and stripped NBS):
(1) Issued or guaranteed by FNMA, FHLMC, GNMA ........................................ 1877 472,718 13.b.(1)
(2) All other mortgage-backed securities ............................................. 2253 16,339 13.b.(2)
14. Other domestic debt securities .......................................................... 3159 37,671 14.
15. Foreign debt securities ................................................................. 3160 4,325 15.
16. Equity securities:
a. Investments in mutual funds and other equity securities with readily determinable
fair values A513 0 16.a.
b. All other equity securities.................................. ........................ 3169 25,962 16.b.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) ... 3170 2,447,172 17.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
(to be completed only by banks with IBFs and other "foreign" offices)
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCON
----
EITHER
1. Net due from the IBF of the domestic offices of the reporting bank ...................... 3051 N/A M.1.
OR
2. Net due to the IBF of the domestic offices of the reporting bank ......................... 3059 0 M.2.
</TABLE>
<PAGE> 58
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-13
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [23]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-I -- Selected Assets and Liabilities of IBFs
To be completed only by banks with IBFs and other "foreign" offices.
<TABLE>
<CAPTION>
To be completed only by banks with IBFs and other "foreign" offices. C445 <-
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCF
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)......... 2133 N/A 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I,
item 12, column A).................................................................... 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, item 4,
column A)............................................................................. 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21)............................. 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule RC-E,
part II, items 2 and 3)............................................................... 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, items 1, 4,
5, and 6)............................................................................. 2381 N/A 6.
</TABLE>
Schedule RC-K -- Quarterly Averages(1)
<TABLE>
<CAPTION>
C455 <-
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest-bearing balances due from depository institutions............................ RCF 3381 2,676 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(2).... RCF 3382 2,211,350 2.
3. Securities issued by states and political subdivisions in the U.S.(2)................. RCF 3383 204,912 3.
4. a. Other debt securities(2)......................................................... RCF 3647 78,190 4.a.
b. Equity securities(3) (includes investments in mutual funds and Federal Reserve
stock)........................................................................... RCF 3648 20,266 4.b.
5. Federal funds sold and securities purchased under agreements to resell................ RCF 3365 3,956 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans................................................................. RCON 3360 18,783,121 6.a.(1)
(2) Loans secured by real estate................................................ RCON 3385 4,890,120 6.a.(2)
(3) Loans to finance agricultural production and other loans to farmers......... RCON 3386 38,478 6.a.(3)
(4) Commercial and industrial loans............................................. RCON 3387 4,376,594 6.a.(4)
(5) Loans to individuals for household, family, and other personal
expenditures................................................................ RCON 3388 9,768,442 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs........ RCF 3360 0 6.b.
7. Trading assets........................................................................ RCF 3401 0 7.
8. Lease financing receivables (net of unearned income).................................. RCF 3484 2,253,582 8.
9. Total assets(4)....................................................................... RCF 3368 26,084,105 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS accounts,
and telephone and preauthorized transfer accounts) (exclude demand deposits).......... RCON 3485 394,917 10.
11. Nontransaction accounts in domestic offices:
a. Money market deposit accounts (MMDAs)............................................ RCON 3486 4,670,855 11.a.
b. Other savings deposits........................................................... RCON 3487 1,789,404 11.b.
c. Time deposits of $100,000 or more................................................ RCON A514 548,213 11.c.
d. Time deposits of less than $100,000.............................................. RCON A529 4,270,459 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries,
and IBFs.............................................................................. RCF 3404 622,502 12.
13. Federal funds purchased and securities sold under agreements to repurchase............ RCF 3353 3,635,255 13.
14. Other borrowed money
(includes mortgage indebtedness and obligations under capitalized leases)............. RCF 3555 2,993,317 14.
</TABLE>
- ---------------
(1) For all items, banks have the option of reporting either (1) an average of
daily figures for the quarter or (2) an average of weekly figures (i.e., the
Wednesday of each week of the quarter).
(2) Quarterly averages for all debt securities should be based on amortized
cost.
(3) Quarterly averages for all equity securities should be based on historical
cost.
(4) The quarterly average for total assets should reflect all debt securities
(not held for trading) at amortized cost, equity securities with readily
determinable fair values at the lower of cost or fair value, and equity
securities without readily determinable fair values at historical cost.
<PAGE> 59
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-14
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [24]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-L -- Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L.
Some of the amounts reported in Schedule RC-L are regarded as volume indicators
and not necessarily as measures of risk.
<TABLE>
<CAPTION>
C460 <-
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Unused commitments: RCF
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., ---
home equity lines................................................................ 3814 1,362,408 1.a.
b. Credit card lines................................................................ 3815 27,952,629 1.b.
c. Commercial real estate, construction, and land development:
(1) Commitments to fund loans secured by real estate............................. 3816 416,959 1.c.(1)
(2) Commitments to fund loans not secured by real estate......................... 6550 133,145 1.c.(2)
d. Securities underwriting.......................................................... 3817 0 1.d.
e. Other unused commitments......................................................... 3818 4,120,402 1.e.
2. Financial standby letters of credit and foreign office guarantees................... 3819 983,857 2.
a. Amount of financial standby letters of credit conveyed to
others .................................................... RCF 3820 111,727 2.a.
---
3. Performance standby letters of credit and foreign office guarantees................. 3821 434,352 3.
a. Amount of performance standby letters of credit conveyed to
others..................................................... RCF 3822 14,230 3.a.
---
4. Commercial and similar letters of credit............................................ 3411 164,714 4.
5. Participations in acceptances (as described in the instructions) conveyed to others
by the reporting bank............................................................... 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the
reporting (nonaccepting) bank....................................................... 3429 0 6.
7. Securities borrowed................................................................. 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is
indemnified against loss by the reporting bank)..................................... 3433 0 8.
9. Financial assets transferred with recourse that have been treated as
sold for Call Report purposes:
a. First lien 1-to-4 family residential mortgage loans: RCF
(1) Outstanding principal balance of mortgages transferred as of the report ---
date......................................................................... A521 0 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date......... A522 0 9.a.(2)
b. Other financial assets (excluding small business obligations reported in item
9.c):
(1) Outstanding principal balance of mortgages transferred as of the report
date......................................................................... A523 4,156,380 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date......... A524 165,954 9.b.(2)
c. Small business obligations transferred with recourse under Section 208 of the
Reigle Community Development and Regulatory Improvement Act of 1994:
(1) Outstanding principal balance of mortgages transferred as of the report
date......................................................................... A249 0 9.c.(1)
(2) Amount of retained recourse on these obligations as of the report date....... A250 0 9.c.(2)
10. Notional amount of credit derivatives:
a. Credit derivatives on which the reporting bank is the guarantor.................. A534 10,000 10.a.
a. Credit derivatives on which the reporting bank is the beneficiary................ A535 0 10.b.
11. Spot foreign exchange contracts..................................................... 8765 0 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives)
(itemize and describe each component of this item over 25% of Schedule RC,
item 28, "Total equity capital").................................................... 3430 0 12.
a. TEXT 3555: .................................................. RCF 3555 N/A 12.a.
b. TEXT 3556: .................................................. RCF 3556 N/A 12.b.
c. TEXT 3557: .................................................. RCF 3557 N/A 12.c.
d. TEXT 3558: .................................................. RCF 3558 N/A 12.d.
