SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10753
Date of Report: (Date of earliest event reported): February 18, 1997
WRT ENERGY CORPORATION
(Exact name of Registrant as specified in its charter)
TEXAS 1-10753 72-1133320
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number Identification Number)
5718 WESTHEIMER, SUITE 1201
HOUSTON, TEXAS 77057
(Address of Registrant's principal executive offices)
(713) 706-3295
(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
On February 18, 1997, WRT Energy Corporation ("WRT" or the "Company")
entered into a Commitment Agreement with DLB Oil & Gas, Inc. ("DLB") and Wexford
Management LLC, on behalf of its affiliated investment funds ("Wexford"; DLB and
Wexford are collectively referred to herein as "DLBW") pursuant to which the
Company and DLBW commit to co-sponsor and fund a plan of reorganization in the
Company's Chapter 11 bankruptcy case pending before the United States Bankruptcy
Court for the Western District of Louisiana, Lafayette-Opelousas Division (the
"Court").
On January 20, 1997, WRT and DLBW jointly filed the First Amended Joint
Plan of Reorganization (the "Plan") and First Amended Disclosure Statement.
Under the terms of the Plan, each holder of an allowed interest of WRT Preferred
Stock shall receive its pro rata share of an aggregate distribution of
Reorganized WRT Warrants equal to 1% of the total Reorganized WRT Common Stock
that would be issued pursuant to the Plan. Also, each holder of an allowed
interest of WRT Common Stock shall receive its pro rata share of an aggregate
distribution of Reorganized WRT Warrants equal to 1% of the total Reorganized
WRT Common Stock that would be issued pursuant to the Plan. Each Reorganized WRT
Warrant shall provide to the holders thereof the right to purchase one share of
Reorganized WRT Common Stock for a purchase price of $10.00. The above described
warrants will be issued to the holders of allowed interests of WRT Preferred
Stock and WRT Common Stock only if the classes given higher treatment in the
Plan vote to accept the Plan.
The Plan also contemplates (i) the issuance to WRT's unsecured creditors,
on account of their allowed claims, an aggregate of 10 million shares of
Reorganized WRT Common Stock, (ii) the issuance to WRT's unsecured creditors, on
account of their allowed claims, of the right to purchase an additional three
million eight hundred thousand shares (3,800,000) of Reorganized WRT Common
Stock at a purchase price of $3.50 per share (the "Rights Offering"), (iii) the
issuance to DLBW and affiliates of the number of shares of Reorganized WRT
Common Stock obtained by dividing DLBW's Allowed Secured Claim amount by a
purchase price of $3.50 per share, (iv) funding by WRT of $3.0 million to an
entity (the "Litigation Entity") to which WRT will transfer any and all causes
of action, claims, rights of actions, suits or proceedings which have been or
could be asserted by WRT except for (a) the action to recover unpaid production
proceeds payable to WRT by Tri-Deck Oil & Gas Company and (b) the foreclosure
action to recover title to certain assets. Reorganized WRT will own a 12%
economic interest in the Litigation Entity and the remainder of the economic
interests in the Litigation Entity will be allocated to unsecured creditors and
DLBW based on their ownership percentage of the 13.8 million shares to be
distributed and issued as described in (i) and (ii) above, (v) the exercise by
DLBW of its rights to purchase Reorganized WRT Common Stock pursuant to the
Rights Offering on account of its allowed claims, (vi) the purchase by DLBW of
all shares of Reorganized WRT Common Stock not otherwise purchased pursuant to
the Rights Offering, and (vii) pursuant to the Transfer and Exchange Agreement,
as part of the Plan, (a) the transfer by DLBW of the interests in oil and gas
properties in the West Cote Blanche Bay Field (the "WCBB Assets"), to be
purchased by DLBW, to WRT, and (b) as consideration for the
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transfer of the WCBB Assets, the issuance to DLB of 5 million shares of
Reorganized WRT Common Stock.
WRT and DLBW anticipate filing the Second Amended Joint Plan of
Reorganization and Second Amended Disclosure Statement on March 11, 1997.
The number of shares of the WRT's Common Stock, $0.01 par value,
outstanding at February 26, 1997 was 9,539,207. The number of shares of WRT's 9%
Convertible Preferred Stock, $0.01 par value, outstanding at February 26, 1997
was 1,265,000. WRT's existing Common and Preferred Stock was quoted on the
NASDAQ National Market System until February 29, 1996, at which time NASDAQ
terminated its quotation of both classes of securities. Since that time, WRT's
existing Common and Preferred Stock has been quoted in the non-NASDAQ
over-the-counter market. Under the Plan, the existing Common and Preferred Stock
of WRT will be canceled, with holders of the existing Common and Preferred Stock
receiving Reorganized WRT Warrants to purchase Reorganized Common Stock as
described above. Reorganized WRT Common Stock will be issued to the creditors as
described above.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 27, 1997
WRT ENERGY CORPORATION
By: /s/ RAYMOND P. LANDRY
Chairman and Chief Executive Officer
<PAGE>
EXHIBITS TO CURRENT REPORT ON FORM 8-K
OF WRT ENERGY CORPORATION
Exhibit No. Description
2.1 Debtor's and DLBW's First Amended Joint Plan of Reorganization Under
Chapter 11 of the United States Bankruptcy Code dated January 20, 1997
2.2 First Amended Disclosure Statement Under 11 U.S.C.ss.1125 In Support
of Debtor's and DLBW's First Amended Joint Plan of Reorganization
Under Chapter 11 of the United States Bankruptcy Code dated January
20, 1997
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
IN RE: ss.
ss.
WRT ENERGY CORPORATION, ss. CASE NO. 96BK-50212
Taxpayer I.D. No. 71-1133320 ss. (CHAPTER 11)
ss.
DEBTOR. ss.
================================================================================
DEBTOR'S AND DLBW'S FIRST AMENDED
JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE
================================================================================
DISCLAIMER
EFFECTIVENESS OF THIS PLAN IS SUBJECT TO FURTHER PROCEEDINGS IN THE CAPTIONED
CHAPTER 11 CASE. NO ORDER OF THE BANKRUPTCY COURT HAS YET BEEN ENTERED APPROVING
THE DISCLOSURE STATEMENT. ACCORDINGLY, DO NOT RELY UPON THIS PLAN AND/OR THE
DISCLOSURE STATEMENT IN ANY MANNER UNLESS AND UNTIL THE APPROVAL BY THE
BANKRUPTCY COURT HAS BEEN OBTAINED.
Joel P. Kay, Esq. ---AND--- Jeffrey S. Sabin, Esq.
Edward Lee Morris, Esq. Mark A. Broude, Esq.
SHEINFELD, MALEY & KAY, P.C. SCHULTE ROTH & ZABEL LLP
1001 Fannin Street, Suite 3700 900 Third Avenue
Houston, Texas 77002-6797 New York, New York 10022
Telephone: (713) 658-8881 Telephone: (212) 756-2000
Telecopy: (713) 658-9756 Telecopy: (212) 593-5955
ATTORNEYS FOR DEBTOR, ATTORNEYS FOR DLB OIL &
WRT ENERGY CORPORATION GAS, INC. AND WEXFORD
MANAGEMENT LLC
DATED: January 20, 1997
<PAGE>
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
IN RE: ss.
ss.
WRT ENERGY CORPORATION, ss. CASE NO. 96BK-50212
Taxpayer I.D. No. 71-1133320 ss. (CHAPTER 11)
ss.
DEBTOR. ss.
DEBTOR'S AND DLBW'S FIRST AMENDED
JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE UNITED STATES BANKRUPTCY CODE
This First Amended Joint Plan of Reorganization Under Chapter 11 of the
United States Bankruptcy Code (the "Plan") is proposed by WRT Energy Corporation
("WRT", "Debtor" or "New WRT", as applicable) and DLB Oil & Gas, Inc. and
Wexford Management LLC, on behalf of its affiliated investment funds
(collectively "DLBW"), pursuant to Sections 1121(a) and 1127, Title 11, United
States Code, as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the following capitalized terms
shall have the following meanings in this Plan. Such meanings shall be equally
applicable to both the singular and plural forms of such terms. The words
"herein," "hereof," "hereunder" and other words of similar import refer to this
Plan as a whole and not to any particular section, subsection or clause
contained in this Plan unless the context requires otherwise. Whenever it
appears appropriate from the context, each term stated in either the singular or
the plural includes the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender include the masculine, feminine and neuter.
Any capitalized term in this Plan which is not defined herein shall have the
meaning assigned to such term by the Bankruptcy Code or the Bankruptcy Rules.
1.1 ABBEVILLE FIELD CLAIMS: Allowed Secured Claims, the Collateral for
which is in or on the Abbeville Field, Vermilion Parish, Louisiana.
1.2 ADJUSTED AMOUNT: With respect to a Disputed Claim, (a) to the extent
such Disputed Claim is a liquidated Claim, the maximum liquidated face amount of
such Disputed Claim as asserted in the relevant proof of claim or such other
amount as the Bankruptcy Court shall have determined on or prior to the
Effective Date in accordance with the Bankruptcy Code is adequate for
determining the amount of Cash or number of shares of New WRT Common Stock to be
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deposited in the Disputed Claims Reserve Account on account of such Disputed
Claim and the number of New WRT Subscription Rights that the holder of such
Disputed Claim shall be entitled to exercise pursuant to the Rights Offering in
accordance with Article 29 of the Plan, or (b) to the extent that such Disputed
Claim is a contingent or unliquidated Claim, an amount that the Bankruptcy Court
shall determine on or prior to the Effective Date in accordance with the
Bankruptcy Code is adequate for determining the amount of Cash or number of
shares of New WRT Common Stock to be deposited in the Disputed Claims Reserve
Account on account of such Disputed Claim and the number of New WRT Subscription
Rights that the holder of such Disputed Claim shall be entitled to exercise
pursuant to the Rights Offering in accordance with Article 29 of the Plan; in
each case, such amount shall be the maximum allowable amount of such Claim
unless the Bankruptcy Court shall order otherwise.
1.3 ADMINISTRATIVE CLAIM: A Claim for payment of an administrative expense
of a kind specified in Section 503(b) of the Bankruptcy Code and referred to in
Sections 507(a)(1) and 1114 of the Bankruptcy Code, including, without
limitation, the actual, necessary costs and expenses incurred after the
commencement of the Chapter 11 Case for preserving the estate and operating the
business of the Debtor including wages, salaries or commissions for services,
compensation for legal and other services and reimbursement of expenses awarded
under Sections 330(a) or 331 of the Bankruptcy Code, costs of providing notices
and ballots in connection with the Plan and of making distributions hereunder,
taxes incurred after the Petition Date, the Stay Bonus, Indenture Trustee Claim,
the DLBW Expense Reimbursement, and all fees and charges assessed against the
estate under Chapter 123, Title 28, United States Code.
1.4 ADMINISTRATIVE CLAIMS BAR DATE: The last day for filing certain
Administrative Claims in the Case, to the extent fixed pursuant to an order of
the Bankruptcy Court.
1.5 ADMINISTRATIVE SERVICES AGREEMENT: That certain Administrative
Services Agreement, dated as of the Effective Date, between DLB and New WRT,
attached as Exhibit "G" to the Disclosure Statement.
1.6 ALLOWED ADMINISTRATIVE CLAIM: All or that portion of an Administrative
Claim which (a) has become an Allowed Claim or (b) was incurred by the Debtor in
the ordinary course of business during the Chapter 11 Case.
1.7 ALLOWED CLAIM: All or that portion of a Claim, other than a Disputed
Claim, as to which (a) on or by the Bar Date (i) no proof of claim was filed
with the Bankruptcy Court to evidence such Claim and (ii) the liquidated and
noncontingent amount is scheduled by the Debtor pursuant to the Bankruptcy Code
as undisputed; (b) a proof of claim has been filed in a liquidated amount with
the Court on or before the Bar Date or, in the case of an Administrative Claim
subject to the Administrative Claims Bar Date, on or before the Administrative
Claims Bar Date, provided that (i) no objection to the allowance of such Claim
or a motion to expunge such Claim has been interposed on or prior to the
applicable Claims Objection Deadline or (ii) if such objection or motion has
been filed, such objection/motion has been determined by a Final Order; (c) a
stipulation to the
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 2
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amount of such Claim has been signed by the Debtor and the respective Creditor
and approved by a Final Order; or (d) is otherwise deemed allowed under this
Plan.
1.8 ALLOWED CONVENIENCE CLAIM: All or that portion of a Convenience Claim
which has become an Allowed Claim.
1.9 ALLOWED GENERAL UNSECURED CLAIM: All or that portion of a General
Unsecured Claim that has become an Allowed Claim.
1.10 ALLOWED INTEREST: Any Equity Interest exclusive of any shares of such
stock held in treasury, which is registered as of the Record Date in such stock
register as may be maintained by or on behalf of the Debtor and as to which no
objection has been made or which has been allowed (and only to the extent
allowed) by a Final Order.
1.11 ALLOWED PRIORITY CLAIM: All or that portion of a Priority Claim that
has become an Allowed Claim.
1.12 ALLOWED PRIORITY TAX CLAIM: All or that portion of a Priority Tax
Claim that has become an Allowed Claim.
1.13 ALLOWED SECURED CLAIM: All or that portion of a Secured Claim that
(a) has become an Allowed Claim and as to which the Lien securing same is valid,
perfected and enforceable under applicable law and is not subject to avoidance
under the Bankruptcy Code or other applicable non- bankruptcy law; (b) which is
duly established in the Chapter 11 Case, but only to the extent of the value of
the interest of the holder of such Secured Claim in the Debtor's interest in the
Assets which the Bankruptcy Court finds to be valid Collateral for such Claim
(except if the class of which such Claim is a part validly and timely makes the
election provided for in Section 1111(b)(2) of the Bankruptcy Code, in which
case the entire amount of the Allowed Claim shall be an Allowed Secured Claim);
and (c) less all payments which have been made to the holder of such Claim on
account of such Claim on or after the Petition Date.
1.14 ALLOWED SECURITIES LITIGATION CLAIM: All of that portion of a
Securities Litigation Claim that has become an Allowed Claim.
1.15 ALLOWED TORT CLAIM: All of that portion of a Tort Claim that has
become an Allowed Claim.
1.16 ALLOWED UNSECURED CLAIM: All or that portion of an Unsecured Claim
that has become an Allowed Claim. "Allowed Unsecured Claim" shall not include
interest on the principal amount of such Claim or attorney's fees from and after
the Petition Date.
1.17 ASSETS: All right, title and interest in and to any and all property
of every kind or nature, owned by the Debtor as of the Effective Date,
including, but not limited to, property as defined in ss. 541 of the Bankruptcy
Code (each identified item of property being herein sometimes
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 3
<PAGE>
referred to as an "asset") including without limitation, Causes of Action and
the Debtor's interest in D&O Policies.
1.18 ASSUMED OBLIGATIONS: Certain obligations relating to the WCBB Assets
as more completely defined in the Purchase, Sale and Exchange Agreement.
1.19 BALLOTING AGENT: The Person approved by the Bankruptcy Court to act
as balloting agent with respect to the Plan.
1.20 BANKRUPTCY CODE: The Bankruptcy Reform Act of 1978, as amended and
codified in Title 11, United States Code.
1.21 BANKRUPTCY COURT OR COURT: The unit of the United States District
Court for the Western District of Louisiana, Lafayette-Opelousas Division,
having jurisdiction over the Chapter 11 Case, or in the event such court ceases
to exercise jurisdiction over the Chapter 11 Case, such court or adjunct thereof
which exercises jurisdiction over the Chapter 11 Case in lieu of such unit of
the United States District Court for the Western District of Louisiana.
1.22 BANKRUPTCY RULES: The Federal Rules of Bankruptcy Procedure, as
amended and prescribed under 28 U.S.C. ss. 2075, as applicable to the Chapter 11
Case, together with the Local Rules of the Bankruptcy Court.
1.23 BAR DATE: The final date for the filing of proofs of claims in the
Chapter 11 Case, set by the Bankruptcy Court as July 1, 1996, or such other date
as may apply to a particular Claim pursuant to a duly-entered order of the
Bankruptcy Court.
1.24 BAYOU HENRY FIELD CLAIMS: Allowed Secured Claims, the Collateral for
which is in or on the Iberville Parish, Louisiana.
1.25 BAYOU PENCHANT FIELD CLAIMS: Allowed Secured Claims, the Collateral
for which is in or on the Bayou Penchant Field, Terrebonne Parish, Louisiana.
1.26 BAYOU PIGEON FIELD CLAIMS: Allowed Secured Claims, the Collateral for
which is in or on the Bayou Pigeon Field, Iberia Parish, Louisiana.
1.27 BUSINESS DAY: Any day other than a Saturday, Sunday or "legal
holiday" as defined in Bankruptcy Rule 9006(a).
1.28 BUYER'S LEASEHOLD AND FACILITIES: WRT's interest in (a) the
approximately 400 acres of non-producing land included within the Contract Area
(as defined in the CAOA), as more completely described in Schedule 1 hereto
Agreement and (b) certain facilities related thereto, as more completely
described in Schedule 2 hereto.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 4
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1.29 CAOA: Collectively, (a) the Contract Area Operating Agreement, dated
as of July 1, 1987, among Texaco, Pelham Partners, Ltd., Breck Operating Corp.,
Fuller Petroleum, Inc., Chilicote Inc. and Tesla Resources, Inc. (as
subsequently amended or modified), (b) the Sale and Assignment, dated July 22,
1988 but effective as of July 1, 1987, among Texaco, Inc., Pelham Partners,
Ltd., Breck Operating Corp., Fuller Petroleum, Inc., Chilicote Inc., Tesla
Resources, Inc. and Producing Property Management, Inc., (c) the Purchase and
Sale Agreement, dated March 31, 1995, among Tenneco Gas Production Corporation,
Tenneco Ventures Corporation and Tesla Resources, Inc., (d) the Purchase and
Sale Agreement, dated March 31, 1995 between Benton Oil and Gas Company of
Louisiana and Tesla Resources, Inc., (e) the Saltwater Disposal Letter
Agreement, dated December 1, 1995, between TEPI and Tesla Resources, Inc., (f)
the Compressor Facilities Letter Agreement, dated December 1, 1995, between TEPI
and Tesla Resources, Inc. and (g) the Dehydration Facilities Letter Agreement,
dated December 1, 1995, between TEPI and Tesla Resources, Inc.
1.30 CASH: Cash and cash equivalents including without limitation, bank
deposits, checks, government securities, and other similar items.
1.31 CASUALTY INSURANCE POLICIES: All casualty insurance policies and all
similar insurance policies that are property of the Debtor.
1.32 CAUSES OF ACTION: Any and all causes of action, claims, rights of
action, suits or proceedings, whether in law or equity, whether known or
unknown, which have been or could be asserted, by the Debtor, including, without
limitation, causes of action under Sections 542, 543, 544, 545, 546, 547, 548,
549, 550, or 553(b) of the Bankruptcy Code.
1.33 CHAPTER 11 CASE: The case under Chapter 11 of the Bankruptcy Code in
which WRT is the Debtor-in-Possession.
1.34 CLAIM: As defined in Section 101(5) of the Bankruptcy Code.
1.35 CLAIMANT OR CREDITOR: A Person asserting a Claim.
1.36 CLAIMS OBJECTION DEADLINE: With respect to any Claim other than an
Administrative Claim, the date established by the Bankruptcy Court as the last
date for filing objections to, or motions contesting the allowance or seeking
the estimation of, such Claim.
1.37 CLASS:A group of Claims or Interests as classified by the Plan.
1.38 COLLATERAL: Any Asset subject to a valid and enforceable Lien
securing the payment of a Claim.
1.39 COMMITMENT AGREEMENT: That certain Commitment Agreement, dated as of
January 20, 1997, among WRT, DLB and Wexford, attached as Exhibit "H" to the
Disclosure Statement, as may be amended or modified and as approved by the
Bankruptcy Court.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 5
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1.40 COMMITTEE: The Official Committee of Unsecured Creditors appointed in
the Chapter 11 Case of the Debtor.
1.41 COMMON STOCK: The common stock of WRT authorized and issued prior to
the Petition Date.
1.42 COMPENSATION ESTIMATE: A good faith written estimate (a) to be filed
on or before three (3) calendar days before the first date set for the hearing
on the confirmation of the Plan of the maximum amount of compensation and
reimbursement of expenses to be requested for any period prior to the
Confirmation Date including, without limitation, any compensation for
substantial contribution in the Chapter 11 Case and for any fees or premiums in
addition to normal hourly charges or quoted fees and (b) to be filed on or
before five (5) calendar days before the first date scheduled for the Effective
Date of the maximum amount of compensation and reimbursement of expenses to be
requested for any period subsequent to the Confirmation Date but prior to the
Effective Date including, without limitation, any compensation for substantial
contribution in the Chapter 11 Case and for any fees or premiums in addition to
normal hourly charges or quoted fees.
1.43 CONFIRMATION DATE: The date of entry by the Bankruptcy Court of the
Confirmation Order on the docket of the Bankruptcy Court.
1.44 CONFIRMATION ORDER: An order of the Bankruptcy Court and any
amendment thereto confirming the Plan in accordance with the provisions of
Chapter 11 of the Bankruptcy Code including Section 1129 of the Bankruptcy Code.
1.45 CONVENIENCE CLAIM: Any Unsecured Claim, the face amount or, if lower,
the allowed amount of which (whether upon filing, amendments, allowances or
otherwise) prior to any subdivision or assignment of any portion or portions
thereof, does not exceed $2,500.00 in amount.
1.46 DARROW FIELD CLAIMS: Allowed Secured Claims, the Collateral for which
is in or on the Darrow Field, Ascension Parish, Louisiana.
1.47 DEBTOR: WRT Energy Corporation, as Debtor and Debtor in Possession in
the Chapter 11 case.
1.48 DEER ISLAND FIELD CLAIMS: Allowed Secured Claims, the Collateral for
which is in or on the Deer Island Field, Terrebonne Parish, Louisiana.
1.49 DEFICIENCY CLAIM: A Claim of a Creditor asserting a Secured Claim
equal to the amount by which the total Allowed Claim of such Creditor exceeds
the sum of (a) any setoff rights of the Creditor permitted under Section 553 of
the Bankruptcy Code as to such Claim, plus (b) the amount of the Claim which is
determined to be an Allowed Secured Claim of such Creditor; PROVIDED, HOWEVER,
that if the holder of a Secured Claim or the Class of which such Claim is a
member validly makes the election provided in Section 1111(b)(2) of the
Bankruptcy Code, there shall be no Deficiency Claim with respect to such Claim.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 6
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1.50 DISBURSING AGENT: The Person approved by the Bankruptcy Court to act
as disbursing agent with respect to the Plan.
1.51 DISBURSING AGENT AGREEMENT: The written agreement between the
Disbursing Agent and New WRT, setting forth the duties and compensation of the
Disbursing Agent.
1.52 DISCLOSURE STATEMENT: The First Amended Disclosure Statement issued
in connection with the Plan, and approved by the Bankruptcy Court, together with
all supplements thereto approved by the Bankruptcy Court.
1.53 DISPUTED CLAIM: A Claim against the Debtor as to which an objection
or motion pursuant to Section 502 of the Bankruptcy Code has been timely filed,
which objection or motion has not been withdrawn or resolved by entry of an
order of the Bankruptcy Court. To the extent that such objection or motion
relates to the allowance of any part of a Claim, such Claim shall be a Disputed
Claim only to the extent of the objection or motion. Prior to the time that an
objection has been or may be timely filed, for the purposes of the Plan, a Claim
shall be considered a Disputed Claim to the extent that (a) the Debtor's
Schedules do not list such Claim or list such Claim as contingent, unliquidated,
or disputed, or (b) the amount of the Claim specified in the relevant proof of
claim exceeds the amount that the Debtor's Schedules list as undisputed,
liquidated and not contingent.
1.54 DISPUTED CLAIMS RESERVE ACCOUNT: The escrow accounts maintained by
the Disbursing Agent as described in Article 27.5 of this Plan.
1.55 DISPUTED NEW WRT SUBSCRIPTION COMMON STOCK: New WRT Common Stock
purchased as a result of the exercise of Disputed New WRT Subscription Rights
pursuant to Articles 29.3 and 29.6 of this Plan.
1.56 DISPUTED NEW WRT SUBSCRIPTION RIGHTSNew WRT Subscription Rights
issued on account of Disputed Claims pursuant to Articles 18.2 and 29.2 of this
Plan.
1.57 DISPUTED SUBSCRIPTION PURCHASE PRICE: The meaning set forth in
Article 29.6(b) of the Plan.
1.58 DISTRIBUTION RECORD DATE: The date established by the Bankruptcy
Court as the record date for making Distributions under the Plan, which shall be
no earlier than the Voting Deadline.
1.59 DISTRIBUTIONS: The Cash, New WRT Common Stock (including New WRT
Subscription Common Stock), or New WRT Warrants required by the Plan to be
delivered to the holders of Allowed Claims and Allowed Equity Interests.
1.60 DISTRICT COURT: The United States District Court for the Western
District of Louisiana.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 7
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1.61 DLB: DLB Oil & Gas, Inc.
1.62 DLBW: DLB Oil & Gas, Inc. and Wexford Management LLC, on behalf of
its affiliated investment funds, collectively as co-proponents of this Plan.
1.63 DLBW EXPENSE REIMBURSEMENT: The expenses to be reimbursed by the
Debtor to DLBW pursuant to the order of the Bankruptcy Court dated December 24,
1996 and any other order of the Bankruptcy Court or modification thereof
permitting or authorizing the Debtor's reimbursement of expenses of DLBW.
1.64 D&O POLICIES: All director and officer liability insurance policies
and any interests or rights therein that are property of the Debtor.
1.65 EAST HACKBERRY FIELD CLAIMS: Allowed Secured Claims, the Collateral
for which is in or on the East Hackberry Field, Cameron Parish, Louisiana.
1.66 EFFECTIVE DATE: The first date, no less than thirty (30) days and not
more than ninety (90) days following the Confirmation Date on which (i) the
Confirmation Order has not been stayed and (ii) the conditions to effectiveness
have been satisfied.
1.67 EQUITY INTERESTS OR INTERESTS: Rights of the owners of the issued and
outstanding shares of the Preferred Stock and Common Stock, WRT Warrants, and
WRT Stock Options.
1.68 EXAMINER: Jason R. Searcy, Esq., heretofore appointed Examiner in the
Chapter 11 Case.
1.69 EXERCISING CLAIMANT: The holder of an Allowed Claim in Class D-3 or a
Disputed Claim potentially within Class D-3 that has exercised, pursuant to
Article 29 of this Plan, the New WRT Subscription Rights that such holder was
entitled to exercise on account of such Claim.
1.70 EXERCISED DISPUTED CLAIM: Disputed Claim potentially within Class D-3
the holder of which has exercised, pursuant to Article 29 of this Plan, the
Disputed New WRT Subscription Rights that such holder was entitled to exercise
on account of such Disputed Claim.
1.71 FEE CLAIM: A Claim under Sections 330 or 503 of the Bankruptcy Code
for the allowance of compensation and reimbursement of expenses in the Chapter
11 Case.
1.72 FINAL INSURANCE DISTRIBUTION: The meaning set forth in Article
17.1(a) of this Plan.
1.73 FINAL ORDER: An order or judgment of the Bankruptcy Court (or any
other Court of competent jurisdiction) which is conclusive of all matters
adjudicated thereby and is in full force and effect and has not been reversed,
stayed, modified or amended and as to which (a) any appeal that has been filed
has been finally determined or dismissed, or (b) the time for appeal has expired
and no notice of appeal has been filed.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 8
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1.74 GENERAL UNSECURED CLAIMS: All Unsecured Claims other than Unsecured
Claims in Classes D-1, D-2, D-4, E-2 and E-3.
1.75 GMAC: The meaning set forth in Article 5.1 of this Plan.
1.76 GMAC LOAN DOCUMENTS: The meaning set forth in Article 5.1 of this
Plan.
1.77 GOLDEN MEADOW FIELD CLAIMS: Allowed Secured Claims, the Collateral
for which is in or on the Golden Meadow Field, Lafourche Parish, Louisiana.
1.78 HOLDBACK PERCENTAGE: The meaning set forth in Article 17.1(c) of this
Plan.
1.79 INCC: Internationale Nederlanden (U.S.) Capital Corporation and its
successors.
1.80 INCC CREDIT AGREEMENT: That certain Credit Agreement between WRT
Energy Corporation and Internationale Nederlanden (U.S.) Capital Corporation,
dated December 30, 1994, as amended by that certain First Amendment to Credit
Agreement, dated as of June 30, 1995, and that certain Second Amendment to
Credit Agreement, dated as of August 18, 1995.
1.81 INCC NOTE: That certain Promissory Note, dated December 30, 1994,
executed by WRT Energy Corporation, as the Borrower, and Internationale
Nederlanden (U.S.) Capital Corporation, as the Lender, in the principal amount
of up to $40,000,000.00.
1.82 INDENTURE AGREEMENT: The Indenture dated as of February 28, 1995,
between WRT Energy Corporation, a Texas corporation and NationsBank of Texas,
National Association, a national banking association.
1.83 INDENTURE TRUSTEE: The Bank of New York, a banking corporation
organized under the laws of the State of New York, successor to NationsBank of
Texas, National Association.
1.84 INDENTURE TRUSTEE CLAIM: The Claim of the Indenture Trustee in its
capacity as such in an amount to which the Debtor, DLBW and Indenture Trustee
agree which Claim shall be treated as an Allowed Administrative Claim in
exchange for the Indenture Trustee's agreement to waive any and all of its
rights under the Indenture Agreement relating to the payment of fees, expenses,
indemnification or other amounts, including, without limitation, any direct
rights against the Debtor and any right to enforce a lien against or otherwise
affect the Distributions provided in this Plan in respect of any Claim.
1.85 INTERIM INSURANCE DISTRIBUTION: The meaning set forth in Article
17.1(c) of this Plan.
1.86 INTERIM INSURANCE DISTRIBUTION AMOUNTS: The meaning set forth in
Article 17.1(c) of this Plan.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 9
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1.87 INTERIM PRO RATA SHARE: The proportion, calculated as of any given
date, that a given Allowed Claim in a particular Class of Claims bears to the
sum of (a) the amount of all Allowed Claims within such Class, (b) the amount of
all Disputed Claims within such Class and (c) the amount of all Claims
potentially within such Class which New WRT, in its sole and absolute
discretion, determines should be included in such calculation.
1.88 LAC BLANC FIELD CLAIMS: Allowed Secured Claims, the Collateral for
which is in or on the Lac Blanc Field, Vermilion Parish, Louisiana.
1.89 LIEN: As defined in Section 101(37) of the Bankruptcy Code.
1.90 MCBT: The meaning set forth in Article 8.1 of this Plan.
1.91 MCBT LOAN DOCUMENTS: The meaning set forth in Article 7.1 of this
Plan.
1.92 NAPOLEONVILLE FIELD CLAIMS: Allowed Secured Claims, the Collateral
for which is in or on the Napoleonville Field, Assumption Parish, Louisiana.
1.93 NEW ING TERM SHEET: That certain Summary of Terms and Conditions,
setting forth the terms of a proposed loan from INCC to New WRT, attached as
Exhibit "I" to the Disclosure Statement.
1.94 NEW WRT: From and after the Effective Date, WRT as reorganized
pursuant to this Plan.
1.95 NEW WRT BY-LAWS: The by-laws for New WRT substantially in the form
attached as Exhibit "J" to the Disclosure Statement.
1.96 NEW WRT CERTIFICATE OF INCORPORATION: The certificate of
incorporation for New WRT substantially in the form attached as Exhibit "K" to
the Disclosure Statement.
1.97 NEW WRT COMMON STOCK: 50,000,000 shares of common stock of New WRT,
to be authorized and issued in part in accordance with the terms and conditions
of this Plan.
1.98 NEW WRT SUBSCRIPTION COMMON STOCK: The 3,000,000 shares of New WRT
Common Stock purchased as a result of the exercise of New WRT Subscription
Rights pursuant to, and in accordance with the terms of, Article 29 of this Plan
and the terms of the New WRT Subscription Rights Agreement.
1.99 NEW WRT SUBSCRIPTION RIGHTS: The right to subscribe to up to
3,000,000 shares of New WRT Common Stock to be given to Unsecured Creditors
pursuant to Articles 18.2 and 29 of this Plan and pursuant to the New WRT
Subscription Rights Agreement.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 10
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1.100 NEW WRT SUBSCRIPTION RIGHTS AGREEMENT: That certain Subscription
Rights Agreement, dated as of the Confirmation Date, between WRT and the
Disbursing Agent, with respect to the New WRT Subscription Rights, attached as
Exhibit "L" to the Disclosure Statement.
1.101 NEW WRT WARRANTS: Warrants which shall be issued by New WRT on the
Effective Date in accordance with the terms of this Plan and the New WRT Warrant
Agreement. The aggregate amount of warrants issued shall be not more than five
percent (5%) of the total New WRT Common Stock that would be issued on the
Effective Date if all New WRT Warrants were exercised on the Effective Date.
Such New WRT Warrants shall have an exercise period of five (5) years from the
Effective Date of the Plan and shall provide to the holders thereof the right,
per each New WRT Warrant, to purchase one share of New WRT Common Stock for a
purchase price of $10.00.
1.102 NEW WRT WARRANT AGREEMENT: That certain Warrant Agreement, dated as
of the Effective Date, between New WRT and the Disbursing Agent, with respect to
the New WRT Warrants, attached as Exhibit "M" to the Disclosure Statement.
1.103 OIL & GAS LIEN CLASS: The meaning set forth in Article 11.1 of this
Plan.
1.104 OIL & GAS LIEN NOTE: The meaning set forth in Articles 11.5(a),
12.5(a) and 15.5(a) of this Plan.
1.105 OTHER OIL & GAS LIEN CLASS: The meaning set forth in Article 15.1 of
the Plan.
1.106 PERSON: An individual, corporation, partnership, association, joint
stock company, joint venture, estate, trust, unincorporated organization or
governmental entity or any particular subdivision thereof or other entity.
1.107 PETITION DATE: February 14, 1996, the date of filing of the Chapter
11 Case by WRT.
1.108 PLAN: This First Amended Plan of Reorganization and all exhibits and
schedules annexed hereto or referred to herein, either in its or their present
form(s) or as it or they may be altered, amended, or modified from time to time
pursuant to Article 36 hereof.
1.109 PREFERRED STOCK: 9% Convertible Preferred Stock of WRT authorized
and issued prior to the Petition Date.
1.110 PRIORITY CLAIM: Any Claim entitled to priority in payment under
Sections 507(a)(3) through 507(a)(7) of the Bankruptcy Code.
1.111 PRIORITY TAX CLAIM: Any Claim entitled to priority in payment under
Section 507(a)(8) of the Bankruptcy Code.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 11
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1.112 PRO RATA SHARE: The proportion, calculated after the date on which
all Disputed Claims within a particular Class and all other Disputed Claims
potentially within such Class have been either allowed or disallowed by Final
Order, that a given Allowed Claim in such Class bears to the amount of all
Allowed Claims within such Class.
1.113 PURCHASE, SALE AND EXCHANGE AGREEMENT: The Purchase, Sale and
Exchange Agreement, dated January _____, 1997, between Texaco and DLB, as
described in the Disclosure Statement.
1.114 RANKIN FIELD CLAIMANTS: Creditors asserting Secured Claims supported
by Liens attached to Rankin Field Proceeds.
1.115 RANKIN FIELD PROCEEDS: The net sales proceeds generated from the
sale of the Debtor's Assets located in or on the Rankin Field, Harris County,
Texas to American Energy Sources, Inc., as authorized by the Bankruptcy Court by
order entered on July 2, 1996.
1.116 RECORD DATE: The date set by the Bankruptcy Court as the date for
determining record holders of Claims against the Debtor, Common Stock and
Preferred Stock.
1.117 REGISTRATION RIGHTS AGREEMENT: That certain Registration Rights
Agreement, dated as of the Effective Date, among New WRT, DLB and Wexford.
1.118 REPURCHASED NEW WRT SUBSCRIPTION COMMON STOCK: The meaning set forth
in Article 29.6(c) of this Plan.
1.119 RESERVE AMOUNT: The number of shares of New WRT Common Stock and the
amount of Cash required to be deposited in the appropriate Disputed Claims
Reserve Account on account of a Disputed Claim or Claims, in each case
determined on the basis of the Adjusted Amount of such Disputed Claim or Claims.
1.120 RIGHTS OFFERING: The issuance to the holders of Allowed Claims in
Class D-3, of the right to purchase shares of New WRT Subscription Common Stock
pursuant to, and in accordance with the terms of, Article 29 of this Plan and
the New WRT Subscription Rights Agreement.
1.121 ROYALTY AND OVERRIDING ROYALTY: Sums payable to a lessor or
sublessor, pursuant to the terms of a mineral lease or sublease, from the
proceeds from production of oil and gas attributable to lands subject to said
mineral lease or sublease.
1.122 SCHEDULES: The Schedules and Statement of Affairs, as amended, filed
by the Debtor with the Bankruptcy Court listing liabilities and assets.
1.123 SECURED CLAIM: A Claim subject to setoff under Section 553 of the
Bankruptcy Code or secured by a Lien on Assets of the Debtor which Lien is
valid, perfected and enforceable under
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 12
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applicable law and is not subject to avoidance under the Bankruptcy Code or
applicable non- bankruptcy law and which is duly established in the Chapter 11
Case, but only to the extent of the value of the Collateral that secures payment
of the Claim or to the extent of the amount subject to setoff, as the case may
be.
1.124 SECURED CREDITOR: The holder of a Secured Claim.
1.125 SECURITIES LITIGATION: That certain litigation which is pending in
the United States District Court for the Southern District of New York, styled
IN RE WRT ENERGY SECURITIES LITIGATION, Case No. 96 Civ. 3610 (JFK), United
States District Court, Southern District of New York.
1.126 SECURITIES LITIGATION CLAIMS: Claims of Creditors and holders of
Equity Interests asserted within the Securities Litigation.
1.127 SENIOR NOTES: Notes evidencing 100,000 Units of 13-7/8% Senior Notes
Due 2002, aggregating a principal amount of $100.0 million, and executed and
issued by WRT prior to the Petition Date in accordance with the Indenture
Agreement.
1.128 SHALLOW CONTRACT AREA: The leasehold ownership in State Lease 340
located in St. Mary Parish in the western portion of West Cote Blanche Bay known
as West Cote Blanche Bay Field limited to depths from the surface to the base of
the Robb "C" marker found in the Texaco, WCBB #265 well at 10,575 feet.
1.129 SOUTH ATCHAFALAYA FIELD CLAIMS: Allowed Secured Claims, the
Collateral for which is assets in or on the South Atchafalaya Field, St. Mary
Parish, Louisiana.
1.130 STAY BONUS: Bonuses payable to the Debtor's employees pursuant to
the bonus program as authorized by the Bankruptcy Court pursuant to its Order
entered November 6, 1996.
1.131 STOCK TRANSFER AGENT: American Stock Transfer & Trust Company, a New
York corporation
1.132 SUBSCRIPTION PURCHASE PRICE: The purchase price that an Exercising
Claimant must pay in order to exercise its Subscription Rights and purchase the
New WRT Subscription Common Stock pursuant to such Subscription Rights in
accordance with Article 29 of this Plan and the terms of the New WRT
Subscription Rights Agreement, which price shall be equal to the product of (a)
the number of shares of New WRT Subscription Common Stock being purchased
pursuant to such Subscription Rights, TIMES (b) $3.50.
1.133 SUBSCRIPTION RIGHTS ELECTION DEADLINE: The date by which any
Creditor entitled to exercise New WRT Subscription Rights must deliver such
Creditor's Subscription Rights Election Form to the Disbursing Agent in order to
exercise such New WRT Subscription Rights, which date shall be the thirtieth
(30th) day after the first date set for the hearing with respect to the
confirmation of the Plan.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 13
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1.134 SUBSCRIPTION RIGHTS ELECTION FORM: As defined in the New WRT
Subscription Rights Agreement.
1.135 SUBSCRIPTION RIGHTS RECORD DATThe date established by the Bankruptcy
Court as the record date for distributing the Subscription Rights Elections
Forms to the Claimants entitled to receive New WRT Subscription Rights pursuant
to Article 29 of this Plan, which shall be no later than thirty (30) days after
the date on which the Bankruptcy Court enters the order approving the Disclosure
Statement.
1.136 SUBSCRIPTION RIGHTS RESERVE ACCOUNT: The escrow account maintained
by the Disbursing Agent as described in Article 27.5 of this Plan.
1.137 TEPI: Texaco Exploration and Production Inc.
1.138 TEXACO: Texaco Inc. and its subsidiaries and affiliates, as the
particular context dictates.
1.139 TIGRE LAGOON FIELD CLAIMS: Allowed Secured Clams, the Collateral for
which is in or on the Tigre Lagoon Field, Vermilion Parish, Louisiana.
1.140 TORT CLAIMS: All Unsecured Claims based on legally defined torts,
including, but not limited to Claims arising out of or related to personal
injuries, wrongful death, physical damage to property, and rights of
contribution and indemnity arising therefrom, together with all resulting or
related damages as to any such Claims which may be asserted pursuant to
applicable laws.
1.141 TRANSFER AND EXCHANGE AGREEMENT: The Transfer and Exchange
Agreement, dated as of the Effective Date, between DLB and New WRT, providing
for, INTER ALIA, the transfer to New WRT of the WCBB Assets and the transfer to
DLB of the Buyer's Leasehold and Facilities, as described in the Disclosure
Statement.
1.142 TRICORE: Tricore Energy Venture, L.P.
1.143 UNCLAIMED DISTRIBUTION: Any Distribution (together with any interest
earned thereon) which is unclaimed six (6) months following the date on which
the Disbursing Agent makes or attempts to make payment in respect of such
Distribution. Unclaimed Distributions shall include (a) checks (and the funds
represented thereby) that have been returned as undeliverable without a proper
forwarding address, (b) funds for checks that have not cleared, (c) checks (and
the funds represented thereby) that were not mailed or delivered because of the
absence of a proper address to which to mail or deliver such property and (d)
New WRT Common Stock and New WRT Warrants that the Disbursing Agent has been
unable to deliver.
1.144 UNEXERCISED SUBSCRIPTION RIGHTAny and all New WRT Subscription
Rights that, as of the Subscription Rights Election Deadline, have not been
exercised or have been deemed not to have been exercised due to the failure of
the holders thereof to meet the requirements of Article
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 14
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29.3 of this Plan including, without limitation, all New WRT Subscription Rights
that are not exercised as a result of the inability of the Disbursing Agent to
distribute such New WRT Subscription Rights pursuant to Article 27.4 of this
Plan.
1.145 UNSECURED CLAIMS: Any and all Claims held by Creditors of the Debtor
which Claims are not secured by Assets of the Debtor, including, but not limited
to, Deficiency Claims, Claims arising from rejection of executory contracts and
unexpired leases which are not otherwise secured by Liens, and Claims arising
from litigation or suits against WRT. For purposes of the definition, "Unsecured
Claims" do not include Administrative Claims, Priority Claims, Priority Tax
Claims, or Secured Claims.
1.146 UNSECURED CREDITOR: Any Creditor that holds an Unsecured Claim.
1.147 VOTING DEADLINE: The date set by the Bankruptcy Court by which the
Balloting Agent must receive ballots for accepting or rejecting the Plan.
1.148 WCBB ASSETS: The interests of TEPI and Texaco in the producing area
of the leasehold ownership in State Lease 340 located in St. Mary Parish in the
western portion of West Cote Blanche Bay known as West Cote Blanche Bay Field
limited to depths from the surface to the base of the Robb "C" marker found in
the Texaco, WCBB #265 well at 10,575 feet, together with certain facilities
related thereto, as more completely described Schedule 3 hereto.
1.149 WARRANT AGENT: American Stock Transfer & Trust Company, a New York
corporation.
1.150 WARRANT AGREEMENT: The Warrant Agreement dated as of February 28,
1995, between WRT Energy Corporation, a Texas corporation, and American Stock
Transfer & Trust Company, a New York corporation.
1.151 WEST COTE BLANCHE BAY FIELD CLAIMS: Allowed Secured Claims, the
Collateral for which is in or on the West Cote Blanche Bay Field, St. Mary
Parish, Louisiana.
1.152 WEST HACKBERRY FIELD CLAIMS: Allowed Secured Claims, the Collateral
for which is in or on the West Hackberry Field, Cameron Parish, Louisiana.
1.153 WEST LAKE PONTCHARTRAIN FIELD CLAIMS: Allowed Secured Claims, the
Collateral for which is in or on the West Lake Pontchartrain Field, Jefferson
Parish, Louisiana.
1.154 WEXFORD: Wexford Management LLC, on behalf of its affiliated
investment funds.
1.155 WFNB: The meaning set forth in Article 9.1 of this Plan.
1.156 WFNB LOAN DOCUMENTS: The meaning set forth in Article 9.1 of this
Plan.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 15
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1.157 WRT: WRT Energy Corporation, a Texas corporation and the Debtor in
the Chapter 11 Case.
1.158 WRT STOCK OPTIONS: Options authorized and granted by WRT prior to
the Petition Date, giving the holders thereof the right to purchase Common Stock
of WRT.
1.159 WRT WARRANTS: Warrant certificates and Senior Notes containing
thereon the endorsement "Warrant Endorsement" representing beneficial ownership
of warrants, issued by WRT in conjunction with the Warrant Agreement, and
entitling the holders thereof to exercise the option to purchase one share of
WRT Common Stock per each warrant for $8.00, or such other price as determined
pursuant to provisions within the Warrant Agreement, and exercisable through
March 1, 2000, which were authorized and issued prior to the Petition Date.
ARTICLE 2
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 CLASSIFICATION GENERALLY: All Claims and Equity Interests, except
Administrative Claims and Priority Tax Claims are placed in the following
Classes. A Claim or Equity Interest is classified in a particular Class only to
the extent that the Claim or Equity Interest qualifies within the description of
the Class and is classified in a different Class to the extent that the Claim or
Equity Interest qualifies within the description of that Class. A proof of Claim
or Equity Interest which asserts a Claim or an Equity Interest which is properly
includible in more than one Class is in the Class asserted only to the extent it
qualifies within the description of such Class and is in a different Class to
the extent it qualifies within a description of such different Class.
UNCLASSIFIED CLAIMS
Allowed Administrative Claims
Allowed Priority Tax Claims
CLASSIFIED CLAIMS
PRIORITY CLAIMS:
Class A-1: Allowed Priority Claims
SECURED CONTRACT CLAIMS:
Class B-1: Allowed Secured Claim of GMAC
Class B-2: Allowed Secured Claim of INCC
Class B-3: Allowed Secured Claim of MC Bank & Trust Company
Class B-4: Allowed Secured Claim of Tricore
Class B-5: Allowed Secured Claim of Woodforest National Bank
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 16
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Class B-6: Allowed Secured Claim of The Woodlands Corporation
ALLOWED SECURED OIL AND GAS LIEN CLAIMS:
Class C-1: Abbeville Field Claims
Class C-2: Bayou Henry Field Claims
Class C-3: Bayou Penchant Field Claims
Class C-3-A: North Lease Claimants
Class C-3-B: South Lease Claimants
Class C-3-C: South/North Lease Claimants
Class C-4: Bayou Pigeon Field Claims
Class C-4-A: Brownell Kidd 90 Lease Claimants
Class C-4-B: David R. McHugh Estate Lease Claimants
Class C-4-C: Edward H. Peterman Lease Claimants
Class C-4-D: Lynch McHugh Heirs et al Lease Claimants
Class C-4-E: VF Landry et al 52 Lease Claimants
Class C-4-F: VF Landry et al 90 Lease Claimants
Class C-4-G: Brownell Kidd 11/66 Lease Claimants
Class C-4-H: Richard Lynch Heirs Lease Claimants
Class C-4-I: VF Landry 11/66 Lease Claimants
Class C-5: Darrow Field Claims
Class C-6: Deer Island Field Claims
Class C-6-A: CL&F 12/21/45 Lease Claimants
Class C-6-B: CL&F 12/26/45 Lease Claimants
Class C-6-C: CL&F SWD Well #1 Claimants
Class C-7: East Hackberry Field Claims
Class C-7-A: M.P. Erwin Lease Claimants
Class C-7-B: State Lease 50 Lease Claimants
Class C-8: Golden Meadow Field Claims
Class C-9: Lac Blanc Field Claims
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 17
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Class C-10: Napoleonville Field Claims
Class C-10-A: Dugas & LeBlanc Ltd 2/94 Lease Claimants
Class C-10-B: Dugas & LeBlanc Ltd 3/94 Lease Claimants
Class C-10-C: Dugas & LeBlanc Ltd 93 Lease Claimants
Class C-10-D: E. Robert Sternfels et al 90 Lease Claimants
Class C-10-E: Dougas LeBlanc A SWD Well Claimants
Class C-11: Rankin Field Claims
Class C-12: South Atchafalaya Bay Field Claims
Class C-13: Tigre Lagoon Field Claims
Class C-14: West Cote Blanche Bay Field Claims
Class C-15: West Hackberry Field Claims
Class C-15-A: R Vincent 1/18/38 Lease Claimants
Class C-15-B: R Vincent 5/36 Lease Claimants
Class C-16: West Lake Pontchartrain Field Claims
UNSECURED CLAIMS:
Class D-1: Allowed Convenience Claims
Class D-2: Allowed Tort Claims
Class D-3: Allowed General Unsecured Claims
Class D-4: Allowed Securities Litigation Claims Based Upon Senior Note
Ownership
EQUITY INTERESTS:
Class E-1: Preferred Stock
Class E-2: Allowed Securities Litigation Claims Based Upon Preferred Stock
Ownership
Class E-3: Common Stock and Allowed Securities Litigation Claims Based Upon
Common Stock Ownership
Class E-4: WRT Warrants
Class E-5: WRT Stock Options
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 18
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ARTICLE 3
PROVISIONS FOR PAYMENT
OF UNCLASSIFIED CLAIMS
3.1 PAYMENT IN FULL TO ADMINISTRATIVE CLAIMANTS: Unless otherwise agreed,
each Allowed Administrative Claim shall be paid in full in Cash by no later than
the later of (a) the Effective Date or (b) fifteen (15) days after the
Administrative Claim becomes an Allowed Administrative Claim; provided, however,
that Administrative Claims that represent liabilities incurred by the Debtor in
the ordinary course of business during the Chapter 11 Case shall be paid in the
ordinary course of business in accordance with any related agreements.
3.2 BAR DATE FOR ADMINISTRATIVE CLAIMS:
(a) COMPENSATION ESTIMATE. Any Person retained or requesting
compensation or expense reimbursement pursuant to Sections 328, 330,
503(b)(2) through (6) or 1103 of the Bankruptcy Code shall file a
Compensation Estimate (i) on or before three (3) calendar days
before the first date set for the hearing on the confirmation of
this Plan and (ii) on or before five (5) calendar days before the
first date scheduled for the Effective Date.
(b) FILING AND ALLOWANCE OF ADMINISTRATIVE CLAIMS. The holder of an
Administrative Claim other than (i) an Allowed Administrative Claim
or (ii) an Administrative Claim that represents a liability incurred
by the Debtor in the ordinary course of business, must file a proof
of Administrative Claim (or, in the case of a Fee Claim, an
application seeking the Bankruptcy Court's approval of such Fee
Claim) on or before the Administrative Claims Bar Date and serve a
copy on counsel for New WRT. Failure to timely file such proof of
Administrative Claim (or application) shall result in the
Administrative Claim being forever barred and discharged. An
Administrative Claim other than a Fee Claim, proof of which has been
timely filed, shall become an Allowed Administrative Claim if no
objection thereto is filed within thirty (30) days after the filing
and service of such proof of Administrative Claim or application, as
the case may be . If an objection is filed within such thirty (30)
day period, the Administrative Claim shall only become an Allowed
Administrative Claim to the extent allowed by Final Order. A Fee
Claim with respect to which an application is timely filed shall
become an Allowed Administrative Claim only to the extent allowed by
Final Order.
3.3 PAYMENT IN FULL TO PRIORITY TAX CLAIMANTS: Unless otherwise agreed,
each Allowed Priority Tax Claim shall be paid in full in equal quarter-annual
installments of principal during a period of time from the Effective Date to
December 31, 2001, plus interest at the rate of LIBOR (London Inter-Bank Offered
Rate) plus 2% per annum from and after the Effective Date which shall also be
paid quarter-annually. The first such installment shall be paid on the first day
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 19
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of the calendar quarter (a) next following the Effective Date or (b) next
following the Priority Tax Claim becoming an Allowed Claim, whichever occurs
last; and subsequent installments shall be paid quarter-annually thereafter;
provided, however, that New WRT shall have the option to prepay any or all of
the Allowed Priority Tax Claims at any time up until December 31, 2001.
ARTICLE 4
PROVISIONS FOR TREATMENT OF
ALLOWED PRIORITY CLAIMS (CLASS A-1)
4.1 PAYMENT IN FULL TO PRIORITY CLAIMANTS: Unless otherwise agreed, each
Allowed Priority Claim shall be paid in full in Cash by no later than the later
of (a) the Effective Date or (b) fifteen (15) days after the Priority Claim
becomes an Allowed Priority Claim by Final Order.
4.2 STATUS OF CLASS: Class A-1 is unimpaired. Therefore, votes for
acceptance or rejection of the Plan from members of such Class will not be
solicited.
ARTICLE 5
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIM OF GMAC (CLASS B-1)
5.1 CURE OF EXISTING DEFAULTS: Unless otherwise agreed, New WRT shall cure
all existing monetary defaults under the documents evidencing the Allowed
Secured Claim of General Motors Acceptance Corporation ("GMAC") (the "GMAC Loan
Documents"), such cure to occur by no later than the later of (a) the Effective
Date or (b) fifteen (15) days after the entry of a Final Order determining such
cure amount in the event of a disagreement between GMAC and New WRT as to such
amount.
5.2 REINSTATEMENT OF OBLIGATIONS: Unless otherwise agreed, the obligations
of WRT to GMAC with respect to the Allowed Secured Claim of GMAC shall be
reinstated and New WRT shall make payments to GMAC pursuant to the GMAC Loan
Documents from and after the date of cure of all monetary defaults as provided
in Article 5.1 of the Plan.
5.3 RELEASE OF LIEN: Upon final payment to GMAC under the GMAC Loan
Documents, GMAC, or its successor in interest if applicable, shall promptly
provide to New WRT all such documentation as New WRT deems necessary to
effectuate a release of all of GMAC's Liens against Collateral of New WRT.
5.4 STATUS OF CLASS: Class B-1 is unimpaired. Therefore, a vote for
acceptance or rejection of the Plan from the Claimant within such Class will not
be solicited.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 20
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ARTICLE 6
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIM OF INCC (CLASS B-2)
6.1 DETERMINATION OF ALLOWED SECURED CLAIM OF INCC: The Allowed Secured
Claim of INCC shall be fixed and allowed as of the Effective Date as the sum of
(a) the principal indebtedness under the INCC Note and INCC Credit Agreement,
which indebtedness shall include all accrued interest, fees and costs as of the
Petition Date; (b) accrued interest on the principal set forth in (a) above at
the non-default rate of interest provided in the INCC Credit Agreement from and
after the Petition Date and through the Effective Date, and (c) any reasonable
fees, costs or other charges provided for under the INCC Credit Agreement as
agreed between INCC and DLBW and the Debtor.
6.2 LOAN RECONSTRUCTURE: The Allowed Secured Claim of INCC will be paid in
full in cash on the Effective Date.
6.3 STATUS OF CLASS: Class B-2 is impaired. Therefore, a vote for
acceptance or rejection of the Plan will be solicited from the Claimant within
such Class.
ARTICLE 7
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIM OF MC BANK & TRUST COMPANY (CLASS B-3)
7.1 CURE OF EXISTING DEFAULTS: Unless otherwise agreed, New WRT shall cure
all existing monetary defaults under the documents evidencing the Allowed
Secured Claim of MC Bank & Trust Company ("MCBT") (the "MCBT Loan Documents"),
such cure to occur by no later than the later of (a) the Effective Date or (b)
fifteen (15) days after the entry of a Final Order determining such cure amount
in the event of a disagreement between MCBT and New WRT as to such amount.
7.2 REINSTATEMENT OF OBLIGATIONS: Unless otherwise agreed, the obligations
of WRT to MCBT with respect to the Allowed Secured Claim of MCBT shall be
reinstated and New WRT shall make payments to MCBT pursuant to the MCBT Loan
Documents from and after the date of cure of all monetary defaults as provided
in Article 7.1 of the Plan.
7.3 RELEASE OF LIEN: Upon final payment to MCBT under the MCBT Loan
Documents, MCBT, or its successor in interest if applicable, shall promptly
provide to New WRT all such documentation as New WRT deems necessary to
effectuate a release of all of MCBT's Liens against Collateral of New WRT.
7.4 STATUS OF CLASS: Class B-3 is unimpaired. Therefore, a vote for
acceptance or rejection of the Plan from the Claimant within such Class will not
be solicited.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 21
<PAGE>
ARTICLE 8
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIM OF TRICORE (CLASS B-4)
8.1 PAYMENT IN FULL: Unless otherwise agreed, the Allowed Secured Claim,
if any, of Tricore shall be paid in full in Cash by no later than the later of
(a) the Effective Date or (b) fifteen (15) days after such Secured Claim becomes
an Allowed Secured Claim by Final Order, provided the conditions set forth in
Article 8.2 below are met.
8.2 RELEASE OF COLLATERAL: Contemporaneous with and as a condition to New
WRT's payment of Tricore's Allowed Secured Claim pursuant to the terms of
Article 8.1 above, Tricore, or its successor in interest if applicable, shall
execute and deliver to New WRT all such documentation which New WRT deems
necessary to effectuate a release by Tricore of all Collateral securing
Tricore's Claim.
8.3 STATUS OF CLASS: Class B-4 is impaired. Therefore, a vote for
acceptance or rejection of the Plan from the Claimant within such Class will be
solicited.
ARTICLE 9
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIM OF
WOODFOREST NATIONAL BANK (CLASS B-5)
9.1 CURE OF EXISTING DEFAULTS: Unless otherwise agreed, New WRT shall cure
all existing monetary defaults under the documents evidencing the Allowed
Secured Claim to Woodforest National Bank ("WFNB") (the "WFNB Loan Documents"),
such cure to occur by no later than the later of (a) the Effective Date or (b)
fifteen (15) days after the entry of a Final Order determining such cure amount
in the event of a disagreement between WFNB and New WRT as to such amount.
9.2 REINSTATEMENT OF OBLIGATIONS: Unless otherwise agreed, the obligations
of WRT to WFNB with respect to the Allowed Secured Claim of WFNB shall be
reinstated and New WRT shall make payments to WFNB pursuant to the WFNB Loan
Documents from and after the date of cure of all monetary defaults as provided
in Article 9.1 of the Plan.
9.3 RELEASE OF LIEN: Upon final payment to WFNB under the WFNB Loan
Documents, WFNB, or its successor in interest if applicable, shall promptly
provide to New WRT all such documentation as New WRT deems necessary to
effectuate a release all of WFNB's Liens against Collateral of New WRT.
9.4 STATUS OF CLASS: Class B-5 is unimpaired. Therefore, a vote for
acceptance or rejection of the Plan from the Claimant within such Class will not
be solicited.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 22
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ARTICLE 10
PROVISIONS FOR TREATMENT
OF ALLOWED SECURED CLAIM OF
THE WOODLANDS CORPORATION (CLASS B-6)
10.1 PAYMENT IN FULL: Unless otherwise agreed, the Allowed Secured Claim
of The Woodlands Corporation shall be paid in full in Cash by no later than the
later of (a) the Effective Date or (b) fifteen (15) days after such Secured
Claim becomes an Allowed Secured Claim by Final Order, provided the conditions
set forth in Article 10.2 below are met.
10.2 RELEASE OF LIEN: Contemporaneous with and as a condition to New WRT's
payment of The Woodlands Corporation's Allowed Secured Claim pursuant to the
terms of Article 10.1 above, The Woodlands Corporation, or its successor in
interest if applicable, shall execute and deliver to New WRT all such
documentation which New WRT deems necessary to effectuate a release of all of
The Woodlands Corporation's Liens against Collateral of New WRT.
10.3 STATUS OF CLASS: Class B-6 is impaired. Therefore, a vote for
acceptance or rejection of the Plan from the Claimant within such Class will be
solicited.
ARTICLE 11
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIMS OF OIL & GAS LIEN CLASS CLAIMANTS
(CLASSES C-1, C-3, C-4, C-6, C-7-A, C-8 AND C-10)
11.1 APPLICABILITY OF PROVISIONS: The provisions of this Article 11 shall
apply independently to each of the following Classes: C-1, C-3 and C-4, C-6,
C-7-A, C-8 and C-10 (each respective Class referred to as "Oil & Gas Lien Class"
herein).
11.2 PAYMENT OF ALLOWED SECURED CLAIMS: Unless a particular Oil & Gas Lien
Class elects treatment under Section 1111(b)(2) of the Bankruptcy Code, in full
and final satisfaction of its Claim, each holder of an Allowed Secured Claim in
such Class shall, at the option of such holder, either (i) be paid in Cash in an
amount equal to the amount of such holder's Allowed Secured Claim (excluding
therefrom all interest, fees or expenses, all which accrued post-petition,
included in such Allowed Secured Claim) or (ii) receive the number of shares of
New WRT Common Stock obtained by dividing the amount of such holder's Allowed
Secured Claim (excluding therefrom all interest, fees or expenses, all which
accrued post-petition, included in such Allowed Secured Claim) by a purchase
price of $3.50 per share, in either case by no later than the later of (i) the
Effective Date or (ii) fifteen (15) days after all Allowed Secured Claims in
such Class have either been disallowed or become Allowed Secured Claims by Final
Order, provided that the conditions set forth in Article 11.3 are met.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 23
<PAGE>
11.3 RELEASE OF COLLATERAL: Contemporaneous with and as a condition to New
WRT's payment of Allowed Secured Claims in the Oil and Gas Lien Classes pursuant
to the terms of Article 11.2 above, holders of Allowed Secured Claims in the Oil
and Gas Lien Classes, or their successors in interest if applicable, shall
execute and deliver to New WRT all such documentation which New WRT deems
necessary to effectuate a release of the applicable Liens against Collateral of
New WRT.
11.4 ELECTION OF SECTION 1111(B)(2) TREATMENT: On or before the conclusion
of the hearing on the Disclosures Statement, each Oil & Gas Lien Class shall
have the option to elect treatment under Section 1111(b)(2) of the Bankruptcy
Code in accordance with Bankruptcy Rule 3014. An Oil & Gas Lien Class shall have
made such election if at least 2/3 in amount and more than 1/2 in number of the
Claims in such Class make such election.
11.5 PROVISIONS FOR TREATMENT OF CLASSES ELECTING 1111(B)(2) TREATMENT:
Each Oil & Gas Lien Class electing treatment under Section 1111(b)(2) of the
Bankruptcy, as provided in Article 11.4 above, shall receive the following
treatment:
(a) PAYMENT: Each holder of an Allowed Secured Claim in such Class shall
receive, in equal monthly installments over a period of seven (7)
years, deferred Cash payments totaling at least the amount of the
Allowed Secured Claim, with a value as of the Effective Date, of at
least the holder's interest in the estate's interest in the
Collateral securing such Claim. By no later than the later of (a)
the Effective Date or (b) fifteen (15) days after the Claim becomes
an Allowed Secured Claim, New WRT shall execute and deliver to the
holder of such Allowed Secured Claim a non-recourse promissory note
(the "Oil & Gas Lien Note") evidencing such payment terms.
(b) RETENTION OF LIENS: Each holder of an Allowed Secured Claim who is
in a Class which has elected treatment under Section 1111(b)(2)
shall retain its Liens to secure repayment of the Oil & Gas Lien
Note until such Oil & Gas Lien Note is fully paid or until the
holder otherwise agrees.
(c) RELEASE OF LIENS: Upon satisfaction of the Oil & Gas Lien Note, the
holder thereof shall promptly execute and deliver to New WRT all
such documentation which New WRT deems necessary to effectuate a
release of the holder's Liens against Collateral of New WRT.
(d) PREPAYMENT: Each Oil & Gas Lien Note may be prepaid by New WRT or on
behalf of New WRT at any time without penalty, provided that such
payment include any accrued interest through the date of such
prepayment.
(e) NO RECOURSE AGAINST NEW WRT: Holders of Allowed Secured Claims who
are in Classes which have elected treatment under Section 1111(b)(2)
of the Bankruptcy Code shall have no recourse against New WRT. In
the event of
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 24
<PAGE>
a default under the Oil & Gas Lien Note provided by Article 11.5(a),
such Creditor's recourse shall be limited to the Collateral to which
such Creditor's Liens are attached.
11.6 STATUS OF CREDITORS: The Oil & Gas Lien Classes are impaired.
Therefore, votes for acceptance or rejection of the Plan will be solicited from
Claimants within each Oil & Gas Lien Class.
ARTICLE 12
PROVISIONS FOR TREATMENT OF ALLOWED
SECURED EAST HACKBERRY STATE LEASE 50 CLAIMS (CLASS C-7-B)
12.1 APPLICABILITY OF PROVISIONS: The provisions of this Article 12 shall
apply to Class C-7-B.
12.2 PAYMENT OF ALLOWED SECURED CLAIMS:
(a) Unless Class C-7-B elects treatment under Section 1111(b)(2) of the
Bankruptcy Code, in full and final satisfaction of its Claim, each
holder of an Allowed Secured Claim in such Class shall, at the
option of such holder, either (i) be paid in Cash in an amount equal
to 75% of the amount of such holder's Allowed Secured Claim (as
determined by Section 12.2(b)) or (ii) receive the number of shares
of New WRT Common Stock obtained by dividing the 75% of amount of
such holder's Allowed Secured Claim (as determined by Section
12.2(b)) by a purchase price of $3.50 per share, in either case by
no later than the later of (i) the Effective Date or (ii) fifteen
(15) days after all Allowed Secured Claims in such Class have either
been disallowed or become Allowed Secured Claims by Final Order,
provided that the conditions set forth in Article 12.3 are met.
(b) For the purpose of Article 12.2(a) hereof, the amount of the Allowed
Secured Claim of each Claimant in Class C-7-B will be determined on
the basis of the assumption that the value of such Claimant's
interest in the Debtor's interest in the applicable Collateral is
equal to seventy-five percent (75%) of the principal amount of such
Claimant's Secured Claim as allowed.
12.3 RELEASE OF COLLATERAL: Contemporaneous with and as a condition to New
WRT's payment of Allowed Secured Claims in Class C-7-B pursuant to the terms of
Article 12.2 above, holders of Allowed Secured Claims in Class C-7-B, or their
successors in interest if applicable, shall execute and deliver to New WRT all
such documentation which New WRT deems necessary to effectuate a release of the
applicable Liens against Collateral of New WRT.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 25
<PAGE>
12.4 ELECTION OF SECTION 1111(B)(2) TREATMENT: On or before the conclusion
of the hearing on the Disclosures Statement, Class C-7-B shall have the option
to elect treatment under Section 1111(b)(2) of the Bankruptcy Code in accordance
with Bankruptcy Rule 3014. Class C-7-B shall have made such election if at least
2/3 in amount and more than 1/2 in number of the Claims in the Class make such
election.
12.5 PROVISIONS FOR TREATMENT OF CLASS IF ELECTING 1111(B)(2) TREATMENT:
If Class C-7-B elects treatment under Section 1111(b)(2) of the Bankruptcy, as
provided in Article 12.4 above, shall receive the following treatment:
(a) PAYMENT: Each holder of an Allowed Secured Claim in Class C-7-B
shall receive, in equal monthly installments over a period of seven
(7) years, deferred Cash payments totaling at least the amount of
the Allowed Secured Claim, with a value as of the Effective Date, of
at least the holder's interest in the estate's interest in the
Collateral securing such Claim. By no later than the later of (a)
the Effective Date or (b) fifteen (15) days after the Claim becomes
an Allowed Secured Claim, New WRT shall execute and deliver to the
holder of such Allowed Secured Claim a non-recourse promissory note
(the "Oil & Gas Lien Note") evidencing such payment terms.
(b) RETENTION OF LIENS: Each holder of an Allowed Secured Claim in a
Class C-7-B shall retain its Liens to secure repayment of the Oil &
Gas Lien Note until such Oil & Gas Lien Note is fully paid or until
the holder otherwise agrees.
(c) RELEASE OF LIENS: Upon satisfaction of the Oil & Gas Lien Note, the
holder thereof shall promptly execute and deliver to New WRT all
such documentation which New WRT deems necessary to effectuate a
release of the holder's Liens against Collateral of New WRT.
(d) PREPAYMENT: Each Oil & Gas Lien Note may be prepaid by New WRT or on
behalf of New WRT at any time without penalty, provided that such
payment include any accrued interest through the date of such
prepayment.
(e) NO RECOURSE AGAINST NEW WRT: Holders of Allowed Secured Claims in
Class C-7-B shall have no recourse against New WRT. In the event of
a default under the Oil & Gas Lien Note provided by Article 12.5(a),
such Creditor's recourse shall be limited to the Collateral to which
such Creditor's Liens are attached.
12.6 STATUS OF CREDITORS: Class C-7-B is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from Claimants within such
Class.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 26
<PAGE>
ARTICLE 13
PROVISIONS FOR TREATMENT OF
ALLOWED SECURED CLAIMS OF RANKIN FIELD CLAIMANTS (CLASS C-11)
13.1 PAYMENT IN FULL: Unless otherwise agreed, the Allowed Secured Claims
of Rankin Field Claimants shall be paid in full in Cash out of the Rankin Field
Proceeds by no later than the later of (a) the Effective Date or (b) fifteen
(15) days after all such Secured Claims held by Rankin Field Claimants become
Allowed Secured Claims or are disallowed by Final Order.
13.2 STATUS OF CREDITOR: Class C-11 is impaired. Therefore, votes for
acceptance or rejection of the Plan by Claimants within Class C-11 will be
solicited.
ARTICLE 14
PROVISIONS FOR TREATMENT OF ALLOWED SECURED
WEST COTE BLANCHE BAY FIELD CLAIMS (CLASS C-14)
14.1 PAYMENT IN FULL: Unless otherwise agreed, each holder of a West Cote
Blanche Bay Field Claim that is an Allowed Secured Claim shall, at such holder's
option, either (i) be paid in full in Cash or (ii) receive the number of shares
of New WRT Common Stock obtained by dividing the liquidated amount of such
holder's Allowed Secured Claim by a purchase price of $3.50 per share, in either
case by no later than the later of (a) the Effective Date or (b) fifteen (15)
days after the date on which such Claim becomes an Allowed Secured Claim,
provided that the conditions set forth in Article 14.2 are met.
14.2 RELEASE OF COLLATERAL: Contemporaneous with and as a condition to New
WRT's payment of an Allowed Secured Claim within Class C-14 pursuant to the
terms of Article 14.1, the holder of such Allowed Secured Claim shall execute
and deliver to New WRT all such documentation as New WRT deems necessary to
effectuate the release by such holders of Liens against Collateral of New WRT.
14.3 STATUS OF CLASS: Class C-14 is impaired. Therefore, votes for
acceptance or rejection of the Plan from Claimants within such Class will be
solicited.
ARTICLE 15
PROVISIONS FOR TREATMENT OF ALLOWED OTHER OIL & GAS
LIEN CLASS CLAIMANTS (CLASSES C-2, C-5, C-9, C-12, C-13, C-15 AND C-16)
15.1 APPLICABILITY OF PROVISIONS: The provisions of this Article 15 shall
apply independently to each of the following Classes: C-2, C-5, C-9, C-12, C-13,
C-15 and C-16 (each respective Class referred to as "Other Oil & Gas Lien Class"
herein).
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 27
<PAGE>
15.2 PAYMENT OF ALLOWED SECURED CLAIMS:
(a) Unless a particular Other Oil & Gas Lien Class elects treatment
under Section 1111(b)(2) of the Bankruptcy Code, in full and final
satisfaction of its Claim, each holder of an Allowed Secured Claim
in such Class shall, at the option of such holder, either (i) be
paid in Cash in an amount equal to 50% of the amount of such
holder's Allowed Secured Claim (as determined by Section 15.2(b)) or
(ii) receive the number of shares of New WRT Common Stock obtained
by dividing the 50% of amount of such holder's Allowed Secured Claim
(as determined by Section 15.2(b)) by a purchase price of $3.50 per
share, in either case by no later than the later of (i) the
Effective Date or (ii) fifteen (15) days after all Allowed Secured
Claims in such Class have either been disallowed or become Allowed
Secured Claims by Final Order, provided that the conditions set
forth in Article 15.3 are met.
(b) For the purpose of Article 15.2(a) hereof the amount of the Allowed
Secured Claim of each Claimant in an Other Oil & Gas Lien Class will
be determined on the basis of the assumption that the value of such
Claimant's interest in the Debtor's interest in the applicable
Collateral is equal to fifty percent (50%) of the principal amount
of such Claimant's Secured Claim as allowed.
15.3 RELEASE OF COLLATERAL: Contemporaneous with and as a condition to New
WRT's payment of Allowed Secured Claims in the Other Oil & Gas Lien Classes
pursuant to the terms of Article 15.2 above, holders of Allowed Secured Claims
in the Other Oil & Gas Lien Classes, or their successors in interest if
applicable, shall execute and deliver to New WRT all such documentation which
New WRT deems necessary to effectuate a release of the applicable Liens against
Collateral of New WRT.
15.4 ELECTION OF SECTION 1111(B)(2) TREATMENT: On or before the conclusion
of the hearing on the Disclosures Statement, each Other Oil & Gas Lien Class
shall have the option to elect treatment under Section 1111(b)(2) of the
Bankruptcy Code in accordance with Bankruptcy Rule 3014. An Other Oil & Gas Lien
Class shall have made such election if at least 2/3 in amount and more than 1/2
in number of the Claims in such Class make such election.
15.5 PROVISIONS FOR TREATMENT OF CLASSES ELECTING 1111(B)(2) TREATMENT:
Each Other Oil & Gas Lien Class electing treatment under Section 1111(b)(2) of
the Bankruptcy, as provided in Article 15.4 above, shall receive the following
treatment:
(a) PAYMENT: Each holder of an Allowed Secured Claim in such Class shall
receive, in equal monthly installments over a period of seven (7)
years, deferred Cash payments totaling at least the amount of the
Allowed Secured Claim, with a value as of the Effective Date, of at
least the holder's interest in the estate's interest in the
Collateral securing such Claim. By no later than the later of (a)
the Effective Date or (b) fifteen (15) days after the Claim
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 28
<PAGE>
becomes an Allowed Secured Claim, New WRT shall execute and deliver
to the holder of such Allowed Secured Claim a non-recourse
promissory note (the "Oil & Gas Lien Note") evidencing such payment
terms.
(b) RETENTION OF LIENS: Each holder of an Allowed Secured Claim who is
in a Class which has elected treatment under Section 1111(b)(2)
shall retain its Liens to secure repayment of the Oil & Gas Lien
Note until such Oil & Gas Lien Note is fully paid or until the
holder otherwise agrees.
(c) RELEASE OF LIENS: Upon satisfaction of the Oil & Gas Lien Note, the
holder thereof shall promptly execute and deliver to New WRT all
such documentation which New WRT deems necessary to effectuate a
release of the holder's Liens against Collateral of New WRT.
(d) PREPAYMENT: Each Oil & Gas Lien Note may be prepaid by New WRT or on
behalf of New WRT at any time without penalty, provided that such
payment include any accrued interest through the date of such
prepayment.
(e) NO RECOURSE AGAINST NEW WRT: Holders of Allowed Secured Claims who
are in Classes which have elected treatment under Section 1111(b)(2)
of the Bankruptcy Code shall have no recourse against New WRT. In
the event of a default under the Oil & Gas Lien Note provided by
Article 15.5(a), such Creditor's recourse shall be limited to the
Collateral to which such Creditor's Liens are attached.
15.6 STATUS OF CREDITORS: The Other Oil & Gas Lien Classes are impaired.
Therefore, votes for acceptance or rejection of the Plan will be solicited from
Claimants within each Other Oil & Gas Lien Class.
ARTICLE 16
PROVISIONS FOR TREATMENT OF
ALLOWED CONVENIENCE CLAIMS (CLASS D-1)
16.1 PARTIAL PAYMENT IN CASH: Unless otherwise agreed, in full and final
satisfaction of its Claim, each holder of an Allowed Convenience Claim shall be
paid 50% of such Allowed Claim in Cash by no later than the later of (a) the
Effective Date, or (b) fifteen (15) days after the Unsecured Claim becomes an
Allowed Convenience Claim by Final Order.
16.2 STATUS OF CREDITORS: Class D-1 is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from Claimants within such
Class.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 29
<PAGE>
ARTICLE 17
PROVISIONS FOR TREATMENT OF
ALLOWED TORT CLAIMS (CLASS D-2)
17.1 PAYMENT OF ALLOWED TORT CLAIMS: In full and final satisfaction of
Allowed Tort Claims, all such Claims shall be satisfied and discharged in the
following manner:
(a) INSURANCE PROCEEDS: If and when a Claim in Class D-2 becomes an
Allowed Claim, proceeds from Casualty Insurance Policies which
become payable as a consequence of such allowance shall be disbursed
by the insurer obligated to pay such proceeds as part of an Interim
Insurance Distribution (as hereinafter defined), or shall be held by
the insurer until such time as all Claims in Class D-2 payable from
proceeds of a particular Casualty Insurance Policy are either
allowed or disallowed pursuant to Final Order (the time of "Final
Insurance Distribution"). The insurer under the particular policy
involved may submit to the Bankruptcy Court an affidavit attesting
that it is aware of no further Claims being asserted against the
Debtor against such Casualty Insurance Policy and thereupon seek an
order of the Bankruptcy Court determining that all Claims in Class
D-2 payable from proceeds of such Casualty Insurance Policy have
either become Allowed Claims or have been disallowed pursuant to
Final Order. The insurer under a particular Casualty Insurance
Policy may apply insurance proceeds for payment of the insurer's
fees and expenses without further order of the Bankruptcy Court. Any
insurance proceeds held by an insurer until such time as all Claims
in Class D-2 payable from proceeds of a particular Casualty
Insurance Policy are either Allowed Claims or disallowed pursuant to
Final Order, and any amounts for fees and expenses incurred by
insurers shall reduce the remaining insurance policy limits by the
amounts of such held proceeds or expenditures.
(b) DISBURSEMENTS: At such time as all Claims in Class D-2 payable from
proceeds of a particular Casualty Insurance Policy for which
proceeds are being held as set forth above either (i) become Allowed
Claims or (ii) are disallowed pursuant to Final Order, the insurer
shall disburse to the holders of such Allowed Claims the insurance
proceeds then being held, and in the event that there are
insufficient proceeds being held to pay in full each said Allowed
Claim, then and in such event the distribution shall be made on a
pro-rata basis as follows: Each holder of an Allowed Claim in Class
D-2 payable from proceeds of a particular Casualty Insurance Policy
for which funds are being held shall receive an amount equal to the
product of all proceeds from such Casualty Insurance Policy held or
previously distributed by the insurer, multiplied by a fraction, the
numerator of which is the holder's Allowed Claim in Class D-2, and
the denominator of which is the total
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 30
<PAGE>
amount of all Allowed Claims in Class D-2 to the holders of which
such held proceeds are payable, less any Interim Insurance
Distribution Amount (as hereinafter defined) previously distributed
to such Class D-2 Claimant pursuant to the provisions of Article
17.1(c) hereof.
(c) INTERIM INSURANCE DISTRIBUTIONS: Notwithstanding the provisions of
Article 17.1(a) and 17.1(b) above, an insurer may make a
distribution (an "Interim Insurance Distribution") of proceeds of a
particular Casualty Insurance Policy (the "Interim Insurance
Distribution Amounts") for an Allowed Claim in Class D-2 at any
time, upon the following conditions:
(i) the Claimant to receive such Interim Insurance Distribution
Amount is the holder of an Allowed Claim in Class D-2;
(ii) the Interim Insurance Distribution Amount to be distributed to
the holder of such Allowed Claim does not exceed the Holdback
Percentage (as hereinafter defined) times the total amount of
such Allowed Claim; and
(iii) the holder of such Allowed Claim has complied with all other
provisions of this Plan.
As used herein, the "Holdback Percentage" shall mean a fraction, the
numerator of which is the stated policy limits of coverage provided
by a particular policy and the denominator of which is the sum, for
such Casualty Insurance Policy, of the amounts listed on timely
filed proofs of claim of those Claimants asserting Tort Claims
asserted to be covered by such Casualty Insurance Policy. The
Holdback Percentage and the Interim Insurance Distribution Amounts
may be recalculated to reflect reductions, if any, in available
insurance proceeds and/or outstanding Claims. All Claims in Class
D-2 shall be deemed objected to until allowed.
In no event shall any holder of a Claim in Class D-2, or affiliate
thereof, or the Debtor assert any action related to a policy or the
Debtor against any insurer of the Debtor except as provided herein,
and any order confirming this Plan shall function as an injunction
under 11 U.S.C. ss. 105 enjoining such action.
(d) EFFECT OF RETENTION PROVISIONS: Notwithstanding any provision herein
to the contrary, if insurance proceeds become payable as a
consequence of the allowance of a Claim in Class D-2 and the
relevant Casualty Insurance Policy contains a retention (deductible)
provision that has not been previously paid by the Debtor, then and
in such event (i) the amount of proceeds to be paid by the insurer
shall be reduced by the unpaid retention and (ii) the holder of
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 31
<PAGE>
the Allowed Claim in Class D-2 shall be deemed to hold an Allowed
Claim in Class D-3 in the amount of such unpaid retention.
17.2 RESERVATION OF RIGHTS IN INSURERS: Except as specifically above set
forth herein with respect to Articles 17.1(b) and 17.1(c), the insurers under
all Casualty Insurance Policies shall retain all rights (including, but not
limited to, rights to defend claims, settle claims, and retain and pay defense
counsel), remedies, defenses, discretions and corresponding obligations as
provided in each such Casualty Insurance Policy and any related agreements. No
insurer shall be required to make a disbursement to the holder of an Allowed
Claim in Class D-2, as provided above, unless the holder of such Allowed Claim
executes and delivers to the insurer a release of all Claims and Causes of
Action in such form and containing such provisions as may be required by the
insurer.
17.3 DUTY OF COOPERATION: New WRT shall have a continuing duty to
cooperate with and assist the insurers issuing or having issued Casualty
Insurance Policies to the Debtor in defense of Claims against the Debtor. New
WRT shall, INTER ALIA, provide the insurers, upon request, with all relevant
documentation and witnesses (both fact and expert) for the defense, trial and
resolution of Claims against the Debtor, provided that the documentation is in
the custody of New WRT and the witnesses (both fact and expert) are in the
employ or subject to the control of New WRT.
17.4 STATUS OF CREDITORS: Class D-2 is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from Claimants within such
Class.
ARTICLE 18
PROVISIONS FOR TREATMENT OF
ALLOWED GENERAL UNSECURED CLAIMS (CLASS D-3)
18.1 DISTRIBUTIONS OF STOCK: In full and final satisfaction of its Claim,
each holder of an Allowed Claim within Class D-3 shall receive its Pro Rata
Share of an aggregate distribution of ten million (10,000,000) shares of New WRT
Common Stock.
18.2 OPTION TO PARTICIPATE IN RIGHTS OFFERING: Each holder of an Allowed
Claim within Class D-3 shall also receive its pro rata share of the New WRT
Subscription Rights provided for in Article 29 of the Plan, entitling such
holder to participate in the Rights Offering described in and under the terms of
such Article; PROVIDED, HOWEVER, that if Class D-3 rejects the Plan, the Rights
Offering will not occur and the holders of Allowed Claims in Class D-3 will
receive no New WRT Subscription Rights.
18.3 STATUS OF CREDITORS: Class D-3 is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from Claimants within such
Class.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 32
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ARTICLE 19
PROVISIONS FOR TREATMENT OF ALLOWED SECURITIES
LITIGATION CLAIMS BASED UPON SENIOR NOTE OWNERSHIP (CLASS D-4)
19.1 CONTINGENT DISTRIBUTION: If Classes D-1, D-2, and D-3 accept the
Plan, in full and final satisfaction of its Claim, each holder of an Allowed
Claim in Class D-4 shall receive its pro rata share of an aggregate distribution
of New WRT Warrants equal to 2% of the total New WRT Common Stock that would be
issued pursuant to the Plan on the Effective Date if all New WRT Warrants were
exercised on the Effective Date.
19.2 REJECTION BY CLASSES D-1, D-2, OR CLASS D-3: If Class D-1, D-2, or
D-3 rejects the Plan, then holders of Allowed Claims in Class D-4 shall receive
no Distribution under the Plan.
19.3 STATUS OF CREDITORS: Class D-4 is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from Claimants within such
Class.
