<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1996
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------------
FORCENERGY INC
(Exact name of Registrant as specified in its charter)
DELAWARE 65-0429338
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2730 SW 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
(305) 856-8500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
--------------------------------
STIG WENNERSTROM
FORCENERGY INC
2730 SW 3RD AVENUE, SUITE 800
MIAMI, FLORIDA 33129-2237
(305) 856-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
T. MARK KELLY JOHN F. WOMBWELL
VINSON & ELKINS L.L.P. ANDREWS & KURTH L.L.P.
1001 FANNIN, SUITE 2300 4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002-6760 HOUSTON, TEXAS 77002
--------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities registered on this Form are being offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Title of each class of Proposed maximum aggregate Amount of registration
securities to be registered offering price fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $.01 per share $97,354,687(1) $29,502
- -----------------------------------------------------------------------------------------------------------------
__% Senior Subordinated Notes due 2006 $175,000,000 $53,031
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457 solely for the purpose of calculating the
amount of the registration fee based upon the average of the high and low
sales prices of the Common Stock as reported on the NASDAQ National Market
on October 2, 1996. Includes 525,000 shares of Common Stock subject to the
Underwriter's over-allotment option.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of Prospectus, one to be
used in connection with the offering of % Senior Subordinated Notes due 2006
(the "Notes Prospectus") and a concurrent offering of Common Stock ("Common
Stock Prospectus"). The Common Stock Prospectus is followed by alternative
pages to be used in the Notes Prospectus. The closing of the offering being
made pursuant to the Notes Prospectus (the "Notes Offering") and the closing of
the offering being made pursuant to the Common Stock Prospectus ("Common Stock
Offering") are not contingent upon each other.
<PAGE> 3
SUBJECT TO COMPLETION, DATED OCTOBER 7, 1996
3,500,000 SHARES
FORCENERGY INC
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------------------------
Of the 3,500,000 shares of Common Stock offered hereby, 1,537,958 shares
are being sold by the Company and 1,962,042 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the shares being sold by the Selling Stockholders. Concurrently with the Common
Stock Offering, the Company is offering $175 million of ___% Senior Subordinated
Notes due 2006 for sale to the public in a separate Notes Offering.
Consummation of the Common Stock Offering and the Notes Offering are not
contingent upon each other. There can be no assurance that the Notes Offering
will be consummated, and if so, on what terms.
The last reported sale price of the Common Stock, which is quoted under the
symbol "FGAS", on the Nasdaq National Market was $23.38 per share. See "Market
For and Recent Prices of Common Stock".
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
---------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------------
<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to Proceeds to Selling
Offering Price Discount (1) Company (2) Stockholders
-------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
Per Share . . . . . . . . . . . . . $ $ $ $
Total(3) . . . . . . . . . . . . .$ $ $ $
</TABLE>
- ----------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $________.
(3) The Company has granted to the Underwriters an option for 30 days to
purchase up to an additional 525,000 shares of Common Stock at the initial
public offering price, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to company
will be $_________, $__________ and $_________, respectively. See
"Underwriting".
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York on
or about ____________, 1996, against payment therefor in immediately available
funds.
---------------------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
---------------------------------------
The date of this Prospectus is ________.
<PAGE> 4
FORCENERGY INC
GULF OF MEXICO PROPERTIES
Description of Pictures--Map--Coast of Texas, Louisiana, Mississippi and
part of Alabama. Shows in green land and cities of Houston, Texas and Lafayette
and New Orleans, Louisiana. Shows in light blue the Shelf area offshore, in
medium blue the Flextrend area offshore and in darker blue the Deepwater area
offshore. Traces the boundaries of and states the names for offshore areas,
including: Galveston Island Area, High Island Area, West Addition, East Cameron
Area, Vermilion Area, South Marsh Island Area, Eugene Island Area, Ship Shoal
Area, South Timbalier, Ewing Bank Area, South Palto, Grand Isle, West Delta
Area, South Pass Area, Main Pass Area, Chandeleur Area, East Addition, Viosca
Knoll and Mississippi Canyon. Lease blocks in which the Company has interests
are marked with triangles and footnoted as such. Operated and non-operated
lease blocks are differentiated by the color of the triangles.
IN CONNECTION WITH THE COMMON STOCK OFFERING, CERTAIN UNDERWRITERS AND
SELLING GROUP MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS
IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY OR THE NOTES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED AT THE NASDAQ NATIONAL
MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZATION, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, included
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes that the Underwriters' over-allotment option will not
be exercised. Investors should carefully consider the information set forth
under "Risk Factors." Certain oil and gas industry terms used in this
Prospectus are defined in "Glossary of Oil and Gas Terms."
THE COMPANY
Forcenergy Inc ("Forcenergy" or the "Company") is an independent oil and
gas company engaged in the exploration, acquisition, development, exploitation
and production of oil and natural gas properties. The Company has experienced
significant growth in the last five years, primarily through the exploitation,
enhancement and development of acquired working interests in producing
properties in the Gulf of Mexico. At December 31, 1995, the Company had net
proved reserves of 365 Bcfe, 71% of which were located in the Gulf of Mexico.
Approximately 60% of the Company's net proved reserves on such date were
natural gas and approximately 69% of proved reserves were classified as proved
developed. The Company operates approximately 72% of its Gulf of Mexico
production.
Strategy. The Company's business strategy is to increase reserves and cash
flow through the development, exploration, acquisition and exploitation of its
producing properties in the shallow waters (less than 350 feet) of the Gulf of
Mexico. Management believes that the Company's high quality asset base
positions it for future growth through a continuing program of further
development through selective exploitation and exploration drilling and through
the enhancement of production through workovers and recompletions. The Company
emphasizes the use of 3-D seismic and computer-aided exploration technology
together with geologic and engineering studies of its properties to evaluate
and prioritize drilling prospects. Focusing drilling activities on producing
properties in a relatively concentrated area in the Gulf of Mexico permits the
Company to utilize its base of geological, engineering and production
experience in the region to maximize its drilling success and to minimize
finding and development costs. Furthermore, the Company's concentration of
drilling activities on its producing properties allows the utilization of
existing infrastructure which greatly reduces incremental lease operating
expenses and costs associated with new production facilities. The Company
plans to continue to pursue acquisitions of working interests in producing
properties that offer further development potential and provide operating
synergies with existing properties. As a complement to its acquisition
strategy, the Company also participates in exploration activities both onshore
and in the Gulf of Mexico.