</TABLE>
<PAGE> 60
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-15
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [25]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
<TABLE>
Schedule RC-L -- Continued
<S> <C> <C> <C> <C> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivates) (itemize RCF
and describe each component of this item over 25% of Schedule RC, item 28, "Total ---
equity capital").................................................................... 5591 0 13.
a. TEXT 5592: .................................................. RCF 5592 N/A 13.a.
b. TEXT 5593: .................................................. RCF 5593 N/A 13.b.
c. TEXT 5594: .................................................. RCF 5594 N/A 13.c.
d. TEXT 5595: .................................................. RCF 5595 N/A 13.d.
</TABLE>
<TABLE>
<CAPTION>
Off-Balance Sheet Derivatives C461 <-
Position Indicators Dollar Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Interest Foreign Equity Commodity
Rate Exchange Derivative And Other
Contracts Contracts Contracts Contracts
<S> <C> <C> <C> <C> <C>
14. Gross amounts (e.g., notional amounts) (for each
column, sum of items 14.a through 14.e must equal
sum of items 15, 16.a, and 16.b):
a. Futures contracts............................. 0 0 0 0 14.a.
---------------------------------------------------
RCF 8693 RCF 8694 RCF 8695 RCF 8696
---------------------------------------------------
b. Forward contracts............................. 0 0 0 0 14.b.
---------------------------------------------------
RCF 8697 RCF 8698 RCF 8699 RCF 8700
---------------------------------------------------
c. Exchange-traded option contracts:
---------------------------------------------------
(1) Written options........................... 0 0 0 0 14.c.(1)
---------------------------------------------------
RCF 8701 RCF 8702 RCF 8703 RCF 8704
---------------------------------------------------
(2) Purchased options......................... 0 0 0 0 14.c.(2)
---------------------------------------------------
RCF 8705 RCF 8706 RCF 8707 RCF 8708
---------------------------------------------------
d. Over-the-counter option contracts:
---------------------------------------------------
(1) Written options........................... 204,439 0 0 0 14.d.(1)
---------------------------------------------------
RCF 8709 RCF 8710 RCF 8711 RCF 8712
---------------------------------------------------
(2) Purchased options......................... 704,439 0 0 0 14.d.(2)
---------------------------------------------------
RCF 8713 RCF 8714 RCF 8715 RCF 8716
---------------------------------------------------
e. Swaps......................................... 19,316,844 0 0 0 14.e.
---------------------------------------------------
RCF 3450 RCF 3826 RCF 8719 RCF 8720
---------------------------------------------------
15. Total gross notional amount of derivative contracts
held for trading................................... 0 0 0 0 15.
---------------------------------------------------
RCF A125 RCF A127 RCF 8723 RCF 8724
---------------------------------------------------
16. Total gross notional amount of derivative contracts
held for purposes other than trading:
---------------------------------------------------
a. Contracts marked to market.................... 110,732 0 0 0 16.a.
---------------------------------------------------
RCF 8725 RCF 8726 RCF 8727 RCF 8728
---------------------------------------------------
b. Contracts not marked to market................ 20,114,990 0 0 0 16.b.
---------------------------------------------------
RCF 8729 RCF 8730 RCF 8731 RCF 8732
---------------------------------------------------
c. Interest rate swaps where the bank
has agreed to pay a fixed rate................ 825,441 16.c.
---------------------------------------------------
CON A589
---------------------------------------------------
</TABLE>
<PAGE> 61
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-16
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [26]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
SCHEDULE RC-L -- Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------------------
Off-Balance Sheet Derivatives (Column A) (Column B) (Column C) (Column D)
Position Indicators Interest Foreign Equity Commodity
Rate Exchange Derivative And Other
Contracts Contracts Contracts Contracts
RCF RCF RCF RCF
--- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
17. Gross fair values of derivative
contracts:
a. Contracts held for trading:
(1) Gross positive fair
value........................... 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative fair
value........................... 8737 0 8738 0 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes
other than trading that are
marked to market:
(1) Gross positive fair
value........................... 8741 376 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative fair
value........................... 8745 366 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes
other than trading that are
not marked to market:
(1) Gross positive fair
value........................... 8749 67,896 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair
value........................... 8753 74,398 8754 0 8755 0 8756 0 17.c.(2)
----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1.-2. Not applicable.................................................................
3. Unused commitments with an original maturity exceeding one year that are RCF
reported in Schedule RC-L, items 1.a through 1.e, above (report only the unused ---
portions of commitments that are fee paid or otherwise legally binding)........ 3833 3,860,660 M.3.
RCF
a. Participations in commitments with an original ---
maturity exceeding one year conveyed to others............ 3834 71,368 M.3.a.
4. To be completed only by banks with $1 billion or more in total assets:
Standby letters of credit and foreign office guarantees (both financial and RCF
performance) issued to non-U.S. addressees (domicile) included in ---
Schedule RC-L, items 2 and 3, above............................................ 3377 N/A M.4.
5. Installment loans to individuals for household, family and other personal
expenditures that have been securitized and sold (with servicing retained),
amounts outstanding by type of loan: RCF
a. Loans to purchase private passenger automobiles ---
(to be completed for the September report only)............................. 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY).................. 2742 3,340,000 M.5.b.
c. All other consumer installment credit (including mobile home loans)
(to be completed for the September report only)............................. 2743 N/A M.5.c.
</TABLE>
<PAGE> 62
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-17
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [27]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-M -- Memoranda
<TABLE>
<CAPTION>
C465 <-
-------------------
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors,
principal shareholders, and their related interests as of the report date: RCF
a. Aggregate amount of all extensions of credit to all executive officers, directors, ---
principal shareholders and their related interests................................... 6164 189,738 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the
amount of all extensions of credit by the reporting bank (including extensions
of credit to related interests) equals or exceeds the lesser of $500,000 or
5 percent of total capital as defined for this purpose in agency RCF Number
--- ------
regulations.................................................... 6165 8 RCF 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. ---
branches and agencies of foreign banks(1) (included in Schedule RC, item 3)............. 3405 0 2.
3. Not applicable.
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for
others (include both retained servicing and purchased servicing):
a. Mortgages serviced under a GNMA contract............................................. 5500 0 4.a.
b. Mortgages serviced under a FHLMC contract:
(1) Serviced with recourse to servicer............................................... 5501 0 4.b.1
(2) Serviced without recourse to servicer............................................ 5502 0 4.b.2
c. Mortgages serviced under a FNMA contract:
(1) Serviced under a regular option contract......................................... 5503 0 4.c.1
(2) Serviced under a special option contract......................................... 5504 0 4.c.2
d. Mortgages serviced under other servicing contracts................................... 5505 0 4.d.
5. To be completed only by banks with $1 billion or more in total assets:
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b
must equal Schedule RC, item 9):
a. U.S. addressees (domicile)........................................................... 2103 5,632 5.a.
b. Non-U.S. addressees (domicile)....................................................... 2104 N/A 5.b.
6. Intangible assets:
a. Mortgage Servicing Rights............................................................ 3164 0 6.a.
(1) Estimated fair value of mortgage servicing assets................................... A590 0 6.a.1
b. Other identifiable intangible assets:
(1) Purchased credit card relationships.............................................. 5506 31,560 6.b.1
(2) All other identifiable intangible assets......................................... 5507 21,513 6.b.2
c. Goodwill............................................................................. 3163 90,209 6.c.
d. Total (sum of items 6.a, 6.b.1, 6.b.2, and 6.c) (must equal Schedule RC, item 10).... 2143 143,282 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been
grandfathered or are otherwise qualifying for regulatory capital purposes............ 6442 0 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock
dedicated to redeem the debt............................................................ 3295 0 7.