ARTICLE 20
PROVISIONS FOR TREATMENT OF INTERESTS
OF HOLDERS OF PREFERRED STOCK(CLASS E-1)
20.1 CONTINGENT DISTRIBUTION: If Classes D-1, D-2, D-3, and D-4 accept the
Plan, in full and final satisfaction of their Interests, each holder of an
Allowed Interest in Class E-1 as of the Distribution Record Date shall receive
its pro rata share of an aggregate distribution of New WRT Warrants equal to 1%
of the total New WRT Common Stock that would be issued pursuant to the Plan on
the Effective Date if all New WRT Warrants were exercised on the Effective Date.
The New WRT Warrants will be issued pro rata to each holder of an Allowed
Interest in Class E-1 based upon its respective number of shares of Preferred
Stock.
20.2 REJECTION BY CLASSES D-1, D-2, D-3, OR D-4: If Class D-1, D-2, D-3 or
D-4 rejects the Plan, the New WRT Warrants otherwise distributable to Class E-1
shall not be so distributed and holders of Allowed Interests in Class E-1 shall
receive no Distribution.
20.3 STATUS OF CLASS: Class E-1 is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from holders with Equity
Interests in such Class.
ARTICLE 21
PROVISIONS FOR TREATMENT OF ALLOWED SECURITIES LITIGATION
CLAIMS BASED UPON PREFERRED STOCK OWNERSHIP (CLASS E-2)
21.1 CONTINGENT DISTRIBUTION: If Classes D-1, D-2, D-3, D-4 and E-1 accept
the Plan, in full and final satisfaction of its Claim each holder of an Allowed
Claim in Class E-2 shall receive
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its pro rata share of an aggregate distribution of New WRT Warrants equal to 1%
of the total New WRT Common Stock that would be issued pursuant to the Plan on
the Effective Date if all New WRT Warrants were exercised on the Effective Date.
21.2 REJECTION BY CLASSES D-1, D-2, D-3, D-4 OR E-1: If Class D-1, D-2,
D-3, D-4 or E-1 rejects the Plan, the New WRT Warrants otherwise distributable
to holders of Allowed Claims in Class E-2 shall not be so distributed and
holders of Allowed Claims in Class E-2 shall receive no distribution.
21.3 STATUS OF CLASS: Class E-2 is impaired. Therefore, votes for
acceptance or rejection of the Plan will be solicited from holders of Claims in
such Class.
ARTICLE 22
PROVISIONS FOR TREATMENT OF INTERESTS OF HOLDERS
OF COMMON STOCK AND ALLOWED SECURITIES LITIGATION
CLAIMS BASED UPON COMMON STOCK OWNERSHIP (CLASS E-3)
22.1 CONTINGENT DISTRIBUTION: If Classes D-1, D-2, D-3, D-4, E-1 and E-2
accept the Plan, in full and final satisfaction of their Claims and Interests,
each holder of an Allowed Claim or Allowed Interest in Class E-3 as of the
Distribution Record Date shall receive its pro rata share of an aggregate
distribution of New WRT Warrants equal to 1% of the total New WRT Stock that
would be issued pursuant to the Plan on the Effective Date if all New WRT
Warrants were exercised on the Effective Date. The New WRT Warrants will be
issued pro rata to each holder of an Allowed Claim or Allowed Interest in Class
E-3 based upon its respective number of shares of Common Stock or, in the case
of Claims, the number of shares of Common Stock upon which the holder's
Securities Litigation Claim is premised.
22.2 REJECTION BY CLASSES D-1, D-2, D-3, D-4, E-1 OR E-2: If Class D-1,
D-2, D-3, D-4, E-1 or E-2 rejects the Plan, the New WRT Warrants otherwise
distributable to Class E-3 shall not be so distributed, and holders of Allowed
Claims and Allowed Interests in Class E-3 shall receive no Distribution.
22.3 STATUS OF CLASS: Class E-3 is impaired. Therefore, votes for
acceptance or rejection of the Plan from holders of Claims and Equity Interests
in such Class will be solicited.
ARTICLE 23
PROVISIONS FOR TREATMENT OF
INTERESTS OF HOLDERS OF WRT WARRANTS (CLASS E-4)
23.1 NO DISTRIBUTION: Holders of WRT Warrants shall receive no
Distribution under the Plan.
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23.2 STATUS OF CLASS: Class E-4 is impaired. Because holders of Equity
Interests in Class E-4 are deemed to have rejected the Plan by virtue of Section
1126(g) of the Bankruptcy Code, their votes for acceptance or rejection of the
Plan will not be solicited.
ARTICLE 24
PROVISIONS FOR TREATMENT OF
INTERESTS OF HOLDERS OF WRT STOCK OPTIONS (CLASS E-5)
24.1 NO DISTRIBUTION: Holders of WRT Stock Options shall receive no
Distribution under the Plan.
24.2 STATUS OF CLASS: Class E-5 is impaired. Because holders of Equity
Interests in Class E-5 Interest Holders are deemed to have rejected the Plan by
virtue of Section 1126(g) of the Bankruptcy Code, their votes for acceptance or
rejection of the Plan will not be solicited.
ARTICLE 25
IDENTIFICATION OF CLAIMS AND
INTERESTS NOT IMPAIRED BY THE PLAN
25.1 UNIMPAIRED CLASSES: Classes A-1, B-1, B-3, and B-5 are not impaired
under the Plan and, therefore, votes for the Plan by the holders of Claims in
such Classes will not be solicited due to the presumed acceptance of the Plan by
such holders pursuant to Section 1126(f) of the Bankruptcy Code, unless
otherwise indicated in this Plan.
25.2 IMPAIRED CLASSES ENTITLED TO VOTE ON PLAN: Classes B-2, B-4, B-6, C-1
through C-16, D-1, D-2, D-3, D-4, E-1, E-2, E-3, E-4 and E-5 are impaired and
holders of Claims or Equity Interests in such Classes are, therefore, entitled
to vote for acceptance or rejection of the Plan, and their votes will be
solicited, with the exception of Classes E-4 and E-5, unless otherwise indicated
in this Plan.
25.3 DEEMED REJECTIONS BY HOLDERS OF EQUITY INTERESTS: Notwithstanding
votes which are actually cast by holders of Equity Interests and Claims within
Classes D-4, E-1, E-2 and E-3, if Class D-1, D-2 or D-3 rejects the Plan, then
Classes D-4, E-1, E-2 and E-3 shall be deemed to have rejected the Plan in
accordance with Section 1126(g) of the Bankruptcy Code. Similarly, (a) if Class
D-4 rejects the Plan, then Classes E-1 through E-3 shall be deemed to have
rejected the Plan; (b) if Class E-1 rejects the Plan, then Classes E-2 and E-3
shall be deemed to have rejected the Plan; and (c) if Class E-2 rejects the
Plan, then Class E-3 shall be deemed to have rejected the Plan. Classes E-4 and
E-5 are deemed to have rejected the Plan.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 35
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ARTICLE 26
ACCEPTANCE OR REJECTION OF THE PLAN;
EFFECT OF REJECTION BY ONE OR MORE CLASSES OF IMPAIRED CLAIMS
26.1 ACCEPTANCE OF PLAN BY CLASS OF CREDITORS: A Class of Creditors shall
have accepted the Plan if the Plan is accepted by holders of Claims of at least
2/3 in amount and more than 1/2 in number in such Class.
26.2 ACCEPTANCE OF PLAN BY CLASS OF EQUITY INTERESTS: A Class of Equity
Interests shall have accepted the Plan if the Plan is accepted by holders of
Equity Interests of at least 2/3 in amount.
26.3 CRAMDOWN: In the event that one or more Classes of Creditors or
Equity Interests rejects the Plan, as long as at least one impaired Class of
Creditors votes to accept the Plan (disregarding the votes of insiders), the
Debtor shall request the Bankruptcy Court to confirm the Plan in accordance with
Section 1129(b) of the Bankruptcy Code.
ARTICLE 27
DISTRIBUTIONS UNDER THE PLAN
27.1 DELIVERY OF DISTRIBUTIONS TO DISBURSING AGENT: On the Effective Date,
New WRT shall (a) issue shares of New WRT Common Stock in a number sufficient to
make all Distributions under the Plan constituting New WRT Common Stock and (b)
issue New WRT Warrants and (c) deliver to the Disbursing Agent such New WRT
Common Stock, such New WRT Warrants and an amount of Cash sufficient to make all
Distributions constituting Cash required under this Plan, in each case for
distribution to the holders of Allowed Claims and Allowed Interests in
accordance with the terms of this Plan.
27.2 INITIAL DISTRIBUTIONS: All Distributions under this Plan shall be
made to (or in the case of Disputed Claims, reserved on behalf of) holders of
Claims and Equity Interests determined as of the Distribution Record Date. On
the Effective Date, or as soon thereafter as is reasonably practicable, but in
no event more than ten (10) Business Days after the Effective Date, the
Disbursing Agent shall make all Distributions and payments required under this
Plan, and shall deposit the Reserve Amounts in the Disputed Claims Reserve
Accounts to the extent required by this Plan or the Bankruptcy Court in respect
of Disputed Claims. The Disbursing Agent shall distribute to each holder of an
Allowed Claim in Class D-3 determined as of the Distribution Record Date the
number of shares of New WRT Common Stock equal to the sum of (a) such holder's
Interim Pro Rata Share of ten million shares of New WRT Common Stock plus (b)
the shares of New WRT Subscription Common Stock, if any, purchased by such
holder pursuant to the Rights Offering.
27.3 INTERIM AND FINAL DISTRIBUTIONS TO CLASS D-3: The Disbursing Agent
may, from time to time, make additional distributions to holders of Allowed
Claims in Class D-3, by
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distributing to each such holder shares of New WRT Common Stock equal to the
recalculation, at the time, of such holder's Interim Pro Rata Share of ten
million shares of New WRT Common Stock less the number of shares of New WRT
Common Stock previously received by such holder (excluding any shares of New WRT
Subscription Common Stock purchased pursuant to the Rights Offering). The
Disbursing Agent shall make such interim distributions until such time as all
Disputed Claims within or potentially within Class D-3 have been allowed or
disallowed by Final Order. As soon as practicable, but in any event with ten
(10) Business Days after the first date on which all Disputed Claims within or
potentially within Class D-3 have been allowed or disallowed by Final Order, the
Disbursing Agent shall make a final distribution to holders of Allowed Claims in
Class D-3, by distributing the each such holder such holder's Pro Rata Share of
ten million shares of New WRT Common Stock less the number of shares of New WRT
Common Stock previously received by such holder (excluding any shares of New WRT
Subscription Common Stock purchased pursuant to the Rights Offering).
27.4 DELIVERY OF DISTRIBUTIONS BY DISBURSING AGENT: Subject to Bankruptcy
Rule 9010, distributions to holders of Allowed Claims or Allowed Interests shall
be made at the address of each such holder as set forth in the proofs of Claim
or proofs of Equity Interest filed by such holders (or at the last known address
of such a holder if no proof of Claim or proof of Equity Interest is filed or if
the Debtor has been notified in writing of a change of address) or, in the case
of holders of Claims based upon the Senior Notes, may be made at the addresses
contained in the records of the Indenture Trustee. If any holder's Distribution
is returned as undeliverable, no further distribution to such holder shall be
made unless and until New WRT, the Disbursing Agent or the Indenture Trustee is
notified of such holder's then current address, at which time all undelivered
Distributions shall be made to such holder without interest.
27.5 RESERVES FOR DISPUTED CLAIMS:
(a) AMOUNT OF RESERVES: Except to the extent that the Bankruptcy Court
shall determine that a lesser amount is adequate, the Disbursing
Agent shall deposit in segregated interest bearing (in the case of
deposits of Cash) escrow accounts for each Class or category of
Claims in which there are Disputed Claims (the "Disputed Claims
Reserve Accounts") Cash or shares of New WRT Common Stock equal to
the Distributions that would have been made to the holders of
Disputed Claims in such Class or category if such Claims were
allowed in the Adjusted Amount. The Disbursing Agent shall also
maintain in the Disputed Claims Reserve Account shares of Disputed
New WRT Subscription Common Stock purchased by the holder of a
Disputed Claim on account of such Disputed Claim in accordance with
Article 29.6 of this Plan.
(b) HELD IN TRUST: All earnings on funds deposited in the Disputed
Claims Reserve Account, and all dividends or distributions on
account of shares of New WRT Common Stock held in the Disputed
Claims Reserve Account,
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 37
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shall be held in trust in the Disputed Claims Reserve Account and
shall be distributed only in the manner described in this Plan.
(c) RELEASE OF RESERVES FROM DISPUTED CLAIMS RESERVE ACCOUNTS: At such
time as all or any portion of a Disputed Claim becomes an Allowed
Claim, the Distributions reserved for such Disputed Claim or portion
(including any interest thereon or dividends received with respect
thereto) shall be released from the appropriate Disputed Claims
Reserve Account and paid or distributed by the Disbursing Agent to
the holder of such Allowed Claim, net of any taxes or other
applicable charges required to be paid by the Disbursing Agent in
respect thereof. At such time as all or any portion of a Disputed
Claim is determined not to be an Allowed Claim, the Distributions
reserved for such Disputed Claim or portion (including any interest
thereon or dividends received with respect thereto) shall be (i) in
the case of Cash, released from the appropriate Disputed Claims
Reserve Account and paid to New WRT, (ii) in the case of New WRT
Common Stock other than Disputed New WRT Subscription Common Stock,
released from the appropriate Disputed Claims Reserve Account and
distributed in accordance with Article 27.3 of this Plan, and (iii)
in the case of Disputed New WRT Subscription Common Stock, purchased
by DLBW and the proceeds distributed to the holder of such Disputed
Claim or portion in accordance with Article 29.6(c) of this Plan, in
each case net of any taxes or other applicable charges required to
be paid by the Disbursing Agent in respect thereof.
27.6 UNCLAIMED DISTRIBUTIONS:
(a) SAFEGUARDING OF UNCLAIMED DISTRIBUTIONS: For a period of six (6)
months following the Effective Date, Distributions, including any
interest as may have been earned thereon and dividends as may have
been received with respect thereto, as have not been claimed shall
be held by the Disbursing Agent in the Disputed Claims Reserve
Accounts, solely for the benefit of the holders of Allowed Claims
and Allowed Administrative Claims that have failed to claim such
Distributions and shall be released from the Disputed Claims Reserve
Accounts and delivered to such holder, net of any taxes or other
applicable charges required to be paid by the Disbursing Agent in
respect thereof, upon presentation of proper proof by such holder of
its entitlement thereto.
(b) RELEASE OF UNCLAIMED DISTRIBUTIONS: On the date on which all or any
portion of any Distribution becomes an Unclaimed Distribution
(including interest thereon and dividends with respect thereto),
such Unclaimed Distribution shall be released by the Disbursing
Agent from the appropriate Disputed Claims Reserve Account and paid
or transferred to New WRT, which shall
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thereupon cancel all New WRT Common Stock contained in any such
Unclaimed Distribution.
27.7 FORM OF DISTRIBUTIONS: Any Cash payment to be made pursuant to the
Plan may be made by a check or wire transfer or as otherwise required by an
order of the Bankruptcy Court.
27.8 ROUNDING: Whenever a payment of a fraction of a cent would otherwise
be called for, the actual payment shall reflect a rounding of such fraction down
to the nearest whole cent.
27.9 FRACTIONAL SHARES: Fractional shares of New WRT Common Stock and
fractional New WRT Warrants shall not be issued or distributed. Whenever the
issuance or distribution of a fractional share of New WRT Common Stock or New
WRT Warrant would otherwise be called for, the actual Distribution of shares of
New WRT Common Stock or New WRT Warrants shall reflect a rounding down to the
nearest whole share or warrant.
27.10 DISPUTED PAYMENT: In the event that any dispute arises as to the
right of a holder of an Allowed Claim to receive any Distribution to be made
under this Plan, the Disbursing Agent may, in lieu of making such Distribution
to such holder, make such Distribution into an escrow account or hold such
Distribution until the disposition thereof shall be determined by the Bankruptcy
Court or by written agreement among the interested parties to such dispute.
27.11 CONDITIONS TO DISTRIBUTIONS: As a condition to receiving
distributions provided for in the Plan in respect of Claims based upon the
ownership of Senior Notes or in respect of Equity Interests, the holder thereof
must surrender such security to New WRT, the Indenture Trustee (in the case of
Senior Notes) or the Stock Transfer Agent (in the case of Equity interests). In
the case of securities delivered to the Indenture Trustee or Stock Transfer
Agent, the delivered securities shall be marked canceled and promptly delivered
to New WRT. Whether or not actually surrendered or delivered to New WRT, on the
Effective Date all outstanding certificates, notes, debentures, stock, warrants
and other instruments shall be canceled on the books of the Debtor and become
settled and compromised solely as provided in this Plan.
27.12 DE MINIMUS DISTRIBUTIONS: No Distribution of less than five dollars
($5) or fewer than five (5) shares of New WRT Common Stock or New WRT Warrants
shall be made to any holder of an Allowed Claim or Allowed Interest. Such
undistributed amount shall be retained by New WRT and such undistributed shares
of New WRT Common Stock and New WRT Warrants shall be canceled.
ARTICLE 28
ROYALTY PROVISIONS
28.1 TREATMENT OF POST-PETITION ROYALTY CLAIMS: All Allowed Claims for
unpaid Royalties which are determined to have become payable on or after the
Petition Date shall constitute Allowed Administrative Claims and shall be paid
in accordance with Article 3.1 of the Plan.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 39
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28.2 TREATMENT OF PRE-PETITION ROYALTY CLAIMS: All Allowed Claims for
unpaid Royalties which are determined to have become payable prior to the
Petition Date shall constitute Allowed Unsecured Claims and the holders of such
Claims shall receive Distributions in accordance with Article 16 or Article 18
of the Plan, as the case may be.
ARTICLE 29
THE RIGHTS OFFERING
29.1 ISSUANCE OF STOCK: On the Effective Date of the Plan, New WRT shall
issue three million (3,000,000) shares of New WRT Common Stock (the "New WRT
Subscription Common Stock") for use in the Rights Offering.
29.2 DISTRIBUTION OF NEW WRT SUBSCRIPTION RIGHTS: Each holder of an
Allowed Claim in Class D-3 or a Disputed Claim within or potentially within
Class D-3 on the Subscription Rights Record Date shall be entitled to receive
New WRT Subscription Rights entitling each such holder to purchase its Interim
Pro Rata Share of the New WRT Subscription Common Stock. The Debtor shall
distribute to each such holder a Subscription Rights Election Form with respect
to the New WRT Subscription Rights to which such holder is entitled together
with the Ballot.
29.3 EXERCISE OF NEW WRT SUBSCRIPTION RIGHTS: In order to exercise the New
WRT Subscription Rights effectively, each Claimant that receives New WRT
Subscription Rights must (i) return a duly completed Subscription Rights
Election Form to the Disbursing Agent so that it is received by the Disbursing
Agent on or before the Subscription Rights Election Deadline and (ii) pay to the
Disbursing Agent on or before the Subscription Rights Election Deadline,
immediately available funds in an amount equal to such holder's Subscription
Purchase Price, such payment to be made either by wire transfer to the
Subscription Rights Reserve Account in accordance with the wire instructions set
forth on the Subscription Rights Election Form or by bank or cashier's check
delivered to the Disbursing Agent along with the Subscription Rights Election
Form. If, on or prior to the Subscription Rights Election Deadline, the
Disbursing Agent for any reason does not receive from a given Claimant both a
duly completed Subscription Rights Election Form and immediately available funds
in an amount equal to such Claimant's Subscription Purchase Price such Claimant
shall be deemed to have not exercised its New WRT Subscription Rights and to
have relinquished and waived its right to participate in the Rights Offering.
29.4 DLBW BACKSTOP: Pursuant to the terms of the Commitment Agreement,
DLBW shall be deemed to have exercised all New WRT Subscription Rights that it
is entitled to receive pursuant to the terms of this Plan. In addition, pursuant
to the terms of the Commitment Agreement, DLBW shall be entitled to, and shall,
exercise all Unexercised Subscription Rights and shall purchase all New WRT
Subscription Common Stock related thereto at the Subscription Purchase Price for
such New WRT Subscription Common Stock. Pursuant to the terms of the Commitment
Agreement, DLBW shall pay to the Disbursing Agent on or before the Subscription
Rights Election Deadline, immediately available funds in an amount equal to the
Subscription Purchase Price for all
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New WRT Subscription Common Stock to be purchased by DLBW pursuant to the terms
hereof and of the Commitment Agreement.
29.5 RELEASE FROM SUBSCRIPTION RIGHTS RESERVE ACCOUNT: On the Effective
Date, the Disbursing Agent shall release from the Subscription Rights Reserve
Account and pay to New WRT all funds received by the Disbursing Agent pursuant
to the exercise of New WRT Subscription Rights and the payment of the
Subscription Purchase Price by each Exercising Claimant, subject to the
provisions of Article 29.6(b) and (c) with respect to funds received pursuant to
the exercise of Disputed New WRT Subscription Rights. The Disbursing Agent
shall, pursuant to Article 27.2 of this Plan, distribute the New WRT
Subscription Common Stock (other than Disputed New WRT Subscription Common
Stock) purchased by each Exercising Claimant to such Exercising Claimant.
29.6 PROCEDURES WITH RESPECT TO DISPUTED CLAIMS:
(a) EXERCISE OF DISPUTED NEW WRT SUBSCRIPTION RIGHTS: Each holder of a
Disputed Claim potentially in Class D-3 on the Subscription Rights
Record Date shall be entitled to exercise its Disputed New WRT
Subscription Rights in accordance with Article 29.3 of this Plan.
Each such holder must comply with the terms of Article 29.3 or such
holder shall be deemed to have not exercised its Disputed New WRT
Subscription Rights and to have relinquished and waived its right to
participate in the Rights Offering.
(b) RETENTION OF DISPUTED NEW WRT SUBSCRIPTION COMMON STOCK; PAYMENT BY
DLBW:
(i) The Disbursing Agent, notwithstanding anything in Articles
27.2 and 29.5 to the contrary, shall not deliver the Disputed
New WRT Subscription Common Stock to the holders of
Exercised Disputed Claims and shall not deliver to New WRT
the Subscription Purchase Price paid on account of the
Disputed New WRT Subscription Common Stock (such
aggregate Subscription Purchase Price being the "Disputed
Subscription Purchase Price"), but shall instead deposit into
the Disputed Claims Reserve Accounts all Disputed New
WRT Subscription Common Stock and funds in the amount
of the Disputed Subscription Purchase Price. All dividends
or distributions on account of shares of Disputed New WRT
Subscription Common Stock held in the Disputed Claims
Reserve Account shall be held in trust in the Disputed Claims
Reserve Account and shall be distributed only in the manner
described in this Plan.
(ii) On the Effective Date, in accordance with the terms of the
Commitment Agreement, DLBW shall pay to New WRT an
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amount of Cash equal to the Disputed Subscription Purchase
Price.
(c) RELEASE OF DISPUTED NEW WRT SUBSCRIPTION COMMON STOCK: At such time
as all or any portion of an Exercised Disputed Claim becomes an
Allowed Claim, (i) the Disputed New WRT Subscription Common Stock
purchased by the holder of such Exercised Disputed Claim on account
of such Exercised Disputed Claim or portion (including any dividends
received with respect thereto) shall be released from the
appropriate Disputed Claims Reserve Account and distributed by the
Disbursing Agent to the holder of such Allowed Claim, net of any
taxes or other applicable charges required to be paid by the
Disbursing Agent in respect thereof and (ii) that portion of the
Disputed Subscription Purchase Price equal to the Subscription
Purchase Price for the Disputed New WRT Subscription Common Stock so
released and distributed shall be released from the appropriate
Disputed Claims Reserve Account and paid by the Disbursing Agent to
DLBW. At such time as all or any portion of an Exercised Disputed
Claim is determined by Final Order not to be an Allowed Claim, (i)
the Disputed New WRT Subscription Common Stock (the "Repurchased New
WRT Subscription Common Stock") purchased by the holder of such
Exercised Disputed Claim on account of such Exercised Disputed Claim
or portion (including any dividends received with respect thereto)
shall be released from the appropriate Disputed Claims Reserve
Account and distributed by the Disbursing Agent to DLBW and (ii)
that portion of the Disputed Subscription Purchase Price equal to
the Subscription Purchase Price for such Repurchased New WRT
Subscription Common Stock shall be released from the appropriate
Disputed Claims Reserve Account and paid by the Disbursing Agent to
the holder of such Exercised Disputed Claim or portion.
29.7 CLASS D-3 REJECTION: If Class D-3 rejects the Plan, the Rights
Offering will not occur and the Disbursing Agent shall return all Subscription
Purchase Prices theretofore received. In such instance, in accordance with the
terms of the Commitment Agreement, DLBW shall purchase all of the New WRT
Subscription Common Stock at the Subscription Purchase Price therefor.
ARTICLE 30
EXECUTORY CONTRACTS AND
UNEXPIRED LEASES UNDER THE PLAN
30.1 REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES: All contracts
and leases constituting executory contracts or unexpired leases under the
provisions of Section 365 of the Bankruptcy Code which have not already been
assumed or rejected, not made the subject of a pending motion to assume or
reject, and which are not otherwise included in a list of executory contracts
and unexpired leases to be assumed, such listing to be filed with the Bankruptcy
Court and
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 42
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served on the affected Person not less than twenty (20) days before the first
date set for the hearing on confirmation of the Plan, shall be deemed to have
been rejected by the Debtor as of the Confirmation Date in accordance with
Section 365 of the Bankruptcy Code. The list of executory contracts to be
assumed which is filed and served by the Debtor shall also specify the amount of
cash to be paid pursuant to Bankruptcy Code Section 365(b)(1)(A) and (B) (the
"Cure Payment"). The Confirmation Order will approve such assumptions and
rejections. Consent to the assumption, if required, of each executory contract
and unexpired lease set forth on the list and the adequacy of the Cure Payment
also set forth on the list shall be deemed to have been given, unless any Person
who is a party to such executory contract objects by filing with the Court a
written objection to the Plan and serving the same on the Debtor and Debtor's
Counsel not less than five (5) days prior to the first date set for the hearing
on confirmation of the Plan.
30.2 FILING OF CLAIMS FOR REJECTION DAMAGES: All Claims arising from the
rejection of executory contracts and unexpired leases under Section 365 of the
Bankruptcy Code must be evidenced by properly filed proofs of claims. Such
proofs of claims must be filed with the Clerk's Office of the Bankruptcy Court
within any applicable deadlines previously established by the Bankruptcy Court
or, if no previously established deadline is applicable, within fifteen (15)
days of the earlier of the Confirmation Date of the Plan or the date of the
entry of a Final Order authorizing rejection of the executory contract or
unexpired lease. Such proofs of claims must also be served on counsel for the
Debtor and counsel for DLBW. Failure to file a proof of claim on or before the
deadline established in this Article shall result in disallowance in full of the
Claim. Objections to Claims filed pursuant to this provision shall be governed
by the procedures set forth in Article 34 of the Plan. Unsecured Claims
resulting from the rejection of executory contracts shall be treated as Class
D-1 or Class D-3 Claims hereunder as appropriate.
ARTICLE 31
PROVISIONS FOR NEW WRT
31.1 CORPORATE GOVERNANCE: The New WRT Certificate of Incorporation and
the New WRT By-Laws shall be effective on the Effective Date. As soon as
practicable after the Effective Date New WRT shall file the New WRT Certificate
of Incorporation and the New WRT By-Laws with the Secretary of State of the
State of Delaware pursuant to the applicable provisions of Delaware Law.
31.2 NEW WRT COMMON STOCK: The provisions of New WRT Common Stock to be
issued pursuant to the Plan are as follows:
(a) AUTHORIZATION: The New WRT Certificate of Incorporation shall
authorize the issuance of fifty (50) million shares of New WRT
Common Stock. Of such authorized shares, nineteen (19) million
shares shall be issued on the Effective Date to make the
distributions contemplated by this Plan. Except as provided by this
Plan, no additional shares of New WRT Common Stock
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 43
<PAGE>
may be issued other than as directed by the board of directors of
New WRT after the Effective Date.
(b) LISTING: New WRT shall use its best efforts to cause the New WRT
Common Stock to be listed on a national securities exchange or,
failing that, to be listed for quotation on the NASDAQ National
Market System.
(c) EMPLOYEE SHARES: On the Effective Date, New WRT shall reserve
300,000 authorized shares of New WRT Common Stock for issuance
pursuant to an employee stock option plan. The date of issuance of
such shares and the vesting period under, and other terms with
respect to, such employee stock option plan shall be determined by
the board of directors of New WRT after the Effective Date.
31.3 NEW WRT WARRANTS: The New WRT Warrants shall represent the right, in
the aggregate, to purchase shares of New WRT Common Stock in an aggregate amount
of not more than five percent (5%) of the total New WRT Common Stock that would
be issued on the Effective Date if all New WRT Warrants were exercised on the
Effective Date. The exercise price of $10.00 per share. Each New WRT Warrant may
be exercised at any time commencing after the Effective Date until the fifth
anniversary thereof unless the expiration thereof has been accelerated pursuant
to its terms.
31.4 DIRECTORS: As of the Effective Date, the board of directors for New
WRT shall consist of five (5) members for the first three (3) years following
the Effective Date. Three (3) such directors shall be selected by DLBW on or
before the Effective Date and the remaining two (2) directors shall be selected
by the Committee on or before the Effective Date. Within fifteen (15) days prior
to the Confirmation Date, DLBW and the Committee shall nominate the initial
directors and immediately notify New WRT and its attorneys of such selections.
In the event that any one or more nominations are not received by New WRT by
twenty (20) days from the Confirmation Date, then New WRT shall be authorized to
make such nominations, subject to the approval of DLBW and the Committee. The
tenure and manner of selection of directors of New WRT thereafter shall be
governed by Certificate of Incorporation and the New WRT By-Laws.
31.5 EXECUTION OF DOCUMENTS: On the Effective Date, New WRT shall execute
and enter into (a) the Administrative Services Agreement, (b) the Registration
Rights Agreement and (c) the New WRT Warrant Agreement.
ARTICLE 32
CONDITIONS PRECEDENT
32.1 CONDITIONS TO CONFIRMATION: The Plan may only be confirmed if:
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 44
<PAGE>
(a) The Commitment Agreement shall be binding on the Debtor and DLBW and
shall not have been terminated in accordance with its terms;
(b) The Debtor shall have included the CAOA on its listing of executory
contracts and unexpired leases to be assumed, filed with the
Bankruptcy Court in accordance with Article 30.1 of this Plan on the
terms set forth in Article 33.13 of the Plan;
(c) The Bankruptcy Court shall have entered an order or orders, which
may be the Confirmation Order, permitting the Debtor to maintain in
the Disputed Claims Reserve Accounts an amount of Cash on account of
all Disputed Claims that shall not exceed $100,000; and
(d) The closing under the Purchase, Sale and Exchange Agreement with
respect to the WCBB Assets and the Claim of TEPI in Class C-14 shall
have occurred.
32.2 CONDITIONS TO EFFECTIVE DATE: The following shall be conditions
precedent to the effectiveness of the Plan:
(a) The Bankruptcy Court shall have made findings of fact and
conclusions of law as to confirmation of the Plan and entered a
Confirmation Order, in each case satisfactory to the Debtor and
DLBW;
(b) The Commitment Agreement shall be binding on the Debtor and DLBW and
shall not have been terminated in accordance with its terms;
(c) Each of the conditions set forth in Articles VIII and IX of the
Commitment Agreement has been satisfied;
(d) New WRT and INCC shall have agreed upon the terms of and executed
definitive documentation with respect to New ING Term Sheet; and
(e) The Louisiana State Mineral Board shall have executed a consent to
the transfer of the WCBB Assets to DLB and its designee pursuant to
the terms of the Purchase, Sale and Exchange Agreement.
32.3 WAIVER OF CONDITIONS: The conditions set forth in this Article 32 may
only be waived jointly by both the Debtor and DLBW.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 45
<PAGE>
ARTICLE 33
MEANS FOR IMPLEMENTATION OF PLAN
33.1 COMMITMENT AGREEMENT: The Commitment Agreement shall be executed on
or before the conclusion of the hearing on the Disclosure Statement.
33.2 WRT TECHNOLOGY DISSOLUTION: On or before the Effective Date, WRT
Technology Corporation shall be dissolved.
33.3 THE DISBURSING AGENT:
(a) APPOINTMENT: On or prior to the Confirmation Date, the Bankruptcy
Court shall enter an order approving the Disbursing Agent Agreement
and appointing the Disbursing Agent, which shall serve from and
after the Effective Date until the completion of its
responsibilities or its resignation or discharge and the appointment
of a subsequent Disbursing Agent. From and after the Effective Date,
the Disbursing Agent and New WRT shall have the right to amend or
modify the Disbursing Agent Agreement without further order of the
Bankruptcy Court but subject to the Disbursing Agent's obligations
provided for in this Plan.
(b) POWERS: The rights, powers and duties of the Disbursing Agent shall
include the following:
(i) The investment of amounts held for distribution to creditors
or deposited in the Disputed Claims Reserve Accounts pursuant
to Section 345 of the Bankruptcy Code;
(ii) The making of all Distributions and the making of all other
payments required under this Plan;
(iii) The maintenance and oversight of the Disputed Claims
Reserve Accounts;
(iv) The maintenance of Unclaimed Distributions and the transfer
to New WRT of any Unclaimed Distributions;
(v) Making annual and other periodic reports regarding the
making of Distributions; and
(vi) Any and all other actions necessary or appropriate to
implement or consummate this Plan.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 46
<PAGE>
(c) STOCK POWERS: The Disbursing Agent shall not be entitled to vote or
exercise any other right of ownership with respect to any shares of
New WRT Common Stock held in the Disputed Claims Reserve Accounts.
(d) COMPENSATION: The Disbursing Agent shall be compensated by New WRT
pursuant to the Disbursing Agent Agreement.
(e) APPOINTMENT OF SUCCESSOR: In the event of the death, resignation or
discharge of the Disbursing Agent, New WRT shall appoint a successor
to the Disbursing Agent. Any such successor to the Disbursing Agent
shall be bound by the provisions of the Plan, the Disbursing Agent
Agreement and the order appointing the Disbursing Agent.
(f) TERMINATION OF DISBURSING AGENT: After the Effective Date and upon
the final resolution of all Disputed Claims, the release from the
Disputed Claims Reserve Accounts of all Distributions including all
Unclaimed Distributions, if any, the Disbursing Agent shall so
inform New WRT and shall be relieved of further responsibilities
under this Plan.
33.4 CANCELLATION OF SECURITIES AND ISSUANCE OF NEW WRT COMMON STOCK AND
NEW WRT WARRANTS: On the Effective Date, all existing Common Stock and Preferred
Stock of WRT, and all options, warrants, or other rights to acquire such stock,
shall be canceled, annulled and extinguished, and new certificates representing
shares of New WRT Common Stock and new certificates representing ownership of
New WRT Warrants will be issued in accordance with the Plan.
33.5 CANCELLATION OF INDENTURE: The Indenture Agreement between WRT and
the Indenture Trustee shall be deemed canceled pursuant to Section 1123(a)(5)(F)
of the Bankruptcy Code as of the Effective Date, provided, however, that the
Indenture Trustee thereunder shall be responsible for the distribution of New
WRT Common Stock to the Creditors for whom they act and shall be permitted to
assert their liens for their fees against such distributions as allowed by the
Indenture and applicable law.
33.6 CANCELLATION OF WARRANT AGREEMENT: The Warrant Agreement between WRT
and the Warrant Agent shall be deemed canceled pursuant to Section 1123(a)(5)(F)
of the Bankruptcy Code as of the Effective Date, provided, however, that the
Warrant Agent thereunder shall be responsible for the distribution of New WRT
Warrants to the warrant holders for whom they act, if applicable.
33.7 EXECUTION OF NEW NOTES AND INSTRUMENTS: On or before the Effective
Date, New WRT shall execute and deliver such instruments, trust agreements, and
other documents as are necessary to evidence its obligations to all Classes of
Creditors under the Plan.
33.8 COMMITTEE: The Committee shall be dissolved as of the Effective Date.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 47
<PAGE>
33.9 PRESERVATION OF ACTIONS: Except as otherwise provided in this Plan,
the Confirmation Order or in any contract, instrument, release or other
agreement entered into in connection with this Plan, the Debtor shall retain and
may enforce or prosecute all Causes of Action.
33.10 DISCHARGE OF INDENTURE TRUSTEE: Subsequent to the performance by the
Indenture Trustee or its agents of its obligations required under the provisions
of the Plan and the Confirmation Order and under the terms of the Indenture
Agreement, the Indenture Trustee and its agents, successors and assigns shall be
discharged of all of its obligations under the Indenture Agreement and released
from all claims and causes of action arising in the Chapter 11 Case and, as of
the Effective Date, the Indenture Agreement shall be deemed terminated, except
that such termination shall not impair the rights of holders of Claims based
upon the Senior Notes to receive Distributions in respect of such Claims.
33.11 NEW ING LOAN AGREEMENT: On the Effective Date, New WRT will execute
definitive documentation containing the terms set forth in the New ING Term
Sheet and shall borrow $15,000,000 in accordance with the terms thereof.
33.12 EXAMINER: The Examiner shall be dismissed as of, and shall have no
authority or duties on and after, the Effective Date.
33.13 ASSUMPTION OF CAOA: As of the Effective Date, the Debtor will assume
the CAOA pursuant to Section 365 of the Bankruptcy Code. The Debtor shall cure
existing defaults under the CAOA by virtue of the payments to the holders of
Claims in Class C-14 pursuant to Article 14 of this Plan, and shall make
adequate assurance of future performance under the CAOA in accordance with the
terms of the Commitment Agreement and the Transfer and Exchange Agreement. New
WRT shall be the operator of the Shallow Contract Area under the CAOA.
33.14 TRANSFER AND EXCHANGE OF WCBB ASSETS: In accordance with the terms
and subject to the conditions of the Transfer and Exchange Agreement and the
Commitment Agreement, on the Effective Date (a) DLB shall transfer the WCBB
Assets to New WRT, (b) New WRT shall (i) deliver to DLB (x) 5 million shares of
New WRT Common Stock, and (y) the number of shares of New WRT Common Stock
obtained by dividing the net amount of capital expenditures incurred by DLB as
of the Effective Date as owner of the WCBB Assets and/or operator of the Shallow
Contract Area, to the extent not disapproved by the Bankruptcy Court, by a
purchase price of $3.50 per share, (ii) transfer to DLB the Buyer's Leasehold
and Facilities and (iii) assume the Assumed Obligations, and (c) New WRT shall
become the operator of the WCBB Assets pursuant to the CAOA.
ARTICLE 34
PROCEDURES FOR RESOLVING
DISPUTED CLAIMS UNDER THE PLAN
34.1 BAR DATE FOR OBJECTIONS TO CLAIMS: Except as otherwise set forth in
the Plan, objections to Claims shall be made and filed by New WRT and/or any
other party in interest and
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 48
<PAGE>
shall be served upon the holders of such Claims, if any, to which objections are
made and filed with the Bankruptcy Court as soon as practicable. Objections
shall be filed on or prior to the Claims Objection Deadline.
34.2 PROSECUTION OF OBJECTIONS TO CLAIMS: New WRT shall use its best
efforts to object to, compromise and/or settle all Claims at amounts accurately
reflecting the amount of each respective Creditor's allowable Claim, subject to
reasonable litigation expense limits. New WRT shall litigate to judgment,
settlement or withdrawal all objections that it may file. Any other party filing
an objection shall be responsible for prosecuting to judgment, settlement or
withdrawal its objections. New WRT shall be permitted to settle any Disputed
Claims as to which objections are not timely filed by parties in interest other
than New WRT without further notice or Court approval. Any stipulations
regarding a Claim filed by a Claimant and New WRT shall be deemed an amendment
to any previously filed proof of claim and shall be deemed an amendment by the
Debtor to its Schedules, and any modifications or supplements thereto. Any
proposed settlement of an objection filed by a party in interest other than New
WRT shall be consented to by New WRT in writing or shall be approved by the
Court before becoming effective.
ARTICLE 35
DISCHARGE OF DEBTOR; INJUNCTION; VESTING OF ASSETS
35.1 DISCHARGE OF DEBTOR: Except as otherwise provided in this Plan or in
the Confirmation Order, entry of the Confirmation Order acts as a discharge
effective as of the Effective Date of any and all Claims against and Equity
Interests in the Debtor or any of its assets or properties, including any rights
to set-off or recoupment, that arose at any time before the entry of the
Confirmation Order. In addition, pursuant to the Confirmation Order the
substantial consummation of the Plan on the Effective Date acts as a discharge
effective as of the Effective Date of all Claims and Equity Interests of any
holder of a Claim against or Equity Interest in the Debtor that is classified
under this Plan of any direct or indirect right or Claim such Person had or may
have had against the Debtor. The discharge of the Debtor shall be effective as
to each Claim or Interest except as otherwise expressly provided for in the
Confirmation Order, regardless of whether a proof of Claim or Equity Interest
therefore was filed, whether the Claim or Equity Interest is a Disputed Claim or
Equity Interest or an Allowed Claim, Allowed Interest or Allowed Administrative
Claim, or whether the holder thereof votes to accept or reject the Plan.
35.2 INJUNCTION: Except as provided in the Plan or Confirmation Order, on
and as of the Confirmation Date all entities that have transferred by sale or
otherwise, currently hold or may come to hold a Claim or other debt or liability
that is discharged or an Equity Interest or other right of an equity security
holder that is canceled pursuant to the terms of the Plan are permanently
enjoined from taking any of the following actions on account of any such
discharged Claims, debts or liabilities or terminated Equity Interests: (a)
asserting commencing or continuing in any manner any action or other proceeding
against New WRT or its property; (b) enforcing, attaching, collecting or
recovering in any manner any judgment, award, decree or order against New WRT or
its property; (c) creating, perfecting or enforcing any lien or encumbrance
against New WRT or its property; (d)
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 49
<PAGE>
asserting a setoff, right of subrogation or recoupment right of any kind against
any debt, liability or obligation due to New WRT or in connection with its
property; and (e) commencing or continuing any action, in any manner, in any
place that does not comply with or is inconsistent with the provisions of the
Plan.
35.3 VESTING OF ASSETS: Except as otherwise provided by the Plan, on the
Confirmation Date of the Plan, all of the Assets of the Debtor's Estate,
including, but not limited to, all rights and Causes of Action, whether
identified or not in the Disclosure Statement, shall vest in New WRT in
accordance with ss. 1141 of the Bankruptcy Code, free and clear of all Liens,
Claims and Encumbrances of any kind or nature, and the Confirmation Order shall
constitute a judicial determination of discharge of the Debtor's liabilities,
except as provided in the Plan.
35.4 RELEASE OF OFFICERS AND DIRECTORS: On the Effective Date current
officers and directors of the Debtor shall be released of any and all Claims and
Causes of Action arising from or relating to their employment by the Debtor,
excluding actions based on gross negligence or willful misconduct.
ARTICLE 36
MODIFICATIONS AND INTERPRETATION
OF THE PLAN; GENERAL PROVISIONS
36.1 MODIFICATION: This Plan may be altered, amended or modified by the
Debtor and DLBW jointly in the manner provided for by ss. 1127 of the Bankruptcy
Code or as otherwise permitted by law.
36.2 HEADINGS: The headings used in this Plan are inserted for convenience
only and neither constitute a portion of this Plan nor in any manner affect the
provisions or interpretations of this Plan.
36.3 SEVERABILITY: Should the Bankruptcy Court determine that any
provision in this Plan be determined to be unenforceable, either on its face or
as applied to any Claim or Equity Interest or transaction, the Debtor and DLBW
jointly may modify this Plan in accordance with Article 36.1 of this Plan so
that such provision shall not be applicable to the holder of any Claim or Equity
interest. Such determination shall in no way limit or affect the enforceability
and operative effect of any other provision within this Plan.
36.4 SUCCESSORS AND ASSIGNS; TRANSFERABILITY: The rights and obligations
of any Person named or referred to in this Plan shall inure to the benefit of,
and shall be binding upon, as the case may be, the successors and assigns of
such Person.
36.5 GOVERNING LAW: Except to the extent that the Bankruptcy Code or
Bankruptcy Rules are applicable, the rights, obligations and provisions of this
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of Texas without giving effect to the conflicts of laws
principles thereof.
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 50
<PAGE>
36.6 REVOCATION: The Debtor and DLBW, acting jointly, reserve the right to
revoke and withdraw this Plan prior to the Effective Date. If the Debtor and
DLBW revoke or withdraw this Plan or if the Effective Date does not occur, then
this Plan shall be deemed null and void and in such event nothing herein shall
be deemed to constitute a waiver or release of any Claims by or against the
Debtors or any other Person or to prejudice in any manner the rights of the
Debtor or any Persons in any further proceeding involving the Debtor.
36.7 COMPLIANCE WITH TAX REQUIREMENTS: In connection with the Plan, the
Disbursing Agent shall comply with all withholding and reporting requirements
imposed by federal, state, local and foreign taxing authorities and all
distributions hereunder shall be subject to such withholding and reporting
requirements.
36.8 COMPLIANCE WITH APPLICABLE LAWS: If notified by any governmental
authority that it is in violation of any applicable law, rule, regulation or
order of such governmental authority relating to its business, New WRT shall
comply with such law, rule, regulation or order; provided, however, that nothing
contained herein shall require such compliance by New WRT where the legality or
applicability of such law, rule, regulation or order is being contested in good
faith in appropriate proceedings by New WRT and, if appropriate, for which an
adequate reserve has been set aside on the books of New WRT.
36.9 BUSINESS DAYS: In the event that any payment or distribution to be
made hereunder would otherwise be required to be made on a day that is not a
Business Day, such payment or distribution shall instead be made on the next
succeeding Business Day.
36.10 PAYMENT OF STATUTORY FEES: All fees payable pursuant to 28 U.S.C.
ss. 1930, as determined by the Bankruptcy Court at the Confirmation hearing,
shall be paid on or before the Effective Date.
36.11 CONFLICT: In the event that there is any conflict or inconsistency
between this plan, the Commitment Agreement, the New WRT Subscription Rights
Agreement and/or the Disclosure Statement, the terms and provisions of this Plan
shall govern.
36.12 NOTICES: Except as otherwise specified in the Plan, all notices and
requests hereunder shall be given by any written means, including, but not
limited to, telex, telecopy, telegram, first class mail, express mail or similar
overnight delivery service and hand-delivered letter; and any such notice or
request shall be deemed to have been given when received. Notices shall be given
as follows:
TO DEBTOR:
WRT Energy Corporation
ATTENTION: Mr. Raymond P. Landry
5718 Westheimer, Suite 1201
Houston, Texas 77057
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 51
<PAGE>
--- AND ---
DLB Oil & Gas, Inc.
Attention: Mr. Mark Liddell
1601 N. W. Expressway, Suite 700
Oklahoma City, Oklahoma 73118-1101
WITH COPIES TO:
Sheinfeld, Maley & Kay, P.C.
ATTENTION: Joel P. Kay, Esq.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
---AND---
Schulte Roth & Zabel LLP
ATTENTION: Jeffrey S. Sabin, Esq
900 Third Avenue
New York, New York 10022
36.13 COMPUTATION OF TIME: In computing any time prescribed by this Plan,
the day of the act, event or default from which the designated period of time
begins to run shall not be included. The last day of the period so computed
shall be included, unless it is a Saturday, a Sunday, or a "legal holiday" as
defined in Bankruptcy Rule 9006(a), in which event the period runs until the end
of the next day which is not one of the aforementioned days.
ARTICLE 37
PROVISIONS FOR RETENTION OF JURISDICTION BY THE
BANKRUPTCY COURT FOR SUPERVISION OF CONSUMMATION
The Bankruptcy Court shall retain jurisdiction over all matters arising
under, or arising in, or relating to the Chapter 11 Case or this Plan to the
fullest extent permitted by 28 U.S.C. ss. 1334 to hear, and by 28 U.S.C. ss. 157
to determine, all proceedings in respect thereof, including, but not limited to,
proceedings for supervision of the Plan. Specifically, but without limitation,
and if applicable law provides, the Bankruptcy Court shall have jurisdiction:
(a) to hear and determine any and all objections or other matters
relating to the allowance of Claims including, without limitation,
Administrative Claims;
(b) to hear and determine any and all applications for allowance and
payment of fees and expenses made by attorneys and other
professionals pursuant to Sections 330 or 503 of the Bankruptcy
Code, or for payment of any other fees
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 52
<PAGE>
or expenses authorized to be paid or reimbursed by the Debtor
pursuant to provisions within the Bankruptcy Code, and any
objections thereto;
(c) to hear and determine any and all pending applications for
rejection, assumption or assumption and assignment, as the case may
be, of unexpired leases and executory contracts to which the Debtor
is a party or with respect to which it may be liable, any and all
Claims arising therefrom; and any other issue that may arise under
Section 365 of the Bankruptcy Code.
(d) to hear and determine any and all motions, applications, adversary
proceedings and contested or litigated matters regarding Claims or
interest, accrued prior to the Confirmation Date, as to assets
revested pursuant to ss. 1141 of the Bankruptcy Code;
(e) to consider and approve modifications of or amendments to the Plan;
(f) to hear and determine disputes regarding the implementation or
consummation of the Plan;
(g) to hear and determine all controversies, disputes, settlements, and
suits which may arise in connection with the interpretation or
enforcement of this Plan, or in connection with the enforcement of
remedies under this Plan;
(h) to hear and determine during the period in which the Chapter 11 Case
remains open all controversies, disputes and issues relating to the
discharge of the Debtor;
(i) to consider and approve compromises, settlements and adjudications
of any objections to Claims;
(j) to estimate disputed, contingent and unliquidated Claims for
purposes of distribution under the Plan;
(k) to correct any defect, cure any omission or reconcile any
inconsistency in the Plan;
(l) to resolve any issues or disputes relating to the revesting of
title, sale, or liquidation of Assets in accordance with provisions
within the Plan;
(m) to enter a final decree closing the Chapter 11 Case;
(n) to hear and determine matters concerning state, local and federal
taxes in accordance with Sections 346, 505 and 1146 of the
Bankruptcy Code;
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 53
<PAGE>
(o) to hear and determine all adversary proceedings filed before or
after the Confirmation Date seeking relief under Sections 542, 543,
544, 547, 548, 549 or 550 of the Bankruptcy Code;
(p) to hear and determine any other matter not inconsistent with the
Bankruptcy Code and title 28 of the United States Code that may
arise in connection with or related to this Plan; and
(q) to hear and determine such other matters as may arise in connection
with the Plan or the Confirmation Order.
DATED: January 20, 1997
WRT ENERGY CORPORATION,
DEBTOR AND DEBTOR IN POSSESSION
By: /s/ RAYMOND P. LANDRY
RAYMOND P. LANDRY
Chief Executive Officer and
Chairman of Board of Directors
Joel P. Kay, Esq.
Edward Lee Morris, Esq.
SHEINFELD, MALEY & KAY, P.C.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6796
ATTORNEYS FOR WRT ENERGY
CORPORATION
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 54
<PAGE>
DLB OIL & GAS, INC.
CO-PROPONENT
By: /s/ MARK LIDDELL
MARK LIDDELL
President
WEXFORD MANAGEMENT LLC
CO-PROPONENT
By: /s/ CHARLES E. DAVEDSON
CHARLES E. DAVIDSON
Chairman of Board of Directors
Jeffrey S. Sabin, Esq.
Mark A. Broude, Esq.
SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
ATTORNEYS FOR DLB OIL & GAS, INC.
AND WEXFORD MANAGEMENT LLC
DEBTOR'S AND DLBW'S FIRST AMENDED PLAN OF REORGANIZATION PAGE 55
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
IN RE: ss.
ss.
WRT ENERGY CORPORATION ss. CASE NO. 96BK-50212
ss. (CHAPTER 11)
DEBTOR. ss.
FIRST AMENDED DISCLOSURE STATEMENT UNDER
11 U.S.C. SS. 1125 IN SUPPORT OF DEBTOR'S AND DLBW'S
FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER
CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
IMPORTANT
THIS FIRST AMENDED DISCLOSURE STATEMENT HAS BEEN PREPARED BY WRT ENERGY
CORPORATION ("DEBTOR") AND DLB OIL & GAS, INC. AND WEXFORD MANAGEMENT LLC, ON
BEHALF OF ITS AFFILIATED INVESTMENT FUNDS (COLLECTIVELY "DLBW"), CO-PROPONENTS,
AND DESCRIBES THE TERMS AND PROVISIONS OF THE DEBTOR'S AND DLBW'S FIRST AMENDED
JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY
CODE DATED JANUARY 20, 1997 (THE "PLAN"). THE DEBTOR'S CHAPTER 11 CASE IS
PENDING IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF
LOUISIANA, LAFAYETTE-OPELOUSAS DIVISION (THE "BANKRUPTCY COURT"), UNDER CHAPTER
11 OF THE UNITED STATES BANKRUPTCY CODE, TITLE 11 OF THE UNITED STATES CODE, AS
AMENDED.
A COPY OF THE PLAN IS ATTACHED HERETO AS EXHIBIT "A" AND SHOULD BE REVIEWED
CAREFULLY.
THE PLAN HAS BEEN PROPOSED WITH A VIEW TOWARD OBTAINING VOTES IN FAVOR OF THE
PLAN BY CREDITORS WITHIN THE VARIOUS CLASSES SO AS TO CONFIRM A CONSENSUAL PLAN.
IN THE EVENT THAT A CONSENSUAL PLAN CANNOT BE OBTAINED, HOWEVER, THE DEBTOR AND
DLBW WILL PROCEED TO CONFIRMATION UNDER SECTION 1129(B) OF THE BANKRUPTCY CODE.
-1-
<PAGE>
THE BANKRUPTCY COURT HAS NOT YET APPROVED THIS DISCLOSURE STATEMENT FOR
SOLICITATION PURPOSES AS CONTAINING ADEQUATE INFORMATION CONCERNING THE PLAN SO
AS TO ENABLE HOLDERS OF CLAIMS AND EQUITY INTERESTS TO MAKE AN INFORMED DECISION
ABOUT VOTING FOR OR AGAINST THE PLAN. SUCH APPROVAL, WHEN OBTAINED WILL NOT
CONSTITUTE AN ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR ANY PROVISIONS
WITHIN THE PLAN. EACH HOLDER OF A CLAIM OR EQUITY INTEREST MUST REACH ITS OWN
DECISION CONCERNING THE PLAN.
THE DEBTOR AND DLBW URGE YOU TO VOTE IN FAVOR OF THE PLAN.
Joel P. Kay, Esq.
Edward Lee Morris, Esq.
SHEINFELD, MALEY & KAY, P.C.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
Telephone: (713) 658-8881
Telecopy: (713) 658-9756
ATTORNEYS FOR DEBTOR
WRT ENERGY CORPORATION
Jeffrey S. Sabin, Esq.
Mark A. Broude, Esq.
SCHULTE, ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
Telephone: (212) 756-2000
Telecopy: (212) 593-5955
ATTORNEYS FOR DLB OIL & GAS, INC.
AND WEXFORD MANAGEMENT LLC
DATED: January 20, 1997
<PAGE>
TABLE OF CONTENTS
I. INTRODUCTION...........................................................7
II. VOTING PROCEDURES AND REQUIREMENTS.....................................9
A. Ballots and Voting Deadline......................................9
B. Creditors Solicited to Vote.....................................11
C. Definition of Impairment........................................11
D. Classes Impaired Under the Plan.................................12
E. Vote Required for Class Acceptance..............................12
F. Distributions Only to Holders of Allowed Claims.................13
III. CONFIRMATION OF THE PLAN..............................................13
A. Confirmation Hearing............................................13
B. Requirements for Confirmation of the Plan.......................15
C. Cramdown........................................................17
IV. HISTORICAL AND BACKGROUND INFORMATION.................................18
A. Corporate Information...........................................18
B. The Business of WRT and Its Operations..........................18
1. INTRODUCTION........................................18
2. BUSINESS STRATEGY...................................19
3. SIGNIFICANT OIL AND GAS PROPERTY ACQUISITIONS.......19
4. TECHNOLOGY..........................................20
5. REGULATION..........................................20
C. Description of Assets of WRT....................................23
1. PRINCIPAL OIL AND GAS PROPERTIES....................23
A. ABBEVILLE FIELD.................................24
B. BAYOU PENCHANT FIELD............................25
C. BAYOU PIGEON FIELD..............................25
D. DEER ISLAND FIELD...............................25
E. EAST HACKBERRY FIELD............................26
F. GOLDEN MEADOW FIELD.............................26
G. LAC BLANC FIELD.................................26
H. NAPOLEONVILLE FIELD.............................27
I. WEST HACKBERRY FIELD............................27
J. WEST COTE BLANCHE BAY FIELD.....................27
2. ACREAGE.............................................28
3. DRILLING AND RECOMPLETION ACTIVITIES................28
4. TITLE TO OIL AND GAS PROPERTIES.....................29
5. RESERVES............................................30
6. PRODUCTION, PRICES AND COST.........................31
7. FACILITIES AND EQUIPMENT............................31
D. Events Leading to Chapter 11 Filing.............................32
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1. SENIOR NOTE OFFERING AND CREDIT FACILITY............32
2. 1995 DEVELOPMENT PLAN...............................33
3. CHANGE IN STRATEGY AND CORPORATE STRUCTURE..........33
4. IMPAIRMENT OF LONG-LIVED ASSETS.....................34
5. FILING OF REORGANIZATION CASE.......................35
V. SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE.........................35
A. Employment of Key Professionals.................................35
1. BANKRUPTCY COUNSEL..................................35
2. GENERAL CORPORATE AND OIL AND GAS LAW COUNSEL;
SPECIAL COUNSEL FOR SECURITIES LITIGATION...........35
3. OIL & GAS ENGINEERS.................................36
4. FINANCIAL ADVISORS..................................36
5. ACCOUNTANTS.........................................36
B. Approval of Cash Management System..............................36
C. Obtaining Authority to Use Cash Collateral......................37
D. Employment Stabilization........................................38
1. EXECUTIVE SALARIES APPROVED.........................38
2. REIMBURSEMENT OF EMPLOYEE EXPENSES & CONTRIBUTIONS
TO 401K PLAN........................................38
3. STAY BONUS..........................................38
E. Appointment of Official Committee of Unsecured Creditors........39
F. Denial of Request for Appointment of Lien Creditors Committee...39
G. Establishment of Claims Bar Date................................39
H. Compromise of Bear Stearns Litigation...........................40
I. Rejection of Tri-Deck Marketing Agreement and Suit for
Turnover of Proceeds............................................40
J. Oil & Gas Lease Dispute.........................................41
K. Motion to Compel Release of Escrowed Production Proceeds........42
L. Adversary Proceeding to Enjoin Securities Litigation Against
Officers and Directors..........................................42
M. Post-Petition Financing.........................................43
N. Sale of Minor Oil and Gas Properties............................43
1. SALE OF RANKIN FIELD INTERESTS......................43
2. SALE OF BAYOU HENRY INTERESTS.......................43
O. Appointment of Examiner.........................................44
P. Motion to Prohibit Use of Production Proceeds from
West Cote Blanche Bay Field.....................................44
Q. The Search for an M&A Candidate or Restructuring Partner........44
R. Tricore Avoidance Action........................................45
VI. SUMMARY OF THE CLAIMS, CLASSIFICATIONS AND
TREATMENT UNDER THE PLAN..............................................46
A. Introduction....................................................46
B. Classification of Creditors.....................................47
C. Treatment of Classes of Claims and Equity Interests.............49
1. TREATMENT OF ADMINISTRATIVE CLAIMS..................49
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2. TREATMENT OF ALLOWED PRIORITY TAX CLAIMS............50
3. TREATMENT OF ALLOWED PRIORITY CLAIMS (CLASS A-1). ..51
4. TREATMENT OF ALLOWED SECURED CLAIM OF GMAC
(CLASS B-1).........................................51
5. TREATMENT OF ALLOWED SECURED CLAIM OF INCC
(CLASS B-2).........................................51
6. TREATMENT OF ALLOWED SECURED CLAIM OF MC BANK &
TRUST COMPANY (CLASS B-3):..........................52
7. TREATMENT OF ALLOWED SECURED CLAIM OF TRICORE
(CLASS B-4).........................................52
8. TREATMENT OF ALLOWED SECURED CLAIM OF WOODFOREST
NATIONAL BANK (CLASSB-5)............................53
9. TREATMENT OF ALLOWED SECURED CLAIM OF THE WOODLANDS
CORPORATION (CLASS B-6).............................53
10. TREATMENT OF ALLOWED SECURED CLAIMS OF OIL & GAS
LIEN CLAIMANTS (CLASSES C-1 THROUGH C-16)...........53
11. TREATMENT OF ALLOWED CONVENIENCE CLAIMS (CLASS D-1).55
12. TREATMENT OF ALLOWED TORT CLAIMS (CLASS D-2)........55
13. TREATMENT OF ALLOWED GENERAL UNSECURED CLAIMS
(CLASS D-3).........................................56
14. TREATMENT OF ALLOWED SECURITIES LITIGATION CLAIMS
BASED UPON SENIOR NOTE OWNERSHIP (CLASS D...........57
15. TREATMENT OF INTERESTS OF HOLDERS OF PREFERRED STOCK
(CLASS E-1).........................................58
16. TREATMENT OF ALLOWED SECURITIES LITIGATION CLAIMS
BASED UPON PREFERRED STOCK OWNERSHIP (CLASS E-2)....58
17. TREATMENT OF INTERESTS OF HOLDERS OF COMMON STOCK
AND ALLOWED SECURITIES LITIGATION CLAIMS BASED
UPON COMMON STOCK OWNERSHIP (CLASS E-3).............58
18. TREATMENT OF INTERESTS OF HOLDERS OF WRT WARRANTS
(CLASS E-4).........................................59
19. TREATMENT OF INTEREST OF HOLDERS OF WRT STOCK OPTIONS
(CLASS E-5).........................................59
D. Impaired Classes................................................59
E. Disputed and Unliquidated Claims................................59
1. DISPUTED SECURED CLAIMS (OTHER THAN OIL & GAS LIEN
CLAIMANTS)..........................................59
a. AFCO CREDIT CORPORATION.......................59
b. AMERADA HESS CORPORATION......................60
c. BAKER HUGHES PROCESS SYSTEMS..................60
d. COSTILLA PETROLEUM CORPORATION................60
e. FLORIS FAY FORGEY DRISKILL, ET AL.............60
f. DUCK LAKE ACQUISITION PARTNERS................60
g. FIRST PREMIUM SERVICES, INC...................61
h. FORD MOTOR CREDIT COMPANY.....................61
i. FREEPORT-MCMORAN OIL & GAS CO.................61
j. GE CAPITAL CORPORATION........................61
k. ROBERT H. & LINDA MCGILL GRIFFIN..............61
l. MILAM ROYALTY CORPORATION.....................62
m. MOBIL OIL EXPLORATION & PRODUCTION............62
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n. NATIONSBANK OF TEXAS..........................62
o. EUGENE W. RUSSELL.............................62
p. RUSSELL RESOURCES, INC........................63
q. TENNECO VENTURES CORPORATION..................63
r. TRICORE ENERGY VENTURE, L.P...................63
s. WOODLANDS CORPORATION.........................64
2. DISPUTED UNSECURED CLAIMS...........................64
a. CLASS PROOF OF CLAIM - SECURITIES LITIGATION. 64
3. UNLIQUIDATED CLAIMS.................................64
VII. OTHER SIGNIFICANT PLAN PROVISIONS.....................................65
A. The Texaco West Cote Blanche Bay Transaction....................65
B. Treatment of Executory Contracts and Unexpired Leases...........66
C. Conditions......................................................66
D. Discharge of the Debtor.........................................67
E. Amendment and Modification to the Plan..........................68
F. Retention of Jurisdiction.......................................68
VIII. MANAGEMENT OF NEW WRT.................................................69
A. Organization and Management of New WRT..........................69
B. Identification of New WRT Directors and Officers................70
C. Information about New WRT Directors and Officers................70
MIKE LIDDELL..............................................70
MARK LIDDELL..............................................70
GARY C. HANNA.............................................70
RONALD D. YOUTSEY.........................................71
RAYMOND P. LANDRY.........................................71
D. Employment Contract.............................................71
IX. FEASIBILITY OF THE PLAN...............................................71
A. Feasibility Requirements and Reorganization Value...............71
B. Future Business Plan of Operations..............................72
X. COMPARISON OF PLAN TO ALTERNATIVES....................................73
A. Dismissal.......................................................73
B. Chapter 7 Liquidation...........................................73
C. Alternative Plans...............................................74
XI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...................75
A. General.........................................................75
1. STATUTORY OVERVIEW..................................75
2. SUMMARY OF PLAN.....................................75
B. Tax Consequences to Debtor......................................76
1. EXISTING TAX AUTHORITIES OF DEBTOR..................76
2. TREATMENT OF DEBT FORGIVENESS INCOME UNDER THE PLAN.76
3. EFFECT OF SECTION 382 - GENERAL RULES...............76
4. SPECIAL RULES FOR CHAPTER 11 CASES..................77
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5. COMPUTATION OF ALTERNATIVE MINIMUM TAX ("AMT").....78
C. Federal Income Tax Consequences to Claimants....................78
1. GENERAL.............................................78
2. CLAIMANTS RECEIVING CASH............................78
3. CLAIMANTS RECEIVING STOCK...........................78
4. TAX BASIS AND HOLDING PERIOD........................79
5. CHARACTER OF GAIN OR LOSS...........................79
6. RECEIPT OF INTEREST.................................79
7. BACKUP WITHHOLDING..................................80
8. FEDERAL INCOME TAX CONSEQUENCES TO EQUITY INTERESTS.80
XII. SECURITIES LAW CONSIDERATIONS.........................................80
A. Issuance........................................................80
B. Resale..........................................................81
C. Attributes of New WRT Common Stock..............................82
D. New WRT Warrants................................................82
XIII. EXISTING AND POTENTIAL LITIGATION.....................................83
A. Pre-Petition Litigation.........................................83
1. EMPLOYMENT LITIGATION...............................83
2. SECURITIES LITIGATION...............................83
3. TAX EXEMPTION LITIGATION............................83
B. Post-Petition Litigation........................................84
1. TRI-DECK/PERRY GAS LITIGATION.......................84
2. E. C. ENERGY MARINE.................................84
3. TRICORE.............................................85
C. Potential Litigation............................................85
1. EXAMINER............................................85
2. AVOIDABLE PREFERENCES...............................86
a. TRADE PAYABLES................................86
b. INSIDERS......................................86
3. AVOIDABLE FRAUDULENT TRANSFERS......................86
a. OIL AND GAS PROPERTY ACQUISITIONS.............87
b. INCC'S LIEN ON WEST COTE PROPERTY.............87
c. PREFERRED STOCK DIVIDEND PAYMENTS.............88
d. PROFESSIONALS AND OTHERS INVOLVED IN SECURITIES
OFFERING......................................88
4. OTHER POTENTIAL LITIGATION..........................88
a. TRANSACTIONS RELATED TO RESERVE REPORTS.......88
b. TRANSACTIONS RELATED TO SECURITIES OFFERINGS..88
c. OIL AND GAS PROPERTY ACQUISITIONS.............88
XIV. MATERIAL UNCERTAINTIES AND RISK FACTORS...............................89
A. Competition and Markets.........................................89
1. AVAILABILITY OF MARKETS. ...........................89
2. IMPACT OF ENERGY PRICE CHANGES......................89
B. Environmental Risks; Governmental Actions.......................89
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C. Operational Hazards and Insurance...............................90
D. Replacement of Reserves.........................................90
E. Uncertainty of Reserve Estimates................................91
F. Financial Projections...........................................91
G. Risks with Respect to the New Securities........................92
1. UNCERTAINTY WITH RESPECT TO THE TRADING PRICES OF THE
NEW SECURITIES......................................92
2. POSSIBLE ILLIQUIDITY OF THE NEW SECURITIES..........92
H. Net Operating Loss Carryforward.................................92
XV. CONCLUSION............................................................92
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<PAGE>
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
IN RE: ss.
ss.
WRT ENERGY CORPORATION ss. CASE NO. 96BK-50212
Taxpayer I.D. No. 71-1133320 ss. (CHAPTER 11)
ss.
DEBTOR. ss.
FIRST AMENDED DISCLOSURE STATEMENT UNDER
11 U.S.C. SS. 1125 IN SUPPORT OF DEBTOR'S AND DLBW'S
FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER
CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE
WRT Energy Corporation (the "Debtor") and DLB Oil & Gas, Inc. and Wexford
Management LLC, on behalf of its affiliated investment funds (collectively
"DLBW"), co-proponents, submit this First Amended Disclosure Statement Under 11
U.S.C. ss. 1125 in Support of Debtor's and DLBW's First Amended Joint Plan of
Reorganization Under Chapter 11 of the United States Bankruptcy Code (the
"Disclosure Statement") in connection with its solicitation of acceptances of
the Debtor's and DLBW's First Amended Joint Plan of Reorganization Under Chapter
11 of the United States Bankruptcy Code (the "Plan") dated January 20, 1997. A
copy of the Plan is attached hereto as Exhibit "A".
This Disclosure Statement is being provided in order to disclose important
and necessary information so as to enable a reasonably informed decision by
Creditors and Equity Interest holders exercising their rights to vote on, or
otherwise participate in, the Plan. The purpose of this Disclosure Statement is
to answer questions which are most often asked by a party receiving a Disclosure
Statement. Unless otherwise stated, the information contained herein is as of
January 20, 1997. Terms which are used in this Disclosure Statement, but which
are not otherwise defined herein, shall have the meaning assigned to them in the
Plan or in the Bankruptcy Code.
<PAGE>
SUMMARY INFORMATION RELATIVE
TO THE CHAPTER 11 REORGANIZATION
1. WHO IS THE DEBTOR?
WRT Energy Corporation, an oil and gas company which was incorporated
under the laws of Texas on November 16, 1988.
2. HOW LONG HAS THE DEBTOR BEEN IN CHAPTER 11?
On February 14, 1996, the Debtor commenced a voluntary reorganization case
under Chapter 11 of the Bankruptcy Code by filing a voluntary petition for
bankruptcy relief with the United States Bankruptcy Court for the Western
District of Louisiana, Lafayette-Opelousas Division (the "Bankruptcy Court").
The case is pending under Case No. 96BK-50212.
3. HAS A TRUSTEE BEEN APPOINTED IN THIS CHAPTER 11 CASE?
No. Since the filing of the bankruptcy case, the Debtor has remained in
possession of its property and has continued to operate its business as a
Debtor-in-Possession under the Bankruptcy Code.
4. HAS A COMMITTEE OF UNSECURED CREDITORS BEEN APPOINTED IN
THIS CHAPTER 11 CASE?
Yes. Pursuant to Section 1102(a) of the Bankruptcy Code, a Creditors'
Committee was appointed on or about March 11, 1996, to represent the interests
of the Unsecured Creditors of the Debtor.
5. WHAT IS THE DEBTOR ATTEMPTING TO DO IN CHAPTER 11?
Chapter 11 is the principal reorganization chapter of the Bankruptcy Code.
Under Chapter 11, the Debtor has been reorganizing its business for the benefit
of the Debtor, the Creditors of the Debtor and holders of Equity Interests.
Formulation and confirmation of a plan of reorganization is the principal
purpose of the Chapter 11 process. The plan of reorganization is the legal
document which sets forth the means by which holders of claims and equity
interests against a debtor will be treated.
6. HAS THE DEBTOR PROPOSED A PLAN OF REORGANIZATION?
Yes. Attached to this Disclosure Statement as Exhibit "A" is a copy of the
Joint Plan proposed by the Debtor and DLBW.
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7. IF THE PLAN OF REORGANIZATION IS THE DOCUMENT WHICH GOVERNS
HOW A CLAIM WILL BE TREATED, WHY AM I RECEIVING THIS
DISCLOSURE STATEMENT?
In order to confirm a plan of reorganization, the Bankruptcy Code requires
that a plan proponent solicit acceptances of the proposed plan. Before a
proponent may solicit such acceptances, however, the Bankruptcy Court must
approve the information which is to be sent to the creditors and equity interest
holders along with the plan of reorganization, to ensure that sufficient
information is disclosed to allow them to make informed judgments about the plan
of reorganization. The purpose of this Disclosure Statement, then, is to provide
that information to you about the Debtor's and DLBW's Plan as required by the
Bankruptcy Code.
8. HAS THIS DISCLOSURE STATEMENT BEEN APPROVED BY THE
BANKRUPTCY COURT?
The Bankruptcy Court approved this Disclosure Statement on February ____,
1997, as containing information of a kind, and in sufficient detail, adequate to
enable a hypothetical, reasonable investor typical of each Class of Creditors or
Equity Interests whose acceptance is being solicited to make an informed
judgment whether to vote to accept or reject the Plan. THIS DISCLOSURE
STATEMENT, TOGETHER WITH THE PLAN WHICH IS ATTACHED HERETO, SHOULD BE READ IN
ITS ENTIRETY. FOR THE CONVENIENCE OF CREDITORS AND STOCKHOLDERS, THE TERMS OF
THE PLAN ARE SUMMARIZED IN THIS DISCLOSURE STATEMENT, BUT THE SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY THE PLAN ITSELF, WHICH IS CONTROLLING IN THE EVENT
OF ANY INCONSISTENCY.
9. HOW DO I DETERMINE WHICH CLASS I AM IN?
To determine the Class of your Claim or Equity Interest, you must first
determine the nature of your Claim against (or Equity Interest in) the Debtor
(I.E., unsecured, secured, holder of a Senior Note, holder of stock); then, turn
to the Table of Contents, which will direct you to the discussion of the Class
in which you are a participant and to the treatment provided to such Class.
Section VI of the Disclosure Statement explains, among other things, who is in
each Class, what you will receive if the Plan is confirmed, and when you will
receive what the Plan has provided for you if the Plan is confirmed.
10. WHY IS CONFIRMATION OF A PLAN OF REORGANIZATION IMPORTANT?
Confirmation of a plan of reorganization is necessary for a debtor in
Chapter 11 to permit the debtor to provide creditors and stockholders with the
treatment proposed under the plan. Unless the plan of reorganization is
confirmed, the debtor is legally prohibited from providing what it has proposed
in its plan of reorganization. Therefore, confirmation of the Debtor's and
DLBW's Plan is necessary to permit Distributions under the Plan to you, as
provided therein.
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11. WHAT IS NECESSARY TO CONFIRM A PLAN OF REORGANIZATION?
Confirmation of a plan requires, among other things, a vote in favor of
the plan by at least two-thirds in total dollar amount and at least a majority
in number of claims actually voting in each voting class of claims and a vote in
favor of the Plan by two-thirds in total dollar amount of the equity interests
in each voting class of stockholders. If the vote is insufficient, the
Bankruptcy Court can still confirm the Plan, but only upon being provided
additional proof regarding the ultimate fairness of the Plan to Creditors and
holders of Equity Interests.
12. AM I ENTITLED TO VOTE ON THE PLAN?
Any Creditor or Equity Interest holder of the Debtor whose Claim or Equity
Interest is impaired under the Plan is entitled to vote, if either (1) (in the
case of a Claim) the Claim has been scheduled by the Debtor and such Claim is
not scheduled as disputed, contingent or unliquidated, (or in the case of an
Equity Interest) the Equity Interest holder has been listed by the Debtor on the
list of equity security holders filed pursuant to Bankruptcy Rule 1007 or (2)
the Creditor or Equity Interest holder has filed a proof of claim or interest,
as appropriate, on or before the last date set by the Bankruptcy Court for such
filing. Holders of Claims as to which objections have been filed (and as to
which such objections are still pending at the time of confirmation) are not
entitled to have their votes counted to the extent of the objections, unless the
Bankruptcy Court temporarily allows such holder to vote its Claim upon motion by
the Creditor. Such motion must be heard and determined by the Bankruptcy Court
prior to the date established by the Bankruptcy Court to confirm the Plan.
13. HOW DO I DETERMINE WHETHER I AM IN AN IMPAIRED CLASS?
In Article 25 of the Plan, the Debtor has identified the Classes of Claims
which are impaired under the Plan and the Classes of Equity Interests which are
impaired under the Plan. In the event there are questions regarding whether a
Claim or Equity Interest is in an impaired Class, the Creditor/Equity Interest
holder should assume that his or her Claim/Interest is impaired and vote. If the
Claim/Interest is determined to be impaired, the vote will be considered by the
Bankruptcy Court.
14. WHEN IS THE DEADLINE BY WHICH I NEED TO RETURN MY BALLOT?
By order of the Bankruptcy Court dated February _____, 1997, the
Bankruptcy Court approved certain procedures for balloting and established
deadlines for the receipt of ballots.
If you are a holder of an Equity Interest, you will receive a ballot
specially sent to you which will clearly state that it is to be used by a holder
of an Equity Interest to vote on the Plan. If you receive the wrong ballot,
contact American Stock Transfer & Trust, Shareholder Services Department at
(800) 937-5449. Ballots cast by holders of Equity Interests must be received by
no later than 5:00 p.m., Eastern Standard Time, on March _____, 1997, at the
following address:
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AMERICAN STOCK TRANSFER & TRUST
ATTENTION: Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005-1303
Except for those ballots cast by holders of Equity Interests, all ballots
must be received by no later than 5:00 p.m., Central Standard Time, on March
_____, 1997, at the following address:
SHEINFELD, MALEY & KAY, P.C.
ATTENTION: E. Lee Morris, Esq.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
BASIC VOTING INFORMATION AND
INSTRUCTIONS FOR COMPLETING THE BALLOT
1. FOR YOUR VOTE TO BE COUNTED, YOU MUST COMPLETE THE BALLOT,
INDICATE ACCEPTANCE OR REJECTION OF THE PLAN IN THE BOXES
INDICATED ON THE BALLOT, MAKE THE APPROPRIATE ELECTIONS (IF
APPLICABLE) AND SIGN AND RETURN THE BALLOT TO THE ADDRESS SET
FORTH ON THE PRE-ADDRESSED ENVELOPE. IF A BALLOT IS RECEIVED
AFTER THE VOTING DEADLINE, IT WILL NOT BE COUNTED. IF YOU
---
RECEIVED A RETURN ENVELOPE ADDRESSED TO YOUR BANK OR
BROKERAGE FIRM (OR ITS AGENT), YOU MUST RETURN YOUR BALLOT BY
MAIL TO THAT ENTITY AND DO SO EARLY ENOUGH FOR YOUR VOTE TO
BE PROCESSED AND THEN FORWARDED TO AND RECEIVED BY THE STOCK
TRANSFER AGENT, AMERICAN STOCK TRANSFER & TRUST, PRIOR TO THE
VOTING DEADLINE.
2. If you hold Claims in more than one Class under the Plan or if you hold
more than one of the Equity Interests classified under the Plan, you may
receive more than one ballot, color coded for different Classes of Claims
and Equity Interests. Each ballot you receive can be voted only for your
Claim or Equity Interest for that Class. Please complete and return each
ballot you receive.
3. The ballot is for voting purposes only and does not constitute and shall
not be deemed to be a proof of claim or interest, an assertion of a Claim
or Equity Interest, or an acknowledgment by the Debtor of any Claim or
Equity Interest or obligation.
OVERVIEW OF THE PLAN
The following summary of the Plan is qualified in its entirety by the more
detailed discussions provided in this Disclosure Statement and the Exhibits
hereto (including the Plan itself).
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Section 1123 of the Bankruptcy Code provides that a plan of reorganization
shall classify the claims and equity interests of a debtor's creditors and
equity interest holders into classes that contain claims and interests that are
substantially similar. The Plan divides Allowed Claims and Equity Interests
against the Debtor into various Classes which the Debtor believes are in
accordance with the classification requirements of the Bankruptcy Code. A
summary of the classification and treatment of Allowed Claims and Equity
Interests under the Plan is set forth below. The Debtor has made efforts to
anticipate the amount of Allowed Claims in each Class. However, the resolution
of Disputed Claims involves many factual and legal issues which may or may not
be resolved in the Debtor's favor. Accordingly, no assurances can be given that
the anticipated amount of Allowed Claims in each Class will be achieved.
The liabilities indicated herein have been derived from the Debtor's books
and records and reconciled or otherwise compared against the proofs of claims
which have been filed in the case. The dollar amounts contained in the following
summary are the Debtor's estimates of valid claim amounts on a per class basis.
The Debtor has received approximately 430 proofs of claims, aggregating
approximately $268,114,000, which includes the Secured Claim of the Debtor's
major lender, Internationale Nederlanden (U.S.) Capital Corporation, oil and gas
lien Claimants, holders of WRT's 13 7/8% Senior Notes, and a "Class Proof of
Claim" in excess of $100 million filed by counsel for the plaintiffs in the
Securities Litigation on behalf of the yet-to-be certified class of plaintiffs.
Of the approximately 430 proofs of claims filed, approximately 45 do not state a
liquidated amount as owing, and therefore the $267,390,500 approximated total
claims amount does not include an amount for such proofs of claims. Of the
$267,390,500 in claims received, the Debtor has verified only $130,539,363 as
duly owing; however, the Debtor is still in the process of reviewing and
reconciling proof of claim amounts and priorities. The Debtor's preliminary
analysis indicates that several Claims are duplicative or otherwise overlap
other claims which have been filed. The total claims estimation does not include
those Claims of Creditors which were listed in the Schedules filed by the Debtor
as being owed, liquidated, non-disputed and non-contingent, and as to which
proofs of claims were not filed. The total of all Claims asserted and such
undisputed, liquidated scheduled Claims is $273,954,000.
The Debtor is confident that the liabilities will be resolved in a manner
consistent with what its books and records have recorded and the aggregate claim
amounts determined by actual studies based upon the claims asserted and the
Debtor's historical claim experience. However, should the amount allowed by the
Bankruptcy Court be in excess of amounts shown on the following table, in the
case of Secured Claims, the amount to be paid by New WRT will exceed the amount
shown on the table below, and in the case of General Unsecured Claims, the
Claimants' pro rata share of New WRT Common Stock will be reduced. The table set
forth on the following page details the anticipated allowable Claims held by
Creditors of the Debtor and the anticipated recovery which Creditors and Equity
Interest holders will obtain under the Plan.
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WRT ENERGY CORPORATION
TABLE DETAILING CLAIMS AND RECOVERIES BY CLASS
<TABLE>
<CAPTION>
WRT'S ESTIMATE OF ESTIMATED
ESTIMATED NUMBER FINAL ALLOWED RECOVERY
CLASS TYPE OF CLAIM OF CLAIMANTS CLAIM AMOUNTS PERCENTAGE
- ----- ------------------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Administrative Claims 3 $ 3,512,725 100.0%
Priority Claims 39 $ 1,291,705 100.0%
A-1 Priority Claims 0 $ 0 100.0%
B-1 GMAC 3 $ 0 100.0%
B-2 INCC 1 $ 17,736,000 100.0%
B-3 Morgan City Bank and Trust 1 $ 195,721 100.0%
B-4 Tricore 1 $ 0 100.0%(1)
B-5 Woodforest National Bank 1 $ 2,379 100.0%
B-6 The Woodlands Corporation 1 $ 100,000 100.0%
C-1 Abbeville Field $ 401 100.0%
C-2 Bayou Henry $ 2,366 50.0%
C-3 Bayou Penchant $ 1,055,131 100.0%
C-4 Bayou Pigeon $ 691,370 100.0%
C-5 Darrow $ 10,008 50.0%
C-6 Deer Island $ 268,020 100.0%
C-7-A East Hackberry (Erwin Heirs) $ 164,111 100.0%
C-7-B East Hackberry (State Lease 50) $ 2,588,870 75.0%
C-8 Golden Meadow $ 32,426 100.0%
C-9 Lac Blanc $ 369,807 50.0%
C-10 Napoleonville $ 87,829 100.0%
C-11 Rankin $ 9,301 100.0%
C-12 South Atchafalaya $ 20,576 50.0%
C-13 Tigre Lagoon $ 51,923 50.0%
C-14 West Cote Blanche Bay,
including Texaco $ 5,402,399 100.0%
C-15 West Hackberry $ 27,857 50.0%
C-16 West Lake Pontchartrain $ 10,423 50.0%
Total Classes C-1 through C-16 90 $ 10,792,817
D-1 Allowed Convenience Claims 1,097 $ 418,620 50.0%
D-2 Allowed Tort Claims 0 $ 0 n/a
D-3 Allowed General Unsecured 298 $ 119,069,630 26.0% - 50.1%(2)
Claims, including deficiency
claims and disputed secured
claims
D-4 Allowed Securities Litigation 9 $ 0 n/a
Claims Based Upon Senior Note
Ownership
E-1 Preferred Stock 0 $ 0 n/a
E-2 Allowed Securities Litigation 0 $ 0 n/a
Claims Based Upon Preferred
Stock Ownership
E-3 Common Stock and Allowed 0 $ 0 n/a
Securities Based Upon
Preferred Stock Ownership
E-4 WRT Warrants 0 $ 0 n/a
E-5 WRT Stock Options 0 $ 0 n/a
Totals 1,544 $ 153,119,591
========== ==============
</TABLE>
(1) For estimation purposes, the Debtor has estimated Tricore to have an
allowed, unsecured claim of approximately $6.4 million, but no allowable
secured claim.