Quality of Asset Base; Drilling Prospects. The Company holds interests in
or rights to 81 lease blocks in federal and state waters in the Gulf of Mexico,
including a 100% working interest in 32 lease blocks and a 50% or greater
working interest in 18 other lease blocks. The Company believes it has
assembled at least a three to five year inventory of development, exploitation
and exploratory drilling opportunities in the Gulf of Mexico on acreage held by
production. Most of the properties comprising this inventory are located in
fields which have prolific production histories and which the Company believes
will yield significant additional reserves through the application of modern
exploration and development technologies. The Company is pursuing the
development of these offshore properties through a combination of development
drilling, recompletions and workovers and exploratory drilling. During 1995,
the Company successfully drilled seven of nine exploratory wells and ten of ten
development wells in the Gulf of Mexico and undertook eight recompletions and
24 workover projects, resulting in initial net production increases of 4,392
Bbls/d of oil and 27,496 Mcf/d of natural gas. The Company plans to drill 20
development wells in 1996, 14 of which were successfully completed in the first
eight months of 1996, and the Company also has budgeted to drill 20
recompletions and 21 workover projects on its properties in the Gulf of Mexico
during 1996, of which 27 have been completed to date. In addition, eight
exploratory wells have been scheduled during 1996 to provide the Company with
exposure to higher risk, higher potential prospects. Of the eight planned
exploratory wells, four have been drilled and successfully completed, and four
remain to be drilled. The Company anticipates that approximately $98.6 million
of its $110 million capital expenditure budget for 1996 (not including
acquisition expenditures) will be spent on these projects.
Control of Operations and Costs. The Company prefers to operate its
offshore properties to more effectively manage production performance while
controlling operating expenses and the timing and amount of capital
expenditures. Forcenergy operates 90 structures and 242 wells in the Gulf of
Mexico. Management believes that the operating expertise and experience of its
personnel in the Gulf of Mexico have been instrumental in its ability to
significantly enhance and improve production rates and cash flow with minor
incremental costs. A significant portion of the drilling prospects the Company
expects to pursue during the next three to five years are accessible from
existing production facilities operated by the Company. This base of operations
will enable the Company to reduce its per unit operating costs if higher
3
<PAGE> 6
production volumes are realized. As a result of these factors, the Company's
lease operating expense was $.86 per Mcfe of production in 1994, $.70 per Mcfe
of production in 1995 and $.69 per Mcfe of production through August 31, 1996.
Technology. The Company uses advanced technology in its exploration and
development activities to reduce drilling risks and finding costs and to more
effectively prioritize drilling prospects based on return potential. The
Company has acquired 3-D seismic surveys on 102 offshore lease blocks and
currently has 825 square miles of 3-D seismic data and 53,000 linear miles of
2-D seismic data on its offshore properties. The Company has nine
geologists/geophysicists with average industry experience of 18 years and has
invested in seven Landmark geophysical stations for use in interpreting 3-D
seismic data. The ability to obtain 3-D seismic data for offshore properties
at reasonable costs has enabled the Company to identify multiple development
and exploratory prospects in mature producing fields which were not identified
through earlier technologies.
Recent Acquisitions. During 1995, the Company spent an aggregate of
approximately $92.1 million for working interests in 15 different fields that
added 121.9 Bcfe of net proved reserves to its reserve base at an average cost
of $.76 per Mcfe. Approximately $81.6 million of such expenditures were for
interests in ten properties located in the Gulf of Mexico. In the first eight
months of 1996, the Company spent approximately $17.0 million for working
interests in 12 different fields that added 28.3 Bcfe of net proved reserves to
its reserve base at an average cost of $.60 per Mcfe. Major acquisitions
during 1995 and 1996 were as follows:
In March 1995, the Company acquired working interests in the South Marsh
Island 136/137 Field and the northern half of South Marsh Island 106 from
Conoco, Inc. (the "Conoco Acquisition") for consideration of $24.5 million. In
April 1995, the Company acquired all the remaining working interests in the
northern half of South Marsh Island 106. The foregoing acquisitions were
particularly attractive because both fields are adjacent to fields in which the
Company holds 100% working interests. The Company had an active drilling
program in Block 106 in 1995 and will have at least one rig in the block for
all of 1996. See "Business -- 1995 and 1996 Offshore and Gulf Coast Drilling
Activity."
In August 1995, in conjunction with the Company's initial public offering,
the Company acquired all of the outstanding capital stock of Ashlawn Energy,
Inc. ("Ashlawn") a privately held Company with substantial working interests in
the South Pass 24 Field, Vermilion 28 Field and Ship Shoal 26 Field (the
"Ashlawn Acquisition"). The purchase price for the Ashlawn Acquisition
consisted of 3,000,000 shares of Common Stock, $3.3 million in cash and the
assumption of $5.7 million in debt. All of the assumed debt was repaid with
the proceeds of the public offering. The Company conducted an active drilling
program on these properties in 1995 and has continued to pursue additional
development projects on the properties in 1996. See "Business -- 1995 and 1996
Offshore and Gulf Coast Drilling Activity".
In November 1995, the Company acquired an approximate 50% working interest
in certain leases in the Howard Glasscock/Snyder fields in Howard County, Texas
from Saga Petroleum, Inc. for approximately $3.9 million. The Company's 1996
capital budget includes $1.9 million for its pro rata share of drilling
injection wells to initiate a waterflood project in the field. In May 1996,
the Company acquired an additional 25% interest in these leases and surrounding
acreage for $4.0 million. At August 31,1996, twenty injection wells had been
drilled, five of which had been completed. Additionally, water injection had
commenced on the five completed wells. Initial response to the water flood, if
any, should occur in 1997.
In late 1995, the Company acquired a 100% working interest in the Vermilion
Block 380 Field, located offshore Louisiana, from Texaco Exploration and
Production, Inc. for approximately $650,000. Effective December 1995, the
Company also acquired a 100% working interest in the West Cameron 630 Field,
located offshore Louisiana and an approximate 51.7% working interest in the
Comite Field in East Baton Rouge Parish, Louisiana from Exxon Corporation for
approximately $3.9 million. The Company currently plans to drill an
exploratory well in the West Cameron 630 field in early 1997.
In June 1996, the Company acquired working interests in eleven Gulf of
Mexico producing fields from Amerada Hess Corporation (the "Amerada Hess
Acquisition") for a cash consideration of $6.9 million. In August 1996, the
Company acquired an additional working interest in one of these fields, Mustang
Island 742/754, for approximately $4.0 million, increasing its total working
interest in the field to 100%.
As is customary in the oil and gas industry, the Company from time to time
submits bids on oil and gas properties, subject to acceptance by the sellers.
Upon acceptance of a bid by the seller, the finalization of such agreements are
subject
4
<PAGE> 7
to the completion of satisfactory due diligence by the Company, including title
and environmental review. There can be no assurance that any of the sellers
will accept the bids or that any of such transactions will be consummated.
Onshore Properties. The Company also owns working and royalty interests in
approximately 1,600 producing oil and gas wells in over 147 fields in the Rocky
Mountain, Gulf Coast, Southwest and Appalachian regions of the United States.