--------------
</TABLE>
- ---------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this item.
<PAGE> 63
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-18
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [28]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-M -- Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. a. Other real estate owned:
(1) Direct and indirect investments in real estate ventures....................... RCF 5372 0 8.a.1
(2) All other real estate owned:
(a) Construction and land development in domestic offices.................... RCON 5508 0 8.a.2.a
(b) Farmland in domestic offices............................................. RCON 5509 0 8.a.2.b
(c) 1-4 family residential properties in domestic offices.................... RCON 5510 3,102 8.a.2.c
(d) Multifamily (5 or more) residential properties in domestic offices....... RCON 5511 0 8.a.2.d
(e) Nonfarm nonresidential properties in domestic offices.................... RCON 5512 5,791 8.a.2.e
(f) In foreign offices....................................................... RCF 5513 0 8.a.2.f
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7)..... RCF 2150 8,893 8.a.
b. Investments in unconsolidated subsidiaries and associated companies:
(1) Direct and indirect investments in real estate ventures....................... RCF 5374 0 8.b.1
(2) All other investments in unconsolidated subsidiaries and associated
companies..................................................................... RCF 5375 6,860 8.b.2
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)..... RCF 2130 6,860 8.b.3
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC,
item 23, "Perpetual preferred stock and related surplus"................................ RCF 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include
proprietary, private label, and third party products):
a. Money market funds................................................................. RCON 6441 25,030 10.a.
b. Equity securities funds............................................................ RCON 8427 50,209 10.b.
c. Debt securities funds.............................................................. RCON 8428 17,981 10.c.
d. Other mutual funds................................................................. RCON 8429 0 10.d.
e. Annuities.......................................................................... RCON 8430 41,480 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through
10.e above)........................................................................ RCON 8784 86,597 10.f.
11. Net unamortized realized deferred gains (losses) on off-balance sheet derivative
contracts included in assets and liabilities reported in Schedule RC................... RCF A525 15 11
12. Amount of assets netted against nondeposit liabilities and deposits in foreign
offices (other than insured branches in Puerto Rico and U.S. territories and
possessions) on the balance sheet (Schedule RC) in accordance with generally accepted
accounting principles (1).............................................................. RCF A526 0 12
13. Outstanding principal balance of loans other than 1-4 family residential mortgage
loans that are serviced for others (to be completed if this balance is more than
$10 million and exceeds ten percent of total assets)................................... RCF A591 0 13
</TABLE>
<TABLE>
<CAPTION>
Memorandum Dollar Amounts in Thousands
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Reciprocal holdings of banking organizations' capital instruments
(to be completed for the December report only).................................... RCF 3836 N/A M.1
------------------------
</TABLE>
- ----------------
(1) Exclude netted on-balance sheet amounts associated with off-balance sheet
derivative contracts, deferred tax assets netted against deferred tax
liabilities, and assets netted in accounting for pensions.
<PAGE> 64
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-19
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [29]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-N -- Past Due and Nonaccrual Loans, Leases, and Other Assets
The FFIEC regards the information reported in all of Memorandum item 1, in
items 1 through 10, column A, and in Memorandum items 2 through 4, column A,
as confidential.
<TABLE>
<CAPTION>
C470 <-
Dollar Amounts in Thousands
-----------------------------------------------------------
--(Column A)-- --(Column B)-- ---(Column C)---
Past due 30 Past due 90 Nonaccrual
through 89 days days or more
and still and still
accruing accruing
<S> <C> <C> <C> <C> <C> <C> <C>
RCF RCF RCF
1. Loans secured by real estate: --- --- ---
a. To U.S. addressees (domicile)................... 1245 1246 19,405 1247 53,109 1.a.
b. To non-U.S. addressees (domicile)............... 1268 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances of
other banks: RCF RCF RCF
a. To U.S. banks and other U.S. depositary --- --- ---
institutions.................................... 5377 5378 0 5379 0 2.a.
b. To foreign banks................................ 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and other
loans to farmers..................................... 1594 1597 155 1583 957 3.
4. Commercial and industrial loans:
a. To U.S. addressees (domicile)................... 1251 1252 8,791 1253 25,638 4.a.
b. To non-U.S. addressees (domicile)............... 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and other
personal expenditures: RCF RCF RCF
--- --- ---
a. Credit cards and related plans.................. 5383 5384 182,070 5385 0 5.a.
b. Other (includes single payment, installment, and
all student loans).............................. 5386 5387 41,126 5388 6,787 5.b.
6. Loans to foreign governments and official
institutions......................................... 5389 5390 0 5391 0 6.
7. All other loans...................................... 5459 5460 1 5461 119 7.
8. Lease financing receivables:
a. Of U.S. addressees (domicile)................... 1257 1258 2,921 1259 1,426 8.a.
b. Of non-U.S. addressees (domicile)............... 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other real
estate owned and other repossessed assets)........... 3505 3506 0 3507 0 9.
----------------------------------------------------------
==========================================================================================================================
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 10 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
-------------------------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10. Loans and leases reported in items 1 through 8 above RCF RCF RCF
which are wholly or partially guaranteed by the U.S. --- --- ---
Government........................................... 5612 5613 19,479 5614 2,719 10.
a. Guaranteed portion of loans and leases included
in item 10 above................................ 5615 5616 19,464 5617 1,980 10.a.
-----------------------------------------------------
</TABLE>
<PAGE> 65
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-20
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [30]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-N -- Continued
<TABLE>
<CAPTION>
C473 <-
Dollar Amounts In Thousands
-------------------------------------------------------
--(Column A)-- --(Column B)-- --(Column C)--
Memoranda Past due 30 Past due 90 Nonaccrual
through 89 days or more
days and still and still
accruing accruing
-------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in
Schedule RC-N, items 1 through 8, above RCF RCF RCF
(and not reported in Schedule RC-C, Part 1, --- --- ---
Memorandum item 2)................................ 1658 1659 1661 M.1.
2. Loans to finance commercial real estate,
construction, and land development activities RCF RCF RCF
(not secured by real estate) included in Schedule --- --- ---
RC-N, items 4 and 7, above........................ 6558 6559 440 6560 281 M.2.
3. Loans secured by real estate in domestic offices
(included in Schedule RC-N, item, 1 above): RCON CON CON
---- --- ---
a. Construction and land development.............. 2759 2769 1,919 3492 2,804 M.3.a.
b. Secured by farmland............................ 3493 3494 213 3495 20 M.3.b.
c. Secured by 1-4 family residential properties:
(1) Revolving, open-end loans secured by 1-4 RCON CON CON
family residential properties and extended ---- --- ---
under lines of credit...................... 5398 5399 2,049 5400 4,989 M.3.c.1
(2) All other loans secured by 1-4 family
residential properties..................... 5401 5402 4,871 5403 26,927 M.3.c.2
d. Secured by multifamily (5 or more) residential
properties..................................... 3499 3500 131 3501 69 M.3.d.
e. Secured by nonfarm nonresidential properties... 3502 3503 10,222 3504 18,300 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
---(Column A)--- ---(Column B)---
Past due Past due 90
30 through 89 days or more
days and still and still
accruing accruing
<S> <C> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other
commodity and equity contracts: RCF RCF
--- ---
a. Book value of amounts carried as assets........ 3522 3528 0 M.4.a.
b. Replacement cost of contracts with a positive
replacement cost............................... 3529 3530 0 M.4.b.