(2) The Plan proposes to distribute shares of New WRT Common Stock to the
general unsecured claimants. The value of distributions to the holders of
general unsecured claims is based upon the net equity value range of New
WRT and the number of New WRT common shares to be issued and outstanding
on the Effective Date. Assuming 20.4 million shares of New WRT Common
Stock, the per share value would range between $3.10 and $5.97 per share
or a recovery of 26.0% to 50.1% of an allowed general unsecured claim.
Creditors and Equity Interest holders under the Plan will receive Cash,
New WRT Common Stock, New WRT Subscription Rights, New WRT Warrants and/or a
restated note setting forth payment terms over time as partial or full payment
of a Claim. The value of the New WRT Common Stock and New WRT Warrants will
depend upon the conditions as they exist at the time such securities are issued
and involves numerous risks and uncertainties, many of which cannot be verified
at this time.
I.
INTRODUCTION
The Debtor and DLBW submit this Disclosure Statement pursuant to 11 U.S.C.
ss. 1125 in connection with the solicitation of acceptances of the Plan. The
Disclosure Statement, which contains the Plan as Exhibit "A", will be
transmitted to all holders of Claims against and Equity Interests in the Debtor.
However, the Debtor is seeking votes only from Creditors and holders of Equity
Interests in impaired Classes.
Capitalized terms used herein, if not separately defined, have the
meanings assigned to them in the Plan or in the Bankruptcy Code. All persons
receiving the Disclosure Statement and Plan are urged to review fully the
provisions of the Plan and all Exhibits attached hereto, in addition to
reviewing the text of this Disclosure Statement.
The Debtor and DLBW have promulgated the Plan consistent with the
provisions of the Bankruptcy Code. The purpose of the Plan is to provide the
maximum recovery to each Class of Claims in light of the assets available for
distribution to Creditors. The Debtor and DLBW believe that the Plan permits
affected Creditors and Equity Interest holders to receive distributions not less
than the amount such Creditors and Equity Interest holders would receive if the
Debtor were liquidated under Chapter 7 of the Bankruptcy Code.
This Disclosure Statement is not intended to replace careful review and
analysis of the Plan. Rather, it is submitted as an aid and supplement in your
review of the Plan and in an effort to explain the terms and implications of the
Plan. Every effort has been made to explain fully the various aspects of the
Plan as it may affect all Creditors and holders of Equity Interests. If you have
any questions, the Debtor urges you to contact Debtor's legal counsel and every
effort will be made to assist you.
On February _____, 1997, after notice and a hearing, the Bankruptcy Court,
The Honorable Gerald H. Schiff presiding, entered an order approving the
Disclosure Statement as containing information of a kind and in sufficient
detail, adequate to enable Creditors and holders of Equity Interests whose votes
on the Plan are being solicited to make an informed judgment whether to accept
or reject the Plan.
-7-
<PAGE>
Creditors and holders of Equity Interests should read this Disclosure
Statement in its entirety prior to voting on the Plan. No solicitation of votes
on the Plan may be made, except pursuant to this Disclosure Statement and
Section 1125 of the Bankruptcy Code. No other party has been authorized to
utilize any information concerning the Debtor or its business, other than the
information contained in this Disclosure Statement, to solicit votes on the
Plan. Creditors and holders of Equity Interests should not rely on any
information relating to the Debtor or its business, other than that contained in
this Disclosure Statement and the Exhibits attached hereto.
EXCEPT AS SET FORTH IN THIS DISCLOSURE STATEMENT AND THE EXHIBITS HERETO,
NO REPRESENTATIONS CONCERNING THE DEBTOR, THE DEBTOR'S ASSETS, THE PAST OR
FUTURE OPERATIONS OF THE DEBTOR, OR THE PLAN ARE AUTHORIZED, NOR ARE ANY SUCH
REPRESENTATIONS TO BE RELIED UPON IN ARRIVING AT A DECISION WITH RESPECT TO THE
PLAN. ANY REPRESENTATIONS MADE TO SECURE ACCEPTANCE OR REJECTION OF THE PLAN
OTHER THAN AS CONTAINED IN THIS DISCLOSURE STATEMENT SHOULD BE REPORTED TO
COUNSEL FOR THE DEBTOR AND COUNSEL FOR DLBW IMMEDIATELY.
EXCEPT AS SPECIFICALLY NOTED, THERE HAS BEEN NO INDEPENDENT AUDIT OF THE
FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT. THE DEBTOR IS NOT
ABLE TO WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT
ANY INACCURACY. THE FACTUAL INFORMATION REGARDING THE DEBTOR, INCLUDING THE
ASSETS AND LIABILITIES OF THE DEBTOR, HAS BEEN DERIVED FROM NUMEROUS SOURCES
INCLUDING, BUT NOT LIMITED TO, THE DEBTOR'S BOOKS AND RECORDS, THE DEBTOR'S
SCHEDULES, AND DOCUMENTS SPECIFICALLY IDENTIFIED HEREIN. SUCH DOCUMENTS INCLUDE,
BUT ARE NOT LIMITED TO, CLAIMS FILED, PLEADINGS AND REPORTS ON FILE WITH THE
BANKRUPTCY COURT, LOAN AGREEMENTS AND BUSINESS RECORDS.
ESTIMATION OF GAS AND OIL RESERVES AND THEIR ESTIMATED VALUES REQUIRE
NUMEROUS ENGINEERING ASSUMPTIONS AS TO THE PRODUCTIVE CAPACITY AND PRODUCTION
RATES OF EXISTING GEOLOGICAL FORMATIONS AND REQUIRE THE USE OF CERTAIN
SECURITIES AND EXCHANGE COMMISSION ("SEC") GUIDELINES AS TO ASSUMPTIONS
REGARDING COSTS TO BE INCURRED IN DEVELOPING AND PRODUCING RESERVES AND PRICES
TO BE REALIZED FROM THE SALE OF FUTURE PRODUCTION. ACCORDINGLY, ESTIMATES OF
RESERVES AND THEIR VALUE ARE INHERENTLY IMPRECISE AND ARE SUBJECT TO REVISION
AND CHANGE AND, WHILE THEY ARE PERTINENT AND CRITICAL TO AN APPROXIMATION OF
QUANTITY, CASH FLOW, AND VALUE, THEY SHOULD NOT BE CONSTRUED AS REPRESENTING THE
ACTUAL QUANTITIES OF FUTURE PRODUCTION OR CASH FLOWS TO BE REALIZED FROM THE
DEBTOR'S OIL AND GAS PROPERTIES OR THE ACTUAL FAIR MARKET VALUE OF SUCH
PROPERTIES.
-8-
<PAGE>
THE APPROVAL BY THE BANKRUPTCY COURT OF THE DISCLOSURE STATEMENT DOES NOT
CONSTITUTE AN ENDORSEMENT BY THE BANKRUPTCY COURT OF THE PLAN OR A GUARANTY OF
THE ACCURACY AND COMPLETENESS OF THE INFORMATION CONTAINED HEREIN.
THE SEC HAS NEITHER APPROVED NOR DISAPPROVED THE INFORMATION CONTAINED IN
THE DISCLOSURE STATEMENT. THE SEC HAS ALSO NOT PASSED UPON THE ACCURACY OR
ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
THE DEBTOR, COUNSEL FOR THE DEBTOR, DLBW, AND COUNSEL FOR DLBW CANNOT AND
DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT IS WITHOUT INACCURACY. NONE OF THE ABOVE-MENTIONED PARTIES OR COUNSEL
HAVE VERIFIED IN EVERY ASPECT THE INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT, ALTHOUGH THEY DO NOT HAVE ACTUAL KNOWLEDGE OF ANY INACCURACIES
EITHER.
HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD NOT CONSTRUE THE CONTENTS OF
THIS DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX
ADVICE. EACH SUCH HOLDER SHOULD, THEREFORE, CONSULT WITH ITS OWN LEGAL,
BUSINESS, FINANCIAL AND TAX ADVISORS AS TO ANY SUCH MATTERS CONCERNING THE
SOLICITATION, THE PLAN, AND THE TRANSACTIONS CONTEMPLATED THEREBY.
II.
VOTING PROCEDURES AND REQUIREMENTS
A. BALLOTS AND VOTING DEADLINE
A ballot to be used for voting to accept or reject the Plan is enclosed
with this Disclosure Statement for Creditors and Equity Interest holders
entitled to vote. Creditors and Equity Interest holders must (1) carefully
review the ballot and the instructions thereon, (2) execute the ballot, and (3)
return the executed ballot to the address indicated thereon by the deadline to
enable the ballot to be considered for voting purposes.
The Bankruptcy Court has directed that, in order for a particular ballot
to be counted for voting purposes, ballots for the acceptance or rejection of
the Plan must be received at the address specified below by no later than the
deadline specified below for the Classes of Claims and Equity Interests
identified:
-9-
<PAGE>
FOR CREDITORS IN CLASSES B-2, B-4, B-6, C-11, D-1 THROUGH D-4, E-2, AND
CREDITORS IN CLASS E-3 HOLDING SECURITIES LITIGATION CLAIMS BASED
UPON COMMON STOCK OWNERSHIP
GREEN BALLOTS
-- AND --
FOR CREDITORS IN CLASSES C-1 THROUGH C-10 AND C-12 THROUGH C-16
PINK BALLOTS
DEADLINE: Must Be RECEIVED By 5:00 p.m., Central Standard Time,
on March _____, 1997
ADDRESSED TO:
SHEINFELD, MALEY & KAY, P.C.
ATTENTION: E. Lee Morris, Esq
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
FOR EQUITY INTEREST HOLDERS IN
CLASSES E-1 AND E-3 THROUGH E-5
YELLOW BALLOTS
DEADLINE: Must Be RECEIVED By 5:00 p.m., Eastern Standard Time,
on March _____, 1997
ADDRESSED TO:
AMERICAN STOCK TRANSFER & TRUST
ATTENTION: Shareholder Services Department
40 Wall Street, 46th Floor
New York, New York 10005-1303
The Record Date for determining which holders of publicly-traded
securities and Senior Notes are entitled to vote on the Plan is March _____,
1997. The Indenture Trustee for the Senior Notes may not and will not vote on
behalf of the holders of these securities. Holders must submit their own
ballots. DO NOT RETURN YOUR SECURITIES, NOTES, OR WARRANTS WITH YOUR BALLOTS.
Bank and broker nominees will transmit a ballot with a copy of this
Disclosure Statement to each beneficial owner of the Debtor's securities and
Senior Notes held in the name of such nominees. Some customers of brokerage
firms and banks will receive pre-validated ballots. The assumptions that will be
made about these direct votes are that (i) each ballot is for a single account,
and (ii) each
-10-
<PAGE>
vote is a separate vote and not duplicative of any other vote cast by other
customers of that firm (unless specific evidence exists that indicates that one
vote is for the identical account number and amount of another customer). Some
customers of brokerage firms and banks will receive ballots that will be
forwarded back to the brokerage firm or bank (or its agent) in order to be
counted. Such brokerage firms and banks (or their agents) will, in turn, cast
master ballots (the "Master Ballots") on behalf of any customers who have
returned ballots to them. If your securities or Senior Notes are held in the
name of your brokerage firm or bank, please return your ballot in the envelope
provided by them. If you are directed to return your ballot to your bank or
broker, please return your ballot to them in sufficient time for them to process
it and return it to American Stock Transfer & Trust or Sheinfeld, Maley & Kay,
P.C., as applicable, by the voting deadline specified above.
The Debtor intends to make a pre-solicitation inquiry to determine (a) the
number of beneficial owners of the Debtor's securities and Senior Notes, and (b)
the number of copies of the Disclosure Statement necessary to supply record or
nominee holders with the solicitation materials in sufficient time to enable an
informed decision by beneficial owners.
B. CREDITORS SOLICITED TO VOTE
All Creditors of the Debtor who have a Claim which is impaired under the
Plan are being solicited to vote if either (i) the Claim has been scheduled by
the Debtor and such Claim is not scheduled as disputed, contingent or
unliquidated, or (ii) the Creditor has filed a proof of claim on or before the
last date set by the Bankruptcy Court for such filing. As to any Claim for which
a proof of claim has been filed and as to which an objection has been filed,
however, if such objection is still pending on the voting date, the Creditor's
vote associated with such Claim will not be counted to the extent of the
objection, unless and to the extent that the Bankruptcy Court temporarily allows
the Claim upon motion by such Creditor in an amount which the Bankruptcy Court
deems proper for the purpose of voting on the Plan. Such motion must be heard
and determined by the Bankruptcy Court prior to the date and time established by
the Bankruptcy Court for determination of confirmation of the Plan. In addition,
a Creditor's vote may be disregarded if the Bankruptcy Court determines that the
Creditor's acceptance or rejection was not solicited or procured in good faith
or in accordance with the provisions of the Bankruptcy Code.
C. DEFINITION OF IMPAIRMENT
Under Section 1124 of the Bankruptcy Code, a Class of Claims or Equity
Interests is IMPAIRED under a plan of reorganization UNLESS, with respect to
each Claim or Equity Interest of such Class, the Plan does at least one of the
following two (2) things:
1. leaves unaltered the legal, equitable, and contractual rights to
which such Claim or Interest entitles the holder of such Claim or
Interest; or
-11-
<PAGE>
2. notwithstanding any contractual provision or applicable law that
entitles the holder of a Claim or Interest to demand or receive
accelerated payment of its Claim or Interest after the occurrence of
a default:
(a) cures any such default that occurred before or after the
commencement of the case under the Bankruptcy Code, other than
a default of a kind specified in section 365(b)(2) of the
Bankruptcy Code;
(b) reinstates the maturity of such Claim or Interest as it
existed before the default;
(c) compensates the holder of such Claim or Interest for damages
incurred as a result of reasonable reliance on such
contractual provision or applicable law; and
(d) does not otherwise alter the legal, equitable, or contractual
rights to which such Claim or Equity Interest entitles the
holder of such Claim or Interest.
D. CLASSES IMPAIRED UNDER THE PLAN
Creditors in Classes B-2, B-4, B-6, C-1 through C-16, D-1, D-2, D-3, D-4,
E-1, E-2, E-3, E-4 and E-5 are impaired under the Plan, and, therefore, are
being solicited to vote on the Plan, with the exception of Classes E-4 and E-5,
which Classes are deemed to have rejected the Plan pursuant to 11 U.S.C. ss.
1126(g).
The remaining Classes are UNIMPAIRED under the Plan and, therefore, are
not being solicited to vote on the Plan pursuant to 11 U.S.C. ss. 1126(f).
With respect to the foregoing, the Debtor specifically reserves the right
to determine and contest, if necessary, (1) the impaired or unimpaired status of
a Class under the Plan; and (2) whether any ballots cast by such Class should be
allowed to be counted for purposes of confirmation of the Plan.
E. VOTE REQUIRED FOR CLASS ACCEPTANCE
The Bankruptcy Code defines acceptance of a plan by a Class of Creditors
as voted acceptances by holders of at least two-thirds (2/3) in dollar amount
and more than one half (1/2) in number of the Allowed Claims of the Class who
have actually cast ballots for acceptance or rejection of the Plan.
-12-
<PAGE>
The Bankruptcy Code defines acceptance of a plan by a Class of equity
interests as voted acceptances by holders of at least two-thirds (2/3) in
allowed amount of the interests of that Class who have actually cast ballots for
acceptance or rejection of the Plan.
F. DISTRIBUTIONS ONLY TO HOLDERS OF ALLOWED CLAIMS
A Claim will receive a Distribution under the Plan only if it is an
"Allowed Claim". An "Allowed Claim" means a Claim against the Debtor to the
extent proof of which was filed with the Bankruptcy Court on or before the Bar
Date (July 1, 1996, unless ordered otherwise), or which has been listed by the
Debtor as liquidated in amount and not disputed or contingent, and, in any of
these cases, as to which no objection to the allowance thereof has been
interposed within the period of limitation fixed by the Plan, or which has been
determined by an order or judgment of any court of competent jurisdiction and
such order or judgment is no longer subject to appeal. "Allowed Claim" shall not
include interest on the principal amount of such Claim or professional fees from
and after the Debtor's Petition Date, except in the case of Secured Claims for
which the value of the Collateral therefor is sufficient to satisfy the entire
Claim, and then only to the extent that such value exceeds the amount of such
Claim.
III.
CONFIRMATION OF THE PLAN
Under the Bankruptcy Code, the following steps must be taken to confirm
the Plan:
A. CONFIRMATION HEARING
Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court,
after notice, to hold a hearing on confirmation of the Plan (the "Confirmation
Hearing"). Section 1128(b) provides that any party in interest may object to
confirmation of the Plan.
By order of the Bankruptcy Court dated December 16, 1996, the Confirmation
Hearing has been scheduled for April 8, 1997, at ________ a.m./p.m., in the
United States Bankruptcy Court, Western District of Louisiana,
Lafayette-Opelousas Division, Federal Building, Third Floor, Opelousas,
Louisiana 70570. Any objection to confirmation must be made in writing and filed
with the Bankruptcy Court with proof of service and served upon the following
parties on or before March ___, 1997:
-13-
<PAGE>
DEBTOR:
WRT ENERGY CORPORATION
ATTENTION: Raymond P. Landry
5718 Westheimer, Suite 1201
Houston, Texas 77057
Telephone: (713) 706-3295
Telecopy: (713) 706-4083
COUNSEL FOR THE DEBTOR:
SHEINFELD, MALEY & KAY, P.C.
ATTENTION: Joel P. Kay, Esq.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
Telephone: (713) 658-8881
Telecopy: (713) 658-9756
COUNSEL FOR DLBW:
SCHULTE ROTH & ZABEL LLP
ATTENTION: Jeffrey S. Sabin, Esq.
900 Third Avenue
New York, New York 10002
Telephone: (212) 756-2000
Telecopy: (212) 593-5955
OFFICE OF THE UNITED STATES TRUSTEE:
UNITED STATES TRUSTEE
ATTENTION: William E. O'Connor, Esq.
United States Courthouse
300 Fannin Street, Suite 3196
Shreveport, Louisiana 71101-3079
Telephone: (318) 676-3456
Telecopy: (318) 676-3212
-14-
<PAGE>
COUNSEL FOR THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS:
STROOCK & STROOCK & LAVAN
ATTENTION: Daniel H. Golden, Esq.
7 Hanover Square
New York, New York 10004
Telephone: (212) 806-5400
Telecopy: (212) 806-6006
- - AND -
DRAPER & CULPEPPER
ATTENTION: Douglas S. Draper, Esq.
LL&E Tower, Suite 2630
909 Poydras Street
New Orleans, Louisiana 70112-1033
Telephone: (504) 581-9595
Telecopy: (504) 525-3761
UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT WILL NOT BE
CONSIDERED BY THE BANKRUPTCY COURT.
B. REQUIREMENTS FOR CONFIRMATION OF THE PLAN
At the Confirmation Hearing, the Bankruptcy Court will determine whether
the confirmation requirements of Section 1129 of the Bankruptcy Code have been
satisfied, and in the event that they have been, the Bankruptcy Court will enter
an order confirming the Plan. The requirements are as follows:
1. The Plan complies with the applicable provisions of the Bankruptcy
Code.
2. The Plan proponents (Debtor and DLBW) comply with the applicable
provisions of the Bankruptcy Code.
3. The Plan has been proposed in good faith and not by any means
forbidden by law.
4. Any payment made or promised by the Plan proponents (Debtor and
DLBW) or by a person issuing securities or acquiring property under
the Plan for services or for costs and expenses in, or in connection
with, the case, or in connection with the Plan and incident to the
case, has been approved by, or is subject to the approval of, the
Bankruptcy Court as reasonable.
-15-
<PAGE>
5. The Plan proponents (Debtor and DLBW) have disclosed the identity
and affiliations of any individual proposed to serve, after
confirmation of the Plan, as a director, officer, or voting trustee
of the Debtor, an affiliate of the Debtor participating in a joint
plan with the Debtor, or a successor to the Debtor under the Plan,
and the appointment to, or continuance in, such office of such
individual, is consistent with the interests of creditors and equity
security holders and with public policy, and the Debtor has
disclosed the identity of any insider that will be employed or
retained by the reorganized Debtor, and the nature of any
compensation for such insider.
6. Any governmental regulatory commission with jurisdiction, after
confirmation of the Plan, over the rates of the Debtor has approved
any rate change provided for in the Plan, or such rate is expressly
conditioned on such approval.
7. With respect to each class of impaired claims or interests, (1)
either each holder of a claim or interest of such class has accepted
the Plan, or will receive or retain under the Plan on account of
such claim or interest property of a value, as of the Effective Date
of the Plan, that is not less than the amount that such holder would
so receive or retain if the Debtor were liquidated on such date
under Chapter 7 of the Bankruptcy Code; or (2) if Section 1111(b)(2)
of the Bankruptcy Code applies to the claims of such class, each
holder of a claim of such class will receive or retain under the
Plan an account of such claim property of a value, as of the
Effective Date of the Plan, that is not less than the value of such
holder's interest in the property that secures such claims.
8. Each class of claims or interests has either accepted the Plan or is
not impaired under the Plan.
9. Except to the extent that the holder of a particular claim has
agreed to a different treatment of such claim, the Plan provides
that administrative expenses and priority claims (other than tax
claims) will be paid in full in the allowed amount of such claims on
the Effective Date of the Plan and that holders of priority tax
claims will receive on account of such claims deferred cash
payments, over a period not exceeding six years after the date of
assessment of such claims, of a value, as of the Effective Date of
the Plan, equal to the allowed amount of such claims.
10. At least one class of claims that is impaired under the Plan has
accepted the Plan, determined without including any acceptance of
the Plan by any insider holding a claim in such Class.
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<PAGE>
11. Confirmation of the Plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of
the Debtor or any successor to the Debtor under the Plan, unless
such liquidation or reorganization is proposed in the Plan.
12. The Plan provides for the payment of all fees payable under 28
U.S.C. ss. 1930, as determined by the Bankruptcy Court at the
hearing on confirmation of the Plan, on the Effective Date of the
Plan.
13. The Plan provides for the continuation, after the Effective Date of
the Plan, of the payment of all retiree benefits, as that term is
defined in ss. 1114 of the Bankruptcy Code, at the level established
pursuant to subsection (e)(1)(B) or (G) of ss. 1114 of the
Bankruptcy Code, at any time prior to confirmation of the Plan, for
the duration of the period the Debtor has obligated itself to
provide such benefits.
If a sufficient number of Creditors and amounts of Claims in the impaired
Classes vote to accept the Plan, the Debtor believes that the Court will approve
confirmation and that the Plan will satisfy all of the applicable statutory
requirements of Bankruptcy Code ss. 1129.
C. CRAMDOWN
The Bankruptcy Court can confirm the Plan at the request of the Debtor if
all the requirements of Section 1129(a) of the Bankruptcy Code are met with the
exception of Section 1129(a)(8), if at least one Class of Claims that is
impaired under the Plan has accepted the Plan (excluding a Class of insiders),
and, as to each impaired Class which has not accepted the Plan, the Plan "does
not discriminate unfairly" and is "fair and equitable." A plan of reorganization
does not discriminate unfairly within the meaning of the Bankruptcy Code if no
class will receive more than it is legally entitled to receive for its claims or
equity interests. "Fair and equitable" has different meanings for secured and
unsecured claims and holders of equity interests.
With respect to a class of secured claims which rejects the Plan, "fair
and equitable" means either (i) the impaired secured creditors retain their lien
securing their claims to the extent of their allowed claims and receive deferred
cash payments at least equal to the allowed amount of their claims with a
present value, as of the effective date of the Plan, at least equal to the value
of each such creditor's interest in the estate's interest in the property
securing their liens, (ii) if the property subject to the lien of the impaired
secured creditor is sold free and clear of that lien, then the lien will attach
to the proceeds of sale, and such lien must be treated in accordance with
clauses (i) or (iii) hereof, or (iii) the impaired secured creditor realizes the
"indubitable equivalent" of its claim under the Plan.
With respect to a class of unsecured claims which rejects the Plan, "fair
and equitable" means either (i) the impaired unsecured creditor receives or
retains property of a value, as of the effective
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<PAGE>
date of the Plan, equal to the amount of its allowed claim, or (ii) the holders
of claims in interest that are junior to the claims of such class will not
receive any property under the Plan.
With respect to a class of equity interests which rejects the Plan, "fair
and equitable" means either (i) each holder of an impaired equity interest
receives or retains on account of such interest property of a value, as of the
effective date of the Plan, equal to the greatest of the allowed amount of any
fixed liquidation preference to which such holder is entitled, any fixed
redemption price to which such holder is entitled, or the value of such
interest; or (ii) the holder of any interest that is junior to the interest of
such class will not receive or retain under the Plan on account of such junior
interest any property.
In the event at least one impaired Class of Claims under the Plan accepts
the Plan and one or more Classes of impaired Claims rejects the Plan, the
Bankruptcy Court will determine at the Confirmation Hearing whether the Plan is
fair and equitable and does not discriminate unfairly against any rejecting
impaired Class of Claims.
IV.
HISTORICAL AND BACKGROUND INFORMATION
A. CORPORATE INFORMATION
WRT Energy Corporation is a Texas corporation which was incorporated in
November 1988. Until December 31, 1995, WRT owned 100% of the stock of two
subsidiaries, Tesla Resources, Inc. ("Tesla") and Southern Petroleum, Inc
("SPI"). On that date, both Tesla and SPI were merged into WRT with WRT emerging
as the sole surviving corporation. Through August 1993, WRT also owned a 20%
investment in TesTech, Inc. ("TesTech"), for which it had funded 100% of the
operations and had management control. In September 1993, WRT acquired the
remaining 80% interest in TesTech and dissolved the company. In November 1995,
WRT formed a wholly-owned subsidiary, WRT Technologies, Inc., which was
established to own and operate WRT's proprietary radioactive cased hole logging
technology. No assets or technologies have been transferred from WRT to WRT
Technologies, Inc. during the course of WRT's Chapter 11 case.
B. THE BUSINESS OF WRT AND ITS OPERATIONS
1. INTRODUCTION
WRT owns and operates mature oil and gas properties primarily in the
Louisiana Gulf Coast area. Prior to the filing of the Chapter 11 Case, WRT's
intention was to increase both its production and total oil and gas recovery
through the use of advanced technologies, including radioactive logging
equipment and specialized fluid separation technologies.
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<PAGE>
2. BUSINESS STRATEGY
Until the fourth quarter of 1995, WRT's stated business strategy was the
acquisition of operated working interests in large, mature oil and gas fields in
south Louisiana and the development of such properties utilizing its technology
and experience along the Louisiana Gulf Coast. WRT sought to utilize its
technologies to take advantage of certain characteristics common to most of the
principal oil and gas fields on the Louisiana Gulf Coast, including their
complex geology, the presence of large numbers of shut-in wells, the presence of
potentially productive bypassed geological zones in these mature fields, and
excessive water production from producing wells.
WRT continued to evaluate potential oil and gas properties which met its
specific acquisition criteria until liquidity concerns and availability of
capital forced WRT to reevaluate its acquisition program. Pending confirmation
of the Plan and completion of the Chapter 11 Case, WRT has suspended its
property acquisition activities. However, the Financial Analysis contemplates
exploration and development expenditures for the six months ending December 31,
1997 of $17.6 million, increasing each year thereafter, as more fully described
in Exhibit "F" attached hereto.
3. SIGNIFICANT OIL AND GAS PROPERTY ACQUISITIONS
In December 1994, WRT purchased from BSFI Western E&P, Inc. ("BSFI") a
100% working interest (approximately 75% average net revenue interest) in
approximately 300 acres of leases within the Napoleonville Field in exchange for
the issuance of 1,300,000 shares of its Common Stock. Three producing wells, two
shut-in wells and one salt water disposal well are located within such lease
acreage.
In December 1994, WRT entered into a definitive agreement with LLOG
Exploration Company ("LLOG") for the purchase of LLOG's working interest in the
Bayou Penchant Field (the "Initial LLOG Property"). WRT concluded the
acquisition of the Initial LLOG Property in late January 1995 for a purchase
price of approximately $15.6 million plus a $5.0 million non-refundable deposit
towards the purchase from LLOG of certain additional oil and gas properties,
described below. The approximately $20.6 million paid to LLOG was financed by
borrowings of $15.0 million under WRT's Credit Facility with INCC, and by the
issuance to LLOG of a short-term, promissory note for approximately $5.6 million
(the "Seller Financing Note"). In early February 1995, WRT refinanced the Seller
Financing Note from the proceeds of a $7.5 million bridge loan (the "Bridge
Loan") from Cargill Financial Services Corporation.
In December 1994, WRT and LLOG also entered into a letter of intent for
the purchase by WRT of a second group of oil and gas properties owned by LLOG
(the "Remaining LLOG Properties"). Separate purchase contracts for each of the
Remaining LLOG Properties were entered into in January 1995. WRT concluded the
acquisition of the Remaining LLOG Properties in early March 1995 for an
aggregate purchase price of approximately $46.4 million, less the $5.0 million
non-refundable deposit previously paid to LLOG in connection with WRT's
acquisition of the Initial
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<PAGE>
LLOG Property. The approximately $41.4 million paid to LLOG was financed through
the Offering of Senior Notes in March 1995.
The Remaining LLOG Properties consist of working interests in four south
Louisiana oil and gas fields: the Bayou Pigeon Field, the Deer Island Field, the
Abbeville Field, and the Golden Meadow Field. WRT owns a 100% working interest
in substantially all acreage comprising the Initial and Remaining LLOG
Properties, other than the Abbeville Field in which it owns approximately 70% of
the working interest. WRT is the operator of the Initial LLOG Property and the
Remaining LLOG Properties.
In January 1995, Tesla entered into an agreement in principle with an
affiliate of Benton Oil and Gas Company and two affiliates of Tenneco, Inc., to
purchase an additional 43.75% working interest in a portion of the West Cote
Blanche Bay Field, a property in which Tesla then owned a 6.25% working
interest. Under the terms of the agreement, the sellers retained their interests
in all depths below an average of approximately 10,500 feet. Texaco Inc. is the
current operator of the field and is the owner of the remaining 50% working
interest in the lease rights Tesla acquired. The purchase price for the
additional interests in the West Cote Blanche Bay Field was $20.0 million and
was financed from The Senior Note Offering. The purchase was completed in April
1995. WRT subsequently acquired Tesla's West Cote Blanche Bay Field interests as
a result of Tesla's merger into WRT.
4. TECHNOLOGY
WRT continued the development of its logging technologies during 1995,
primarily in the area of logging tool development. WRT contracted for the
construction of four additional logging tools during 1995, two of which were
completed in 1995 and two of which were completed in 1996. WRT has maintained
its wireline and logging assets, however, as discussed in "Events Leading to
Chapter 11 Filing", WRT's recent reduction in workforce included substantially
all of the employees involved in the wireline and logging operations.
5. REGULATION
Operations of WRT are subject to numerous federal, state, and local laws
and regulations governing the discharge of materials into the environment or
otherwise relating to environmental protection. These laws and regulations may
require the acquisition of a permit before drilling commences, restrict or
prohibit the types, quantities and concentration of substances that can be
released into the environment in connection with drilling and production
activities, prohibit drilling activities on certain lands lying within wetlands
or other protected areas and impose substantial liabilities for pollution
resulting from drilling and production operations. Moreover, state and federal
environmental laws and regulations may become more stringent. These
environmental laws and regulations may affect WRT's operations and costs as a
result of their effect on oil and gas development, exploration, and production
operations. For instance, legislation has been proposed in Congress from time to
time that would amend the federal Resource Conservation and Recovery Act
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of 1976 ("RCRA") to reclassify oil and gas production wastes as "hazardous
waste." If such legislation were enacted, it could have a significant impact on
WRT's operating costs, as well as the oil and gas industry in general. It is not
anticipated that WRT will be required in the near future to expend amounts that
are material in relation to its total capital expenditures program by reason of
environmental laws and regulations, but inasmuch as such laws and regulations
are frequently changed, WRT is unable to predict the ultimate cost of
compliance. In addition, The Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA" or "Superfund") and certain state laws and
regulations impose liability for cleanup of waste sites and in some cases
attorney's fees, exemplary damages and/or trebling of damages.
The Oil Pollution Act of 1990 (the "OPA") and regulations thereunder
impose a variety of regulations on "responsible parties' related to the
prevention of oil spills and liability for damages resulting from such spills in
United States waters. A "responsible party" includes the owner or operator of a
facility or vessel, or the lessee or permittee of the area in which an offshore
facility is located. The OPA assigns liability to each responsible party for oil
removal costs and a variety of public and private damages. While liability
limits apply in some circumstances, a party cannot take advantage of liability
limits if the spill was caused by gross negligence or willful misconduct or
resulted from violation of a federal safety, construction or operating
regulation. If the party fails to report a spill or to cooperate fully in the
cleanup, liability limits do not apply. Few defenses exist to the liability
imposed by the OPA. The OPA also imposes ongoing requirements on a responsible
party, including proof by owners and operators of offshore oil and gas
facilities of establishment of $150 million in financial responsibility.
Financial responsibility could be established by various means including
insurance, guarantee, surety bond, letter of credit or qualification as a
self-insurer. There is substantial uncertainty as to whether insurance companies
or underwriters will be willing to provide coverage under the OPA. The financial
tests or other criteria that will be used to judge self-insurance are also
uncertain. WRT cannot predict the final resolution of these financial
responsibility issues but such requirements have the potential to result in the
imposition of substantial additional annual costs on WRT or otherwise materially
adversely affect WRT. The impact of the rule should not be any more adverse to
WRT than it will be to the other similarly situated or less well capitalized
owners or operators.
The Clean Water Act, together with the related National Pollution
Discharge Elimination System ("NPDES"), and similar state environmental laws
prohibit oil and gas producers from discharging produced water overboard into
waters of the U.S. shoreward of the territorial seas ("Coastal Waters") . In
June 1995, WRT began underground injection at its East Hackberry facility and
discontinued overboard discharge. During 1996, WRT completed work on its surface
facilities at the Tigre Lagoon Field, thereby elimating the last location of
overboard discharge within properties in which WRT holds an interest.
WRT is licensed, regulated and subject to inspection by the LDEQ with
respect to the ownership and operation of its radioactive well logging tools.
Failure to comply with such licensing and regulatory requirements could cause
WRT to lose its rights to operate its well logging tools. WRT has and will
continue to comply with all such regulatory requirements.
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<PAGE>
Complex regulations concerning all phases of energy development at the
local, state and federal levels apply to WRT's operations and often require
interpretation by WRT's professional staff or outside advisors. The federal
government and various state governments have adopted numerous laws and
regulations respecting the production, transportation, marketing and sale of oil
and gas. Regulation by state and local governments usually covers matters such
as the spacing of wells, allowable production rates, pooling and unitization,
environmental protection, pollution control, pricing, taxation and other related
matters. In Louisiana, the Commissioner of the Office of Conservation is
empowered to create geographic or geological units for drilling and producing
wells which units contain, in the Commissioner's sole judgment, the production
acreage likely to be efficiently and economically drained by such wells. These
units are created only after notice to interested parties and a hearing at which
time the Commissioner will accept geological and engineering testimony from the
interested parties. The creation of these units could have the result of
combining WRT's leasehold interests with lease acreage held by competing
producers and could have the effect of reducing WRT's interests in a drilling or
producing well below the leasehold interest to which WRT would otherwise be
entitled. Unitization of WRT's properties may force WRT to share production from
its wells and leases with others and can occur after development or acquisition
costs have been incurred by WRT. If WRT's leases are subjected to unitization,
WRT may ultimately be entitled to a lesser share of production from its wells
than it expected. Any federal leases acquired by WRT will be subject to various
federal statutes and the rules and regulations of federal administrative
agencies. Moreover, future changes in local, state or federal laws and
regulations could adversely affect the operations of WRT.
Legislation affecting the oil and gas industry is under constant review
for amendment or expansion, frequently increasing the regulatory burden.
Numerous departments and agencies, both federal and state, are also authorized
by statute to issue, and have issued, rules and regulations binding the oil and
gas industry that often are costly to comply with and that carry substantial
penalties for non-compliance. In addition, production operations are affected by
changing tax and other laws relating to the petroleum industry, by constantly
changing administrative regulations and possible interruption or termination by
government authorities.
The Federal Energy Regulatory Commission (the "FERC") regulates the
transportation and sale for resale of natural gas in interstate commerce
pursuant to the Natural Gas Act of 1938 (the "NGA") and the Natural Gas Policy
Act of 1978 (the "NGPA"). In the past, the federal government has regulated the
prices at which oil and gas could be sold. Currently, sales by producers of
natural gas, and all sales of crude oil, condensate and natural gas liquids can
be made at uncontrolled market prices, but Congress could reenact price controls
at any time.
Commencing in April 1992, the FERC issued a series of orders, Order No.
636, Order No. 636-A, and Order No. 636-B ("Order No. 636"), which require
interstate pipelines to provide transportation separate, or "unbundled", from
the pipelines' sales of gas. Also, Order No. 636 requires pipelines to provide
open-access transportation on a basis that is equal for all gas shippers.
Although Order No. 636 does not directly regulate WRT's activities, the FERC has
stated that it intends for Order No. 636 to foster increased competition within
all phases of the natural gas industry.
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<PAGE>
It is unclear what impact, if any, increased competition within the natural gas
industry under Order 636 will have on WRT's activities. Although Order 636,
assuming it is upheld in its entirety, could provide WRT with additional market
access and more fairly applied transportation service rates, Order No. 636 could
also subject WRT to more restrictive pipeline imbalance tolerances and greater
penalties for violation of those tolerances. The FERC has issued final orders of
virtually all Order No. 636 pipeline restructuring proceedings. Order No. 636
was upheld in all principal respects by the D. C. Circuit Court of Appeals.
FERC has recently announced its intention to reexamine certain of its
transportation-related policies, including the appropriate manner for setting
rates for new interstate pipeline construction and the manner in which
interstate pipelines release transportation capacity under Order No. 636. While
any resulting FERC action would affect WRT only indirectly, these inquiries are
intended to further enhance competition in natural gas markets.
WRT's natural gas gathering operations may be or become subject to safety
and operational regulations relating to the design, installation, testing,
construction, operation, replacement, and management of facilities. Pipeline
safety issues have recently become the subject of increasing focus in various
political and administrative arenas at both the state and federal levels. WRT
cannot predict what effect, if any, the adoption of additional pipeline safety
legislation might have on its operations, but does not believe that any adverse
effect will be material.
Additional proposals and proceedings that might affect the oil and gas
industry are pending before the Congress, FERC, and the courts. WRT cannot
predict when or whether any such proposals may become effective. In the past,
the natural gas industry has been very heavily regulated. There is no assurance
that the current regulatory approach pursued by the FERC will continue
indefinitely into the future.
Notwithstanding the foregoing, it is not anticipated that compliance with
existing federal, state and local laws, rules and regulations will have a
material adverse effect upon the capital expenditures, earnings or competitive
position of WRT.
C. DESCRIPTION OF ASSETS OF WRT
1. PRINCIPAL OIL AND GAS PROPERTIES
WRT owns interests in a number of producing oil and gas properties located
along the Louisiana Gulf Coast and is serving as the operator on substantially
all such properties with the exception of the West Cote Blanche Bay Field which
is operated by Texaco, Inc. The following table presents certain information as
of December 31, 1996, respecting WRT's net interests in its producing oil and
gas properties, including those held through joint ventures:
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<PAGE>
<TABLE>
<CAPTION>
Producing Shut-In Wells Acreage Proved Reserves (2)
Wells
Property (1) Gross Net Gross Net Gross Net Gas Oil Total
------------ ----- ---- ----- ----- ------ ------ ------ ------ ------
(MMcf) (MBbls) (MBoe)
------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Abbeville (3) .......... 2 1.4 0 0.0 60 42 249 3 45
Bayou Penchant (3) ..... 7 7.0 5 5.0 1360 1360 5767 25 986
Bayou Pigeon ........... 11 9.9 2 2.0 1490 1490 831 317 456
Deer Island ............ 6 5.4 0 0.0 412 412 3541 171 761
East Hackberry ......... 22 11.8 63 32.8 3582 1791 2240 1661 2034
Golden Meadow .......... 1 1.0 0 0.0 171 171 1063 29 206
Lac Blanc .............. 3 0.2 6 4.0 4841 2887 90 0 15
Napoleonville .......... 3 3.0 2 2.0 278 278 137 326 348
Tigre Lagoon ........... 1 0.3 2 0.5 265 66 0 0 0
West Hackberry ......... 7 7.0 18 18.0 592 592 0 31 31
West Cote Blanche Bay(3) 56 26.0 336 168.0 5892 2946 1213 11360 11562
Other Wells ............ 1 0.4 6 3.8 1294 456 0 0 0
--- ---- --- ----- ------ ------ ------ ------ ------
Total at year-end ...... 120 73.4 440 236.1 20,237 12,491 15,131 13,923 16,444
</TABLE>
- ----------
(1) Substantially all properties are located in south Louisiana.
(2) Represents proved reserves attributable to properties as estimated by
independent petroleum engineers, Netherland, Sewell & Associates, Inc.
("NSAI"). The proved reserves are shown at SEC PV10 values. These reserves
are calculated using year-end prices at 12/31/96, which were $25.93/Bbl
and $3.99/Mcf. "PV10" means estimated future net revenue, discounted at a
rate of 10% per annum, before income taxes and with no price or cost
escalation or de- escalation in accordance with guidelines promulgated by
the Securities and Exchange Commission.
(3) Acreage subject to depth limitations.
A. ABBEVILLE FIELD. The Abbeville Field, purchased in March 1995, situated
on dry land near Abbeville in Vermilion Parish, Louisiana, was first discovered
by Continental Oil Company (Conoco) in 1939. WRT acquired approximately 70% of
the working interest before payout (approximately 67% after payout) with an
average net revenue interest of approximately 54% before payout (51% after
payout) in approximately 60 gross acres in the field. The three tracts acquired
contain varying depth limitations. In one tract WRT acquired only the rights
below 9,550 feet. Another tract is limited to depths from the surface down to
13,000 feet. The third tract contains both leases without depth limitations and
leases with depth limited from the surface to 13,000 feet. The two wells in the
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Abbeville Field produce primarily gas. During 1995, WRT successfully recompleted
one gas well in the Abbeville Field. During 1996, both of the wells were
recompleted to new producing horizons but one of the wells produced only a
minimal amount of gas before depleting.
B. BAYOU PENCHANT FIELD. The Bayou Penchant Field, purchased in January
1995, consists of approximately 1,360 gross acres of leases, and includes seven
producing wells, five shut-in wells and one salt water disposal well in
Terrebonne Parish, Louisiana. WRT's working interest is 100% (approximately 86%
average net revenue interest) in all but one well, the CL&F No. 7 well where
WRT's working interest is approximately 70% (59% net revenue interest). The
Bayou Penchant Field is located in a marshy area with existing dredged canals
and produces primarily gas from multiple productive zones, ranging in depth from
2,400 to 10,400 feet. During 1995, there were eight successful gas zone
recompletion attempts in the Bayou Penchant Field and no failures. In addition,
two development wells were drilled, one resulting in a dry hole and the other
successfully completed as a producing gas well. During 1996, two wells were the
subject of unsuccessful recompletion attempts. Both of these operations involved
the use of relatively low cost "through-tubing" techniques utilizing wireline
equipment to perform the operations. A third well was also targeted for the use
of similar procedures but the intended operations were aborted when it was
discovered that the well's production tubing is damaged. Preparations are
currently being made to perform this recompletion utilizing a workover rig.
C. BAYOU PIGEON FIELD. The Bayou Pigeon Field, purchased in March 1995,
consists of approximately 1,490 gross acres located in the marshy coastal waters
on both sides of Little Bayou Pigeon in Iberia Parish, Louisiana. WRT's working
interest is 100% (approximately 80% average net revenue interest). See Section
IV - "Historical and Background Information, Title to Oil and Gas Properties".
Production from the Bayou Pigeon Field is predominately oil from multiple
productive zones at depths ranging from 6,900 to 12,000 feet. During 1995, three
successful gas zone and three successful oil zone recompletions were performed
in the Bayou Pigeon Field with one attempt being unsuccessful. One new
development well was successfully drilled for previously untapped reserves and
completed as a producing oil well. During 1996, one well was successfully
recompleted.
D. DEER ISLAND FIELD. The Deer Island Field, purchased in March 1995, is
located in marshy, inland waters in Terrebonne Parish, Louisiana and is accessed
by work boat through dredged canals. WRT acquired a 100% working interest
(approximately 73% net revenue interest before payout and 66% thereafter) in
approximately 412 acres, comprised of two non-contiguous lease blocks in the
Deer Island Field. Current production from the southern lease block is primarily
gas from multiple producing zones at depths ranging from 8,200 to 10,200 feet.
The two wells in the northern lease block produce from an oil sand at a depth of
approximately 10,350 feet. The interests in both tracts were originally acquired
through two separate subleases from Exxon. In the southern lease block, the
interest is composed of three tracts with varying depth limitations, with the
greatest depth being approximately 10,500 feet. Exxon retained the rights below
10,500 feet and Exxon or other producers own the rights to the other outstanding
depths. In the northern lease block, the interest is limited to depths between
the surface and 10,720 feet. During 1996, LLOG Exploration Company completed a
new well into a unit in which WRT holds an interest. Although not yet approved
by the State of
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Louisiana, WRT will ultimately hold a minimum working interest of approximately
38.9% (34% NRI) of production from this unit.
E. EAST HACKBERRY FIELD. In February 1994, WRT purchased a 100% working
interest (approximately 82% average net revenue interest) in certain producing
oil and gas properties situated in the East Hackberry Field in Cameron Parish,
Louisiana. The purchase included two separate lease blocks, the Erwin Heirs
Block, originally developed by Gulf Oil Company and the Texaco State Lease
("S/L") 50 Block, originally developed by Texaco, Inc. The East Hackberry Field
is located along the western shore of Lake Calcasieu in Cameron Parish,
Louisiana approximately 80 miles west of Lafayette and 15 miles inland from the
Gulf of Mexico. The properties cover approximately 3,582 acres of oil and gas
leases, together with 22 productive wells and 63 shut-in wells that were
originally drilled by Gulf Oil Company and Texaco.
In September 1994, WRT sold an overriding royalty interest in certain
producing oil and gas wells situated in the East Hackberry Field, retaining a
50% net working interest. The overriding royalty interest provides for payment
to the purchaser of 50% of the net profits attributable to the wells covered by
the arrangement until the purchaser recovers 150% of its cash investment and
37.5% thereafter. The agreement further provides that for an additional royalty
purchase price equal to 50% of WRT's future cost of drilling new wells or
recompleting existing wells in new reservoirs, the purchaser may elect to retain
an identical royalty interest in the new wells. WRT retains complete operational
control over the East Hackberry Field. During 1995, WRT made 20 successful oil
zone recompletions and one successful gas zone recompletion. Seven such
recompletion attempts proved to be unsuccessful. In addition, WRT attempted
three sidetracks, two of which were completed successfully as oil wells and one
of which missed the geological objective resulting in a dry hole. During 1996,
three wells were successfully recompleted. Additionally, operations were
conducted to convert six wells in this field to gas-lift. Two wells were the
subject of unsuccessful recompletion attempts.
F. GOLDEN MEADOW FIELD. The Golden Meadow Field, purchased in March 1995,
is located in marshy, inland waters in Lafourche Parish, Louisiana and was
discovered by Texaco in 1961. The portion of the Golden Meadow Field in which
WRT owns a 100% working interest (approximately 79% average net revenue
interest) covers approximately 171 acres. The Golden Meadow Field is presently
producing from a gas bearing sand at a depth of approximately 12,500 feet.
During 1996, the sole producing well in Golden Meadow was reworked to repair a
downhole mechanical failure.
This work was successful and the well was restored to production.
G. LAC BLANC FIELD. The Lac Blanc Field, purchased in July 1993, consists
of 4,841 gross acres and underlies a marsh and shoreline near the community of
Pecan Island in Vermilion Parish, Louisiana and was first discovered in 1975.
WRT purchased a 91% average working interest (55% average net revenue interest)
in acreage within the Lac Blanc Field from an affiliate of Freeport-McMoRan,
Inc. The sellers retained a 20% back-in working interest in any new wells
drilled in previously undeveloped fault blocks. The field has produced
approximately 150 Bcf of gas and 1.1 MMBbls of oil since its discovery, but in
recent years it has experienced substantial
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<PAGE>
production declines, which were accompanied by substantial increases in water
production rates. Three unsuccessful attempts were made during 1995 to restore
production to this field and compensate for the reduced gas volumes caused by
the unexpected onset of water production. Two workover attempts were made in the
Exxon Fee No. 23 well. A split in the casing ultimately resulted in the loss of
future utility of the well. During 1996, one "through-tubing" recompletion was
attempted but this operation was aborted due to encountered obstructions in the
well's production tubing. In connection with the purchase of the Lac Blanc
Field, WRT established a plugging and abandonment escrow arrangement.
H. NAPOLEONVILLE FIELD. The Napoleonville Field is located in Assumption
Parish, Louisiana on dry land and produces primarily oil from multiple pay zones
which range in depth from 9,500 to 10,000 feet. WRT's interest in the
Napoleonville Field was purchased in exchange for the issuance of 1,300,000
shares of its Common Stock. During 1995, three unsuccessful attempts were made
to recomplete two shut-in wells in this field. At this time there are still
three producing wells, two shut- in wells, and one salt water disposal well.
During 1995, WRT purchased for approximately $1.2 million and $600,000,
respectively, certain additional leasehold acreage in the Napoleonville Field
and saltwater disposal facilities from BSFI. At the time of the purchase, BSFI,
as a 5.5% shareholder of WRT, was a related party.
I. WEST HACKBERRY FIELD. In November 1992, WRT purchased a 100% working
interest (approximately 80% average net revenue interest) in acreage within the
West Hackberry Field, in Cameron Parish, Louisiana. The field was discovered in
1928 and was developed by Superior Oil Company (now Mobil) between 1938 and
1988. In connection with its purchase of the East Hackberry Field properties,
WRT purchased a 7.5% overriding royalty interest in its West Hackberry Field
that was retained by the original seller of the property. As a result, WRT's net
revenue interest in the West Hackberry Field increased from approximately 80% to
approximately 87.5%, effective March 1, 1994.
J. WEST COTE BLANCHE BAY FIELD. Texaco Exploration and Production, Inc.
("Texaco"), the current operator of the property, discovered the West Cote
Blanche Bay Field in 1938 (State Lease 340). This field lies approximately five
miles off the coast of Louisiana in St. Mary Parish in a shallow bay, with water
depths averaging seven to eight feet, and overlies one of the largest salt dome
structures on the Gulf Coast. Tesla, a wholly owned subsidiary of WRT which was
subsequently merged into WRT, acquired from Texaco a 6.25% working interest in
the West Cote Blanche Bay Field in July 1988. In April 1995, Tesla completed the
purchase of an additional 43.75% working interest in the West Cote Blanche Bay
Field from an affiliate of Benton Oil and Gas Company and two affiliates of
Tenneco, Inc. whereby the sellers conveyed their interests in the shallow
depths, but retained their interests in all depths below approximately 10,500
feet. Texaco is the owner of the remaining 50% working interest and continues to
operate the field. During 1995, ten successful oil and three successful gas
recompletions were made with two attempts being unsuccessful. Additionally, five
new development oil wells and one new development gas well were drilled. One
development well was unsuccessful. During 1996, nine successful oil
recompletions and one
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<PAGE>
successful gas recompletion were made with two attempts being unsuccessful. One
unsuccessful shallow attempt was made.
2. ACREAGE
The following table sets forth WRT's developed acreage at December 31,
1996. WRT did not own any undeveloped acreage at December 31, 1996.
Developed
Acreage (1)
GROSS Net
---------------------
Louisiana Onshore and State Waters 19,856 12,396
Texas Onshore 381 95
- --------------------------------- ---------------------
Total 20,237 12,491
- --------------------------------- ---------------------
- -----------
(1) Developed acreage is acreage assigned to producing wells for the spacing
unit of the producing formation. Developed acreage in certain of WRT's
properties that include multiple formations with different well spacing
requirements may be considered undeveloped for certain formations but have only
been included as developed acreage in the presentation above. Certain acreage is
subject to depth limitations. See Section C - "Description of Assets of WRT."
The oil and gas leases in which WRT has an interest are for varying
primary terms and may require the payment of delay rentals to continue the
primary terms. The leases may be surrendered by the operator at any time by
notice to the lessors, by the cessation of production or by failure to make
timely payment of delay rentals.
3. DRILLING AND RECOMPLETION ACTIVITIES
The following table contains data respecting certain of WRT's field
operations during the years ended December 31, 1996, 1995 and 1994. No
exploratory wells were drilled by WRT during the periods presented.
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Year Ended December 31
---------------------------------------
1996 1995 1994
----------- ---------- -----------
Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
Recompletions, side-tracks
and deepenings
Oil .......................... 12 5.7 35 19.5 23 9.9
Gas .......................... 5 3.2 17 12.7 5 3.2
Non-Productive ............... 7 4.7 18 13.1 8 6.7
-- ---- -- ---- -- ----
Total ................ 24 13.6 70 45.3 36 19.8
Development Wells
Oil .......................... 0 0 6 3.5 1 1.0
Gas .......................... 0 0 2 1.1 1 0.1
Non-Productive ............... 1 .5 2 1.1 -- --
-- ---- -- ---- -- ----
Total ................ 1 .5 10 5.7 2 1.1
4. TITLE TO OIL AND GAS PROPERTIES
It is customary in the oil and gas industry to make only a cursory review
of title to undeveloped oil and gas leases at the time they are acquired and to
obtain more extensive title examinations when acquiring producing properties.
However, with respect to future undeveloped leasehold and producing property
acquisitions, if any, WRT will conduct title examinations on material portions
of such properties in a manner generally consistent with industry practice.
Certain of WRT's oil and gas properties may be subject to title defects,
encumbrances, easements, servitudes or other restrictions, none of which, except
as noted below, in management's opinion, will in the aggregate materially
restrict WRT's operations.
During 1996, WRT received notice that a third party is claiming that WRT's
title has failed as to approximately 43 acres in the Bayou Pigeon Field. Some or
all of the acreage in dispute is considered to be productive in three separate
production units. Under the assumption that WRT's title is flawed, WRT's working
interest in three units may be reduced to approximately 7% (5% NRI), 74% (63%
NRI), and 95% (72% NRI). Financial statements as of and for the year ended
December 31, 1995 and 1996, reflect operating results and proved reserves
discounted for a substantial portion of this possible title failure. As the
alleged title failure predates its ownership of the field, WRT is currently
evaluating its recourse against the predecessors-in-title relative to this
issue.
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<PAGE>
5. RESERVES
The oil and gas reserve information set forth below represents only
estimates. Reserve engineering is a subjective process of estimating volumes of
economically recoverable oil and gas that cannot be measured in an exact manner.
The accuracy of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation. As a result, the
estimates of different engineers often vary. In addition, the results of
drilling, testing and production may justify revisions of such estimates.
Accordingly, reserve estimates often differ from the quantities of oil and gas
that are ultimately recovered. Estimates of economically recoverable oil and gas
and of future net revenues are based on a number of variables and assumptions,
all of which may vary from actual results, including geologic interpretation,
prices, and future production rates and costs. The following table sets forth
estimates of the proved oil and gas reserves of WRT at December 31, 1996, as
estimated by WRT's independent petroleum engineers.
Proved Reserves
-------------------------------
Developed Undeveloped Total
----------------------------------
Oil (MBbls) 9,550 4,373 13,923
- ------------------------------------------------------------------
Gas (MMcf) 11,687 3,434 15,121
- ------------------------------------------------------------------
Equivalents (MBoe) 11,498 4,945 16,443
- ------------------------------------------------------------------
Year-end present value of estimated
future net revenues before income
tax, discounted 10% per annum
($000s) 67,527 31,140 98,667
- ------------------------------------------------------------------
The estimated future net revenues set forth above were determined by using
reserve quantities of proved reserves and the periods in which they are expected
to be developed and produced based on economic conditions prevailing at December
31, 1996. The estimated future production is priced at December 31, 1996,
($25.93 per Bbl and $3.99 per Mcf) without escalation. Such pricing is required
for SEC disclosure purposes. However, for the projections, the Debtor has
utilized prices of $20.83 per Bbl and $2.04 per Mcf.
In compliance with federal law, WRT files annual reports with the Energy
Information Agency of the U.S. Department of Energy with respect to its
production of oil and gas during each calendar year and its estimated oil and
gas reserves at the end of each year. The reserve values set forth above and in
WRT's Consolidated Financial Statements attached hereto may vary within five
percent from the estimates previously provided to the Department of Energy by
WRT due to WRT's practice of including in its report to the U.S. Department of
Energy all oil and gas production and reserves attributable to wells for which
WRT serves as operator.
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6. PRODUCTION, PRICES AND COST
WRT sells its oil and gas at the wellhead and does not refine petroleum
products. Other than normal production facilities, WRT does not own an interest
in any bulk storage facilities or pipelines. As is customary in the industry,
WRT sells its production in any one area to relatively few purchasers, including
transmission companies that have pipelines near WRT's producing wells. Gas
purchase contracts are generally on a short-term 30-day "spot market" basis and
usually contain provisions by which the prices and delivery quantities for
future deliveries will be determined. Oil production is sold at prices based on
postings plus a premium. The following table contains certain historical data
respecting the average sales prices received and the average production costs
incurred by WRT during the years ended December 31, 1996, 1995 and 1994.
Year Ended December 31
1996 1995 1994
--------- --------- ---------
Production Volumes:
Oil (MBbls) ............... 615 778 270
--------- --------- ---------
Gas (MMcf) ................ 3,629 7,403 3,503
--------- --------- ---------
Oil equivalents (MBoe) .... 1,220 2,012 854
--------- --------- ---------
Average Prices:
Oil (MBbls) ............... $ 21.36 $ 16.59 $ 16.44
Gas (MMcf) ................ $ 2.62 $ 1.59 $ 1.88
Oil equivalents (MBoe) .... $ 18.54 $ 12.25 $ 12.92
--------- --------- ---------
Average production costs (per MBoe) $ 6.97 $ 4.74 $ 3.60
--------- --------- ---------
7. FACILITIES AND EQUIPMENT
As part of management's plans to reduce operating costs and overhead, WRT
relocated its principal offices to Lafayette, Louisiana in 1995, occupying
approximately 12,000 square feet of leased premises. WRT moved its corporate
offices from The Woodlands, Texas, where it occupied approximately 24,000 square
feet, to Houston, Texas where it occupies approximately 7,000 square feet of
leased space. In connection with the Chapter 11 Reorganization Case, the Court
has approved WRT's rejection of the office lease in The Woodlands, Texas. WRT
owns an industrial building located in Lafayette, Louisiana with approximately
12,500 square feet of office, warehouse and shop space. This space currently
houses WRT's technology and well logging equipment.
WRT's cased hole logging equipment includes two wireline logging trucks,
two skid mounted wireline units, four sets of small diameter radioactive well
logging tools, five sets of large
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diameter radioactive well logging tools, and all necessary wireline and pressure
control equipment for onshore and offshore well logging.
In December 1994, WRT sold four drilling and workover rigs, obtained in
connection with certain oil and gas property acquisitions, to an oil field
service contractor for a total consideration of $3.9 million. The purchaser gave
a 6% secured promissory note in exchange. No gain or loss was recognized at the
date of the sale and the $1.0 million gain on the sale was deferred and was
being realized over the life of the note. Concerns about the ability of the
purchaser to perform pursuant to the terms of the contract resulted in WRT
reversing, in September 1995, the deferred gain. In addition, WRT negotiated the
return of all but one drilling and workover rig and the cancellation of the
related note receivable. The Debtor has employed legal counsel to compel
turnover of such rig.
In December 1994 and May 1995, WRT sold to an oil field service contractor
marine and oil field service equipment for a total consideration of $5.2
million. The purchaser gave two 6% secured promissory notes in exchange. No gain
or loss was recognized at the date of the sale and the $800,000 gain on the sale
was deferred and was being realized over the life of the notes. Concerns about
the ability of the purchaser to perform pursuant to the terms of the contracts
resulted in WRT reversing, in September 1995, the deferred gain. Prior to filing
the Chapter 11 Case, WRT was negotiating with the purchaser for the return of
the equipment and cancellation of the related notes receivable. The Debtor has
employed legal counsel to compel turnover of the equipment.
D. EVENTS LEADING TO CHAPTER 11 FILING
1. SENIOR NOTE OFFERING AND CREDIT FACILITY
In February 1995, WRT offered 100,000 Units consisting of $100.0 million
aggregate principal amount of 13 7/8% Senior Notes due 2002 and warrants to
purchase an aggregate of 800,000 shares of WRT's Common Stock (the "Warrants")
(collectively, the "Offering"). The net proceeds from the Offering were used to
acquire the Remaining LLOG Properties, to repay both the Bridge Loan and
substantially all borrowings under the Credit Facility (defined herein), to
acquire an additional working interest in the West Cote Blanche Bay Field and
for general corporate purposes.
In December 1994, WRT entered into a $40.0 million credit facility (the
"Credit Facility") with International Nederlanden (U.S.) Capital Corporation
("INCC") that is secured by substantially all of WRT's assets. WRT borrowed
$15.0 million thereunder to purchase the Initial LLOG Property. In March 1995,
$12.0 million of the outstanding borrowings under the then existing borrowing
base of the Credit Facility was repaid from the proceeds of the Offering. During
1995, WRT borrowed an additional $12.0 million under the Credit Facility,
bringing the outstanding borrowings to $15.0 million, the maximum amount of
borrowings available under the borrowing base of the Credit Facility. On
December 31, 1995, the Credit Facility converted to a term loan
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whereby quarterly principal payments of one-sixteenth of the outstanding
indebtedness are due and payable.
2. 1995 DEVELOPMENT PLAN
Upon completion of the acquisitions, and commencing in May 1995, WRT
initiated a significant capital expenditure program to increase oil and gas
production levels in each of its fields. This program consisted of 70 workover,
side track and recompletion projects and 10 new development wells. Funding was
provided from operating cash flow, remaining proceeds from the Offering and
borrowings under WRT's existing revolving Credit Facility. WRT's production
levels increased on a gas equivalent (Mcfe) basis from and after March 1995,
when the oil and gas property acquisitions were completed, through September
1995; however, the production increases were realized at a slower pace than
expected earlier in the year and the peak levels ultimately achieved were less
than anticipated.
The lower than expected level of production resulted from various factors
including a combination of ordinary production declines, unexpected losses of
production from several key wells, mechanical difficulties in the Lac Blanc
Field and significant production declines in the predominantly oil producing
West Cote Blanche Bay Field, which is not operated by WRT. Contributing
significantly to the shortfall in anticipated production rates were three major
well projects which proved to be unsuccessful in September 1995, for which WRT
expended a total of approximately $3.6 million. Also contributing to lower than
expected net revenues and operating cash flow was a significant decline in oil
and gas prices during the third and early fourth quarters of 1995. Average oil
and gas prices received in the third quarter of 1995 were 9% and 18% lower,
respectively, than those received during the corresponding quarter of the
previous year. The lower than expected production rates, together with decreased
oil and gas prices during the third quarter of 1995, had a significant negative
effect on WRT's liquidity and cash flow from operations. Due to the lack of
success in its exploitation program and the correspondingly lower level of
operating cash flow, WRT fully utilized the $15 million borrowing base available
under the revolving Credit Facility in the early fourth quarter of 1995.
3. CHANGE IN STRATEGY AND CORPORATE STRUCTURE
Based on operating results for the quarter ended September 30, 1995, WRT
had not yet realized the oil and gas production levels required at then current
prices and costs to support WRT's capital requirements, fund existing debt
service on WRT's Senior Notes and pay dividends on its 9% Convertible Preferred
Stock. In early October 1995, in response to liquidity and cash flow concerns,
WRT changed its focus from acquisition and development of non-producing
reserves, to conservation of cash resources and maintenance of existing
producing properties. WRT curtailed its activities to the minimum level of
maintenance necessary to operate prudently its producing oil and gas wells. All
other activities, including prospect acquisitions, new drilling, and development
of WRT's proved, non-producing and undeveloped reserves ceased.
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In connection with this strategy, WRT made certain changes to its
corporate structure and organization aimed at reducing costs and improving
operations. On November 10, 1995, Steven S. McGuire resigned as a director,
Chairman of the Board and Chief Executive Officer of WRT. Samuel C. Guy, WRT's
Executive Vice President at the time, also resigned as a director. Mr. Guy's
employment contract, which expired on February 29, 1996, was not renewed by WRT.
The Board of Directors appointed Raymond P. Landry, previously President and
Chief Operating Officer of WRT, to the position of Chairman of the Board and
Chief Executive Officer. WRT also implemented a plan to reduce general and
administrative expenses. WRT's oil and gas operations were consolidated in
Lafayette, Louisiana and the remaining corporate offices were moved from The
Woodlands, Texas to smaller offices located in Houston, Texas. WRT reduced its
workforce from 76 in October 1995 to 35 in March 1996. These reductions,
primarily from WRT's research and development activities and wireline/logging
operations, were consistent with WRT's focus on conservation of cash and
maintenance of existing producing properties.
4. IMPAIRMENT OF LONG-LIVED ASSETS
Effective December 31, 1995, WRT adopted Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121") - "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." WRT recorded a
non-cash charge of $103.3 million in connection with the adoption of this new
accounting standard.
Based upon the preliminary oil and gas reserve data then available, WRT
estimated that in October 1995 it would recognize in the fourth quarter a $60 to
$65 million charge related to the adoption of SFAS No. 121. However, final
year-end estimates of proved oil and gas reserves resulted in significant
downward revisions from the amounts estimated in October 1995. These downward
revisions were partially the result of differences in professional opinion
between WRT's current and predecessor independent engineering firms. These
differences, many of which relate to classification of reserves within the
different oil and gas reserve categories (i.e. proved, probable and possible)
are due to the numerous engineering, geological and operational assumptions that
generally are derived from limited data. Additional downward revisions are
attributed to field development activity and production data during the year.
Drilling and recompletion activities, including the unsuccessful well projects
in WRT's East Hackberry and Bayou Penchant fields and the mechanical failure of
the Lac Blanc Exxon Fee #23 well resulted in significant reserve losses. These
downward revisions resulted in WRT recognizing an impairment of oil and gas
properties of approximately $95 million. Of this $95 million impairment, WRT
believes that approximately 46% (or approximately $44 million) is attributable
to the differences in professional opinion, the October 1995 preliminary
estimates having been based on the prior professionals' reports.
WRT also recorded a non-cash charge related to certain rig, marine and
field equipment owned or securing notes receivable. WRT originally expected that
this equipment would provide drilling and field services in WRT's oil and gas
development program. Due to liquidity problems and the reduced level of
development activity, WRT did not utilize these assets to the extent originally
anticipated and accordingly, recovery of the related carrying cost was largely
lost. As a
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result of the adoption of SFAS No. 121, WRT has recorded an impairment of $7.9
million related to this equipment.
5. FILING OF REORGANIZATION CASE
WRT experienced further decreases in oil and gas production and related
cash flows in late 1995 and early 1996, which further deteriorated WRT's already
weakened financial condition. As a result, WRT was not generating and did not
expect to generate in the near term sufficient cash flow to meet its existing
obligations, including: the $6.9 million interest payment on Senior Notes due
March 1, 1996, trade payable obligations remaining from WRT's 1995 capital
expenditure program, principal and interest due on the Credit Facility,
dividends on the Preferred Stock and ongoing field operating and general and
administrative expenses. As liquidity problems became more severe, WRT concluded
that a comprehensive financial restructuring would provide the best result to
the various stakeholders in WRT. Consequently, after discussions with WRT's
financial and legal advisors, INCC and certain holders of the Senior Notes,
WRT's Board of Directors determined it would be desirable to effectuate its
financial restructuring through a Chapter 11 filing.
V.
SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE
During the course of the Debtor's Chapter 11 case, numerous pleadings have
been filed with the Bankruptcy Court and numerous hearings have been conducted.
The following is a general description of the more significant events which have
transpired during the pendency of the case. For a comprehensive listing of the
pleadings which have been filed in the case, however, the docket for the Chapter
11 Case should be consulted and the relevant pleadings referenced thereby may be
obtained and reviewed from the Bankruptcy Court.
A. EMPLOYMENT OF KEY PROFESSIONALS
1. BANKRUPTCY COUNSEL
On February 14, 1996, the Petition Date, the Debtor filed an Application
of Debtor in Possession for an Order Authorizing the Retention of Sheinfeld,
Maley & Kay, P.C. as Counsel for its bankruptcy reorganization. On February 15,
1996, the Bankruptcy Court approved such employment. On the Petition Date, the
Debtor also filed an Application to Employ Attorney, requesting authority to
retain the firm of DeBaillon & DeBaillon as local counsel for the case. On
February 15, 1996, the Bankruptcy Court entered an Order Authorizing Retention
of Attorney for the Debtor-in-Possession, approving DeBaillon & DeBaillon as
local counsel.
2. GENERAL CORPORATE AND OIL AND GAS LAW COUNSEL; SPECIAL COUNSEL FOR
SECURITIES LITIGATION
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On or about March 4, 1996, the Debtor filed an Application to Employ
Special Counsel for Chapter 11 Debtor in Possession, requesting authority to
employ the firm of Porter & Hedges, LLP to assist the Debtor in defending
against the Securities Litigation and advising the Debtor as to matters
involving corporate, securities, and oil and gas law. On March 5, 1996, the
Bankruptcy Court entered an Order Authorizing Employment of Special Counsel for
Chapter 11 Trustee [sic.], approving the Debtor's retention of Porter & Hedges.
3. OIL & GAS ENGINEERS
On or about March 13, 1996, the Debtor filed an Application to Retain
Netherland, Sewell & Associates, Inc. as Engineering Consultants. Netherland,
Sewell & Associates, Inc. ("NSAI") had been retained by the Debtor prior to
bankruptcy to provide a valuation of the Debtor's oil and gas reserves, which
valuation was not complete by the time of the Debtor's Chapter 11 bankruptcy
filing. Therefore, the Debtor's Application sought approval to continue NSAI's
retention to enable completion of NSAI's report. On March 18, 1996, the
Bankruptcy Court entered an Order Authorizing Employment of Netherland, Sewell &
Associates, Inc. as Petroleum Engineering Consultants.
4. FINANCIAL ADVISORS
On or about February 26, 1996, the Debtor filed an Application for
Retention of Jefferies & Company, Inc. as Financial Advisor, seeking authority
to retain Jefferies & Company, Inc. to assist the Debtor in restructuring and/or
soliciting third party bids for the merger, sale, or other substantial
disposition of the Debtor's assets. On April 9, 1996, the Bankruptcy Court
entered an Order Approving Retention of Jefferies & Company, Inc. as Financial
Advisor.
5. ACCOUNTANTS
On or about March 4, 1996, the Debtor filed an Application for Authority
to Retain KPMG Peat Marwick LLP ("KPMG") as Accountants and Consultants to the
Debtor, seeking authority to retain KPMG for the purpose of providing accounting
and auditing services, tax guidance and return preparation, and general
financial advice including assistance with the bankruptcy restructuring efforts.
On March 5, 1996, the Bankruptcy Court entered an Order Authorizing the
Employment and Retention of KPMG Peat Marwick LLP as Accountants and Consultants
to the Debtor. KPMG commenced providing assistance with bankruptcy related
issues, including development of the Plan and Disclosure Statement, on or about
October 8, 1996.
B. APPROVAL OF CASH MANAGEMENT SYSTEM
On the Petition Date, the Debtor filed a Motion for Authority to Maintain
and Use Existing Depository Accounts and Business Forms (the "Cash Management
Motion"). The Cash Management Motion sought Court approval for maintenance of
the Debtor's pre-petition operational bank accounts and authorization to
continue use of its checks and other business forms without
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alteration or change. On or about February 16, 1996, the Bankruptcy Court
entered an order granting such requests.
C. OBTAINING AUTHORITY TO USE CASH COLLATERAL
The Debtor also filed an Emergency Motion for Use of Cash Collateral on
February 14, 1996, seeking authority to use proceeds from its oil and gas
production to continue funding operations. Among other Creditors, Internationale
Nederlanden (U.S.) Capital Corporation and Creditors holding oil and gas liens
against the Debtor's properties asserted and continue to assert a security
interest in cash generated from the Debtor's mineral production making it
necessary to obtain authority from the Bankruptcy Court pursuant to Section 363
of the Bankruptcy Code. On February 21, 1996, after notice and a hearing, the
Court entered a Preliminary Order authorizing Use of Proceeds from Oil and Gas
Operations (the "Preliminary Order").
Pursuant to the Preliminary Order, the Debtor was instructed to maintain a
Revenue Receipts Account, an Operating Account, a Suspended Royalty Trust
Account, and a Capital Distribution Account. All post-petition funds received by
the Debtor are to be initially deposited into the Revenue Receipts Account. From
there, production proceeds attributable to royalty owners, overriding royalty
owners and working interest owners are to be distributed to such owners on a
timely basis, at least monthly; provided, however, that any such distribution
which is to be setoff against joint interest billings for lease operating
expenses due from working interest holders is to be transferred to the Operating
Account instead, and any such distribution which is undetermined by a division
order is to be placed in the Suspended Royalty Trust Account. On the 28th day of
each month, the remaining proceeds in the Revenue Receipts Account are to be
disbursed to the Operating Account and Capital Distribution Account, in
accordance with the Debtor's budgeted expenditures. Mechanically, the Debtor was
preliminarily authorized to expend funds for general and administrative expenses
from the Operating Account in accordance with the Budget attached to the motion,
or as supplemented by written consent from INCC and the Committee. To the extent
of the Debtor's use of cash, INCC obtained a post-petition lien and security
interest against post-petition funds received by the Debtor, other than those
attributable to royalties and overriding royalties, subject only to competing
priority claims and lienholders.
On March 5, 1996, the Bankruptcy Court entered a Final Order Authorizing
Use of Proceeds from Oil and Gas Operations (the "Final Order"). Pursuant to the
Final Order, the procedures set forth in the Preliminary Order were fully
ratified and continued in force, with the substitution of a new initial budget.
As to the time period following the initial budget, the Debtor has been
submitting proposed monthly Budget Extensions to INCC and the Committee for
approval. In addition to the post-petition security given to INCC in the
Preliminary Order, the Final Order also provides that as to Creditors holding
perfected liens or privileges on the Debtor's post-petition revenue, such
Creditors shall have a post petition lien and security interest in funds
belonging to the Debtor from its operations, second in priority to the
post-petition lien granted to INCC, in the event that the Debtor's use of such
revenue results in a diminution in the value of such Creditor's secured
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position. As of the filing of this Disclosure Statement, the Debtor is still
operating under the terms of the Final Order.
D. EMPLOYMENT STABILIZATION
The following significant steps were taken by the Debtor to ensure
continuing employment of the Debtor's necessary staff.
1. EXECUTIVE SALARIES APPROVED
On the Petition Date, the Debtor filed a Verified Application for
Authorization to Compensate Officers and Directors, seeking approval to continue
payment of annual salaries to the Debtor's officers and directors, including its
President/CEO, Vice-President of Finance/CFO, Vice- President of Engineering and
Geology, Vice-President of Operations, and two other independent outside
directors. On March 27, 1996, the Bankruptcy Court entered an Order Authorizing
Debtor in Possession to Pay Compensation to Raymond P. Landry, Ronald E. Hale,
Wayne A. Beninger, and Tom C. Stewart.
2. REIMBURSEMENT OF EMPLOYEE EXPENSES & CONTRIBUTIONS TO 401K PLAN
On or about March 26, 1996, the Debtor filed a Motion for Authority to Pay
Pre-Petition Reimbursable Employee Expenses and Employer Matching Contributions
to the 401K Plan, requesting that it be permitted to reimburse pre-petition
employee expenses and to make matching 401K plan contributions which had fallen
due pre-petition, collectively in amounts not to exceed $4,000 per person, the
amount which would be allowable as a priority expense in bankruptcy. On April
30, 1996, the Bankruptcy Court entered an Order Authorizing Payment of
Pre-Petition Reimbursable Employee Expenses and Employer Matching Contributions
to the 401K Plan.
3. STAY BONUS
Finally, on August 23, 1996, the Debtor filed an initial Motion for
Authorization to Provide Employment "Stay Bonus" to Employees. The Motion was
subsequently denied without prejudice to the filing of an amended motion, due to
substantial changes which had occurred to the proposal, and on or about October
7, 1996, the Debtor filed a new Motion by WRT Energy Corporation for
Authorization to Provide Employment "Stay Bonus" to Employees. As described in
the Motion, prior to bankruptcy WRT's Board of Directors determined that it was
necessary to provide a "stay bonus" to facilitate retention of employees during
the Chapter 11 Case in view of the uncertainties of the future of the Company.
The policy approved by the Board, and proposed in the Motion, was to provide (1)
certain designated "key" employees with a stay bonus of 50% of salary earned
subsequent to the Petition Date, limited to a maximum of six months salary; and
(2) non-"key" employees with a stay bonus of 25% of salary earned subsequent to
the Petition Date, limited to maximum of three months' salary. A condition
precedent to the receipt of such bonus is continued employment through
confirmation or a sale of a substantial portion of the Debtor's properties,
unless
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permitted otherwise by order of the Bankruptcy Court under extenuating
circumstances. On November 6, 1996, the Bankruptcy Court entered an Order
Authorizing Debtor to Provide Employment "Stay Bonus" to Employees. Thereafter,
on December 17, 1996, the Debtor filed a motion requesting approval to pay the
stay bonus to Kathleen Ruegsegger under such extenuating circumstances. A
hearing is set on the motion for January 21, 1997.
E. APPOINTMENT OF OFFICIAL COMMITTEE OF UNSECURED CREDITORS
On or about March 11, 1996, the United States Trustee's Office appointed
an official Committee of Unsecured Creditors to participate in the Chapter 11
Case. Upon consideration of the Debtor's schedules and solicitation to the
largest Creditors in the Case, the Committee was compiled by the U.S Trustee.
Since the Committee's appointment, the Committee has retained professionals in
the Case to assist its participation in the case including Stroock & Stroock &
Lavan as its bankruptcy counsel, along with Draper & Culpepper as local counsel,
and Coopers & Lybrand as its financial advisors.
F. DENIAL OF REQUEST FOR APPOINTMENT OF LIEN CREDITORS COMMITTEE
On March 7, 1996, Halliburton Company and certain other lien creditors
filed a motion for appointment of a Lien Creditor's Committee in the Case. After
due consideration by the Court, such request was denied. An additional request
was lodged by Halliburton in connection with the Debtor's request for authority
to obtain post-petition financing, but such request has not been granted and no
lien creditor's committee has been approved or appointed in the case to date. To
accommodate certain concerns of the lien creditors in the case, however, Texaco,
Inc. was placed on the Committee to act as a representative of all lien
creditors in the case.
G. ESTABLISHMENT OF CLAIMS BAR DATE
On April 3, 1996, the Debtor filed a motion to establish deadline for the
filing of Claims in the case, requesting that the deadline for the filing of
proofs of claims be set as July 1, 1996. The establishment of a claims bar date
was critical to the Debtor's ability to determine its outstanding liabilities,
especially oil and gas lien Claimants. By order entered on April 8, 1996, the
Bankruptcy Court granted the motion and established July 1, 1996, as the bar
date. Thereafter, the Debtor provided direct notice to all known Creditors, and
publication notice, via applicable regional newspapers, was provided to all
unknown Creditors. On June 26, 1996, the Debtor filed a motion for establishment
of a supplemental deadline requesting an extended deadline of August 23, 1996,
for certain parties whose addresses were discovered subsequent to July 1, 1996
(listed on Exhibit "A" to the motion). The Bankruptcy Court granted the motion
and established the supplemental bar date of August 23, 1996 as to such
additional parties. Several Creditors have also independently filed motions for
extension of the bar date, and the Bankruptcy Court has provided certain of the
Creditors with an extended deadline in accordance with their requests. Finally,
in connection with the denial of Continental Land & Fur Co.'s motion to compel
release of certain escrowed production proceeds, the Bankruptcy Court
established a new deadline of January 16,
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1997, for the filing of proofs of claims by Claimants asserting Claims based
upon unpaid royalties.
H. COMPROMISE OF BEAR STEARNS LITIGATION
Prior to the filing of the Debtor's Chapter 11 Case, on December 10, 1992,
WRT, one of its executives, a former executive and others instituted a lawsuit
against Bear, Stearns & Co., Inc. ("Bear Stearns"), Drake Capital Securities,
Inc. ("Drake"), Seven Antebi ("Antebi") and Jerry Friedman ("Friedman") in the
District Court of Harris County, Texas, 133rd Judicial District. After settling
with Drake and Friedman, the plaintiffs commenced trial on February 28, 1995. On
March 31, 1995, the jury returned a verdict in favor of the Debtor and five of
its shareholders against Antebi for approximately $1.1 million. The Debtor,
however, considered the jury verdict to be insufficient. Accordingly, the Debtor
requested, and on August 4, 1995 was granted, a new trial. The new trial,
originally docketed to begin on October 30, 1995, was postponed and was
rescheduled for April 8, 1996. Prior to commencement of the new trial, the case
went to mediation and was settled on February 16, 1996, for $600,000 plus court
costs of approximately $69,000, subject to the approval of the Bankruptcy Court.
Consequently on April 22, 1996, Debtor filed a Motion for Authority to
Compromise the Bear Stearns Litigation, requesting that the settlement be
approved and that the distribution of proceeds generated therefrom be authorized
to the respective parties to the Litigation pursuant to the Settlement Agreement
reached. Due to objections raised as to the distribution of the Bear Stearns
Litigation Proceeds, the Bankruptcy Court approved the Settlement Agreement but
instructed that a subsequent Motion be provided to resolve the issue of
disposition of the proceeds. As a result on August 27, 1996, the Debtor filed a
Motion for Authorization to finally settle distribution of the Bear Stearns
Litigation Proceeds. On September 10, 1996, the Bankruptcy Court approved such
Motion and the proceeds have since been distributed accordingly, including the
distribution of approximately $152,000 to the Debtor.
I. REJECTION OF TRI-DECK MARKETING AGREEMENT AND SUIT FOR TURNOVER OF PROCEEDS
Prior to filing its Chapter 11 Case, WRT allegedly entered into a
marketing agreement with Tri-Deck Oil & Gas Company ("Tri-Deck") pursuant to
which Tri-Deck would market all of WRT's oil and gas production. Subsequent to
the agreement, Tri-Deck's principal, James Florence (WRT's Director of
Marketing) on behalf of WRT assigned to Plains Marketing its right to market
WRT's oil production. During the early stages of the Debtor's Chapter 11 Case,
Tri-Deck failed to make payments to WRT attributable to several months of WRT's
gas production. Consequently, the Debtor responded in two ways. First, on May
20, 1996, the Debtor filed a Motion to Reject the Tri- Deck Marketing Agreement
(Motion to Reject Oil and Gas Sales and Purchase Agreement with Tri-Deck by WRT
Energy Corporation). Second, on May 29, 1996, the Debtor initiated an adversary
proceeding against Tri-Deck and Perry Gas Companies, Inc. ("Perry Gas"), styled
WRT ENERGY CORPORATION V. TRI-DECK OIL & GAS COMPANY AND PERRY GAS COMPANIES,
INC., Case No. 96- 5028 (the "Adversary Proceeding"). Perry Gas was the party
which ultimately purchased WRT's gas production for the months in question.
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With respect to the Motion to Reject, on June 11, 1996, the Bankruptcy
Court entered an order authorizing the rejection, effective June 4, 1996. On
June 20, 1996, the Debtor filed a motion requesting the Bankruptcy Court to
amend the rejection order to reflect an earlier effective date for the
rejection. On July 22, 1996, after receiving briefs from both the Debtor and
Tri-Deck, the Bankruptcy Court entered its Reasons for Decision, finding that
the effective date would not change, but directing Tri-Deck and the Debtor to
determine the amount of production proceeds attributable to the Debtor's June
gas production which are unquestionably payable to the Debtor, and to submit an
order effectively directing Tri-Deck to pay such amounts to the Debtor.
Accordingly, on August 8, 1996, the Bankruptcy Court entered an Amended Order to
that effect. Thereafter, however, Tri- Deck appealed the order, and requested a
stay pending the appeal. On August 21, 1996, the Bankruptcy Court entered an
order denying the request for a stay, and the appeal has since been dismissed.