Management believes that the Company's stable reserve base of long-lived,
primarily non-operated, onshore properties complements the Company's Gulf of
Mexico operations by providing an additional source of cash flow which requires
limited management involvement. The Company's onshore properties accounted for
approximately 29% of net proved reserves at December 31, 1995. During 1995, the
Company expended approximately $4.0 million in capital on its onshore
properties, including $3.7 million for drilling and recompletion activities.
Approximately $2.4 million in capital has been spent on the onshore properties
in 1996, the majority of which was focused on the Howard Glasscock Snyder
fields.
Principal Securityholders. Approximately 49.1% of the Company's Common
Stock is held by Forcenergy AB ("FAB"), the B shares of which are listed on the
Stockholm (Sweden) Stock Exchange. The Forss family beneficially owns a 49.9%
voting interest in FAB. Pursuant to an agreement among FAB, the Company and
the holders of the Company's 7% Exchangeable Subordinated Notes (the
"Subordinated Notes"), the size of the Company's Board of Directors is fixed at
no more than eight persons to consist of (i) two designees of FAB, (ii) three
designees of the holders of the Subordinated Notes (the "Note Holders"), (iii)
the Company's Chief Executive Officer and (iv) two independent directors
nominated by FAB and acceptable to the Note Holders. It is anticipated that
following the Common Stock Offering, including the sale by FAB of 300,000
shares in the offering, that FAB's ownership percentage in the Company will
decrease to approximately 39%. Upon completion of the Common Stock offering,
the number of shares held by the Note Holders will be reduced to below 5% of
the outstanding shares of Common Stock and the agreement among FAB, the Company
and the Note Holders will terminate pursuant to its terms. See "Description of
Existing Securities and Senior Credit Facility -- Voting and Holdback Agreement.
5
<PAGE> 8
THE COMMON STOCK OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company . . . . . . . 1,537,958 shares
Common Stock offered by the Selling Stockholders . 1,962,042 shares
Common Stock to be outstanding after the Common
Stock Offering . . . . . . . . . . . . . . . . . . 22,373,656 shares (1)
NASDAQ National Market symbol . . . . . . . . . . . "FGAS"
Use of Proceeds . . . . . . . . . . . . . . . . . . To repay a portion of indebtedness under the
Company's Senior Credit Facility. The Company may
reborrow amounts under the Senior Credit Facility to
fund the Company's on-going capital expenditure
program and for other general corporate purposes.
Notes Offering . . . . . . . . . . . . . . . . . . Concurrently with the offering of Common Stock (the
"Common Stock Offering"), the Company is offering
$175 million of % Senior Subordinated Notes due
2006 for sale to the public (the "Notes Offering"
and, together with the Common Stock Offering, the
"Offerings"). The Common Stock Offering is not
contingent upon consummation of the Notes Offering,
nor is the Notes Offering contingent upon
consummation of the Common Stock Offering. There
can be no assurance that the Notes Offering will be
consummated and, if so, on what terms.
</TABLE>
- ----------------
(1) Assumes the exchange of all of the outstanding Subordinated Notes for
2,343,047 shares of Common Stock and exercise of certain options held by
holders of the Subordinated Notes to purchase 214,866 shares of Common
Stock. Does not include 2,365,558 shares of Common Stock issuable pursuant
to outstanding options and warrants held by management and others.
RISK FACTORS
Prior to making an investment decision, prospective purchasers of Common
Stock should consider all of the information set forth in this Prospectus and
should evaluate the considerations set forth in "Risk Factors."
6
<PAGE> 9
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents certain historical and pro forma financial
data as of and for each of the periods indicated. The historical financial
data for the years ended December 31, 1991, 1992, 1993, 1994 and 1995 have been
derived from the audited financial statements of the Company. The financial
data for the six months ended June 30, 1995 and 1996 are derived from the
Company's unaudited financial statements which, in the opinion of management,
include all adjustments (which consist only of normal recurring accruals)
necessary for a fair presentation of the financial position and results of
operations of the Company for such interim periods. The following information
should be read together with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Pro Forma Financial Information"
included in this Prospectus and the Financial Statements of the Company and
certain other pro forma financial information incorporated by reference
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
-------------------------------------------------------------------- --------------------------------
Pro Forma Pro Forma
1991 1992 1993 1994 1995 1995(1) 1995 1996 1996(4)
------- ------- ------- ------- -------- --------- -------- -------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas sales . . . $12,680 $24,937 $49,652 (2) $58,354 (2) $72,147 $93,795 $34,140 $57,477 $66,740
Other. . . . . . . . . . 337 475 441 (2) 388 (2) 494 521 235 276 276
------- ------- ------- ------- -------- -------- -------- -------- --------
13,017 25,412 50,093 58,742 72,641 94,316 34,375 57,753 67,016
------- ------- ------- ------- -------- -------- -------- -------- --------
Expenses:
Lease operating . . . . 4,091 7,769 16,632 23,744 24,507 32,742 11,602 16,819 19,136
Depreciation, depletion
and amortization . . . 4,216 8,014 19,889 24,572 31,295 41,541 15,560 24,162 28,120
Production taxes . . . . 280 606 1,560 1,701 1,868 2,420 923 1,653 1,653
General and
administrative, net. . 1,947 2,523 3,166 6,463 5,670 5,770 2,821 3,575 3,575
------- ------- ------- ------- -------- -------- -------- -------- --------
Total operating
expenses . . . . . . . 10,534 18,912 41,247 56,480 63,340 82,473 30,906 46,209 52,484
------- ------- ------- ------- -------- -------- -------- -------- --------
Income from operations. . 2,483 6,500 8,846 2,262 9,301 11,843 3,469 11,544 14,532
Interest and other
income (loss) . . . . 525 197 545 789 (561) (561) 290 237 237
Interest expense, net of
amounts capitalized . (233) (2,303) (6,192) (9,529) (11,668) (9,867) (6,519) (5,913) (6,177)
------- ------- ------- ------- -------- -------- -------- -------- --------
Income (loss) before
income taxes . . . . . 2,775 4,394 3,199 (6,478) (2,928) 1,415 (2,760) 5,868 8,592
Income tax provision
(benefit) (3) . . . . . -- -- 2,337 (2,403) (1,075) 545 (1,029) 2,188 3,204
Minority interest . . . . 83 132 107 -- -- -- -- -- --
------- ------- ------- ------- -------- -------- -------- -------- --------
Net income (loss) (3) . . $ 2,692 $ 4,262 $ 755 $(4,075) $(1,853) $ 870 $(1,731) $ 3,680 $ 5,388
======= ======= ======= ======= ======== ======== ======== ======== ========
Net income (loss) per
share (3) . . . . . . . $ (.50) $ (.14) $ .05 $ (.19) $ .20 $ .30
======= ======== ======== ======== ======== ========
UNAUDITED PRO FORMA
DATA (3):
Income before income
taxes, including
minority interest . . $ 2,692 $ 4,262 $ 3,092
Income tax provision . . $ 1,027 $ 1,639 $ 1,207
Net income . . . . . . . $ 1,665 $ 2,623 $ 1,885
======= ======= =======
Net income per share $ .26 $ .41 $ .29
======= ======= =======
Weighted average number
of shares outstanding 6,451 6,451 6,520 8,188 12,910 18,250 9,040 18,261 18,261
</TABLE>
7
<PAGE> 10
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
As
Adjusted,
at
At December 31, At June 30, June 30,
--------------------------------------------------- -------------------------------------
1991 1992 1993 1994 1995 1995 1996 1996(8)
-------- ------- -------- ------- -------- -------- ------- -----------
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property, plant and
equipment, net . . . . $ 59,691 $ 112,441 $ 152,659 $ 186,241 $298,832 $ 219,451 $ 356,030
Total assets . . . . . . 71,154 127,685 187,786 220,287 335,090 258,306 391,674
Total debt . . . . . . . 7,922 75,758 127,234 131,646 130,729 155,270 175,135
Stockholders' equity . . 48,612 45,252 43,336 71,061 154,961 69,330 158,710
OTHER FINANCIAL DATA:
Capital Expenditures (5) $ 13,751 $ 67,660 $ 53,371 $ 58,169 $144,689 $ 48,770 $ 81,168
EBITDA(6) . . . . . . . 7,224 14,711 29,280 27,623 40,035 19,319 35,943
Ratio of Earnings to
Fixed Charges (7). . . 12.9x 2.9x 1.4x 0.3x 0.6x 0.5x 1.7x
</TABLE>
(1) Gives effect to (i) the Conoco Acquisition, the Ashlawn Acquisition and
other acquisitions by the Company prior to the Company's initial public
offering in August 1995, and the Amerada Hess Acquisition in June 1996, (ii)
the application of the net proceeds of the July 1995 initial public
offering and (iii) incremental general and administrative expenses
associated with being a public company, as if such transactions had been
consummated on January 1, 1995.