- ----------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be directed:
C477 <-
Name Title Area Code/Phone Number/Extension
8901 John Dible 8901 Sr. Regulatory Analyst 8902 614-248-8592
</TABLE>
32
<PAGE> 66
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-21
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037 Cert #: 06559
FDIC Certificate No.: 06559 [31]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-O -- Other Data for Deposit Insurance and FICO Assessments
<TABLE>
<CAPTION>
C475 <-
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCON
1. Unposted debits (see instructions): ----
a. Actual amount of all unposted debits............................................... 0030 N/A 1.a.
OR
b. Separate amount of unposted debits:
(1) Actual amount of unposted debits to demand deposits............................ 0031 0 1.b.1
(2) Actual amount of unposted debits to time and savings deposits(1)............... 0032 0 1.b.2
2. Unposted credits (see instructions):
a. Actual amount of all unposted credits.............................................. 3510 N/A 2.a.
OR
b. Separate amount of unposted credits:
(1) Actual amount of unposted credits to demand deposits........................... 3512 0 2.b.1
(2) Actual amount of unposted credits to time and savings deposits(1).............. 3514 0 2.b.2
3. Uninvested trust funds (cash) held in bank's own trust department (not included
in total deposits in domestic offices)................................................ 3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions (not included in total deposits):
a. Demand deposits of consolidated subsidiaries....................................... 2211 12,965 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries.......................... 2351 8,480 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries............... 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions:
a. Demand deposits in insured branches (included in Schedule RC-E, Part II)........... 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E,
Part II)........................................................................... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches
(included in Schedule RC-G, item 1.b).............................................. 5515 0 5.c.
6. Reserve balances actually passed through to the Federal Reserve by the reporting bank
on behalf of its respondent depository institutions that are also reflected as deposit
liabilities of the reporting bank: RCON
a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, ----
Memorandum item 4 or 5 column B).................................................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E,
Part I, Item 4 or 5, column A or C, but not column B)............................... 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1)
a. Unamortized premiums............................................................... 5516 1,574 7.a.
b. Unamortized discounts.............................................................. 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
a. Deposits purchased or acquired from other FDIC-insured institutions during the
quarter (exclude deposits purchased or acquired from foreign offices other than
insured branches in Puerto Rico and U.S. territories and possessions): RCON
(1) Total deposits purchased or acquired from other FDIC-insured institutions ----
during the quarter............................................................... A531 9,830,867 8.a.1
RCO
(2) Amount of purchased or acquired deposits reported in item 8.a.(1) above ---
attributable to SAIF; SAIF members report deposits attributable to BIF)........... A532 914,673 8.a.2
b. Total deposits sold or transferred during the quarter (exclude sales or
transfers by the reporting bank of deposits in foreign offices other than
insured branches in Puerto Rico and U.S. territories and possessions)............. A533 N/A 8.b
</TABLE>
- ---------------
(1) For FDIC and FICO insurance assessment purposes, "time and savings
deposits" consists of nontransaction accounts and all transaction accounts other
than demand deposits.
<PAGE> 67
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-22
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [32]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-O -- Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCON
----
9. Deposits in lifeline accounts......................................................... 5596 9
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total
deposits in domestic offices)......................................................... 8432 0 10
11. Adjustments to demand deposits in domestic offices and in insured branches in
Puerto Rico and U.S. territories and possessions reported in Schedule RC-E for
certain reciprocal demand balances:
a. Amount by which demand deposits would be reduced if the reporting bank's
reciprocal demand balances with the domestic offices of U.S. banks and
savings associations and insured branches in Puerto Rico and U.S. territories RCON
and possessions that were reported on a gross basis in Schedule RC-E had ----
been reported on a net basis....................................................... 8785 0 11.a
b. Amount by which demand deposits would be increased if the reporting bank's
reciprocal demand balances with foreign banks and foreign offices of other
U.S. banks (other than insured branches in Puerto Rico and U.S.
territories and possessions) that were reported on a net basis in Schedule
RC-E had been reported on a gross basis............................................ A181 0 11.b
c. Amount by which demand deposits would be reduced if cash items in process
of collection were included in the calculation of the reporting bank's net
reciprocal demand balances with the domestic offices of U.S. banks and
savings associations and insured branches in Puerto Rico and U.S.
territories and possessions in Schedule RC-E....................................... A182 0 11.c
12. Amount of assets netted against deposit liabilities in domestic offices and in
insured branches in Puerto Rico and U.S. territories and possessions on the
balance sheet (Schedule RC) in accordance with generally accepted accounting
principles (exclude amounts related to reciprocal demand balances):
a. Amount of assets netted against demand deposits................................... A527 0 12.a
b. Amount of assets netted against time and savings deposits......................... A528 0 12.b
</TABLE>
<TABLE>
<CAPTION>
Memoranda (To be completed each quarter except as noted)
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1)
and 1.b.(1) must equal Schedule RC, item 13.a): RCON
a. Deposit accounts of $100,000 or less: ----
(1) Amount of deposit accounts of $100,000 or less.............................. 2702 11,125,220 M.1.a1
(2) Number of deposit accounts of $100,000 or less RCON Number
(to be completed ---- ---------
for the June report only)............................. 3779 1,836,803 M.1.a2
b. Deposit accounts of more than $100,000:
(1) Amount of deposit accounts of more than $100,000............................ 2710 4,329,262 M.1.b1
RCON Number
---- ---------
(2) Number of deposit accounts of more than $100,000..... 2722 13,103 M.1.b2
2. Estimated amount of uninsured deposits in domestic offices of the bank:
a. An estimate of your bank's uninsured deposits can be determined by multiplying
the number of deposit accounts of more than $100,000 reported in Memorandum item
1.b.(2) above by $100,000 and subtracting the result from the amount of deposit
accounts of more than $100,000 reported in Memorandum item 1.b.(1) above.
Indicate in the appropriate box at the right whether your bank has a method or RCON YES/NO
procedure for determining a better estimate of uninsured deposits than the ---- ------
estimate described above................................................... 6861 NO M.2.a
b. If the box marked YES has been checked, report the estimate of uninsured
deposits determined by using your bank's method or procedure.................... 5597 N/A M.2.b
3. Has the reporting institution been consolidated with a parent bank or savings
association in that parents bank's or parent savings association's
Call Report of Thrift Financial Report ?
If so, report the legal title and FDIC Certificate Number of the parent bank or
parent savings association:
TEXT RCO FDIC Cert No.
--- N/A M.3
A545
</TABLE>
<PAGE> 68
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-33
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [23]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-R -- Regulatory Capital
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1996,
must complete items 2 through 9 and Memoranda items 1 and 2. BANKS WITH ASSETS
OF LESS THAN $1 BILLION MUST COMPLETE ITEMS 1 THROUGH 3 BELOW OR SCHEDULE
RCR IN ITS ENTIRETY, DEPENDING ON THEIR RESPONSE TO ITEM 1 BELOW.
<TABLE>
<CAPTION>
C480 <-
<S> <C> <C> <C> <C>
1. Test for determining the extent to which Schedule RC-R must be completed.
To be completed only by banks with total assets of less than $1 billion. RCF YES / NO
Indicate in the appropriate box at the right whether the bank has total ----
capital greater than or equal to eight percent of adjusted total assets........ 6056 YES 1.