Next, with respect to the Adversary Proceeding, the Debtor sought turnover
by Tri-Deck and/or Perry Gas of all unpaid production proceeds payable to the
Debtor under the marketing agreement and the issuance of a temporary restraining
order and preliminary injunction against both parties to prevent further
disposition of such proceeds pending outcome of the adversary. On May 31, 1996,
after conducting a hearing on notice, the Bankruptcy Court entered a consensual
temporary restraining order against both Tri-Deck and Perry Gas. The TRO was
carried forward in a Preliminary Injunction entered by the Court on May 31,
1996. Currently, the Adversary Proceeding remains pending as to the ultimate
issue of turnover of proceeds. Tri-Deck has also filed an answer and
counterclaim in which Tri-Deck is asserting, among other things, damages for
tortious interference of its contractual relationships with others. The Debtor
believes that Tri- Deck's counterclaim is without merit.
J. OIL & GAS LEASE DISPUTE
On May 20, 1996, Pigeon Land Company and several additional parties
(co-movants) filed a motion, pursuant to Section 365 of the Bankruptcy Code, to
compel assumption or rejection of certain oil and gas leases and associated land
agreements. Both the Debtor and the Committee opposed the motion based upon the
assertion that Louisiana oil and gas leases do not constitute executory
contracts or unexpired leases within the meaning of Section 365 of the
Bankruptcy Code. On July 2, 1996, the Bankruptcy Court conducted a hearing to
receive arguments at the conclusion of which the Pigeon Land Company et al
motion was taken under advisement. Numerous additional parties stand to be
affected by the Court's ruling and additional Creditors have filed similar
motions to compel, including Continental Land & Fur Co. On November 13, 1996,
the Bankruptcy Court rendered its Reasons for Decision in which the Court
determined that Louisiana oil and gas leases do not constitute executory
contracts or unexpired leases under Section 365 of the Bankruptcy Code. On the
same date, the Bankruptcy Court entered a corresponding order denying both
Pigeon Land Company's motion to compel and Continental Land & Fur's motion to
compel (the "Pigeon & CLF Order"). Similarly, Exxon Corporation's motion to
compel was subsequently denied by a supplemental order entered on December 18,
1996 (the "Exxon Order"). Timely appeals were filed as to the Pigeon & CLF Order
by Pigeon Land Co. et al. and Continental Land & Fur. Jeanerette
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Lumber and Shingle later also filed an appeal. With respect to the Exxon Order,
Exxon Corporation timely filed an appeal therefrom. Currently, the appeals as to
both the Pigeon and CLF Order and the Exxon Order are pending determination by
the District Court for the Western District of Louisiana.
K. MOTION TO COMPEL RELEASE OF ESCROWED PRODUCTION PROCEEDS
In connection with the Motion by the Debtor to obtain approval to use Cash
collateral in funding operations, the Debtor agreed to segregate $170,000
representing an estimation of the oil and gas proceeds attributable to oil and
gas royalties just prior to the Debtor's bankruptcy filing. On or about June 11,
1996, Continental Land & Fur ("CL&F") filed a motion to compel distribution of
greater than $79,000 from such segregated account in satisfaction of certain oil
and gas royalty payments it deemed due and owing to CL&F from such fund. Both
the Debtor and the Committee filed objections to such distribution, claiming
that such funds were not property of CL&F, as claimed, but instead represented
commingled funds of the Debtor subject to the Debtor's use in funding continuing
operations, and that CL&F would have a Claim for unpaid royalties in the nature
of an Unsecured Claim. On November 15, 1996, the Bankruptcy Court entered an
order denying CL&F's Motion, determining that such funds do not belong to CL&F
but instead represent property of the estate. In conjunction with such ruling,
the Bankruptcy Court instructed the Debtor to provide notice of the order to all
known royalty Claimants along with a notice of an additional forty-five day bar
date period in which to file Claims for unpaid royalties.
L. ADVERSARY PROCEEDING TO ENJOIN SECURITIES LITIGATION AGAINST OFFICERS AND
DIRECTORS
Prior to the filing of the Debtor's Chapter 11 Case, two class action
securities litigation cases (collectively the "Securities Litigation") were
filed against the Debtor and certain other Defendants, including several of
WRT's current and former officers and directors, in the District Court for the
Southern District Court of California. On or about April 22, 1996, the Debtor
filed an action to enjoin further prosecution of the Securities Litigation as
against such officers' and directors', claiming that if the litigation were
permitted to proceed it would place the Debtor at risk for the possibility for
certain issues being held against the Debtor under principles of collateral
estoppel and rejudication, and that the officers and directors efforts in
defending such litigation would divert attention from the reorganizational needs
of the Debtor in its Chapter 11 Case. The suit was joined with a request for a
preliminary injunction which became largely unnecessary due to the Defendants
consent to a stand still arrangement during the period in which negotiations
could take place. During such standstill period, the Securities Litigation was
transferred to the District Court for the Southern District of New York where it
remains pending. On September 16, 1996, the Bankruptcy Court entered an order
denying the request for preliminary injunction and the case was subsequently
dismissed.
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M. POST-PETITION FINANCING
On May 10, 1996, the Debtor filed a motion for authority to obtain
post-petition financing seeking authority to obtain additional financing from
INCC pursuant to Section 364 of the Bankruptcy Code (the "INCC Financing
Motion"). After several continuances of the hearing on the motion, on July 19,
1996, the Debtor filed a second motion for authority to obtain post-petition
financing, this time from Wexford Management LLC (the "Wexford Financing
Motion"). Thereafter the Debtor filed a motion to withdraw the INCC Financing
Motion, which the Bankruptcy Court thereafter granted. The Wexford Financing
Motion has been continued several times since such time, and remains pending as
of the filing of this Disclosure Statement.
N. SALE OF MINOR OIL AND GAS PROPERTIES
1. SALE OF RANKIN FIELD INTERESTS
On June 20, 1996, the Debtor filed a motion to sell and assign its oil and
gas interests and related property interests in the Rankin Field, Harris County,
Texas to American Energy Sources, Inc. free and clear of liens. The
consideration proposed by American Energy in exchange for an assignment of all
of the Rankin Field Interests was $5,000 plus American Energy's agreement to
assume all plugging and abandonment liability and all post-sale environmental
liabilities associated with the land. On July 2, 1996, the Bankruptcy Court
approved the sale and entered an order to that effect. With respect to the cash
proceeds received, the Court authorized the Debtor to pay the Secured Claims of
Huffman Independent School District and Spanish Cove Public Utility District,
and directed the Debtor to place the remaining funds into a segregated account
pending allowance of all other Secured Claims associated with the Rankin Field.
Correspondingly, all liens previously attached to the Rankin Field Interests
were transferred to the funds held in the segregated account.
2. SALE OF BAYOU HENRY INTERESTS
On or about September 30, 1996, the Debtor filed a motion requesting
authority to consummate a sale of the Debtor's oil and gas interests (if any
remaining) and associated property in the Bayou Henry Field, Iberia Parish,
Louisiana to Hunter Oil & Gas. The consideration proposed by Hunter in exchange
for an assignment of all such interests was $10.00 plus the assumption of all
costs and liabilities associated with WRT's obligations to plug and abandon the
wells and restore the surface. Previously, WRT had entered into a settlement
agreement with ATC Realty Eight, Inc. and Gulf Coast Package Limited whereby WRT
agreed to provide certain letters of credit to secure P&A costs. Two letters of
credit remain in the amount of $50,000 each. Therefore, ATC Realty Eight and
Gulf Coast Package Ltd. filed an objection to the proposed sale to the extent
that the letters of credit would not remain in place. On October 29, 1996, the
Bankruptcy Court approved the transaction, but subject to the Debtor's filing of
supplemental information detailing the P&A security to be provided by Hunter.
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O. APPOINTMENT OF EXAMINER
On July 15, 1996, Baker Hughes, Inc. filed a motion for appointment of an
examiner in the Case pursuant to Section 1104 of the Bankruptcy Code.
Thereafter, on August 8, 1996, Schlumberger Well Services, Double Eagle Marine,
Inc., and Inland Marine Services, Inc. also filed a motion for appointment of an
examiner. On August 13, 1996, the Bankruptcy Court granted the motion,
establishing certain specified matters for the examiner to collect information
for the purpose of reporting back to the Court and Creditors. On August 10,
1996, the U.S. Trustee filed a letter indicating the Trustee's selection of
David J. Moore as the examiner. Baker Hughes objected to the appointment, and on
August 27, 1996, the Court entered an order denying such appointment.
Consequently, on September 3, 1996, the U.S. Trustee filed a new letter with the
Court indicating the Trustee's selection of Jason R. Searcy as the examiner, and
on September 10, 1996, the Court entered an order authorizing Mr. Searcy as the
examiner. Pursuant to the original order appointing an examiner in the case, a
report was to be filed by the examiner by no later than November 12, 1996,
reflecting the examiner's findings to that point. On November 15, 1996, such
preliminary report was filed by the Examiner, a copy of which is attached hereto
as Exhibit "C". Subsequent to that time, on November 19, 1996, the Examiner
filed a Supplement thereto making certain minor modifications, and such
Supplement is attached hereto as Exhibit "C" as well.
P. MOTION TO PROHIBIT USE OF PRODUCTION PROCEEDS FROM WEST COTE BLANCHE BAY
FIELD
On or about August 20, 1996, Texaco filed a motion pursuant to Section
363(e) of the Bankruptcy Code seeking to prohibit the Debtor's use of proceeds
from production from the West Cote Blanche Bay Field until such time as Texaco
has "recouped" sufficient funds to satisfy the Debtor's indebtedness to Texaco
pursuant to the operating agreement in force as to such field. Both the Debtor
and the Committee filed objections to the motion. On September 17, 1996, a
hearing was conducted at which time the motion was taken under advisement, and
to date, a decision has yet to be rendered.
Q. THE SEARCH FOR AN M&A CANDIDATE OR RESTRUCTURING PARTNER
During the first quarter of 1995, the Debtor and its financial advisor,
Jefferies & Company, Inc. ("Jefferies") commenced a process to systematically
determine and assess the Debtor's strategic options including the potential sale
of all or part of the Debtor's assets or stock by merger, tender offer, exchange
offer, plan of reorganization or other acquisition of the Debtor's debt or
securities (the "M&A/Restructuring Process"). Jefferies was authorized to
undertake such an assignment pursuant to a Bankruptcy Court Order dated March
26, 1996.
At the commencement of the M&A/Restructuring Process, the Debtor, through
Jefferies, mailed over seventy Information Memoranda to potentially interested
parties, with the majority of such memoranda having been mailed on June 22,
1996. Parties receiving the Information Memorandum were asked to submit
preliminary indications of value by July 9, 1996. Indications of value were
received from 13 parties with 9 invites to a data room for comprehensive due
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diligence activities extended to parties expressing significant values. The Data
Room was open from August 1, 1996 through September 18, 1996.
On or about October 1, 1996, the Debtor received five non-binding bids or
restructuring proposals for the Debtor and/or its assets. After consultation
with the Debtor's Board of Directors, Jefferies was directed to contact each
bidder or restructuring candidate for an offer or proposal of higher value for
the estate. Two asset bidders raised the aggregate amounts of their bids based
upon these efforts. As each of the bids and proposals differed in certain
respects, Jefferies performed financial analyses concerning the valuation of
each bid. The Debtor's Board of Directors, after consultation with Jefferies,
selected the DLBW Restructuring Proposal.
At or about the same time Jefferies met with the Debtor's Board of
Directors and to coordinate strategy and efforts concerning the bids and
proposals, Jefferies initiated communications with the financial advisors to the
Committee of Unsecured Creditors in an effort to apprise the Committee of the
bid procedure undertaken and the preliminary results obtained.
In mid-October 1996, Jefferies circulated an information book and met with
members of the Committee and their advisors to summarize for the Committee
members the terms and conditions of each bid along with preliminary financial
analyses concerning the same. The Committee concurred with the Debtor that the
DLBW Proposal was the most favorable option to both the Debtor and Creditors.
On October 29, 1996, the Debtor filed a motion requesting approval of a
break-up fee of $1,000,000.00, contained in the DLBW Proposal, and of the
reimbursement of DLBW's attorneys' fees and expenses up to a maximum of
$500,000.00. On December 16, 1996, the Court rendered its Reasons for Decision
whereby it indicated that the reimbursement of expenses would be approved, but
the break-up fee, as requested, would be denied. Accordingly, on December 24,
1996, an order was entered to that effect, without prejudice to DLBW's
subsequent filing of an additional motion for approval of a break-up fee in
alignment with the Court's ruling.
R. TRICORE AVOIDANCE ACTION
On January 14, 1997 the Debtor initiated an adversary proceeding to obtain
a declaration of the invalidity of the security interests or liens allegedly
securing Tricore Energy Venture, LP's ("Tricore's") asserted Secured Claim of
"up to $9,223,741.00," or alternatively for avoidance of such security interests
or liens pursuant to Sections 544 and 547 of the Bankruptcy Code. Such suit is
pending as of the filing of this Disclosure Statement.
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VI.
SUMMARY OF THE CLAIMS,
CLASSIFICATIONS AND TREATMENT UNDER THE PLAN
A. INTRODUCTION
A summary of the principal provisions of the Plan and the treatment of
Classes of Allowed Claims and Equity Interests in the Plan is set out in this
section VI. The summary is qualified in its entirety by reference to the Plan.
THE AMOUNTS OF CLAIMS IN THE VARIOUS CLASSES AND THE NUMBER OF HOLDERS OF
SUCH CLAIMS CANNOT NOW BE EXACTLY DETERMINED. WHILE THE DEBTOR HAS REFLECTED IN
THE SCHEDULES, AS AMENDED, THE DEBTS AND CLAIMANTS KNOWN TO IT OR REFLECTED ON
ITS BOOKS, ADDITIONAL CLAIMS ARISING FROM THE REJECTION OF EXECUTORY CONTRACTS
OR UNEXPIRED LEASES MAY ALSO BE FILED AT A LATER DATE AND ROYALTY CLAIMS ARE
CONTINUING TO BE RECEIVED BY THE DEBTOR DUE TO THE COURT'S EXTENDED FILING
DEADLINE OF JANUARY 16, 1997 FOR SUCH CLAIMS. IN MOST INSTANCES, THEREFORE, THE
AMOUNT OF CLAIMS IN THE VARIOUS CLASSES AND THE NUMBER OF HOLDERS OF SUCH CLAIMS
SET FORTH HEREIN ARE ESTIMATES. HOWEVER, THE DEBTOR BELIEVES THE ESTIMATES TO BE
REASONABLE.
When reviewing Section VI of this Disclosure Statement, readers should
keep in mind that:
1. The projections assume that the Bankruptcy Court will confirm the
Plan on or before April 15, 1997 (the "Confirmation Date") and that
the Effective Date under the Plan will be on or before June 30,
1997. If the Effective Date were to occur prior to June 30, 1997,
the Debtor believes that it will have sufficient Cash to consummate
the Plan.
2. The following statements relating to the Claims against the Debtor
and the instruments evidencing the Claims are summaries of
provisions contained therein and do not purport to be complete. The
provisions of the specific instruments referred to in the summaries,
whether to sections or defined terms, are incorporated herein by
reference and the summaries are qualified in their entirety by
reference to the applicable instruments evidencing the Claims
against the Debtor.
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B. CLASSIFICATION OF CREDITORS
As set out below, the Plan provides for the division of the Debtor's
Creditors into Classes. All Claims and Interests, except Administrative Claims
and Priority Tax Claims, are placed in the following Classes. A Claim or
Interest is classified in a particular Class only to the extent that the Claim
or Interest qualifies within the description of the Class and is classified in a
different Class to the extent that the Claim or Interest qualifies within the
description of that Class. A proof of claim or interest which asserts a Claim or
an Interest which is properly includible in more than one Class is in the Class
asserted only to the extent it qualifies within the description of such Class
and is in a different Class to the extent it qualifies within a description of
such different Class.
UNCLASSIFIED CLAIMS
Allowed Administrative Claims
Allowed Priority Tax Claims
CLASSIFIED CLAIMS
PRIORITY CLAIMS:
Class A-1: Allowed Priority Claims
SECURED CONTRACT CLAIMS:
Class B-1: Allowed Secured Claim of GMAC
Class B-2: Allowed Secured Claim of INCC
Class B-3: Allowed Secured Claim of MC Bank & Trust Company
Class B-4: Allowed Secured Claim of Tricore
Class B-5: Allowed Secured Claim of Woodforest National Bank
Class B-6: Allowed Secured Claim of The Woodlands Corporation
SECURED OIL AND GAS LIEN CLAIMS:
Class C-1: Abbeville Field Claims
Class C-2: Bayou Henry Field Claimants
Class C-3: Bayou Penchant Field Claims
Class C-3-A:North Lease Claimants
Class C-3-B:South Lease Claimants
Class C-3-C:South/North Lease Claimants
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Class C-4: Bayou Pigeon Field Claims
Class C-4-A:Brownell Kidd 90 Lease Claimants Class
C-4-B:David R. McHugh Estate Lease Claimants Class
C-4-C:Edward H. Peterman Lease Claimants Class
C-4-D:Lynch McHugh Heirs et al Lease Claimants Class
C-4-E:VF Landry et al 52 Lease Claimants Class
C-4-F:VF Landry et al 90 Lease Claimants Class
C-4-G:Brownell Kidd Lease Claimants Class
C-4-H:Richard Lynch Heirs Lease Claimants Class
C-4-I:VF Landry 11/66 Lease Claimants
Class C-5: Darrow Field Claims
Class C-6: Deer Island Field Claims
Class C-6-A:CL&F 12/21/45 Lease Claimants
Class C-6-B:CL&F 12/26/45 Lease Claimants
Class C-6-C:CL&F SWD Well #1 Claimants
Class C-7: East Hackberry Field Claims
Class C-7-A:M.P. Erwin Lease Claimants
Class C-7-B:State Lease 50 Lease Claimants
Class C-8: Golden Meadow Field Claims
Class C-9: Lac Blanc Field Claims
Class C-10: Napoleonville Field Claims
Class C-10-A:Dugas & LeBlanc Ltd 2/94 Lease Claimants
Class C-10-B:Dugas & LeBlanc Ltd 3/94 Lease Claimants
Class C-10-C:Dugas & LeBlanc Ltd 93 Lease Claimants
Class C-10-D:E. Robert Sternfels et al 90 Lease Claimants
Class C-10-E:Dougas LeBlanc A SWD Well Claimants
Class C-11: Rankin Field Claims
Class C-12: South Atchafalaya Bay Field Claims
Class C-13: Tigre Lagoon Field Claims
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Class C-14: West Cote Blanche Bay Field Claims
Class C-15: West Hackberry Field Claims
Class C-15-A: R Vincent 1/18/38 Lease Claimants
Class C-15-B: R Vincent 5/36 Lease Claimants
Class C-16: West Lake Pontchartrain Field Claims
UNSECURED CLAIMS:
Class D-1: Allowed Convenience Claims
Class D-2: Allowed Tort Claims
Class D-3: Allowed General Unsecured Claims
Class D-4: Allowed Securities Litigation Claims Based Upon Senior Note
Ownership
EQUITY INTERESTS:
Class E-1: Preferred Stock
Class E-2: Allowed Securities Litigation Claims Based Upon Preferred
Stock Ownership
Class E-3: Common Stock and Allowed Securities Litigation Claims Based
Upon Common Stock Ownership
Class E-4: WRT Warrants
Class E-5: WRT Stock Options
C. TREATMENT OF CLASSES OF CLAIMS AND EQUITY INTERESTS
1. TREATMENT OF ADMINISTRATIVE CLAIMS
Pursuant to the Plan, each Allowed Administrative Claim will be paid in
full by no later than the later of the Effective Date or fifteen days after
allowance of the Claim by Final Order, unless the Claim was incurred by the
Debtor in the ordinary course of the Debtor's business during the course of the
Chapter 11 Case in which case the Claim will be paid in the ordinary course.
Administrative Claims are Claims against the Debtor for any cost or expense of
the Chapter 11 Case allowed under Section 503(b) of the Bankruptcy Code,
including all actual and necessary expenses relating to the preservation of the
Debtor's estate or the operation of WRT's business and allowance of compensation
or reimbursement of expenses to the extent allowed by the Bankruptcy Code.
Any person requesting compensation or expense reimbursement pursuant to
Sections 328, 330, 503(b)(2) through (6) or 1103 of the Bankruptcy Code shall
file Compensation Estimates (i) on or before three (3) calendar days before the
first date set for the hearing or the confirmation of the Plan, and (ii) on or
before five (5) calendar days before the first date scheduled for the Effective
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Date. Each holder of an Administrative Claim other than (i) an Allowed
Administrative Claim or (ii) an Administrative Claim incurred in the ordinary
course of the Debtor's business must file a proof of Administrative Claim (or an
application for approval in the case of a Fee Claim) on or before the
Administrative Claims Bar Date and serve a copy on counsel for New WRT.
All payments to professionals for compensation and reimbursement of
expenses are made in accordance with detailed procedures established by the
Bankruptcy Code relating to the payment of interim and final fees. The
Bankruptcy Court will review all requests for compensation and reimbursement of
expenses. Attorneys and other professionals may make application to the
Bankruptcy Court for payment of such compensation. In addition, the assumption
that professionals will be paid or have been paid in the ordinary course assumes
that there will be no material litigation involving any aspect of the Plan or
any Claims thereunder and that the Plan will be confirmed without substantial
controversy. If any events occur or if confirmation of the Plan is delayed for
any reason, such assumptions may not prove to be reasonable and the estimated
Administrative Claims may be much higher. Finally, the Plan proposes to treat
unpaid post-petition oil and gas royalties as Administrative Claims. At this
time all royalties have been paid on proceeds received by WRT from oil and gas
production after the Petition Date.
Additionally, as further described in Section V of the Disclosure
Statement, the Debtor has commenced an adversary proceeding against Tri-Deck Oil
& Gas and Perry Gas Companies, Inc. The amount in controversy in the Tri-Deck
Litigation exceeds $4,000,000. As part of that litigation, Perry Gas has
deposited $1,524,236 into the registry of the Court subject to further Order as
to the fund's disposition. Perry Gas has asserted an Administrative Expense
Claim in the amount of $120,467.88, as to the amount of which negotiations are
continuing between the Debtor and Perry Gas.
2. TREATMENT OF ALLOWED PRIORITY TAX CLAIMS
Priority Tax Claims consist of Claims against the Debtor entitled to
priority in accordance with Section 507(a)(8) of the Bankruptcy Code. These
Claims consist of Claims asserted by governmental taxing authorities. The
estimated amount of Allowed Priority Tax Claims is $1,200,000.
Under Section 1129(a)(9)(C) of the Bankruptcy Code, Priority Tax Claims
may be paid in deferred Cash payments over a period of six (6) years from the
date of assessment. The Priority Tax Claims at issue in WRT's case were assessed
in 1995 or later. Pursuant to the Plan, New WRT will pay Allowed Priority Tax
Claims in full in deferred Cash payments in equal quarterly payments through the
end of year 2001 with interest at a rate of LIBOR (London Inter-Bank Offered
Rate), plus 2%.
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3. TREATMENT OF ALLOWED PRIORITY CLAIMS (CLASS A-1).
Allowed Priority Claims within Class A-1 consist of Claims entitled to
priority in payment under Section 507(a)(3)-(a)(7) of the Bankruptcy Code. The
Debtor estimates that the total amount of Allowed Priority Claims against the
Debtor as of the Effective Date will be nominal. Such Claims will be paid in
full by no later than the later of the Effective Date or fifteen days after
allowance of the Claims by Final Order.
4. TREATMENT OF ALLOWED SECURED CLAIM OF GMAC (CLASS B-1).
Class B-1 is comprised of the Allowed Secured Claim of General Motors
Acceptance Corporation ("GMAC"). GMAC has asserted two different Secured Claims
in the Case in the aggregate amount of in excess of $21,908.07. One of the
Claims (totaling in excess of $6,044.97) was filed after the Bar Date and will
be opposed accordingly. The remaining Claim is based upon a truck loan which was
made in 1994. The Plan proposes to cure all outstanding monetary defaults to
GMAC, reinstate the obligations evidenced in the applicable loan documents
supporting such Claim, and to resume payments thereafter in accordance with such
loan documents.
5. TREATMENT OF ALLOWED SECURED CLAIM OF INCC (CLASS B-2).
Class B-2 is comprised of the Allowed Secured Claim of Internationale
Nederlanden (U.S.) Capital Corporation ("INCC"). INCC has asserted a Secured
Claim in the Case in the amount of $15,367,257.56, based upon financing which
INCC provided to WRT prior to the Petition Date. The INCC indebtedness is
secured by a blanket lien on virtually all of WRT's oil and gas properties,
including, but not limited to, wells and equipment located on such properties
and the production thereof. Based upon their review of the INCC financing
transaction, however, the Debtor and DLBW believes that the lien asserted by
INCC on the Debtor's interest in West Cote Blanche Bay is avoidable under
Sections 544, 547 and 548 of the Bankruptcy Code.
DLBW and ING (U.S.) Capital Corporation (successor to INCC) ("ING") have
reached an agreement in principle providing for the consensual treatment of
INCC's Claim and for availability of a new loan to New WRT. The agreement
remains subject to the completion of definitive documentation, corporate
approvals and certain other conditions. The basic terms and conditions of the
agreement are set forth on Exhibit "I" hereto and may be summarized as follows:
(a) INCC's Claim will be an Allowed Secured Claim in the approximate
amount of $17.7 million which will be satisfied by a cash payment in
full on the Effective Date. This Allowed Secured Claim consists of
$15 million of principal outstanding as of the Petition Date,
approximately $2.3 million of interest at the non-default contract
rate (estimated as of a July 1, 1997 Effective Date), and
approximately $400,000 of expenses (allowable under Section 506(b)
of the Bankruptcy Code) and represents the Debtor's belief that the
value of INCC's interest in the Debtor's Assets (other than WCBB)
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exceeds the amount of INCC's Claim. INCC has asserted that it is
entitled to be paid interest at the default rate, and that its
allowable expenses are in excess of $400,000. Nonetheless, INCC has
indicated that it will accept the Plan notwithstanding the lower
payments set forth above.
(b) ING's proposal to lend to New WRT (to be finalized shortly in a
formal commitment to DLB) contemplates, among other things, a term
loan to New WRT of a principal amount of $15 million which will (i)
mature two (2) years after the Effective Date, (ii) require three
(3) $1 million installments of principal to be paid at the end of
September 1998, December 1998 and March 1999, respectively, (iii)
bear interest at either LIBOR plus three percent (3%) or ING's
fluctuating "reference rate" plus 1.25%, at the option of New WRT,
(iv) be secured by a first lien covering substantially all of New
WRT's Assets, and (v) such other terms consistent with Exhibit "I"
hereto.
6. TREATMENT OF ALLOWED SECURED CLAIM OF MC BANK & TRUST COMPANY
(CLASS B-3):
Class B-3 is comprised of the Allowed Secured Claim of MC Bank & Trust
Company ("MCBT"). The Debtor scheduled MCBT as having a non-disputed,
non-contingent Secured Claim as of the Petition Date of $215,130. MCBT has not
filed a proof of claim in the Case; therefore, taking into account payments
which have been made by the Debtor for installments falling due post-petition,
MCBT's Allowed Secured Claim as of the filing of this Disclosure Statement is
approximately $200,000. MCBT's Claim is secured by Collateral in the form of an
office complex located in Lafayette, Louisiana, such Collateral having a value
sufficient to support the entire outstanding balance of the MCBT indebtedness as
an Allowed Secured Claim. Accordingly, the Plan proposes to cure all outstanding
monetary defaults under the applicable loan documents to MCBT, and to reinstate
WRT's obligations to MCBT and continue to make payments to MCBT pursuant to such
loan documents from and after the date of cure.
7. TREATMENT OF ALLOWED SECURED CLAIM OF TRICORE (CLASS B-4).
Class B-4 is comprised of the Allowed Secured Claim of Tricore Energy
Venture, L.P. ("Tricore"). Tricore has asserted a Secured Claim in the Case in
an amount of "an amount not exceeding $9,223,741", based upon certain alleged
defaults which occurred under a certain Joint Venture Agreement between Tricore,
WRT, and Stagg Energy Corporation. The secured nature of such Claim is
presumably premised upon certain Collateral Assignments made subject to the
terms and provisions of the Joint Venture Agreement, which were provided by WRT
as to certain oil and gas interests in the West Cote Blanche Bay Field. WRT has
initiated an adversary proceeding against Tricore seeking a declaration that the
security interests or liens pursuant to such Collateral Assignments are invalid
and of no effect, or alternatively avoidance of such security interests or liens
pursuant to Sections 544 and/or 547 of the Bankruptcy Code. Nevertheless,
pursuant to the Plan, to the extent that Tricore obtains an Allowed Secured
Claim, WRT proposes to pay such
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Claim in full by no later than the Effective Date or fifteen days after
allowance of such Claim by a Final Order.
8. TREATMENT OF ALLOWED SECURED CLAIM OF WOODFOREST NATIONAL BANK
(CLASS B-5).
Class B-5 is comprised of the Allowed Secured Claim of Woodforest National
Bank ("WFNB"). WFNB has asserted a Secured Claim in the Case in the amount of
$9,696, based upon certain truck loans. The vehicles supporting the secured
nature of such Claim are of a value sufficient to support the total indebtedness
to WFNB as an Allowed Secured Claim. Therefore, pursuant to the Plan, WRT
proposes to cure all existing monetary defaults under the applicable loan
documents supporting the WFNB Claim, to reinstate the obligations thereunder,
and to continue making payments thereafter in accordance with such loan
documents.
9. TREATMENT OF ALLOWED SECURED CLAIM OF THE WOODLANDS CORPORATION
(CLASS B-6).
Class B-6 is comprised of the Allowed Secured Claim of The Woodlands
Corporation ("TWC"). TWC has asserted a Secured Claim in the amount of $250,000,
the portion of TWC's total Claim for rejection damages under Section 365 of the
Bankruptcy Code attributable to rental obligations associated with WRT's lease
of office space in The Woodlands, Texas, and allegedly secured by the value of
certain office equipment and furniture pledged by WRT. The value of such
Collateral is substantially less than the asserted Secured Claim; therefore, WRT
will object to TWC's Secured Claim to the extent that such Claim amount exceeds
the value of the Collateral. To the extent that the Claim is allowed as an
Allowed Secured Claim, however, the Plan proposes to pay such Claim in full by
no later than the later of the Effective Date or fifteen days after the
allowance of such Claim by Final Order.
10. TREATMENT OF ALLOWED SECURED CLAIMS OF OIL & GAS LIEN CLAIMANTS
(CLASSES C-1 THROUGH C-16).
Classes C-1 through C-16 consist of Claimants who have asserted Secured
Claims based upon statutory oil and gas Liens under the provisions of the
Louisiana Oil Well Lien Act and/or the Texas Property Code.
The purpose of the classification of oil and gas Liens in the foregoing
manner is to assure that the Claim of each oil and gas lien holder is determined
solely in the context of the Debtor's particular Asset as to which each Claim
has been asserted. Therefore, based on proofs of claim filed in the Chapter 11
Case, public reports reflecting oil and gas liens filed in South Louisiana and
recorded documents in the various Parishes in which the Debtor's assets are
located, the Debtor has determined that the Creditors asserting Liens in each
Class are as set forth in Exhibit "D."
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<PAGE>
The Liens asserted by the holders of Claims in these Classes are, in the
Debtor's opinion, junior in priority to the Lien asserted by INCC to the extent
that such Lien is valid and perfected. As a result, each Claim in these Classes
is secured only to the extent of the value of the Asset against which the Lien
securing the Claim is asserted after taking into account the Lien asserted by
INCC. The determination of whether the Lien asserted by INCC should be applied
in whole or in part to each Asset against which such Lien is asserted and, if
the Lien is to be applied in part, the method by which the Lien is to be
allocated to such Assets, would require complicated, expensive and
time-consuming litigation involving issues such as marshaling and the equitable
power of the Bankruptcy Court. The results of such litigation cannot be
predicted, but range from a determination that each Claim allegedly secured by
an oil and gas Lien is fully secured, partially secured or fully unsecured.
Based upon the Liquidation Analysis attached as Exhibit "B" hereto, the
Debtor has arrived at a provisional determination of the amount of Collateral
value that would be available to satisfy the holders of Secured Claims based
upon statutory oil and gas Liens. However, that Liquidation Analysis makes
certain assumptions in arriving at the value of the Debtor's oil and gas fields.
For example, as more fully set forth in the Liquidation Analysis, it is assumed
that the purchaser of those fields would make certain capital investments in
order to maximize field production. Based upon that assumption, the Liquidation
Analysis valued the "back-in" component at the highest cash bid made for those
fields at $16.2 million, and the total bid at $36.2 million. If, however, it is
assumed instead that no such capital investments were made, the "back-in"
component of the calculated value would be eliminated, and the value of those
fields would decline to $20 million, resulting in little or no Collateral value
available to satisfy the Allowed Secured Claims based upon statutory oil and gas
Liens. The chart set forth on the following page reflects such valuation without
capital investment.
The Debtor has proposed under the Plan that, in consideration of the risks
involved in potential litigation regarding Collateral value, and to spare the
estate the costs of such litigation, each holder of an Allowed Secured Claim
will be entitled to (i) in Class C-1, C-3, C-4, C-6, C-7-A, C-8 and C-10 a cash
payment equal to the amount of such holder's Allowed Secured Claim (excluding
therefrom all interests, fees and expenses included therein), (ii) in Class
C-7-B a cash payment equal to 75% of the amount of such holder's Allowed Secured
Claim (excluding therefrom all interests, fees and expenses included therein),
and (iii) in Classes C-2, C-5, C-9, C-12, C-13, C- 15 and Class C-16 a cash
payment equal to 50% of the amount of such holder's Allowed Secured Claim
(excluding therefrom all interests, fees and expenses included therein). In each
case, each holder of an Allowed Secured Claim in Classes C-1 through C-10, C-12,
C-13, C-15 and C-16 may elect on its Ballot to receive, in lieu of its cash
payment, the number of shares of New WRT Common Stock obtained by dividing the
amount of such cash payment by a purchase price of $3.50 per share. For Classes
C-2, C-5, C-7-B, C-9, C-12, C-13, C-15 and C-16, "Allowed Secured Claim" should
be determined as the allowable amount of such Secured Claim with the exception
of a valuation analysis of the Secured Claimant's interest in the Debtor's
interest in the underlying Collateral, which value is defined under the Plan to
be 50% or 75%, as the case may be, of the otherwise allowable amount of the
asserted Secured Claim.
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<PAGE>
WRT Energy Corporation
Calculation of M&M Lien Recoveries-Sensitivity 1
Allocation of Value Based Upon PDP, PDNP and PUD Excluding WCBB
<TABLE>
<CAPTION>
(1) (2) (3)
Allocation INCC Net M & M Estimated
PV10 of Value Allocation Value Liens Recovery %
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Abbeville ................................... 268,800 107,973 155,729 (47,756) 401 0.0%
Bayou Henry ................................. -- -- -- -- 2,366 0.0%
Bayou Penchant .............................. 7,581,400 3,045,344 4,392,277 (1,346,933) 1,055,131 0.0%
Bayou Pigeon ................................ 3,918,200 1,573,887 2,270,005 (696,118) 691,370 0.0%
Darrow ...................................... -- -- -- -- 10,008 0.0%
Deer Island ................................. 4,411,900 1,772,200 2,556,030 (783,830) 268,020 0.0%
East Hackberry (Erwin Lease) ................ 2,253,300 905,120 1,305,447 (400,328) 164,111 0.0%
East Hackberry (State Lease 50) ............. 8,102,700 3,254,743 4,694,292 (1,439,548) 2,588,870 0.0%
Golden Meadow ............................... 1,028,600 413,175 595,918 (182,744) 32,426 0.0%
Lac Blanc ................................... 21,800 8,757 12,630 (3,873) 369,807 0.0%
Napoleonville ............................... 2,667,200 1,071,378 1,545,240 (473,862) 87,829 0.0%
Rankin ...................................... -- -- -- -- 9,301 0.0%
South Atchafalaya ........................... -- -- -- -- 20,576 0.0%
Tigre Lagoon ................................ -- -- -- -- 51,923 0.0%
West Cote Blanche Bay ....................... 19,515,900 7,839,269 -- 7,839,269 5,402,399 100.0%
West Hackberry .............................. 20,300 8,154 11,761 (3,607) 27,857 0.0%
West Lake Pontchartrain ..................... -- -- -- -- 10,423 0.0%
---------- ---------- ---------- ---------- ----------
Totals ............................ 49,790,100 20,000,000 17,539,329 2,460,671 10,792,817
========== ========== ========== ========== ==========
</TABLE>
(1) Per 1/1/97 NSAI Reserve Reports
(2) Total bid value based upon valuation of highest bid (other than DLB)
received by Jefferies & Co.
(3) Allocation of INCC bank note to properties other than West Cote Blanche
Bay. Includes principal, interest and fees.
<PAGE>
There are two Classes of oil and gas Lien Claimants excluded from the
treatment described above. The first is Class C-14, the Class consisting of West
Cote Blanche Bay Field Claims. The Debtor believes that the Lien of INCC on West
Cote Blanche Bay is avoidable under Sections 544, 547 and 548 of the Bankruptcy
Code. As a result, the Debtor believes that no part of the INCC Lien should be
applied against that Asset. Therefore, the value of the Debtor's interest in
West Cote Blanche Bay is sufficient to support the aggregate amount of allowable
Claims in Class C-14. The plan proposes that each holder of an Allowed Claim in
Class C-14 will, at such holder's election, either receive a cash payment equal
to the amount of such holder's Allowed Secured Claim or the number of shares of
New WRT Common Stock obtained by dividing such payment by a purchase price at
$3.50 per share.
The second exception is Class C-11. Class C-11 consists of oil and gas
Lien Claims filed with respect to the Rankin Field in Harris County, Texas,
which has been sold pursuant to an Order previously entered in the Chapter 11
Case. The Allowed Secured Claims in this Class will be paid from the sale
proceeds currently held in a separate account.
11. TREATMENT OF ALLOWED CONVENIENCE CLAIMS (CLASS D-1).
Class D-1 is comprised of Allowed Unsecured Claims in the amount of $2,500
or less. The Plan proposes to pay each holder of an Allowed Convenience Claim
50% of the allowed amount of such Claim. The estimated amount of all Class D-1
Claims is $418,000. The estimate reflects the Debtor's assumption that all
Creditors asserting Claims of $4,167 or less will waive such Claims to the
extent such Claims exceed $2,500.00, in order to receive $1,250.00 on account of
each such Claim. Such a distribution will represent a recovery in excess of the
estimated 28.1% recovery to be received by the holders of General Unsecured
Claims in Class D-3, which estimate falls within the range of recoveries
anticipated for Claims within Class D-3.
12. TREATMENT OF ALLOWED TORT CLAIMS (CLASS D-2).
Class D-2 is comprised of Allowed Unsecured Claims premised upon certain
legally defined tort causes of action including, but not limited to, Claims
arising out of or related to personal injuries, wrongful death, physical damage
to property and rights of contribution and indemnity arising therefrom, together
with all resulting or related damages as to any such Claims which may be
asserted pursuant to applicable laws. The aggregate amount of such Claims which
have been asserted is $1,024,000. WRT has had, and continues to have, multiple
insurance policies designed to protect against injuries sustained by WRT's
employees and contractors and to damage to property. Accordingly, the Plan
proposes to satisfy Allowed Claims in Class D-2 first out of any insurance
proceeds which would be available to satisfy such Claims and second from WRT's
estate. In this way, WRT will insure maximization of its rights under existing
insurance policies in its favor while at the same time minimizing the total
exposure from the estate for the ultimate benefit of all other Creditors. In
order to provide distribution to holders of Allowed Class D-2 Claims on a timely
basis, the Plan proposes to provide certain interim distributions throughout the
course of the post-
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<PAGE>
confirmation period until such time as all Allowed Claims in relation to a
particular insurance policy are finally resolved at which time a final
distribution to such Claimants shall occur.
13. TREATMENT OF ALLOWED GENERAL UNSECURED CLAIMS (CLASS D-3).
Class D-3 is comprised of Unsecured Claims in excess of $2,500 which are
not otherwise treated within the Tort Claims Class (Class D-2) or the
Shareholder Litigation Claims Classes (Classes D-4, E-2 and E-3). The aggregate
amount of Claims asserted in such Class is approximately $120,000,000. The Plan
proposes to provide to the holders of such Allowed General Unsecured Claims an
aggregate distribution of 10,000,000 shares of New WRT Common Stock.
If Class D-3 accepts the Plan, the holders of Allowed General Unsecured Claims
will also receive the right to participate in an offering of 3,000,000
additional shares of New WRT Common Stock, such shares to be offered at a price
of $3.50 per share. As with the Class D-2 Claims, the Plan proposes to provide
an initial distribution and interim distributions of such Stock during the
course of the resolution of all Disputed Unsecured Claims, which Claims shall
potentially consist of, among other things, Deficiency Claims of Secured
Creditors, Claims obtained by Creditors against whom preference actions have
been successfully litigated and Claims held by parties to executory contracts
and unexpired leases which have been rejected by the Debtor. Once all Allowed
General Unsecured Claims have been finally determined, a final distribution will
occur at which time the balance of the 10,000,000 shares will be distributed
accordingly.
The Rights Offering shall take place in three segments. First, along with
the Ballot for voting on the Plan, each holder of an Allowed Claim in Class D-3
or a Disputed Claim within or potentially within Class D-3 determined as of the
Subscription Rights Record Date shall be sent a Subscription Rights Election
Form which may be used by such holder to elect to participate in the Rights
Offering by promising to purchase its pro rata share of New WRT Subscription
Common Stock at $3.50 per share. To exercise the right to participate, the
Claimant must: (i) return a duly completed Subscription Rights Election Form to
the Disbursing Agent so that it is received by the Disbursing Agent by no later
than the Subscription Rights Election Deadline and (ii) pay to the Disbursing
Agent on or before the Subscription Rights Election Deadline immediately
available funds in an amount equal to the Subscription Purchase Price,
calculated as each Claimant's calculated pro rata share of New WRT Subscription
Common Stock times $3.50 per share. Payment may take the form of either a wire
transfer to the Subscription Rights Reserve Account in accordance with the wire
instructions set forth on the Subscription Rights Election Form, or by check
delivered to the Disbursing Agent along with the duly executed Subscription
Rights Election Form. To ensure that the Rights Offering is fully subscribed,
DLBW is deemed, under the Plan and pursuant to its contractual commitment in the
Commitment Agreement, to have exercised all of its New WRT Subscription Rights
and also to have exercised all Unexercised Subscription Rights, and shall pay to
the Disbursing Agent by no later than the Subscription Rights Election Deadline
the corresponding Subscription Purchase Price attributable to the exercise of
all such Rights.
Next, on the Effective Date of the Plan, or as soon thereafter as is
reasonably practicable but in no event more than ten (10) Business Days after
the Effective Date, the Disbursing Agent will
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<PAGE>
distribute to the Claimants who have exercised their Subscription Rights
("Exercising Claimants") New WRT Common Stock purchased thereby to the extent of
their Allowed Claims in Class D-3.
Third, to the extent that an Exercising Claimant's Class D-3 Claim has not
been Allowed as of such distribution date, the Disbursing Agent shall retain in
a Disputed Claims Reserve Account both the Disputed New WRT Common Stock
otherwise distributable to the Exercising Claimant on account of the Disputed
Claim and the Disputed Subscription Purchase Price paid by such Exercising
Claimant. Pursuant to the Commitment Agreement, DLBW shall pay to New WRT an
amount equal to the aggregate amount of all Disputed Subscription Purchase
Prices. Thereafter, the Disbursing Agent will periodically make additional
interim distributions of New WRT Common Stock to account for the Disputed Claim
of an Exercising Claimant that has subsequently become an Allowed Claim, in
which case the Disputed Subscription Purchase Price paid by such Exercising
Claimant will be released to DLBW. If a Disputed Claim is disallowed instead,
then the New WRT Common Stock reserved for such Claim amount shall be
distributed to DLBW and the Disputed Subscription Purchase Price previously paid
by such Exercising Claimant shall be returned to such Excercising Claimant.
If Class D-3 rejects the Plan, however, then the Rights Offering will not
occur and instead DLBW will purchase the 3,000,00 shares of New WRT Subscription
Common Stock at a price of $3.50 per share.
The Debtor and DLBW reserve the right to determine, at any point prior to
the Bankruptcy Court's approval of the Disclosure Statement, based upon the
amount of cash needed to fund the Plan and the sources available for such cash
whether to increase or decrease be number of shares or New WRT Common Stock
offered in the Rights Offering.
14. TREATMENT OF ALLOWED SECURITIES LITIGATION CLAIMS BASED UPON SENIOR
NOTE OWNERSHIP (CLASS D-4).
Class D-4 Claims consist of Claims based on Senior Note ownership which
have been asserted in the Securities Litigation. At this time there has been no
certification of a class of plaintiffs in the Securities Litigation.
Nevertheless, a "Class Proof of Claim" has been asserted by counsel for the
existing plaintiffs on behalf of potential Plaintiffs. The Class Proof of Claim
asserts a total claim of approximately $100,000,000, which would include Claims
attributable to Classes E-2 and E-3 as well as Class D-4. WRT does not believe
that any of these Claims are valid. Additionally, WRT has or will shortly be
filing an objection to the Class Proof of Claim, based upon the non-existence of
a certified class of plaintiffs to date. However, to the extent that any of the
Class D-4 Claims become Allowed Claims, the Plan provides to holders of such
Claims, on a pro rata basis, an aggregate distribution of New WRT Warrants equal
to 2% of the New WRT Common Stock to be issued under the Plan, provided Classes
D-1, D-2 and D-3 vote to accept the Plan. If any of the before-mentioned Classes
rejects the Plan, though, then the holders of Claims within Class D-4 will
receive no distribution under the Plan.
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<PAGE>
15. TREATMENT OF INTERESTS OF HOLDERS OF PREFERRED STOCK (CLASS E-1)
Class E-1 consists of holders of Preferred Stock. Provided that Classes
D-1, D-2, D-3 and D-4 vote to accept the Plan, holders of Allowed Interests in
Class E-1 shall receive on a pro rata basis an aggregate distribution of New WRT
Warrants equal to 1% of the New WRT Common Stock to be issued pursuant to the
Plan. However, if any one of the before-mentioned Classes rejects the Plan, the
holders of Interests in Class E-1 will receive no distribution under the Plan.
In either case, existing shares of WRT Preferred Stock will be canceled on the
Effective Date.
16. TREATMENT OF ALLOWED SECURITIES LITIGATION CLAIMS BASED UPON
PREFERRED STOCK OWNERSHIP (CLASS E-2)
Class E-2 Claims consist of Claims based on Preferred Stock ownership
which have been asserted in the Securities Litigation. At this time there has
been no certification of a class of plaintiffs in the Securities Litigation.
Nevertheless, a "Class Proof of Claim" has been asserted by counsel for the
existing plaintiffs on behalf of potential plaintiffs. The Class Proof of Claim
asserts a total Claim of approximately $100,000,000, which would include Claims
attributable to Classes D-4 and E-3 as well as Class E-2. WRT does not believe
that any of these Claims are valid. Additionally, WRT has or will shortly be
filing an objection to the Class Proof of Claim, based upon the non-existence of
a certified class of plaintiffs to date. However, to the extent that any of the
Class E-2 Claims become Allowed Claims, the Plan provides to holders of such
Claims, on a pro rata basis, an aggregate distribution of New WRT Warrants equal
to 1% of the New WRT Common Stock to be issued pursuant to the Plan, but only if
Classes D-1, D-2, D-3, D-4, and E-1 vote to accept the Plan. In the event that
any one of the before-mentioned Classes should reject the Plan, however, then
Claimants in Class E-2 will receive no distribution under the Plan.
17. TREATMENT OF INTERESTS OF HOLDERS OF COMMON STOCK AND ALLOWED
SECURITIES LITIGATION CLAIMS BASED UPON COMMON STOCK OWNERSHIP
(CLASS E-3)
Class E-3 consists of holders of Common Stock and holders of Claims based
on Common Stock ownership asserted in the Securities Litigation. With respect to
the Securities Litigation Claims, while at this time there has been no
certification of a class of plaintiffs, a "Class Proof of Claim" has been
asserted by counsel for the existing Plaintiffs on behalf of potential
plaintiffs. The Class Proof of Claim asserts a total Claim of approximately
$100,000,000, which would include Claims attributable to Classes D-4 and E-2 as
well as Class E-3. WRT does not believe that any of the Class E-3 Securities
Litigation Claims are valid. Additionally, WRT has or will shortly be filing an
objection to the Class Proof of Claim, based upon the non-existence of a
certified class of plaintiffs to date. With respect to all Allowed Interests and
Claims which become Allowed Claims within Class E-3, however, the Plan provides
to holders of such Interests and Claims, on a pro rata basis, an aggregate
distribution of New WRT Warrants equal to 1% of the New WRT Common Stock to be
issued under the Plan, but only if Classes D-1, D-2, D-3, D-4, E-1, and E-2 vote
to accept the Plan. In the event that any one of the before-mentioned Classes
should reject the Plan,
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<PAGE>
however, the Claimants in Class E-3 will receive no distribution under the Plan.
In any event, on the Effective Date, all outstanding shares of WRT Common Stock
shall be canceled.
18. TREATMENT OF INTERESTS OF HOLDERS OF WRT WARRANTS (CLASS E-4)
The holders of WRT Warrants in Class E-4 will receive no distribution
under the Plan and their rights will be extinguished.
19. TREATMENT OF INTEREST OF HOLDERS OF WRT STOCK OPTIONS (CLASS E-5)
The holders of WRT Stock Options in Class E-5 will receive no distribution
under the Plan and their rights will be extinguished.
D. IMPAIRED CLASSES
Classes B-2, B-4, B-6, C-1 through C-16, D-1 through D-4, and E-1 through
E-5 consist of impaired Claims and Interests within the meaning of Section 1126
of the Bankruptcy Code.
E. DISPUTED AND UNLIQUIDATED CLAIMS
1. DISPUTED SECURED CLAIMS (OTHER THAN OIL & GAS LIEN CLAIMANTS)
Several Secured Claims have been filed in the case as to which the Debtor
has or will shortly be filing objections and/or adversary proceedings, as
appropriate, in opposition thereto. Of such Claims, with the exception of
Secured Claims which have been asserted by Claimants alleging security in the
form of oil and gas Liens (and as to which special provisions are contained
within the Plan), the following are identified for discussion herein due to
their magnitude and/or the fact that the Plan has not provided for their
separate Class B classification:
PLEASE TAKE NOTICE: ALL OF THE FOLLOWING IDENTIFIED CLAIMS HAVE BEEN FILED
AS SECURED CLAIMS IN THE DEBTOR'S CHAPTER 11 CASE. ALL OF THE BELOW-MENTIONED
SECURED CLAIMS HAVE BEEN OR WILL SHORTLY BE OBJECTED TO IN FULL AS SECURED
CLAIMS AND, WITH THE EXCEPTION OF THE SECURED CLAIMS OF TRICORE ENERGY VENTURE,
LP AND THE WOODLANDS CORPORATION, NO SEPARATE SECURED CLASSES HAVE BEEN
ESTABLISHED FOR THEM IN THE PLAN. SUCH CLAIMS ARE TREATED IN THE PLAN AS
UNSECURED CLAIMS AND SHALL ENTITLE THE HOLDERS THEREOF, IF AND TO THE EXTENT
THAT SUCH CLAIMS ARE DETERMINED TO BE ALLOWED UNSECURED CLAIMS, TO DISTRIBUTIONS
IN ACCORDANCE WITH CLASSES D-1 OR D-3, AS THE CASE MAY BE.
a. AFCO CREDIT CORPORATION. AFCO Credit Corporation ("AFCO") filed a
Secured Claim in the amount of $4,241.43 based upon gross unearned premiums, if
any, under a premium financing agreement dated April 9, 1990. The Claim is
allegedly secured by return premiums and coverage payments under the insurance
policy financed. Such policy is no longer in existence, however, such that there
is no basis for an Allowed Secured Claim. Furthermore, AFCO's Claim
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<PAGE>
is barred by the relevant statute of limitations. Therefore, a separate Secured
Class has not been designated for AFCO's Secured Claim in the Plan.
b. AMERADA HESS CORPORATION. Amerada Hess ("Amerada") filed a Secured
Claim in the amount of $301,758.25 based upon certain alleged unpaid amounts
associated with Amerada's asserted net profit interest in the Lac Blanc Field,
asserted net profits and working interest in the Exxon Fee #23 well, and
asserted production expenses associated with State Lease 8396. Amerada's proof
of claim reflects no basis for its secured nature, and the Debtor is of the
opinion that no such unavoidable basis exists. Therefore, the Debtor has or will
shortly be objecting to Amerada's Secured Claim as a Secured Claim, among other
things. Therefore, no separate Class has been provided for Amerada's Secured
Claim in the Plan.
c. BAKER HUGHES PROCESS SYSTEMS. Baker Hughes Process Systems ("Baker
Hughes") filed a Secured Claim in an amount in excess of $81,000 based upon
certain equipment furnished to WRT under a lease agreement dated December 15,
1995. The Debtor's interest in such equipment is as a lessee; the Debtor has no
present proprietary interest in such equipment (although the Debtor does have
the option to purchase such equipment for additional consideration). Therefore,
the Debtor has or will shortly be objecting to Baker Hughes Secured Claim as to
both its amount and asserted secured nature. Correspondingly, no separate
Secured Class has been established in the Plan for Baker Hughes' Claim.
d. COSTILLA PETROLEUM CORPORATION. Costilla Petroleum Corporation
("Costilla") filed a Secured Claim in the amount of $168,489.63 based upon
certain unidentified joint interest billings and accounts receivable. Costilla's
Claim is allegedly secured by a "contractual and/or statutory non-operators lien
on sale of production." The Debtor has or will shortly be filing an objection to
the secured nature of the Claim as no contractual lien was provided by WRT to
Costilla and Costilla's statutory lien, if valid, is avoidable pursuant to
Section 545 of the Bankruptcy Code. For the same reason, a separate Secured
Class was not established for Costilla's Claim in the Plan.
e. FLORIS FAY FORGEY DRISKILL, ET AL. Floris Fay Forgey and several
additional individuals (the "Driskill Group") collectively filed a Secured Claim
in the case for $129,570.03. The Driskill Group's Secured Claim is allegedly
based upon a statutory lessor's lien. Such lien, to the extent valid, is
avoidable pursuant to Section 545 of the Bankruptcy Code. Therefore, the Debtor
has or will shortly be objecting to the Driskill Group's Claim on such basis,
among possible others, and no separate Secured Class has been designated in the
Plan for it.
f. DUCK LAKE ACQUISITION PARTNERS. Duck Lake Acquisition Partners, LP
("Duck Lake") has filed a Secured Claim for $318,377.12 based upon certain
alleged unpaid royalties associates with the Lac Blanc Field. Duck Lake's Claim
is allegedly secured by a statutory lessor's lien. Such lien, if valid, is
avoidable pursuant to Section 545 of the Bankruptcy Code. Accordingly, the
Debtor will be objecting to such Claim on that basis, among possible others, and
no separate Secured Class has been provided for Duck Lake's Claim in the Plan.
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g. FIRST PREMIUM SERVICES, INC. First Premium Services, Inc. ("First
Premium") filed a Secured Claim in the amount of $69,857.20 based upon amounts
allegedly owing by WRT under an insurance financing agreement related to
insurance coverage between 1995 and 1996. The Claim is allegedly secured by
return premiums and coverage payments under the insurance policy financed. WRT
paid such amount in full during the course of the Chapter 11 Case, however, such
that no further liability exists. Accordingly, a separate Secured Class has not
been designated for First Premium's Secured Claim either.
h. FORD MOTOR CREDIT COMPANY. Ford Motor Credit Company ("FMCC") filed a
Secured Claim in the amount of $25,316.92 based upon its alleged interest in a
vehicle leased by WRT prior to the Chapter 11 Case. During the course of the
Chapter 11 Case, the FMCC lease was rejected and the automobile at issue was
returned to FMCC. Therefore, there is no basis for an Allowed Secured Claim by
FMCC, and a separate Secured Class for FMCC's Claim has not be designated.
i. FREEPORT-MCMORAN OIL & GAS CO. Freeport-McMoRan Oil & Gas Co.
("Freeport") filed a Secured Claim in the amount of $589,505.00 based upon
certain alleged final adjustments due under a Purchase and Sale Agreement dated
as of June 14, 1993. The Claim has been asserted as a Secured Claim based upon
an alleged vendor's lien under Louisiana law. The Debtor has or will shortly be
objecting to Freeport's Secured Claim for the following reasons, among possible
others: (i) failure to timely assert a final settlement statement as required by
the Purchase and Sale Agreement, (ii) Freeport's vendor's lien, to the extent
valid, is avoidable pursuant to Section 545 of the Bankruptcy Code. Therefore,
no separate Secured Class for Freeport's Secured Claim has been designated in
the Plan.
j. GE CAPITAL CORPORATION. GE Capital Corporation ("GE") filed a Secured
Claim in the amount of $48,017.06 based upon certain equipment leased to WRT
beginning in 1993. The Debtor's interest in the equipment held under the GE
leases is as a lessee; the Debtor has no propriety interest in such equipment to
form the basis for an allowable Secured Claim in favor of GE. Furthermore, the
Debtor assumed the GE leases during the course of the Chapter 11 case, all
existing monetary defaults at that time, and has been current on lease payments
to date. Therefore, the Debtor has or will be objecting to GE's Secured Claim as
to both its amount and asserted secured nature. Correspondingly, no separate
Secured Class has been established within the Plan for GE's Claim.
k. ROBERT H. & LINDA MCGILL GRIFFIN. Robert H. Griffin and Linda McGill
Griffin (the "Griffins") filed a Secured Claim in the amount of $133,698.51
based upon WRT's alleged failure to pay in full a purchase price for certain oil
and gas interests in the Napoleonville Field. The Griffins' Claim is allegedly
secured by a vendor's lien under applicable state law. The Debtor has or will
shortly be filing an objection to the Griffins' Claim in full due to lack of any
contractual obligation on the part of WRT to pay any amounts to the Griffins.
Furthermore, to the extent that the Griffins may have obtained a statutory
vendor's lien, such lien is avoidable pursuant to Section
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<PAGE>
545 of the Bankruptcy Code. Consequently, no separate Secured Class in the Plan
is established for the Griffins' Claim.
l. MILAM ROYALTY CORPORATION. Milam Royalty Corporation ("Milam") filed an
Unsecured Claim in the case for $1,204,513.00 based upon certain adjustments
allegedly owing in connection with WRT's acquisition and operation of certain
oil and gas interests in the East Hackberry Field. While the claim is identified
as unsecured in the proof of claim, the proof of claim also asserts that it is
to be considered a Secured Claim to the extent that Milam may have set-off
rights against the Debtor. The Debtor is unaware of any such set-off rights and,
therefore, has or will shortly be objecting to Milam's Claim or a Secured Claim,
among possible other reasons. Therefore, no separate Secured Class has been
designated in the Plan for Milam's Claim.
m. MOBIL OIL EXPLORATION & PRODUCTION. Mobil Oil Exploration & Production
("Mobil") filed a Secured Claim in the amount of $13,100,000, plus certain
allegedly unknown additional damages, based upon contingent liability which
Mobil asserts will result if and when CXY Energy Inc. ("CXY") earns certain
farmout acreage from WRT in the Lac Blanc Field (and as to which CXY has
contractually obligated itself to assign to Mobil at such time). The largest
components of such Claim consist of a contingent reimbursement piece of $12
million associated with the alleged cost of eliminating INCC's Lien on WRT's Lac
Blanc Field interests and a contingent reimbursement piece of $1.1 million
associated with certain allegedly unpaid oil and gas Lien Claim in the Field.
Mobil's basis in asserting the Claim as secured in nature is an alleged right of
recoupment under bankruptcy and Louisiana law. The Debtor has or will shortly be
objecting to Mobil's Claim as secured for the following reasons, among possible
others: (i) there is no contractual privity between the Debtor and Mobil to
support its Claim; (ii) Mobil's Claim is contingent in nature, at best; (iii)
Mobil's Claim, to the extent of $13.1 million, is duplicative of INCC's Secured
Claim and the oil and gas Lien Claims associated with the Lac Blanc Field, all
of which arae already provided for within the Plan; and (iv) Mobil has asserted
no valid, unavoidable basis for the secured nature of its Claim. As a result of
the foregoing, no separate Secured Class is designated in the Plan for Mobil's
Claim.
n. NATIONSBANK OF TEXAS. NationsBank of Texas ("NationsBank") filed a
Secured Claim in the amount of $400,000.00 based upon 4 outstanding letters of
credit (the "LCs") which NationsBank issued on behalf of WRT to cover certain
contingent plugging and abandonment liabilities. NationsBank obtained a pledge
of certain of WRT's bank accounts to secure repayment of the LCs to NationsBank
in the event of a call on the LCs by the beneficiaries thereto. NationsBank has
recently informed the Debtor that it will not be renewing the LCs for an
additional year after the end of January 1997. Therefore, the Debtor is in the
process of obtaining substitute LCs from another lending institution to replace
the NationsBank LCs. Once such replacements are obtained, NationsBank's
contingent liability will be eliminated such that NationsBank will have no basis
for a Claim whether Secured or Unsecured.
o. EUGENE W. RUSSELL. Eugene W. Russell ("Russell") filed a Secured Claim
in this case for $28,790.15 based upon WRT's alleged failure to pay in full a
purchase price associated with
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certain oil and gas interests in the Napoleonville Field. Russell has based the
secured nature of his Claim on an alleged statutory vendor's lien. Such lien to
the extent valid, is avoidable pursuant to Section 545 of the Bankruptcy Code.
Therefore, the Debtor has or will shortly be objecting to Russell's Claim on
such basis, among possible others, and no separate Secured Class is established
for the Claim in the Plan.
p. RUSSELL RESOURCES, INC. Russell Resources, Inc. ("Russell Resources")
filed a Secured Claim in the case for $135,040.74, based upon an alleged failure
on the part of WRT to pay in full a purchase price for certain oil and gas
interests in the Napoleonville Field (the "Napoleonville Piece"), plus
$5,983.00, based upon certain alleged unpaid overriding royalties associated
with the Debtor's oil and gas interests in the Abbeville Field (the "Abbeville
Piece"). Russell Resources has asserted its Claim as secured as to the
Napoleonville Piece based upon an alleged vendor's lien. Such lien, to the
extent valid, is avoidable pursuant to Section 545 of the Bankruptcy Code.
Russell Resources has presented no basis for the secured nature of the Abbeville
Piece, and the Debtor and DLBW are aware of no such unavoidable basis.
Therefore, the Debtor has or will shortly be objecting to the entirety of
Russell Resource's Claim as secured, among possible other reasons, and a
separate Secured Class for its Claim is not designated in the Plan.
q. TENNECO VENTURES CORPORATION. Tenneco Ventures Corporation ("Tenneco")
has asserted two Secured Claims in the aggregate amount of $240,888.00. Both of
the Claims are based upon WRT's alleged contractual obligation to pay for
Tenneco's portion of certain joint interest billings ("JIBs") to Texaco in
connection with operation of oil and gas properties in the West Cote Blanche Bay
Field -- one of the Claims (in the amount of $100,888.00) asserting a right of
reimbursement for payments actually made by Tenneco to Texaco; and the other (in
the amount of $140,000.00) asserting an approximated, contingent claim for
Tenneco's portion of certain unpaid JIBs to Texaco (which unpaid JIBs form a
part of the claim asserted by Texaco in Class C-14). Both of the Claims also
base their secured nature on a vendor's privilege and right of rescission under
Louisiana law. With respect to the $140,000.00 contingent claim, the Debtor has
or will be objecting to the Claim based upon its contingency and the fact that,
as a result of the payment in full of the claims in Class C-14, Tenneco will no
longer be obligated to Texaco for the unpaid JIBs. With respect to the
$100,888.00 Secured Claim, Tenneco's Lien, if valid, is avoidable under Section
545 of the Bankruptcy Code. Accordingly, the Debtor will be objecting to such
Claim on that basis, among possible others, and no separate Secured Class has
been designated in the Plan for Tenneco's Claims.
r. TRICORE ENERGY VENTURE, L.P. Tricore Energy Venture, L.P. ("Tricore")
has asserted a Secured Claim in an amount identified as "no greater than
$9,223,741.00." On January 14, 1997, the Debtor initiated an adversary
proceeding to obtain a declaration of the invalidity of the security interests
or liens allegedly securing Tricore's Claim, or alternatively for avoidance of
such security interests or liens pursuant to Sections 544 and 547 of the
Bankruptcy Code. In addition, the Debtor intends to file an objection to the
asserted Claim of Tricore (i) under Section 502(c) of the Bankruptcy Code
seeking to estimate such asserted Claim on the grounds that it is a contingent
claim the liquidation of which would unduly delay the administration of the
Chapter 11 Case, and
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(ii) under Section 502(d) of the Bankruptcy Code seeking to disallow such
asserted Claim in full on the grounds that Tricore is the transferee of a
transfer available under Sections 544 and 547 of the Bankruptcy Code.
Nevertheless, to the extent that Tricore may obtain an Allowed Secured Claim,
the Plan provides for specific treatment of the Claim in Class B-4.
s. WOODLANDS CORPORATION. The Woodlands Corporation ("TWC") has asserted a
Secured Claim in the amount of $250,000.00 based upon rejection damages from the
Debtor's rejection of the TWC lease of certain office space in the Woodlands,
Texas, which damages are allegedly secured by TWC's security interest in the
Debtor's office furniture and equipment. The Debtor has reason to believe that
the value of the Collateral securing TWC's Claim is considerably less than
$250,000.00 and is in the process of analyzing such value. Pursuant to Section
506 of the Bankruptcy Code, TWC's Allowed Secured Claim will amount to only such
value. Furthermore, the Debtor is in the process of determining whether, and to
what extent, TWC has released the premises at issue, such that TWC's Claim might
be reduced by mitigation. To the extent that TWC's Secured Claim becomes an
Allowed Secured Claim, however, the Plan provides for specific treatment of it
in Class B-6.
2. DISPUTED UNSECURED CLAIMS
The Debtor has internally identified numerous objectionable Unsecured
Claims, and will be filing objections to such Claims as merited. None of the
Disputed Unsecured Claims, with the exception of the Class Proof of Claim
described below, are specifically identified herein due to the fact that the
outcome of litigation on such Claims will not materially affect the proposal set
forth for satisfaction of Allowed Unsecured Claims, as a whole, under the Plan.
With respect to General Unsecured Claims, to the extent such Claims are
successfully challenged and disallowed, the other holders of the Allowed
Unsecured Claims in Class D-3 obtain the benefit of such disallowance in the
form of a proportionate allocation of the shares of New WRT Common Stock which
would have otherwise been distributable to such Disputed Unsecured Claims to
them.
a. CLASS PROOF OF CLAIM - SECURITIES LITIGATION. A Class Proof of
Claim has been filed in the case, on behalf of a yet-to-be certified class of
plaintiffs, by counsel for the existing plaintiffs in the Securities Litigation.
The Debtor has or will shortly be filing an objection to such Claim based upon,
among other things, the fact that no class certification has been obtained to
date. Should such class certification be obtained, however, and the Class Proof
of Claim is otherwise Allowed, the plaintiffs represented by such class Claim
shall be entitled to the Distributions set forth in the Plan applicable to such
Securities Litigation Claims.
3. UNLIQUIDATED CLAIMS.
Numerous Claims have been filed in the Case in an unliquidated
amount. The Debtor has or will be filing an objection to all such Claims.
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VII.
OTHER SIGNIFICANT PLAN PROVISIONS
A. THE TEXACO WEST COTE BLANCHE BAY TRANSACTION
DLB is negotiating with Texaco and TEPI regarding, INTER ALIA, (i) the
Claim asserted by Texaco and TEPI against WRT in Class C-14 (the "Texaco
Claim"), (ii) the WCBB Assets and (iii) the CAOA. The intent of the parties to
those negotiations is that New WRT would obtain ultimate ownership of the WCBB
Assets. Texaco and TEPI have insisted that, because of concerns over WRT's
financial status, certain time exigencies and other matters relating to that
certain Global Settlement Agreement, DLB be in the chain of title of the WCBB
Assets and furthermore that DLB guarantee, for TEPI's and Texaco's benefit, the
cost of performance of certain plugging and abandonment obligations with respect
to the WCBB Assets should New WRT fail to perform those obligations.
The transaction currently under negotiation would occur in three stages.
The first two stages would occur pursuant to the Purchase, Sale and Exchange
Agreement. In the first stage, among other things, (i) DLB would acquire the
Texaco Claim and the WCBB Assets, (ii) DLB would assume certain operational
liabilities and execute certain agreements and subleases related thereto, (iii)
DLB would execute and place into escrow an agreement (the "P&A Guaranty")
pursuant to which DLB will assume and guarantee plugging and abandonment
obligations related to both the WCBB Assets and WRT's existing interest in the
West Cote Blanche Bay Field, and (iv) Texaco and TEPI would designate DLB (or
its designee) as the operator of the Shallow Contract Area. The closing of the
first stage would be conditioned on, among other things, the Debtor's consent to
the designation of DLB (or its disagree) as operator and the filing by Texaco
and TEPI with the Louisiana State Mineral Board (the "LSMB") of an application
seeking its consent to the transfer of the WCBB Assets to DLB.
In the second stage, upon the execution by the LSMB of its consent to the
transfer to DLB of the WCBB Assets, the P&A Guaranty would be released from
escrow and become effective. To implement the P&A Guaranty, DLB would contribute
to a trust (the "P&A Trust") established for the benefit of the State of
Louisiana (i) $1,000,000 and (b) $18,000 per month commencing the first calendar
month after such initial payment for seven years.
In the third stage, which would occur on the Effective Date pursuant to
the Transfer and Exchange Agreement, (i) DLB would transfer the WCBB Assets to
New WRT, (ii) New WRT would transfer the Buyer's Leasehold and Facilities to
DLB, which will in turn transfer them to Texaco and TEPI, (iii) New WRT would
issue to DLB 5 million shares of New WRT Common Stock plus the additional number
of shares of New WRT Common Stock obtained by dividing the amount of capital
expenditures incurred by DLB as of the Effective Date as owner of the WCBB
Assets and/or operator of the Shallow Contract Area, to the extent not
disapproved by the
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Bankruptcy Court, by a purchase price of $3.50 per share, (iv) the Texaco Claim
would be paid in accordance with the Plan, and (v) the Debtor would assume the
CAOA.
The Debtor and DLB are hopeful that the parties will be able to negotiate
definitive documentation setting forth the foregoing transaction. However, there
can be no assurances that they will be successful in doing so.
B. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Pursuant to the Plan, the Debtor shall file and serve on or before March
19, 1997, a listing of all executory contracts and unexpired leases which it
intends to assume and which have not already been made the subject of a pending
Motion or otherwise assumed or rejected prior to such time. Such listing shall
also identify the payment amount ("the Cure Payment") pursuant to Section 365 of
the Bankruptcy Code. Consent to the assumption of such contracts or leases as
listed, if required, shall be deemed to have been given unless any Person who is
a party to such executory contract or unexpired lease objects by filing a
written objection to the Plan with the Bankruptcy Court and serving the same on
the Debtor and the Debtor's counsel not less than five days prior to the date
set for the hearing on Confirmation. Thereafter, all executory contracts and
unexpired leases which have not been listed by the Debtor or which have not
previously been made the object of a Motion to Assume or Reject or otherwise
assumed or rejected shall be deemed rejected as of Confirmation. All Claims
arising from the rejection of executory contracts and unexpired leases shall be
evidenced by properly filed proofs of claims which much be filed within any
applicable deadline previously established by the Bankruptcy Court or, if no
such deadline has been established, within fifteen (15) days of the earlier of
the Confirmation Date of the Plan or the date of entry of a Final Order
authorizing rejection of the executory contract or unexpired lease. Such proofs
of claims must also be served on counsel for the Debtor and counsel for DLBW.
Failure to file a proof of claim on or before such deadline shall result in
disallowance in full of such Claim.
C. CONDITIONS
The Plan contains conditions both as to the confirmation of the Plan and
as to the Effective Date of the Plan.
The Plan provides that it may only be CONFIRMED if the following
conditions are met:
(a) the Commitment Agreement shall be binding on the Debtor and DLBW and
shall not have been terminated by DLBW in accordance with its terms;
(b) The Debtor shall have included the CAOA on its listing of executory
contracts and unexpired leases to be assumed, filed with the
Bankruptcy Court in accordance with Article 30.1 of this Plan;
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(c) The Bankruptcy Court shall have entered an order or orders, which
may be the Confirmation Order, permitting the Debtor to maintain in
the Disputed Claims Reserve Accounts an amount of Cash on account of
all Disputed Claims that shall not exceed $100,000; and
(d) The closing under the Purchase, Sale and Exchange Agreement with
respect to the WCBB Assets and the claim of TEPI in Class C-14 shall
have occurred.
The Plan provides that the EFFECTIVENESS of the plan will be subject to
the satisfaction of the following conditions:
(a) The Bankruptcy Court shall have made findings of fact and
conclusions of law as to confirmation of the Plan and entered a
Confirmation Order, in each case satisfactory to the Debtor and
DLBW;
(b) The Commitment Agreement shall be binding on the Debtor and DLBW and
shall not have been terminated in accordance with its terms;
(c) Each of the conditions set forth in Articles VIII and IX of the
Commitment Agreement has been satisfied; and
(d) New WRT and INCC shall have agreed upon the terms of and executed
definitive documentation with respect to New ING Term Sheet; and
(e) The Louisiana State Mineral Board shall have executed a consent to
the transfer of the WCBB Assets to DLB or its designee pursuant to
the terms of the Purchase, Sale and Exchange Agreement.
The conditions to confirmation and to effectiveness may be waived jointly
by DLBW and the Debtor.
D. DISCHARGE OF THE DEBTOR
The Debtor shall receive a full and complete discharge, pursuant to ss.
1141(d) of the Bankruptcy Code, of all Claims and other debts that have arisen
prior to confirmation, including, but not limited to, a discharge of all Claims
of the kind specified in ss. 502(g), (h) and (i) of the Bankruptcy Code
(including any fine, penalty, multiple or exemplary damages or forfeitures). All
Creditors and holders of Equity Interests will be precluded from asserting
against New WRT or its Assets any other or further Claims based upon any act or
omission, transaction or other activity of any kind or nature that occurred
prior to the Confirmation Date. All current officers and directors will receive
a release from all Claims and causes of action arising from their employment by
the Debtor, other than actions based on gross negligence as willful misconduct.
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E. AMENDMENT AND MODIFICATION TO THE PLAN
The Plan may be altered, amended or modified by the Debtor in the manner
provided for by ss. 1127 of the Bankruptcy Code or as otherwise permitted by
law.
F. RETENTION OF JURISDICTION
Pursuant to the Plan, the Bankruptcy Court will retain jurisdiction over
all matters arising under, or arising in, or relating to the Chapter 11 Case or
this Plan to the fullest extent permitted by 28 U.S.C. ss. 1334 to hear, and by
28 U.S.C. ss. 157 to determine, all proceedings in respect thereof, including,
but not limited to, proceedings for supervision of the Plan. Specifically, but
without limitation, and if applicable law provides, the Bankruptcy Court will
have jurisdiction:
(a) to hear and determine any and all objections or other matters
relating to the allowance of Claims, including, without limitation,
Administrative Claims;
(b) to hear and determine any and all applications for allowance and
payment of fees and expenses made by attorneys and other
professionals pursuant to Sections 330 or 503 of the Bankruptcy
Code, or for payment of any other fees or expenses authorized to be
paid or reimbursed by the Debtor pursuant to provisions within the
Bankruptcy Code, and any objections thereto;
(c) to hear and determine any and all pending applications for
rejection, assumption or assumption and assignment, as the case may
be, of unexpired leases and executory contracts to which the Debtor
is a party or with respect to which it may be liable, and any and
all Claims arising therefrom, and any other issue that may arise
under Section 365 of the Bankruptcy Code;
(d) to hear and determine any and all motions, applications, adversary
proceedings and contested or litigated matters regarding Claims or
interest, accrued prior to the Confirmation Date, as to assets
revested pursuant to ss. 1141 of the Bankruptcy Code;
(e) to consider and approve modifications of or amendments to the Plan;
(f) to hear and determine disputes regarding the implementation or
consummation of the Plan;
(g) to hear and determine all controversies, disputes, settlements, and
suits which may arise in connection with the interpretation or
enforcement of this Plan, or in connection with the enforcement of
remedies under this Plan;
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(h) to hear and determine during the period in which the Chapter 11 Case
remains open all controversies, disputes and issues relating to the
discharge of the Debtor;
(i) to consider and approve compromises, settlements and adjudications
of any objections to Claims;
(j) to estimate disputed, contingent and unliquidated Claims for
purposes of distribution under the Plan;
(k) to correct any defect, cure any omission or reconcile any
inconsistency in the Plan;
(l) to resolve any issues or disputes relating to the revesting of
title, sale, or liquidation of Assets in accordance with provisions
within the Plan;
(m) to enter a final decree closing the Chapter 11 Case;
(n) to hear and determine such other matters as may arise in connection
with the Plan or the Confirmation Order;
(o) to hear and determine all adversary proceedings filed before or
after the Confirmation Date seeking relief under Sections 542, 543,
544, 547, 548, 549 or 550 of the Bankruptcy Code;
(p) to hear and determine any other matter not inconsistent with the
Bankruptcy Code and Title 28 of the United States Code that may
arise in connection with or related to the Plan; and
(q) to hear and determine such other matters as may arise in connection
with the Plan or the Confirmation Order.
VIII.
MANAGEMENT OF NEW WRT
A. ORGANIZATION AND MANAGEMENT OF NEW WRT
The Plan proposes that New WRT will be organized under the laws of the
State of Delaware and that the New WRT Certificate of Incorporation and the New
WRT By-Laws will be in the form attached as Exhibits "K" and "J" hereto,
respectively. Subject to the Bankruptcy Court's approval pursuant to Section
1129(a)(5) of the Bankruptcy Code, the Plan also proposes to provide for a Board
of Directors for New WRT consisting of five members for the first three years
following the
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Effective Date. Such directors shall consist of three individuals selected by
DLBW and the remaining two selected by the Committee. Such initial Board of
Directors shall take all actions necessary to implement the Plan and upon the
Effective Date the operation of New WRT shall be and become the general
responsibility of such Board of Directors who shall thereafter have the
responsibility for the management, control, and operation of the company. Among
the responsibilities which the new board shall take on are (i) selection of the
officers of New WRT and (ii) the preparation, execution, and issuance of New WRT
Common Stock, New WRT Warrants, the Rights Offering and such other notes,
securities, and documents of New WRT as may be necessary to carry out the Plan.
The Board shall also call the first shareholder meeting of New WRT within twelve
months after the Effective Date. To effectuate the initial identification of
directors, DLBW has set forth below its designation of initial Directors and
Officers, and the Committee shall identify their selections for the board by no
later than fifteen days prior to the Confirmation Date and shall notify Debtor's
counsel of such selections within such period as well. In the event that any one
or more nominations are not timely received by New WRT and/or its counsel, the
existing directors of WRT shall be authorized to make such nominations in the
place of the Committee, subject to the approval of DLBW and the Committee.
B. IDENTIFICATION OF NEW WRT DIRECTORS AND OFFICERS
The three directors of New WRT appointed by DLBW will be Charles E.
Davidson, Mark Liddell and Mike Liddell. The remaining two directors will be
appointed by the Committee on or before the Effective Date.
The officers of New WRT will be: Gary C. Hanna, President; Raymond P.
Landry, Executive Vice President; and Ronald Youtsey, Secretary and Treasurer.
C. INFORMATION ABOUT NEW WRT DIRECTORS AND OFFICERS
MIKE LIDDELL has served as Chief Executive Officer of DLB since October
1994, and as a director of DLB since 1991. From 1991 to 1994, Mr. Liddell was
President of DLB. From 1979 to 1991, he was President and Chief Executive
Officer of DLB Energy. He received a B.S. degree in education from Oklahoma
State University. He is the brother of Mark Liddell.
MARK LIDDELL has served as the President of DLB since October 1994, and
since 1991 has been a director of Davidson and DLB. From 1991 to 1994, Mr.
Liddell was Vice President of DLB. From 1985 to 1991, he was Vice President of
DLB Energy. From 1991 to May 1995, Mr. Liddell served as a director of TGX
Corporation, a publicly-held oil and gas company, and, from 1989 to 1990, he
served as a director of Kaneb Services, Inc., a publicly-held industrial
services and pipeline transportation company. He received a B.S. degree in
education and a J.D. degree from the University of Oklahoma. He is the brother
of Mike Liddell.
GARY C. HANNA has served as Executive Vice President and Chief Operating
Officer of DLB since October 1994. From 1982 to October 1994, he was President
and Chief Executive Officer of
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Hanna Oil Properties, Inc., an Oklahoma City-based petroleum consulting company.
Beginning in 1991 and continuing until Mr. Hanna joined the Company, Hanna Oil
Properties, Inc. performed most of the Company's acquisition and land services.
He received a B.B.A. degree in economics from the University of Oklahoma. Mr.
Hanna is on the Board of Directors of the Oklahoma Independent Producers
Association.
RONALD D. YOUTSEY has served as Senior Vice President and Chief Financial
Officer of DLB since October 1994. Mr. Youtsey joined DLB as Controller in 1991.
From 1979 to 1991, he was employed by French Petroleum Corporation, an oil and
gas exploration and production company, last serving as Vice President of
Finance. Mr. Youtsey is a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants. He received a B.S. degree in
accounting from the University of Central Oklahoma.
RAYMOND P. LANDRY. Mr. Landry has served as WRT's President and Chief
Operating Officer since April 1995 and as Chairman of the Board and Chief
Executive Officer since November 10, 1995. Mr. Landry was elected by the
shareholders in December 1994 to serve as a Class I Director for a three-year
term. From June 1991 to April 1995, Mr. Landry served as the Executive Vice
President of Offshore Pipelines, Inc. Mr. Landry is a Certified Public
Accountant and holds a B.S. degree in Accounting from Louisiana State
University.
D. EMPLOYMENT CONTRACT
As part of the consummation of the Plan, New WRT will enter into an
employment agreement with Raymond P. Landry. That employment agreement will,
among other things, provide for (i) a two year term, (ii) a salary at $156,000
per year and (iii) stock options to purchase 60,000 shares of New WRT Common
Stock at $3.50 per share.
IX.
FEASIBILITY OF THE PLAN
A. FEASIBILITY REQUIREMENTS AND REORGANIZATION VALUE
The Bankruptcy Code requires that confirmation of a plan is not likely to
be followed by liquidation or the need for further financial reorganization. For
purposes of determining whether the Plan meets this requirement, the Debtor and
DLBW have analyzed the ability of the Debtor, upon and after the Effective Date,
to meet its obligations under the Plan. As part of this analysis, the Debtor, on
behalf of the Debtor and DLBW, has prepared projections of New WRT's financial
performance for each of the fiscal years in the period ending December 31, 2000
(the "Projection Period"). These projections, and the assumptions on which they
are based, are annexed hereto as Exhibit "F" (the "Financial Forecast"). See
also Section XII(F) "Material Uncertainties and Risk Factors -- Financial
Projections."
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In developing an estimate of the reorganization value of the Debtor, the
Debtor has been advised by Jefferies & Company, Inc. (the "Financial Advisor").
The Financial Advisor developed a range of reorganization values by utilizing
the Financial Forecast and examining comparable public companies to determine a
range of appropriate multiples of EBITDA (earnings before interest, taxes,
depreciation and amortization). The Financial Advisor believes this approach is
considered by the financial community to be an appropriate valuation technique
for estimating the going concern value of an oil and gas exploration and
production business undergoing a chapter 11 plan of reorganization. The
Financial Advisor's estimate of the range of the Debtor's reorganization value
is based upon a number of assumptions, including a successful reorganization of
the Debtor's business and finances in a timely manner in accordance with the
Plan, the Debtor's and DLBW's estimates of the Debtor's future operations, and
the Financial Forecast. Many of such assumptions are beyond the control of the
Debtor, DLBW and the Financial Advisor. Actual events may vary from such
assumptions and the variations may be material. See Section XII herein,
"Material Uncertainties and Risk Factors." Based on the foregoing, and assuming
20.4 million shares of New WRT Common Stock will be issued and outstanding on
the Effective Date, the Financial Advisor estimates the reorganization value of
the New WRT Common Stock to be from $3.10 to $5.97 per share. No assurance can
be given that a liquid trading market will develop after the effectiveness of
the Plan or that the New WRT Common Stock will trade in such price range. See
Section XII "Material Uncertainties and Risk Factors -- Risks With Respect to
New Securities". The per share reorganization value utilitized by the Debtor and
DLBW in calculating Distributions to Creditors is thus considered to be
reasonable by the Financial Advisor based upon the methodologies employed and
utilizing the Financial Forecast and the Debtor's and DLBW's estimates of the
reorganized Debtor's (New WRT's) future operations. The Financial Advisor will
provide testimony at the Confirmation Hearing as to the reasonableness of the
reorganization value utilized by the Debtor and DLBW, the valuation approaches
undertaken and the assumptions underlying such valuation.