(2) Natural gas liquid revenues for 1993 and 1994 have been reclassified from
plant processing and other revenues to oil and gas sales for consistent
presentation with 1995 revenues.
(3) Prior to September 14, 1993, the Company was exempt from United States
federal and certain state income taxes as a result of its partnership
status. The unaudited pro forma data reflects the income tax expense that
would have been recorded had the Company not been exempt from paying such
income taxes. Net income per share data is described as unaudited pro forma
because of the Company's former partnership status.
(4) Gives effect to the Amerada Hess acquisition as if it had taken place on
January 1, 1995. The increase of $.10 per share to the historical results
for the six month period ended June 30, 1996 may not be representative of
future operations as the associated reserves with the acquired properties
have a high decline rate.
(5) Capital expenditures includes acquisitions of oil and gas properties
including non-cash item relating to the 1995 Ashlawn Acquisition, amounting
to $46.4 million.
(6) EBITDA is defined as earnings before interest, taxes, depletion,
depreciation and amortization and is presented because it is a widely
accepted financial indication of a Company's ability to service and incur
debt. EBITDA should not be considered as an alternative to earnings (loss)
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity.
(7) For purposes of determining the ratio of earnings to fixed
charges, earnings are computed as net income (loss) before income taxes,
plus fixed charges. Fixed charges consist of interest expense, whether
expensed or capitalized, on all indebtedness plus amortization of debt
issuance costs. Earnings did not cover fixed charges in the years ended
December 31, 1995 and 1994 and for the six months ended June 30, 1995 by
$5.5 million, $8.0 million and $3.9 million, respectively.
(8) Assumes conversion of $34 million (all) of the Subordinated notes into
2,343,047 shares of Common Stock, the exercise of options by certain holders
of the Subordinated Notes to purchase 214,866 shares of Common Stock and the
sale of 1,537,950 shares of Common Stock by the Company. Also assumes the
issuance of $175 million in __% Senior Subordinated Notes retiring the
outstanding balance of the Senior Credit Facility.
8
<PAGE> 11
SUMMARY OIL AND GAS RESERVE DATA
The following table summarizes the estimates of the Company's net proved
oil and gas reserves as of the dates indicated and the present value
attributable to these reserves at such dates. The reserve and present value
data as of December 31, 1995 for the onshore properties have been estimated by
Netherland, Sewell & Associates, Inc., independent petroleum engineering
consultants. The reserve and present value data as of December 31, 1995 for
the offshore properties have been estimated by Collarini Engineering Inc.,
independent petroleum engineering consultants. The reserve estimates and
present value data as of December 31, 1994 have been audited by Netherland,
Sewell & Associates, Inc. and such data and estimates as of December 31, 1993
and 1994 were prepared by Collarini Engineering Inc. and Joe C. Neal &
Associates, independent petroleum engineering consultants. For additional
information relating to the Company's oil and natural gas reserves, see "Risk
Factors - Uncertainty of Reserve Information and Future Net Revenue Estimates,"
"Business - Oil and Gas Reserves" and the Supplemental Information on Oil and
Gas Producing Activities in Note 16 of the Notes to the Financial Statements of
the Company incorporated by reference elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Proved Reserves:
Oil (Mbbls) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,776 11,310 24,458
Natural gas (Mmcf) . . . . . . . . . . . . . . . . . . . . . . . . . . 138,862 172,122 218,052
Total (Mmcfe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,518 239,982 364,800
Present value of future net revenues before income taxes (000s) (1) . . $197,965 $171,391 $540,901
Standardized measure of discounted future net cash flows (000s) (2) . . $159,173 $152,627 $406,956
</TABLE>
- --------------------
(1) The present value of future net revenues attributable to the Company's
reserves was prepared using constant prices as of the calculation date,
discounted at 10% per annum on a pre-tax basis.
(2) The standardized measure of discounted future net cash flows represents the
present value of future net revenues after income tax discounted at 10%.
SUMMARY OPERATING DATA
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
----------------------------------------- ---------------------
Pro Forma Pro Forma
1993 1994 1995 1995(1) 1996 1996(2)
-------- -------- ------ --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Production . . . . . . . . . . . . . . .
Liquids (Mbbls) (3) . . . . . . . . 1,425(4) 1,753(4) 2,343 2,818 1,778 1,844
Natural gas (Mmcf) . . . . . . . . . 12,025 17,121 21,112 29,766 12,772 16.218
Total (Mmcfe) . . . . . . . . . . . 20,575 27,639 35,170 46,674 23,440 27,282
Average sales prices:
Liquids (per Bbl) . . . . . . . . . . $ 16.65 $ 15.04 $ 16.46 16.44 $ 16.75 $ 16.75
Natural gas (per Mcf) . . . . . . . 2.16 1.87 1.59 1.59 2.17 2.21
Expenses (per Mcfe):
Lease operating . . . . . . . . . . $ .81 $ .86 $ .70 .70 $ .72 $ .70
Production taxes . . . . . . . . . . .08 .06 .05 .05 .07 .06
Depreciation, depletion and .96 .88 .88 .89 1.03 1.03
amortization . . . . . . . . . . . .