For purposes of this test, adjusted total assets equals total assets
less cash, U.S. Treasuries, U.S. Government agency obligations, and 80
percent of U.S. Government-sponsored agency obligations plus the allowance
for loan and lease losses and selected off-balance sheet items as reported
on Schedule RC-L (see instructions).
If the box marked YES has been checked, then the bank only has to
complete item 2 and 3 below. If the box marked NO has been checked,
the bank must complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's
actual risk-based capital ratio is less than eight percent or that the bank
is not in compliance with the risk-based capital guidelines.
NOTE: All Banks are required to complete
items 2 and 3 below
</TABLE>
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2. Portion of qualifying limited-life capital instruments (original
weighted average maturity of at least five years) that is includible RCF
in Tier 2 capital: ---
a. Subordinated debt (1) and intermediate term preferred stock................. A515 547,015 2.a
b. Other limited-life capital instruments...................................... A516 0 2.b
3. Amounts used in calculating regulatory capital ratios (report amounts
determined by the bank for its own internal regulatory capital analysis
consistant with applicable capital standards):
a. Tier 1 capital.............................................................. 8274 2,203,411 3.a
b. Tier 2 capital.............................................................. 8275 873,038 3.b
c. Total risk-based capital.................................................... 3792 3,076,450 3.c
d. Excess allowance for loan and lease losses
(amount that exceeds 1.25% of gross risk-weighted assets)................... A222 222,867 3.d
e. Net risk-weighted assets (gross risk-weighted assets less excess
allowance reported in item 3.d above and all other deductions)............... A223 25,854,013 3.e
f. "Average total assets" (quarterly average reported in Schedule RC-K,
item 9, less all assets deducted from Tier 1 capital)(2).................... A224 25,972,383 3.f
</TABLE>
Items 4-9 and Memoranda items 1 and 2 are to be completed
by banks that answered NO to item 1 above and
by banks with total assets of $1 billion or more.
<TABLE>
<CAPTION>
--(Column A)-- --(Column B)--
Credit
Equivalent
Assets Recorded Amount of Off-
on the Balance Balance Sheet
Dollar Amounts in Thousands Sheet Items(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items assigned RCF
to the Zero percent risk category: --- RCF
a. Assets recorded on the balance sheet................................ 5163 1,649,981 --- 4.a.
b. Credit equivalent amount of off-balance sheet items................. 3796 0 4.b
</TABLE>
- ---------------
(1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in
column A.
<PAGE> 69
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-24
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [34]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Schedule RC-R -- Continued
<TABLE>
<CAPTION>
--(Column A)-- --(Column B)--
Credit Equivalent
Assets Recorded on Amount
the of Off-Balance
Dollar Amounts in Thousands Balance Sheet Sheet Items(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items RCF
assigned to the 20 percent risk category: --- RCF
a. Assets recorded on the balance sheet......................... 5165 2,621,138 --- 5.a
b. Credit equivalent amount of off-balance sheet items................................. 3801 583,806 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 50 percent risk category:
a. Assets recorded on the balance sheet......................... 3802 1,890,908 6.a.
b. Credit equivalent amount of off-balance sheet items.................................. 3803 386,684 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items
assigned to the 100 percent risk category:
a. Assets recorded on the balance sheet......................... 3804 20,457,398 7.a.
b. Credit equivalent amount of off-balance sheet items.................................. 3805 3,869,697 7.b.
8. On-balance sheet asset values excluded from and deducted in
the calculation of the risk-based capital ratio(2).............. 3806 132,092 8.
9. Total assets recorded on the balance sheet (sum of items 4.a,
5.a, 6.a, 7.a, and 8, column A) (must equal Schedule RC, item 12
plus items 4.b and 4.c)......................................... 3807 26,751,517 9.
--------------------------------------
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RCF
1. Current credit exposure across all off-balance sheet derivative contracts ---
covered by the risk-based capital standards................................. 8764 68,271 M.1.
--------------------
</TABLE>
<TABLE>
<CAPTION>
---With a remaining maturity of---
------------------------------------------------------
--(Column A)-- --(Column B)-- --(Column C)--
Over one year
through five Over five
One year or less years years
<S> <C> <C> <C> <C> <C> <C> <C>
2. Notional principal amounts of off-balance RCF RCF RCF
sheet derivative contracts:(3) --- --- ---
a. Interest rate contracts.................... 3809 2,859,429 8766 10,822,365 8767 3,294,756 M.2.a.
b. Foreign exchange contracts................. 3812 N/A 8769 N/A 8770 N/A M.2.b.
c. Gold contracts............................. 8771 N/A 8772 N/A 8773 N/A M.2.c.
d. Other precious metals contracts............ 8774 N/A 8775 N/A 8776 N/A M.2.d.
e. Other commodity contracts.................. 8777 N/A 8778 N/A 8779 N/A M.2.e.
f. Equity derivative contracts................ A000 N/A A001 N/A A002 N/A M.2.f.
-----------------------------------------------------
</TABLE>
- ---------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes on-balance
sheet asset values (or portions thereof) of off-balance sheet interest rate,
foreign exchange rate, and commodity contracts and those contracts (e.g.,
futures contracts) not subject to risk-based capital item 8 margin accounts
and accrued receivables not included in the calculation of credit equivalent
amounts of off-balance sheet derivatives as well as any portion of the
allowance for loan and lease losses in excess of the amount that may be
included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
<PAGE> 70
<TABLE>
<S> <C> <C> <C>
Legal Title of Bank: BANK ONE, NA Call Date: 06/30/97 State #: FFIEC 031
Address: 100 EAST BROAD STREET, OH1-1066 Vendor ID: D RC-25
City, State Zip: COLUMBUS, OH 43271 Transit #: 04400037
FDIC Certificate No.: 06559 [35]
Transmitted to EDS as 0054682 on 07/30/97 at 12:04:10 CST
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
Bank One, NA Columbus OH
------------ -------- --
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief narrative
statement on the amounts reported in the Reports of Condition and Income. This
optional statement will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in response to any
request for individual bank report data. However the information reported in
column A and in all of Memorandum item 1 of Schedule RC-N is regarded as
confidential and will not be released to the public.
BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE
STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK
CUSTOMERS. REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN
SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE
PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMER.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statements accuracy.
If, subsequent to the original submission, material changes are submitted for
the date reported in the Reports of Condition and Income, the existing narrative
statement will be deleted from the files, and from disclosure; the bank at its
option, may replace it with a statement appropriate to the amended area.
The optional narrative statement will appear in agency records and in release to
the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank.
THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY
AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT
SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE
ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL
APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE
MANAGEMENT OF THE REPORTING BANK.
- -------------------------------------------------------------------------------
C471 C472 <-
<TABLE>
<CAPTION>
<S> <C>
RCON
----
X= NO COMMENT Y= COMMENT.............................. 6979 Y
BANK MANAGEMENT STATEMENT (please type or print clearly):
TEXT (70 characters per line)
During the quarter, the bank merged with 16 other
Ohio based Banc One affiliate banks. This merger
resulted in increases of approximately $14.5 billion
in assets, $10.5 billion in deposits and $1.4 billion
in capital. The income amounts reported reflect
year-to-date income for all merged banks. The acquired
deposits reported on Schedule RC-O Items 8.a(1) and
8.a(2) reflect the deposits of all other banks involved
in the merger.