Based upon the Financial Forecast, the Debtor and DLBW believe that New
WRT will be able to make all payments required pursuant to the Plan and,
therefore, that confirmation of the Plan is not likely to be followed by
liquidation or the need for further reorganization. The Debtor and DLBW further
believe that New WRT will be able to repay or refinance any and all of the then
outstanding indebtedness under the Plan at or prior to the maturity of such
indebtedness.
B. FUTURE BUSINESS PLAN OF OPERATIONS
The Debtor and DLBW have set forth in Exhibit "F", attached to this
Disclosure Statement a description of New WRT's future business plan and
operations. Included within such exhibit are projections for New WRT's financial
performance for each of the fiscal years in the period ending December 31, 2000.
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X.
COMPARISON OF PLAN TO ALTERNATIVES
There are three likely possible consequences if the Plan is rejected or if
the Court refuses to confirm the Plan: (1) the Bankruptcy Court could dismiss
the Chapter 11 Case; (2) the Chapter 11 Case could be converted to a liquidation
case under Chapter 7 of the Bankruptcy Code; or (3) the Bankruptcy Court could
consider and confirm a plan of reorganization proposed by a party other than the
Debtor and DLBW.
A. DISMISSAL
The most remote possibility is dismissal. If dismissal were to occur, the
Debtor would no longer have the protection of the Bankruptcy Court and the
applicable provisions of the Bankruptcy Code. Dismissal would force a race among
Creditors to take over and dispose of the Debtor's available assets. Unsecured
Creditors, on an aggregate basis, would likely fail to realize recovery on their
Claims.
B. CHAPTER 7 LIQUIDATION
A straight liquidation bankruptcy or "Chapter 7 case" requires liquidation
of each of the Debtor's assets by an impartial trustee. In a Chapter 7 case, the
amount Unsecured Creditors receive depends upon the net estate available after
all assets of the Debtor have been reduced to cash. The cash realized from
liquidation of each of the Debtor's assets would be distributed in accordance
with the order of distribution prescribed in Section 726 of the Bankruptcy Code.
Whether a bankruptcy case is one under Chapter 7 or Chapter 11, allowed secured
claims, administrative claims and priority claims are entitled to be paid in
cash and in full before unsecured creditors receive any funds.
If this Chapter 11 Case were to be converted to one under Chapter 7 of the
Bankruptcy Code, the present Priority Claims may have a priority lower than
Priority Claims generated by the Chapter 7 case, such as the Chapter 7 trustee's
fee or the fees of attorneys, accountants and other professionals the trustee
may engage. Conversion to Chapter 7, then, would create an additional layer of
priority claims.
In a Chapter 7 liquidation case, a secured creditor would be entitled to
full payment, including interest, from the proceeds of sale of the secured
creditor's collateral, provided the realized value of the collateral is
sufficient to pay both the principal and interest. A secured creditor whose
collateral is insufficient to pay its secured claim in full will be entitled to
assert an unsecured claim for its deficiency and share with general unsecured
creditors.
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In the event this case were converted to one under Chapter 7, the
Bankruptcy Court would appoint a trustee to liquidate the assets of the Debtor
and to distribute the proceeds as described immediately above.
The Chapter 7 trustee would be entitled to receive compensation under
Section 326 of the Bankruptcy Code based upon distributions to creditors. The
trustee's fee would not exceed 25% on the first $5,000 or less, 10% on any
amount in excess of $5,000, but not in excess of $50,000, 5% on any amount in
excess of $50,000, but not in excess of $1,000,000, and 3% on any amount in
excess of $1,000,000 from all monies disbursed or turned over in the case to
parties in interest, excluding the Debtor, but including holders of secured
claims. The trustee's fees would be paid as a cost of administration and may be
paid in full prior to the costs and expenses incurred in a Chapter 11 case and
prior to any payment to unsecured creditors.
It is also highly likely that the Chapter 7 trustee would retain his or
her own attorneys and accountants, and perhaps other professionals such as
appraisers, whose fees would also constitute priority claims in a Chapter 7
case, with a priority that may be higher than those claims arising under a
Chapter 11 case.
Liquidation under Chapter 7 of the Bankruptcy Code would also entail the
appointment of a trustee having no experience or knowledge of the Debtor's
business, its records or assets. Hence, a substantial amount of time would be
required in order for any Chapter 7 trustee to wind the case up effectively.
Also, in the event litigation proves necessary on multiple issues, the Chapter 7
trustee would likely be in an inferior position to prosecute such actions
without prior knowledge regarding the Debtor's business.
If the Debtor were to be liquidated under Chapter 7 of the Bankruptcy
Code, the amount estimated to be available for distribution to Creditors would
go first to Allowed Secured Claims, second to Chapter 7 Allowed Priority Claims,
third to Chapter 11 Allowed Priority Claims, then to Allowed General Unsecured
Claims. Annexed hereto as Exhibit "B" is the Debtor's Liquidation Analysis. The
analysis provided is believed to be a reasonable estimate of value distributable
in a hypothetical liquidation of the Company. Readers are urged to review both
the exhibit and the assumptions underlying it.
C. ALTERNATIVE PLANS
To date, no other party besides the Debtor and DLBW has sought to file a
plan of reorganization.
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XI.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
A. GENERAL
1. STATUTORY OVERVIEW
Under the Internal Revenue Code of 1986, as amended (the "Tax Code") and
income tax regulations (the "Regulations") promulgated thereunder, there are
certain significant federal income tax consequences associated with the Plan
described in this Disclosure Statement. Certain of these consequences are
discussed below. Due to the unsettled nature of several of the tax issues
presented by the Plan, including the changes made by the Bankruptcy Tax Act of
1980 ("BTA80"), the Tax Reform Act of 1984 ("TRA84"), the Tax Reform Act of 1986
("TRA86"), the Omnibus Reconciliation Act of 1987 ("ORA87"), the Technical and
Miscellaneous Revenue Act of 1988 ("TAMRA"), the Omnibus Budget Reconciliation
Act of 1989 ("OBRA89"), the Revenue Reconciliation Act of 1990 ("RRA90") and the
Revenue Reconciliation Act of 1993 ("RRA93"), the differences in the nature of
the Claims of the various Claimants, their taxpayer status, residence and
methods of accounting (including Claimants within the same Class of Claims) and
prior actions taken by Claimants with respect to their Claims, as well as the
possibility that events or legislation subsequent to the date hereof could
change the federal tax consequences of the transactions, the federal tax
consequences described herein are subject to significant uncertainties.
No administrative rulings will be sought from the Internal Revenue Service
("IRS") with respect to any of the federal income tax aspects of the Plan.
Consequently, there can be no assurance that the treatment described in this
Disclosure Statement will be accepted by the IRS. No opinion of counsel has
either been sought or obtained with respect to the federal income tax aspects of
the Plan.
THE DISCUSSION SET FORTH IN THIS DISCLOSURE STATEMENT IS INCLUDED FOR
GENERAL INFORMATION ONLY. ALL CLAIMANTS AND STOCKHOLDERS SHOULD CONSULT THEIR
OWN TAX ADVISORS REGARDING THE FEDERAL INCOME TAX CONSEQUENCES CONTEMPLATED
UNDER OR IN CONNECTION WITH THE PLAN, INCLUDING STATE AND LOCAL TAX
CONSEQUENCES.
2. SUMMARY OF PLAN
Pursuant to the Plan, 10,000,000 shares of New WRT Common Stock will be
issued to Class D-3 Creditors. In addition, these same Creditors will be granted
rights to purchase up to 3,000,000 shares of New WRT Common Stock at a price of
$3.50 per share. These rights will be exercised by existing Creditors and/or the
DLBW proponent. The cash will be used to pay administrative, priority, certain
secured Claims, and a portion of the unsecured Claims. Other existing Creditors
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of the Debtor will exchange their Allowed Claims for stock or warrants of New
WRT. As part of the Plan, DLB will acquire from Texaco certain oil and gas
assets (the WCBB Assets) and claims of Texaco against WRT and will guarantee the
performance by New WRT of certain plugging and abandonment obligations with
respect to the WCBB Assets should New WRT fail to perform these obligations. DLB
will then transfer the WCBB Assets to WRT for 5,000,000 New WRT shares. DLB will
also receive approximately 2 million shares of New WRT stock in exchange for the
Texaco claim.
B. TAX CONSEQUENCES TO DEBTOR
1. EXISTING TAX ATTRIBUTES OF DEBTOR
For its fiscal year ending December 31, 1995, the Debtor had a net
operating loss carry forward of approximately $30,000,000. Management
anticipates that Debtor will realize operating losses. The 1995 tax return of
the Debtor reflects basis in assets in excess of basis for financial reporting
purposes of approximately $165,000,000. Most of these assets are depreciable or
depletable properties. Such amounts of net operating losses and basis are
subject to adjustment as a result of tax audits.
2. TREATMENT OF DEBT FORGIVENESS INCOME UNDER THE PLAN
The satisfaction of debentures (Senior Notes) and trade Claims aggregating
approximately $120,000,000 with stock having an estimated fair market value of
$35,000,000 will give rise to approximately $85 million of debt forgiveness
income. The satisfaction of the Section 10(b)(5) claims at less than their face
amount should not give rise to debt forgiveness income since a payment of the
claim would generate a current tax deduction. Since Debtor is in a Chapter 11
proceeding, the receipt of debt forgiveness income will not give rise to taxable
income. However, pursuant to Tax Code Section 108(b), the Debtor is required to
reduce its tax attributes to reflect the debt forgiveness income. The tax
attributes, and the order in which they are required to be reduced, is set forth
in Tax Code Section 108(b).
Assuming that the normal ordering rule for attribute reduction is
followed, the net operating loss carryovers would be reduced or eliminated and
the balance would be applied to reduce tax basis. Tax Code Section 108(b)(5)
allows taxpayers to elect to vary the normal ordering rule for attribute
reduction. A taxpayer can elect to first reduce the basis of depreciable assets,
as opposed to starting with the net operating loss carryover. If this election
were made, the net operating loss carryover would remain intact, but the basis
would be reduced by the entire amount of debt forgiveness income.
3. EFFECT OF SECTION 382 - GENERAL RULES
Under the Plan, there will be almost a complete change in ownership of the
Debtor. Accordingly, an ownership change under Tax Code Section 382 will occur.
When an ownership
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change occurs, a corporation is limited in its ability to utilize net operating
losses incurred before such ownership change to offset taxable income generated
after such ownership change. The Tax Code Section 382 limitation is determined
by multiplying the value of the loss corporation (immediately before the
ownership change) by the appropriate Federal long term tax exempt rate. For
ownership changes occurring during January, 1997, the applicable Federal
long-term tax exempt rate was 5.60%. The value of the Debtor before the
ownership change, and before giving effect to the debt forgiveness occurring
under the Plan, is negligible. Accordingly, under the general Tax Code Section
382 limitation, New WRT would not be able to utilize any of its net operating
losses.
Moreover, the excess of the bases in assets over their fair market value
will be treated as a built-in loss. This built-in loss, if triggered as a loss
within the five year recognition period, would be added to the otherwise
available net operating loss, and the total would be subject to the Tax Code
Section 382 annual limitation. Also, even if the built-in losses are not
triggered, the annual depreciation or depletion deductions attributable to such
built-in losses would themselves be subject to the Tax Code Section 382
limitation.
4. SPECIAL RULES FOR CHAPTER 11 CASES
Tax Code Section 382(l)(5) provides a special rule for certain ownership
changes occurring pursuant to a Chapter 11 Plan of Reorganization. Under this
special rule, otherwise available net operating losses, after reduction by a
toll change, are not subject to an annual limitation. This is true only, if
former shareholders and "qualifying creditors" receive more than 50 per cent of
the stock. Debtor does not believe that the requirements of Tax Code Section
382(l)(5) will be met but does believe that Tax Code Section 382(l)(6) will be
beneficial.
Tax Code Section 382(l)(6) also provides a special rule for ownership
changes occurring pursuant to a Chapter 11 Plan of Reorganization. Under this
special rule, the value of the loss corporation is determined by giving effect
to the increase in value of the loss corporation resulting from any surrender or
cancellation of Creditors' Claims.
The Regulations provide that the value of the loss corporation is the
lesser of --
"(1) THE VALUE OF THE STOCK OF THE LOSS CORPORATION IMMEDIATELY AFTER THE
OWNERSHIP CHANGE (DETERMINED UNDER THE RULES OF PARAGRAPH (K) OF THIS SECTION);
OR
(2) THE VALUE OF THE LOSS CORPORATION'S PRE-CHANGE ASSETS (DETERMINED
UNDER THE RULES OF PARAGRAPH (L) OF THIS SECTION)."
The regulations provide various limitations and special rules to be
applied in valuing a loss company for Section 382(l)(6). In general, however,
the Debtor believes that the stock value of New WRT should be the total amount
paid in as capital for the stock, including the indebtedness exchanged for
stock. This should give a value of approximately $70 million which will equate
to a Section 382 limitation of approximately $4 million of net operating losses.
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5. COMPUTATION OF ALTERNATIVE MINIMUM TAX ("AMT")
As a result of the reduced tax attributes discussed above, New WRT could
incur income tax in future years. AMT must be paid by a corporation when and to
the extent that its liability for AMT is greater than its regular tax liability.
AMT is equal to twenty percent (20%) of alternative minimum taxable income
("AMTI") less certain allowable credits. Under the Tax Code, AMT generally
equals regular taxable income, increased or decreased by certain adjustments and
preference items. However, only ninety percent (90%) of AMTI can be offset with
net operating loss carryovers. AMT liability, regardless of the amount of
available net operating loss carryovers, will be at least twenty percent (20%)
of the ten percent (10%) of AMTI that cannot be offset with NOL carryovers.
C. FEDERAL INCOME TAX CONSEQUENCES TO CLAIMANTS
1. GENERAL
The tax consequences of the implementation of the Plan to a Claimant will
depend in part on whether the Claimant's present debt constitutes a "security"
for federal income tax purposes, the type of consideration received by the
Claimant in exchange for its Allowed Claim, whether the Claimant reports income
on the accrual basis, whether the Claimant receives consideration in more than
one tax year of the Claimant, whether the Claimant is a resident of the United
States, and whether all the consideration received by the Claimant is deemed to
be received by that Claimant in an integrated transaction.
2. CLAIMANTS RECEIVING CASH
A Claimant who receives Cash in full satisfaction of his Claim will be
required to recognize gain or loss on the exchange. The Claimant will recognize
gain or loss equal to the difference between the "amount of cash received" in
respect of such Claim and the Claimant's tax basis in the Claim.
3. CLAIMANTS RECEIVING STOCK
The receipt of shares of New WRT Common Stock by the Claimants for their
existing Claims may generate Federal income tax consequences. The income tax
consequences to the Claimants will depend in part on whether the Claims they are
exchanging for the share constitute "tax securities" for federal income tax
purposes.
The determination as to whether a Claim of any particular Claimant
constitutes a "tax security" for federal income tax purposes is based on the
facts and circumstances surrounding the origin and nature of the Claim and its
maturity date. Generally, Claims arising out of the extension of trade credit
have been held not to be tax securities. Instruments with a five-year term or
less also
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rarely qualify as tax securities. On the other hand, bonds or debentures with an
original term in excess of ten years have generally been held to be tax
securities.
Tax Code Section 354 generally provides for nonrecognition of gain or loss
by holders of stock or tax securities of a corporation who exchange such stock
or tax securities solely for new stock or tax securities pursuant to a tax
reorganization as defined in Tax Code Section 368. The Senior Notes (part of
Class D-3) were originally issued in 1995 with a maturity of seven years. While
the issue is not free from doubt, the Debtor believes that the Senior Notes will
constitute tax securities. Accordingly, no gain or loss will be recognized by
these Claimants. The Debtor does not believe that any of the other Claims will
constitute tax securities; accordingly, such Claimants will recognize gain or
loss.
4. TAX BASIS AND HOLDING PERIOD
If a Claimant's shares of New WRT Common Stock under the Plan are deemed
to be acquired via an exchange under Tax Code Section 1001, such Claimant will
take a basis in the shares equal to the "amount realized" for tax purposes with
respect to such Claimant. The Claimant's holding period for the shares will
begin on the day following the exchange. If no gain or loss is recognized
because the exchange is governed by Tax Code Section 354, the Claimants will
take a carryover tax basis and holding period.
5. CHARACTER OF GAIN OR LOSS
The character of gain or loss recognized by a holder of a Claim as capital
or ordinary gain or loss and, in the case of capital gain or loss, as short term
or long term, will depend on a number of factors, including: (i) the nature of
the origin of the Claims; (ii) the tax status of the holder of the Claims; (iii)
whether the holder is a financial institution; (iv) whether the Claim is a
capital asset in the hands of the holder; (v) whether the Claim has been held
for more than one (1) year; and (vi) the extent to which the holder previously
claims a loss, bad debt deduction or charge to a reserve for bad debts with
respect to the Claim. CLAIMANTS ARE URGED TO CONSULT THEIR INDIVIDUAL TAX
ADVISORS REGARDING THESE ISSUES.
6. RECEIPT OF INTEREST
The BTA80 reversed prior law by providing that consideration attributable
to accrued but unpaid interest will be treated as ordinary income, regardless of
whether the Claimant's existing Claims are capital assets in his hands and the
exchange is pursuant to a tax reorganization. A Claimant, who, under his
accounting method, was not previously required to include in income, accrued but
unpaid interest attributable to his existing Claims, and who exchanges his
interest Claim for Cash, other property, shares of New WRT Common Stock or a
combination thereof, pursuant to the Plan, will be treated as receiving ordinary
interest income to the extent of any consideration so received allocable to such
interest, regardless of whether that Claimant realizes an overall gain or loss
as a result of the exchange of his existing Claims.
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7. BACKUP WITHHOLDING
Under the Tax Code, interest, dividends and other "reportable payments"
may, under certain circumstances, be subject to "backup withholding" at a
thirty-one percent (31%) rate. Withholding generally applies if the holder (i)
fails to furnish his social security number or other taxpayer identification
number (hereinafter "TIN"), (ii) furnishes an incorrect TIN, (iii) fails
properly to report interest or dividends, or (iv) under certain circumstances,
fails to provide a certified statement, signed under penalty of perjury, that
the TIN provided is his correct number and that he is not subject to backup
withholding.
8. FEDERAL INCOME TAX CONSEQUENCES TO EQUITY INTERESTS
Pursuant to the Plan, the existing Equity Interest holders may receive New
WRT Warrants to buy stock in New WRT. Under current law this would be a taxable
exchange and any realized gain or loss would be recognized. However, the
Department of the Treasury has proposed regulations which would likely cause
warrants issued in a reorganization to be treated as stock or securities. If
these regulations were adopted in their proposed form, Equity Interest Holders
receiving warrants would have a tax free exchange. The reguations will not be
effective until sixty days after adopted.
XII.
SECURITIES LAW CONSIDERATIONS
Section 1145 of the Bankruptcy Code provides that federal and state
registration requirements do not apply to the issuance of securities by a debtor
under a plan of reorganization to holders of claims or equity interests wholly
or principally in exchange for those claims or interests. With certain
exceptions discussed below, recipients of such securities may also resell them
without restriction. Set forth below is a discussion of the securities law
considerations to the Plan.
A. ISSUANCE
Section 1145 of the Bankruptcy Code exempts the original issuance of
securities under a plan of reorganization from registration under the Securities
Act of 1933, as amended ("Securities Act"), and state law. For the original
issuance to be exempt, three principal requirements must be satisfied: (i) the
securities must be issued by the debtor or its successor under a plan of
reorganization, (ii) each recipient of the securities must hold a claim against
the debtor, equity interest in the debtor or a claim for an administrative
expense against the debtor, and (iii) the securities must be issued entirely in
exchange for the recipient's claim against or equity interest in the debtor or
"principally" in such exchange and "partly" for cash or property. Under the
Plan, New WRT will issue New WRT Common Stock in satisfaction of Claims in Class
D-3. Class D-3 Claimants shall also obtain the right to participate in a Rights
Offering for an additional up to six
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million shares of New WRT Common Stock. Distributions of stock to Class D-3
Claimants pursuant to the Rights Offering shall occur on a staggered basis as
Claims within Class D-3 are finally Allowed. Nevertheless, such shares shall be
immediately transferable.
B. RESALE
Although Debtor believes that the subsequent distribution of New WRT
Common Stock by its recipients would be exempt from registration and not subject
to a holding period in most circumstances, certain recipients of the securities
- - i.e. those recipients who may be deemed "underwriters" as defined under
Section 1145(b) of the Bankruptcy Code - may be unable to resell such securities
absent registration of the securities under the Securities Act and applicable
state law, or absent exemption therefrom. THE DEBTOR RECOMMENDS THAT CREDITORS
AFFECTED BY THIS RISK CONSULT THEIR OWN COUNSEL.
Section 1145(b) of the Bankruptcy Code defines four types of
"underwriters": (i) a person who purchases a claim against, an equity interest
in, or a claim for administrative expenses against the debtor with a view to
distributing any security received in exchange for such a claim or equity
interest; (ii) a person who offers to sell securities authorized under a plan of
reorganization for the holders of such securities; (iii) a person who offers to
buy such securities from the holders of such securities, if the offer is (a)
with a view to distributing such securities, or (b) made under a distribution
agreement; and (iv) a person who is an "issuer" with respect to the security, as
the term "issuer" as defined in Section 2(11) of the Securities Act. An "issuer"
includes any person directly or indirectly controlling or controlled by the
debtor, or any person under direct or indirect common control with the debtor.
Whether a person is an "issuer", and therefore an "underwriter" for
purposes of Section 1145(b) of the Bankruptcy Code depends on a number of
factors. Such factors include (i) the person's equity interest in a company;
(ii) the distribution and concentration of other equity interests in a company;
(iii) whether the person is an officer or director of the company; (iv) whether
the person, either alone or acting in concert with others, has a contractual or
other relationship giving that person power over management policies and
decisions of the company; and (v) whether the person actually has such power
notwithstanding the absence of formal indicia of control. An officer or director
of the company may be deemed a controlling person, particularly if his position
is coupled with ownership of a significant percentage of voting stock. In
addition, the legislative history of Section 1145 of the Bankruptcy Code
suggests that a creditor with at least 20% of the securities of the debtor could
be deemed a controlling person.
To the extent that persons deemed "underwriters" receive securities
pursuant to the Plan, resales by such persons would not be exempted by Section
1145 of the Bankruptcy Code from registration under the Securities Act. Given
the complex, subjective nature of the question whether a particular holder may
be an underwriter, the Debtor makes no representation concerning the right of
any person to trade in the New WRT Common Stock. The Debtor recommends that
potential
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recipients of the New WRT Common Stock consult their own counsel concerning the
impact of the Securities Act on the ability to trade securities.
The New WRT Common Stock, absent underwriter status, should be freely
transferable, although the Debtor recommends that potential recipients consult
their own counsel with respect to their particular situation.
C. ATTRIBUTES OF NEW WRT COMMON STOCK
Under the Plan, the existing Common Stock and Preferred Stock of WRT shall
be canceled and New WRT Common Stock shall be issued to the holders of Allowed
Claims in Class D-3. Creditors holding Allowed Claims in Class D-3 will receive
a proportionate part of 10,000,000 shares of New WRT Common Stock, such shares
to be distributed in potentially several interim distributions and a final
distribution during the course of resolution of all potential D-3 Claims.
The current Certificate of Incorporation of WRT does not, and the
anticipated New WRT Certificate of Incorporation will not provide for any
restrictions upon the power of the Board of Directors to authorize the issuance
of additional authorized but unissued shares of stock. The current Certificate
of Incorporation authorizes the issuance of 50,000,000 shares of Common Stock
and no amendment to this provision is anticipated. At this time, the Debtor does
not foresee any need or justification for the issuance of Common Stock other
than as contemplated by the Plan, including those shares to be distributed
pursuant to the Rights Offering in Article 29 of the Plan. The Debtor estimates
that up to 16,000,000 shares of New WRT Common Stock will be issued to Creditors
under the Plan including such Rights Offering shares.
D. NEW WRT WARRANTS
In addition to the issuance of actual New WRT Common Stock shares, the
Plan contemplates the issuance of New WRT Warrants as well, such Warrants to be
exercisable over a period of five years from the Effective Date for the purchase
of one additional share of New WRT Common Stock per Warrant at $10.00 per share.
Claimants holding Allowed Claims in Class D-4 shall obtain Warrants equal to 2%
of the total number of shares to be issued pursuant to the Plan, provided that
Classes D-1, D-2, and D-3 vote in favor of the Plan. Classes E-1 and E-2 Allowed
Claims and Equity Interest holders shall similarly obtain Warrants equal to 1%,
respectively, of the total number of shares to be issued pursuant to the Plan,
provided that Classes D-1, D-2, D-3, and D-4 (and E-1, in the case of Equity
Interests in Class E-2) vote in favor of the Plan. Finally, Creditors holding
Claims and Equity Interests in Class E-3 shall obtain, collectively, Warrants
equal to 1% of the total number of shares to be issued pursuant to the Plan, but
only if Classes D-1, D-2, D-3, D-4, E-1 and E-2 vote in favor of the Plan. As
with shares of New WRT Common Stock, the Debtor believes that such Warrants
shall be freely transferable in the absence of a potential restriction as to
"underwriters". Nevertheless, the Debtor advises all such holders of Claims and
Equity Interests likely to receive New WRT Warrants pursuant to the Plan to
consult their own respective counsel regarding such transferability.
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XIII.
EXISTING AND POTENTIAL LITIGATION
A. PRE-PETITION LITIGATION
1. EMPLOYMENT LITIGATION
On September 28, 1995, a lawsuit was served against the Debtor, Arnoult
Equipment and Construction, Inc., Steven S. McGuire, Donald J. Arnoult and
others in the 24th Judicial District Court for the Parish of Jefferson, State of
Louisiana. The plaintiff Donald Muller, the former president, chief executive
officer and stockholder in certain oilfield service companies used by the Debtor
in its filed development activities, alleged that the Debtor and others
interfered with his employment, ultimately resulting in his forced resignation
from such companies. The plaintiff further alleged the Debtor and others acted
in a manner which resulted in the devaluing of the services companies' assets
and plaintiff's corresponding equity holdings in the companies. On November 9,
1995, the Debtor, et al. filed with the Court exceptions of no cause of action,
no right of action, and vagueness. The plaintiff has taken no action since the
filing of the case and no court date has been set. The Debtor's filing of the
Chapter 11 Case has resulted in an automatic stay of this litigation. The Debtor
believes the case to be without merit and that the outcome of the litigation
will not have a material effect on its financial condition or results of
operations.
2. SECURITIES LITIGATION
On December 18 and 19, 1995, two class-action shareholder's suits were
filed in the United States District Court for the Southern District of
California, seeking damages on behalf of a purported class of persons who
purchased the publicly-traded securities of the Debtor between October 20, 1993
and October 27, 1995. In these complaints, the plaintiffs have sued the Debtor,
certain of the members or past members of its Board of Directors, and others,
alleging joint and several liability for violations of Section 12(2) and Section
15 of the Securities Act of 1933. The plaintiffs also complain that all
defendants violated Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10(b)(5) of the Securities Exchange Commission. The individual defendants
are alleged to be liable under Section 20(a) of the Securities Exchange Act of
1934. On February 23, 1996, a Notice of Stay by reason of the Debtor's
bankruptcy was filed in both actions. On March 21, 1996, all parties entered
into a Stipulation whereby the plaintiffs agreed to consolidate the two actions
under an amended and consolidated complaint. Thereafter, on June 1, 1996, by
agreement of all parties, the case was transferred to the Southern District of
New York.
3. TAX EXEMPTION LITIGATION
In 1994, the Debtor received a certification from the Louisiana Department
of Natural Resources ("DNR"), qualifying certain gas production under Section
107(c)(2) of the Natural Gas Policy Act of 1978 (the "NGPA") as gas produced
from geopressured brine. As required under the
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NGPA, the DNR's determination was forwarded to the FERC for review. In April
1995, the FERC reversed the position of the DNR, rejecting the qualification of
the wells under Section 107(c)(2) of the NGPA. The Debtor has appealed the FERC
determination to the United States Court of Appeals for the Fifth Circuit,
located in New Orleans, Louisiana. Oral arguments in the case took place on
November 7, 1996, and the Debtor is awaiting a decision from the Court.
B. POST-PETITION LITIGATION
1. TRI-DECK/PERRY GAS LITIGATION
On May 29, 1996, the Debtor initiated an adversary proceeding against
Tri-Deck Oil & Gas Co. and Perry Gas Companies, Inc. to recover certain unpaid
production proceeds and to otherwise enjoin any further disposition of such
proceeds pending a final judgment in the suit. For a detailed discussion of such
litigation, SEE Section V.I. of this Disclosure Statement. The Debtor is also
reviewing other potentially assertable causes of action, such as actions
pursuant to Sections 547 and 548 of the Bankruptcy Code, and other potential
defendants who may be added to the suit. As of the filing of this Disclosure
Statement, the suit remains pending.
2. E. C. ENERGY MARINE
In November of 1994, WRT sold certain drilling rigs to E.C. Energy
Production, Inc. The payment price represented by the promissory note in the
amount of $3.9 million was never paid and therefore to cancel the indebtedness,
WRT and E. C. Energy Production, Inc. entered into a dation en paiement dated
May 18, 1995 as a giving in payment to satisfy the indebtedness which at the
execution of the dation amounted to $4,017,000.00. The property or assets
transferred to WRT in satisfaction of the indebtedness was WRT Rig No. 1, WRT
Rig No. 2, WRT Rig No. 3, WRT Rig No. 4 and WRT Rig No. 4-A.
All but WRT Rig No. 4 were involved in the sale from WRT to E.C. Energy
Production, Inc.; Rig No. 4-A, however, came from parts of a separate WRT rig
which were cannibalized to comprise Rig No. 4-A. Rig No. 4-A is still in the
possession of the E.C. Energy Production, Inc. and/or its related corporations.
Suit was filed by the Debtor under adversary proceeding number 96-5036 for the
turnover of Rig No. 4-A. The defendant alleges that Rig No. 4-A is not owned by
E.C. Energy Production, Inc. or was not owned by E.C. Energy Production, Inc. at
the time the dation was entered into with WRT, and therefore E.C. Energy
Production, Inc. could not transfer title of the asset to the Debtor.
The corporation alleged to be the owner by E.C. Energy Production, Inc. is
Energy Workover and Drilling Services, Inc. which has intervened into the
adversary proceeding. The defendants also assert that WRT Rig No. 4-A was not
included in the original sale package from WRT to the defendant E.C. Energy
Production, Inc. and therefore could not be transferred by means of a dation. To
date, the adversary proceeding remains pending.
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3. TRICORE
On January 14, 1997, the Debtor initiated an adversary proceeding against
Tricore Energy Venture, L.P. to obtain a declaration of the invalidity of
certain asserted security interests in WRT's interest in the West Cote Blanche
Bay Field, or alternatively to obtain avoidance of such security interests or
liens pursuant to Sections 544 and 547 of the Bankruptcy Code. See Section V.R.
of this Disclosure Statement for a detailed discussion of such litigation. As of
the filing of this Disclosure Statement, the suit remains pending.
C. POTENTIAL LITIGATION
1. EXAMINER
By orders entered on August 13, 1996 and September 10, 1996, the
Bankruptcy Court appointed Jason R. Searcy as a Chapter 11 Examiner in the case
pursuant to Section 1104 of the Bankruptcy Code. Among other things, the
Examiner has been instructed to review transactions between WRT and certain
individuals and entities, and to otherwise review conduct undertaken by such
individuals and entities which may have resulted in compensable damage to WRT.
Those individuals and entities currently under review by the Examiner are listed
below. In conjunction therewith, the Examiner has scheduled Bankruptcy Rule 2004
examinations for January 27 and 28, 1997 to obtain further insight into such
possibilities. See also Exhibit "C" (Examiner's Preliminary Report). If the
Examiner obtains evidence of wrongdoing by any such individual or entity, the
Debtor will pursue such actions as are reasonably likely to result in recovery
by New WRT after payment of litigation expenses.
IDENTIFIED FOR REVIEW BY EXAMINER
o Aftech and Affiliated Parties
o Arnoult Equipment & Construction, Inc.
o A.E.C. and Affiliated Parties
o Current and Former Officers and Directors
o James Florence
o Tri-Deck
o Seqouia Marketing
o Oilfield Production Equipment Company and Affiliated Parties
o John Peterson
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o Joseph Brantley
o Mark Miller
o Mayronne Energy Services and Affiliated Parties
o Plains Marketing and Transportation
o Stephen Edwards and Affiliated Parties
2. AVOIDABLE PREFERENCES
Pursuant to the Bankruptcy Code, the Debtor, acting as
Debtor-in-Possession, may recover certain transfers of property made while
insolvent during the ninety (90) days, and in other instances one (1) year,
prior to the filing of its bankruptcy petition in payment of antecedent debts to
the extent the transferees thereof received more than they would have received
as to such debts had the Debtor been liquidated under Chapter 7 of the
Bankruptcy Code. If a transfer is recovered by a Debtor, the transferee obtains
a general unsecured claim against the Debtor to the extent of the recovery.
a. TRADE PAYABLES. Payments totaling $10,988,832 were made to Creditors
(including Insiders who received non-payroll payments) during the ninety (90)
day period prior to the Petition Date. The Debtor is analyzing all payments to
creditors in instances where the creditor received aggregate payments of $25,000
or more during the ninety (90) days prior to the Petition Date. Subject to such
analysis, the Debtor will pursue all discovered preferential payments which are
reasonably likely to result in recovery by New WRT after payment of litigation
expenses. A Potential Preference Actions listing is attached hereto as Exhibit
"E."
b. INSIDERS. Payments and other forms of transfers made to Insiders within
a year prior to the Petition Date could potentially be preferential in nature.
The Examiner appointed in the case is currently reviewing all insider
transactions; accordingly, the Debtor will pursue all discovered preferential
payments which are reasonably likely to result in recovery by New WRT after
payment of litigation expenses.
3. AVOIDABLE FRAUDULENT TRANSFERS
Under the Bankruptcy Code and various state laws, the Debtor, acting as
Debtor-in- Possession, may recover certain transfers of property, including the
grant of a security interest in property, made while insolvent, or which
rendered it insolvent, if and to the extent the Debtor received less than
reasonably equivalent value for such property. At this time, the Debtor is
reviewing all payments and other transfers of property made by the Debtor under
the circumstances described above, but such analysis has not yet been completed.
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a. OIL AND GAS PROPERTY ACQUISITIONS. During the four-year period prior to
the filing of WRT's Chapter 11 Case, WRT acquired virtually all of its existing
oil and gas properties. The Debtor is currently reviewing such acquisitions to
determine whether the consideration given by WRT in any particular transaction
was fraudulently obtained, in whole or part, or whether it was not of a
reasonably equivalent value of the property received by WRT in exchange for such
consideration during a period of WRT's insolvency. All such acquisitions which
are determined to be avoidable under the Bankruptcy Code and/or applicable state
law shall be pursued by New WRT if likely to result in recovery by New WRT after
payment of litigation expenses. A listing of the potential fraudulent property
acquisitions currently under analysis by the Debtor as possible fraudulent
transfers is set forth below:
PARTY PROPERTIES
- ------------------------------------------ ----------------------------------
Benton Oil and Gas Company West Cote Blanche Bay
- --------------------------------------------------------------------------------
BSFI, Southfork Investments and
Affiliated Parties Napoleonville Field
- --------------------------------------------------------------------------------
Buckingham and Affiliated Parties South Hackberry Field
- --------------------------------------------------------------------------------
Freeport McMoRan and Affiliated Parties Lac Blanc Field
- --------------------------------------------------------------------------------
LLOG Exploration and Affiliated Parties Abbeville Field
Bayou Penchant Field
Bayou Pigeon Field
Bayou Pigeon Field
- Top Lease Issue
Deer Island Field
Deer Island Field
- D-5 Well Stray Sand Issue
Golden Meadow Field
- --------------------------------------------------------------------------------
Tenneco Gas Production and
Affiliated Parties West Cote Blanche Bay
- --------------------------------------------------------------------------------
Texas American Resources and East Hackberry Field
Affiliated Parties Rankin Field
- --------------------------------------------------------------------------------
Tico and Affiliated Parties South Hackberry Field
- --------------------------------------------------------------------------------
b. INCC'S LIEN ON WEST COTE PROPERTY. The indebtedness owing to INCC is
secured by a blanket lien on virtually all of WRT's oil and gas properties. With
respect to the West Cote Blanche Bay Field interests of WRT (the "WCBB
Interests"), while WRT obtained the benefit of the INCC financing, WRT's
wholly-owned subsidiary, Tesla Resources, Inc. ("Tesla"), was the record owner
of the WCBB Interests and was the entity that actually granted a lien thereon to
INCC in exchange for the provision of credit to WRT. Based upon the Debtor's and
DLBW's review of such financing transaction, and the financial condition of
Tesla at the time, the Debtor and DLBW believe that INCC's lien on the WCBB
Interests is avoidable under Sections 544, 547 and 548 of the Bankruptcy Code.
Accordingly, the Debtor and DLBW have structured the Plan in a manner
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consistent with such belief. Should there be resistance to such treatment in the
Plan, it may become necessary for the Debtor to pursue one or more of the causes
of action above.
c. PREFERRED STOCK DIVIDEND PAYMENTS. During the one-year period prior to
the filing of the Debtor's Chapter 11 case, the Debtor paid dividends to holders
of Preferred Stock in the total aggregate amount of $2,134,687.44. Such payments
may be avoidable as fraudulent transfers, but the Debtor is skeptical of the
potential for ultimate recovery of such payments from the beneficial owners of
such stock given the costs of litigation which would be associated therewith.
Nevertheless, the Debtor is currently reviewing transfers and likelihood of
recovery and will pursue any such actions as it ultimately determines to be
economical.
d. PROFESSIONALS AND OTHERS INVOLVED IN SECURITIES OFFERING. The Debtor is
also reviewing payments and other transfers of property which were made by WRT
to professionals and other third parties associated with the Securities
Offering, including, but not limited to, Triumph Securities and its affiliates,
to determine whether such payments are avoidable as fraudulent transfers (e.g.,
less than reasonably equivalent value received for services performed at time of
the Debtor's insolvency). The Debtor will pursue recovery of such transfers if
it is determined that there is a reasonable likelihood of recovery, taking into
account litigation costs.
4. OTHER POTENTIAL LITIGATION
a. TRANSACTIONS RELATED TO RESERVE REPORTS. The Debtor is in the process
of determining if there was negligence regarding reserve data provided by
various engineering firms. The firms and affiliated parties being analyzed
include Huddleston and Co., The Scotia Group, Inc. and Veazey & Associates. If
the Debtor concludes that any or all of the above firms were negligent in
providing reserve data, actions will be taken to recover damages, if provided
such actions are likely to result in recovery by New WRT after payment of
litigation expenses.
b. TRANSACTIONS RELATED TO SECURITIES OFFERINGS. The Debtor is in the
process of determining if there was negligence in transactions related to the
public securities offering. The firms and affiliated parties being analyzed
include Oppenheimer & Co. and Schroeder Wertheim. If the Debtor concludes that
either or both of the above firms were negligent in providing services related
to the public securities offering, actions will be taken to recover damages, if
such actions are likely to result in recovery by New WRT after payment of
litigation expenses.
c. OIL AND GAS PROPERTY ACQUISITIONS. The Debtor is in the process of
determining if there was any fraudulent and/or negligent actions taken by third
parties in the course of WRT's acquisition of its oil and gas properties.
Various parties have been identified as being either directly or indirectly
involved in purchase and sale transactions which may have resulted in
over-payments by WRT. If the Debtor concludes that any such fraudulent or
negligent action was undertaken by any such third party, the Debtor will take
action to recover damages, provided such action is likely to result in recovery
by New WRT after payment of litigation expenses.
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XIV.
MATERIAL UNCERTAINTIES AND RISK FACTORS
A. COMPETITION AND MARKETS
1. AVAILABILITY OF MARKETS.
The availability of a ready market for oil and gas produced by the Debtor
depends on numerous factors beyond the control of management, including but not
limited to, the extent of domestic production and imports of oil, the proximity
and capacity of gas pipelines, the availability of skilled labor, materials and
equipment, the effect of state and federal regulation of oil and gas production
and federal regulation of gas sold in interstate commerce. Gas produced by the
Debtor in Louisiana is sold to various purchasers who service the areas where
the Debtor's wells are located. The Debtor's wells are not subject to any
agreements that would prevent the Debtor from either selling its gas production
on the spot market or committing such gas to a long-term contract; however,
there can be no assurance the Debtor will continue to have ready access to
suitable markets for its future oil and gas production.
2. IMPACT OF ENERGY PRICE CHANGES
Oil and gas prices can be extremely volatile and are subject to
substantial seasonal, political, and other fluctuations. The prices at which oil
and gas produced by the Debtor may be sold is uncertain and it is possible that
under some market conditions the production and sale of oil and gas from some or
all of the Debtor's properties may not be economical. The availability of a
ready market for oil and gas, and the prices obtained for such oil and gas,
depend upon numerous factors beyond the control of the Debtor, including
competition from other oil and gas suppliers and national and international
economic and political developments. Because of all the factors influencing the
price of oil and gas, it is impossible to accurately predict future prices.
B. ENVIRONMENTAL RISKS; GOVERNMENTAL ACTIONS
The Debtor's operations are subject to numerous laws and regulations,
including laws and regulations controlling the discharge of materials into the
environment or requiring removal and cleanup of environmental damages under
certain circumstances. Laws and regulations protecting the environment have
generally become more stringent in recent years, and may in certain
circumstances impose "strict liability," rendering a person liable for
environmental damages without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Debtor to liability for the
conduct of operations or conditions caused by others, or for acts of the Debtor
which were in compliance with all applicable laws at the time such acts were
performed. The modification of existing laws or regulations or the adoption of
new laws or regulations relating to environmental matters could have a material
adverse effect on the Debtor's operations. In addition, the Debtor's existing
and proposed operations could result in liability for fires, blowouts,
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oil spills, discharge of hazardous materials into surface and subsurface
aquifers and other environmental damage, any one of which could result in
personal injury, loss of life, property damage or destruction or suspension of
operations.
While the Debtor presently discharges produced water overboard from wells
at one of its properties under exemptive orders from the Louisiana Department of
Environmental Quality, applicable federal and state laws and regulations
generally prohibit such overboard discharge and it is anticipated that such
discharge will be prohibited in areas where the property is located. When the
prohibition becomes effective, the Debtor will be required to install
underground disposal facilities for its properties in such areas or abandon the
portion of reserves in those properties where high levels of saltwater are
produced.
C. OPERATIONAL HAZARDS AND INSURANCE
The Debtor's operations are subject to all of the risks normally incident
to the production of oil and gas, including blowouts, cratering, pipe failure,
casing collapse, oil spills and fires, each of which could result in severe
damage to or destruction of oil and gas wells, production facilities or other
property, or injury to persons. The energy business is also subject to
environmental hazards, such as oil spills, gas leaks, and ruptures and discharge
of toxic substances or gases that could expose the Debtor to substantial
liability due to pollution and other environmental damage. Although the Debtor
maintains insurance coverage considered to be customary in the industry, it is
not fully insured against certain of these risks, either because such insurance
is not available or because of high premium costs. The occurrence of a
significant event that is not fully insured against could have a material
adverse effect on the Debtor's financial position.
D. REPLACEMENT OF RESERVES
The Debtor's future success depends upon its ability to find, acquire and
develop additional oil and gas reserves that are economically recoverable. The
proved reserves of the Debtor will generally decline as they are produced,
except to the extent that the Debtor conducts successful revitalization
activities, or acquires properties containing proved reserves, or both. To
increase reserves and production, the Debtor must continue its development
drilling and recompletion programs, identify and produce previously overlooked
or bypassed zones in shut-in wells, acquire additional properties or undertake
other replacement activities. The Debtor's current strategy is to increase its
reserve base, production and cash flow through the revitalization of its
existing oil and gas fields and selective acquisitions of producing properties
where the Debtor can utilize its technology. There can be no assurance, however,
that the Debtor's planned revitalization, development and acquisition activities
will result in significant additional reserves or that the Debtor will have
continued success finding and producing reserves at low finding and development
costs. Furthermore, while the Debtor's revenues may increase if prevailing oil
and gas prices increase significantly, the Debtor's finding costs for additional
reserves could also increase.
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E. UNCERTAINTY OF RESERVE ESTIMATES
Oil and gas reserve estimates and the discounted present value estimates
associated therewith are based on numerous engineering, geological and
operational assumptions that generally are derived from limited data. Common
assumptions include such matters as the areal extent and average thickness of a
particular reservoir, the average porosity and permeability of the reservoir,
the anticipated future production from existing and future wells, future
development and production costs and the ultimate hydrocarbon recovery
percentage. As a result, oil and gas reserve estimates and discounted present
value estimates are frequently revised in subsequent periods to reflect
production data obtained after the date of the original estimate. If reserve
estimates are inaccurate, production rates may decline more rapidly than
anticipated, and future production revenues may be less than estimated.
Moreover, significant downward revisions of reserve estimates may adversely
affect the Debtor's borrowing capacity or have an adverse impact on other
financing arrangements.
In addition, any estimates of future net revenue and the present value
thereof are based on period ending prices and on cost assumptions made by the
Debtor which only represent its best estimate. If these estimates of quantities,
prices and costs prove inaccurate, the Debtor is unsuccessful in expanding its
oil and gas reserves base, and/or declines in and instability of oil and gas
prices occur, writedowns in the capitalized costs associated with the Debtor's
oil and gas assets may be required. The Debtor will also rely to a substantial
degree on reserve estimates in connection with the acquisition of producing
properties. If the Debtor over-estimates the potential oil and gas reserves of a
property to be acquired, or if its subsequent operations on the property are not
successful, the acquisition of the property could result in substantial losses
to the Debtor.
F. FINANCIAL PROJECTIONS
The Debtor with the assistance of DLBW has prepared the Financial Forecast
based upon certain assumptions which it believes to be reasonable under the
circumstances. Those assumptions considered to be significant are described in
the Financial Forecast. The Financial Forecast has not been examined or compiled
by independent accountants. The Debtor and DLBW make no representation as to the
accuracy of the projections or their ability to achieve the projection results.
Many of the assumptions on which the projections are subject to significant
uncertainties. Inevitably, some assumptions will not materialize and
unanticipated events and circumstances may affect the actual financial results.
Therefore, the actual results achieved throughout the Projection Period may vary
from the projected results and the variations may be material. All holders of
Claims that are entitled to vote to accept or reject the Plan are urged to
examine carefully all of the assumptions on which the Financial Forecast is
based in evaluating the Plan. SEE Section XII herein, "Material Uncertainties
and Risk Factors." Additionally, the Financial Forecast, the Debtor and DLBW
have made assumptions with respect to the terms of the restructured INCC loan
and Texaco's ownership interest in West Cote Blanche Bay that are consistent
with the ongoing discussions with INCC and Texaco. The Financial Forecast is
also based on the assumption that
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the Plan will be confirmed by the Bankruptcy Court and, for projection purposes,
that the Effective Date under the Plan and the initial distributions thereunder
will commence on July 1, 1997.
G. RISKS WITH RESPECT TO THE NEW SECURITIES
1. UNCERTAINTY WITH RESPECT TO THE TRADING PRICES OF THE NEW SECURITIES
No trading market currently exists for the New WRT Common Stock or any of
the New WRT Warrants. Because Creditors may have little, if any, ability to
liquidate their Claims during the pendency of the Chapter 11 Case, the Debtor
anticipates that upon the establishment of a trading market, there may initially
be a large number of holders who wish to dispose of the New WRT Common Stock
received pursuant to the Plan. As a result, the trading market for the New WRT
Common Stock may be expected to be unstable for some period of time following
Confirmation.
2. POSSIBLE ILLIQUIDITY OF THE NEW SECURITIES
If the Plan is confirmed, a substantial number of New WRT Warrants and
shares of New WRT Common Stock will be concentrated in a relatively small number
of Persons. Sales or offers to sell the substantial blocks of the New WRT Common
Stock, or the New WRT Warrants issued pursuant to the Plan, or the perception by
investors, investment professionals and securities analysts of the possibility
that such sales may occur, could adversely affect the price of and market for
such New WRT Common Stock. In addition, New WRT does not anticipate the payout
of dividends on the New WRT Common Stock in the foreseeable future.
H. NET OPERATING LOSS CARRYFORWARD
As of December 31, 1995, the Debtor had a net operating loss carryforward.
Management anticipates that the Debtor will realize an additional operating loss
in 1996. The Debtor believes that such carryforwards are significant assets of
the Debtor which may be available to offset future taxable income of the Debtor,
if any, and thereby reduce the Debtor's tax obligation. The potential ability of
the Debtor to have the benefit of such carryforwards may be restricted upon
Confirmation of the Plan.
XV.
CONCLUSION
The Debtor urges Creditors and holders of Equity Interests solicited by
this Disclosure Statement to vote to accept the Plan and to evidence such
acceptance by returning the ballot so that it is received by the Balloting Agent
prior to the Voting Deadline.
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DATED: January 20, 1997
WRT ENERGY CORPORATION,
DEBTOR AND DEBTOR IN POSSESSION
By: /s/ RAYMOND P. LANDRY
RAYMOND P. LANDRY
Chief Executive Officer and
Chairman of Board of Directors
Joel P. Kay, Esq.
Edward Lee Morris, Esq.
SHEINFELD, MALEY & KAY, P.C.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6796
ATTORNEYS FOR WRT ENERGY
CORPORATION
DLB OIL & GAS, INC.,
CO-PROPONENT
By: /s/ MARK LIDDELL
MARK LIDDELL
President
WEXFORD MANAGEMENT LLC,
CO-PROPONENT
By:/s/ CHARLES E. DAVIDSON
CHARLES E. DAVIDSON
Chairman of Board of Directors
Jeffrey S. Sabin, Esq.
Mark A. Broude, Esq.
SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
ATTORNEYS FOR DLB OIL & GAS, INC.
AND WEXFORD MANAGEMENT LLC
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EXHIBIT `B'
ESTIMATED LIQUIDATION PROCEEDS
ASSUMING CONVERSION TO CHAPTER 7
WRT ENERGY CORPORATION
INTRODUCTION
Section 1129(a)(7)(A) of the Bankruptcy Code provides that the Bankruptcy Court
shall not confirm a plan of reorganization as to creditors and equity interest
holders who do not vote to accept the Plan unless it will provide such creditors
and equity interest holders at least the amount or value they would receive if
the Debtor were liquidated in a hypothetical case under Chapter 7 of the
Bankruptcy Code, commonly referred to as the "best interests of creditors" test.
This Liquidation Analysis (the "Analysis") presents estimated amounts that would
be paid to claimants and equity interest holders under a hypothetical Chapter 7
liquidation. The assumptions and estimates utilized in this Analysis are
considered reasonable by management of the Debtor ("the Company or the Debtor")
and, with respect to the Company's oil and gas assets, incorporate the results
of the Debtor's six month sale program managed by Jefferies & Company, Inc. (the
"Financial Advisor"). This Analysis is also based upon assumptions with regard
to management decisions that may be subject to change in an actual liquidation
of the Company. Accordingly, there can be no assurance that the values reflected
in this Analysis would be realized if the Debtor was, in fact, to undergo such a
liquidation.
This Analysis is believed to reflect all relevant information known to
management as of the date of this Disclosure Statement. The Debtor is not aware
of any events subsequent to such date that would materially affect this
Analysis. There can be no assurance that the assumptions underlying this
Analysis would be made or accepted by the Bankruptcy Court in an actual Chapter
7 proceeding.
Abbreviations and terms are defined more extensively in the Plan and Disclosure
Statement and are incorporated herein by reference. This Analysis should be read
in conjunction with the Plan, Disclosure Statement and attached exhibits.
BASIS OF PRESENTATION
This Analysis is based upon the Debtor's projected financial statements as of
June 30, 1997 and various adjustments thereto, as reflected in the significant
assumptions section below and the footnotes section following the Analysis, as
well as other amounts estimated by The Debtor's management. The Analysis assumes
that the Debtor's asset and liability values at June 30, 1997, the date of a
hypothetical conversion of the case to a Chapter 7 proceeding, would be based
upon a rollforward of the December 31, 1996 unaudited financial statements
adjusted to incorporate the Debtor's 1997 budget through June 30, 1997. Actual
recoveries in a Chapter 7 liquidation may differ materially from the preliminary
estimate of recoveries included herein.
Page 1
<PAGE>
APPENDIX
EXHIBIT `B'
SIGNIFICANT ASSUMPTIONS
OIL AND GAS PROPERTY LIQUIDATION VALUE. The highest oil and gas asset bid
received by Financial Advisor through the six month sales process was for $57.0
million, comprised of $20.0 million in cash upon closing and $37.0 million paid
to the estate over time through a "back-in" after payout (the "High Bid"). The
Financial Advisor valued the High Bid at $36.2 MILLION by assigning full value
to the cash portion of the High Bid and by valuing the "back-in" at $16.2
million. The value of the "back-in" was obtained by (i) calculating the time
period over which the "back-in" proceeds would be paid in accordance with the
reserve report dated January 16, 1997 produced by the Company's engineering
consultants, Netherland, Sewell and Associates, Inc. ("NSAI") which incorporated
the price assumptions in the Financial Forecast and held prices and costs
constant in accordance with SEC methodologies (the "NSAI Sensitivity Report"),
and (ii) by utilizing a 30% discount rate for those proceeds. The foregoing
analysis assumes capital reinvestment in accordance with the NSAI Sensitivity
Report. Lesser or no capital reinvestment would have a materially negative
impact on the value of the High Bid. No other reductions in the amount of the
High Bid proceeds have been assumed nor have any other discounts been taken into
account for the risks, contingencies and deductions possibly associated with an
asset sale closing.
ALLOCATION OF INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION ("INCC")
NOTE PAYABLE. The INCC indebtedness is secured by a blanket lien on virtually
all of The Debtor's oil and gas properties, including, but not limited to wells
and equipment located on such properties and the production thereof. Based upon
its review of the INCC financing transaction; however, the Debtor believes that
the lien asserted by INCC on the Debtor's interest in West Cote Blanche Bay is
avoidable under Sections 544, 547 and 548 of the Bankruptcy Code. Therefore, in
determining if the value of the properties against which oil and gas liens are
attached is sufficient to cover the allowable lien claims asserted against such
properties, the Debtor has allocated the full amount of the INCC note (including
principal, interest and fees) to all properties other than West Cote Blanche
Bay. This allocation is based upon the NSAI Sensitivity Report PV10 values of
the properties adjusted to approximate the value of the High Bid as determined
by the Financial Advisor.
ORDER OF DISTRIBUTION. The hypothetical Chapter 7 scenario assumes the following
order of distribution in accordance with Section 726 of the Bankruptcy Code:
(1) Allowed Secured Claims
(2) Allowed Chapter 7 Administrative Claims
(3) Allowed Chapter 11 Administrative Claims
(4) Allowed Priority Claims
(5) Allowed General Unsecured Claims
Page 2
<PAGE>
APPENDIX
EXHIBIT `B'
OTHER ASSUMPTIONS.
o The Debtor's operations would immediately cease upon conversion of the case
to a Chapter 7 proceeding. Oil and gas operating functions would be handled
by another operator;
o A Chapter 7 trustee would liquidate the assets on an accelerated schedule;
o Liquidation would commence July 1, 1997 and be complete by September 30,
1997. Also assumes the oil and gas properties are sold on June 30, 1997 and
another operator will commence operations on July 1, 1997;
o No asset value has been attributed to potential preferences, fraudulent
transfers or other possible recoveries through pending lawsuits; and
o No estimate has been incorporated for contingent liabilities such as
lawsuits and Orphan Well Fund Obligations.
Based upon the foregoing assumptions, see Exhibit `B' attached hereto for the
Analysis, including a comparison of the estimated recoveries in a hypothetical
Chapter 7 liquidation with estimated recoveries under the Plan.
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<PAGE>
APPENDIX
EXHIBIT `B'
WRT Energy Corporation
Liquidation Analysis
Estimated as of 6/30/97
Projected
Balances Chapter 7
at 6/30/97 Liquidation
------------ ------------
Cash ........................................ $ 10,383,193 $ 10,383,193(1)
Cash held in escrow ......................... 1,534,068 1,061,867(2)
Revenues received 7/97
related to 6/97 production ................ -- 1,878,099(3)
------------ ------------
Total cash ............................. 11,917,261 13,323,159
Accounts receivable ......................... 3,596,828 3,596,828(4)
Prepaids/deposits ........................... 635,000 --(5)
PP&E:
Total oil and gas properties ........... 57,660,738 36,200,000(6)
Total non oil and gas .................. 4,570,492 2,170,500(7)
Less: 5% cost to realize other assets . -- (108,525)(10)
------------ ------------
Total net PP&E .............................. 62,231,230 38,261,975
Cash escrow-Lac Blanc ....................... 831,000 --(8)
Debt issuance costs ......................... 3,745,000 --(9)
------------ ------------
Assets Available for Distribution ........... 82,956,319 55,181,962
============ ============
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APPENDIX
EXHIBIT `B'
WRT Energy Corporation
Best Interests Test
Estimated as of 6/30/97
<TABLE>
<CAPTION>
Chapter 7 Plan
--------------------------------- --------------------------------------
Estimated Estimated Estimated Estimated Estimated Estimated
Claim $ Recovery $ Recovery % Claim $ Recovery $ Recovery %
------------ ------------ ----- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Chapter 7 Administrative Expenses $ 1,350,000 $ 1,350,000 100.0% -- -- --(11)
Chapter 11 Administrative Expenses 3,512,725 3,512,725 100.0% $ 3,512,725 $ 3,512,725 100.0%(12)
Allowed priority tax claims 1,291,705 1,291,705 100.0% 1,291,705 1,291,705 100.0%(13)
Class A-1 Allowed priority claims -- n/a 100.0% -- n/a 100.0%
Class B-1 Allowed secured claim of GMAC -- n/a 100.0% -- n/a 100.0%(14)
Class B-2 Allowed secured claim of INCC 17,736,000 17,736,000 100.0% 17,736,000 17,736,000 100.0%
Class B-3 Allowed secured claim of Morgan City Bank 195,721 195,721 100.0% 195,721 195,721 100.0%(15)
Class B-4 Allowed secured claim of Tricore -- n/a 100.0% -- n/a 100.0%(16)
Class B-5 Allowed secured claim of Woodforest Bank 2,379 2,379 100.0% 2,379 2,379 100.0%(17)
Class B-6 Allowed secured claim of The Woodlands Corp. 100,000 100,000 100.0% 100,000 100,000 100.0%
Class C-1 Abbeville field claims 401 401 100.0% 401 401 100.0%(19)
Class C-2 Bayou Henry field claims * 2,379 -- 0.0% 2,379 1,190 50.0%(19)
Class C-3 Bayou Penchant field claims 1,055,131 1,055,131 100.0% 1,055,131 1,055,131 100.0%(19)
Class C-4 Bayou Pigeon field claims * 691,370 578,730 83.7% 691,370 691,370 100.0%(19)
Class C-5 Darrow field claims * 10,008 -- 0.0% 10,008 5,004 50.0%(19)
Class C-6 Deer Island field claims 268,020 268,020 100.0% 268,020 268,020 100.0%(19)
Class C-7-A M.P. Erwin lease claimants 164,111 164,111 100.0% 164,111 164,111 100.0%(19)
Class C-7-B State Lease 50 lease claimants * 2,588,870 1,196,794 46.2% 2,588,870 1,941,653 75.0%(19)
Class C-8 Golden Meadow field claims 32,426 32,426 100.0% 32,426 32,426 100.0%(19)
Class C-9 Lac Blanc field claims * 369,807 3,220 0.9% 369,807 184,903 50.0%(20)
Class C-10 Napoleonville field claims 87,829 87,829 100.0% 87,829 87,829 100.0%(19)
Class C-11 Rankin field claims * 9,301 -- 0.0% 9,301 9,301 100.0%(19)
Class C-12 South Atchafalaya field claims * 20,576 -- 0.0% 20,576 10,288 50.0%(19)
Class C-13 Tigre Lagoon field claims * 51,923 -- 0.0% 51,923 25,962 50.0%(19)
Class C-14 West Cote Blanche Bay field claims 5,402,399 5,402,399 100.0% 5,402,399 5,402,399 100.0%(19)
Class C-15 West Hackberry field claims * 27,857 2,998 10.8% 27,857 13,929 50.0%(19)
Class C-16 West Lake Pontchartrain field claims * 10,423 -- 0.0% 10,423 5,211 50.0%(19)
Class D-1 Allowed convenience claims 418,620 77,067 18.4% 418,620 192,525 46.0%(21)
Class D-2 Allowed Tort claims -- n/a n/a -- n/a n/a
Class D-3 Allowed general unsecured claims 120,176,697 22,124,306 18.4% 119,069,630 33,400,000 28.1%(22)
Class D-4 Allowed securities litigation
claims-senior notes -- n/a n/a -- n/a n/a
Classes E-1 through E-5 -- -- n/a -- n/a n/a
------------ ------------ ----- ------------ ------------ ----------
$154,226,677 $ 55,181,962 -- $153,119,610 $ 66,330,181 --(26)
============ ============ ===== ============ ============ ==========
</TABLE>
* The deficiency claims associated with Class C-1 through C-16 are included
in the Class D-3 total. The amounts of these deficiency claims are as
follows:
Chapter 7 Scenario $2,000,771
----------
Plan Scenario $ 893,704
----------
Page 5
<PAGE>
EXHIBIT `B'
WRT Energy Corporation
Calculation of M&M Lien Recoveries
Allocation of Value Based Upon PDP, PDNP and PUD Excluding WCBB
<TABLE>
<CAPTION>
(1) (2) (3)
Fair Market Allocation INCC Net M & M Estimated
PV10 Value of PV10 of Value Allocation Value Liens Recovery %
---------- ---------- ---------- ---------- ---------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Abbeville ............................... 268,800 195,432 195,432 155,729 39,703 401 100.0%
Bayou Henry ............................. -- -- -- -- -- 2,379 0.0%
Bayou Penchant .......................... 7,581,400 5,512,073 5,512,073 4,392,277 1,119,796 1,055,131 100.0%
Bayou Pigeon ............................ 3,918,200 2,848,736 2,848,736 2,270,005 578,730 691,370 83.7%
Darrow .................................. -- -- -- -- -- 10,008 0.0%
Deer Island ............................. 4,411,900 3,207,681 3,207,681 2,556,030 651,651 268,020 100.0%
East Hackberry (Erwin Lease) ............ 2,253,300 1,638,267 1,638,267 1,305,447 332,819 164,111 100.0%
East Hackberry (State Lease 50) ......... 8,102,700 5,891,086 5,891,086 4,694,292 1,196,794 2,588,870 46.2%
Golden Meadow ........................... 1,028,600 747,846 747,846 595,918 151,927 32,426 100.0%
Lac Blanc ............................... 21,800 15,850 15,850 12,630 3,220 369,807 0.9%
Napoleonville ........................... 2,667,200 1,939,194 1,939,194 1,545,240 393,954 87,829 100.0%
Rankin .................................. -- -- -- -- -- 9,301 0.0%
South Atchafalaya ....................... -- -- -- -- -- 20,576 0.0%
Tigre Lagoon ............................ -- -- -- -- -- 51,923 0.0%
West Cote Blanche Bay ................... 19,515,900 14,189,077 14,189,077 -- 14,189,077 5,402,399 100.0%
West Hackberry .......................... 20,300 14,759 14,759 11,761 2,998 27,857 10.8%
West Lake Pontchartrain ................. -- -- -- -- -- 10,423 0.0%
---------- ---------- ---------- ---------- ---------- ---------- -----
Totals .................................. 49,790,100 36,200,000 36,200,000 17,539,329 18,660,671 10,792,830
========== ========== ========== ========== ========== ========== =====
</TABLE>
(1) Per 1/1/97 NSAI Reserve Reports
(2) High Bid allocated to field
(3) Allocation of INCC bank note to properties other than West Cote Blanche
Bay. Includes principal, interest and fees.
Page 6
<PAGE>
EXHIBIT `B'
WRT Energy Corporation
Allocation of High Bid Liquidation Value
<TABLE>
<CAPTION>
Proved Proved Proved
Developing Developed Undeveloped Allocation of
Producing Non-Producing Producing Total PV10 High Bid Value
Property Reserves Reserves Reserves Value by Field
-------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C>
Abbeville ..................... 52.8 216.0 -- 268.8 $ 195,432
Bayou Henry ................... -- -- -- -- --
Bayou Penchant ................ 1,734.4 4,766.0 1,081.0 7,581.4 5,512,073
Bayou Pigeon .................. 2,693.4 1,224.8 -- 3,918.2 2,848,736
Darrow ........................ -- -- -- -- --
Deer Island ................... 2,630.9 1,781.0 -- 4,411.9 3,207,681
East Hackberry (Erwin Lease) .. 374.6 (346.7) 2,225.4 2,253.3 1,638,267
East Hackberry (State Lease 50) (1,699.6) 1,570.2 8,232.1 8,102.7 5,891,086
Golden Meadow ................. 339.8 688.8 -- 1,028.6 747,846
Lac Blanc ..................... -- 21.8 -- 21.8 15,850
Lac Des Allemands ............. -- -- -- -- --
Napoleonville ................. 2,390.8 276.4 -- 2,667.2 1,939,194
Rankin ........................ -- -- -- -- --
South Atchafalaya ............. -- -- -- -- --
Summers ....................... -- -- -- -- --
Tigre Lagoon .................. -- -- -- -- --
West Cote Blanche Bay ......... (7,738.1) 20,969.4 6,284.6 19,515.9 14,189,077
West Hackberry ................ 28.1 (7.8) -- 20.3 14,759
West Lake Pontchartrain ....... -- -- -- -- --
-------- -------- -------- -------- -----------
Totals ........................ 807.1 31,159.9 17,823.1 49,790.1 $36,200,000
</TABLE>
Page 7
<PAGE>
EXHIBIT `B'
FOOTNOTES TO THE LIQUIDATION ANALYSIS
PROCEEDS:
(1) The cash balance at June 30, 1997 is an estimate of cash available based
upon projections prepared by the Debtor for operations for the first six
months of 1997;
(2) Cash held in escrow relates to monies escrowed by the Court relating to
production revenues from April 1996 and May 1996. Upon release of these
funds, WRT will disburse funds to the royalty owners. The remaining funds
would be available to disburse to creditors in a Chapter 7 liquidation;
(3) The Debtor has estimated the sources of cash during the wind down period.
The sources include oil and gas revenues related to June 1997 production
which would be received in July 1997;
(4) Accounts receivable are shown at estimated book value. It is assumed that
uncollectible receivables are written down by the Debtor prior to June 30,
1997;
(5) Prepaids and deposits are assumed to have no value in a liquidation
scenario;
(6) The oil and gas property values are estimated as described in the
significant assumptions section;
(7) These miscellaneous assets include drilling rigs, well servicing equipment,
a building located in Lafayette, Louisiana, a log library, computer and
office equipment, autos and trucks and land. The Debtor has obtained
preliminary liquidation values from independent appraisers. These
preliminary estimates were derived by analysis of schedules provided by the
Debtor to the appraiser. No physical inventory or final evaluation has been
performed nor have third party bids been received for these assets;
(8) The monies escrowed on behalf of the Lac Blanc property in a liquidation
are assumed to be transferred to the buyer of this property. These escrowed
funds related to the Lac Blanc property are assumed to have no value to the
Debtor's creditors in a liquidation since the State of Louisiana controls
these escrow funds for use in plugging and abandoning properties;
(9) Capitalized debt issuance costs are not a recoverable asset in a
liquidation. This asset is assumed to have no value in a liquidation;
Page 8
<PAGE>
EXHIBIT `B'
APPLICATION OF PROCEEDS:
(10) A 5% cost is estimated to realize value of other assets for which no bid
has been obtained through the Debtor's and Financial Advisor's six month
sales process. Cash, accounts receivable, and oil and gas properties are
not included in this calculation;
(11) Estimated Chapter 7 administrative costs and expenses, including the
Chapter 7 trustee's fees ($125,000), Chapter 7 professional fees ($125,000)
and operating costs associated with June 1997 production, capital
expenditure payments related to June 1997 costs and general and
administrative costs required to operate the Company during the three month
wind down period ($1,100,000).
The Bankruptcy Code allows a trustee to be compensated in an amount up to
3% of total distributions over $1 million. However, since the Debtor has
already undergone a six month sale process with the Financial Advisor to
secure bids for its assets, it is assumed in this liquidation analysis that
a trustee would be retained to work in an hourly capacity to liquidate the
remaining assets of the Company. This scenario estimates that a trustee
would require 500 hours (@ $250/hour) to liquidate the remaining assets of
the Debtor. It is also estimated that Chapter 7 professional fees would
approximate the total fees earned by the trustee;
(12) Administrative expenses consist of post-petition royalties, professional
fees, employee stay bonus, cure for the assumption of executory contracts,
INCC accrued interest and fees and DLBW's (DLB Oil & Gas, Inc. and Wexford
Management LLC, on behalf of its affiliated investment funds, collectively
as co-proponents of this Plan) expense recovery of $1,500,000 ($500,000 has
been approved by the Court);
(13) All allowed priority tax claims will be paid in quarterly installments
beginning with the first quarter after confirmation and continuing through
December 31, 2001. However, these taxes would be payable in full upon
conversion to a Chapter 7 liquidation;
(14) The Debtor is current on all amounts owed to GMAC. Per the Plan, New WRT
will continue payments to GMAC per the original loan agreements. It is
estimated the principal amount owed to GMAC at June 30, 1997 will be $0 due
to payments made during the first six months of 1997;
(15) The Plan assumes the Morgan City real estate loan will continue to be paid
per the terms of the original agreement. In a Chapter 7 liquidation, Morgan
City would be paid in full through the liquidation of its collateral;
(16) Tricore asserted a secured claim in an amount up to $9.2 million. The
Debtor believes the claim is unsecured and would not exceed $6.4 million.
This claim would be entitled to treatment as an unsecured creditor;
Page 9
<PAGE>
EXHIBIT `B'
(17) The Plan assumes the Woodforest National Bank (formerly FNB-Conroe) loan
will continue to be paid per the terms of the original agreement. However,
in a Chapter 7 liquidation, Woodforest would be entitled to payment in
full. The amount owed to Woodforest at 6/30/97 is estimated to be $2,379;
(18) The liquidation analysis assumes that these claimants take their payment
entirely in cash;
(19) The liquidation analysis assumes that oil and gas lien claimants will
receive cash for the secured portion of their claim. The amount of these
claims in excess of the value of the property are treated as deficiency
claims and receive treatment as general unsecured claims;
(20) For comparative purposes, West Cote Blanche Bay lien claimants will receive
cash payment in full for any and all allowed claims in both the Plan and
under a liquidation scenario. According to the Plan, these claimants will
be given the option of receiving payment in full in cash or converting
their allowable claim into equity at $3.50 per share.
(21) In a Chapter 7 liquidation, the convenience class claimants would be
treated as general unsecured claimants. The Plan, on the other hand,
proposes to pay each convenience class claimant (i.e. holders of claims not
exceeding $2,500) 50% of their allowed claim. Further, any creditor with a
claim in excess of $2,500 may choose to opt-in to the convenience class by
voluntarily reducing its claim to an amount no greater than $2,500.
Assuming a general unsecured class recovery of approximately 30%, it is
beneficial to creditors with claims less than $4,167 to opt-in to the
convenience class. This analysis assumes that all creditors with claims
less than approximately $4,167 will opt-in to this class;
(22) The Plan proposes to distribute shares of New WRT Common Stock to the
general unsecured claimants. The value of distributions to the holders of
general unsecured claims is based upon the net equity value range of New
WRT and the number of New WRT common shares to be issued and outstanding on
the Effective Date. Assuming 20.4 million shares of New WRT Common Stock,
the per share value would range between $3.10 and $5.97 or a recovery of
26.0% to 50.1% of an allowed general unsecured claim.
Page 10
<PAGE>
EXHIBIT C
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
IN RE: SS.
SS. CASE NO. 96-50212-011
WRT ENERGY CORPORATION SS.
SS. CHAPTER 11
DEBTOR SS.
EXAMINER'S PRELIMINARY REPORT
TO THE HONORABLE JUDGE GERALD H. SCHIFF:
BACKGROUND
On August 13, 1996, the Court executed and entered its Order Appointing
Examiner in the above styled and numbered cause directing the United States
Trustee to appoint a disinterested person as examiner pursuant to Rule 2007.1,
Federal Rules of Bankruptcy Procedure. By order signed and entered on September
10, 1996, the Court approved the appointment of the undersigned as examiner.
The Court ordered that the duly appointed examiner file a preliminary
report "of the investigation conducted, including any fact ascertained by the
examiner pertaining to fraud, dishonesty, incompetence, misconduct,
mismanagement, or irregularity in the management of the affairs of the Debtor"
as soon as practicable, but in no event more than sixty (60) days following the
order appointing the examiner. Accordingly, this preliminary report is filed.
NATURE OF PRELIMINARY INVESTIGATION
Prior to the filing of this Preliminary Report, the Examiner has
interviewed either in person or via telephone, on one or more occasions, the
following individuals:
Ray Landry, President and CEO of WRT Energy Corporation Wayne Benninger,
Vice President of WRT Energy Corporation Joel Kay, Sheinfeld, Maley & Kay,
counsel for Debtor Sam Guy, former Vice-President of WRT Energy
Corporation
1
<PAGE>
Michael Fenasci, Fernandez, Seemann & Fenasci, counsel for former
President of AEC Marine Lesli S. Bolner, Berke & Ingolia, counsel for
leasehold owner in Napoleanville field Joseph Brantley, IV Wayne Fuquay,
Pate, Winters & Stone, former consultants to the Debtor Randy Hill,
accountant for Debtor Peter Chapman, Blue Light Investments Corp. Robert
Burr, President, Tricore Energy Corporation Don Muller, former president
of AEC Bob Thomas, Porter & Hedges
The Examiner attempted to contact and interview numerous other witnesses,
but due to the limited time, was unable to successfully interview all witnesses
necessary for a complete determination and a final report.
Several hundred pages of documents were copied and provided for the
Examiner's review by the Debtor, Debtor's counsel, Wayne Fuquay, Don Muller,
Joseph Brantley, and Lesli Bolner.
The scope of the examination during this preliminary stage was sufficient
to draw the conclusions set out herein, but is not sufficient to make final
recommendations or findings regarding the matters designated for examination by
the Court.
PRELIMINARY FINDINGS
INSIDER TRANSACTIONS
The Court directed the Examiner to investigate the following: "All
transactions, including transfers of property, within three years of the filing
of this chapter 11 proceeding, between the Debtor and 'insiders' as defined by
11 U.S.C. ss. 101(31), including, but not limited to, Steven McGuire, Raymond
Landry, Ronald Hale, James I. Florence, Mark Miller, John L. Petersen, and WRT
Technologies, Inc."
"Insider" is defined in the Bankruptcy Code as a director of the debtor,
officer of the debtor, person in control of the debtor, partnership in which the
debtor is a general partner, general partner
2
<PAGE>
of the debtor, or relative of a general partner, director, officer, or person in
control of the debtor."
Debtor's management represented that there were no payments to insiders
which were not disclosed in the debtor's schedules. The payments made within one
year prior to the filing of the bankruptcy petition reflected in the Debtor's
Statement of Financial Affairs filed in this proceeding include the following:
Raymond Landry $141,430.62 Ronald E. Hale, Jr. $140,084.95 Thomas C. Stewart $
47,378.79 Wayne A. Beninger $ 80,895.05 Steven S. McGuire $467,234.25 Samuel C.
Guy $150,767.09 Herb C. Thompson $109,436.75 William L. Walter $ 68,753.89 Wayne
A. Munson $108,955.12 James Rash $ 4,500.00 Dr. Dominic Lam $ 4,000.00
In addition to salaries, the following cash bonuses were paid to the
debtor's officers:
Steven S. McGuire.... 1995 $ 50,000
1994 $ 50,000
1993 $100,000
Samuel C. Guy........ 1995 $ 20,000
Ronald E. Hale....... 1995 $ 27,000
1994 $ 20,000
1993 $ 20,000
Wayne A. Munson...... 1995 $ 5,000
As additional compensation, certain officers of the Debtor were awarded
restricted stock. This bonus program was terminated on November 10, 1995, with
two remaining participants. As of that day, in return for cancellation of the
restricted stock awarded to them previously as compensation, Steven S. McGuire
was paid $90,000 and Ronald E. Hale was paid $18,000.
Other compensation included the grant of options to purchase stock in the
Debtor, which is
3
<PAGE>
disclosed in the company's 10K SEC filing as being 137,500 shares to Steven S.
McGuire in 1994, 68,750 shares to Ronald E. Hale, Jr. in 1994 and 25,000 in
1993; and 200,000 shares in 1995 to Raymond P. Landry.
Upon the termination of the employment of Steven S. McGuire, he was paid
$90,000 as a severance payment on January 31, 1996. He received $30,000 on
February 28, 1996, and since that time has been paid $7,500 per month under a
consulting agreement.
Aftech, Inc., is a corporation created as a non-profit corporation to
assist in obtaining grants or other benefits through the Houston Advanced
Research Center ("HARC") for the development of the debtor's technology assets.
The technology was developed through a subsidiary of the debtor known as WRT
Technologies, Inc. Funds paid to Aftech, Inc., were passed through to WRT
Technologies, Inc., for which Steven S. McGuire is currently working. Since
January 1994, a total of $1,474,321.35 was paid by WRT Energy Corp. to Aftech,
Inc. Aftech, Inc., is no longer an active corporation, and its charter was
revoked in February 1996, for failure to pay franchise taxes.
John L. Petersen borrowed $324,691 from WRT Energy Corp., which he used to
purchase stock in WRT. He then pledged that stock to secure the payment of a
note to another party, defaulted on the note, and the stock was taken by the
secured party. He acknowledges the existence of the debt. He has filed for
protection under Chapter 11 of the United States Bankruptcy Code in Case No.
96-44020-H1-11 in the United States Bankruptcy Court for the Southern District
of Texas, Houston Division. He has filed a Plan of Reorganization which proposes
to pay WRT 10% of its claim in monthly installments over 60 months, without
interest.
James I. Florence is specifically listed as an insider of the Debtor. Mr.
Florence denies that he was an employee or officer of the Debtor, but that he
held an "informal" position as Director of Shareholder Relations. He was also
given the position of Director of Marketing wherein he was
4
<PAGE>
responsible for marketing all of the Debtor's oil and gas product. Because of
his obvious authority and participation in management of the Debtor, the
Examiner believes him to be an insider.
In December 1995, a $25,000 account receivable, wherein Mr. Florence was
indebted to WRT, was written off at the direction of James E. Hale, Jr.
In addition, Mr. Florence was an officer and shareholder in Trideck Oil &
Gas, through which he marketed the Debtor's oil and gas production (see
discussion of Trideck herein). No payments of cash directly to Mr. Florence were
discovered. On November 17, 1995, a payment was made by WRT to Trideck of
$455,329.10. In addition, James Florence owns and operates a portion of his
business affairs through Sequoia Marketing Group, Inc. Sequoia is a Texas
corporation formed in August 1994, which reflects a corporate address at 3418
Mercer, Suite 111, Houston, Texas 77027, and the registered agent at that
address is George F. Simons, Jr. The President and Director of the company is
listed as James I. Florence. Mr. Florence was granted options to purchase stock
in WRT Energy Corp., which he from time to time exercised at below market
prices. WRT issued new issue stock to him which he retained in the name of
Sequoia Marketing Group, Inc. On at least one occasion, WRT used this process as
a method of raising capital. It issued new stock to Florence with an
artificially low price, the stock was then sold on the open market, and most of
the price differential returned to WRT. Records exist reflecting the following
stock options exercised by Mr. Florence:
DATE NO. SHARES EXERCISE PRICE/SHARE PAYMENT TO WRT DATE OF EXERCISE
---- ---------- -------------------- -------------- ----------------
7/94 25,000 $ 6.125 $153,125 5/95
7/94 50,000 $ 6.125 $306,250
7/94 20,000 $ 6.125 $122,500 1/95
25,000 $ 8.50 $212,500 11/94
9/94 200,000 (50,000 exercisable immediately, balance when price over $12.50)
10/95 175,000 $ 2.00 $350,000 10/95
5
<PAGE>
In the time allowed for this preliminary report, the Examiner was unable
to complete a review of the records involved in these stock transactions. To
fully examine this issue, the records of Oppenheimer & Co., Inc., which acted as
the broker in these transactions, must be obtained and reviewed. Further, more
in-depth review of the debtor's books would be required.
In addition, Sequoia Marketing was paid a $100,000 bonus for services
which have not yet been explained or determined.
Shortly prior to the filing of the bankruptcy petition, certain
transactions occurred involving entities owned or controlled by Joseph Brantley
and the Debtor. These transactions may well constitute insider transactions
based on the substantial stock ownership in the Debtor held by Mr. Brantley.
They are discussed in more detail in the Napoleanville section of this
preliminary report.
The Examiner believes numerous of the described payments and transactions
are recoverable, and suggests further, more detailed review of each.
NAPOLEANVILLE
The Court directed the Examiner to investigate the following: "The
transactions pursuant to which the Debtor acquired mineral interests in the
Napoleanville Field, and transactions relating to the original acquisition
thereafter between the Debtor and the 'sellers'."
On November 23, 1994, a letter agreement was executed by WRT and BSFI
Western B & P, Inc., for the purchase of several oil and gas leases covering
approximately 300 acres constituting the Napoleanville Field in Assumption
Parish, Louisiana. BSFI did not own all of the lease interests, but had an
informal agreement with the other owners of working interest to seek a
purchaser. BSFI is owned and controlled by Joseph Brantley. The letter agreement
is executed by John Petersen, Vice President and General Counsel, on behalf of
WRT. The contemplated
6
<PAGE>
transaction had been negotiated on behalf of WRT by Stephen Edwards, an attorney
in Baton Rouge, Louisiana, who played a pivotal role in the arrangement. The
letter agreement called for WRT to give as consideration 1,250,000 shares of its
unregistered common stock . The stock certificates were to be delivered to
Stephen Edwards as Escrow Agent. He in turn was to arrange for the re-sale of
650,000 shares of the stock to a "third party institutional investor". Following
the re-sale, Edwards was to deliver 600,000 shares of stock and $4,000,000 cash
to BSFI, with any remaining balance from sales proceeds to be retained by
Edwards as closing costs, expenses, etc. The stock was to be "piggy-backed"
under a registration of stock by WRT or registered within one year. No
consideration was to pass to BSFI until after January 1, 1995. The transaction
was intended to net BSFI not less than $10,000,000. The letter agreement
contains a notation handwritten by Stephen Edwards that, "This is the
deal---Money should be here on Thu or Fri 8-9 Dec."
On December 16, 1994, a formal Purchase and Sale Agreement was entered
into between BSFI Western E & P, Inc. and WRT. This agreement called for
consideration of 1,250,000 shares of unregistered stock to be placed in escrow
and not delivered until title opinions satisfactory to Stephen Edwards were
rendered. In the agreement, BSFI represents it "is purchasing the Common Stock
for its own account, for investment, and is not purchasing any Common Stock with
a view to or for resale in connection with any subsequent distribution thereof
and he has no present plans to enter into any contract, undertaking, agreement
or arrangements for such resale or distribution." The leases were assigned to
WRT on December 16, 1994. BSFI remained as operator of the property and marketed
the oil and gas produced. It was to forward the net production proceeds to WRT.
On December 20, 1994, a letter agreement was made between BSFI and Stephen
Edwards as Escrow Agent, which included a "cap and collar" guarantee. This
called for an unidentified third party to guarantee the value of the remaining
600,000 shares to be not less than $10 per share. If the
7
<PAGE>
price was in excess of $10 per share, the excess would be divided equally
between the guarantor and BSFI. The identity of the guarantor is not disclosed.
WRT issued 1,300,000 shares of its common stock as payment for the
properties, and delivered the certificates to Stephen Edwards as Escrow Agent.
The additional 50,000 shares were to be distributed to "two finders involved in
the BSFI transaction" who have not yet been identified. It was anticipated that
700,000 of the shares held by Edwards as Escrow Agent were to be sold
immediately following the closing of the sale to GFL Ultra Fund Limited. The
Examiner has had insufficient time to determine the identity of this entity. The
sale did not occur and the $4 million cash due to be paid BSFI was not made.