General and administrative, net . . .15 .23 .16 .12 .15 .13
- --------------------
</TABLE>
(1) Gives effect to the Ashlawn Acquisition, Conoco Acquisition, Amerada Hess
and other acquisitions as if such transactions had been consummated on
January 1, 1995.
(2) Gives effect to the Amerada Hess acquisition as if it had been consummated
on January 1, 1995.
(3) Includes crude oil, condensate and natural gas liquids.
(4) Includes certain natural gas liquid volumes reclassified to conform with
1995 classifications.
9
<PAGE> 12
RISK FACTORS
The following factors should be considered carefully, together with the
other information contained in this Prospectus before purchasing the securities
offered hereby.
VOLATILITY OF NATURAL GAS AND OIL PRICES
Revenues generated from the Company's operations are highly dependent upon
the price of, and demand for, oil and natural gas. Historically, the markets
for oil and natural gas have been volatile and are likely to continue to be
volatile in the future. Prices for oil and natural gas are subject to wide
fluctuations in response to relatively minor changes in the supply of and
demand for oil and natural gas, market uncertainty and a variety of additional
factors that are beyond the control of the Company. These factors include the
level of consumer product demand, weather conditions, domestic and foreign
governmental regulations, the price and availability of alternative fuels,
political conditions in the Middle East, the foreign supply of oil and natural
gas, the price of foreign imports and overall economic conditions. It is
impossible to predict future oil and natural gas price movements with any
certainty. Declines in oil and natural gas prices may materially adversely
affect the Company's financial condition, liquidity and results of operations.
Lower oil and natural gas prices also may reduce the amount of the Company's
oil and natural gas that can be produced economically. In order to reduce its
exposure to price risks in the sale of its oil and natural gas, the Company
enters into hedging arrangements from time to time. The Company's hedging
arrangements apply to only a portion of its production and provide only limited
price protection against fluctuations in the oil and natural gas markets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - General" and "Business - Marketing and Customers."
The Company uses the full cost method of accounting for its investment in
oil and natural gas properties. Under the full cost method of accounting, all
costs of acquisition, exploration and development of oil and natural gas
reserves are capitalized into a "full cost pool" as incurred, and properties in
the pool are depleted and charged to operations using the unit-of-production
method based on the ratio of current production to total proved oil and natural
gas reserves. To the extent that such capitalized costs (net of accumulated
depreciation, depletion and amortization) less deferred taxes exceed the
present value (using a 10% discount rate) of estimated future net cash flow
from proved oil and natural gas reserves, and the lower of cost or fair value
of unproved properties after income tax effects, such excess costs are charged
to operations. Once incurred, a write-down of oil and natural gas properties
is not reversible at a later date even if oil or natural gas prices increase.
While the Company has never been required to write-down its asset base,
significant downward revisions of quantity estimates or declines in oil and gas
prices from those in effect on December 31, 1995 which are not offset by other
factors could result in a write-down for impairment of oil and gas properties.
REPLACEMENT OF RESERVES
In general, the volume of production from oil and gas properties declines
as reserves are depleted. The rate of decline depends on reservoir
characteristics, and varies from the steep decline rate characteristic of Gulf
of Mexico reservoirs, where the Company has a significant portion of its
production, to the relatively slow decline rate characteristic of the
long-lived fields in the Rocky Mountain, Gulf Coast, Southwest and Appalachian
regions. Except to the extent the Company acquires properties containing
proved reserves or conducts successful development and exploration activities,
or both, the proved reserves of the Company will decline as reserves are
produced. The Company's future oil and natural gas production is, therefore,
highly dependent upon its level of success in finding or acquiring additional
reserves. The business of exploring for, developing or acquiring reserves is
capital intensive. To the extent cash flow from operations is reduced and
external sources of capital become limited or unavailable, the Company's
ability to make the necessary capital investment to maintain or expand its
asset base of oil and natural gas reserves would be impaired. In addition,
there can be no assurance that the Company's future development, acquisition
and exploration activities will result in additional proved reserves or that
the Company will be able to drill productive wells at acceptable costs.
UNCERTAINTY OF RESERVE INFORMATION AND FUTURE NET REVENUE ESTIMATES
There are numerous uncertainties inherent in estimating oil and natural gas
reserves and their estimated values, including many factors beyond the control
of the producer. The reserve data set forth in this Prospectus represents only
estimates. Reservoir engineering is a subjective process of estimating
underground accumulations of oil and natural gas that cannot be measured in an
exact manner. Estimates of economically recoverable oil and gas reserves and
of future net cash flows necessarily depend upon a number of variable factors
and assumptions, such as historical production from
10
<PAGE> 13
the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions concerning
future oil and gas prices, future operating costs, severance and excise taxes,
development costs and workover and remedial costs, all of which may in fact
vary considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers at different times may
vary substantially and such reserve estimates may be subject to downward or
upward adjustment based upon such factors. Actual production, revenues and
expenditures with respect to the Company's reserves will likely vary from
estimates, and such variances may be material. See "Business - Oil and Gas
Reserves."
The present values of estimated future net cash flows referred to in this
Prospectus should not be construed as the current market value of the estimated
oil and natural gas reserves attributable to the Company's properties. In
accordance with applicable requirements of the Commission, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate, whereas actual future prices
and costs may be materially higher or lower. Actual future net cash flows also
will be affected by factors such as the amount and timing of actual production,
supply and demand for oil and natural gas, curtailments or increases in
consumption by gas purchasers and changes in governmental regulations or
taxation. The timing of actual future net cash flows from proved reserves, and
their actual present value, will be affected by the timing of both the
production and the incurrence of expenses in connection with development and
production of oil and gas properties. In addition, the calculation of the
present value of the future net revenues using a 10% discount as required by
the Commission, is not necessarily the most appropriate discount factor based
on interest rates in effect from time to time and risks associated with the
Company's reserves or the oil and gas industry in general.
EFFECTS OF LEVERAGE
The Company's senior secured credit facility (the "Senior Credit Facility")
provides for a commitment of $195 million. At September 30, 1996 the Company
had availability of approximately $26.2 million under the Senior Credit
Facility. The Company's level of indebtedness has several important effects
on its operations, including (i) the covenants contained in the Senior Credit
Facility and the Subordinated Note agreements require the Company to meet c
ertain financial tests, and other restrictions limit its ability to borrow
additional funds or to dispose of assets and may affect the Company's
flexibility in planning for, and reacting to, changes in business conditions
and (ii) the Company's ability to obtain additional financing in the future
for working capital, capital expenditures, acquisitions, general corporate or
other purposes may be impaired. Moreover, future acquisition or development
activities may require the Company to alter its capitalization significantly.