/S/ illegible 7/31/97
--------------------------------------------------------
Signature of Executive Officer of Bank Date of Signature
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
</TABLE>
<PAGE> 71
[33]
BANK ONE, NA OMB No. For FDIC: 1557-0081
100 EAST BROAD STREET, OH1-1066 OMB No. For FDIC: 3064-0052
COLUMBUS, OH 43271 OMB No. For Federal Reserve: 7100-0036
Expiration Date: 3/31/2000
<TABLE>
SPECIAL REPORT C700 <-
Dollar Amounts in Thousands
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Close of Business Date: FDIC Cert.#
6/30/97 06559
</TABLE>
- --------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- --------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but
does not constitute a part of the Report of Condition. With each Report of
Condition, these Laws require all banks to furnish a report of loans or other
extensions of credit to their executive officers made since the date of the
previous Report of Condition. Data regarding individual loans or other
extension of credit are not required. If no such loans or other extensions of
credit were made during the period, insert "none" against subitem (a).
(Exclude the first $15,000 of indebtedness of each executive officer under bank
credit card plan.) See Section 215.2 and 215.3 of Title 12 of the Code of
Federal Regulations. (Federal Reserve Board Regulation O) for the definitions
of "executive officer" and "extension of credit", respectively. Exclude loans
and other extensions of credit to directors and principal shareholders who are
not executive officers.
<TABLE>
<S> <C> <C> <C> <C> <C>
RCF
---
a. Number of loans made to executive officers since the previous Call Report date....... 3561 2 a.
b. Total dollar amount of above loans (in thousands of dollars)......................... 3562 29 b.
c. Range of interest charged on above loans RCF From RCF TO
--- ---- --- --
(example: 9-3/4% = 9.75)........................................7701 9.50% 7702 17.90% c.
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT: DATE (month, Day, Year):
<S> <C>
NAME AND TITLE OF PERSON TO
WHOM INQUIRIES MAY BE DIRECTED: (TEXT) AREA CODE/PHONE NUMBER/EXTENSION: (TEXT)
8903 ________________________________ 8904 _____________________________________
8903 ________________________________
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
FDIC / 53 (12-92)
<PAGE> 1
EXHIBIT 99.1
FORM OF
LETTER OF TRANSMITTAL
NATIONAL ENERGY GROUP, INC.
Offer to Exchange its Series D 10 3/4% Senior Notes due 2006
for any and all of its outstanding
10 3/4% Series C Senior Notes due 2006
and any and all of its outstanding
10 3/4% Series B Senior Notes due 2006
---------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON __________, 1997,
UNLESS THE OFFER IS EXTENDED
---------------------------------------
Deliver to Bank One, N.A.
(the "Exchange Agent")
BY REGISTERED OR CERTIFIED MAIL: BY OVERNIGHT MAIL OR HAND:
Bank One, N.A. Bank One, N.A.
Corporate Trust Operations Corporate Trust Department
235 West Schrock Road 235 West Schrock Road
Columbus, Ohio 43271-0184 Westerville, Ohio 43081
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(614) 248-7234
Attention: Lora Marsch
Confirm: (614) 248-4856
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE
ONES LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt of the Prospectus dated
_______, 1997 (the "Prospectus") of National Energy Group, Inc. (the "Company")
and this Letter of Transmittal, which together constitute the Company's offer
(the "Exchange Offer") to exchange $1,000 principal amount of its 10 3/4%
Series D Senior Notes due 2006 (the "Exchange Notes," which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part, for
each $1000 principal amount of its outstanding 10 3/4% Series C Senior Notes
due 2006 and 10 3/4% Series B Senior Notes due 2006 (together, the "Notes").
The terms "Expiration Date" shall mean 5:00 p.m., New York City time, on
__________, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term shall mean the latest date and time to
which the Exchange Offer is extended.
<PAGE> 2
Capitalized terms used but not defined herein have the meaning given to them in
the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS RELATING TO THE PROCEDURE FOR TENDERING AND REQUESTS FOR ADDITIONAL
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT. QUESTIONS RELATING TO THE EXCHANGE OFFER AND REQUESTS FOR
ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF
TRANSMITTAL MAY BE DIRECTED TO THE COMPANY.
List below the Notes to which this Letter of Transmittal relates. If
the space indicated below is inadequate, the certificate numbers and principal
amounts should be listed on a separately signed schedule affixed hereto.
<TABLE>
<CAPTION>
=====================================================================================================================
DESCRIPTION OF NOTES TENDERED HEREBY
- ---------------------------------------------------------------------------------------------------------------------
Aggregate Principal
Name(s) and Address(es) of Registered Registration Amount Principal
Holder(s) Numbers* Represented by Amount
Exactly as Name(s} Appear(s) on Notes and Series Notes Tendered**
(Please fill in)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total
=====================================================================================================================
</TABLE>
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Notes. All tenders
must be in integral multiples of $1,000.
This Letter of Transmittal is to be used (i) if certificates of Notes
are to be forwarded herewith, (ii) if delivery of Notes is to be made by
book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in "The
Exchange Offer-Procedures for Tendering" in the Prospectus or (iii) tender of
the Notes is to be made according to the guaranteed delivery procedures
described in the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures." See Instruction 2. Delivery of documents to a book-entry
transfer facility does not constitute delivery to the Exchange Agent. It is
understood that participants in DTC's book-entry system will, in accordance
with DTC's Automated Tender Offer Program procedures and in lieu of physical
delivery to the Exchange Agent of a Letter of Transmittal, electronically
acknowledge receipt of, and agreement to be bound by, the terms of this Letter
of Transmittal
The term "Holder" with respect to the Exchange Offer means any person
in whose name 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. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Notes must complete
this letter in its entirety.
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
-------------------------------------------------
[ ] The Depository Trust Company
Account Number
----------------------------------------------------------------
Transaction Code Number
-------------------------------------------------------
Holders whose Notes are not immediately available or who cannot
deliver their Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedure set forth in the Prospectus under the caption
"The Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
-----------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
----------------------------
Name of Eligible Institution that Guaranteed Delivery
-------------------------
If delivered by book-entry transfer:
Account Number
-----------------------------------------------------------
Transaction Code Number
--------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name
--------------------------------------------------------------------------
Address
-----------------------------------------------------------------------
<PAGE> 4
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer,
the undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
such Notes tendered hereby, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company all right, title and interest
in and to such Notes as are being tendered hereby, including all rights to
accrued and unpaid interest thereon as of the Expiration Date. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent the true and
lawful agent and attorney-in-fact of the undersigned (with full knowledge that
said Exchange Agent acts as the agent of the Company in connection with the
Exchange Offer) to cause the Notes to be assigned, transferred and exchanged.
The undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Company that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is
receiving the Exchange Notes for its own account in exchange for Notes that
were acquired as a result of market-making activities or other trading
activities, the undersigned acknowledges that it or such other person will
deliver a prospectus in connection with any resale of such Exchange Notes. The
undersigned and any such other person acknowledge that, if they are
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes, (i) they cannot rely on the position of the staff of the
Securities and Exchange Commission enunciated in Exxon Capital Holdings
Corporation (available April 13, 1989) or similar no-action letters and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with the
resale transaction and (ii) failure to comply with such requirements in such
instance could result in the undersigned or any such other person incurring
liability under the Securities Act for which such persons are not indemnified
by the Company. If the undersigned or the person receiving the Exchange Notes
covered by this letter is an affiliate (as defined under Rule 405 of the
Securities Act) of the Company, the undersigned represents to the Company that
the undersigned understands and acknowledges that such Exchange Notes may not
be offered for resale, resold or otherwise transferred by the undersigned or
such other person without registration under the Securities Act or an exemption
therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a Book-Entry Transfer Facility. The undersigned further agrees
that acceptance of any tendered Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Registration Rights Agreement and that the
Company shall have no further obligations or liabilities thereunder for the
registration of the Notes or the Exchange Notes.