In January 1995, Banque Franck S.A. Geneve purchased a portion of the
stock held by Stephen Edwards for $2,400,000 through Tanner, Owen & Co. and/or
Brian W. Pusch, an attorney in New York. Of that amount, $2,187,500 was
forwarded to Stephen Edwards, Escrow Agent, and he disbursed $2,000,000 to BSFI.
The remaining $187,500 was retained by Edwards as a "legal fee" for handling the
Napoleanville transaction.
On January 25, 1995, Stephen Edwards wrote to BSFI purporting to amend the
transaction to have the unpaid balance of $8 million bear interest from January
3, 1995, until paid, to give WRT or "friendly shareholders" the right to
reacquire the shares for $10 per share in 100,000 share blocks per month, and
attempting to commit WRT to owe the remaining $8 million whether there were
sufficient shares of stock to pay that amount when sold or not. It commits to a
300,000 share redemption on or about February 18, 1995, with a payment to BSFI
of $3 million. In addition, it purports to give BSFI additional warrants to
acquire 100,000 shares of WRT stock at $7.50 per share. The letter further
authorizes BSFI to deduct from its payment of production proceeds to WRT a sum
equal to the interest accrual on the unpaid balance of $8 million and to "charge
such as a
8
<PAGE>
production supervisory fee."
In March 1995, WRT completed its public offering of $100 million 13 7/8%
Senior Notes. The proceeds of the offering were to be used to purchase oil and
gas properties. Although no independent analysis has been made, the Examiner has
been told by officers of the Debtor that the assumption of debt in this
magnitude had a negative impact on the price per share of WRT stock, and its
value fell several dollars per share shortly thereafter. The Napoleanville
property was included in the assets valued to support the issuance of these
notes.
In March 1995, an exchange occurred between WRT and Southfork Investments,
Inc., a corporation owned and controlled by Joseph Brantley. This transaction
purported to exchange a group of oil and gas leases owned by Southfork for Lot 9
of the Walden Subdivision, East Baton Rouge Parish, Louisiana, which was
purported to be owned by WRT. Steven Edwards executed the instrument on behalf
of WRT under a power of attorney signed by Ronald Hale. The leases actually
transferred by this document were the same leases previously conveyed to WRT in
December 1994. The property conveyed to Southfork contains a house the Examiner
believes to be valued in excess of $350,000. This exchange was not disclosed in
the company's SEC filings.
In June 1995, $1,170,000 was transferred by WRT to the trust account of
Stephen Edwards. This was done in the from of two checks in the amounts of
$1,000,000 and $170,000, respectively. The check requests indicate the funds
were for purchase of the "Hackberry Field". The funds were not used to purchase
any property in the Hackberry Field. Mr. Brantley stated these funds were paid
to BSFI or a related company.
At the time Pate, Winters and Stone, as consultants to the Debtor, began
their investigation of this transfer of funds, they were informed the funds were
for the purchase of oil and gas leases surrounding the Napoleanville Field and
that no assignment had yet been received. Immediately
9
<PAGE>
prior to the bankruptcy filing, an assignment was apparently received, but no
copy has been reviewed by the Examiner. Based on information and belief, the oil
and gas leases conveyed are believed to have no value. They had terminated for
non-production prior to the assignment being made. The leases cover property
outside the confines of the Napoleanville Field, and Joseph Brantley had a few
months earlier indicated this to WRT. This transaction is reported in the
Debtor's 1995 10K filing with the Securities and Exchange Commission as the
purchase of oil and gas leases for $1.2 million.
Shortly prior to the filing of the bankruptcy, as disclosed in the 10K
filed by the Debtor, the Debtor purportedly purchased an interest in a salt
water disposal well from BSFI Western. Joseph Brantley informed the Examiner
that the salt water disposal well had been previously conveyed to WRT as part of
the original transfer of leases in the Napoleanville Field. The Debtor's SEC
filing reports it paid $600,000 for this property.
In November 1995, BSFI had withheld from WRT the sum of $461,261.73, which
it purports was the accrued interest owed it under the January 25, 1995, Stephen
Edwards letter. A meeting was held at which Brantley, Raymond Landry, Mark
Miller, and others were present to discuss this. A settlement agreement was
entered into and signed by WRT and all owners of an interest in the
Napoleanville Field except Russell Resources, Inc., Eugene W. Russell and Robert
H. Griffin. The agreement allowed BSFI to keep the money and WRT to assume
operations of the field.
Brantley indicates he has received total payments of $7.2 million. A
portion of this apparently came from the purchase of 300,000 shares of the
escrowed stock by Gerald Boelte. Mr. Boelte is believed to be the principal in
LLOG, a company from whom WRT purchased a substantial oil and gas property with
approximately $60 million in proceeds from the issued notes. Correspondence
exists indicating a possible agreement that WRT would have the shares
registered, that Mr. Boelte was given the right of first refusal to acquire up
to an additional 400,000 shares of
10
<PAGE>
the stock held by Stephen Edwards as Escrow Agent, and that all WRT common stock
owned or to which Stephen McGuire had a right was to be pledged to assure that
Boelte did not suffer a loss for 180 days on his purchase price of $6.67 per
share. The Examiner has not been provided a copy of this correspondence signed
by Stephen McGuire.
Brantley indicated to the Examiner that he does not know how many shares
of stock he currently owns. He stated he had removed it from Stephen Edwards'
control, and that it was now held in escrow by Mark Miller of Oppenheimer.
The relationship between the Debtor and the Brantley entities is
extremely complex and involves numerous transfers of large sums of money to
various persons and entities. This relationship and the participation of various
individuals must be explored in much greater detail than the 60 days allowed for
this preliminary report , if an accurate re-creation is to be completed.
DONALD ARNOULT
The Court directed the Examiner to investigate the following: "The
transactions pursuant to which the Debtor transferred equipment to Donald
Arnoult, or entities controlled by him, or in which he holds an interest,
together with post-petition actions to recover such equipment."
The Examiner has been unable to determine the original owners of the
equipment in question. There are two kinds of equipment transfers involving the
Debtor and entities owned or controlled by Donald Arnoult. These include five
(5) workover rigs in one group, and a large amount of marine equipment in the
other group. Various documents indicate WRT owned the equipment prior to the
transactions in question. Other documents represent that the equipment was owned
by one or more companies owned or controlled by Donald Arnoult, including, but
not limited to, AEC/Energy Marine, Inc., Arnoult Equipment and Construction,
Inc., Energy Workover & Drilling Services, Inc., and Energy Labor Services, Inc.
(cumulatively called "AEC"). Some records reviewed by the
11
<PAGE>
Examiner indicate the funds to purchase the equipment were provided by WRT, but
the equipment purchased by AEC.
A representative of the Debtor reported to the Examiner that he was told
by Mr. Arnoult that a large portion of the equipment (the marine equipment) was
conveyed to the Debtor in connection with the Debtor's purchase of oil
properties. The representation continued that the oil properties did not justify
the high price being paid, and that the equipment was added to the transaction
with an arbitrary value placed on it of approximately $7 million to allow the
sale to be completed. The equipment is not believed to have a value of $7
million. The Examiner has been unable to investigate this representation further
in the time allowed for this preliminary report.
At the time WRT purchased its interest in the South Hackberry field, it
owned one workover rig. As a part of that acquisition, it obtained two
additional rigs. Subsequent to its purchase, WRT retained Arnoult Equipment and
Construction Company, Inc. ("AEC"), or other entities controlled by Donald
Arnoult, to provide services on its properties, and paid it a substantial amount
for these services. A fourth rig was owned which was not operable and used for
parts. During this process, AEC caused a fifth rig to be purchased.
In December 1994, WRT sold the rigs to AEC for $3.9 million. AEC executed
a promissory note payable to WRT bearing interest at 6% per annum. The Debtor's
10K filed with the SEC states that after WRT grew concerned over the ability of
AEC to pay on the notes, an agreement was negotiated where the rigs were
returned to WRT in apparent cancellation of the notes. However, AEC claims to
own the fifth rig and has retained possession of that rig. WRT has retained
counsel in New Orleans in an attempt to recover the rig.
Prior to the spring of 1995, invoices were not routinely sent from AEC to
WRT for services. Sporadic large payments were made by WRT to AEC. It appears
that one or more of these payments
12
<PAGE>
was intended to purchase equipment for AEC to use in its operations for WRT. In
early 1995, a new President of AEC was employed, Mr. Don Muller. According to
Mr. Muller, he would contact WRT to be paid for services, and funds would be
forwarded by WRT. However, oral instructions from WRT's officers, including
Ronald Hale, were that various amounts of the payments were to be paid to
"consultants" who were not employees of AEC nor WRT. Mr. Muller contends that he
made several attempts to collect what was carried on the AEC books and records
as a $3-$4 million account receivable from WRT. He contends he was forced to
resign as a result of these efforts, and has filed suit against WRT and others
for interference with his employment. In May 1995, an agreement was reached
between WRT and AEC that WRT owed AEC the sum of $1,017,000. This sum of money
was wired by WRT to the escrow account of Stephen Edwards on May 19, 1995, and
described as "Settlement on Arnoult Equipment 500,000 Note Receivable - 517,000
on account".
In December 1994 and May 1995, the equipment was sold to AEC/Energy
Marine, Inc., a company owned and controlled by Donald Arnoult. The sales price
was $5.2 million, which was evidenced by two promissory notes payable to WRT
bearing interest at 6% per annum. In May 1995, the Debtor entered into a Master
Service Contract with AEC/Energy Marine, Inc. whereby, WRT agreed to employ AEC
to utilize the equipment purchased in servicing and maintaining WRT properties
with a guaranteed minimum monthly payment to AEC of $250,500. This was more than
sufficient to provide net income to AEC in an amount necessary to pay the note
payments under the indebtedness to WRT. In short, it appears WRT sold the marine
equipment to AEC, and then contracted to provide enough work to AEC so that the
profit earned would be sufficient to pay WRT for the marine equipment.
In September 1995, the Debtor made efforts to cancel the agreement with
AEC and obtain the return of the marine equipment. The Debtor had attempted to
perfect a mortgage on the marine
13
<PAGE>
equipment at the time it was sold to AEC. Apparently the mortgage was not
perfected. AEC, subsequent to its purchase, pledged a portion of the equipment
to secure its indebtedness to General Electric Credit Company. GECC may,
therefore, hold a prior lien on some of the equipment. In addition, a person
claiming to have been injured on the equipment obtained a judgment, and has
executed on a portion of the equipment such that it is now in the hands of the
sheriff to be sold to satisfy the judgment.
The Debtor retained Randy Guidry, an attorney in Lafayette, Louisiana, to
recover the marine equipment. Mr. Guidry did not return telephone calls from the
Examiner. According to the Debtor's President, Mr. Guidry has made no progress.
There are concerns that Mr. Guidry may have represented both the buyer and
seller in the transactions, and may have been the person responsible for
perfecting the mortgage on the property for WRT's benefit which was not done.
According to corporate records retained by the State of Louisiana, Mr.
Guidry is or was a shareholder in Mayronne Energy Services, Inc. Mr. Muller
contends that the equipment was obtained by Mayronne Energy Services from AEC,
and is being used by that entity. The Debtor's schedules reflect payments to
Mayronne Energy Services on 12/1/95 of $30,000; 12/31/95 of $127,368.70; and
2/13/96 of $28,084.
The Examiner believes additional review of this transaction is merited,
together with possible causes of action which may result.
TRI-DECK OIL & GAS COMPANY
The Court directed the Examiner to investigate the following: "The
relationship and transactions between the Debtor and Tri-Deck Oil & Gas Company
('Tri-Deck')."
Until some time in 1995, WRT had no marketing plan and no officer
responsible for marketing its oil and gas. In 1995, Raymond Landry, President,
requested that James Florence
14
<PAGE>
assume the responsibility of marketing the company's product. Mr. Florence
caused Tri-Deck to be formed on May 9, 1995. Tri-Deck is a Texas corporation
whose registered office is 146 Westco Street, Suite 200, Houston, Texas 77007.
Robert Levine is the registered agent for service at that address. No officers
or directors of WRT profess any knowledge of or agreement with the creation of
Tri-Deck. An "Oil and Gas Sales and Purchase Agreement" dated April 28, 1995, to
be effective June 1, 1995, was executed whereby Tri-Deck became the purchaser of
all oil and gas produced by or under the control of the Debtor. The signatory on
the agreement for WRT purports to be Steve McGuire, who states he has no memory
of executing such an agreement. The signatory on the agreement for Tri-Deck is
Mark Miller. Mark Miller is an employee of Oppenheimer and an ex officio advisor
to WRT and McGuire.
This contract was withheld from WRT for several months despite attempts to
obtain a copy from Tri-Deck.
The contract price to be paid for WRT's oil and gas is not set out in the
agreement, but it states the price will be specified monthly.
WRT has sued Tri-Deck for non-payment of oil and gas production it
purchased from WRT. In connection with that litigation, the deposition of Mr.
Florence was taken. In that deposition, Mr. Florence states that the sales
arrangement was discussed by him with Ray Landry, Steve McGuire and Ronald Hale.
He further states that they knew his company was to make a profit of 2 cents per
MMBtu. His testimony is unclear as to his understanding of the arrangement
regarding oil and fluids produced from the wells.
A comparative analysis performed by Wayne Fuqua and Wayne Benninger
reflects that Tri- Deck paid WRT substantially less than the open market price
for its oil. Tri-Deck has not paid WRT for the liquids produced.
15
<PAGE>
The Examiner believes that this relationship should be investigated
further, and that an in-depth investigation of the relationship of Mark Miller
and Oppenheimer to Tri-Deck and WRT should be made.
CLAIMS ACQUISITION
The Court directed the Examiner to investigate the following: "The
acquisition of claims in this chapter 11 proceeding by Blue Light Investment
Corp."
Blue Light Investment Corp. ("Blue Light") is represented to be a
Washington corporation with offices located at 301 N. Harrison St., Suite 206,
Princeton, New Jersey 08540. Peter A. Chapman is reflected as the Vice-President
of the Corporation.
Mr. Chapman stated that Blue Light purchased the claims as an investment.
He further stated Blue Light has no relationship with any officer, principal,
director or person related to WRT.
Blue Light Investment Corp. purchased 36 claims of primarily trade
creditors. The face amount of these claims total $293,240.35.
On August 27, 1996, Blue Light assigned all claims it had purchased to
LIM, Inc. LIM, Inc., has offices at 4550 Gordon Drive, Naples, Florida 33940.
The Notice of Assignment filed with the Court reflects the assignment to Lloyd
Miller, Inc., but the attached assignment is to LIM, Inc.
The State of Florida corporate records show LIM, Inc., to be a "for
profit" corporation with principal offices at 4550 Gordon Drive, Naples, Florida
33940; its registered agent as John R. Asbell, Esq., 3174 E. Tamiami Trail,
Naples, Florida 33962; and its President as Lloyd I. Miller at 4550 Gordon
Drive, Naples, Florida.
The State of Florida corporate records show Lloyd Miller, Inc., to be an
inactive corporation, whose corporate charter was involuntarily dissolved, with
principal offices located at 1320 S. Dixie Hwy, Suite 830, Coral Gables, Florida
33146; its registered agent as Robert G. Breier, 1320 S. Dixie
16
<PAGE>
Hwy, Suite 830, Coral Gables, Florida 33146; and its Director to be Lloyd
Miller, 600 NW 183 St #6, Miami, Florida.
The assignment from Blue Light to LIM reflects a price based in part on a
"pricing letter" dated July 29, 1996, between Blue Light and M. J. Whitman
Senior Debt Corp. The Examiner was unable to locate any information regarding M.
J. Whitman Senior Debt Corp.
There appears to be no impropriety in the purchase of claims by Blue Light
Investment Corp.
TRICORE ENERGY VENTURE
The Court directed the Examiner to investigate the following: "The
relationship and transactions between the Debtor and Tricore Energy Venture."
On or about October 18, 1991, a joint venture was formed known as WRT-Gulf
Coast Joint Venture. This venture was between Western Resource Technologies,
Inc., Tricore Energy Venture, L.P. ("Tricore"), and Stag Energy Corporation
("Stag"). The agreement called for Tricore Energy Venture, L.P. to make a
capital contribution to develop oil and gas properties located in West Lake
Ponchartrain, Block 40 Field, Jefferson Parish, Louisiana; Delcambre Project,
Tigre Lagoon, Iberia Parish, Louisiana; and State Lease 2670 #4 Project, Lake
Des Allemande Field, St. John the Baptist Parish, Louisiana. The venture was
subsequently expanded to include other properties.
Tricore Energy Venture, L.P., is an investment company which raises funds
through the private sale of limited partnership shares to various investors. Its
general partner is Tricore Energy Corporation, 8552 Katy Freeway, Suite 200,
Houston, Texas 77024 {713.932.9093}. The president of Tricore Energy Corp. is
Robert Burr. The funds raised by Tricore are used in conjunction with oil and
gas companies to develop or produce oil and gas properties. Tricore initially
raised $1,862,500 in 1991, which was utilized in the joint venture business. The
capitalization was subsequently increased in 1992 with $2,741,250 being
available to the joint venture. A substantial
17
<PAGE>
ownership interest is obtained by Tricore in return for its capital investments.
The properties known to have been improved with these funds are the Delcambre
A-2, the Delcambre #1, and the Summers #1 in Brazoria County, Texas. As of
December 31, 1993, Tricore had contributed $5,994,625 to the joint venture, and
the development included the Exxon 23 well. In 1994, it committed to raise an
additional $3,400,000 to use in developing the West Lake Ponchartrain Project
and the Lac Blanc Project. In March 1995, Tricore committed additional funds for
work on the Atkinson No. 2 Well, State Lease 8396 # 1 and #2, and the K.G.
Wilbert No. 1 well.
Under the joint venture agreement, Tricore paid for all intangible
drilling costs. WRT and Stag provided the leases and projects to be developed.
Tricore generally received 70% of the net income from the properties, subject to
the agreement, with WRT and Stag sharing the remaining 30% of net income. This
allocation varied somewhat from well to well, but the 70-30 division is most
common.
WRT is the operator of all of the properties developed under the joint
venture agreement. The agreement obligates WRT and Stag to guarantee certain
minimum production levels from the properties through 1996.
There are no known relationships between any principal or insider of WRT
and Tricore. Robert Bass, President of Tricore, denied knowledge of any of the
principals of WRT. He indicated that there was a current dispute with WRT over
the work over of the Exxon #23 well, in which he contends production proceeds
were utilized by WRT to re-work the well without the consent of Tricore. The
funds in dispute total approximately $320,000. He further stated that Tricore
had received no revenues from WRT for any production after August 1995, which it
received in November 1995. WRT records reflect as of July 31, 1996, the LOE on
the affected wells was in excess of the net attributable to the Tricore
interest.
18
<PAGE>
The examiner discovered no improprieties in this contractual arrangement.
ADDITIONAL AREAS OF CONCERN
The Examiner believes an investigation should be made regarding the
transactions wherein WRT purchased various oil and gas properties with the
proceeds of the public note offering. In at least two of the transactions,
suggestions have been made that an excessive price was paid.
The Examiner believes the role of Mark Miller and Oppenheimer and Co.,
with regards to the management of the Debtor and transactions with the Debtor,
should be investigated.
PRELIMINARY CONCLUSIONS
Numerous actions for recovery of property or damages for the Debtor's
estate appear to exist which should be pursued. Due to the complicated nature of
the transactions and the relatively short time allowed for investigation prior
to this report, additional review and investigation is warranted to determine
what, if any, additional actions are appropriate.
Respectfully submitted,
JASON R. SEARCY, P.C.
-------------------------------
Jason R. Searcy
P. O. Box 3929
Longview, Texas 75606
Tel. 903/757-3399
Fax. 903/757-9559
State Bar No. 17953500
CERTIFICATE OF SERVICE
I, the undersigned, certify that a true and correct copy of the above and
foregoing was mailed by first class mail, postage prepaid, on this date, to each
person shown on the attached mailing matrix.
Signed this ____ day of November, 1996.
-----------------------------------
Jason R. Searcy
19
<PAGE>
UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE-OPELOUSAS DIVISION
IN RE: SS.
SS. CASE NO. 96-50212-011
WRT ENERGY CORPORATION SS.
SS. CHAPTER 11
DEBTOR SS.
SUPPLEMENT AND CORRECTION TO
EXAMINER'S PRELIMINARY REPORT
TO THE HONORABLE JUDGE GERALD H. SCHIFF:
Now comes Jason R. Searcy, Examiner, and files this his Supplement and
Correction to Examiner's Preliminary Report and would show as follows:
1. The Examiner filed his Preliminary Report herein on or about November
12, 1996.
2. Subsequent to its filing, the Examiner determined that an inaccurate
statement is included in the second complete paragraph on page 10 of the report.
The report should be corrected to reflect that Raymond Landry was not present at
the meeting referenced.
3. The report should be supplemented by the addition in the second full
paragraph of page 9 to reflect that the property conveyed to Southfork in the
exchange with WRT is believed to be occupied by Joseph Brantley as his personal
residence.
Respectfully submitted,
-------------------------------
Jason R. Searcy
P. O. Box 3929
Longview, Texas 75606
Tel. 903/757-3399
Fax. 903/757-9559
State Bar No. 17953500
CERTIFICATE OF SERVICE
1
<PAGE>
I, the undersigned, certify that a true and correct copy of the above and
foregoing was mailed by first class mail, postage prepaid, on this date, to each
person shown on the attached mailing matrix.
Signed this ____ day of November, 1996.
-----------------------------------
Jason R. Searcy
2
<PAGE>
EXHIBIT D
================================================================================
CLASS C-1
LEASE CODE ELINA MOTTY LONG ET AL 4/6/92
VENDOR NAME
Central Industries, Inc.
Dupre' Supply Service
Mike Monte Welding Service
================================================================================
CLASS C-2
LEASE CODE A. WILBERT'S SONS 8/16/73
VENDOR NAME
HTS, Inc.
Moores Wireline, Inc.
================================================================================
CLASS C-3-A
LEASE CODE CL&F NORTH
VENDOR NAME
Anchor Drilling Fluids USA, Inc.
Caillou Island Towing
Diamond Services Corp.
Dupre' Supply Service
HTS, Inc.
Halliburton Energy Services
Hughes Christensen Company
Inland Marine Service, Inc.
Mallard Bay Drilling, Inc.
Mike Monte Welding Service
Schlumberger Well Services
Settoon Marine, Inc.
Settoon, Inc.
Terrebone Wireline Services, Inc.
Top Tool Company, Inc.
CLASS C-3-B
LEASE CODE CL&F SOUTH
VENDOR NAME
Anchor Drilling Fluids USA, Inc.
Caillou Island Towing
Central Boat Rentals, Inc.
Diamond Services Corp.
Double Eagle Marine, Inc.
Dupre' Supply Service
Halliburton Energy Services
Helmer Directional Drilling, Inc.
Hughes Christensen Company
Inland Marine Service, Inc.
K&D Production Services, Inc.
Mike Monte Welding Service
Moores Wireline, Inc.
Mud Motors
Newport Operators
Petro Rentals
Schlumberger Well Services
Settoon Marine, Inc.
Superior Marine Energy Services, Inc.
Top Tool Company, Inc.
CLASS C-3-C
LEASE CODE CL&F SOUTH/NORTH
VENDOR NAME
Benchmark
Caillou Island Towing
Diamond Services Corp.
Double Eagle Marine, Inc.
HTS, Inc.
Halliburton Energy Services
Moores Pump & Supply, Inc.
Newport Operators
Settoon Marine, Inc.
Terrebone Wireline Services, Inc.
================================================================================
CLASS C-4-A
LEASE CODE BROWNELL KIDD 90
VENDOR NAME
Benchmark
Dupre' Supply Service
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
CLASS C-4-B
LEASE CODE DAVID R MCHUGH, ESTATE OF
VENDOR NAME
Benchmark
Dupre' Supply Service
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
CLASS C-4-C
LEASE CODE EDWARD H. PETERMAN ET AL 90
VENDOR NAME
BJ Services Company USA
Benchmark
Camco Coiled Tubing
Central Boat Rentals, Inc.
Dupre' Supply Service
Mallard Bay Drilling, Inc.
Operators & Consulting Services, Inc.
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
Southern Wireline Service, Inc.
Top Tool Company, Inc.
CLASS C-4-D
LEASE CODE LYNCH MCHUGH HEIRS ET AL
VENDOR NAME
Anchor Drilling Fluids USA, Inc.
Benchmark
Dailey
Diamond Services Corp.
Double Eagle Marine, Inc.
Dupre' Supply Service
HTS, Inc.
Halliburton Energy Services
Hughes Christensen Company
Inland Marine Service, Inc.
K&D Production Services, Inc.
Mallard Bay Drilling, Inc.
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
Top Tool Company, Inc.
CLASS C-4-E
LEASE CODE VF LANDRY ET AL 52
VENDOR NAME
BJ Services Company USA
Benchmark
Central Boat Rentals, Inc.
Dupre' Supply Service
HTS, Inc.
Halliburton Energy Services
Hopson Transportation, Inc.
Inland Marine Service, Inc.
Mallard Bay Drilling, Inc.
Mike Monte Welding Service
Operators & Consulting Services, Inc.
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
Terrebone Wireline Services, Inc.
Top Tool Company, Inc.
CLASS C-4-F
LEASE CODE VF LANDRY ET AL 90
VENDOR NAME
Benchmark
Dupre' Supply Service
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
CLASS C-4-G
LEASE CODE BROWNELL-KIDD 11/66
VENDOR NAME
Benchmark
Double Eagle Marine, Inc.
Dupre' Supply Service
Fred Settoon, Inc.
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
CLASS C-4-H
LEASE CODE RICHARD LYNCH HEIRS
VENDOR NAME
Benchmark
CLASS C-4-I
LEASE CODE VF LANDRY 11/66
VENDOR NAME
Benchmark
Double Eagle Marine, Inc.
Dupre' Supply Service
Fred Settoon, Inc.
Performance Industries, Inc.
Settoon Dock Service
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
================================================================================
CLASS C-5
LEASE CODE MCCARVER ET AL 11/22/50
VENDOR NAME
Action Oilfield Services.
Arlan Enterprise of Louisiana, Inc.
B.J. Guidry Construction Co.
================================================================================
CLASS C-6-A
LEASE CODE CL&F 12/21/45
VENDOR NAME
Benchmark
Diamond Services Corp.
Dupre' Supply Service
K&D Production Services, Inc.
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
CLASS C-6-B
LEASE CODE CL&F 12/26/45
VENDOR NAME
Ambar, Inc.
Benchmark
Diamond Services Corp.
Dupre' Supply Service
K&D Production Services, Inc.
Settoon Marine, Inc.
Settoon, Inc.
Southern Gulf, Inc.
Terrebone Wireline Services, Inc.
CLASS C-6-C
LEASE CODE SEC 1 WRT OFF LEASE
VENDOR NAME
Benchmark
Diamond Services Corp.
Dupre' Supply Service
K&D Production Services, Inc.
Settoon Marine, Inc.
Settoon, Inc.
================================================================================
CLASS C-7-A
LEASE CODE M.P. ERWIN
VENDOR NAME
A.E.C., Inc.
Ace Fishing & Rental Tools, Inc.
BJ Services Company USA
Bell Marketing, Inc.
Benchmark
Charles Holston, Inc.
Dailey
Dupre' Supply Service
HTS, Inc.
J&L Well Service, Inc.
Mike Monte Welding Service
Moores Pump & Supply, Inc.
Moores Wireline, Inc.
Operators & Consulting Services, Inc.
Performance Industries, Inc.
Resource Transportation
Settoon Marine, Inc.
CLASS C-7-B
LEASE CODE STATE LEASE 50
VENDOR NAME
A.E.C., Inc.
Ace Fishing & Rental Tools, Inc.
B.J. Guidry Construction Co.
BJ Services Company USA
Benchmark
Caillou Island Towing
Central Boat Rentals, Inc.
Dailey
Diamond Services Corp.
Drilling Measurement, Inc.
E.J. Patterson, Inc.
HTS, Inc.
Halliburton Energy Services
Hughes Christensen Company
I.E. Miller of Eunice, Inc.
Louisiana Pipeline & Construction Co.
Mallard Bay Drilling, Inc.
Mike Monte Welding Service
Moores Pump & Supply, Inc.
Moores Wireline, Inc.
Operators & Consulting Services, Inc.
Patterson Marine, Inc.
Settoon Marine, Inc.
Suard Barge Service, Inc.
Top Tool Company, Inc.
================================================================================
CLASS C-8
LEASE CODE LPSB 1/8/60
VENDOR NAME
Benchmark
Dupre' Supply Service
K&D Production Services, Inc.
Mike Monte Welding Service
Performance Industries, Inc.
Southern Gulf, Inc.
================================================================================
CLASS C-9
LEASE CODE LOUISIANA FUR
VENDOR NAME
Bell Marketing, Inc.
Benchmark
Camco Coiled Tubing
Derrick Corporation
Dupre' Supply Service
Halliburton Energy Services
Mike Monte Welding Service
Moores Wireline, Inc.
Thomas Tools
================================================================================
CLASS C-10-A
LEASE CODE DUGAS & LEBLANC LTD. 2/94
VENDOR NAME
BJ Services Company USA
Camco Coiled Tubing
HTS, Inc.
Moores Pump & Supply, Inc.
Operators & Consulting Services, Inc.
Top Tool Company, Inc.
CLASS C-10-B
LEASE CODE DUGAS & LEBLANC LTD. 3/94
VENDOR NAME
Action Oilfield Services.
CLASS C-10-C
LEASE CODE DUGAS & LEBLANC LTD. 93
VENDOR NAME
Action Oilfield Services.
CLASS C-10-D
LEASE CODE E. ROBERT STERNFELDS ET AL 90
VENDOR NAME
Action Oilfield Services.
CLASS C-10-E
LEASE CODE SEC 40 WRT OFF LEASE
VENDOR NAME
Action Oilfield Services.
Producers Assistance Corporation
================================================================================
CLASS C-10-A
LEASE CODE HARRIS COUNTY
VENDOR NAME
Producers Assistance Corporation
Wells Lease Service
================================================================================
CLASS C-12
LEASE CODE STATE LEASE 8396
VENDOR NAME
Ambar, Inc.
Benchmark
Diamond Services Corp.
Dupre' Supply Service
K&D Production Services, Inc.
Mike Monte Welding Service
================================================================================
CLASS C-13
LEASE CODE WK RAINBOLT ET AL 4/10/92
VENDOR NAME
BJ Services Company USA
Benchmark
Moores Wireline, Inc.
Southern Gulf, Inc.
================================================================================
CLASS C-14
LEASE CODE STATE LEASE 340
VENDOR NAME
HTS, Inc.
================================================================================
CLASS C-15-A
LEASE CODE R VINCENT ET AL 1/8/38
VENDOR NAME
Benchmark
CLASS C-15-B
LEASE CODE R VINCENT ET AL 5/36
VENDOR NAME
A.E.C., Inc.
BJ Services Company USA
Benchmark
Moores Wireline, Inc.
================================================================================
CLASS C-16
LEASE CODE STATE LEASE 7325
VENDOR NAME
Dupre' Supply Service
Halliburton Energy Services
Mike Monte Welding Service
================================================================================
<PAGE>
APPENDIX
EXHIBIT 'E'
WRT Energy Corporation
Summary of Payments During Preference Period
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
A&B Bolt & Supply, Inc. 67,559.61 (1)
A&T Well Service, Inc. 25,257.00 (1)
A.E.C., Inc. 232,500.00 (1)
A.I. Credit Corp. 124,301.25 (1)
Aamco Transmission 1,157.66
Acadiana Business Supply 910.98
Ace Fishing & Rental Tools, Inc. 88,654.14 (1)
Ace Supply, Inc. 3,866.97
Ace Transportation, Inc. 9,949.02
Action Oilfield Services, Inc. 3,633.50 (1)
Affiliated Tax Consultants 832.50
Aftech, Inc. 91,354.37 (1)
Alamo Natural Resources 667.46
Aldine ISD 743.00
All Brand Packers 896.80
Ambar Inc. 123,841.70 (1)
Amerada Hess Corp. 47,367.86
American Express 59,360.61 (1)
American Stock Transfer & Trust 3,263.00
American Well Control 14,403.15
Amoco Production Co 2,554.35
Amy's Sewer Service 2,960.00
Andrew C. Stone 1,333.85
Ann Thomas Forgey 636.18
Annabelle M. Hamner 1,871.02
Apollo Services 130,000.00 (1)
Applied Electronic Systems, Inc. 2,306.11
Arlan Enterprise Of Louisiana, Inc. 7,928.28
Ashland Exploration 932.72
Associated Building Services 1,847.19
Associated Reprographic 833.17
Associated Travel Service, Inc. 2,683.00
AT&T 17,345.30
AT&T Capital Corporation 7,522.84
Atchafalya Measurement, Inc. 11,195.50
Audrey Breaux Vogler 885.90
Author Services, Inc. 11,379.00
B&G Wireline Service, Inc. 1,200.00
B&S Oilfield Service & Supply 1,678.87
B.J. Guidry Construction Co. 62,646.25 (1)
Baker And Hostetler 1,116.36
Bakers Oil Tools 1,462.00
Bank One 6,870.00
Bankers Capital 4,105.25
Barrios Services, Inc.: 328,000.00 (1)
Bass Consulting 8,280.00
Bayou Oaks Apartments 2,727.50
Beacon Energy Corporation 17,868.62
Becfield Drilling Services: 39,267.00 (1)
Bell Marketing, Inc. 11,723.30 (1)
Bell South Mobility 11,937.55
Bellsouth USA 6,111.64
Bill Laurence, Inc. 17,935.45
Page 1 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Bill Wood, LLC 25,000.00 (1)
BJ Services Company, Inc. 79,975.81 (1)
Blaine Frantzen Agency 2,223.05
Bluesky Oil & Gas 1,240.74
Boardwalk Management & Construction 128,218.69 (1)
Bob's Bayou Black Marina, Inc. 4,502.58
Bourque Vacuum Service Inc. 834.00
Boyd's Bit Service, Inc. 11,164.80
Brian's Well Service 2,450.00
Bridgeline Gas Distribution LLC 127,017.07 (1)
Broussard's Catering 1,474.28
Brownell Kidd Company 670.24
Browning-Ferris Industries 2,577.20
Bryan's Production Service, Inc. 872.00
Buckner Rental Service, Inc. 1,082.90
C&H Rental Tools,Inc 5,832.29
C&J Barge & Crane Co., Inc. 2,380.00
C. Randall Loewen 28,000.00 (1)
C.L. Jack Stelly & Associates, Inc. 5,000.00
Caillou Island Towing 5,534.99 (1)
Cajun Well Service, Inc. 6,653.00
Cajun Wireline Incorporated 54,591.41 (1)
Calcasieu Rentals, Inc. 19,899.76
Cambe Geological Services 640.00
Camco Coiled Tubing 15,982.07 (1)
Cameron Telephone Company 8,124.97
Cameron Waterworks Dist. #2 2,333.46
Campbell Wells 25,525.96 (1)
Cardinal Services 1,445.00
Cellular One Of Lake Charles 2,546.49
Central Boat Rentals, Inc. 62,735.12 (1)
Charles N. Hebert 13,491.62
Charlie Ann Forgey Blues 874.74
Chas P. Young Co . 30,249.03 (1)
Chet Morrison 27,810.00 (1)
Cinco Pipe & Supply, Inc.: 30,071.45 (1)
City Of Lafayette 4,115.30
Coastal Chemical Company, Inc. 1,136.41
Coastal Fluid Technologies 999.18
Colleen Bourque 640.49
Computalog USA 166,099.37 (1)
Computalog Wireline Services, Inc. 759.28
Computer Tech 13,214.59
Consolidated Graphics 30,000.00 (1)
Continental Land & Fur Co 303,889.83
Copy Data Of Lafayette, Inc. 1,360.43
Core Petrophysics Inc. 14,941.80
Cory Kent Bourque 640.47
Crain Brothers, Inc.: 57,704.75 (1)
Crochet Electric 6,351.31
Crown Lift Trucks 2,373.00
D&D Pipe & Rentals, Inc. 46,280.24 (1)
D-O-R Engineering, Inc.: 37,553.61 (1)
Page 2 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Dailey Petroleum Services, Corp. 10,251.63
Daily 50,000.00 (1)
Dan A. Hebert 1,255.12
Danley's Drafting & Graphics 8,925.00
Datacom 25,225.46 (1)
Datex 9,309.17
Davies Construction, Inc. 1,479.04
Deballion & Debaillon 20,000.00
Deborah K. Bourque 640.48
Dek., Inc. 3,630.68
Delta Elec. Co. Of Baton Rouge, Inc 1,200.00
Denise Goodman 676.41
Department Of Revenue & Taxation 113,721.74
Diane M. Haas 2,120.00
Dishman & Bennett: 130,723.53 (1)
Dolphin Pipe And Rental 11,783.78
Double Eagle Marine Inc. 5,536.25
Drilling Measurement, Inc. 45,039.88 (1)
Duke Transportation 1,718.00
Dupre Supply Company: 126,410.21 (1)
Dynasty Transportation, Inc. 2,196.28
Edi Environmental Svcs Inc. 750.00
Elizabeth A. Stone 1,333.79
Ellen Stevenson Hebert 761.73
Energy Confederation Inc. 1,612.50
Energy Development Corporation 1,452.33
Energy Marine, Inc. 10,687.66
Enterprise Developments 3,212.90
Enterra Lift Systems 7,763.26 (1)
Eric Barton Wood 137,597.01 (1)
Ethel Louise Delcambre 1,200.39
Euel A. Breaux 885.90
Evora Breaux Bonin 885.91
Exxon Co. Usa 123,193.59
F&F Wireline Service, Inc. 8,772.62
Farnsworth & Vonberg 145,000.00 (1)
Federal Express Corporation 894.80
Filco International, Inc. 49,781.22 (1)
First Commercial Bank 1,028.76
First National Bank 20,000.00
First Premium Services, Inc. 22,904.00
Fiscal Services 1,680.00
Floris Fay Forgey Driskill 2,385.70
Foil, Inc. 1,492.61
Ford Motor Credit Company 1,150.52
Fortis Benefits 126,963.18 (1)
Francis Drilling Fluids, Ltd. 80,000.00 (1)
Frank's Casing Crew 28,932.19 (1)
Fred Settoon 4,572.00
Future Realty Inc. 2,598.42
G&L Well Service 6,215.50
G&R Tugs 33,700.00 (1)
Garron Frantzen Trust 2,223.06
Page 3 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Gas Gathering Corp. 1,500.00
Gas Market Report 928.00
Gaylen & Landry Briehn 1,192.82
General Motors Acceptance Corp. 2,204.57 (1)
General Stationers, Inc. 6,917.25
Geomap Company 3,971.85
George Veazey 1,800.00
Goex International, Inc. 17,145.13
Gray Marine Power, Inc. 2,956.26
Great Western Onshore Inc. 1,861.10
Gte Mobilnet 10,442.21
Gulf Coast Packaging, Inc. 2,115.87
Gulf States Utilities 45,640.25 (1)
Halliburton Energy Services 132,225.30 (1)
Hamilton Engineering 30,662.07 (1)
Hanks Construction, Inc. 7,401.50
Hanover Compressor Co. 42,363.18 (1)
Harc 20,000.00
Hayco Well Testers,Inc. 6,899.57
Herbert Thompson 4,427.08
Hertz Equipment Rental Corp. 7,034.11
Hilcorp 41,528.70
Hilcorp Energy Co. Gen Partners 32,197.35
Hilda L. Delcambre 1,801.27
Hlp Engineering 7,055.88
Hopson Transportation Inc. 10,000.00
Houma Salt Wtr Disp 3,182.50
Houston Advanced Research Center 25,000.00 (1)
Houston Cellular Telephone, Inc. 5,959.40
Houston Lighting & Power 3,691.72
HTS, Inc. 42,494.00 (1)
Hub City Industries, Inc. 1,723.66
Hughes Christensen Co. 62,218.48 (1)
Indel Davis 772.98
Inland Marine Service, Inc. 7,845.00 (1)
Integrated Energy Services Solution 36,761.10
International Diving 22,000.00
International Oilfield Services 19,496.00
Intracoastal Liquid Mud 5,700.00
Irvin Lee Delcambre 660.51
Iss Compression, Inc 3,843.00
J&L Well Service, Inc. 20,000.00 (1)
J. Otis Winters 774.54
Jack L. Traver 974.42
James Gallet 3,923.81
Jerry Ikes 2,392.00
Jim Balassone 650.00
John A. Farquhar 12,800.90
John S. Herold, Inc. 765.98
Jones Oilfield Service 875.08
K&D Production Services, Inc. 43,125.97 (1)
K.R. Leblanc 22,700.00
Kelly Pump & Supply 5,009.21
Page 4 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Kohlar Frantzen Trust 2,223.03
KPMG Peat Marwick 92,450.00 (1)
L&L Oil Company 22,698.32
L.A. Cellular Telephone Co. 876.42
Lafayette Parish 871.00
Lafayette Well Service, Inc. 69,332.00 (1)
Lafourche Parish School Board 19,444.20
Lake Charles Instruments, Inc. 690.60
Leon E. Comeaux & Assoc. 4,315.10
Lightning Marine Service 6,345.53
Lillie D. Pullin 1,921.45
Lionel Charles Landry 1,192.86
Loomis International Inc. 11,923.18
Lorraine Therese M. Foreman 3,046.93
Louisiana Mid-Continent 1,008.00
Louisiana Oil & Gas,Inc. 3,111.49
Louisiana Pipeline 31,703.55 (1)
Louisiana Power & Light Company 703.22
Louisiana Tank, Inc. 1,576.60
Louisiana Workers' Compensation 10,567.94
M C Bank And Trust Co. 6,718.19
Mallard Bay Drilling Inc. 389,475.00 (1)
Margaret Stone 1,333.83
Marine Operators, Inc. 6,058.00
Marvin's Engine Service, Inc. 63,589.21 (1)
Mary Ellen M. Leonard 1,071.04
Mary Wiseman Geoffroy 2,385.70
Mayflower Transit, Inc. 6,785.86
Mayronne Energy Services,Inc. 28,084.00 (1)
Mazzarella, Dunwoody, Wilson & Petty 25,000.00 (1)
Mcgriff, Seibels, Barbara & Colvin 3,913.50
Mercury Delivery Inc. 639.00
Michael Lynn Delcambre 660.51
Michaela S. Groot 774.69
Midcon Texas Pipeline 1,000.00
Mike Monte Weldind Service 56,280.82 (1)
Mildred Breaux Guidry 885.91
Milling,Benson,Woodward,Hillyer, 1,850.67
Mirex Corporation Of Tx 824.75
Miss Phyllis, Inc. 10,443.00
Monteiro Towing Co., Inc. 19,692.50
Moores Engineering Inc. 17,341.40
Moores Pump & Supply, Inc. 149,253.41 (1)
Moores Wireline, Inc. 82,991.45 (1)
N.R. Broussard Landing, Inc. 702.00
Najmud Dowla 1,105.10
Nantim Energy,Inc. 2,397.50
Nasdaq 1,000.00
National-Oilwell 35,000.00 (1)
Netherland & Sewell 50,000.00 (1)
New Visions 23,550.00
Newpark Enviromental Services, Inc. 17,881.50
Newport Operators 25,735.60 (1)
Page 5 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Office Depot 2,063.24
Office Of Mineral Resources 20,008.49
Offshore Casing Crews Inc. 1,745.00
Oilfield Barges 2,247.00
Oilfield Brine Disposal, Inc. 1,000.00
Omni Drilling Partnership 1979-2 4,763.77
Omni Laboratories, Inc. 3,901.00
Operators & Consulting Services 75,842.22 (1)
OXY U.S.A. 1,109.80
Packers And Service Tools, Inc. 1,030.93
Paincourtville Motorservice, Inc. 962.50
Pat Manual Service & Equipment, Inc 42,879.70 (1)
Pate, Winters & Stone 72,115.47 (1)
Pearl River Navigation, Inc. 3,992.10
Performance Industries 98,371.58 (1)
Performance Industries, Inc. 65,132.48 (1)
Petcom, Inc. 8,299.17
Petro-Log, Inc. 24,303.68
Petroleum Information Corp. 779.00
Porter & Hedges, LLC 103,509.65 (1)
Premium Valve Services L.L.C. 14,749.34
Production Management Corporation 751,701.95 (1)
Production Operators, Inc. 11,568.55
Production Specialties, Inc. 10,400.00
Psc Supply, Inc. 778.20
R&R Packers, Inc. 18,783.10
Randall L. Guidry 14,098.50
Raymond Landry 1,849.24
Reeled Tubing, Inc. 52,891.48 (1)
Renae Swint 1,250.00
Reynolds Supplies & Services, Inc. 59,501.11 (1)
Rita Mazie M. Stevenson 1,523.47
Robert A. Hutchins 7,500.00
Rod Pump Sales & Service Division 994.91
Roland'S Auto Repair 1,739.94
Ronald Hale Jr. 18,275.50
Royal Production Co., Inc. 938.27
S & L Welding, Inc. 738.57
Sam Broussard Trucking Co., Inc. 3,988.62
Samuel Delcambre 1,921.43
Schlumberger Well Services 56,717.59 (1)
Seaboard Equipment Company, Inc. 1,816.92
Securities And Exchange Commission 1,000.00
Settoon Dock Services 5,759.00 (1)
Settoon Marine, Inc. 67,381.90 (1)
Settoon, Inc 20,000.00 (1)
Sharon Mcglaun 600.00
Shelton J. Breaux 885.91
Slemco 8,743.71
Sonny's Truck Rental 882.81
Southern Gulf, Inc. 15,000.00 (1)
Southern Wireline Service, Inc. 55,289.70 (1)
Southland Rentals, Inc. 998.40
Page 6 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Southwest Guaranty Trust Co. 630.00
Southwestern Bell Telephone 10,615.37
State Farm Insurance 2,615.25
State Mineral Board 774.08
State Of Louisiana 15,600.82
Steve Buchanan 16,591.02
Steven S. McGuire 240,523.14
Stric-Lan Companies Corporation 34,930.38 (1)
Suard Barge Service, Inc. 18,678.14
Sunset Services 104,021.19 (1)
Superior Marine Energy Services 203,612.25 (1)
Supreme Contractors, Inc. 19,992.96
Suzanne Stone 1,333.83
SW Guaranty Trust 3,929.52
Syklvia Landry Delcambre 600.43
T. Baker Smith & Son, Inc. 12,882.26
Tadlock Pipe & Equipment Inc. 26,561.52 (1)
Talen'S Marine & Fuel, Inc. 10,321.12
Terrebone Wireline Services, Inc. 68,015.80 (1)
Terry Productions 1,250.29
Texaco E & P, Inc. 572,777.28 (1)
Texas State Treasurer 1,436.04
The Cavines Corp. 1,000.97
The Scotia Group, Inc. 80,000.00 (1)
The Western Company 61,008.31 (1)
Thomas Barr III 1,666.56
Thomas C. Stewart 3,975.07
Thomas Charles Forgey 874.75
Thomas Stone 1,333.85
Thomas Tools 90,000.00 (1)
Thompson & Knight 11,126.92
Tidewater Compression 88,141.50 (1)
Tidewater Dock, Inc. 19,736.34
Tom Davis 13,500.00
Tong Speciality, Inc. 16,412.99
Top Tool Company 76,524.18 (1)
Toshiba Easy Lease 1,690.98
Traco Production Services, Inc. 7,543.76
Trend Services Inc. 626.08
Tri-Tech Fishing 3,790.04
Tricore Energy Venture 5,517.80
Trideck Oil & Gas 455,329.10 (1)
Trussco, Inc. 7,217.31
Tubular Technology,Inc 6,887.91
U.S. Coast Guard-Civil Penalties 5,000.00
United Parcel Service 6,181.02
United Way Mont Co 1,035.00
Vanguard Vacuum Trucks, Inc. 849.00
Vegetation Management Specialist 792.00
Venture Transport, Inc. 20,449.14
Vermilion Shell & Limestone Co Inc 1,039.88
Vortoil Seperation Systems 36,000.00 (1)
Warren Communications 766.01
Page 7 of 8
<PAGE>
Total Payments
During Analysis
Vendor Period (2)
- -------------------------------- ------------------
Waste Management Of Lake Charles 2,374.00
Watson Communications 20,603.23
Wayne Beninger 4,152.37
Weatherford U.S. Inc. 61,222.01 (1)
Wells Lease Service 3,300.00
Western Diazo 1,427.79
Whiting-Park Prod Partnership 10,598.13
William B. Jenny 7,500.00
William F. Stevenson, Jr. 761.74
Woodland Corporation 24,553.08
Woodlands Property Management 950.00
Woodrow W. Daly & Wilma E. Daly 747.05
Wrt / Gulf Coast Joint Venture 29,416.69 (1)
Wyco International 104,849.00 (1)
Xerox Corporation 2,082.39
Total 10,988,832.45
=============
(1) - Transactions are currently under review for potential preference
(2) - Total payments during the Analysis Period do not include payments
made to vendors who received payments in the aggregate of less than
$600 during the Analysis Period.
<PAGE>
EXHIBIT F
WRT ENERGY CORPORATION
FINANCIAL ANALYSIS
AS OF JANUARY 20, 1997
<PAGE>
WRT ENERGY CORPORATION
FINANCIAL ANALYSIS
1994 - 2000
INTRODUCTION
WRT Energy Corporation is an independent oil and gas producer that has
historically specialized in the acquisition and revitalization of mature oil and
gas fields in south Louisiana. The Debtor's program to increase production
rates, lengthen the productive life of wells and increase total proved reserves
consists primarily of sidetracks and recompletions of shut-in wells and
installation of hydrocyclones on gas wells producing large volumes of formation
water. In addition, certain sidetrack and development drilling locations have
been identified as improving reservoir drainage and increasing the ultimate
recovery of reserves. Pursuant to this strategy, the Debtor has made, and will
be required to make, substantial capital expenditures to fully develop its oil
and gas reserves.
In accordance with the Plan, New WRT will emerge from Chapter 11 and will
continue to operate its properties. The most significant operating change in the
business is that New WRT will operate and own 100% of the wells producing from
reservoirs above the Rob C stratigraphic horizon located within the producing
limits of the West Cote Blanche Bay Field, hereinafter referred to as the "West
Cote Blanche Bay Shallow Rights", in accordance with the terms of various
agreements between Texaco and its affiliate TEPI, the Debtor and DLBW as more
fully described in the Disclosure Statement and the Exhibits hereof.
Upon emergence from Chapter 11, New WRT intends to expand its strategy to
include exploration on both existing acreage and acreage not currently held.
Exploration on acreage not currently held would include prospects developed by
third parties as well as those identified by New WRT's technical staff. These
investments are included in the projected capital expenditure amounts and are
described below. The assumed exploration and development investment for the six
months ended December 31, 1997, is $17.6 million, increasing each year
thereafter, as more fully detailed in "Capital Expenditures" discussed below.
2
<PAGE>
HISTORICAL AND PROJECTED FINANCIAL STATEMENTS
The attached schedules set forth the Debtor's (i) audited balance sheet and
related statement of operations as of and for each of the years in the two-year
period ended December 31, 1995; (ii) unaudited preliminary balance sheet and
related statement of operations as of and for the year ended December 31, 1996;
and (iii) projected balance sheets and statements of projected operations as of
and for each of the years in the four-year period ending December 31, 2000,
hereinafter referred to as the "Financial Analysis".
The Financial Analysis presents, to the best of Management's (management of
WRT and DLBW, collectively referred to as Management) belief, the expected
results of operations for the projected periods, utilizing the assumptions
referred to below. Accordingly, the Financial Analysis reflects Management's
judgment, based on current facts and circumstances, of the expected conditions
and Management's anticipated course of action upon the Effective Date of the
Plan. While Management believes the assumptions set forth below are reasonable,
their validity may be affected by the occurrence of events and the existence of
conditions not now contemplated and by other factors, many of which are beyond
the control of Management. The Financial Analysis is, therefore, not intended to
be a representation of New WRT's actual future performance. Actual operating
results during the projected periods may vary from the Financial Analysis and
such variations may be material.
The historical information for the years ended December 31, 1994 and 1995,
has been extracted from the Debtor's consolidated financial statements for such
years as included in WRT's 1995 Annual Report on Form 10-K, which should be
read, including the related footnotes, for additional information. WRT's
historical accounting policies have been consistently applied in the Financial
Analysis, except for the change in its method of accounting for its oil and gas
operations from the successful efforts method to the full cost method, as
discussed below.
The Financial Analysis has not been prepared with a view towards compliance
with published guidelines of the Securities and Exchange Commission and the
American Institute of Certified Public Accountants regarding projections or
forecasts. The Financial Analysis has not been examined or compiled by the
Debtor's independent accountants.
Abbreviations are defined more extensively in the Plan, Disclosure Statement
and attached Exhibits. This Financial Analysis should be read in conjunction
with the Plan, Disclosure Statement and related Exhibits.
3
<PAGE>
BASIS OF PRESENTATION
EFFECTIVE DATE. The Financial Analysis assumes that the Debtor will emerge
from Chapter 11 on an Effective Date of July 1, 1997.
TEXACO TRANSACTION. As described in Section VI, "Summary of the Claims,
Classifications and Treatment Under the Plan" in the Disclosure Statement, the
Debtor anticipates a transaction with Texaco and its affiliate, TEPI. The
Financial Analysis assumes that the transaction with Texaco and its affiliate
will be consummated on or about the Effective Date.
The following is a summary of the financial impact of such transaction
reflected in the Financial Analysis in the sequence of events anticipated to
occur:
- DLB will acquire the Texaco Claim and WCBB Assets;
- DLB will transfer the WCBB Assets to New WRT in exchange for 5 million
shares of New WRT Common Stock;
- In satisfaction of the Allowed Texaco Claim of approximately $5.4 million,
DLB will elect to receive the number of shares of New WRT Common Stock
obtained by dividing such payment by a purchase price at $3.50 per share,
or approximately 1.5 million shares; and
- New WRT will plug and abandon a minimum of twenty (20) wells in the West
Cote Blanche Bay Field per year. The Financial Analysis includes $66,667
per month in charges to the full cost pool related to the plugging and
abandonment, commencing in July 1997.
4
<PAGE>
FINANCIAL REPORTING BY ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE
("SOP 90-7"). In accordance with SOP 90-7, the projected financial statements
reflect the application of "fresh-start" reporting. Under fresh-start reporting,
the reorganization value, or enterprise value, of the entity is allocated to the
entity's assets in conformity with the purchase method described in APB Opinion
16, "Business Combinations". The effects of fresh-start adjustments on assets
and liabilities and the effects of the discharge of liabilities subject to
compromise have been included in bankruptcy expenses and extraordinary gain,
respectively, in the New WRT's projected statement of operations for the
six-month period ending June 30, 1997. Upon the Effective Date, New WRT will
allocate the actual reorganization value to the entity's assets, and that
allocation may be significantly different from the estimated preliminary
allocation included in New WRT's reorganized balance sheet as of July 1, 1997.
Due to the utilization of a different basis of accounting, financial statements
for entities emerging from Chapter 11 are not comparable to financial statements
of predecessor operations.
CHANGE IN ACCOUNTING METHOD. The Debtor expects to change its method of
accounting for its oil and gas operations from the successful efforts method to
the full cost method on the Effective Date. Historical financial statements have
not been restated to reflect this change in method of accounting.
The audited and unaudited financial statements prior to the assumed Effective
Date of July 1, 1997, employ the successful efforts method of accounting for its
oil and gas operations. Under the successful efforts method, costs of productive
wells, development dry holes and productive leases are capitalized and amortized
on a unit-of-production basis over the life of the remaining reserves. The
Debtor's estimates of future dismantlement and abandonment costs are considered
in computing the aforementioned amortization. Exploration expenses, including
geological, geophysical and costs of carrying and retaining undeveloped
properties are charged to expense as incurred. Exploratory drilling costs are
initially capitalized but are charged to expense if and when the well is
determined to be unsuccessful.
Projected financial statements subsequent to the assumed Effective Date of
July 1, 1997, employ the full cost method of accounting for its oil and gas
operations. Under the full cost method, all costs associated with acquisition,
exploration and development of oil and gas properties are capitalized, including
nonproductive costs and certain general and administrative costs, and amortized
on a unit-of-production basis over the life of the remaining reserves. The
Debtor's estimates of future capital expenditures, dismantlement and abandonment
costs are considered in computing the aforementioned amortization.
5
<PAGE>
SIGNIFICANT ASSUMPTIONS
INCOME STATEMENT ASSUMPTIONS
PRICING. The markets for oil and gas have historically been, and will
continue to be, volatile. Prices for oil and gas may fluctuate in response to
relatively minor changes in supply and demand, market uncertainty and a variety
of factors beyond the control of Management. Set forth in the table below are
the average prices historically obtained by and assumed future prices to be
received by WRT during the periods indicated.
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended Year Ended
December 31, June 30, December 31, December 31,
------------------------------- --------- --------- -------------------------------
(Preliminary
(Historical) Actual) (Projected)
-------------------- --------- -----------------------------------------------------
1994 1995 1996 1997 1997 1998 1999 2000
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average prices:
Oil price (per Bbl) ......... $ 16.44 $ 16.59 $ 21.36 $ 20.83 $ 20.83 $ 20.83 $ 20.83 $ 20.83
Gas price (per Mcf) ......... $ 1.88 $ 1.59 $ 2.62 $ 2.04 $ 2.04 $ 2.04 $ 2.04 $ 2.04
Oil equivalents (per BOE) .. $ 12.92 $ 12.25 $ 18.54 $ 16.34 $ 18.25 $ 18.24 $ 18.55 $ 18.53
</TABLE>
The pricing assumptions utilized for determining future oil and gas revenues
have been made by Management with the advice of its Financial Advisor. Such
pricing assumptions consider that the prices received by New WRT for sale of its
oil and gas production will average $20.83 per Bbl and $2.04 per Mcf,
respectively, in the future periods shown. Fluctuations in the oil equivalents'
average price per BOE for these periods, as reflected in the table above,
fluctuate due to changes in the mix of oil and gas volumes sold. If future
prices differ, the level of reserves New WRT will be able to economically
produce will be affected. At December 31, 1996, the Debtor's average price
received for sale its of oil and gas production was approximately $25.93 per Bbl
and $3.99 per Mcf.
6
<PAGE>
The Debtor's revenues and cash flows are affected by changes in oil and gas
prices. Oil and gas prices are subject to substantial seasonal, political and
other fluctuations that Management is unable to control or accurately predict.
WRT historically has not entered into transactions to hedge against changes in
oil and gas prices or interest rates. The Financial Analysis does not assume
that New WRT will enter into any such transactions.
See also Section XII, "Material Uncertainties and Risk Factors" in the
Disclosure Statement for certain information regarding pricing.
PRODUCTION VOLUMES. Set forth in the following table are the actual
production volumes and projected production volumes during the periods
indicated.
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended Year Ended
December 31, June 30, December 31, December 31,
----------------------- ----- ----- -----------------------
(Preliminary
(Historical) Actual) (Projected) (1)
-------------- ----- -----------------------------------------
1994 1995 1996 1997 1997 1998 1999 2000
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Production volumes:
Oil (Mbbls) ........... 270 778 615 305 661 1,380 1,747 1,866
Gas (Mmcf) ............ 3,503 7,403 3,629 2,001 1,697 3,568 3,796 4,097
Oil equivalents (MBoe) 854 2,012 1,220 639 944 1,974 2,379 2,549
</TABLE>
(1) Includes volumes, subsequent to June 30, 1997, attributable to the purchase
of additional interest in the West Cote Blanche Bay Field, as described
above.
The decrease in historical gas production volumes from 1995 to 1996 was due
primarily to a decrease in gas production in the Lac Blanc Field, caused by a
premature unexpected influx of water into the gas wells in late 1995. The Debtor
was unable to reestablish production from these zones and this field has limited
recompletion opportunities. The decrease in oil production in 1996 is a result
of the naturally occurring decline in production in various wells' performance
over time.
7
<PAGE>
The Financial Analysis includes volumes produced for the projected periods
from oil and gas properties in which the Debtor owns an interest, including the
following fields:
Abbeville
Bayou Penchant
Bayou Pigeon
Deer Island
Golden Meadow
Lac Blanc
East Hackberry
Napoleonville
South Atchafalaya
Tigre Lagoon
West Hackberry
West Cote Blanche Bay (Includes volumes attributable to the
purchase of additional interest in
this field, as described above)
West Lake Pontchartrain
8
<PAGE>
Oil and gas volumes for the projected periods have been determined by WRT and
DLB and reviewed by independent reserve engineers, Netherland, Sewell &
Associates, Inc. ("NSAI"), as of January 1, 1997. The increased ownership
resulting from the acquisition of Texaco's interest in the West Cote Blanche Bay
Shallow Rights is also included in the future periods. Further projected volumes
include anticipated results of exploration activity utilizing anticipated
reserves at a cost between $6 and $7 per BOE. Revenues and operating costs are
assumed to occur during the month the capital expenditures are funded.
See "Capital Expenditures" below.
See also Section XII, "Material Uncertainties and Risk Factors" in the
Disclosure Statement for certain information regarding reserve estimates.
PRODUCTION COST. Historical production costs decreased $1 million, or 11%,
from $9.5 million, due primarily to cost control measures implemented by the
Debtor during 1996. Production costs per BOE increased 47% from $4.74 in 1995 to
$6.97 in 1996 primarily due to the significant decrease in production.
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended Year Ended
December 31, June 30, December 31, December 31,
----------------------- ----- ----- -----------------------
(Preliminary
(Historical) Actual) (Projected)
-------------- ----- -----------------------------------------
1994 1995 1996 1997 1997 1998 1999 2000
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average production cost
(per BOE) ........... $3.60 $4.74 $6.97 $4.87 $4.63 $4.61 $4.02 $3.92
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
Production costs used in the Financial Analysis, including lease operating
expenses, severance taxes and ad valorem taxes, have been obtained from the NSAI
reserve report, which is based on current production costs. Production costs
associated with the new exploration discoveries are based on the exploration
model, more fully described in "Capital Expenditures" below.
9
<PAGE>
DEPRECIATION, DEPLETION AND AMORTIZATION. The following table summarizes
depletion rates per BOE for the periods indicated.
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended Year Ended
December 31, June 30, December 31, December 31,
----------------------- ----- ----- -----------------------
(Preliminary
(Historical) Actual) (Projected)
-------------- ----- -----------------------------------------
1994 1995 1996 1997 1997 1998 1999 2000
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Depletion rate
(per BOE) . $3.32 $5.97 $5.64 $6.00 $9.64 $9.57 $9.33 $9.04
----- ----- ----- ----- ----- ----- ----- -----
</TABLE>
The increase in depletion rates commencing for the six months ended December
31, 1997, is due to the change in accounting method from the successful efforts
method of accounting for oil and gas properties to the full cost method, and the
difference in calculation of amortization under the two methods.
GENERAL AND ADMINISTRATIVE EXPENSE. Historical general and administrative
expenses decreased from $4.9 million in 1995 to $3 million in 1996. The monthly
general and administrative expenses from September 1996 through December 1996
have averaged approximately $250,000. General and administrative expenses
decreased overall as a result of the Debtor's focus on cost control and a
reduction in the Debtor's workforce from 76 in October 1995 to 29 in September
1996.
The Financial Analysis assumes general and administrative expenses prior to
the Effective Date to be $250,000 per month, net of drilling and producing
overhead, which is consistent with current general and administrative expense
level. General and administrative expenses subsequent to the Effective Date are
projected to be approximately $195,000 per month, net of an approximate 30%
capitalized to the full cost pool and overhead reimbursement from third parties.
10
<PAGE>
PROVISION FOR DOUBTFUL RECEIVABLES. During 1996, Tri-Deck Oil & Gas Company
("Tri-Deck"), by and through James Florence, its principal, marketed WRT's oil
and gas production, but failed to make payments to the Debtor attributable to
February through May 1996 gas production revenues. The Debtor rejected the
Tri-Deck oil and gas marketing contract. On May 29, 1996, the Debtor also
initiated an adversary proceeding against Tri-Deck to recover the unpaid
production proceeds and to otherwise enjoin any further disposition of such
proceeds pending a final judgment in the suit. In conjunction with the
proceeding, an amount of $1.5 million attributable to April and May 1996 gas
production revenues is held in the registry of the Bankruptcy Court, pending
release. Due to the uncertainty of collection of the remainder of the funds, the
Debtor has recorded an allowance for $2.9 million against the receivable. See
Section XI, "Existing and Potential Litigation" in the Disclosure Statement for
further details on the Tri-Deck Litigation.
RESTRUCTURING CHARGES. In 1995, Restructuring Charges included certain costs
the Debtor incurred in connection with its change in strategy and corporate
structure. These costs consisted primarily of the write-off of approximately $1
million in leasehold improvements related to the relocation of a majority of the
Debtor's operations from The Woodlands, Texas to Lafayette, Louisiana,
approximately $305,000 in severance costs related staff reductions and changes
in senior management.
REORGANIZATION EXPENSES. Reorganization Expenses of $3.1 million in 1996
include professional fees incurred during the course of the Chapter 11 Case. The
Financial Analysis includes projected expenses for the six-month period ending
June 30, 1997 as follows: (1) $1.5 million in professional fees expected to be
incurred, (2) charges of $2.9 million for Allowed Claims to increase the
estimate of net liabilities subject to compromise, and (3) a charge of $8.0
million for the write-down of long-term assets to estimate fair market value in
accordance with SOP 90-7.
EXTRAORDINARY ITEMS. Extraordinary Items consist of the gain on the discharge
of liabilities subject to compromise in accordance to the Plan. No current
income tax expense has been projected for the gain. See "Income Taxes" below and
Section IX, "Certain Federal Income Tax Consequences of the Plan" in the
Disclosure Statement.
11
<PAGE>
IMPLEMENTATION OF SFAS NO. 121. As discussed in Section IV, "Historical and
Background Information" in the Disclosure Statement, the Debtor's adoption of
SFAS No. 121, effective December 31, 1995, resulted in the recognition of an
impairment loss related to the Debtor's oil and gas properties and other
long-lived assets. The Debtor recorded a non-cash charge of $103.3 million, of
which approximately $95.4 million was impairment of oil and gas properties as a
result of significant downward revisions in the Debtor's proved oil and gas
reserves at December 31, 1995, and $7.9 million related to certain rig, marine
and field equipment owned or securing notes receivable.
MINIMUM PRODUCTION GUARANTEE. At December 31, 1996 and 1995, WRT recognized a
$2.8 million and a $3.6 million liability, respectively, related to its
obligation to Tricore Energy Venture, L.P. in accordance with a minimum
production guarantee contained within a joint venture agreement between WRT,
Tricore and Stagg Energy. The recognized liability reflects the Debtor's
anticipated ultimate obligation, at the time, of guaranteeing that Tricore will
receive certain minimum gas production, net of estimated production volumes and
gross revenues, including tax credits, allocable to Tricore under the agreement,
and based upon the Debtor's respective year-end estimates of proved oil and gas
reserves. See also Section XI "Existing and Potential Litigation" in the
Disclosure Statement.
INTEREST EXPENSE. Historical interest expense decreased $9.7 million, from
$13.8 million for the year ended December 1995, to $4.1 million for the
comparable period in 1996. This is primarily the result of the Debtor's
discontinuance of the accrual of interest on the unsecured 13 7/8% Senior Notes
after the Chapter 11 Filing on February 14, 1996. Interest expense for the year
ended December 31, 1995 included interest on borrowings under WRT's Credit
Facility, entered into in December 1994, and the Senior Notes, issued in March
1995. Interest expense for 1995 also included $803,000 of interest incurred and
the amortization of debt issuance costs related to the $7.5 million bridge loan
executed in February 1995 in conjunction with the purchase of the Initial LLOG
Property, which was repaid by WRT in March 1995.
The Financial Analysis includes interest expense in accordance with the terms
of New WRT's note payable to ING, discussed below and in Section VI, "Summary of
the Claims, Classifications and Treatment Under the Plan" in the Disclosure
Statement.
12
<PAGE>
OTHER INCOME. In 1996, Other Income includes interest earned on available
cash balance at an average annual rate of 4%. Also, on September 10, 1996, the
Bankruptcy Court approved a motion regarding a litigation settlement with Bear,
Stearns & Co. Inc., on behalf of WRT and others. The proceeds of this litigation
settlement have since been distributed accordingly, including approximately
$152,000 which was received by WRT in 1996 and recorded in Other Income.
The Financial Analysis assumes interest income to consist of interest earned
on available cash balance at an annual rate of 4%, which rate is consistent with
current interest income earned.
INCOME TAXES. The Financial Analysis assumes, prior to the Effective Date,
that any current taxable income will be offset by the Debtor's net operating
loss carryovers resulting in no income tax expense.
This Financial Analysis assumes that the Debtor will realize $85 million of
debt forgiveness income, created by the satisfaction of debentures and trade
claims with stock having an estimated fair market value less than the face
amount of the obligations. The debt forgiveness income will offset the Debtor's
existing net operating loss carryovers, and the balance of the debt forgiveness
income will be applied to reduce tax basis of its assets. See Section IX,
"Certain Federal Income Tax Consequences of the Plan" in the Disclosure
Statement. The Financial Analysis assumes that subsequent to this application,
New WRT will have a basis in its assets for tax reporting purposes substantially
in excess of the basis in its assets for financial reporting purposes. The
difference in depletion for tax and financial reporting purposes will be
sufficient to offset current income tax liabilities. The Financial Analysis
assumes deferred tax expense to be recognized during the periods in which income
for financial reporting purposes is offset by excess tax depletion, with the
offset recorded as additional paid-in capital. Deferred income taxes are assumed
to equal 40% of income for financial reporting purposes.
DIVIDENDS ON PREFERRED STOCK. The Debtor was precluded under the terms of the
Senior Note Indenture and Credit Facility from declaring any dividends during
1996. As a result, the Debtor did not accrue dividends payable on its preferred
stock during 1996.
13
<PAGE>
BALANCE SHEET ASSUMPTIONS
CASH. See footnotes to Fresh Start Balance Sheet for explanation of
adjustments to cash.
CASH HELD IN ESCROW. These Financial Analysis assumes cash held in escrow in
amount of $1,543,000. This amount represents the Debtor's April and May 1996 gas
production revenues that are currently held in the registry of the Bankruptcy
Court pending release in connection with the Tri-Deck Litigation. See Section V,
"Significant Events During the Chapter 11 Case" in the Disclosure Statement.
ACCOUNTS RECEIVABLE. The Financial Analysis assumes accounts receivable
includes two month's worth of gas sales, one month's worth of oil sales and
monthly joint interest billing receivables of $250,000. Projected accounts
receivable also include an $800,000 balance at June 30, 1997, due from a net
profits interest owner, which is projected to be reduced by its share of net
revenues estimated at $50,000 per month.
CAPITAL EXPENDITURES. Historical and projected exploration and development
costs are as follows: Six Months Six Months
<TABLE>
<CAPTION>
Six Months Six Months
Year Ended Ended Ended Year Ended
December 31, June 30, December 31, December 31,
-------------------------------- -------------------- --------------------------------
(Preliminary
(Historical) Actual) (Projected)
-------------------- -------- --------------------------------------------------------
1994 1995 1996 1997 1997 1998 1999 2000
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquisition (1) $ 42,042 $ 88,996 $ -- $ 15,000 $ -- $ -- $ -- $ --
Exploration ... -- -- -- -- 11,385 7,195 16,330 19,030
Development ... 21,216 27,225 4,117 5,691 6,211 11,185 9,615 8,875
-------- -------- -------- -------- -------- -------- -------- --------
$ 63,258 $116,221 $ 4,117 $ 20,691 $ 17,596 $ 18,380 $ 25,945 $ 27,905
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
(1) Includes acquisitions in which WRT purchased oil and gas properties with
common stock.
14
<PAGE>
Capital expenditures used in the Financial Analysis are based upon
Management's planned expenditures, and have been reviewed by NSAI and included
in the NSAI reserve report as of January 1, 1997. The planned expenditures
include an increase to those in the NSAI reserve report for the additional
ownership resulting from the acquisition of Texaco's interest in the West Cote
Blanche Bay Shallow Rights. Also capitalized to the full cost pool is an amount
of approximately $66,667 per month, commencing in July 1997, for plugging and
abandonment of a minimum of 20 wells per year in the West Cote Blanche Bay
Field, as discussed in the description of the Texaco Transaction above. This
Financial Analysis also assumes that New WRT will make additional capital
expenditures for the amount of cash flows in excess of a $1.5 million cash
balance. These additional capital expenditures are based on an exploration
program model, prepared by the Debtor's and DLB's engineering departments, to
develop new oil and gas reserves. This exploration program assumes a finding
cost between $6 and $7 per BOE. Lease operating expenses, severance taxes and ad
valorem taxes have been increased proportionately for each new volume added as a
result of the exploration program. The Financial Analysis assumes that no
exploration capital expenditures will be made prior to the assumed Effective
Date of July 1, 1997. The assumed exploration and development investment for the
six months ended December 31, 1997, is $17.6 million.
Historically WRT has not explored for oil and gas, however the near term
forecast of product prices, increased revenue as a result of the acquisition of
Texaco's ownership in the West Cote Blanche Bay Shallow Rights, make it possible
for New WRT to pursue such opportunities. To this end, New WRT will actively
invest in third party exploration drilling opportunities, exploration prospects
developed on acreage not currently owned and prospects to be generated from the
application of three-dimensional seismic activities.
During the pendency of the Chapter 11 Case, the Debtor's use of funds
qualifying as "cash collateral" (under the Bankruptcy Code) has been subject to
certain limitations imposed by the Bankruptcy Code. The Bankruptcy Court has
entered an order permitting the Debtor to use cash collateral, including without
limitation the revenues received by the Debtor from the sale of oil and gas
production in accordance with four week budgets consented to by INCC and the
Unsecured Creditors' Committee. Cash collateral may not be used for any
expenditures not provided for in the budget and consented to by INCC and the
Unsecured Creditors' Committee in the absence of approval by the Bankruptcy
Court.
15
<PAGE>
ACCOUNTS PAYABLE. Prior to the Effective Date, accounts payable are projected
to equal two months' worth of lease operating expenses, one month's worth of
capital expenditures and one month's worth of general and administrative cost,
less projected salaries. Subsequent to the Effective Date, accounts payable are
projected to include, in addition to the payables described in the preceding
sentence, an additional $3 million in payables based on favorable terms received
from creditors.
INTERNATIONAL NEDERLANDEN (U.S.) CAPITAL CORPORATION NOTE PAYABLE. The
Financial Analysis assumes that INCC's Allowed Secured Claim in the approximate
amount of $17.7 million will be satisfied by a cash payment in full on the
Effective Date. This Allowed Secured Claim consists of $15 million of principal
outstanding, approximately $2.3 million of accrued interest through the
Effective Date, and approximately $400,000 of expenses. The Financial Analysis
also assumes that New WRT will enter into a term loan with ING of a principal
amount of $15 million which will: (i) mature two (2) years after the Effective
Date, (ii) require three (3) $1 million installments of principal to be paid at
the end of September 1998, December 1998 and March 1999, respectively, (iii)
bear interest at either LIBOR plus three percent (3%) or ING's fluctuating
"reference rate" plus 1.25%, at the option of New WRT, (iv) be secured by a
first lien covering substantially all of New WRT's Assets, and (v) bank fees of
approximately $387,500, of which $187,500 will be paid at the Effective Date,
$100,000 will be paid on December 31, 1997 and $100,000 will be paid on December
31, 1998. These fees are amortized straight line over the term of the note.
These Financial Analysis assumes the note payable to ING will be renewed with
this or another financial institution upon maturity. This renewed indebtedness
is assumed to bear interest at an annual rate of LIBOR plus 1.25%.
MORGAN CITY BANK & TRUST COMPANY NOTE PAYABLE. The Financial Analysis assumes
that New WRT will continue to make monthly payments on its pre-petition real
estate note payable to Morgan City Bank & Trust Company in accordance with the
terms of the note. The terms of the note include an annual interest rate of 9
1/4% and monthly principal and interest payments through February 2006. The
outstanding principal balance is projected to be $196,000 at June 30, 1997.
16
<PAGE>
COMMON STOCK. The Financial Analysis assumes New WRT will issue ten million
(10,000,000) shares of New WRT Common Stock to the holders of Allowed General
Unsecured Claims greater than $2,500. The Financial Analysis also assumes New
WRT will issue three million (3,000,000) additional shares of New WRT Common
Stock for use in a Rights Offering. See Section VI in the Disclosure Statement
for a discussion of the Rights Offering. The stock to be issued pursuant to
exercise of these rights will be sold at $3.50 per share.
As discussed in Section VI in the Disclosure Statement, each holder of an
Allowed Secured Claim in Classes C-1 through C-10 and Classes C-12 through C-16
may elect to receive, in lieu of its cash payment, the number of shares of New
WRT Common Stock obtained by dividing the amount of such cash payment by a
purchase price of $3.50 per share. This Financial Analysis assumes that DLB and
its affiliates will elect to receive New WRT Common Stock in lieu of cash
payment, in satisfaction of the Allowed Secured Claims held. All other holders
of Allowed Secured Claims are assumed to receive cash payments as satisfaction.
This Financial Analysis assumes that DLB will acquire an additional interest
in the West Cote Blanche Bay Field from Texaco and TEPI. These properties will
be contributed to New WRT in exchange for five million (5,000,000) additional
shares of New WRT Common Stock. See "Texaco Transaction" discussion above.
CONTINGENCIES. The Financial Analysis does not assume any recoveries that may
result from potential litigation on avoidance actions taken by New WRT due to
the uncertainties involved in the litigation. If positive recoveries are
obtained by New WRT, however, they will have a beneficial effect on New WRT's
future financial condition and could result in material variations in the
Financial Analysis. New WRT intends to vigorously pursue preference, fraudulent
transfer and other actions which could yield additional value to New WRT. See
Section XI, "Existing and Potential Litigation" in the Disclosure Statement.