These changes in capitalization may significantly alter the leverage of the
Company or, in the case of the issuance of additional equity securities, may
be dilutive to holders of Common Stock. The Company's ability to meet its debt
service obligations and to reduce its total indebtedness will be dependent
upon the Company's future performance, which will be subject to general
economic conditions and to financial, business and other factors affecting the
operations of the Company, many of which are beyond its control. There can be
no assurance that the Company's future performance will not be adversely
affected by such economic conditions and financial, business and other
factors. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes may
require the Company to repurchase all or a portion of such holder's Notes at
101% of the principal amount of the Notes, together with accrued and unpaid
interest, if any, to the date of repurchase. The Indenture will require that
prior to such a repurchase, the Company must either repay all outstanding
Senior Debt or obtain any required consents to such repurchase. The occurrence
of a Change of Control may result in a default under the Senior Credit
Facility. If a Change of Control were to occur, the Company may not have the
financial resources to repay all of the Senior Debt, the Notes and the other
indebtedness that would become payable upon the occurrence of such Change of
Control. See "Description of Notes --Repurchase at the Option of
Holders--Change of Control."
11
<PAGE> 14
CONTROL BY PRINCIPAL SECURITYHOLDERS
The Company's principal stockholder, FAB, currently owns approximately
49.1% of the outstanding shares of Common Stock. Following the Common Stock
Offering and the sale of a portion of the shares held by FAB in the Common
Stock Offering, FAB ownership in the Company will be reduced to approximately
39% of the outstanding shares of Common Stock. See "Selling Stockholders."
FAB is a publicly traded Swedish company with two classes of stock, A shares
and B shares. There are 1,000,000 outstanding A shares, each of which is
entitled to one vote per share, and 13,392,000 outstanding B shares, each of
which is entitled to 1/10th of a vote per share. The B shares of FAB are
listed on the Stockholm Stock Exchange. The Forss family and its affiliates
owned all 1,000,000 A shares and 1,665,333 B shares of FAB as of September 17,
1996. Accordingly, the Forss family had a 49.9% voting interest and a 18.5%
economic interest in FAB. Under Swedish law, new issues of FAB securities are
subject to preferential rights of existing stockholders which gives the Forss
family the ability to maintain voting control over FAB in the event of future
stock issuances.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial capital
expenditures for the development, exploration, acquisition and production of
oil and natural gas reserves. Historically, the Company has financed these
expenditures primarily with proceeds from bank borrowings, the sale of the
Subordinated Notes, sales of Common Stock and cash generated by operations.
The Company made capital expenditures (including expenditures for acquisitions)
of $144.7 million during 1995 and plans to make capital expenditures, not
including expenditures for acquisitions, of approximately $110 million in 1996.
Management believes that the Company will have sufficient cash provided by
operating activities, borrowings under the Senior Credit Facility and proceeds
from the Offerings to fund planned capital expenditures in 1996. If revenues
decrease as a result of lower oil and gas prices or operating difficulties, or
the Company does not complete each of the Offerings, the Company may be limited
in its ability to expend the capital necessary to undertake or complete its
drilling program in future years. There can be no assurance that additional
debt or equity financing or cash generated by operations will be available to
meet these requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
DRILLING RISKS
Drilling involves numerous risks, including the risk that no commercially
productive natural gas or oil reservoirs will be encountered. The cost of
drilling, completing and operating wells is often uncertain, and drilling
operations may be curtailed, delayed or canceled as a result of a variety of
factors, including unexpected drilling conditions, pressure or irregularities
in formations, equipment failures or accidents, adverse weather conditions and
shortages or delays in the delivery of equipment. The Company's future
drilling activities may not be successful and, if unsuccessful, such failure
will have an adverse effect on the Company's future results of operations and
financial condition.
ACQUISITION RISKS
The Company's rapid growth in recent years has been largely the result of
acquisitions of producing properties. The Company expects to continue to
evaluate and pursue acquisition opportunities which are available on terms
management considers favorable to the Company. The successful acquisition of
producing properties requires an assessment of recoverable reserves, future oil
and gas prices, operating costs, potential environmental and other liabilities
and other factors beyond the Company's control. Such assessments are
necessarily inexact and their accuracy inherently uncertain. In connection
with such an assessment, the Company performs a review of the subject
properties that it believes to be generally consistent with industry practices.
Such a review, however, will not reveal all existing or potential problems nor
will it permit a buyer to become sufficiently familiar with the properties to
fully assess their deficiencies and capabilities. Inspections may not always
be performed on every platform or well, and structural and environmental
problems are not necessarily observable even when an inspection is undertaken.
The Company is generally not entitled to contractual indemnification for
pre-closing liabilities, including environmental liabilities, and generally
acquires interests in the properties on an "as is" basis.
12
<PAGE> 15
DEPENDENCE ON KEY PERSONNEL
The Company depends to a large extent on the services of its founder, Stig
Wennerstrom, and certain other senior management personnel. The loss of the
services of Mr. Wennerstrom and other senior management personnel could have a
material adverse effect on the Company's operations. The Company has entered
into employment agreements with Stig Wennerstrom, J. Russell Porter and E.
Joseph Grady. The Company believes that its success is also dependent upon its
ability to continue to employ and retain skilled technical personnel.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The Company's business is regulated by certain local, state and federal
laws and regulations relating to the exploration for, and the development,
production, marketing, pricing, transportation and storage of, oil and natural
gas. The Company's business is also subject to extensive and changing
environmental and safety laws and regulations governing plugging and
abandonment, the discharge of materials into the environment or otherwise
relating to environmental protection. As with any owner of property, the
Company is also subject to cleanup costs and liability for hazardous materials,
asbestos or any other toxic or hazardous substance that may exist on or under
any of its properties. In addition, the Company is subject to changing and
extensive tax laws, and the effect of newly enacted tax laws cannot be
predicted. The implementation of new, or the modification of existing, laws or
regulations, including amendments to the Oil Pollution Act of 1990 or
regulations which may be promulgated thereunder, could have a material adverse
effect on the Company. See "Business - Abandonment Costs," "- Government
Regulation" and "- Environmental Matters."
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company currently intends to retain its cash for the operation and
expansion of its business, including development, exploration and acquisition
activities. The terms of the Senior Credit Facility and the Indenture contain
restrictions on the payment of dividends to holders of Common Stock.
Accordingly, the Company's ability to pay dividends will depend upon such
restrictions and the Company's results of operations, financial condition,
capital requirements and other factors deemed relevant by the Board of
Directors. See "Dividend Policy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
COMPETITION
The oil and gas industry is highly competitive. The Company encounters
competition from other oil and gas companies in all areas of its operations,
including the acquisition of producing properties. The Company's competitors
include major integrated oil and natural gas companies and numerous independent
oil and natural gas companies, individuals and drilling and income programs.