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions." The
undersigned recognizes that as a result of these conditions (which may be
waived, in whole or in part, by the Company), as more particularly set forth in
the Prospectus, the Company may not be required to exchange any of the Notes
tendered hereby and, in such event, the Notes not exchanged will be returned to
the undersigned at the address shown below the signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
<PAGE> 5
representatives, successors and assigns of the undersigned. Tendered Notes may
be withdrawn at any time prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this
Letter of Transmittal, certificates for all Exchange Notes delivered in
exchange for tendered Notes, and any Notes delivered herewith but not
exchanged, will be registered in the name of the undersigned and shall be
delivered to the undersigned at the address shown below the signature of the
undersigned. If an Exchange Note is to be issued to a person other than the
person(s) signing this Letter of Transmittal, or if the Exchange Note is to be
mailed to someone other than the person(s) signing this Letter of Transmittal
or to the person(s) signing this Letter of Transmittal at an address different
than the address shown on this Letter of Transmittal, the appropriate boxes of
this Letter of Transmittal should be completed. IF NOTES ARE SURRENDERED BY
HOLDER(S) THAT HAVE COMPLETED EITHER THE BOX ENTITLED "SPECIAL REGISTRATION
INSTRUCTIONS" OR THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS" IN THIS
LETTER OF TRANSMITTAL, SIGNATURE(S) ON THIS LETTER OF TRANSMITTAL MUST BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (SEE INSTRUCTION 4).
<TABLE>
<S> <C>
======================================================================================================================
SPECIAL REGISTRATION INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 5) (See Instruction 5)
To be completed ONLY if the Exchange To be completed ONLY if the Exchange Notes are to be sent to
Notes are to be issued in the name of someone someone other than the undersigned, or to the undersigned at an
other than the undersigned. address other than that shown under "Description of Notes
Issue Exchange Note to: Tendered Hereby."
Name: Mail Exchange Note to:
---------------------------------------
Address: Name:
------------------------------------ ------------------------------------------------------
------------------------------------ Address:
(Please print or type) ---------------------------------------------------
---------------------------------------------------
(Please print or type)
======================================================================================================================
</TABLE>
REGISTERED HOLDER(S)OF NOTES SIGN HERE (In addition
complete Substitute Form W-9 Below)
X
-----------------------------------------------------------------------------
X
-----------------------------------------------------------------------------
(Signature(s) of Registered Holder(s))
Must be signed by registered holder(s) exactly as name(s) appear(s) on
the Notes or on a security position listing as the owner of the Notes or by
person(s) authorized to become registered holder(s) by properly completed bond
powers transmitted herewith If signature is by attorney-in-fact trustee
executor, administrator, guardian, officer of a corporation or other person
acting in a fiduciary capacity, please provide the following information
(Please print or type):
Name and Capacity (full title):
-----------------------------------------------
Address: (including zip):
-----------------------------------------------------
Area Code and Telephone Number:
-----------------------------------------------
Dated:
--------------------------
Signature Guarantee (If required -- See Instruction 4)
Authorized Signature:
---------------------------------------------------------
(Signature of Representative of Signature Guarantor)
Name and Title:
---------------------------------------------------------------
Name of Firm:
-----------------------------------------------------------------
Area Code and Telephone Number:
-----------------------------------------------
(Please print or type)
Dated:
------------------------
===============================================================================
<PAGE> 6
Payor's Name: [_________________________________________________________]
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
Please provide your social security number or other taxpayer
identification number on the following Substitute Form W-9 and certify therein
that you are not subject to backup withholding.
<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C>
SUBSTITUTE Part l -- Please provide your TIN in the box at
FORM W-9 right and certify by signing and dating below. ______________________________
Department of the Treasury Social Security
Internal Revenue Service Part 2 -- Check the box if you are not subject to Number or Employer
backup withholding under the provisions of section Identification
3406(a)(l)(C) of the Internal Revenue Code
because Number (l) you have not been notified
that you are subject to backup withholding as a
result of [ ] failure to report all interest or
dividends or (2) the Internal Revenue Service has
notified you that you are no longer subject to backup
withholding.
Certification Under the penalties of perjury I
certify that the information provided on this form Part 3
Payor's Request for is true correct and complete.
Taxpayer Identification AWAITING TIN [ ]
Number ("TIN") Signature: Dated:
---------------------- ---------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS IN EXCESS OF $10.00 MADE TO
YOU.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAX IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number within 60 days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
- ----------------------------------------------------- -----------------------
Signature Date
===============================================================================
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
All physically delivered Notes or any confirmation of a book-entry
transfer to the Exchange Agent's account at a Book-Entry Transfer Facility of
Notes tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date (as defined in the Prospectus). THE METHOD OF DELIVERY OF THIS
LETTER OF TRANSMITTAL, THE NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT.
IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, BE USED.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance
of the Notes for exchange.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH HEREIN, OR INSTRUCTIONS VIA A
FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH HEREIN, WILL NOT CONSTITUTE A
VALID DELIVERY.
2. GUARANTEED DELIVERY PROCEDURES.
Holders who wish to tender their Notes, but whose Notes are not
immediately available and thus cannot deliver their Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent (or comply
with the procedures for book-entry transfer) prior to the Expiration Date, may
effect a tender if:
(a) the tender is made through a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an
office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under
the Exchange Act (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the Holder,
the registration number(s) and series of such Notes and the
principal amount of Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof), together with the Notes
(or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility) and
any other documents required by the Letter of Transmittal, will
be deposited by the Eligible Institution with the Exchange Agent;
and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form
for transfer (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility) and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within five
New York Stock Exchange trading days after the Expiration Date.
<PAGE> 8
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to Holders who wish to tender their Notes according to the
guaranteed delivery procedures set forth above. Any holder who wishes to tender
Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such Notes prior to the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by a Holder who attempted to use the guaranteed delivery
procedures.
3. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the column entitled "Principal Amount Tendered" of
the box entitled "Description of Notes Tendered Hereby." A newly issued Note
for the principal amount of Notes submitted but not tendered will be sent to
such holder as soon as practicable after the Expiration Date. All Notes
delivered to the Exchange Agent will be deemed to have been tendered in full
unless otherwise indicated. Tenders of Notes will be accepted only in integral
multiples of $1,000.
Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date, after which tenders of Notes are
irrevocable. To be effective, a written, telegraphic or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Notes to be withdrawn (the "Depositor"), (ii) identify the Notes to be
withdrawn (including the registration number(s), series and principal amount of
such Notes, or, in the case of Notes transferred by book-entry transfer, the
name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the Holder in the same manner as the original
signature on this Letter of Transmittal (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Notes register the transfer of such Notes into the
name of the person withdrawing the tender and (iv) specify the name in which
any such Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no Exchange Notes will be issued with respect thereto unless the Notes so
withdrawn are validly retendered. Any Notes that have been tendered but not
accepted for exchange, will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder(s) of the Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of the certificates without
alteration or enlargement or any change whatsoever. If this Letter of
Transmittal is signed by a participant in the Book-Entry Transfer Facility, the
signature must correspond with the name as it appears on the security position
listing as the holder of the Notes
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Notes.