17
<PAGE>
WRT ENERGY CORPORATION
STATEMENT OF OPERATIONS
FOR PERIODS ENDING IN 1994 THROUGH 2000
<TABLE>
<CAPTION>
For the
six months
----------------------------------------------- -------------
(1) (1) (2) Ended June 30,
1994 1995 1996 1997
(Preliminary) (Pro Forma)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales ..................... $ 11,034,000 $ 24,655,000 $ 22,624,000 $ 10,434,915
------------- ------------- ------------- -------------
EXPENSES:
Production cost ....................... 3,077,000 9,534,000 8,503,000 3,110,600
Gross production taxes ................ 811,000 2,139,000 1,740,000 974,118
Field operations costs ................ -- -- -- --
Depreciation and depletion expense .... 3,201,000 12,645,000 7,684,000 4,830,870
General and administrative expense .... 3,038,000 4,882,000 2,966,000 1,500,000
Provision for doubtful receivables .... -- 2,007,000 2,852,000 --
Restructuring charges ................. -- 1,433,000 -- --
Minimum production guarantee obligation -- 3,591,000 2,819,000 --
Impairment of long-lived assets ....... -- 103,266,000 -- --
------------- ------------- ------------- -------------
10,127,000 139,497,000 26,564,000 10,415,588
------------- ------------- ------------- -------------
NET INCOME (LOSS) FROM OPERATIONS ........ 907,000 (114,842,000) (3,940,000) 19,327
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense ...................... (19,000) (13,759,000) (4,133,000) (727,412)
Gain on sale of oil and gas properties 3,033,000 -- -- --
Other income, net ..................... 344,000 426,000 356,000 175,083
------------- ------------- ------------- -------------
3,358,000 (13,333,000) (3,777,000) (552,329)
------------- ------------- ------------- -------------
REORGANIZATION EXPENSES .................. -- -- 3,095,000 12,415,175
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE INCOME TAXES .... 4,265,000 (128,175,000) (10,812,000) (12,948,177)
------------- ------------- ------------- -------------
PROVISION FOR (BENEFIT FROM) INCOME TAXES: (36,000) -- -- --
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE DIVIDENDS ON
PREFERRED STOCK ....................... 4,229,000 (128,175,000) (10,812,000) (12,948,177)
DIVIDENDS ON PREFERRED STOCK ............. (2,846,000) (2,846,000) -- --
------------- ------------- ------------- -------------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCK .......................... 1,383,000 (131,021,000) (10,812,000) (12,948,177)
------------- ------------- ------------- -------------
EXTRAORDINARY GAINS (LOSSES)
Debt foregiveness income .............. -- -- -- 85,150,157
------------- ------------- ------------- -------------
NET INCOME (LOSS) ........................ $ 1,383,000 $(131,021,000) $ (10,812,000) $ 72,201,980
============= ============= ============= =============
PER COMMON SHARE:
Earnings (Loss) per Common and Common
Equivalent Share ................... $ 0.18 $ (13.84) $ (1.13) $ 7.57
============= ============= ============= =============
Average Common and Common Equivalent
Shares Outstanding ................. 7,792,000 9,466,000 9,570,400 9,539,100
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
For the
six months For the year ended December 31,
------------- -----------------------------------------------
Ended Dec 31,
1997 1998 1999 2000
(Pro Forma) (Pro Forma) (Pro Forma) (Pro Forma)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales ..................... $ 17,225,071 $ 39,125,206 $ 44,130,412 $ 47,221,696
------------- ------------- ------------- -------------
EXPENSES:
Production cost ....................... 4,372,336 9,103,749 9,577,047 9,984,112
Gross production taxes ................ 1,873,105 4,278,980 4,890,001 5,226,709
Field operations costs ................ -- -- -- --
Depreciation and depletion expense .... 9,285,527 20,969,032 22,237,878 23,059,784
General and administrative expense .... 1,170,000 2,340,000 2,340,000 2,340,000
Provision for doubtful receivables .... -- -- -- --
Restructuring charges ................. -- -- -- --
Minimum production guarantee obligation -- -- -- --
Impairment of long-lived assets ....... -- -- -- --
------------- ------------- ------------- -------------
16,700,968 36,691,761 39,044,926 40,610,605
------------- ------------- ------------- -------------
NET INCOME (LOSS) FROM OPERATIONS ........ 524,103 2,433,445 5,085,486 6,611,091
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense ...................... (743,593) (1,442,552) (1,063,699) (853,786)
Gain on sale of oil and gas properties -- -- -- --
Other income, net ..................... 67,370 84,467 61,917 61,446
------------- ------------- ------------- -------------
(676,223) (1,358,085) (1,001,782) (792,340)
------------- ------------- ------------- -------------
REORGANIZATION EXPENSES .................. -- -- -- --
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE INCOME TAXES .... (152,120) 1,075,360 4,083,704 5,818,750
------------- ------------- ------------- -------------
PROVISION FOR (BENEFIT FROM) INCOME TAXES: (60,848) 430,145 1,633,482 2,327,500
------------- ------------- ------------- -------------
NET INCOME (LOSS) BEFORE DIVIDENDS ON
PREFERRED STOCK ....................... (91,272) 645,215 2,450,222 3,491,250
DIVIDENDS ON PREFERRED STOCK ............. -- -- -- --
------------- ------------- ------------- -------------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCK .......................... (91,272) 645,215 2,450,222 3,491,250
------------- ------------- ------------- -------------
EXTRAORDINARY GAINS (LOSSES)
Debt foregiveness income .............. -- -- -- --
------------- ------------- ------------- -------------
NET INCOME (LOSS) ........................ $ (91,272) $ 645,215 $ 2,450,222 $ 3,491,250
============= ============= ============= =============
PER COMMON SHARE:
Earnings (Loss) per Common and Common
Equivalent Share ................... $ (0.01) $ 0.07 $ 0.26 $ 0.36
============= ============= ============= =============
Average Common and Common Equivalent
Shares Outstanding ................. 20,388,400 20,388,400 20,388,400 20,388,400
============= ============= ============= =============
</TABLE>
18
<PAGE>
WRT ENERGY CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
(1) (1) (2)
December 31, December 31, December 31,
1994 1995 1996 June 30, 1997
(Actual) (Actual) (Preliminary) (Pro Forma)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....... $ 9,188,000 $ 1,608,000 $ 5,671,000 $ 10,383,261
Cash held in escrow ............. -- -- 1,534,000 1,534,000
Accounts receivable - net ....... 6,425,000 7,139,000 5,404,000 3,596,828
Notes receivable ................ 488,000 -- -- --
Prepaid expenses ................ 492,000 768,000 635,000 635,000
------------- ------------- ------------- -------------
Total current assets ......... 16,593,000 9,515,000 13,244,000 16,149,089
------------- ------------- ------------- -------------
PROPERTY AND EQUIPMENT, net ....... 59,042,000 63,913,000 60,915,000 62,231,230
------------- ------------- ------------- -------------
OTHER ASSETS:
Notes and other long term
receivables ................... 5,585,000 -- -- --
Cash held in escrow ............. 490,000 710,000 831,000 831,000
Debt Issuance costs ............. 147,000 5,109,000 4,201,000 3,745,000
------------- ------------- ------------- -------------
6,222,000 5,819,000 5,032,000 4,576,000
------------- ------------- ------------- -------------
$ 81,857,000 $ 79,247,000 $ 79,191,000 $ 82,956,319
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities ........... $ 9,313,000 $ 23,576,000 $ 20,896,000 $ 26,701,600
Unsecured pre petition debts .... -- 117,540,000 115,294,000 115,294,000
Current portion of long-term debt 979,000 -- 15,203,000 15,195,721
------------- ------------- ------------- -------------
10,292,000 141,116,000 151,393,000 157,191,321
------------- ------------- ------------- -------------
LONG-TERM DEBT ..................... 6,260,000 -- -- --
------------- ------------- ------------- -------------
DEFERRED CREDIT .................... 1,766,000 -- -- --
------------- ------------- ------------- -------------
COMMON STOCK SUBJECT TO REPURCHASE . -- -- -- --
------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock (old) ........... 27,677,000 27,677,000 27,677,000 27,677,000
Common stock (old) .............. 90,000 95,000 95,000 95,000
Common stock (new) .............. -- -- -- --
Paid-in capital (new) ........... -- -- -- --
Paid-in capital ................. 38,517,000 38,866,000 39,344,000 39,344,000
Retained Earnings (deficit) ..... -- (128,175,000) (138,986,000) (141,019,002)
Deferred compensation ........... (2,430,000) -- -- --
Treasury stock .................. (315,000) (332,000) (332,000) (332,000)
------------- ------------- ------------- -------------
63,539,000 (61,869,000) (72,202,000) (74,235,002)
------------- ------------- ------------- -------------
$ 81,857,000 $ 79,247,000 $ 79,191,000 $ 82,956,319
</TABLE>
<TABLE>
<CAPTION>
ASSETS
Effective
Date December 31, December 31, December 31, December 31,
July 1, 1997 1997 1998 1999 2000
(Pro Forma) (Pro Forma) (Pro Forma) (Pro Forma) (Pro Forma)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....... $ 12,612,669 $ 2,351,482 $ 1,592,469 $ 1,547,918 $ 1,536,139
Cash held in escrow ............. 1,534,000 1,534,000 1,534,000 1,534,000 1,534,000
Accounts receivable - net ....... 3,596,828 4,285,816 4,188,861 4,572,813 4,881,629
Notes receivable ................ -- -- -- -- --
Prepaid expenses ................ 635,000 504,000 504,000 504,000 504,000
------------- ------------- ------------- ------------- -------------
Total current assets ......... 18,378,497 8,675,298 7,819,330 8,158,731 8,455,768
------------- ------------- ------------- ------------- -------------
PROPERTY AND EQUIPMENT, net ....... 72,943,000 81,653,673 79,864,641 84,371,463 90,016,679
------------- ------------- ------------- ------------- -------------
OTHER ASSETS:
Notes and other long term
receivables ................... -- -- -- -- --
Cash held in escrow ............. 831,000 831,000 831,000 831,000 831,000
Debt Issuance costs ............. 387,500 290,625 96,875 -- --
------------- ------------- ------------- ------------- -------------
1,218,500 1,121,625 927,875 831,000 831,000
------------- ------------- ------------- ------------- -------------
$ 92,539,997 $ 91,450,596 $ 88,611,846 $ 93,361,194 $ 99,303,447
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable and
accrued liabilities ........... $ 9,339,600 $ 8,409,799 $ 6,511,928 $ 8,195,40 $ 8,338,520
Unsecured pre petition debts .... -- -- -- -- --
Current portion of long-term debt 15,195,721 15,188,240 13,172,002 12,154,174 12,134,557
------------- ------------- ------------- ------------- -------------
24,535,321 23,598,039 19,683,930 20,349,574 20,473,077
------------- ------------- ------------- ------------- -------------
LONG-TERM DEBT ..................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
DEFERRED CREDIT .................... -- -- -- -- --
------------- ------------- ------------- ------------- -------------
COMMON STOCK SUBJECT TO REPURCHASE . -- -- -- -- --
------------- ------------- ------------- ------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock (old) ........... -- -- -- -- --
Common stock (old) .............. 203,885 203,885 203,885 203,885 203,885
Common stock (new) .............. -- -- -- -- --
Paid-in capital (new) ........... -- -- -- -- --
Paid-in capital ................. 67,800,791 67,739,943 68,170,088 69,803,570 72,131,070
Retained Earnings (deficit) ..... -- (91,272) 553,943 3,004,165 6,495,415
Deferred compensation ........... -- -- -- -- --
Treasury stock .................. -- -- -- -- --
------------- ------------- ------------- ------------- -------------
68,004,676 67,852,556 68,927,916 73,011,620 78,830,370
------------- ------------- ------------- ------------- -------------
$ 92,539,997 $ 91,450,595 $ 88,611,846 $ 93,361,194 $ 99,303,447
</TABLE>
(1) Audited Financial Statements
(2) Unaudited Financial Statements
19
<PAGE>
WRT ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
FOR PERIODS ENDING IN 1994 THROUGH 2000
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
ENDED JUNE 30,
(1) (1) (2) --------------
1994 1995 1996 1997
(Actual) (Actual) (Pro Forma) (Pro Forma)
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) before dividends ........................ $ 4,229,000 $(128,175,000) $(10,812,000) $ 72,201,980
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation, depletion, and amortization ............ 3,471,000 13,674,000 8,593,000 4,830,870
Provision for doubtful accounts and notes receivable . -- 2,007,000 2,852,000 --
Deferred income taxes ................................ -- -- -- --
Impairment of long-lived assets ...................... -- 103,266,000 -- 8,033,250
Write-off of leasehold improvements .................. -- 946,000 -- --
Extraordinary gain.................................... -- -- -- (85,150,157)
Gain on sale of oil and gas proverties ............... (3,033,000) (3,000) -- --
Loss on conversion of notes payable .................. -- --
Other ................................................ -- -- -- --
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable .......... (3,553,000) (2,249,000) (2,651,000) 1,807,172
(Increase) Decrease in prepaid expenses ............. (406,000) (349,000) 133,000 (187,500)
Increase (Decrease) in accounts payable .............. 4,207,000 13,551,000 8,070,000 604,433
Increase (Decrease) in minimum production
guarantee obligation .............................. -- 3,591,000 2,819,000 --
------------ ------------- ------------ ------------
Net cash provided by operating activities ................. 4,915,000 6,259,000 9,004,000 2,140,048
------------ ------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in notes and other receivables ........ 333,000 69,000 -- --
Additions to cash held in escrow .......................... (240,000) (220,000) (121,000) --
Additions to property and equipment ....................... (40,087,000) (116,730,000) (4,686,000) (5,691,100)
Proceeds from sale of oil and gas properties .............. 11,765,000 390,000 -- --
------------ ------------- ------------ ------------
Net cash (used in) investing activities ................... (28,229,000) (116,491,000) (4,807,000) (5,691,100)
------------ ------------- ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings .................................. 7,000,000 127,742,000 -- 15,000,000
Debt issuance costs ....................................... -- (5,722,000) -- --
Principal payments on borrowings .......................... (206,000) (19,603,000) (134,000) (15,007,279)
Purchase of treasury stock ................................ (1,569,000) (17,000) -- --
Proceeds from option and warrant exercises ................ 3,840,000 2,507,000 -- 10,500,000
Common stock filing fees .................................. -- (120,000) -- --
Dividends on preferred stock .............................. (2,135,000) (2,135,000) -- --
------------ ------------- ------------ ------------
Net cash provided by financing activities ................. 6,930,000 102,652,000 (134,000) 10,492,721
------------ ------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH .............................. (16,384,000) (7,580,000) 4,063,000 6,941,669
------------ ------------- ------------ ------------
CASH, BEGINNING OF PERIOD .................................... 25,572,000 9,188,000 1,608,000 5,671,000
------------ ------------- ------------ ------------
CASH, END OF PERIOD .......................................... $ 9,188,000 $ 1,608,000 $ 5,671,000 $ 12,612,669
============ ============= ============ ============
</TABLE>
(Table continued on next page)
WRT ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
FOR PERIODS ENDING IN 1994 THROUGH 2000 (Continued)
<TABLE>
<CAPTION>
For the six months For the year ended December 31,
Ended Dec. 31, ----------------------------------------------------
1997 1998 1999 2000
(Pro forma) (Pro forma) (Pro forma) (Pro forma)
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) before dividends ............ $ (91,272) $ 645,215 $ 2,450,222 $ 3,491,250
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation, depletion, and
amortization ........................... 9,285,527 20,969,032 22,237,878 23,059,784
Provision for doubtful accounts
and notes receivable ................... -- -- -- --
Deferred income taxes .................... (60,848) 430,145 1,633,482 2,327,500
Impairment of long-lived assets........... -- -- -- --
Write-off of leasehold improvements....... -- -- -- --
Extraordinary gain........................ -- -- -- --
Gain on sale of oil and gas proverties.... -- -- -- --
Loss on conversion of notes payable....... -- -- -- --
Other..................................... -- -- -- --
Changes in operating assets and liabilities:
(Increase) Decrease in accounts
receivable ............................. (688,988) 96,955 (383,952) (308,816)
(Increase) Decrease in prepaid
expenses ............................... 227,875 193,750 96,875 --
Increase (Decrease) in accounts
payable ................................ (929,801) (1,897,871) 1,683,472 143,120
Increase (Decrease) in minimum production
guarantee obligation................... -- -- -- --
----------------- ---------------- ---------------- ----------------
Net cash provided by operating activities ..... 7,742,494 20,437,226 27,717,977 28,712,838
----------------- ---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in notes
and other receivables........................ -- -- -- --
Additions to cash held in escrow
Additions to property and equipment ........... (17,996,200) (19,180,000) (26,744,700) (28,705,000)
Proceeds from sale of oil and
gas properties............................... -- -- -- --
----------------- ---------------- ---------------- ----------------
Net cash (used in) investing activities ....... (17,996,200) (19,180,000) (26,744,700) (28,705,000)
----------------- ---------------- ---------------- ----------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from borrowings....................... -- -- -- --
Debt issuance costs
Principal payments on borrowings .............. (7,481) (2,016,238) (1,017,828) (19,617)
Purchase of treasury stock..................... -- -- -- --
Proceeds from option and warrant
exercises.................................... -- -- -- --
Common stock filing fees....................... -- -- -- --
Dividends on preferred stock................... -- -- -- --
Net cash provided by financing
activities .................................. (7,481) (2,016,238) (1,017,828) (19,617)
----------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN CASH .................. (10,261,187) (759,012) (44,551) (11,779)
----------------- ---------------- ---------------- ----------------
CASH, BEGINNING OF PERIOD ........................ 12,612,669 2,351,482 1,592,469 1,547,918
----------------- ---------------- ---------------- ----------------
CASH, END OF PERIOD .............................. $ 2,351,482 $ 1,592,469 $ 1,547,918 $ 1,536,139
================= ================ ================ ================
</TABLE>
(1) Audited Financial Statements
(2) Unaudited Financial Statements
20
<PAGE>
WRT ENERGY CORPORATION
PRO FORMA BALANCE SHEET
AT JUNE 30, 1997
<TABLE>
<CAPTION>
(3)
(1) (2) Exchange of
Balance at Reorganization Cancellation of stock for
June 30, 1997 Value Adjustments Pre-petition stock WCBB Asset
------------ ----------------- ------------------ -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............................. 11,917,261 -- -- --
Accounts receivable-trade .............................. 3,596,828 -- -- --
Prepaid Expenses and other ............................. 635,000 -- -- --
------------ ------------ ----------- ----------
Total Current Assets ............................... 16,149,089 -- -- --
PROPERTY AND EQUIPMENT
Oil and gas properties-Using full cost
accounting-
Properties being amortized .......................... 84,646,100 (34,646,100) -- 15,000,000
Properties not subject to amortization .............. -- 5,000,000 -- --
Non oil and gas properties ............................. 6,436,000 (3,493,000) -- --
Accumulated depletion-oil and gas properties ........... (26,985,362) 26,985,362 --
Accumulated depreciation, depletion and
amortization-other .................................. (1,865,508) 1,865,508 -- --
------------ ------------ ----------- ----------
62,231,230 (4,288,230) -- 15,000,000
OTHER ASSETS:
Debt issuance costs, net of amortization ............... 3,745,000 (3,745,000) -- --
Cash held in escrow .................................... 831,000 -- -- --
------------ ------------ ----------- ----------
82,956,319 (8,033,230) -- 15,000,000
============ ============ =========== ==========
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Liabilities not subject to compromise
Administrative expenses ............................. 6,249,000 -- -- --
Pre petition priority debt .......................... 1,292,000 --
Post petition accounts payable ...................... 7,847,600 -- -- --
Notes payable ....................................... 15,195,721 -- -- --
Liabilities subject to compromise
Oil and gas lien claims ............................. 10,793,000 -- -- --
Pre-petition other .................................. 102,000 -- -- --
Convenience claims .................................. 418,000 -- -- --
Unsecured debt ...................................... 115,294,000 2,881,925 -- --
------------ ------------ ----------- ----------
157,191,321 2,881,925 -- --
STOCKHOLDERS' EQUITY
Preferred stock (old) .................................. 27,677,000 -- (27,677,000) --
Common stock (old) ..................................... 95,000 -- (95,000) --
Additional paid in capital (old) ....................... 39,344,000 -- (39,344,000) --
Treasury stock (old) ................................... (332,000) -- 332,000 --
Common stock (New WRT) ................................. -- -- -- 50,000
Additional paid in capital (New WRT) ................... -- -- -- 14,950,000
Retained earnings ...................................... (141,019,002) (10,915,155) 66,784,000 --
------------ ------------ ----------- ----------
(74,235,002) (10,915,155) -- 15,000,000
------------ ------------ ----------- ----------
82,956,319 (8,033,230) -- 15,000,000
============ ============ =========== ==========
</TABLE>
WRT ENERGY CORPORATION
PRO FORMA BALANCE SHEET (Continued)
AT JUNE 30, 1997
<TABLE>
<CAPTION>
(4) (5) (6) (7)
Payoff of Proceeds Proceeds from Discharge of
INCC note from ING rights priority and
payable note payable offering secured debt
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents .............................. (17,736,000) 14,812,500 10,500,000 (1,539,567)
Accounts receivable-trade .............................. -- -- -- --
Prepaid Expenses and other ............................. -- -- -- --
Total Current Assets ............................... (17,736,000) 14,812,500 10,500,000 (1,539,567)
----------- ----------- ----------- -----------
PROPERTY AND EQUIPMENT
Oil and gas properties-Using full cost
accounting-
Properties being amortized .......................... -- -- -- --
Properties not subject to amortization .............. -- -- -- --
Non oil and gas properties ............................. -- -- -- --
Accumulated depletion-oil and gas properties
Accumulated depreciation, depletion and
amortization-other .................................. -- -- -- --
----------- ----------- ----------- -----------
OTHER ASSETS:
Debt issuance costs, net of amortization ............... -- 387,500 -- --
Cash held in escrow .................................... -- -- -- --
----------- ----------- ----------- -----------
(17,736,000) 15,200,000 10,500,000 (1,539,567)
=========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Liabilities not subject to compromise
Administrative expenses ............................. (2,736,000) -- -- --
Pre petition priority debt
Post petition accounts payable ...................... -- 200,000 -- --
Notes payable ....................................... (15,000,000) 15,000,000 -- --
Liabilities subject to compromise
Oil and gas lien claims ............................. -- -- -- (10,793,000)
Pre-petition other .................................. -- -- -- --
Convenience claims .................................. -- -- -- --
Unsecured debt ...................................... -- -- -- 893,696
(17,736,000) 15,200,000 -- (9,899,304)
STOCKHOLDERS' EQUITY
Preferred stock (old) .................................. -- -- -- --
Common stock (old) ..................................... -- -- -- --
Additional paid in capital (old) ....................... -- -- -- --
Treasury stock (old) ................................... -- -- -- --
Common stock (New WRT) ................................. -- -- 30,000 23,885
Additional paid in capital (New WRT) ................... -- -- 10,470,000 8,335,852
Retained earnings ...................................... -- -- -- --
----------- ----------- ----------- -----------
-- -- 10,500,000 8,359,737
----------- ----------- ----------- -----------
(17,736,000) 15,200,000 10,500,000 (1,539,567)
=========== =========== =========== ===========
</TABLE>
WRT ENERGY CORPORATION
PRO FORMA BALANCE SHEET (Continued)
AT JUNE 30, 1997
<TABLE>
<CAPTION>
(8) (9)
Payment of Discharge of Reorganized
administrative unsecured balance
post-petition claims debt sheet
-------------------- ------------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....................................... (3,513,000) (294,525) 14,146,669
Accounts receivable-trade ....................................... -- -- 3,596,828
Prepaid Expenses and other ...................................... -- -- 635,000
------------ ------------ ----------
Total Current Assets ........................................ (3,513,000) (294,525) 18,378,497
PROPERTY AND EQUIPMENT
Oil and gas properties-Using full cost
accounting-
Properties being amortized ................................... -- -- 65,000,000
Properties not subject to amortization ....................... -- -- 5,000,000
Non oil and gas properties ...................................... -- -- 2,943,000
Accumulated depletion-oil and gas properties
Accumulated depreciation, depletion and
amortization-other ........................................... -- -- --
------------ ------------ ----------
-- -- 72,943,000
OTHER ASSETS:
Debt issuance costs, net of amortization ........................ -- -- 387,500
Cash held in escrow ............................................. -- -- 831,000
------------ ------------ ----------
(3,513,000) (294,525) 92,539,997
============ ============ ==========
LIABILITIES AND STOCKHOLDERS EQUITY
LIABILITIES
Liabilities not subject to compromise
Administrative expenses ...................................... (3,513,000) -- --
Pre petition priority debt ................................... -- -- 1,292,000
Post petition accounts payable ............................... -- -- 8,047,600
Notes payable ................................................ -- -- 15,195,721
Liabilities subject to compromise
Oil and gas lien claims ...................................... --
Pre-petition other ........................................... -- (102,000) --
Convenience claims ........................................... -- (418,000) --
Unsecured debt ............................................... -- (119,069,621) --
------------ ------------ ----------
(3,513,000) (119,589,621) 24,535,321
STOCKHOLDERS' EQUITY
Preferred stock (old) ........................................... -- -- --
Common stock (old) .............................................. -- -- --
Additional paid in capital (old) ................................ -- -- --
Treasury stock (old) ............................................ -- -- --
Common stock (New WRT) .......................................... -- 100,000 203,885
Additional paid in capital (New WRT) ............................ -- 34,044,939 67,800,791
Retained earnings ............................................... -- 85,150,157 --
------------ ------------ ----------
-- 119,295,096 68,004,676
------------ ------------ ----------
(3,513,000) (294,525) 92,539,997
============ ============ ==========
</TABLE>
21
<PAGE>
WRT ENERGY CORPORATION
NOTES TO FRESH START BALANCE SHEET
(1) To adjust oil and gas properties and non oil and gas assets to estimated
fair market value in accordance with SOP 90-7, to write off debt issuance
costs and to record estimated bankruptcy expenses not reflected on the
Debtor's books. The net effect of these transactions is reported as a
Bankruptcy Expense on the Debtor's income statement for the period ended
June 30, 1997.
(2) To reflect cancellation of WRT preferred stock, common stock, additional
paid in capital and treasury stock at June 30, 1997 in accordance with SOP
90-7.
(3) To reflect issuance of 5,000,000 shares New WRT common stock to DLB in
exchange for WCBB Assets.
(4) To reflect payment of INCC note including principal, accrued interest and
fees.
(5) To reflect proceeds and corresponding debt associated with new financing
obtained from ING. Net proceeds received by New WRT are reflected as
$14,812,500 after an offset for fees associated with the transaction of
$187,500 to be paid on the Effective Date. A fee of $100,000 is to be paid
on December 31, 1997 and December 31, 1998 which is capitalized as debt
issuance cost and amortized over the life of the life of the loan.
(6) To reflect proceeds of Rights Offering. New WRT will receive $10,500,000
(3,000,000 shares at $3.50).
(7) To reflect discharge of priority and secured debt. The projections assume
that holders of allowed oil and gas lien claims (Class C-1 through Class
C-10 and Class C-12 through C-16) other than those claims purchased by DLB,
will be discharged by cash payment. DLB and its affiliates are assumed elect
receipt of common stock in lieu of a cash payment. The deficiency claims
relate to these transactions are included in general unsecured liabilities
and will be discharged per treatment of the general unsecured class.
(8) To reflect payment of estimated administrative expenses payable at the
Effective Date.
(9) To reflect discharge of pre petition, unsecured debt and deficiency claims
in exchange for 10,000,000 shares of New WRT common stock.
22
<PAGE>
Cash Distributions. The projections assume cash payments to be distributed on
the Effective Date as follows:
Cash balance - June 30, 1997 $11,917,261
Proceeds:
Proceeds from Rights Offering 10,500,000
Proceeds from ING note 14,812,500
----------
37,229,761
Uses:
Administrative Expenses:
Post petition royalties 1,108,000
Professional fees 337,000
Employee stay bonus 550,000
DLB fee and expense recovery 1,500,000
Executory contracts 18,000
----------
3,513,000
INCC bank note 17,736,000
Oil and gas lien claims 1,539,567
Convenience claims 294,525
----------
19,570,092
-----------
Cash balance - July 1, 1997 $14,146,669
===========
23
<PAGE>
EXHIBIT G
ADMINISTRATIVE SERVICES AGREEMENT
THIS ADMINISTRATIVE SERVICES AGREEMENT (this "AGREEMENT") is entered
into as of the ____ day of __________, 1997, by and between WRT ENERGY
CORPORATION, a _________________ corporation ("WRT"), and DLB OIL & GAS, INC.,
an Oklahoma corporation ("DLB").
R E C I T A L S:
WHEREAS, WRT and DLB are each in the business of the exploration
for, and production of, oil, gas and other minerals; and
WHEREAS, WRT desires to retain DLB by this Agreement to provide
certain administrative and related services to WRT; and
WHEREAS, WRT and DLB have agreed to the terms and conditions
pursuant to which the administrative services will be provided by DLB to WRT.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, WRT hereby engages DLB, and DLB accepts engagement,
to provide administrative services and other related services and functions to
WRT as more specifically set forth below.
<PAGE>
I. SERVICES TO BE PROVIDED
1.1 From and after the date hereof and until the termination of this
Agreement, DLB shall make available, or cause to be made available, on a
non-exclusive basis, to WRT such personnel, services, facilities, supplies, and
equipment as WRT may, from time to time, request, to include, without
limitation, the following: (a) services of various management and staff
personnel as set forth in SCHEDULE A attached hereto; (b) facilities, supplies
and equipment; and (c) at the request of WRT, any other such personnel,
services, facilities, supplies or equipment as DLB may be willing to provide
without undue disruption of DLB's business.
1.2 All services to be performed by DLB hereunder shall be performed in a
timely, professional and workmanlike manner, and shall comply with all
applicable laws and regulations.
II. ALLOCATION OF CHARGES
2.1 The charge to WRT for the personnel, services, facilities, supplies,
and equipment provided by DLB pursuant to Section I hereof shall be based on the
pro rata proportion of WRT's use thereof and shall be calculated as follows:
(a) With respect to personnel and services, an amount equal to DLB's
fully allocated internal costs (including, without limitation, salary,
payroll taxes, occupancy, travel, benefits, expense reimbursements,
communications, administrative expense and the like) of providing such
personnel and/or performing such services, plus the actual costs
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to DLB of any third-party services required, if any (also fully allocated
in the case of services provided by a third party for the benefit of both
DLB and WRT);
(b) With respect to equipment, the appropriate occupancy, rental,
usage, or depreciation and interest charges; and
(c) With respect to supplies, DLB's actual costs thereof.
WRT's pro rata portion of the costs referred to in subparagraphs (a), (b) and
(c) above shall represent DLB's good faith estimate of its fully absorbed cost
of providing such services and may be determined by DLB in any reasonable manner
and may be based upon any reasonable assumptions made by DLB.
2.2 The above charges shall be computed and assessed on a monthly basis,
in accordance with Section 5.1 hereof.
2.3 DLB shall not charge WRT for any costs attributable to DLB's general
corporate affairs.
2.4 DLB will be compensated hereunder solely for its services rendered to
WRT which benefit WRT, and DLB shall not be compensated for any activities
solely related to DLB's status as a shareholder of WRT.
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III. LIABILITY AND INDEMNIFICATION
3.1 Each party hereto shall at all times (both during and after the term
hereof) be liable to the other party for, and shall indemnify and hold each
other harmless from, losses, claims, damages and liabilities of every nature due
to the willful malfeasance, bad faith, or gross negligence of the indemnifying
party or that of its' employees or agents in the performance by the indemnifying
party of its obligations hereunder; and in case any claim, action, suit or
proceeding shall at any time (either during or after the term hereof) be made or
brought against any party based upon an allegation of willful malfeasance, bad
faith or gross negligence of the other party or any of such other parties'
employees or agents in the performance by such other party of its obligations
hereunder, such other party, at its sole cost and expense, shall resist and
defend such claim, action, suit, or proceeding.
IV. TERM AND TERMINATION
4.1 This Agreement shall be effective from the date hereof and shall
continue for a period of one (1) year thereafter (the "INITIAL TERM"); SUBJECT,
HOWEVER, to the terms of Section 4.2 below. At the end of the Initial Term, this
Agreement shall continue in full force and effect for subsequent one (1) year
periods unless terminated by either party hereto by notice in writing no less
than sixty (60) days prior to the anniversary date of the date of this
Agreement.
4.2 In the event the parties hereto shall mutually agree in writing, this
Agreement may be terminated during the Initial Term on the terms and dates
stipulated therein.
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4.3 After the end of the Initial Term, either party hereto may, with or
without cause, give to the other at least sixty (60) days advance written notice
of its intent to terminate this Agreement, whereupon this Agreement shall
terminate on the date specified in such notice.
V. ACCOUNTING
5.1 The accounting periods under this Agreement shall be the end of each
calendar month. Within fifteen (15) days after the end of the first fiscal month
or a part thereof and within fifteen (15) days after the end of each succeeding
fiscal month, during the term of this Agreement, DLB shall present to WRT an
itemized accounting of the services rendered under the terms of this Agreement
in such fiscal month.
5.2 Settlement between DLB and WRT shall be made within fifteen (15) days
after the delivery of such itemized accounting (the "SETTLEMENT DATE"), but
shall be subject to audit or other review by independent public accountants who
may require DLB to deliver invoices and other documentation (whether of an
accounting nature or otherwise) supporting such itemized accounting.
5.3 Any amount owing from WRT to DLB that has not been paid by the
Settlement Date shall be subject to a late payment charge of one percent (1%)
per month.
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VI. CONFIDENTIALITY AND ACCESS
6.1 Except as necessary for performance hereunder or as required by law or
by an order of a court with jurisdiction thereof, or by regulation, neither
party, without the written authorization of the other, will use or disclose or
assign to anyone other than each other, confidential or proprietary information
concerning WRT's operations in regard to the services performed under this
Agreement, or any other information which is obtained as a result of this
Agreement. Confidential or proprietary information is defined as information not
otherwise available to the general public and/or all information specifically
designated by WRT or DLB as confidential or proprietary. In the event of the
termination of this Agreement, the terms of this Section shall continue in full
force and effect for a period of one (1) year subsequent to the date of the
termination.
6.2 DLB and its duly authorized representatives shall have complete access
to WRT's offices, facilities and records wherever located in order to perform
its duties under this Agreement.
VII. RELATIONSHIP OF THE PARTIES
7.1 It is expressly understood that DLB is hereby engaged by WRT to
provide management and operational services as an agent of WRT; PROVIDED,
HOWEVER, this Agreement does not generally constitute the parties hereto as
partners, or as joint venturers, and neither party hereto will so represent
itself. Nothing contained herein shall be construed as imposing any
responsibility on DLB for the debts or obligations of WRT or any of its
affiliates.
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VIII. LIMITATION OF LIABILITY
8.1 In providing services hereunder, DLB shall have a duty to act, and
cause its employees and agents to act, in a reasonably prudent manner. Neither
DLB, nor any officer, director, employee or agent of DLB shall be liable to WRT
for any error of judgment or for any loss incurred by WRT in connection with the
matters to which this Agreement relates, except a loss resulting from the
willful malfeasance, bad faith or gross negligence on the part of DLB.
IX. REPRESENTATIONS AND WARRANTIES
9.1 Each party represents and warrants that on the date of this Agreement:
(1) it is a corporation, duly established, validly existing and in good standing
under the laws of its state or jurisdiction of incorporation, with power and
authority to carry on the business in which it is engaged and to perform its
respective obligations under this Agreement; (2) the execution and delivery of
this Agreement have been duly authorized and approved by all requisite corporate
action; (3) it has all the requisite corporate power and authority to enter into
this Agreement and to perform its obligations hereunder; and (4) the execution
and delivery of this Agreement do not, and consummation of the transactions
contemplated herein will not, violate any of the provisions of its charter or
bylaws or any applicable state or federal laws applicable to them.
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X. INSURANCE
10.1 If requested by DLB in writing, WRT will obtain and maintain such
insurance coverage as DLB may reasonably require. All such insurance shall be in
amounts and placed with such companies as DLB may reasonably determine.
XI. MISCELLANEOUS
11.1 All notices, consents, requests, instructions, approvals and other
communications provided for herein shall be validly given, made, or served, if
in writing and delivered personally, via facsimile or sent by certified mail,
return receipt requested, or by registered commercial overnight courier, and
addressed as follows:
(a) If to WRT:
(b) If to DLB: DLB Oil & Gas Inc.
1601 N.W. Expressway, Suite 700
Oklahoma City, OK 73118-1401
Facsimile: (405) 848-9449
Attn: Michael J. Blaschke
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11.2 This Agreement may be executed in counterparts, each of which shall
be deemed to be an original, and all of which together will constitute but one
and the same instrument.
11.3 The headings contained herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
11.4 This Agreement has been executed and delivered and shall be
interpreted, enforced, governed by and construed in accordance with the laws of
the State of Oklahoma, regardless of the laws that might otherwise govern under
applicable principles of conflict of laws thereof.
11.5 This Agreement may not be assigned by either party without the prior
written consent of the other party, which consent shall not be unreasonably
withheld.
11.6 Each of the parties hereto agrees to execute, acknowledge and verify,
if required to do so, all further or additional documents, and take such further
actions, as may be reasonably necessary to effectuate fully the terms of this
Agreement.
11.7 This Agreement shall be binding upon and shall inure solely to the
benefit of the parties hereto and their respective successors and assigns.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person, including any employee or creditor of the parties hereto,
any rights or remedies of any nature whatsoever under or by reason of this
Agreement.
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11.8 This Agreement may only be amended, modified, waived or supplemented
by a written instrument executed by both of the parties hereto. This Agreement
sets forth the entire agreement and understanding between the parties relating
to its subject matter.
11.9 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, each of which shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first above written.
WRT ENERGY CORPORATION,
a _________________ corporation
By:
Name:
Title:
DLB OIL & GAS, INC.,
an Oklahoma corporation
By:
Name:
Title:
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SCHEDULE A
SERVICES
1. Executive and managerial;
2. Accounting, auditing and tax;
3. Engineering;
4. Geological and geophysical;
5. Legal;
6. Land; and
7. Administrative and clerical.
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EXHIBIT H
EXECUTION COPY
COMMITMENT AGREEMENT
COMMITMENT AGREEMENT, dated as of January 20, 1997, by and among
WRT Energy Corporation ("WRT"), a Texas corporation and a debtor and
debtor-in-possession in that certain voluntary proceeding under Chapter 11 of
the Bankruptcy Code referred to below, DLB Oil & Gas, Inc., an Oklahoma
corporation ("DLB"), the investment funds listed on the signature page hereof
(the "Wexford Funds") and Wexford Management LLC, a Connecticut limited
liability company, in its capacity as investment manager and as agent for the
Wexford Funds ("Wexford"; DLB and Wexford are collectively referred to herein as
"DLBW"). Unless the context otherwise requires, all capitalized terms defined in
the Plan (as defined below) and not otherwise defined herein shall have the same
meanings herein as in the Plan.
W I T N E S S E T H:
WHEREAS, on February 14, 1996, WRT filed a voluntary petition for
relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court (the
United States Bankruptcy Court for the Western District of Louisiana,
Lafayette-Opelousas Division), commencing the Chapter 11 Case (Case No.
96BK-50212);
WHEREAS, since the commencement of the Chapter 11 Case, WRT has
operated its business and held its assets and properties as a
debtor-in-possession under Section 1107 of the Bankruptcy Code;
WHEREAS, on October 22, 1996, WRT accepted and signed the proposal
submitted by DLBW on October 16, 1996 (the "DLBW Proposal") providing the terms
of a proposed capital investment in, and plan of reorganization for, WRT;
WHEREAS, by order dated December 24, 1996 (the "Expense Order"), the
Bankruptcy Court approved the reimbursement by WRT of certain of the third-party
expenses incurred DLBW in connection with the DLBW Proposal;
WHEREAS, subsequent to WRT's execution of the DLBW Proposal, DLB
commenced negotiations with Texaco and TEPI regarding, INTER ALIA, (i) the claim
asserted by Texaco and TEPI against WRT and its affiliates (the "Texaco Claim"),
(ii) the WCBB Assets and (iii) the CAOA;
WHEREAS, the intent of the parties to those negotiations was that
WRT would purchase the WCBB Assets from Texaco and TEPI;
<PAGE>
WHEREAS, DLB has represented and WRT believes that Texaco and TEPI
have insisted that, because of concerns over WRT's financial status certain time
exigencies and other matters relating to that certain Global Settlement
Agreement, DLB be in the chain of title of the WCBB Assets and furthermore that
DLB guarantee, for Texaco's and TEPI's benefit, the cost of performance of
certain plugging and abandonment obligations with respect to the WCBB Assets
should New WRT fail to perform those obligations;
WHEREAS, as a result of the negotiations, Texaco, TEPI and DLB
reached an agreement embodied in the Purchase, Sale and Exchange Agreement
pursuant to which, INTER ALIA, (i) DLB will purchase the Texaco Claim, (ii) as
required by Texaco and TEPI, DLB will purchase the WCBB Assets from TEPI, and
(iii) DLB will guarantee (the "P&A Guarantee") the performance of all plugging
and abandonment obligations related to both the WCBB assets and WRT's interests
in West Cote Blanche Bay Field and, in order to implement the P&A Guarantee,
will pay into a trust (the "P&A Trust") established for the benefit of the State
of Louisiana, $1,000,000 on or before the Effective Date and certain other
amounts;
WHEREAS, on January 20, 1997, WRT and DLBW have jointly filed the
Plan, which Plan contemplates, INTER ALIA, (i) the issuance to WRT's unsecured
creditors, on account of their Allowed Claims, an aggregate of 10 million shares
of New WRT Common Stock, (ii) the issuance to WRT's unsecured creditors, on
account of their Allowed Claims, of the right to purchase an additional three
million eight hundred thousand shares of New WRT Common Stock at a purchase
price of $3.50 per share (the "Rights Offering"), (iii) the exercise by DLBW of
its rights to purchase New WRT Common Stock pursuant to the Rights Offering on
account of its Allowed Claims, (iv) the purchase by DLBW of all shares of New
WRT Common Stock not otherwise purchased pursuant to the Rights Offering, and
(v) pursuant to the Transfer and Exchange Agreement, as part of the Plan, (a)
the transfer by DLB of the WCBB Assets to WRT, (b) as consideration for the
transfer of the WCBB Assets, the issuance by DLB of the P&A Guarantee and the
making by DLB of payments into the P&A Trust, (1) the delivery to DLB of (A) 5
million shares of New WRT Common Stock and (B) the number of shares of New WRT
Common Stock obtained by dividing the net amount of capital expenditures
incurred by DLB as of the Effective Date as owner of the WCBB Assets and/or
operator of the Shallow Contract Area, to the extent not disapproved by the
Bankruptcy Court, by a purchase price of $3.50 per share, (2) transfer by WRT to
DLB of the Buyer's Leasehold and Facilities and (3) the assumption by DLB of the
Assumed Obligations, and (c) the payment in full of the Texaco Claim;
WHEREAS, WRT desires that DLB and Wexford enter into this
Commitment Agreement in order to evidence their respective commitments and
obligations; and
WHEREAS, WRT, DLB and Wexford are willing to enter into this
Commitment Agreement upon the terms and conditions hereinafter set forth;
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NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings set
forth in this Article I, in addition to the other capitalized terms defined in
the Plan.
"Closing" shall mean the closing of the transactions contemplated
by this Commitment Agreement.
"Environmental Laws" shall mean all federal, state, local and
foreign laws and regulations relating to pollution or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"Extant Bidder" shall mean each Person who (a) had, as of October
16, 1996, submitted to Jefferies & Company, Inc., as part of the formal auction
of WRT conducted by Jefferies & Company, Inc., either (i) a bid to purchase all
or any material part of the assets of WRT or (ii) a proposal for a plan of
reorganization for WRT or (b) was specifically identified as providing the
financing for such bid or proposed plan. An "Extant Bidder" shall not include
(x) any combination of an Extant Bidder with one or more Persons that are not
Extant Bidders, (y) any combination of two or more Extant Bidders or (z) any
combination of two or more Extant Bidders with one or more Persons that are not
Extant Bidders.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Material Adverse Effect" shall mean, in connection with WRT or any
of its Subsidiaries, any change or effect that is materially adverse to the
business, operations, properties (including intangible properties), condition
(financial or otherwise), prospects or assets or liabilities of WRT and its
Subsidiaries taken as a whole.
"Materials of Environmental Concern" shall mean hazardous
substances as defined under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss.9601, ET SEQ. and hazardous wastes
as defined under the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901,
ET SEQ. and petroleum and petroleum products and such other chemicals, materials
or substances as are listed as "hazardous wastes", "hazardous materials",
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"toxic substances", or words of similar import under any similar federal, state,
local or foreign laws.
"Permitted Liens" shall mean liens:
(a) for taxes, assessments or governmental charges or levies
if the same shall not at the time be delinquent or thereafter can be paid
without penalty or (if foreclosure, distraint, sale or other similar
proceedings shall not have been commenced) are being contested in good
faith and by appropriate proceedings diligently conducted, and such
reserve or other appropriate provision, if any, as shall be required by
GAAP shall have been made therefor;
(b) of mechanics and materialmen for sums not yet due or
being contested in good faith and by appropriate proceedings diligently
conducted, if such reserve or other appropriate provision, if any, as
shall be required by GAAP shall have been made therefor; or
(c) constituting easements, rights of way, restrictions and
other similar encumbrances, not interfering in a material respect with the
ordinary conduct of the business of WRT and not materially detracting from
the value or current or intended use of the property to which they are
applicable.
"Plan" shall mean the Debtor's and DLBW's First Amended Joint Plan
of Reorganization Under Chapter 11 of the United States Bankruptcy Code, dated
as of January 20, 1997, attached hereto as Exhibit A, as may be amended with the
consent of DLB and Wexford.
"Subsidiary" shall mean any corporation or other entity, a majority
of the shares of capital stock or other equity interests of which are owned,
directly or indirectly, by WRT.
ARTICLE II
THE CLOSING
Section 2.01. OBLIGATIONS OF DLB AND WEXFORD. In reliance upon the
representation, warranties, covenants and agreements of WRT and upon the terms
and subject to the conditions of this Commitment Agreement:
(a) DLB and Wexford, jointly and severally, agree to subscribe for
and purchase at the Closing from New WRT, in the amount determined pursuant to
the Plan and the New WRT Subscription Rights Agreement, (i) their full pro rata
share of the New WRT Subscription Common Stock granted to DLB and Wexford
pursuant to the Plan and the New WRT Subscription Rights Agreement on account of
any and all Claims and (ii) all of the remaining New WRT Subscription Common
Stock not otherwise subscribed for and purchased as a result of either
Unexercised Subscription Rights pursuant to the Plan or the failure of the
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Rights Offering to occur (the "Backstop Shares"), and WRT agrees to cause New
WRT and the Disbursing Agent to issue and sell to DLB and Wexford such New WRT
Subscription Common Stock. Such New WRT Subscription Common Stock shall be paid
for in the amount of its related Subscription Purchase Price in the manner
provided for in the Plan.
(b) DLB and Wexford, jointly and severally, agree to pay at the
Closing to New WRT an amount of cash equal to the Disputed Subscription Purchase
Price (or such lesser amount with respect to Exercised Disputed Claims as may be
required pursuant to the Plan). Such payment shall be made by wire transfer of
immediately available funds to such account as WRT shall designate in writing at
least two (2) Business Days prior to the Closing.
(c) DLB agrees to execute the Transfer and Exchange Agreement and,
in accordance with its terms, and the terms of the Plan, transfer the WCBB
Assets to New WRT and designate New WRT as operator of the Shallow Contract
Area. In exchange for the transfer of the WCBB Assets to New WRT, the issuance
of the P&A Guarantee and the payments into the P&A Trust, (i) DLB shall receive
at the Closing (A) 5 million shares of New WRT Common Stock and (B) the number
of shares of New WRT Common Stock obtained by dividing the amount of capital
expenditures incurred by DLB (net of any net cash received by DLB as owner of
the WCBB Assets or as operator of the Shallow Contract Area) as of the Effective
Date as owner of the WCBB Assets and/or operator of the Shallow Contract Area,
to the extent not disapproved by the Bankruptcy Court, by a purchase price of
$3.50 per share (collectively, the "WCBB Shares") and (ii) WRT shall transfer to
DLB the Buyer's Leasehold and Facilities.
(d) At the discretion of DLB and Wexford, the payments due WRT or
New WRT under this Section 2.01 may be offset against any or all payments that
DLB, Wexford or the Wexford Funds would otherwise receive under the Plan on the
Effective Date.
(e) DLB and Wexford each agree to (i) vote all Claims held by them
to accept the Plan, and (ii) exercise any and all rights that they have under
the Plan on account of all Claims held by them in Classes C-1 through C-16
(including, without limitation, the Texaco Claim) (such Claims being the
"Exchangeable Claims") to elect to receive a Distribution of New WRT Common
Stock in lieu of a Distribution of Cash.
Section 2.02. OBLIGATIONS OF WRT. WRT agrees that it shall:
(a) In connection with the sale of the WCBB Assets by Texaco and
TEPI to DLB, WRT will (i) consent to the designation by Texaco and TEPI of DLB
(or its designee) as operator of the Shallow Contract Area under the CAOA
provided that DLB (or its designee) shall have become qualified as an operator
under Louisiana law; and (ii) waive any preference rights that WRT may have
under the CAOA arising from or related to such sale.
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(b) Provide Texaco and TEPI with the ability to use certain
facilities in connection with TEPI's operation of the portion of the producing
Contract Area under, and as defined in the CAOA other than the Shallow Contract
Area, the use of such facilities to be on terms to be agreed.
(c) Execute the Transfer and Exchange Agreement and, in accordance
with its terms, (i) deliver to DLB on the Effective Date the WCBB Shares and
(ii) transfer to DLB on the Effective Date the Buyer's Leasehold and Facilities.
Section 2.03. CLOSING. (a) The Closing shall take place at the
offices of Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York, or at
such other location as the parties may agree, on the Effective Date.
(b) At the Closing:
(i) New WRT shall deliver to DLB and Wexford, jointly and
severally, certificates of New WRT Common Stock representing DLB's and Wexford's
pro rata portion of the New WRT Common Stock distributed to holders of Allowed
General Unsecured Claims pursuant to the Plan, in definitive form and registered
in the name(s) specified in writing by DLB and Wexford at least two (2) Business
Days prior to the Closing;
(ii) New WRT shall deliver to DLB and Wexford, jointly and
severally, against payment therefor, certificates of New WRT Subscription Common
Stock, in definitive form and registered in the name(s) specified in writing by
DLB and Wexford at least two (2) Business Days prior to the Closing,
representing DLB's and Wexford's pro rata portion of the New WRT Subscription
Common Stock subscribed for and purchased pursuant to Section 2.01(a)(i) hereof
and the Backstop Shares subscribed for and purchased pursuant to Section
2.01(a)(ii) hereof;
(iii) New WRT shall deliver to DLB, certificates of New WRT
Common Stock, in definitive form and registered in the name(s) specified in
writing by DLB at least two (2) Business Days prior to the Closing, representing
the WCBB Shares;
(iv) Pursuant to the terms of the Plan, WRT shall deliver to
DLB and Wexford, jointly and severally, certificates of New WRT Common Stock to
be distributed to them under the Plan on account of the Exchangeable Claims.
(v) New WRT shall issue, and the Disbursing Agent shall
reserve, shares of New WRT Subscription Common Stock representing the Disputed
New WRT Subscription Common Stock to be held by the Disbursing Agent in a
Disputed Claims Reserve Account.
(c) At the Closing, each party to this Commitment Agreement shall
deliver to the other parties such other documents, instruments and writings as
may be required to be
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delivered in accordance with this Commitment Agreement or as may be reasonably
requested by such other party.
Section 2.04. RELIANCE BY WRT AND NEW WRT. Each of WRT and New WRT
shall be entitled to rely on and assume that it has fully satisfied its
obligations to both DLB and Wexford through any payment made or document
delivered to DLB and Wexford in accordance with any provision of this Commitment
Agreement; PROVIDED that such payment or delivery is made in the manner
specified by DLB and Wexford. The division of any such payment or sharing of any
such document shall be the sole responsibility of DLB and Wexford and WRT shall
have no obligations or liabilities relating thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WRT
WRT hereby represents and warrants, as of the execution and
delivery hereof, to DLB & Wexford as follows:
Section 3.01. ORGANIZATION AND QUALIFICATION. WRT is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Texas, and has full power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. WRT is duly
qualified to do business as a foreign corporation in each jurisdiction set forth
on Schedule 3.01 hereto. Such jurisdictions are the only jurisdictions in which
the nature of WRT's properties and/or business makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect.
Section 3.02. SUBSIDIARIES. Except for WRT Technology, Inc., WRT
does not have any Subsidiaries and, except as set forth on Schedule 3.02 hereto,
to the best of its knowledge WRT is not a partner or joint venturer with any
person in any enterprise or undertaking. As of the Closing, New WRT will have no
Subsidiaries.
Section 3.03. AUTHORITY, AUTHORIZATION AND VALIDITY. Subject to
approval of this Commitment Agreement by the Bankruptcy Court and the issuance
of the Confirmation Order, WRT has full power and authority to execute, deliver
and perform this Commitment Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Commitment
Agreement by WRT, and the consummation by WRT of the transactions contemplated
hereby to be performed by WRT, have been duly authorized by all requisite action
of its Board of Directors and, if required, shareholders of WRT, and this
Commitment Agreement constitutes the valid and binding obligation of WRT,
enforceable against WRT in accordance with its terms, subject, where applicable,
to entry of the Confirmation Order.
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Section 3.04. CAPITALIZATION. (a) Except as set forth on Schedule 3.04 hereto,
as of the date of this Commitment Agreement, there are no outstanding securities
of WRT or any of its Subsidiaries or any outstanding subscriptions, options,
warrants, calls or other commitments or agreements (other than this Commitment
Agreement) to which WRT is a party or by which it is bound requiring the
issuance by WRT of additional shares of capital stock or other securities.
(b) The securities set forth on Schedule 3.04 hereto are duly
authorized, validly issued, fully paid and non-assessable and are free of
preemptive rights and entitle the holders thereof to all the rights of a holder
of such securities in accordance with the certificate of incorporation and
by-laws of WRT and the laws of the State of Texas.
(c) The shares of New WRT Common Stock to be issued by New WRT
pursuant to this Commitment Agreement and/or the Plan, or upon exercise of the
New WRT Warrants pursuant to the New WRT Warrant Agreement, when so issued as
provided in the Plan and/or this Commitment Agreement, or pursuant to the new
WRT Warrant Agreement, as the case may be, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights and will
entitle the holders thereof to all of the rights of a holder of New WRT Common
Stock in accordance with the New WRT Certificate of Incorporation, the New WRT
By-Laws and the laws of the State of Delaware.
Section 3.05. APPROVALS AND CONSENTS. Except for (i) approval by
the Bankruptcy Court of the provisions of this Commitment Agreement, (ii) any
required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") and the expiration or earlier termination of the applicable
waiting periods thereunder, and (iii) the issuance of the Confirmation Order, no
consent, approval, order or authorization of, and no registration, declaration
or filing with, any federal, state, local or foreign government or governmental
authority is required to be made or obtained by WRT in connection with the
execution and delivery by WRT of this Commitment Agreement or the consummation
by WRT of the transactions contemplated hereby to be performed by WRT.
Section 3.06. NO CONFLICTS. From and after the Effective Date, the
consummation of the Plan and the transactions contemplated thereby and hereby
will not conflict with, violate or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under or result in the
creation of a lien (other than Permitted Liens), or the acceleration of any
obligation or the loss of a benefit under, (i) the New WRT Certificate of
Incorporation or the New WRT By-Laws, (ii) any note, indenture, deed of trust,
material lease, or other material instrument, contract or agreement to which New
WRT may then be a party or by which it or its respective properties and assets
may then be bound, or (iii) any law, ordinance, rule or regulation of any
government or governmental authority or judgment, order or decree of any court
or governmental authority.
Section 3.07. SEC REPORTS, FINANCIAL STATEMENTS. (a) WRT has
heretofore delivered to DLB and Wexford copies of (i) its Annual Report on Form
10-K for the fiscal year
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ended December 31, 1995 (the "WRT 10-K"), (ii) its proxy or information
statements relating to meetings of, or actions taken without a meeting by, the
stockholders of WRT held since January 1, 1996 and (iii) all of the other
reports, statements and schedules filed with the Securities and Exchange
Commission (the "Commission") since January 1, 1996.
(b) The WRT 10-K (i) was filed with the Commission on or about June
12, 1996 and (ii) except as described in the Disclosure Statement and the
exhibits thereto, at the time of filing thereof did not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. As of its filing date, each such other report or
statement filed pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), complied as to form in all material respects with the Exchange
Act and did not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
(c) No event has occurred since the filing of the WRT 10-K which
would necessitate the filing by WRT with the Commission of a Current Report on
Form 8-K, other than events with respect to which such a Current Report on Form
8-K has been filed with the Commission and delivered to DLB and Wexford and a
Current Report on Form 8-K which will be filed to report the transactions
contemplated hereby.
Section 3.08. FINANCIAL STATEMENT. The audited consolidated balance
sheets of WRT and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for each of the three fiscal years in the period ended December 31, 1995
(the "Historical WRT Financial Statements"), and, except as described in the
Disclosure Statement and the exhibits thereto, all financial statements
contained in any periodic or other report of WRT, or filed with the Commission
after the date of the WRT 10-K and prior to the Effective Date, (i) did and will
fairly present, as of the relevant dates and/or for the relevant periods set
forth therein, the consolidated financial position, results of operations,
changes in stockholders' equity (deficit) (in the case of annual financial
statements) and changes in the consolidated financial position of WRT and
Subsidiaries, subject in the case of statements for interim periods to normal
year-end adjustments; (ii) were and will be prepared in accordance with GAAP
applied on a basis consistent with prior periods, except as indicated in the
notes thereto, and subject, in the case of audited financial statements, to the
qualifications stated in the report thereon of KPMG Peat Marwick LLP; and (iii)
contained and will contain notes, if required, which were and will be true,
accurate and complete in all material respects.
Section 3.09. DISCLOSURE STATEMENT. On January 21, 1997, WRT and
DLBW filed with the Bankruptcy Court an amended disclosure statement pursuant to
Section 1125 of the Bankruptcy Code. Such amended disclosure statement, in the
form approved by the Bankruptcy Court for use by WRT and DLBW in the
solicitation of acceptances or rejections of the Plan, is herein called the
"Disclosure Statement." The Disclosure Statement, as of the Mailing Date (as
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hereinafter defined), will contain "adequate information" (as defined in Section
1125(a)(1) of the Bankruptcy Code) with respect to the Plan, and will describe
accurately in all material respects the provisions of the Plan and this
Commitment Agreement.
Section 3.10. INDEBTEDNESS, LIABILITIES AND OBLIGATIONS. Except as
set forth on Schedule 3.10 hereto and except for such as will be fully
discharged and extinguished upon confirmation of the Plan without any
distribution in respect thereof by WRT, any Subsidiary of WRT or New WRT,
neither WRT nor any subsidiary of WRT has any indebtedness, liabilities (actual,
contingent or other), obligations or commitments, contingent or otherwise, or
any of the foregoing (material or otherwise) which are otherwise required to be
disclosed in the Historical WRT Financial Statements or in a disclosure
statement prepared in accordance with the Bankruptcy Code, which are not either
(i) fairly and adequately reflected in the Historical WRT Financial Statements
or described in the notes thereto, or (ii) described in the Disclosure
Statement. Any indebtedness, liabilities, obligations or commitments which are
not required to be so disclosed are not in the aggregate material to the
business, operations or financial condition of WRT or any Subsidiary of WRT,
taken as a whole.
Section 3.11. TAXES. Complete and correct copies of the federal
income tax returns, and all amendments thereto, for the years ended December 31,
1993, 1994 and 1995, heretofore filed by WRT with the Internal Revenue Service
for the taxable years then ended, have been delivered to DLB and Wexford. For
purposes of this Commitment Agreement, the term "tax" shall include all federal,
state, local and foreign taxes, assessments, levies, imposts, duties, license
fees, registration fees, withholding or other governmental charges and any
interest or penalty on, and any addition to, any of the foregoing and any right
to a credit or deduction against, or a reduction of, any of the foregoing, and
"tax return" means any return, report, statement or other document relating to
any tax. Except as set forth on Schedule 3.11 hereto, (i) WRT and each
Subsidiary have filed all tax returns required to be filed, all such tax returns
are correct and complete and all taxes shown to be due on such tax returns have
been paid, (ii) there are no material unpaid taxes which have given rise to a
lien on the properties and assets of WRT, except liens for taxes not yet due and
payable, (iii) all material taxes not yet due and payable which require accrual
in accordance with applicable financial accounting practices have been properly
accrued on the books of account of WRT and, if applicable with respect to
periods ended on or prior to December 31, 1995, reflected in the Historical WRT
Financial Statements, (iv) the charges, accruals and reserves shown in the
Historical WRT Financial Statements, if any, in respect of taxes for all fiscal
periods covered thereby are adequate in all material respects with respect to
such periods, and there are not pending or known to WRT proposed assessments by
any taxing authority for additional taxes for which WRT does not have adequate
book reserves for any such fiscal period , (v) since the date of the Historical
WRT Financial Statements, neither WRT nor any Subsidiary has incurred any
liability for taxes other than in the ordinary course of business, (vi) no
audits or administrative or judicial proceedings are pending or threatened with
respect to WRT or any Subsidiary, (vii) neither WRT nor any Subsidiary is liable
for taxes of another Person under Treasury Regulation 1.1502-6, as transferee or
successor, by contract or
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otherwise, (viii) there are no unexpired waivers of applicable statutes of
limitation, or extensions thereof, with respect to any taxes, (ix) all monies
required to be withheld by WRT from employees for income taxes, social security,
unemployment insurance taxes, or similar taxes or assessments have been
collected or withheld and either paid to the respective governmental agencies or
set aside in accounts for such purpose.
Section 3.12. PROPERTIES. Except as otherwise provided in Section
3.21 hereto:
(a) There is set forth in the Schedules a correct and complete list
of all material items of real property, including leased property, and any
material buildings, structures and improvements thereon or therein, which are
owned or used by WRT or any of its Subsidiaries. With respect to any material
real property of WRT or any of its Subsidiaries, including any leased property,
and any material buildings, structures and improvements located thereon or
therein, such buildings, fixtures and improvements, and the present use thereof,
comply in all material respects with all zoning laws, ordinances and regulations
of the governmental or other authorities having jurisdiction thereof, including
provisions relating to permissible nonconforming uses, if any, and such premises
are not affected, nor to the best of WRT's knowledge threatened, by any
condemnation or eminent domain proceeding. All material leases of real or
personal property by WRT or any of its Subsidiaries, are, except as a result
solely of the pendency of the Chapter 11 Case, valid and subsisting leases and,
except as contemplated by this Commitment Agreement or the Plan, or terminated
in the ordinary course of business or in accordance with their terms, from and
after the Effective Date and the consummation of the transactions contemplated
hereby, will continue to entitle New WRT to the use and possession of the real
or personal property purported to be covered thereby for the terms specified in
such leases and for the purposes for which such real or personal property is now
used.
(b) WRT has good title to all property and assets (whether real or
personal, tangible or intangible) reflected in the WRT Historical Financial
Statements or acquired after the date thereof. None of such property or assets
is subject to any lien, mortgage, claim, interest, charge, security interest or
other encumbrance or adverse interest of any nature whatsoever ("Liens"),
except:
(i) Liens disclosed in the WRT Historical Financial
Statements;
(ii) Permitted Liens; or
(iii) Liens which do not materially detract from the
value or materially interfere with any present or intended use of such
property or assets.
(c) There are no developments affecting any such property or assets
(whether real or personal) pending or, to the knowledge of WRT, threatened which
might materially
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detract from the value of such property or assets or materially interfere with
any present or intended use of any such property or assets.
Section 3.13. CONTRACTS AND AGREEMENTS. Except as set forth on
Schedule 3.13 hereto, the Schedules set forth a correct and complete list of all
contracts, agreements, leases and instruments to which WRT or any of its
Subsidiaries is a party or by which it is or its properties or assets are bound
(i) that provide for potential payment or receipt (or the provision of services
or products having a value) to or from WRT or any of its Subsidiaries in excess
of $50,000 or are otherwise material to the financial condition, operations,
business, assets and liabilities of WRT, (ii) that pertain to employment or
severance benefits for any officer or director of WRT or any of its Subsidiaries
or for any employee of WRT or any of its Subsidiaries to whom such contracts,
agreements or instruments provide employment benefits of more than $100,000 per
year, including in the form of stock distributions or distributions-in-kind, or
severance benefits of more than $50,000, including in the form of stock
distributions and distributions-in-kind, other than employees covered by
collective bargaining contracts with trade unions, a list of whom has heretofore
been provided to DLB and Wexford, (iii) that cover or relate to the lease or
charter of vessels, or (iv) that will be assumed by WRT pursuant to the Plan.
Neither WRT, nor any of its Subsidiaries nor, to WRT's knowledge but without
investigation, any other party to any such contract, commitment, undertaking,
agreement or instrument to which WRT or any of such Subsidiaries is a party is
in material default thereunder except as a result of the pendency of the Chapter
11 Case or as disclosed in the Disclosure Statement, and except as so disclosed
or as may result solely from the pendency of the Chapter 11 Case, each such
contract, commitment, undertaking, agreement and instrument is in full force and
effect and is valid and legally binding. WRT is not in violation of, or in
default with respect to, any term of its certificate of incorporation or
by-laws.
Section 3.14. INSURANCE. WRT maintains policies of fire, liability,
business interruption and other forms of insurance covering its properties,
businesses, officers and directors against such losses and risks as are
generally insured against by companies in the same or similar businesses in such
amounts as are adequate to prevent WRT from being a co-insurer within the terms
of such policies, except to the extent such status as a co-insurer may result
solely from the provision in the policies of deductibles not in excess of those
customarily contained in policies of companies in the same or similar businesses
or solely from claims in excess of policy limits. Set forth on Schedule 3.14
hereto is a correct and complete list of all such insurance policies currently
maintained by WRT. Each such policy is in full force and effect and will remain
in full force and effect following consummation of the Plan. No such policy has
premiums in arrears and no notice of cancellation or termination has been
received with respect to any such policy.
Section 3.15. LITIGATION. Except as set forth on the Schedules,
there is no suit, action, proceeding or governmental investigation pending or,
to the best of the knowledge of WRT, threatened against WRT or any of its
Subsidiaries (other than any suit, action or proceeding in which WRT or any of
such Subsidiaries is the plaintiff and in which no
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counterclaim or cross-claim against WRT or any of such Subsidiaries has been
filed) nor has WRT or any of such Subsidiaries or any of their respective
officers or directors been subject to any suit, action, proceeding or
governmental investigation as a result of which any such officer or director is
or may be entitled to indemnification by WRT or any of such Subsidiaries, except
for suits, actions or proceedings (other than suits, actions or proceedings
commenced by any government or governmental authority) which if resolved
adversely to WRT or any of such Subsidiaries would not in the aggregate have a
Material Adverse Effect or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated hereby. Except
as so disclosed, there is not outstanding against WRT or any of such
Subsidiaries any judgment, decree, injunction, rule or order of any court,
government, department, commission, agency, instrumentality or arbitrator, nor
is WRT or any of such Subsidiaries in violation of any applicable law,
regulation, ordinance, order, injunction, decree or requirement of any
governmental body or court which violation would have a Material Adverse Effect.
Section 3.16. EMPLOYEE BENEFITS. WRT has delivered to DLB and
Wexford a true and complete copy of its employee benefit plans and programs
(including, without limitation, any of the foregoing covering retirees)
maintained by WRT or its Subsidiaries (the "Benefit Plans"). Neither WRT, its
Subsidiaries nor any entity treated as a single employer with WRT or its
Subsidiaries under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code
of 1986, as amended (the "Code"), sponsors, maintains or contributes to any
Benefit Plan that is subject to Title IV of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA or, within the preceding five
(5) years, sponsored, maintained or contributed to any such Benefit Plan. None
of the Benefit Plans, and neither WRT nor its Subsidiaries, have any liability
with respect to medical or life insurance coverage for retirees or other
terminated employees, other than as required under Section 4980B of the Code.
Each Benefit Plan has been administered and maintained in compliance with all
applicable laws, including, without limitation, ERISA and the Code, and in
accordance with its terms. No nonexempt "prohibited transaction" (as defined in
Section 406 of ERISA and Section 4975 of the Code) has occurred with respect to
any Benefit Plan. WRT and its Subsidiaries have complied with all reporting,
disclosure and other obligations as may be imposed under all applicable laws by
reason of the operation of any Benefit Plan. The terms of each Benefit Plan
permit the sponsor to amend, modify or terminate each such Benefit Plan and no
representations, written or oral, would limit the ability of WRT or its
Subsidiaries to amend, modify or terminate any Benefit Plan. With respect to
each Benefit Plan intended to qualify under Section 401(a) of the Code, the
Internal Revenue Service has issued a favorable determination letter that such
Benefit Plan is qualified under Section 401(a) of the Code and such Benefit Plan
is exempt from federal taxation under Section 501(a) of the Code; a copy of the
most recent of all such determination letters has been made available to DLB and
Wexford and nothing has occurred since the date of such letter that could
reasonably be expected to cause any such Benefit Plan to lose such qualification
or exemption.
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Section 3.17. ABSENCE OF CERTAIN CHANGES. Since the date of the WRT Historical
Financial Statements and except as disclosed in the WRT 10-K or the Disclosure
Statement, the business of WRT has been conducted in the ordinary course
consistent with past practices and there has not been:
(i) any event, occurrence, development or state of
circumstances or facts which has had or could reasonably be expected to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock
of WRT, or any repurchase, redemption or other acquisition by WRT or any
Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, WRT or any Subsidiary;
(iii) any amendment of any material term of any
outstanding security of WRT or any Subsidiary;
(iv) any incurrence, assumption or guarantee by WRT or
any Subsidiary of any indebtedness for borrowed money;
(v) any creation or assumption by WRT or any Subsidiary
of any Lien on any material asset other than in the ordinary course of
business consistent with past practices;
(vi) any making of any loan, advance or capital
contributions to or investment in any Person;
(vii) any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of
WRT or any Subsidiary which, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect;
(viii) any transaction or commitment made, or any
contract or agreement entered into, by WRT or any Subsidiary relating to
its assets or business (including the acquisition or disposition of any
assets) or any relinquishment by WRT or any Subsidiary of any contract or
other right, in either case, material to WRT and its Subsidiaries, taken
as a whole, other than transactions and commitments in the ordinary course
of business consistent with past practices and those contemplated by this
Commitment Agreement;
(ix) any (A) employment, deferred compensation,
severance, retirement or other similar agreement entered into with any
director, officer or employee of WRT or any Subsidiary (or any amendment
to any such existing agreement), (B) grant
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of any severance or termination pay to any director, officer or employee
of WRT or any Subsidiary, or (C) change in compensation or other benefits
payable to any director, officer or employee of WRT or any Subsidiary
pursuant to any severance or retirement plans or policies thereof;
(x) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any employees of WRT or any Subsidiary,
which employee was not previously subject to a collective bargaining
agreement, or any lockouts, strikes, slowdowns, work stoppages or threats
thereof by or with respect to any employees of WRT or any Subsidiary; or
(xi) any agreement to do any of the forgoing.
Section 3.18. ENVIRONMENTAL MATTERS. (a) WRT and its Subsidiaries
have obtained all permits, licenses and other authorizations, and have made all
registrations and given all notifications, that are required with respect to the
operation of their respective businesses under all applicable Environmental Laws
other than those permits, licenses, other authorizations, registrations and
notifications the failure of which to obtain or make, individually or in the
aggregate, would not have a Material Adverse Effect.
(b) WRT and its Subsidiaries are in compliance in all material
respects with all terms and conditions of the required permits, licenses and
other authorizations referred to in paragraph (a) above, and are also in
compliance in all material respects with any other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any regulation,
code, plan, order, decree, judgment, injunction, settlement agreement, notice or
demand letter issued, entered, promulgated or approved thereunder, other than
where the failure to be in such compliance, individually or in the aggregate,
would not have a Material Adverse Effect.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding, notice
or demand letter (collectively "Actions") pending or, to the knowledge of WRT,
threatened against WRT or any of its Subsidiaries (including without
limitations, any claims made against or with respect to the Buyer's Leasehold
and Facilities) relating in any way to Environmental Laws or any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder other than Actions that, if
determined adversely to WRT or such Subsidiaries, would not reasonably be
expected to have a Material Adverse Effect.
Section 3.19. INTELLECTUAL PROPERTY. (a) Set forth on Schedule 3.19
hereto is a correct and complete list of all patent rights or licenses or other
rights to use patent rights, inventions, trademarks, service marks, trade names
and copyrights owned by WRT or its Subsidiaries. WRT and its Subsidiaries own or
possess adequate patent rights or licenses or other rights to use patent rights,
inventions, trademarks, service marks, trade names and
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copyrights used or necessary to conduct the general business now operated by
them and neither WRT nor any of its Subsidiaries has received any notice of
infringement or conflict with asserted rights of others with respect to any
patent, patent rights, inventions, trademarks, service marks, trade names or
copyrights which, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
(b) None of the processes and formulae, research and development
results and other know-how of WRT or any Subsidiary, the value of which to WRT
or such Subsidiary is contingent upon maintenance of the confidentiality
thereof, has been disclosed by WRT or any Subsidiary to any Person other than
employees, representatives and agents of WRT or any Subsidiary all of whom are
bound by written confidentiality agreements.
Section 3.20 LICENSES AND PERMITS. Schedule 3.20 correctly
describes each license, franchise, permit or other similar authorization
affecting, or relating in any way to, the assets or business of WRT and its
Subsidiaries (the "PERMITS") together with the name of the government agency or
entity issuing such Permit. Such Permits are valid and in full force and effect
and none of the Permits will be terminated or impaired or become terminable, in
whole or in part, as a result of the transactions contemplated hereby.
Section 3.21 LABOR MATTERS. Neither WRT nor any of its Subsidiaries
are, or, within the preceding three (3) years, have been, parties to any
collective bargaining agreements covering employees or former employees. WRT and
its Subsidiaries are in compliance with all applicable labor and employment
laws, except where the failure so to comply could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. To the best
of the knowledge of WRT, no employee or former employee has a reasonable basis
for any action against WRT or its Subsidiaries arising out of any statute,
ordinance or regulation relating to discrimination in employment practices.
Section 3.22 OIL AND GAS REPRESENTATIONS. (a) ROYALTIES AND
RENTALS; FULL FORCE AND EFFECT. The oil, gas and mineral lease forming a portion
of the Buyer's Leasehold and Facilities is in full force and effect. WRT has
paid, or has caused to be paid, timely all royalties, rentals or other payments
due under the Buyer's Leasehold and Facilities except for those payments which
are subject to a bona fide dispute and which will not result in grounds for
cancellation of any portion of the Buyer's Leasehold and Facilities and has
taken or has caused to be taken all necessary action required to preserve the
Buyer's Leasehold and Facilities in full force and effect. WRT has not received
any demand (which has not been satisfied) from, nor is it a party to any dispute
concerning the Buyer's Leasehold and Facilities, and, to WRT's knowledge, no
other person owning an interest in the Buyer's Leasehold and Facilities has
received any such demand or is a party to any such dispute. Additionally, there
has not occurred any event, fact or circumstance which with the lapse of time or
the giving of notice, or both, would constitute a breach or default on behalf of
WRT or, to the knowledge of WRT, on behalf of any other party, under the oil,
gas and mineral lease forming a part of the Buyer's Leasehold and Facilities.
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(b) PREPAYMENT ARRANGEMENTS. WRT is not obligated by virtue of any
prepayment arrangement under any contract for the sale of hydrocarbons
containing a take-or-pay or similar provision, or a production payment or of any
other prepayment arrangement, to deliver hydrocarbons whose production is or may
be attributable to the Buyer's Leasehold and Facilities at some future time
without then or thereafter having the right to receive and retain full payment
therefor.
(c) CALL ON PRODUCTION. No party has any call upon, option to
purchase or other preferential purchase right with respect to hydrocarbon
production from or attributable to the Buyer's Leasehold and Facilities.
(d) OIL AND GAS TAXES. All ad valorem, property, production,
excise, severance, windfall profits and other similar taxes and assessments
based on or measured by the ownership of the Buyer's Leasehold and Facilities or
the production of hydrocarbons or the receipt of proceeds therefrom for all
years prior to the year 1997, which are not foreclosed by reason of the
expiration of any applicable statutes of limitation or the receipt of any
closing letters from relevant taxing authorities, have been properly paid, and
all such taxes and assessments which become due and payable prior to Closing
shall be properly paid by WRT.
(e) LIENS; CLAIMS; LITIGATION. There are no liens, claims or
demands or suits, actions or other proceedings pending or, to the knowledge of
WRT, threatened before any court or governmental body or agency or arbitral body
which could result in impairment or loss of WRT's title to any part of the
Buyer's Leasehold and Facilities or the value thereof or which might hinder or
impede the operation of the Buyer's Leasehold and Facilities.
(f) CONDITION OF PERSONAL PROPERTY. Except as disclosed to DLB, all
of the equipment, facilities, fixtures, appurtenances and other personal
property which form a part of the Buyers Leasehold and Facilities have been
maintained in a state of repair that is adequate for normal operations, and are
in good working order.
(g) ACCURACY OF DATA. All of the written data, including production
records, computer printouts and other such data, whether similar or dissimilar,
at the time furnished by WRT to DLB, in conjunction with DLB's evaluation of the
Buyer's Leasehold and Facilities, was complete to the best of WRT's knowledge,
and the information reported therein was not materially false, and it did not
omit any material fact necessary to make the reported information not
misleading. WRT has no knowledge of any matter which materially and adversely
affects (or may materially and adversely affect) the operations, prospects or
condition of any portion of the Buyer's Leasehold and Facilities, which has not
been set forth in this Agreement or in the Schedules thereto.
(h) TITLE. Seller owns Defensible Title (as hereinafter defined) to
no less than the net revenue interest and no more than the working interest in
the oil, gas and mineral lease forming a part of the Buyer's Leasehold and
Facilities as is set forth in Schedule 3.22. The term
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"DEFENSIBLE TITLE" as used herein shall mean, as to the Buyer's Leasehold and
Facilities, such title that (1) entitles WRT to receive a percentage of all oil,
gas and other hydrocarbon minerals which are produced, saved and marketed from
or attributable to the Buyer's Leasehold and Facilities not less than the
interest shown as the net revenue interest of WRT on Schedule 3.22 hereto,
without reduction, suspension or termination for the productive life of Buyer's
Leasehold and Facilities; (2) obligates WRT to bear a percentage of the costs
and expenses relating to operations on the maintenance and development of the
Buyer's Leasehold and Facilities not greater than the interest shown as the
working interest of WRT on Schedule 3.22 hereto, without increase for the
productive life of the Buyer's Leasehold and Facilities (unless the net revenue
interest increases at least proportionately); and (3) is free and clear of all
production payments, debts, liens, mortgages, security interests, contract
obligations, restrictions on transferability, preferential purchase rights,
claims, defects and encumbrances except for the Permitted Encumbrances (as
hereinafter defined). The term "PERMITTED ENCUMBRANCES" as used herein shall
mean:
(1) liens securing amounts not yet owing for taxes;
(2) mechanic's, materialmen's, repairmen's or similar liens or
charges which relate to obligations not yet delinquent or the validity of which
is being contested in good faith;
(3) liens of a form and scope customary in the oil and gas industry
under operating agreements and other similar instruments and agreements;
(4) such defects or irregularities, if any, in the title to the
Buyer's Leasehold and Facilities that individually or in the aggregate do not
impair the Buyer's Leasehold and Facilities or the value thereof, affect the
obligation of WRT under this Agreement or materially adversely affect the use of
the Buyer's Leasehold and Facilities; and
(5) royalties, overriding royalties, production payments and other
burdens on production from or attributable to the Buyer's Leasehold and
Facilities that are usual and customary in the oil and gas industry and that
have been taken into account in the net revenue interests set forth in Schedule
3.22.
(j) LICENSES AND PERMITS; FILINGS. All authorizations, licenses and
permits required under federal, state and local laws have been obtained, and all
filings necessary to obtain such authorizations, licenses and permits have been
made, to own and operate the Buyer's Leasehold and Facilities as presently being
owned and operated. Such authorizations, licenses, permits and filings are in
full force and effect, and no material violations exist with respect to any of
the same, and WRT has not received notice of any violation of or investigation
relating thereto.
(k) AFE'S AND OTHER EXTANT OBLIGATIONS. There are no outstanding
authorities for expenditure or other contracts or agreements, except that
certain Global Settlement
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by and among the State of Louisiana, Texaco, Inc. and the Louisiana Land and
Exploration Company, dated February 22, 1994, that;
(l) require the drilling of wells or other material
development operations in order to earn or to continue to hold all or any
portion of the Buyer's Leasehold and Facilities; or
(2) obligate WRT to make payments of any material amounts in
connection with drilling of wells or other material capital expenditures
affecting the Buyer's Leasehold and Facilities.
(l) WELLS, PLUGGING AND ABANDONMENT. There are no wells located on
the Buyer's Leasehold and Facilities, or bottom-holed under the Buyer's
Leasehold and Facilities, which are currently producing, or capable of
producing, hydrocarbons. All wells located on, or bottom-holed under, the
Buyer's Leasehold and Facilities have been plugged and abandoned in accordance
with all applicable laws, ordinances, rules, regulations and permits of any
governmental body or agency having jurisdiction thereover; and there are no
wells located on, or bottom-holed under, the Buyer's Leasehold and Facilities
that WRT, the subject operator or any other party owning an interest in the
Buyer's Leasehold and Facilities is obligated by order or other action of any
governmental body or agency to plug and abandon within a time certain.
(m) EXISTING DOCUMENTS. For purposes of this Agreement, the term
"Existing Documents" shall mean all the oil, gas and other mineral leases,
assignments or other instruments or agreements that comprise the Buyer's
Leasehold and Facilities and all contractually binding arrangements to which the
Buyer's Leasehold and Facilities may be subject and which will be binding on the
Buyer's Leasehold and Facilities or DLB after closing (including, without
limitation, oil, gas and farm-in agreements, option agreements, forced pooling
orders, assignments of production payments, unit agreements, joint operating
agreements, balancing agreements, unit operating agreements, production
contracts, processing contracts, gas sales contracts, marketing and
transportation contracts and division orders). With respect to the Buyer's
Leasehold and Facilities and insofar as the following could materially prevent
DLB from receiving the proceeds of production attributable to, or otherwise
receiving the economic benefits deriving from, the Buyer's Leasehold and
Facilities or result in he cancellation of DLBW's interest therein, (i) all
Existing Documents are in full force and effect and are the valid and legally
binding obligations of the parties thereto and are enforceable in accordance
with their respective terms, except as may result from the pendency of the
Chapter 11 Case or as disclosed in the Disclosure Statement; (ii) WRT is not in
material breach or default with respect to any of its obligations pursuant to
any such Existing Documents or any regulations incorporated therein or governing
same, except as a result of the pendency of the Chapter 11 Case or as disclosed
in the Disclosure Statement; and (iii) all payments (including, without
limitation, royalties, delay rentals, shut-in royalties and valid calls under
unit or operating agreements) and obligations due thereunder have been made and
satisfied by or on behalf of WRT.
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Section 3.23. FULL DISCLOSURE. WRT has disclosed to DLB and Wexford all material
facts concerning WRT's and its Subsidiaries assets, business, operations,
financial condition and prospects. No representation or warranty by WRT in this
Commitment Agreement and no statement made by WRT contained in the Plan, the
Disclosure Statement (other than statements made by DLBW therein) or any
document delivered or to be delivered by or on behalf of WRT to DLB and Wexford
in accordance with this Commitment Agreement contained or will contain any
untrue statement of material fact or omitted or will omit to state a material
fact necessary to make the statements contained in this Commitment Agreement or
in any such document, in light of the circumstances under which they were made,
not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DLB AND WEXFORD
Section 4.01. REPRESENTATIONS AND WARRANTIES OF DLB. DLB hereby
represents and warrants to, and covenants and agrees with, WRT and Wexford that
(i) this Commitment Agreement has been duly authorized by DLB and has been duly
executed and delivered on its behalf and constitutes the valid and binding
obligation of DLB, enforceable against DLB in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, moratorium,
reorganization and similar laws affecting creditors' rights generally and to
general principles of equity, whether considered in a proceeding at law or in
equity, (ii) it has and will have full power and authority to contribute at the
closing the funds required pursuant to Article II hereof to the capital of New
WRT, (iii) the execution and delivery by DLB of this Commitment Agreement, and
the consummation by DLB of the transactions contemplated hereby, will not, to
the best of DLB's knowledge, conflict with, violate, or result in any breach of,
any of the terms, conditions or provisions of, or constitute a default under, or
result in the creation of a lien on, or the acceleration of any obligation or
the loss of a benefit under, (I) DLB's certificate of incorporation or by-laws,
(II) any note, indenture, deed of trust, material lease, or other material
instrument, contract or agreement to which DLB may then be a party or by which
it or its respective properties and assets may then be bound, or (III) any law,
ordinance, rule or regulation of any government or governmental authority or
judgment, order or decree of any court or governmental authority, (iv) subject
to such filings as may be required under the Exchange Act, the HSR Act and the
entry of the Confirmation Order, all consents, approvals, orders and
authorizations of, and all registrations, declarations and filings with, any
federal or state government or governmental authority required to be made or
obtained by DLB for the consummation by it of the transactions contemplated
hereby have been made or obtained or will be made or obtained prior to the
Effective Date and (v) the information provided by DLB in writing expressly for
inclusion in the Disclosure Statement does not, and will not, contain an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Section 4.02 REPRESENTATIONS AND WARRANTIES OF WEXFORD. Wexford
hereby represents and warrants to, and covenants and agrees with, WRT and DLB
that (i) this
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Commitment Agreement has been duly authorized by Wexford in its capacity as
investment manager for the Wexford Funds and, if necessary, by each of the
Wexford Funds, has been duly executed and delivered on its behalf and
constitutes the valid and binding obligation of the Wexford Funds, enforceable
against the Wexford Funds in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, moratorium, reorganization and
similar laws affecting creditors' rights generally and to general principles of
equity, whether considered in a proceeding at law or in equity, (ii) the Wexford
Funds have and will have full power and authority to contribute at the Closing
the funds required pursuant to Article II hereof to the capital of new WRT,
(iii) the execution and delivery by Wexford and the Wexford Funds of this
Commitment Agreement, and the consummation by the Wexford Funds of the
transactions contemplated hereby, will not, to the best of Wexford's knowledge,
conflict with, violate, or result in any breach of, any of the terms, conditions
or provisions of, or constitute a default under, or result in the creation of a
lien on, or the acceleration of any obligation or the loss of a benefit under,
(I) Wexford's operating agreement or the partnership agreements of the Wexford
Funds, (II) any note, indenture, deed of trust, material lease, or other
material instrument, contract or agreement to which Wexford or the Wexford Funds
may then be a party or by which they or their respective properties and assets
may then be bound, or (III) any law, ordinance, rule or regulation of any
government or governmental authority or judgment, order or decree of any court
or governmental authority, (iv) subject to such filings as may be required under
the Exchange Act, the HSR Act and the entry of the Confirmation Order, all
consents, approvals, orders and authorizations of, and all registrations,
declarations and filings with, any federal or state government or governmental
authority required to be made or obtained by Wexford for the consummation by it
of the transactions contemplated hereby have been made or obtained or will be
made or obtained prior to the Effective Date and (v) the information provided by
Wexford in writing expressly for inclusion in the Disclosure Statement does not,
and will not, contain an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.03. FINANCING. DLB and the Wexford Funds have, or will
have prior to the Closing, sufficient cash, available lines of credit or other
sources of immediately available funds to enable it to make payment of the funds
required pursuant to Article II hereof and any other amounts to be paid by it
hereunder.
Section 4.04. PURCHASE FOR INVESTMENT. DLB and the Wexford Funds
are purchasing the New WRT Common Stock and the New WRT Subscription Common
Stock for investment for their own respective accounts and not with a view to,
or for sale in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended. DLB, Wexford and the Wexford Funds(either
alone or together with their advisors) have sufficient knowledge and experience
in financial and business matters so as to be capable of evaluating the merits
and risks of its investments in the New WRT Common Stock and the New WRT
Subscription Common Stock and are capable of bearing the economic risks of such
investment.
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Section 4.05. LITIGATION. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of DLB, Wexford or the Wexford Funds
threatened against or affecting, DLB, Wexford or the Wexford Funds before any
court or arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Commitment Agreement.
ARTICLE V
COVENANTS OF WRT
WRT covenants and agrees with DLB and Wexford that, from and after
the date hereof and until the Effective Date, except as otherwise expressly
provided herein or in the Plan and subject to the terms and conditions hereof:
Section 5.01 CONDUCT OF BUSINESS. (a) WRT shall carry on its
business diligently and consistent with good business practice, maintain its
properties in customary repair, order and condition, ordinary wear and tear
excepted, and use all reasonable commercial efforts to maintain and preserve its
business organization.
(b) WRT will not (i) take or agree or commit to take any action
that would make any representation and warranty of WRT hereunder inaccurate in
any material respect at, or as of any time prior to, the Effective Date or (ii)
omit or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time.
Section 5.02 ACTIONS IN THE CHAPTER 11 CASE.
(a) Subject to its fiduciary obligations as debtor-in-possession in
the Chapter 11 Case, WRT shall use its best efforts, diligently and in good
faith, to cause the Plan to be confirmed by the Bankruptcy Court. Without
limiting the application of the foregoing sentence, so long as this Commitment
Agreement is in full force and effect, WRT will not propose or in any way
support any plan that fails to provide for the full payment in cash at the
Closing of the Texaco Claim. WRT shall not amend the Plan or permit the Plan to
be amended without the prior written consent of DLB and Wexford and, upon the
request of DLB and Wexford, shall promptly file with the Bankruptcy Court all
such amendments to the Plan and to the Disclosure Statement or any exhibit to
the Plan or Disclosure Statement as are necessary in order to give effect to the
provisions of this Commitment Agreement. Subject to the confirmation of the
Plan, WRT shall take all actions not inconsistent with the terms of this
Commitment Agreement that are necessary or appropriate in order to effect the
consummation of the Plan and the transactions contemplated by this Commitment
Agreement.
(b) Promptly after the execution and delivery hereof, WRT shall
make such filings (which shall be in form and substance satisfactory to DLB and
Wexford) with the
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Bankruptcy Court as are necessary in order to obtain the approval of the
Bankruptcy Court of the terms and provisions of this Commitment Agreement on or
before entry of an order approving the Disclosure Statement, including, without
limitation, the provisions of Sections 10.02 and 10.03 hereof. WRT shall use its
best efforts, diligently and in good faith, to obtain such approval as promptly
as practicable and shall submit a motion for such approval, substantially in the
form of Exhibit B hereto, to the Bankruptcy Court no later than the close of
business on January 28, 1997.
(c) WRT shall use its best efforts, diligently and in good faith,
to file with the Bankruptcy Court and to prosecute objections to all Claims that
WRT, DLB or Wexford believes in good faith are subject to objection in whole or
in part, including, without limitation, objections to the amount of such Claims
and to any lien, mortgage or other security interest asserted with respect to
such Claims, and shall not settle any such objection except with the consent of
DLB and Wexford, which consent shall not be unreasonably withheld.
(d) WRT shall not take any actions or omit to take any actions that
are inconsistent with the provisions of this Commitment Agreement or that
interfere in any manner with the provisions of this Commitment Agreement.
(e) WRT shall exercise all reasonable efforts, diligently and in
good faith, to have the New WRT Common Stock qualified, prior to the Effective
Date, for quotation on the NASDAQ system upon issuance thereof.