Many of its competitors are large, well-established companies with
substantially larger operating staffs and greater capital resources than the
Company's and which, in many instances, have been engaged in the energy
business for a much longer time than the Company. Such companies may be able
to pay more for productive oil and natural gas properties and exploratory
prospects and to define, evaluate, bid for and purchase a greater number of
properties and prospects than the Company's financial or human resources
permit. The Company's ability to acquire additional properties and to discover
reserves in the future will be dependent upon its ability to evaluate and
select suitable properties and to consummate transactions in a highly
competitive environment.
OPERATING RISKS OF OIL AND GAS OPERATIONS
The oil and gas business involves certain operating hazards such as well
blowouts, cratering, explosions, uncontrollable flows of oil, natural gas or
well fluids, fires, formations with abnormal pressures, pollution, releases of
toxic gas and other environmental hazards and risks, any of which could result
in substantial losses to the Company. The Company's offshore operations also
are subject to the additional hazards of marine operations, such as severe
weather, capsizing and collision. The availability of a ready market for the
Company's oil and natural gas production also depends on the proximity of
reserves to, and the capacity of, oil and gas gathering systems, pipelines and
trucking or terminal facilities. In addition, the Company may be liable for
environmental damages caused by previous owners of property purchased and
leased by the Company. As a result, substantial liabilities to third parties
or governmental entities may be incurred, the payment of which could reduce or
eliminate the funds available for development, acquisitions or exploration, or
result in the loss of the Company's properties. In accordance with customary
industry practices, the Company maintains insurance against some, but not all,
of such risks and losses. The Company does not carry business interruption
insurance.
13
<PAGE> 16
The occurrence of such an event not fully covered by insurance could have a
material adverse effect on the financial condition and results of operations of
the Company.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation, as amended, and Bylaws and the
Delaware General Corporation Law contain provisions that may have the effect of
discouraging unsolicited takeover proposals for the Company. These provisions,
among other things, restrict the ability of stockholders to take action by
written consent, require the approval of the holders of 75% of the Common Stock
to approve certain business combinations with "interested stockholders"
(excluding shares owned by the interested stockholder), authorize the Board of
Directors to designate the terms of and issue new series of preferred stock,
limit the personal liability of directors and impose additional restrictions on
business combinations with certain interested parties.
SHARES ELIGIBLE FOR FUTURE SALE
After giving effect to the Common Stock Offering, 22,373,656 shares of
Common Stock will be outstanding, of which 8,740,486 will be held by FAB. The
officers, directors, stockholders selling shares in the Common Stock Offering
(the "Selling Stockholders") and certain other stockholders have agreed not to
dispose of any additional shares of Common Stock, with certain exceptions, for a
period of 90 days from the date of this Prospectus without the consent of the
representatives of the Underwriters. See "Underwriting." The outstanding
shares of Common Stock held by FAB are eligible for resale, subject to the
volume and other limitations of Rule 144 under the Securities Act, or pursuant
to the exercise of demand registration rights. FAB's registration rights, for
shares not included in the Common Stock Offering, will survive the Common Stock
Offering. Approximately 895,871 shares of Common Stock issued upon conversion
of the 7% Exchangeable Subordinated Notes concurrently with the Common Stock
Offering not sold in the Common Stock Offering also will be eligible for sale
under Rule 144. In addition, there are 2,365,558 shares of Common Stock
issuable pursuant to outstanding options and warrants held by the Note Holders,
management and others, all of which are covered by demand or piggyback
registration rights or will be issued pursuant to a registration statement on
Form S-8.
No prediction can be made as to the effect, if any, that future sales of
shares or the availability of shares for sale will have on the market price for
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock in the public market, or the perception of the availability of
shares for sale, could adversely affect the prevailing market price of the
Common Stock and could impair the Company's ability to raise capital through
the sale of its equity securities.
14
<PAGE> 17
THE COMPANY
GENERAL
Forcenergy is an independent oil and gas company engaged in the
development, exploration, acquisition and production of domestic oil and
natural gas properties. The Company has experienced significant growth in the
last five years, primarily through the acquisition of producing properties in
the Gulf of Mexico. At December 31, 1995 the Company had net proved reserves
of 365 Bcfe, 71% of which were located in the Gulf of Mexico. Approximately
60% of the Company's net proved reserves on such date were natural gas and
approximately 69% were classified as proved developed. The Company operates
approximately 72% of its Gulf of Mexico production.
The Company's principal executive offices are located at 2730 SW 3rd
Avenue, Suite 800, Miami, Florida 33129-2237 and its telephone number is (305)
856-8500. Unless the context otherwise requires, the terms "Company" or
"Forcenergy" as used in this Prospectus mean Forcenergy Inc and its predecessor
entities.
RELATIONSHIP WITH FORCENERGY AB
The Company was incorporated in Delaware in August 1993 under the name
Forcenergy Gas Exploration, Inc. to succeed by merger in September 1993 to the
ownership of the oil and gas properties of its predecessor, Forcenergy
Partners, L.P. ("Forcenergy Partners"). Forcenergy Partners was a limited
partnership in which FAB was a 97% limited partner and a corporation wholly
owned by Stig Wennerstrom, the Company's President and Chief Executive Officer,
was the 3% general partner. In connection with the foregoing merger, Mr.
Wennerstrom received shares in FAB and cash. Forcenergy Partners and its
predecessors had been engaged in the domestic oil and gas business since 1982.
At the 1996 Annual Meeting of Stockholders held on May 23, 1996, the
Stockholders of the Company approved a proposal to amend the Company's Amended
and Restated Certificate of Incorporation to effect a change in the name of the
Company to "Forcenergy Inc".
Prior to the Company's initial public offering in August 1995, all of the
outstanding shares of Common Stock of the Company were owned by FAB. FAB
currently owns approximately 49.1% of the outstanding shares of Common Stock.