Signatures on this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution unless the Notes
tendered hereby are tendered (i) by a registered Holder who has not completed
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution.
<PAGE> 9
If this Letter of Transmittal is signed by the registered Holder or
Holders of Notes (which term, for the purposes described herein, shall include
a participant in the Book-Entry Transfer Facility whose name appears on a
security listing as the holder of the Notes) listed and tendered hereby, no
endorsements of the tendered Notes or separate written instruments of transfer
or exchange are required. In any other case, the registered Holder (or acting
Holder) must either properly endorse the Notes or transmit properly completed
bond powers with this Letter of Transmittal (in either case, executed exactly
as the name(s) of the registered Holder(s) appear(s) on the Notes, and, with
respect to a participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Notes, exactly as the name of
the participant appears on such security position listing), with the signature
on the Notes or bond power guaranteed by an Eligible Institution (except where
the Notes are tendered for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
5. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at the Book-Entry Transfer Facility) in which the Exchange
Notes or substitute Notes for principal amounts not tendered or not accepted
for exchange are to be issued (or deposited), if different from the names and
addresses or accounts of the person signing this Letter of Transmittal. In the
case of issuance in a different name, the employer identification number or
social security number of the person named must also be indicated and the
tendering Holder should complete the applicable box.
If no instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the acting
Holder of the Notes or deposited at such Holder's account at the Book-Entry
Transfer Facility.
6. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Notes to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any other reason other than the
transfer and exchange of Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered Holder or any other person) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly
to such tendering Holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer stamps to be affixed to the Notes listed in this Letter of
Transmittal.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part,
any of the conditions to the Exchange Offer set forth in the Prospectus.
8. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
<PAGE> 10
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Company at 4925 Greenville Avenue, Suite
1400, Dallas, Texas 75206, Attention: Secretary (telephone: (214) 692-9211).
10. VALIDITY AND FORM.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Notes not properly tendered or any Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify Holders of defects or irregularities with respect to tenders of
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Notes will not
be deemed to have been made until such defects or irregularities have been
cured or waived. Any Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering Holders as soon
as practicable following the Expiration Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Notes is required to
provide the Exchange Agent with such holder's correct TIN on Substitute Form
W-9 below. If such Holder is an individual, the TIN is the Holder's social
security number. The Certificate of Awaiting Taxpayer Identification Number
should be completed if the tendering Holder has not been issued a TIN and has
applied for a number or intends to apply for a number in the near future. If
the Exchange Agent is not provided with the correct TIN, the Holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such Holder with respect to tendered Notes may be
subject to backup withholding.
Certain Holders (including, among others, all corporations and certain
foreign individuals and foreign entities) are not subject to these backup
withholding and reporting requirements. In order for such a Holder to qualify
as an exempt recipient, that holder must submit to the Exchange Agent a
properly completed Internal Revenue Service Form W-8, signed under penalties of
perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any amounts otherwise payable to the Holder. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to
backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a Holder
with respect to Notes tendered for exchange, the Holder is required to notify
the Exchange Agent of his or her correct TIN by completing the form herein
certifying that the TIN provided on Substitute Form W-9 is correct (or that
such Holder is awaiting a TIN) and that (i) such Holder has not been notified
by the Internal Revenue Service that he or she is subject to backup withholding
as a result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such Holder that he or she is no longer subject to
backup withholding.
<PAGE> 11
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the Notes.
If Notes are in more than one name or are not in the name of the actual Holder,
consult the instructions on Internal Revenue Service Form W-9, which may be
obtained from the Exchange Agent, for additional guidance on which number to
report.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
If the tendering holder has not been issued a TIN and has applied for
a number or intends to apply for a number in the near future, write "Applied
For" in the space for the TIN on Substitute Form W-9, sign and date the form
and the Certificate of Awaiting Taxpayer Identification Number and return them
to the Exchange Agent. If such certificate is completed and the Exchange Agent
is not provided with the TIN within 60 days, the Exchange Agent will withhold
31% of all payments made thereafter until a TIN is provided to the Exchange
Agent.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
NOTICE OF GUARANTEED DELIVERY FOR
NATIONAL ENERGY GROUP, INC.
This form or one substantially equivalent hereto must be used to
accept the Exchange Offer of National Energy Group, Inc. (the "Company") made
pursuant to the Prospectus, dated __________ (the "Prospectus"), if
certificates for Outstanding Notes or the Series B Notes, as the case may be,
of the Company are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Company prior to 5:00 p.m., New York City time,
on the Expiration Date of the Exchange Offer. Such form may be delivered or
transmitted by facsimile transmission, mail, or hand delivery to Bank One, N.A.
(the "Exchange Agent") as set forth below. Capitalized terms used but not
defined herein have the meanings given to them in the Prospectus.
Bank One, N.A.
Delivery to: Bank One, N.A., Exchange Agent
By Hand or Overnight Courier By Registered or Certified Mail:
Bank One, N.A. Bank One, N.A.
Corporate Trust Operations Bank One, N.A.
235 West Shrock Road 235 West Shrock Road
Westerville, Ohio 43081 Columbus, Ohio 43271-0184
Attn: Lora Marsch
By Facsimile: (614) 248-7234
Confirm by Telephone: (614) 248-4856
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the accompanying
Letter of Transmittal, the undersigned hereby tenders to the Company the
principal amount of Outstanding Notes or the Series B Notes, as the case may
be, set forth below, pursuant to the guaranteed delivery procedure described in
"The Exchange Offer - Guaranteed Delivery Procedures" section of the
Prospectus.
Principal Amount of Notes Tendered:*
$____________________
*Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
If the Notes will be
delivered by book-entry
transfer to the Depository
Trust Company, provide
account number.
Certificate Nos. (if available):
______________________
Total Principal Amount Represented
by Notes Certificate(s):
$____________________ Account Number__________
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X_____________________________ ______________
X_____________________________ ______________
Signature(s) of Owner(s)
or Authorized Signatory
Area Code and Telephone Number:______________
Must be signed by the holder(s) Notes as their name(s) appear(s) on
certificates for Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or the
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
PLEASE PRINT NAME(S) AND ADDRESS
Name(s):_________________________
Capacity:________________________
Address:_________________________
GUARANTEE
The undersigned, a member of a registered national securities exchange, or a
member of the National Association of Securities Dealers, Inc., or a commercial
bank or trust company having an office or correspondent in the United States,
hereby guarantees that the certificates representing the principal amount of
Outstanding Notes tendered hereby in proper form for transfer, or timely
confirmation of the book-entry transfer of such Outstanding Notes into the
Exchange Agent's account at the Depository Trust Company pursuant to the
procedures set forth in "The Exchange Offer - Guaranteed Delivery Procedures"
section of the Prospectus, together with a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) with any
required signature guarantee and any other documents required by the Letter of
Transmittal, will be received by the Exchange Agent at the address set forth
above, no later than five New York Stock Exchange trading days after the
Expiration Date.
Name of Firm:______________ Authorized Signature:___________________
Address:___________________ Title:__________________________________
__________________________ Name:___________________________________
Area Code and Telephone No.:_________________ Dated:_________________
NOTE: DO NOT SEND CERTIFICATES FOR NOTES WITH THIS FORM. CERTIFICATES FOR
NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