Section 5.03 NEGATIVE COVENANTS. WRT will not, except as expressly
or specifically contemplated by this Commitment Agreement or as expressly and
specifically permitted in the Plan, engage in any of the following activities or
transactions without the express written consent of DLB and Wexford, which shall
not be unreasonably withheld:
(a) propose or in any way support any plan of reorganization
for WRT other than the Plan;
(b) sell, lease, dispose of or transfer, or agree to sell,
lease, dispose of or transfer, any material leases or any other material
assets or rights, or cancel or agree to cancel any material liabilities
owed to WRT;
(c) issue, sell, deliver or agree to issue, sell or deliver
any shares of capital stock, bonds, debentures, notes or other corporate
securities of which WRT is the issuer or grantor, or grant or issue, or
agree to grant or issue, any options, warrants, bonuses or other similar
rights calling for the issuance of such securities;
(d) borrow, or agree to borrow, any funds or voluntarily
incur, or assume or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability for borrowed money;
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(e) except for (i) Permitted Liens and (ii) leases entered into in the
ordinary course of business and not otherwise prohibited hereby, mortgage,
pledge or otherwise encumber any part of its assets;
(f) enter, or agree to enter, into any agreement or
arrangement (i) granting any rights of first refusal or similar
preferential rights to purchase any assets of WRT, other than in the
ordinary course of business and with respect to non-material assets, or
(ii) requiring the consent of any Person to the consummation of any of the
transactions contemplated by this Commitment Agreement or the Plan;
(g) breach, amend (other than in the ordinary course of
business consistent with past practices) or terminate (other than in
accordance with its terms) any material agreement, contract or instrument
to which WRT is a party;
(h) merge or consolidate with or into any other Person,
acquire control or acquire any capital shares or other securities of any
other Person, or take any steps incidental to or in furtherance of any
such actions, whether by entering into an agreement providing therefor or
otherwise;
(i) enter into any material contract, arrangement or
agreement (other than contracts, agreements or arrangements entered into
in the ordinary course of business consistent with past practices);
(j) except as required by law or by GAAP, made any material
alteration in the manner of keeping its books, accounts or records or in
the accounting practices reflected therein;
(k) enter into any material transaction or acquire any
capital assets other than in the ordinary course of business consistent
with past practices;
(l) reject any executory contract or unexpired lease with
respect to which the damages resulting from such rejection would exceed
$50,000;
(m) amend its certificate of incorporation or by-laws or
change its authorized or outstanding capital stock;
(n) except in amounts that individually or in the aggregate
are not material, (i) grant to any director or officer or to any employee
or consultant any increase in compensation in any form, (ii) grant to any
such person any severance or termination pay or benefit, or (iii) make any
loan or advance to, or enter into, amend, modify, terminate or renew any
compensation benefit or employment agreement or arrangement with, any such
person; or
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(o) take any other action inconsistent with the terms of this Commitment
Agreement or the Plan or that could reasonably be expected to impair the
consummation of the transactions contemplated hereby or thereby.
Section 5.04 DELIVERY OF CERTAIN DOCUMENTS.
(a) WRT shall promptly furnish to DLB and Wexford from the date
hereof until the Effective Date a copy of each such report, including financial
statements and schedules, hereafter filed by WRT pursuant to the Exchange Act,
and all material documents served upon or served by WRT in connection with the
Chapter 11 Case or any action or proceeding which may be initiated with respect
to any transaction contemplated by this Commitment Agreement.
(b) WRT shall give DLB and Wexford and their respective
accountants, counsel and other designated representatives access during normal
business hours throughout the
period from the date hereof to the Effective Date to all premises, books,
records and other information of and concerning WRT (including, without
limitation, all work papers relating to tax and accounting information used in
connection with the preparation of financial statements and tax returns), and
shall cause its officers and managerial employees to furnish to DLB and Wexford
such financial and operating data and other information with respect to its
business and properties as either may reasonably request. No investigation made
by or information furnished to DLB or Wexford pursuant to this Commitment
Agreement shall be deemed to impact DLB's and Wexford's ability to rely on any
representations or warranties by WRT or the conditions to the obligations of the
parties to consummate the transactions contemplated by this Commitment
Agreement.
Section 5.05 NOTIFICATION. WRT shall promptly notify DLB and
Wexford of (a) the occurrence of any change, event or condition that has had, or
could reasonably be expected to have, an effect on the Closing or a Material
Adverse Effect, (b) the commencement or threat of commencement of any litigation
that might reasonably be expected to have a Material Adverse Effect or that
relate to the consummation of the transactions contemplated by this Commitment
Agreement or the Plan, (c) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the consummation of the transactions contemplated by this Commitment
Agreement or the Plan, (d) any notice or other communication from any
governmental or regulatory agency or authority in connection with the
transactions contemplated by this Commitment Agreement or the Plan or (e) any
change in the senior management of WRT.
Section 5.06. UPDATING DISCLOSURES. From time to time through the
Effective Date, WRT will promptly deliver to DLB and Wexford any information
concerning events subsequent to the date of this Commitment Agreement or which
becomes available to WRT after the date hereof which is necessary to supplement
the representations and warranties of WRT contained herein, in order that such
representations and warranties are kept current, complete and accurate in all
material respects. Such delivery shall, to the extent of any new disclosure the
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substance of which has had or could be reasonably expected to have a Material
Adverse Effect, provide DLB and Wexford the right to terminate this Commitment
Agreement or pursue any other legal remedy hereunder.
Section 5.07. MAINTENANCE OF INSURANCE. Through the Effective Date,
WRT will keep in force substantially the same kinds and amounts of insurance
which is carried as of the date hereof.
Section 5.08 GOVERNMENT FILINGS. WRT will (i) duly and timely file
(subject to authorized extensions) all reports or returns required to be filed
with federal authorities and all material reports and returns required to be
filed with state, foreign, local or other authorities, (ii) except as
contemplated by the Plan, unless contesting such in good faith and having
established adequate book reserves therefor, promptly pay, as and when due, all
federal, state, local and foreign taxes, assessments and governmental charges to
the extent such taxes, assessments and charges constitute expenses of
administration under Section 503 of the Bankruptcy Code and (iii) duly observe
and conform to all lawful requirements of any governmental authority relating to
any of its properties or to the operation and conduct of its business and to all
covenants, terms and conditions upon, or under which, any of its properties are
held where the failure so to observe, conform or comply would have a Material
Adverse Effect.
Section 5.09 MANAGEMENT REPORTS. Subject to its fiduciary duties as
debtor-in- possession, WRT shall prepare, consistently with its current
practice, and deliver to DLB and Wexford copies of its monthly operating
statements, variance reports and other internal reports and documents,
simultaneously with the customary internal circulation thereof within WRT.
Section 5.10 BOARD MEETINGS. WRT shall give DLB and Wexford at
least two days' prior notice of any board meeting or meeting of a committee of
the board and, subject to WRT's fiduciary duties as a debtor-in-possession, DLB
and Wexford each shall have the right to have a representative attend all such
meetings.
Section 5.11 FURTHER ASSURANCES. WRT shall (a) execute and deliver
such instruments and take such other actions as DLB and Wexford may reasonably
require in order to carry out the intent and purpose of this Commitment
Agreement and the Plan, (b) use its best efforts, diligently and in good faith,
to obtain any consents required herein to be obtained, (c) subject to its
fiduciary duties as debtor-in-possession, diligently support this Commitment
Agreement and the Plan in any proceeding before the Bankruptcy Court or any
other governmental or regulatory authority whose approval of the transaction
contemplated hereby and by the Plan is required, (d) subject to its fiduciary
duties as debtor-in-possession, use its best efforts, diligently and in good
faith, to oppose any litigation that seeks to restrain or prohibit the
consummation of the transactions contemplated hereby or by the Plan or which
would have a Material Adverse Effect and (e) use its best efforts, diligently
and in good faith, to cause the conditions precedent set forth in Article IX
hereof to be satisfied.
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ARTICLE VI
COVENANTS OF DLB AND WEXFORD
Section 6.01 GENERAL COVENANTS. Each of DLB and Wexford, jointly
and severally, covenants and agrees, subject to the terms and conditions hereof,
that they will (a) execute and deliver such instruments and take such other
actions as WRT may reasonably require in order to carry out the intent and
purpose of this Commitment Agreement and the Plan, (b) use their best efforts,
diligently and in good faith, to obtain any consents required herein to be
obtained by them, (c) diligently support this Commitment Agreement and the Plan
in any proceeding before the Bankruptcy Court or any other governmental or
regulatory authority whose approval of the transaction contemplated hereby and
by the Plan is required, (d) vote the Claims held by them in favor of the
confirmation of the Plan, (e) use their best efforts, diligently and in good
faith, to oppose any litigation that seeks to restrain or prohibit the
consummation of the transactions contemplated hereby or by the Plan and (f) use
their best efforts, diligently and in good faith, to cause the conditions
precedent set forth in Article VIII hereof to be satisfied.
ARTICLE VII
COVENANTS OF WRT, DLB AND WEXFORD
WRT, DLB and Wexford agree that:
Section 7.01 BEST EFFORTS. Subject to the terms and conditions of
this Commitment Agreement, WRT, DLB and Wexford will use their best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Commitment Agreement. WRT, DLB
and Wexford agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be necessary
or desirable in order to consummate or implement expeditiously the transactions
contemplated by this Commitment Agreement.
Section 7.02 CERTAIN FILINGS. WRT, DLB and Wexford shall cooperate
with one another (i) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Commitment Agreement and (ii) in taking such
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 7.03 PUBLIC ANNOUNCEMENTS. The parties agree to consult
with each other before making any press release or making any public statement
with respect to this
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Commitment Agreement or the transactions contemplated hereby and, except as may
be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
Section 7.04 CONFIDENTIAL TREATMENT. Each of DLB and Wexford,
severally and not jointly, on the one hand and WRT on the other hand agrees that
all non-public information provided or made available to it or any of its
affiliates by or on behalf of the other party hereunder or pursuant hereto shall
be kept confidential and shall not be used by it or such affiliates for any
purpose other than in connection with the transactions contemplated by this
Commitment Agreement; PROVIDED, HOWEVER that the foregoing shall not apply to
any such information which becomes publicly available (i) other than through
breach of this Section 7.04, (ii) from a third party not under a confidentiality
obligation to the parties hereto or (iii) because it is included in the
Disclosure Statement as required pursuant to Section 1125 of the Bankruptcy
Code.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF WRT
Section 8.01. CONDITIONS PRECEDENT TO WRT'S OBLIGATIONS. The
obligations of WRT to consummate the transactions contemplated by this
Commitment Agreement, including, without limitation, to issue shares of New WRT
Common Stock and New WRT Subscription Common Stock as provided herein and in the
Plan at the times herein and therein provided, shall be subject to the
satisfaction, or to the waiver by WRT, of each of the following conditions:
(a) The Bankruptcy Court shall have entered the Confirmation Order.
(b) At the Effective Date, all required consents and approvals of
any governmental agency, authority, commission or other party shall have been
obtained and the same shall be in full force and effect, any applicable waiting
period (and any extension thereof) applicable to the consummation of the Plan
under the HSR Act shall have expired or been earlier terminated and no
preliminary or permanent injunction or other order, decree or ruling barring
consummation of the Plan shall have been entered with respect to or in
connection with any application under the HSR Act.
(c) The representations and warranties of DLB and Wexford contained
herein shall have been true and correct when made, and shall be true and correct
in all material respects on and as of the Effective Date, as if made by DLB and
Wexford, respectively, on and as of such date.
(h) At the Effective Date, each of DLB and Wexford shall have
complied or shall concurrently comply with each covenant and agreement required
herein to be complied with by it on or prior to the Effective Date.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF DLB AND WEXFORD
Section 9.01. CONDITIONS TO RESPECTIVE OBLIGATIONS OF DLB AND
WEXFORD. The joint and several obligations of DLB and Wexford to consummate the
transactions contemplated by this Commitment Agreement, including, without
limitation, to make or effect or cause to be made or effected, the payments
required pursuant to Article II hereof at the times therein provided, shall be
subject to the satisfaction, or to the waiver by each of DLB and Wexford (except
as expressly provided in this Section 9.01), of each of the following
conditions:
(a) Prior to the Effective Date, there shall have been approved
pursuant to an order of the Bankruptcy Court (which order, contemplated to be
the Confirmation Order, shall have become a Final Order) the issuance to DLB and
Wexford of the shares of New WRT Common Stock and New WRT Subscription Common
Stock issuable to DLB and Wexford, the payment in full of the Texaco Claim and
all the other provisions of Article II hereof and at the Effective Date, no
action, suit or proceeding by or before any court, governmental agency or other
tribunal shall be pending or threatened against WRT, DLB or Wexford, arising out
of or with respect to the transactions contemplated by this Commitment
Agreement, the Plan or the Disclosure Statement.
(b) The Bankruptcy Court shall have entered the Confirmation Order,
which order shall have become a Final Order, and such Final Order shall contain,
INTER ALIA, provisions approving the amount of the fees and expenses paid or
payable to DLB and Wexford and shall be in form and substance satisfactory to
each of DLB and Wexford.
(c) Prior to the initial date of mailing of the Disclosure
Statement, as approved by the Bankruptcy Court to the creditors and shareholders
of WRT (the "Mailing Date"), the Bankruptcy Court shall have entered an order
(which order shall become a Final Order) approving certain provisions of this
Commitment Agreement, including, without limitation, Sections 2.02(a) and (b),
10.02 and 10.03 and Articles V and VII.
(d) At the Effective Date, no action, suit or proceeding by or
before any court, governmental agency or other tribunal shall be pending or
threatened, other than those actions, suits and proceedings described in the
Schedules, against WRT the adverse determination of which would have a Material
Adverse Effect.
(e) From the date hereof through and including the Effective Date,
there shall have been no material adverse change in the business, properties,
financial condition, results of operations or prospects of WRT or New WRT.
(f) All consents and approvals of any governmental agency,
authority, commission or other party shall have been obtained and the same shall
be in full force and effect
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on and as of the Effective Date, any waiting period (and any extension thereof)
applicable to the consummation of the Plan under the HSR Act shall have expired
or been earlier terminated and no preliminary or permanent injunction or other
order, decree or ruling barring consummation of the Plan shall have been entered
with respect to or in connection with any application under the HSR Act.
(g) The representations and warranties of WRT contained herein
shall have been true and correct when made, and shall be true and correct in all
material respects on and as of the Effective Date, as if made by New WRT on and
as of such date, and DLB and Wexford shall have received a certificate of an
executive officer of New WRT to such effect.
(h) At the Effective Date, each of WRT and New WRT shall have
complied or shall concurrently comply with each covenant and agreement required
herein to be complied with by it on or prior to the Effective Date, and DLB and
Wexford have received a certificate of an executive officer of New WRT to such
effect.
(i) At the Effective Date, the New WRT Certificate of Incorporation
shall have been duly adopted and filed with the Secretary of State for the State
of Delaware and the New WRT By-Laws shall have been duly adopted and each shall
contain provisions acceptable to DLB and Wexford.
(j) The Registration Rights Agreement, the New WRT Subscription
Rights Agreement and the Administrative Services Agreement shall have been
executed and delivered by the parties thereto and such agreements shall contain
substantially the terms described in the Disclosure Statement, and all Exhibits
and Schedules to the Plan and Disclosure Statement shall be in form and
substance reasonably satisfactory to each of DLB and Wexford.
(k) The Louisiana State Mineral Board shall have executed a consent
to the transfer of the WCBB Assets to DLB (or its designee) pursuant to the
terms of the Purchase, Sale and Exchange Agreement.
(l) There shall not have occurred (i) any material adverse change
in the condition of the financial markets generally, in the United States, or in
the worldwide market for geophysical services, or any outbreak of hostilities if
such hostilities materially adversely affect the oil markets or the market for
geophysical services or involve the United States, or other national or
international calamity or crisis the effect of which shall be such as to make
it, in the reasonable judgment of DLB and Wexford, impracticable to consummate
the transactions contemplated hereby to be consummated at the Effective Date, or
(ii) any suspension in trading in any securities of WRT or New WRT by the
Commission or any national or regional securities exchange, or the establishment
of minimum or maximum prices for trading, or maximum ranges for prices for
securities, by said exchange or by order of the Commission or any other
government authority, or any declaration of a banking moratorium by Federal, New
York or Texas authorities.
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(m) DLB and Wexford shall have received an opinion, dated the Effective Date, of
Sheinfeld, Maley & Kay, P.C., counsel to WRT, in form and substance satisfactory
to DLB and Wexford.
Section 9.02. WAIVERS. On the date (which shall not be prior to 15
days after entry of an order confirming the Plan) on which WRT notifies DLB and
Wexford that the remaining conditions to the obligations of DLB and Wexford set
forth in Section 9.01 hereof have been satisfied or waived and WRT delivers all
such instruments, certificates and opinions in appropriate form as required
under this Commitment Agreement, DLB and Wexford shall determine whether the
conditions set forth in Sections 9.01(d), 9.01(g) and 9.01(k) have been
satisfied, or if such conditions have not been satisfied shall determine whether
or not to waive the same, and shall notify New WRT of the results of said
determination and in the event that all of such conditions are not satisfied or
waived, the Effective Date shall not occur and the parties hereto shall have
such right and obligations as are expressly set forth herein.
ARTICLE X
MISCELLANEOUS
Section 10.01. COMPLIANCE WITH PLAN. Without limiting the
obligations of WRT under this Commitment Agreement, WRT hereby covenants and
agrees with DLB and Wexford that it will comply in all respects with the
provisions of the Plan from and after the entry by the Bankruptcy Court of the
Confirmation Order with the same force and effect as if such provisions were set
forth in full herein.
Section 10.02. BREAK-UP FEE. If (a) WRT breaches in any material
respect any of its covenants or obligations under this Commitment Agreement or
the Plan, (b) WRT reaches an agreement in principle with respect to, accepts a
commitment for the purchase of, contracts to sell or sells WRT or a material
portion of its assets or operations, or, pursuant to a plan of reorganization or
otherwise, debt or equity securities of WRT, to any person other than an Extant
Bidder, DLB and Wexford or persons approved by DLB and Wexford, or WRT
terminates this Commitment Agreement for any reason other than as a result of a
material breach hereof by DLB and Wexford or (c) a plan of reorganization for
WRT other than the Plan or a plan proposed solely by an Extant Bidder is
confirmed (collectively, a "Break-Up Event"), then (x) DLB and Wexford shall
have the right to terminate this Commitment Agreement or pursue any other legal
remedy hereunder and (y) WRT shall immediately pay to DLB and Wexford, in
addition to the reimbursement of out-of-pocket expenses set forth in Section
10.03 hereof, a fee (the "Break-Up Fee") in the amount of $700,000, payable
following written demand therefor by DLB and Wexford; PROVIDED, HOWEVER, that
the Break-Up Fee shall not be payable if (x) any of the conditions precedent
contained in this Commitment Agreement or the Plan is not met or (y) DLB and
Wexford breaches any of their covenants or obligations under this Commitment
Agreement. The Break-Up Fee shall be an administrative expense claim under
Section 503(b)(1)(A) of the Bankruptcy Code payable at the time all other such
administrative expenses are paid (other than
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professional fees and administrative expenses paid in the ordinary course). The
Break-Up Fee shall be payable to DLB and Wexford if, and only if, at the
occurrence of the Break-Up Event, DLB and Wexford shall have not theretofore
exercised any right or stated its intent to terminate or not perform its
obligations under this Commitment Agreement, except as a consequence of the
failure of WRT to perform its material covenants or obligations under this
Commitment Agreement or the Plan.
Section 10.03. EXPENSE REIMBURSEMENT. The reasonable out-of-pocket
expenses (including, without limitation, the reasonable fees and expenses of
counsel and other advisors to DLB and Wexford) incurred in connection with the
preparation, negotiation and consummation of this Commitment Agreement, the Plan
and all related documents and transactions shall be for WRT's account and shall
be an allowed administrative expense claim under Section 503(b)(1)(A) of the
Bankruptcy Code, whether or not the transactions contemplated by this Commitment
Agreement are consummated; PROVIDED, HOWEVER, that if such transactions are not
consummated as a result of the material breach by DLB and Wexford of their
covenants or obligations under this Commitment Agreement, WRT shall have no
obligation to pay the fees and expenses of DLB and Wexford. Payment of such
reasonable out-of-pocket costs and expenses shall be made from time to time
promptly, and in no event later than 15 days, following written demand therefor
by DLB and Wexford accompanied by appropriate invoices, except that the fees and
expenses incurred by DLB and Wexford prior to October 22, 1996 shall be paid
only if the Bankruptcy Court enters an order, which may be the Confirmation
Order, approving such fees and expenses. Any costs and expenses paid to DLB and
Wexford for which it is not eligible pursuant to the proviso in the first
sentence of this Section 10.03 shall be promptly returned to WRT. The obligation
of WRT to reimburse DLB and Wexford for their reasonable out-of-pocket costs and
expenses shall not exceed $1,000,000 in excess of any and all out-of-pocket
expenses of DLB and Wexford the reimbursement of which has already been approved
by the Bankruptcy Court pursuant to the Expense Order, (whether or not DLB and
Wexford have actually sought or obtained reimbursement of any or all of such
amount). DLB and Wexford will not seek, as part of the expense reimbursement
provided pursuant to this Section 10.03, reimbursement of expenses incurred by
it (a) in connection with the negotiation and closing of any consensual
arrangement among Texaco, DLB and WRT relating to WCBB and (b) in connection
with any litigation between WRT and Texaco related to WCBB and Texaco's claims
related thereto.
Section 10.04. LIQUIDATED DAMAGES. If DLB or Wexford breaches in
any material respect any of its covenants or obligations under this Commitment
Agreement, then DLB and Wexford shall pay to WRT liquidated damages in the
amount of $700,000, payable following written demand therefor by WRT. The
payment of such liquidated damages shall be in addition to any other remedies
available to WRT as a result of such breach.
Section 10.05. WAIVERS. Any failure of WRT, DLB or Wexford to
comply with any obligation, covenant, agreement or condition herein may be
expressly waived by the party to which such obligation, covenant or agreement is
owed or for whose benefit such condition exists
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to the extent permitted under applicable law. Any such waiver shall be in a
writing signed by an officer or agent of the party giving such waiver thereunto
duly authorized. Any waiver or any failure to insist upon strict compliance with
any such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
Section 10.06. BROKERS AND FINDERS; EXPENSES. Except for Jefferies
& Company, Inc., which will be compensated as described in the Disclosure
Statement, each of WRT, DLB and Wexford represents and warrants to the others of
them that no broker or finder (including any of its officers, directors or
agents) is entitled to any brokerage or finder's fee or other commission from it
based on agreements, arrangements or undertakings made by it in connection with
this Commitment Agreement or the transactions contemplated hereby. Except as
otherwise provided in this Commitment Agreement, each party shall bear its own
costs and expenses in connection herewith.
Section 10.07. NOTICES. Any notice, demand, claim or other
communications under this Commitment Agreement shall be in writing and shall be
deemed to have been given upon personal delivery thereof, or upon receipt
thereof if sent by registered mail, return receipt requested, postage prepaid,
or upon confirmation of delivery thereof by courier service, if sent by
recognized overnight courier service, to the respective address of the parties
set forth below (or such other address as a party may specify by notice given as
herein provided):
IF TO WRT, TO:
WRT Energy Corporation
Attention: Mr. Raymond P. Landry
5718 Westheimer, Suite 1201
Houston, Texas 77057
COPY TO:
Sheinfeld, Maley, & Kay, P.C.
Attention: Joel P. Kay, Esq.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
IF TO DLB, WEXFORD AND THE WEXFORD FUNDS, TO:
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DLB Oil & Gas, Inc.
Attention: Mark Liddell
1601 N.W. Expressway, Suite 700
Oklahoma City, OK 73118-1401
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Wexford Management LLC
Attention: Arthur Amron, Esq.
411 West Putnam Avenue
Greenwich, CT 06830
COPY TO:
Schulte Roth & Zabel LLP
Attention: Jeffrey S. Sabin, Esq.
900 Third Avenue
New York, New York 10022
Section 10.08. SUCCESSORS AND ASSIGNS. This Commitment Agreement
and all the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors (including, without
limitation, any trustee of WRT and New WRT) and permitted assigns, but neither
this Commitment Agreement nor any of the rights, interests or obligations
hereunder may be assigned by any of the parties hereto without the prior written
consent of the other parties.
Section 10.9. HEADINGS. The headings of the Articles and Sections
of this Commitment Agreement are inserted for convenience only and shall not
affect the interpretation hereof.
Section 10.10. ENTIRE AGREEMENT. This Commitment Agreement, the New
WRT Subscription Rights Agreement, the Administrative Services Agreement and the
Plan (including the Exhibits and Schedules hereto and thereto) contains the
entire understanding of the parties hereto with respect to the subject matter
hereof. There are no restrictions promises, representations, warranties,
covenants, or undertakings among the parties relating to the subject matter
hereof other than those expressly set forth or referred to herein or therein,
subject to the approval of the Bankruptcy Court. This Commitment Agreement
supersedes all prior agreements and understandings among the parties with
respect to the subject matter hereof. In the event of any inconsistency between
the term and provisions of this Commitment Agreement and the terms and
provisions of the Plan, then, and in such event, the terms and provisions of
this Commitment Agreement shall control.
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Section 10.11. COUNTERPART. This Commitment Agreement may be executed in two or
more counterparts, and each such counterpart shall be deemed an original but all
such counterparts together shall constitute one and the same agreement.
Section 10.12. GOVERNING LAW. Except to the extent inconsistent
with the Bankruptcy Code, this Commitment Agreement and the legal relations
between the parties hereto shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York, without giving effect to the
provisions, principles or policies thereof respecting conflict or choice of
laws.
Section 10.13. SURVIVAL. The representations and warranties of the
parties hereto shall survive only until the Effective Date but not thereafter.
Section 10.14. EFFECTIVENESS OF AGREEMENT. The provisions of this
Commitment Agreement shall become effective upon the entry by the Bankruptcy
Court of an order approving the terms and conditions hereof; PROVIDED, HOWEVER,
that the provisions of Sections 5.02(b), 5.02(d) and 7.04 hereof shall be
effective upon the execution and delivery hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Agreement to be duly executed by their officers, partners or agents thereunto
duly authorized as of the day and year first above written.
WRT ENERGY CORPORATION, INC., Debtor
and Debtor-in-Possession
By:_______________________________________
Name:
Title:
DLB OIL & GAS, INC.
By:______________________________________
Name:
Title:
WEXFORD MANAGEMENT LLC
By:_______________________________________
Name:
Title:
WEXFORD MANAGEMENT LLC, as agent for:
WEXFORD CAPITAL PARTNERS II, L.P.
WEXFORD OVERSEAS PARTNERS I, L.P.
WEXFORD SPECIAL SITUATIONS 1996, L.P.
WEXFORD SPECIAL SITUATIONS 1996
INSTITUTIONAL, L.P.
WEXFORD-EURIS SPECIAL SITUATIONS
1996, L.P.
WEXFORD SPECIAL SITUATIONS 1996,
LIMITED
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT I
EXHIBIT I TO DISCLOSURE STATEMENT
Facility: $15,000,000 senior term credit facility (the
"Facility").
Borrower: Reorganized WRT Energy Corporation ("WRT").
Lender: ING (U.S.) Capital Corporation ("ING").
Maturity: Due in full two years from Effective Date (assumed to be
July 1, 1997). Installments of $1,000,000 each due on
last day of the 15th, 18th, and 21st month after
Effective Date.
Interest Rates: ING's fluctuating "reference rate", plus 1.25%, based on
a 360-day year, payable quarterly, or, at WRT's option.
Reserve adjusted LIBOR for periods of 1, 2, 3 or 6
months, plus 3.0%, based on a 360-day year, payable at
the end of each interest period and, for periods longer
than 3 months, payable quarterly.
Fees: Facility Fee: Non-refundable arrangement fee payable to
ING in an amount equal to 1.25% of Facility (i.e.,
$187,500). One-half payable upon execution by ING and
DLB of Commitment Letter and one-half payable on
closing.
Anniversary Fees: $200,000, payable in two installments
of $100,000 each on December 31, 1997 and December 31,
1998 (or, if earlier, at prepayment of facility).
Security and WRT will provide liens, security interests, and
Supporting assignments to ING (collectively, "ING Liens") covering
Agreements substantially all of WRT's assets (including, without
limitation, first priority liens and assignments of
production covering all of WRT's proved oil and gas
properties and the 50% interest in West Cote Blanche
Bay to be contributed by DLB).
THIS TERM SHEET IS NEITHER A COMMITMENT NOR AN OFFER TO FUND ANY TRANSACTION BY
ING (U.S.) CAPITAL CORPORATION ("ING") OR ANY OF ITS AFFILIATES. THE ISSUANCE
OF ANY COMMITMENT LETTER WILL BE SUBJECT TO SATISFACTORY DUE DILIGENCE OF WRT
AND ITS OPERATING SUBSIDIARIES, RECEIPT OF INTERNAL CREDIT AND OTHER APPROVALS,
AND RECEIPT OF A FAVORABLE LEGAL OPINION FROM ING'S LEGAL COUNSEL. THE TERMS AND
CONDITIONS IN THIS TERM SHEET ARE SUBJECT TO MODIFICATION AT THE DISCRETION OF
ING, PARTICULARLY IN THE EVENT OF MATERIAL ADVERSE CHANGE AFFECTING WRT.
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Conditions of Lending: 1. ING satisfaction with certain due diligence.
2. The Credit Agreement, promissory note, Security
Documents, and all other documents relating to the
Facility (collectively, the "Loan Documents") must be
executed and delivered in forms acceptable to ING.
3. ING shall have received payment in full in cash of
its claim.
4. Confirmation, on or before July 15, 1997, by the U.S.
Bankruptcy Court for the Western District of Louisiana
of a reorganization plan for WRT (the "Plan") that is
acceptable to ING in its discretion.
5. The Effective Date shall have occurred.
6. The Plan shall provide for WRT to acquire the
remaining 50% interest it does not presently own in the
shallow rights at West Cote Blanche Bay, and WRT shall
become operator of those shallow rights.
7. ING must be satisfied with WRT's financial condition,
operations and properties as presented in the disclosure
statement, and there must be no material adverse change
thereto at closing.
Representations and The Credit Agreement and other Loan Documents shall
Warranties: contain such representations and warranties as ING deems
appropriate for this transaction.
Affirmative The Credit Agreement and other Loan Documents shall
Covenants: contain such affirmative covenants as ING deems
appropriate for this transaction.
Negative Covenants: The Credit Agreement and other Loan Documents shall
contain such negative covenants as ING deems appropriate
for this transaction.
THIS TERM SHEET IS NEITHER A COMMITMENT NOR AN OFFER TO FUND ANY TRANSACTION BY
ING (U.S.) CAPITAL CORPORATION ("ING") OR ANY OF ITS AFFILIATES. THE ISSUANCE
OF ANY COMMITMENT LETTER WILL BE SUBJECT TO SATISFACTORY DUE DILIGENCE OF WRT
AND ITS OPERATING SUBSIDIARIES, RECEIPT OF INTERNAL CREDIT AND OTHER APPROVALS,
AND RECEIPT OF A FAVORABLE LEGAL OPINION FROM ING'S LEGAL COUNSEL. THE TERMS AND
CONDITIONS IN THIS TERM SHEET ARE SUBJECT TO MODIFICATION AT THE DISCRETION OF
ING, PARTICULARLY IN THE EVENT OF MATERIAL ADVERSE CHANGE AFFECTING WRT.
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<PAGE>
Events of Default: The Credit Agreement and other Loan Documents will
contain such events of default as ING deems
appropriate.
THIS TERM SHEET IS NEITHER A COMMITMENT NOR AN OFFER TO FUND ANY TRANSACTION BY
ING (U.S.) CAPITAL CORPORATION ("ING") OR ANY OF ITS AFFILIATES. THE ISSUANCE
OF ANY COMMITMENT LETTER WILL BE SUBJECT TO SATISFACTORY DUE DILIGENCE OF WRT
AND ITS OPERATING SUBSIDIARIES, RECEIPT OF INTERNAL CREDIT AND OTHER APPROVALS,
AND RECEIPT OF A FAVORABLE LEGAL OPINION FROM ING'S LEGAL COUNSEL. THE TERMS AND
CONDITIONS IN THIS TERM SHEET ARE SUBJECT TO MODIFICATION AT THE DISCRETION OF
ING, PARTICULARLY IN THE EVENT OF MATERIAL ADVERSE CHANGE AFFECTING WRT.
3
<PAGE>
EXHIBIT J
BY-LAWS
OF
WRT ENERGY CORPORATION
(HEREINAFTER CALLED THE "CORPORATION")
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Except as otherwise provided in these
By-laws, all meetings of the stockholders shall be held on such dates and at
such times and places, within or without the State of Delaware, as shall be
determined by the Board of Directors, or the Chairman of the Board of Directors
or the President and as shall be stated in the notice of the meeting or in
waivers of notice thereof. If the place of any meeting is not so fixed, it shall
be held at the registered office of the Corporation in the State of Delaware.
Section 2. ANNUAL MEETING. The annual meeting of stockholders for
the election of directors and the transaction of such other proper business as
may be brought before the meeting shall be held on such date after the close of
the Corporation's fiscal year, and at such time, as the Board of Directors may
from time to time determine.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders,
for any purpose or purposes, may be called by the Board of Directors, or the
Chairman of the Board of Directors or the President and shall be called by the
President or the Secretary upon the written request of a majority of the
directors or the holders of not less than sixty-six percent (66%) of the
Corporation's outstanding shares entitled to vote at such meeting. The request
shall state the date, time, place and purpose or purposes of the proposed
meeting.
Section 4. NOTICE OF MEETINGS. Except as otherwise required or
permitted by law, whenever the stockholders are required or permitted to take
any action at a meeting, written notice thereof shall be given, stating the
place, date and hour of the meeting and, unless it is the annual meeting, by or
at whose direction it is being issued. The notice also shall designate the place
where the stockholders list is available for examination, unless the list is
kept at the place where the meeting is to be held. Notice of a special meeting
also shall state the purpose or
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purposes for which the meeting is called. A copy of the notice of any meeting
shall be delivered personally or shall be mailed, not less than ten (10) and not
more than sixty (60) days before the date of the meeting, to each stockholder
entitled to vote at the meeting.
If mailed, the notice shall be deemed given when deposited in the
United States mail, postage prepaid, directed to each stockholder at such
stockholder's address as it appears on the records of the Corporation, unless
such stockholder shall have filed with the Secretary of the Corporation a
written request that such notices be mailed to some other address, in which case
it shall be directed to such other address. Notice of any meeting of
stockholders need not be given to any stockholder who shall attend the meeting,
other than for the express purpose of objecting at the beginning thereof to the
transaction of any business because the meeting is not lawfully called or
convened, or who shall submit, either before or after the time stated therein, a
signed waiver of notice.
Unless the Board of Directors, after an adjournment is taken, shall
fix a new record date for an adjourned meeting or unless the adjournment is for
more than thirty (30) days, notice of an adjourned meeting need not be given if
the place, date and time to which the meeting shall be adjourned are announced
at the meeting at which the adjournment is taken. If, however, the date of any
adjourned meeting is more than thirty (30) days after the date for which the
meeting was originally noticed, or if a new record date is fixed for the
adjourned meeting, written notice of the place, date and time of the adjourned
meeting shall be given in conformity herewith. At any adjourned meeting, any
business may be transacted which might have been transacted at the original
meeting.
Section 5. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, at all meetings of stockholders
the holders of a majority of the shares of the Corporation entitled to vote,
present in person or represented by proxy, shall constitute a quorum for the
transaction of business. Where a separate vote by a class, classes or series is
required, a majority of the outstanding shares of such class, classes, or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter, unless or
except to the extent that the presence of a larger number may be required by law
or the Certificate of Incorporation. If a quorum shall fail to attend any
meeting, the chairman of the meeting may adjourn the meeting to another place,
date or time without notice other than announcement at the meeting, until a
quorum shall be present or represented.
Section 6. VOTING. Except as otherwise provided by law or by the
Certificate of Incorporation of the Corporation, at any meeting of the
stockholders every stockholder of record having the right to vote thereat shall
be entitled to one vote for every share of stock standing in his name as of the
record date and entitling him to so vote. A stockholder may vote in person or by
proxy. Except as otherwise provided by law or by the Certificate of
Incorporation, any corporate action to be taken by a vote of the stockholders,
other than the election of directors, shall be authorized by the affirmative
vote of a majority of the shares present or represented by proxy at the meeting
and entitled to vote on the subject matter. Directors shall be elected as
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provided in Section 2 of Article III of these By-laws. Written ballots shall not
be required for voting on any matter unless ordered by the chairman of the
meeting.
Section 7. PROXIES. Every proxy shall be executed in writing by the
stockholder or by his authorized representative, or otherwise as provided in the
General Corporation Law of the State of Delaware ("DGCL").
Section 8. LIST OF STOCKHOLDERS. For a period of at least ten (10)
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
their addresses and the number of shares registered in their names as of the
record date shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
Section 9. CONDUCT OF MEETINGS. At each meeting of the stockholders,
the Chairman of the Board of Directors or, in his absence, one of the following
officers present in the order stated shall act as chairman of the meeting: the
President, the Vice Presidents in their order of rank and seniority, or a
chairman chosen by a majority of the directors present. The Secretary, or, in
his absence, an Assistant Secretary, or in the absence of the Secretary and the
Assistant Secretaries, any person appointed by the chairman of the meeting shall
act as Secretary of the meeting and shall keep the minutes thereof. The order of
business at all meetings of the stockholders shall be as determined by the
chairman of the meeting.
Section 10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Certificate of Incorporation of the Corporation, any
action required to be taken or which may be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed, in person or by proxy, by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted in person or by proxy and shall be delivered
to the Corporation as required by law. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
Section 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more inspectors of
election, who need not be stockholders, to act at such meeting or any
adjournment thereof. If inspectors of election are not so appointed, the person
presiding at any such meeting may, and on the request of any stockholder
entitled to vote at the meeting and before voting begins shall, appoint
inspectors of election. If any person who is appointed fails to appear or act,
the vacancy may be filled by appointment made by the Board of Directors in
advance of the meeting, or at the meeting by the
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<PAGE>
person presiding at the meeting. Each inspector, before entering upon the
discharge of his duties, shall take an oath faithfully to execute the duties of
inspector at such meeting.
If inspectors of election are appointed as aforesaid, they shall
determine from the lists referred to in Section 8 of this Article II the number
of shares outstanding, the shares represented at the meeting, the existence of a
quorum and the voting power of shares represented at the meeting, determine the
authenticity, validity and effect of proxies, receive votes or ballots, hear and
determine all challenges and questions in any way arising in connection with the
right to vote or the number of votes which may be cast, count and tabulate all
votes or ballots, determine the results, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders entitled to vote
thereat. Unless waived by vote of the stockholders conducted in the manner which
is provided in Section 5 of this Article, the inspectors shall make a report in
writing of any challenge or question matter which is determined by them, and
execute a sworn certificate of any facts found by them. The decision, act or
certificate of a majority of the inspectors of election shall be effective in
all respects as the decision, act or certificate of all the inspectors of
election.
ARTICLE III
BOARD OF DIRECTORS
Section 1. NUMBER OF DIRECTORS. Except as otherwise provided by the
Certificate of Incorporation of the Corporation, until such time as the Board of
Directors determines otherwise, the Board of Directors shall consist of five (5)
members, with the then-authorized number of directors being fixed from time to
time solely by or pursuant to a resolution passed by the Board of Directors,
provided, however, that from ___________, 1997 until ____________, 2000 there
shall be no more than and no less than five (5) directors. Effective
_____________, 2000, the number of directors may be reduced or increased from
time to time by action of a majority of the whole Board, but no decrease may
shorten the term of an incumbent director. When used in these By-laws, the term
"whole Board" means the total number of directors which the Corporation would
have if there were no vacancies.
Section 2. ELECTION AND TERM. Except as otherwise provided by law,
by the Certificate of Incorporation of the Corporation or by these By-laws, the
directors shall be elected at the annual meeting of the stockholders and the
persons receiving a plurality of the votes cast shall be so elected. Subject to
his earlier death, resignation or removal, each director shall hold office until
his successor shall have been elected and shall have qualified.
Section 3. REMOVAL. Except for such directors, if any, as are
elected by the holders of any series of Preferred Stock separately as a class as
provided for or fixed pursuant to the provisions of the Certificate of
Incorporation, any director of the Corporation may be removed from office only
for cause and only by the affirmative vote of the holders of not less than
sixty-six percent (66%) of the votes which could be cast by holders of all
outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, considered for this purpose as one
class.
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Section 4. RESIGNATIONS. Any director may resign at any time by
giving written notice of his resignation to the Corporation. A resignation shall
take effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of a resignation shall not be
necessary to make it effective.
Section 5. VACANCIES. Except as otherwise provided by the
Certificate of Incorporation of the Corporation, any vacancy in the Board of
Directors and newly created directorships, resulting from any increase in the
authorized number of directors or otherwise, may be filled only by the vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same remaining term
as that of his predecessor.
Section 6. PLACE OF MEETINGS. Except as otherwise provided in these
By-laws, all meetings of the Board of Directors, both regular and special, shall
be held at such places, within or without the State of Delaware, as the Board
determines from time to time.
Section 7. ANNUAL MEETING. The first meeting of each newly-elected
Board of Directors shall be held either (x) immediately following the annual
meeting of stockholders and no notice of such meeting shall be necessary to be
given the newly-elected directors in order legally to constitute the meeting,
provided a quorum shall be present, or (y) as soon as practicable after the
annual meeting of the stockholders on such date and at such time and place as
the Board of Directors determines from time to time. In the event such annual
meeting of stockholders is not so held, the annual meeting of the Board of
Directors shall be held on such date and at such time and place as the Board
determines from time to time.
Section 8. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held on such dates and at such times and places as the Board
of Directors determines from time to time. Notice of regular meetings need not
be given, except as otherwise required by law.
Section 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors, for any purpose or purposes, may be called by the Chairman of the
Board of Directors or the President and shall be called by the President or the
Secretary upon the written request of a majority of the directors. The request
shall state the date, time, place and purpose or purposes of the proposed
meeting.
Section 10. NOTICE OF MEETINGS. Notice of each special meeting of
the Board (and of each annual meeting which is not held immediately after, and
in the same place as, the annual meeting of stockholders) shall be given, not
less than twenty-four (24) hours before the meeting is scheduled to commence, by
the Chairman of the Board of Directors, the President or the Secretary and shall
state the place, date and time of the meeting. Notice of each meeting may be
delivered to a director by hand or given to a director orally (either by
telephone or in person) or mailed, telegraphed or sent by facsimile transmission
to a director at his residence or usual place of business, provided, however,
that if notice of less than seventy-two (72) hours is given it may not be
mailed. If mailed, the notice shall be deemed given when deposited in the United
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States mail, postage prepaid; if telegraphed, the notice shall be deemed given
when the contents of the telegram are transmitted to the telegraph service with
instructions that the telegram immediately be dispatched; and if sent by
facsimile transmission, the notice shall be deemed given when transmitted with
transmission confirmed. Notice of any meeting need not be given to any director
who shall submit, either before or after the time stated therein, a signed
waiver of notice or who shall attend the meeting, other than for the express
purpose of objecting at the beginning thereof to the transaction of any business
because the meeting is not lawfully called or convened. Notice of an adjourned
meeting, including the place, date and time of the new meeting, shall be given
to all directors not present at the time of the adjournment, and also to the
other directors unless the place, date and time of the new meeting are announced
at the meeting at the time at which the adjournment is taken.
Section 11. QUORUM. Except as otherwise provided by law or in these
By-laws, at all meetings of the Board of Directors a majority of the whole Board
shall constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. A majority of the directors present, whether or
not a quorum is present, may adjourn any meeting to another place, date and
time.
Section 12. CONDUCT OF MEETINGS. At each meeting of the Board of
Directors, the Chairman of the Board of Directors or, in his absence, the
President or, in his absence, a director chosen by a majority of the directors
present shall act as chairman of the meeting. The Secretary or, in his absence,
any person appointed by the chairman of the meeting shall act as Secretary of
the meeting and keep the minutes thereof. The order of business at all meetings
of the Board of Directors shall be as determined by the chairman of the meeting.
Section 13. COMMITTEES OF THE BOARD. The Board of Directors, by
resolution adopted by a majority of the whole Board of Directors, may designate
an executive committee and other committees, each consisting of one or more
directors. Each committee (including the members thereof) shall serve at the
pleasure of the Board of Directors and shall keep minutes of its meetings and
report the same to the Board of Directors. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member or members at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, if no
alternate member has been designated by the Board of Directors, the member or
members present at any meeting and not disqualified from voting, whether or not
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of the absent or disqualified
member. Except as limited by law, each committee, to the extent provided in the
resolution of the Board of Directors establishing it, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation.
Section 14. OPERATION OF COMMITTEES. A majority of all the members
of a committee shall constitute a quorum for the transaction of business, and
the vote of a majority of all the members of a committee present at a meeting at
which a quorum is present shall be the act
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of the committee. Each committee shall adopt whatever other rules of procedure
it determines to be necessary for the conduct of its activities.
Section 15. CONSENT TO ACTION. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 16. ATTENDANCE OTHER THAN IN PERSON. Members of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation shall constitute
presence in person at the meeting.
Section 17. COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE IV
OFFICERS
Section 1. GENERAL. The officers of the Corporation shall be
appointed by the Board of Directors and shall consist of a Chairman of the Board
or a President, or both, one or more Vice Presidents, a Treasurer and a
Secretary. The Board of Directors may also choose one or more Assistant
Secretaries and Assistant Treasurers and such other officers and agents as the
Board of Directors, in its sole and absolute discretion, shall deem necessary or
appropriate as designated by the Board of Directors from time to time. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-laws provide otherwise.
Section 2. ELECTION; TERM OF OFFICE. The Board of Directors at its
first meeting held after each annual meeting of stockholders shall elect a
Chairman of the Board or a President, or both, one or more Vice Presidents, a
Secretary and a Treasurer, and may also elect at that meeting or any other
meeting, such other officers and agents as it shall deem necessary or
appropriate. Each officer of the Corporation shall exercise such powers and
perform such duties as shall be determined from time to time by the Board of
Directors together with the powers and duties which are customarily exercised by
such officer; and each officer of the Corporation shall hold office until such
officer's successor is elected and qualified or until such officer's earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Corporation. The Board of Directors may at any time, with or without
cause, by the affirmative vote of a majority of directors then in office, remove
an officer.
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Section 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and the Board of Directors and shall
have such other duties and powers as may be prescribed by the Board of Directors
from time to time.
Section 4. PRESIDENT. The President shall be the chief executive
officer of the Corporation, shall have general and active management of the
business of the Corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall have and
exercise such further powers and duties as may be specifically delegated to or
vested in the President from time to time by these By-laws or the Board of
Directors. In the absence of the Chairman of the Board or in the event of his
inability or refusal to act, or if the Board has not designated a Chairman, the
President shall perform the duties of the Chairman of the Board, and when so
acting, shall have the powers and be subject to all of the restrictions upon the
Chairman of the Board.
Section 5. VICE PRESIDENT. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
that there be more than one Vice President, the Vice Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. The Vice Presents shall perform such other
duties and have such other powers as the Board of Directors or the President may
from time to time prescribe.
Section 6. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
President. If the Secretary shall be unable or shall refuse to cause to be given
notice of all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors or the President may choose another officer to cause such notice to be
given. The Secretary shall have custody of the seal of the Corporation and the
Secretary or any Assistant Secretary, if there be one, shall have authority to
affix same to any instrument requiring it and when so affixed, it may be
attested to by the signature of the Secretary or by the signature of any such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest to the affixing
by his or her signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to be
kept or filed are properly kept or filed, as the case may be.
Section 7. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep complete and accurate accounts of
all receipts and disbursements of the Corporation, and shall deposit all monies
and other valuable effects of the Corporation in its name and to its credit in
such banks and other depositories as may be designated from time to time by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation,
taking proper vouchers and receipts for such disbursements, and shall render to
the Board of Directors,
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at its regular meetings, or when the Board of Directors so requires, an account
of all his or her transactions as Treasurer and of the financial condition of
the Corporation. The Treasurer shall, when and if required by the Board of
Directors, give and file with the Corporation a bond, in such form and amount
and with such surety or sureties as shall be satisfactory to the Board of
Directors, for the faithful performance of his or her duties as Treasurer. The
Treasurer shall have such other powers and perform such other duties as the
Board of Directors or the President shall from time to time prescribe.
Section 8. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
Section 9. RESIGNATIONS. Any officer may resign at any time by
giving written notice of his resignation to the Corporation. For purposes of
this Section, notice to the Board of Directors, the Chairman of the Board, the
President or the Secretary shall be deemed to constitute notice to the
Corporation. Such resignation shall take effect at the time specified therein
or, if the time when it shall become effective shall not be specified therein,
immediately upon its re ceipt, and, unless otherwise specified therein, the
acceptance of a resignation shall not be necessary to make it effective.
Section 10. REMOVAL. Any officer or agent may be removed, either
with or without cause, at any time, by the Board of Directors at any meeting
called for that purpose; provided, however, that the President may remove any
agent appointed by him.
Section 11. VACANCIES. Any vacancy among the officers, whether
caused by death, resignation, removal or any other cause, shall be filled in the
manner which is prescribed for election or appointment to such office.
ARTICLE V
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 1. CERTIFICATES. Certificates for the Corporation's capital
stock shall be in such form as required by law and as approved by the Board of
Directors. Each certificate shall be signed in the name of the Corporation by
the Chairman of the Board of Directors, the President or any Vice President and
by the Secretary, the Treasurer, any Assistant Secretary or any Assistant
Treasurer and may bear the seal of the Corporation or a facsimile thereof. Any
or all of the signatures on a certificate may be a facsimile. In case any
officer, transfer agent or registrar who shall have signed or whose facsimile
signature shall have been placed on any certificate shall have ceased to be such
officer, transfer agent or registrar before the certificate shall be issued, the
certificate may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 2. REPLACEMENT CERTIFICATES. The Corporation may issue a new
certificate of stock in place of any certificate previously issued by it,
alleged to have been lost, stolen or
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destroyed, and the Board of Directors may require the owner of the lost, stolen
or destroyed certificate, or such person's legal representative, to make an
affidavit of that fact and to give the Corporation a bond sufficient to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of the certificate or the
issuance of such new certificate.
Section 3. TRANSFERS OF SHARES. Transfers of shares shall be
registered on the books of the Corporation maintained for that purpose after due
presentation of the stock certificates therefor, appropriately endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer.
Section 4. RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or the allotment of any
rights, or for the purpose of any other action, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which record date
shall not be more than sixty (60) or less than ten (10) days before the date of
any such meeting, shall not be more than ten (10) days after the date on which
the Board fixes a record date for any such consent in writing, and shall not be
more than sixty (60) days prior to any other action.
Section 5. DIVIDENDS. To the extent permitted by law, the Board of
Directors shall have full power and discretion, subject to the provisions of the
Certificate of Incorporation of the Corporation and the terms of any other
corporate document or instrument binding upon the Corporation, to determine
what, if any, dividends or distributions, which may be paid in cash, property,
shares of the capital stock of the Corporation or any combination thereof, shall
be declared and paid or made.
ARTICLE VI
INDEMNIFICATION
Section 1. INDEMNIFICATION. Unless otherwise determined by the Board
of Directors, the Corporation shall, to the fullest extent permitted by the DGCL
(including, without limitation, Section 145 thereof) or other provisions of the
laws of Delaware relating to indemnification of directors, officers, employees
and agents, as the same may be amended and supplemented from time to time,
indemnify any and all such persons whom it shall have power to indemnify under
the DGCL or such other provisions of law.
Section 2. STATUTORY INDEMNIFICATION. Without limiting the
generality of Section 1 of this Article VI, to the fullest extent permitted, and
subject to the conditions imposed, by law, and pursuant to Section 145 of the
DGCL, unless otherwise determined by the Board of Directors:
(i) the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or
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proceeding whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful;
and
(ii) the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure
a judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except as otherwise provided by law.
Section 3. INDEMNIFICATION BY RESOLUTION OF STOCKHOLDERS OR
DIRECTORS OR AGREEMENT. To the fullest extent permitted by law, indemnification
may be granted, and expenses may be advanced, to the persons described in
Section 145 of the DGCL or other provisions of the laws of Delaware relating to
indemnification and advancement of expenses, as from time to time may be in
effect, by (i) a resolution of stockholders, (ii) a resolution of the Board of
Directors, or (iii) an agreement providing for such indemnification and
advancement of expenses, provided that no indemnification may be made to or on
behalf of any person if a judgment or other final adjudication adverse to the
person establishes that such person's acts were committed in bad faith or were
the result of active and deliberate dishonesty and were material to the cause of
action so adjudicated, or that such person personally gained in fact a financial
profit or other advantage to which such person was not legally entitled. If it
is subsequently determined that any person who was indemnified or to whom
expenses were advanced in accordance with the provisions of this Article VI was
not entitled to such indemnification or advancement of expenses or both, by
reason of the person having acted in bad faith or with active and deliberate
dishonesty, or having personally gained a financial profit or other advantage to
which such person was not legally entitled or otherwise, then such person shall
promptly reimburse the Corporation for all such fees and expenses previously
paid by the Corporation.
Section 4. GENERAL. It is the intent of this Article VI to require
the Corporation, unless otherwise determined by the Board of Directors, to
indemnify the persons referred to herein for judgments, fines, penalties,
amounts paid in settlement and expenses (including attorneys' fees), and to
advance expenses to such persons, in each and every circumstance in which such
indemnification and such advancement of expenses could lawfully be permitted by
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express provision of by-laws, and the indemnification and expense advancement
provided by this Article VI shall not be limited by the absence of an express
recital of such circumstances. The indemnification and advancement of expenses
provided by, or granted pursuant to, these By-laws shall not be deemed exclusive
of any other rights to which a person seeking indemnification or advancement of
expenses may be entitled, whether as a matter of law, under any provision of the
Certification of Incorporation of the Corporation or these By-laws, by
agreement, by vote of stockholders or disinterested directors of the Corporation
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
Section 5. INDEMNIFICATION BENEFITS. Indemnification pursuant to
these By-laws shall inure to the benefit of the heirs, executors, administrators
and personal representatives of those entitled to indemnification.
Section 6. INSURANCE AND TRUST FUND. In furtherance and not in
limitation of the powers conferred by statute:
(1) the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of another corporation as
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted
against him and incurred by him in any such capacity, or arising out of
his power to indemnify him against such liability under the provisions of
law; and
(2) the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds, and/or other similar arrangements), as well as enter
into contracts providing indemnification to the fullest extent permitted
by law and including as part thereof provisions with respect to any or all
of the foregoing, to ensure the payment of such amount as may become
necessary to effect indemnification as provided therein, or elsewhere.
ARTICLE VII
APPROVAL OF CERTAIN CORPORATE ACTION
Section 1. MERGERS, CONSOLIDATIONS, ETC. The affirmative vote of at
least a majority of the directors shall be required for the approval of any (i)
merger, (ii) consolidation, (iii) restructuring, (iv) recapitalization, (v)
issuance of Common Stock, (vi) sale of all or substantially all of the assets
of, or a majority of the capital stock of, any "significant subsidiary" of the
Corporation (as defined in Regulation S-X promulgated by the Securities and
Exchange Commission), if any, (vii) repurchase by the Corporation of shares of
capital stock or other securities of the Corporation, or (viii) sale, transfer
or other conveyance of assets outside the ordinary course of business of the
Corporation or any subsidiary which assets have a book value, or sale price,
whichever is greater, in excess of [$600,000].
Section 2. AGREEMENTS FOR THE PAYMENT OF FEES. All agreements for
consulting services, employment agreements, or other agreements for the payment
of fees, in any case
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providing for payments by the Corporation in excess of [$125,000], shall be
subject to the express approval of the Board of Directors of the Corporation.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. SEAL. The Corporation's seal shall be in such form as is
required by law and as shall be approved by the Board of Directors.
Section 2. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 3. VOTING UPON SHARES HELD BY THE CORPORATION. Unless
otherwise provided by law or by the Board of Directors, the Chairman of the
Board of Directors, if one shall be elected, or the President, if a Chairman of
the Board of Directors shall not be elected, acting on behalf of the
Corporation, shall have full power and authority to attend and to act and to
vote at any meeting of stockholders of any corporation in which the Corporation
may hold stock and, at any such meeting, shall possess and may exercise any and
all of the rights and powers incident to the ownership of such stock which, as
the owner thereof, the Corporation might have possessed and exercised, if
present. The Board of Directors by resolution from time to time may confer like
powers upon any other person or persons.
Section 4. CHECKS, DRAFTS, NOTES. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner as shall from time to time be
determined by resolution (whether general or special) of the Board of Directors
or may be prescribed by any officer or officers, or any officer and agent
jointly, thereunto duly authorized by the Board of Directors.
ARTICLE IX
AMENDMENTS
Section 1. BY-LAWS. These By-laws may be adopted, amended or
repealed by the Board of Directors, provided the conferral of such power on the
Board shall not divest the stockholders of the power, or limit their power, to
adopt, amend or repeal these By-laws.
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EXHIBIT k
CERTIFICATE OF INCORPORATION
OF
WRT ENERGY CORPORATION
ARTICLE I
NAME
The name of the corporation is WRT Energy Corporation (the "Corporation").
ARTICLE II
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DGCL"), within or without the State of
Delaware.
ARTICLE III
DURATION
The duration of the Corporation shall be in perpetuity, or such maximum
period as may be authorized by the laws of Delaware.
ARTICLE IV
AUTHORIZED CAPITAL
The Corporation is hereby authorized to issue a total of fifty-one
(51,000,000) shares of capital stock which shall be subdivided into classes as
follows:
(a) Fifty million (50,000,000) shares of the Corporation's capital stock
shall be denominated as Common Stock, have a par value of $0.01 per share, and
have the rights, powers and preferences set forth in this paragraph. The holders
of Common Stock shall share ratably, with all other classes of common equity, in
any dividends that may, from time to time, be declared by the Board of
Directors. No dividends may be paid with respect to the Corporation's Common
Stock, however, until dividend distributions to the holders of Preferred Stock,
if any, have been paid in accordance with the certificate or certificates of
designation relating to such Preferred Stock. The holders of Common Stock shall
share ratably, with all other classes of common equity, if any, in any assets of
the Corporation that are available for distribution to the holders of common
equity securities of the Corporation upon the dissolution or liquidation of the
Corporation. The holders of Common Stock shall be entitled to cast one vote per
share on all matters that are submitted for a vote of the stockholders. There
are no redemption or sinking
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fund provisions that are applicable to the Common Stock of the Corporation.
Subject only to the requirements of the DGCL and the foregoing limits, the Board
of Directors is expressly authorized to issue shares of Common Stock without
stockholder approval, at any time and from time to time, to such persons and for
such consideration as the Board of Directors shall deem appropriate under the
circumstances.
(b) One million (1,000,000) shares of the Corporation's authorized capital
stock shall be denominated as Preferred Stock, par value of $0.01 per share.
Shares of Preferred Stock may be issued from time to time in one or more series
as the Board of Directors, by resolution or resolutions, may from time to time
determine, each of said series to be distinctively designated. The voting
powers, preferences, and relative, participating, optional and other special
rights, and the qualifications, limitations or restrictions thereof, if any, of
each such Series of Preferred Stock may differ from those of any and all other
series of Preferred Stock at any time outstanding, and the Board of Directors is
hereby expressly granted authority to fix or alter, by resolution or
resolutions, the designation, number, voting powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, of each such series of Preferred Stock,
including, but without limiting the generality of the foregoing, the following:
(i) The distinctive designation of, and the number of shares of
Preferred Stock that shall constitute, each series of Preferred
Stock, which number (except as otherwise provided by the Board of
Directors in the resolution establishing such series) may be
increased or decreased (but not below the number of shares of such
series then outstanding) from time to time by the Board of Directors
without prior approval of the holders of such series;
(ii) The rights in respect of dividends, if any, of such series of
Preferred Stock, the extent of the preference or relation, if any,
of such dividends payable on any other class or classes or any other
series of the same or other class or classes of capital stock of the
Corporation, and whether such dividends shall be cumulative or
non-cumulative;
(iii) The right, if any, of the holders of such series of Preferred
Stock to convert the same into, or exchange the same for, shares of
any other class or classes or of any other series of the same or any
other class or classes of capital stock of the Corporation and the
terms and conditions of such conversion or exchange, including,
without limitation, whether or not the number of shares of such
other class or series into which shares of such series may be
converted or exchanged shall be adjusted in the event of any stock
split, stock dividend, subdivision, combination, reclassification or
other transaction or series of transactions affecting the class or
series into which such series of Preferred Stock may be converted or
exchanged;
(iv) Whether or not shares of such series of Preferred Stock shall
be subject to redemption, and the redemption price or prices and the
time or times at which, and
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the terms and conditions on which, shares of such series of
Preferred Stock may be redeemed;
(v) The rights, if any, of the holder of such series of Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation or in the event of any merger or
consolidation of or sale of assets by the Corporation;
(vi) The terms of sinking fund or redemption or repurchase account,
if any, to be provided for shares of such series of Preferred Stock;
(vii) The voting powers, if any, of the holders of any series of
Preferred Stock generally or with respect to any particular matter,
which may be less than, equal to or greater than one vote per share,
and which may, without limiting the generality of the foregoing,
include the right, voting as a series by itself or together with the
holders of any other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation (which, without limiting the generality of the
foregoing, may include a specified number or portion of the
then-existing number of authorized directorships of the Corporation,
or a specified number or portion of directorships in addition to the
then-existing number of authorized directorships of the
Corporation), generally or under such specific circumstances and on
such conditions, as shall be provided in the resolution or
resolutions of the Board of Directors adopted pursuant hereto; and
(viii) Such other powers, preferences and relative, participating,
optional and other special rights, and the qualifications,
limitations and restrictions thereof, as the Board of Directors
shall determine.
Upon the creation of any new class or series of Preferred Stock of the
Corporation, the Board of Directors shall prepare and file with the records of
the Corporation a certificate setting forth the rights and preferences of such
class or series of Preferred Stock, which shall be deemed an amendment to this
Certificate of Incorporation and shall not require the consent of any
stockholder.
(c) In addition to the Common Stock and Preferred Stock described above,
the Board of Directors is authorized to cause the issuance of any other type of
security (including without limitation, options, rights, warrants or
appreciation rights relating to any equity or debt security of the Corporation
and which may have rights or preference junior or senior to any equity or debt
security of the Corporation) from time to time on terms and conditions
established in the sole and complete discretion of the Board of Directors. If
and to the extent required by the DGCL, upon the creation of any new class or
series of additional securities of the Corporation, the Board of Directors shall
prepare and file with the records of Corporation a certificate setting forth the
rights and preferences of such class or series of additional securities of the
Corporation, which certificate shall be deemed an amendment to this Certificate
of Incorporation and shall not require the consent of any stockholder.
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<PAGE>
(d) Except to the extent that such rights are specifically enumerated in a
certificate setting forth the rights and preferences of a specific class or
series of Preferred Stock or other securities of the Corporation, no stockholder
shall have any preemptive, preferential or other right, including without
limitation with respect to (i) the issuance or sale of additional Common Stock
of the Corporation, (ii) the issuance or sale of additional Preferred Stock of
the Corporation, (iii) the issuance of any obligation and/or evidence of
indebtedness of the Corporation which is or may be convertible into or
exchangeable for, or accompanied by any rights to receive, purchase or subscribe
to, any shares of Common Stock, Preferred Stock or other securities of the
Corporation, (iv) the issuance of any right of subscription to, or right to
receive, any warrant or option for the purchase of any Common Stock, Preferred
Stock or other securities of the Corporation, or (v) the issuance or sale of any
other equity or debt securities that may be issued or sold by the Corporation
from time to time.
(e) Notwithstanding anything in this Certificate of Incorporation to the
contrary, the Board of Directors shall be prohibited from authorizing or issuing
any equity securities that have no voting rights.
ARTICLE V
RIGHTS AND POWERS OF STOCKHOLDERS
(a) Meetings of stockholders may be held within or without the State of
Delaware, at such date and time as is requested by the person or persons calling
the meeting, within the limits fixed by law. The books of the Corporation may be
kept (subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation.
(b) At any annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting in accordance with this Article V. To be properly brought before an
annual meeting business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the meeting, provided, however, that in the event that less than seventy (70)
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth (10th) day following the day
on which such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (b)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (c) the number of shares of the Corporation
which are beneficially
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owned by the stockholder and (d) any material interest of the stockholder in
such business. To be properly brought before a special meeting of stockholders,
business must have been specified in the notice of meeting (or supplement
thereto) given by or at the direction of the Board of Directors. Notwithstanding
anything in the By-laws to the contrary, no business shall be conducted at any
annual or special meeting except in accordance with the procedures set forth in
this Article V. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Article V, and if
he should so determine, he shall so declare at the meeting and any such business
not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in this Article V shall be eligible for election as directors of the
Corporation. Nominations of persons for election to the Board of Directors of
the Corporation may be made at a meeting of stockholders by or at the direction
of the Board of Directors or by any stockholder of the Corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Article V. Such nominations, other than those made
by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting, provided, however, that in the
event that less than seventy (70) days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made. Such stockholder's notice
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or reelection as a director, (i) the name, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the number of shares, if any, of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such persons' written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such stockholder and (ii) the number of shares of
the Corporation which are beneficially owned by such stockholder. The chairman
of the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed
herein, and if he should so determine, he shall so declare at the meeting and
the defective nomination shall be disregarded.
ARTICLE VI
DIRECTORS
(a) The business and affairs of the Corporation shall be conducted and
managed by, or under the direction of, the Board of Directors. The exact number
of directors of the Corporation shall be fixed by the Board of Directors as
provided in the By-laws.
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<PAGE>
(b) The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by the DGCL (including, without
limitation, paragraph (7) of subsection (b) of Section 102 thereof), as the same
may be amended and supplemented from time to time. If the DGCL hereafter is
amended to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation, in addition to
the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended DGCL. Any repeal or modification of this
paragraph by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
(c) The election of directors of the Corporation need not be by written
ballot, unless the By-laws of the Corporation otherwise provide.
ARTICLE VII
REGISTERED OFFICE AND AGENT, AND DIRECTORS
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, Wilmington, County of New Castle, Delaware, 19085.
Corporation Service Company is the Corporation's registered agent at this
address. The names and mailing addresses of the persons who are to serve as
directors until the first annual meeting of stockholders or until their
successors are elected and qualified are:
NAME ADDRESS
1.
2.
3.
4.
5.
ARTICLE VIII
AMENDMENTS TO THE CERTIFICATE OF
INCORPORATION AND BY-LAWS
(a) The Corporation reserves the right to amend, alter, change or repeal,
from time to time, any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation of powers.
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<PAGE>
(b) The Board of Directors shall have the power to make, adopt, alter,
amend and repeal from time to time the By-laws of this Corporation, subject to
the right of the stockholders entitled to vote with respect thereto to adopt,
amend and repeal by-laws.
ARTICLE X
INCORPORATOR
Gabriel S. Mairzadeh is the sole incorporator and his mailing address is
c/o Schulte Roth & Zabel LLP, 900 Third Avenue, 25th Floor, New York, New York,
10022.
Date: ____________, 1997
Gabriel S. Mairzadeh, Incorporator
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EXHIBIT L
EXECUTION COPY
SUBSCRIPTION RIGHTS AGREEMENT
SUBSCRIPTION RIGHTS AGREEMENT (the "Agreement"), dated as of
___________________, 1997, by and between WRT Energy Corporation, a Texas
corporation (the "Company"), and __________________ (the "Disbursing Agent")
acting on behalf of the Holders (defined below).
W I T N E S S E T H:
WHEREAS, on February 14, 1996, the Company filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy
Court commencing the Chapter 11 Case (Case No. 96BK-50212);
WHEREAS, since the commencement of the Chapter 11 Case, the Company
has operated its business and held its assets and properties as a
debtor-in-possession under Section 1107 of the Bankruptcy Code;
WHEREAS, in order to emerge from bankruptcy, Debtor's and DLBW's
[First] Amended Joint Plan of Reorganization Under Chapter 11 of the United
States Bankruptcy Code (the "Plan") has been filed with the Bankruptcy Court;
WHEREAS, the Plan categorizes claims thereunder, including claims
that are or potentially are within Class D-3 (the "Class D-3 Claims");
WHEREAS, on the Subscription Rights Record Date there will exist
holders of Claims that are Allowed Claims in Class D-3 or are Disputed Claims in
or potentially in Class D- 3 (the "Holders");
WHEREAS, concurrently with the solicitation of acceptance of the
Plan, the Company may provide the right to purchase 3,000,000 shares of New WRT
Subscription Common Stock (the "New WRT Subscription Rights") to the Holders
proportionately on a pro rata basis based on the relative amount of such Claims
in or potentially within Class D-3;
WHEREAS, pursuant to the Plan and the Commitment Agreement, DLBW
will pay to the Disbursing Agent, on behalf of the Company, on or before the
Effective Date the Subscription Purchase Price for all shares of New WRT
Subscription Common Stock that may be purchased by Holders whose Class D-3
Claims are Disputed Claims (the "Disputed Claims Subscription Purchase Price"),
and DLBW is to receive such shares to the extent that such Claims are denied;
WHEREAS, pursuant to the Plan, to the extent that any Holder does
not duly exercise its New WRT Subscription Rights on or before the Subscription
Rights Election Deadline, DLBW shall pay the Subscription Purchase Price for the
shares of New WRT
<PAGE>
Subscription Common Stock represented by such unexercised New WRT Subscription
Rights, and DLBW shall receive such shares (the "Backstop Shares") on the
Effective Date;
WHEREAS, the Disbursing Agent has been approved by the Bankruptcy
Court to receive on behalf of the Holders the shares of New WRT Subscription
Common Stock and to disburse such shares to the Holders or to DLBW as provided
for in the Plan;
NOW, THEREFORE, in consideration of the foregoing and for the
purpose of defining the terms and provisions of the New WRT Subscription Rights
and the respective rights and obligations thereunder of the Company and the
Holders, the parties hereto hereby agrees as follows:
SECTION 1
DEFINITIONS
All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Plan.
SECTION 2
INITIAL ISSUANCE OF RIGHTS; TRANSFER OF RIGHTS
2.1 INITIAL ISSUANCE OF RIGHTS. On and after the Subscription
Rights Record Date, the New WRT Subscription Rights shall be deemed to be issued
to the Holders in accordance with Article 29 of the Plan. As soon as reasonably
practicable after the Subscription Rights Record Date, the Company shall
distribute to each Holder an election form (the "Subscription Rights Election
Form") which form shall state, among other things, the number of shares of New
WRT Subscription Common Stock that such Holder is entitled to purchase pursuant
to such New WRT Subscription Rights assuming that such Holder's Class D-3 Claim
is, or is eventually determined to be, an Allowed Claim (an "Allowed Class D-3
Claim"). The New WRT Subscription Rights shall be evidenced, subject to the
provisions of Section 3 hereof, by the registration of the Holders in the
Subscription Rights Register (as defined in Section 3 hereof) and not by
separate certificates.
2.2 TRANSFER OF RIGHTS. The New WRT Subscription Rights shall not
be transferable. The Company and the Disbursing Agent shall not accept the
exercise of any New WRT Subscription Rights from, and may not issue or deliver
any shares of New WRT Subscription Common Stock to, any Person other than the
Holders listed in, and in accordance with their New WRT Subscription Rights as
set forth in, the Rights Register. Any attempt to sell, dispose of or otherwise
transfer any New WRT Subscription Rights shall be null and void.
SECTION 3
RECORDATION OF RIGHTS
The New WRT Subscription Rights issued to Holders shall be
registered in a register (the "Subscription Rights Register") on the
Subscription Rights Record Date. The
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Company and New WRT shall keep the Subscription Rights Register at its principal
office in Houston, Texas. The Subscription Rights Register shall show the names
and addresses of the Holders and the number of New WRT Subscription Rights held
by each Holder. The Company and New WRT shall be entitled to treat the Holder of
any New WRT Subscription Rights as the owner in fact thereof for all purposes
and shall not recognize any equitable or other claim to or interest in such New
WRT Subscription Rights on the part of any other person, notwithstanding any
notice to the Company or New WRT to the contrary.
SECTION 4
TERM OF RIGHTS; EXERCISE OF SUBSCRIPTION RIGHTS; DLBW'S RIGHTS;
DENIAL OF CLASS D-3 CLAIMS; DIVIDENDS; DE MINIMUS DISTRIBUTIONS;
VOTING
4.1 TERM OF NEW WRT SUBSCRIPTION RIGHTS. (a) Subject to the terms
of this Agreement, each Holder shall have the right until the Subscription
Rights Election Deadline to subscribe to purchase from the Company the number of
fully paid and nonassessable shares (with any fractions being rounded down to
the nearest whole number) of New WRT Subscription Common Stock representing such
Holder's Interim Pro Rata Share.
(b) In order to effect the foregoing subscription , the Disbursing
Agent must have received on or before the Subscription Rights Election Deadline
(i) a duly completed and executed Subscription Rights Election Form which shall
include (w) the name of the Holder, (x) an election to exercise the right of
purchase represented by the New WRT Subscription Rights, (y) the number of
shares of New WRT Subscription Common Stock to be purchased and (z) the
signature of the Holder (which signature shall be guaranteed by a bank or trust
company located in the United States or a broker or dealer that is a member of a
national securities exchange); and (ii) payment of the Subscription Purchase
Price to the Disbursing Agent in immediately available funds either by wire
transfer to the Subscription Rights Reserve Account in accordance with the wire
instructions set forth on the Subscription Rights Election Form or by bank or
cashiers check made payable in accordance with the instructions set forth on the
Subscription Rights Election Form.
(c) To the extent that the Subscription Rights Election Form or the
Subscription Purchase Price for any Holder is received after the Subscription
Rights Election Deadline, such Holder shall be deemed to have not exercised its
New WRT Subscription Rights and the Disbursing Agent shall promptly return to
the applicable Holders any Subscription Purchase Price received on behalf of
such Holders.
4.2 EXERCISE OF NEW WRT SUBSCRIPTION RIGHTS. Subject to Section 5
hereof, after such delivery of the Subscription Rights Election Form exercising
the New WRT Subscription Rights and payment of the Subscription Purchase Price
to the Disbursing Agent as aforesaid, if a Class D-3 Claim or any portion
thereof becomes an Allowed Claim, New WRT shall issue and the Disbursing Agent
shall cause to be delivered as soon as practicable on or after the Effective
Date, but in no event more than the later of ten (10) Business Days after the
Effective Date or the date on which the Class D-3 Claim or any portion thereof
in respect of the
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related New WRT Subscription Rights becomes an Allowed Class D-3 Claim (a
"Determination Date"), (i) to the address(es) as the Holder shall have
designated in the applicable Subscription Rights Election Form, a certificate or
certificates for the number of full shares of New WRT Subscription Common Stock
so purchased upon the exercise of such New WRT Subscription Rights and (ii) to
the Company, the Subscription Rights Purchase Price with respect to such shares.
The Holder shall be deemed to have become a holder of record of such shares of
New WRT Subscription Common Stock as of the Effective Date. The rights of
purchase represented by the New WRT Subscription Rights shall be exercisable, at
the election of the Holders thereof, either in full or in part, but in no event
on more than one occasion or after the Subscription Rights Election Deadline.
4.3 DLBW'S RIGHTS. (a) Subject to Section 5 hereof, after payment
by DLBW to the Disbursing Agent on or before the Effective Date of the
Subscription Purchase Price for the Backstop Shares, New WRT shall issue and the
Disbursing Agent shall cause to be delivered as soon as practicable on or after
the Effective Date, but in no event more than ten (10) Business Days after the
Effective Date, (i) to the address(es) as DLBW shall have designated, a
certificate or certificates for the number of full shares of New WRT
Subscription Common Stock representing the Backstop Shares and (ii) to the
Company, the Subscription Purchase Price with respect to such shares. DLBW shall
be deemed to have become a holder of record of such shares of New WRT
Subscription Common Stock as of the Effective Date.
(b) Promptly after a Determination Date as to any Class D-3 Claim
or portion thereof, but in no event later than ten (10) Business Days after such
Determination Date, the Disbursing Agent shall cause to be returned to DLBW the
portion of the Disputed Claims Subscription Purchase Price representing the New
WRT Subscription Common Stock issued in respect of such Class D-3 Claim or such
portion thereof as becomes an Allowed Class D-3 Claim.
4.4 DENIAL OF CLASS D-3 CLAIMS. Subject to Section 5 hereof, the
Disbursing Agent shall cause to be delivered as soon as practicable on or after
any date (a "Denial Date") on which a Class D-3 Claim or any portion thereof in
respect of the related New WRT Subscription Rights is determined by Final Order
not to be an Allowed Class D-3 Claim (a "Denied Class D-3 Claim"), but in no
event more than ten (10) Business Days after such Denial Date, (i) to the
address(es) and in such name(s) as DLBW shall have designated, a certificate or
certificates for the number of full shares of New WRT Subscription Common Stock
related to the Denied Class D-3 Claim; and (ii) to the applicable Holder, the
Subscription Purchase Price for the New WRT Subscription Common Stock so
delivered to DLBW. DLBW shall be deemed to have become a holder of record of
such shares of New WRT Subscription Common Stock as of the Effective Date.
4.5 DIVIDENDS. All dividends or distributions on account of shares
of New WRT Subscription Common Stock shall be held in trust by the Disbursing
Agent and shall be distributed along with the applicable shares of New WRT
Subscription Common Stock upon delivery thereof pursuant to this Section 4.
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4.6 DE MINIMUS DISTRIBUTIONS. No Holder whose Interim Pro Rata
Share of the New WRT Subscription Rights would entitle such Holder to purchase
fewer than five (5) shares of New WRT Subscription Common Stock shall be
entitled to receive any New WRT Subscription Rights pursuant to this Agreement
or the Plan.
4.7 VOTING. The Disbursing Agent shall abstain from the voting of
any New WRT Subscription Common Stock.
SECTION 5
PAYMENT OF TAXES
The Company and New WRT shall pay all documentary stamp taxes, if
any, attributable to the initial issuance of shares of New WRT Subscription
Common Stock issuable upon the exercise of New WRT Subscription Rights;
PROVIDED, HOWEVER, that the Company and New WRT shall not be required to pay,
and the Holders shall pay, any tax or taxes that may be payable in respect of
any transfer involved in the issue or delivery of any certificates for shares of
New WRT Subscription Common Stock in a name other than that of the registered
Holder of the New WRT Subscription Rights that were exercised.
SECTION 6
ISSUANCE OF NEW WRT SUBSCRIPTION COMMON STOCK
6.1 ISSUANCE OF NEW WRT SUBSCRIPTION COMMON STOCK. On the Effective
Date, New WRT shall issue out of its authorized common stock 3,000,000 shares of
New WRT Subscription Common Stock. The consideration for such shares shall be
the payment received by the Disbursing Agent from the Holders or DLBW as
contemplated by this Agreement. Such shares shall be delivered to the Disbursing
Agent for distribution as provided in Sections 4.2, 4.3 and 4.4 hereof and in
Article 29 of the Plan.
6.2 DELIVERY OF NEW WRT COMMON STOCK BY TRANSFER AGENT. The
Disbursing Agent is hereby irrevocably authorized to arrange for the transfer
agent for the New WRT Common Stock (the "Transfer Agent") to issue certificates
evidencing New WRT Subscription Common Stock in the name of the Holders
receiving such shares upon the exercise of the New WRT Subscription Rights in
accordance with the terms of this Agreement.
SECTION 7
NO RIGHTS AS STOCKHOLDERS
Except as set forth in this Agreement, nothing contained in this
Agreement or in any of the New WRT Subscription Rights shall be construed as
conferring upon the Holders the right to vote or to receive dividends or to
consent to or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or New WRT or any
other matter, or any rights whatsoever as stockholders of the Company or New
WRT.
SECTION 8
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INSPECTION OF RIGHTS AGREEMENT
The Company shall keep copies of this Agreement, any notices given
or received hereunder and any other documents related hereto and required to be
held by the Company available for inspection by the Holders during normal
business hours at its principal office in Houston, Texas.
SECTION 9
METHOD OF DELIVERY
The method of delivery of the Subscription Rights Election Form and
the payment of the Subscription Purchase Price to the Disbursing Agent are at
the election and risk of the Holders.
SECTION 10
FAILURE OF EFFECTIVE DATE TO OCCUR; CRAMDOWN
If either the Bankruptcy Court determines that the Effective Date
under the Plan will not occur or (ii) the Holders vote to reject the Plan, then
the Company or New WRT shall instruct the Disbursing Agent to return to each
Holder the Subscription Purchase Price delivered by such Holder.
SECTION 11
INTEREST
No interest shall accrue and be payable hereunder at any time with
respect to funds delivered in payment of the Subscription Purchase Price.
SECTION 12
VALIDITY OF EXERCISES
All questions concerning the timeliness, validity, form and
eligibility of any exercise of New WRT Subscription Rights will be determined by
the Company or New WRT, in its sole discretion, whose determination shall be
final and binding. The Company and New WRT reserve the absolute right to reject
any subscription if such subscription is not in proper form or if the acceptance
thereof or the issuance of New WRT Subscription Common Stock pursuant thereto
could, in the opinion of the Company's or New WRT's counsel, be deemed unlawful.
The Company also reserves the right to waive any defect with regard to any
particular subscription or to reject any purported subscription by reason of any
defect or irregularity in such exercise. Neither the Company, New WRT nor the
Disbursing Agent shall be under any duty to give notification of any defects or
irregularities in subscriptions, nor shall any of them incur any liability for
failure to give such notification.
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SECTION 13
NO REVOCATION
After any Holder has exercised any New WRT Subscription Right, such
exercise may not be revoked by such Holder.
SECTION 14
NOTICES
Any notice, demand, claim or other communications under this
Agreement shall be in writing and shall be deemed to have been given upon
personal delivery thereof, or upon receipt thereof if sent by registered mail,
return receipt requested, postage prepaid, or upon confirmation of delivery
thereof by courier service, if sent by recognized overnight courier service, to
the respective address of the parties set forth below (or such other address as
a party may specify by notice given as herein provided):
(a) If to the Company or New WRT,
to:
WRT Energy Corporation
5718 Westheimer, Suite 1201
Houston, Texas 77057
Attention: Mr. Raymond P. Landry
Copies to:
Sheinfeld, Maley, & Kay, P.C.
1001 Fannin Street, Suite 3700
Houston, Texas 77002-6797
Attention: Joel P. Kay, Esq.
and
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Jeffrey S. Sabin, Esq.
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(b) If to the Disbursing Agent, to:
----------------------
----------------------
----------------------
Attention: ______________
(c) If to any Holder, to:
The address of such Holder as reflected in the Rights Register.
SECTION 15
SUPPLEMENTS AND AMENDMENTS
The Company may from time to time supplement or amend this
Agreement without the approval of any Holder in order to cure any ambiguity or
to correct or supplement any provision contained herein that may be defective or
inconsistent with any other provisions herein or to make any other provisions
with regard to matters or questions arising hereunder that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
Holders.
SECTION 16
SUCCESSORS
This Agreement and all the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
(including, without limitation, any trustee of the Company and New WRT) and
permitted assigns, but neither this Agreement nor any of the rights, interests
or obligations hereunder may be assigned by any of the parties hereto without
the prior written consent of the other parties.
SECTION 17
APPLICABLE LAW
Except to the extent inconsistent with the Bankruptcy Code, this
Agreement and the legal relations between the parties hereto shall be governed
by, and construed and enforced in accordance with, the laws of the State of New
York, without giving effect to the provisions, principles or policies thereof
respecting conflict or choice of laws. All matters relating to this Agreement
shall be determined by the Bankruptcy Court.
SECTION 18
BENEFITS OF THIS AGREEMENT
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Nothing in this Agreement shall be construed to give any person or
corporation other than the Company, New WRT and the Holders any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company, New WRT, the Holders and
their respective successors and assigns hereunder.
SECTION 19
COUNTERPARTS
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
SECTION 20
CAPTIONS
The captions of the Sections and Subsections of this Agreement have
been inserted for convenience only and shall not affect the interpretation
hereof.
SECTION 21
SEVERABILITY
In the event any term, provision, covenant or restriction of this
Agreement shall, for any reason, be held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Agreement
and the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated. It is hereby stipulated and declared to be the
intention of the Company and the Holders that they would have executed the
remaining terms, provisions, covenants and restrictions of this Agreement
without including any of such provisions that may be hereafter declared invalid,
illegal, void or unenforceable.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
WRT ENERGY CORPORATION
By:
Name:
Title:
, AS DISBURSING
AGENT
By:
Name:
Title:
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