Following the Common Stock Offering, the ownership of Common Stock by FAB will
decrease to approximately 39%. FAB is a publicly- traded Swedish company with
two classes of stock, A shares and B shares. Each of the 1,000,000 outstanding
A shares is entitled to one vote per share, and each of the 13,392,000
outstanding B shares is entitled to 1/10th of a vote per share. The B shares
of FAB are listed on the Stockholm Stock Exchange. The Forss family and its
affiliates owned all 1,000,000 A shares and 1,665,333 B shares as of September
17, 1996. Accordingly, the Forss family had a 49.9% voting interest and a
18.5% economic interest in FAB.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation, statements under "Prospectus
Summary," "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" regarding the planned capital
expenditures, increases in oil and gas production, the number of anticipated
wells to be drilled in 1996 and thereafter, the Company's financial position,
business strategy and other plans and objectives for future operations, are
forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
There are numerous uncertainties inherent in estimating quantities of proved
oil and natural gas reserves and in projecting future rates of production and
timing of development expenditures, including many factors beyond the control
of the Company. Reserve engineering is a subjective process of estimating
underground accumulations of oil and natural gas that cannot be measured in an
exact way, and the accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. As a result, estimates made by different engineers often vary from
one another. In addition, results of drilling, testing and production
subsequent to the date of an estimate may justify revisions of such estimate
and such revisions, if significant, would change the schedule of any further
production and development drilling. Accordingly, reserve estimates are
generally different from the quantities of oil and natural gas that are
ultimately recovered. Additional important factors that could cause actual
results to differ materially from the Company's expectations are disclosed
under "Risk Factors" and elsewhere in this Prospectus, including without
limitation in conjunction with the forward-looking statements included
15
<PAGE> 18
in this Prospectus. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by such factors.
NOTES OFFERING
Concurrently with the Common Stock Offering, the Company is offering $175
million of _____% Senior Subordinated Notes due 2006 for sale to the public.
The consummation of the Common Stock Offering and the Notes Offering are not
contingent on each other and there can be no assurance that the Notes Offering
will be completed. The Indenture for the Notes will contain certain covenants,
including, but not limited to, covenants with respect to the following matters:
(i) limitations on restricted payments; (ii) limitations on the incurrence of
indebtedness; (iii) limitations on sale and leaseback transactions; (iv)
limitations on liens; (v) limitations on disposition of proceeds of asset
sales; (vi) limitations on transaction with affiliates; (vii) limitations on
dividends and other payment restrictions affecting restricted subsidiaries; and
(viii) restrictions on mergers, consolidations or sale of assets.
USE OF PROCEEDS
The net proceeds of the Common Stock Offering are estimated to be
approximately $______ million ($_____ million if the underwriters'
over-allotment option is exercised in full). The net proceeds of the Notes
Offering are estimated to be approximately $____ million, after deducting
underwriting discounts and estimated expenses. The consummation of the Common
Stock Offering and the Notes Offering are not contingent on each other. The
Company intends to apply the net proceeds of the Offerings to repay outstanding
indebtedness under the Senior Credit Facility, which had an outstanding balance
of $158.0 million at September 30, 1996. The Senior Credit Facility had a
weighted average interest rate at September 30, 1996, of approximately 6.9%
and matures on December 31, 1997, at which time the amounts outstanding convert
to a term loan with quarterly principal payments due through June 30, 2001.
Amounts under the Senior Credit Facility have been used to fund the Company's
capital expenditure program for acquisitions of oil and gas properties and for
general working capital purposes. The balance of the net proceeds from the
Offerings, if any, will be used for general corporate purposes. The Company
may reborrow amounts available under the Senior Credit Facility to fund the
Company's on-going capital expenditure program and for other general corporate
purposes. The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders in the Common Stock Offering.
16
<PAGE> 19
MARKET FOR AND RECENT
PRICES OF COMMON STOCK
Forcenergy's Common Stock is traded on the Nasdaq National Market under the
symbol "FGAS." The following table sets forth, for the periods indicated, the
range of closing high and low sale prices of the Common Stock as reported by
the Nasdaq National Market. The Company commenced trading on the Nasdaq
National Market on July 28, 1995; therefore no public market existed for the
Common Stock prior to that date.
<TABLE>
<CAPTION>
HIGH LOW
--------- ----------
<S> <C> <C>
1995
Third Quarter (commencing July 28, 1995) . . . . . . . . . . . . . . . . . $11.38 $10.00
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.50 $ 9.25
1996
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $11.69 $10.50
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $19.25 $11.63
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24.88 $17.75
Fourth Quarter (through October 4, 1996) . . . . . . . . . . . . . . . . . $24.50 $23.38
</TABLE>
On October 4, 1996, the last reported sale price of the Common Stock on the
Nasdaq National Market was $23.375 per share. At September 30, 1996, the
Company had 22 shareholders of record of its Common Stock. The Company
estimates that there are approximately 1,600 beneficial owners of Common Stock.
DIVIDEND POLICY
The Company currently intends to retain its cash for the operation and
expansion of its business, including development, exploration and acquisition
activities. The terms of both the Senior Credit Facility and the Indenture
contain restrictions on the payment of dividends to holders of Common Stock.
Accordingly, the Company's ability to pay dividends will depend upon such
restrictions and the Company's results of operations, financial condition,
capital requirements and other factors deemed relevant by the Board of
Directors.
17
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company at June 30,
1996, and as adjusted to give effect to the conversion of the Exchangeable Notes
into 2,343,047 shares of Common Stock, and the exercise of options to purchase
214,866 shares of Common Stock by certain holders of the Subordinated Notes,
the issuance and sale of 1,537,958 shares of Common Stock by the Company
pursuant to the Common Stock Offering and the issuance of $175 million of
aggregate principal amount of Notes pursuant to the Notes Offering. The
repayment of existing Senior Credit Facility indebtedness and the application
of the net proceeds from the Offerings as described in "Use of Proceeds"
assume such transactions occurred on June 30, 1996. This table should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus and
the Financial Statements of the Company and the related Notes thereto
incorporated by reference elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At June 30, 1996
---------------------------------------
Actual As Adjusted
-------------- ----------------
(in thousands)
<S> <C> <C>
Senior Credit Facility . . . . . . . . . . . . . . . . . . . . $ 135,118
7% Exchangeable Subordinated Notes (1) . . . . . . . . . . . . 40,017 ----
___% Senior Subordinated Notes due 2006 . . . . . . . . . . . . ---- $ 175,000
Total long-term debt . . . . . . . . . . . . . . . . . . . 175,135
Stockholders' equity:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding . . . . . ---- ----
Common Stock, $.01 par value, 50,000,000 shares
authorized; 18,267,785 issued and outstanding;
22,363,656 shares pro forma (2) . . . . . . . . . . . 183 224
Capital in excess of par value . . . . . . . . . . . . . . 163,447
Accumulated deficit, since September 4, 1994 . . . . . . . (4,920) (4,920)
------------ ----------
Total stockholders' equity . . . . . . . . . . . . . . 158,710
------------ ----------
Total capitalization . . . . . . . . . . . . . . . $ 333,845 $
============ ==========
</TABLE>
- -----------------
(1) Includes $34 million in aggregate principal amount payable upon maturity
and approximately $6.0 million in deferred interest.
(2) Does not include 2,385,424 shares of Common Stock (2,365,558 As Adjusted)
issuable pursuant to outstanding options and warrants to purchase Common
Stock held by management and others. As adjusted at June 30, 1996 does not
include 2,365,558 shares of Common Stock underlying options and warrants to
purchase Common Stock held by management and others.
18
<PAGE> 21
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data for the
Company as of and for each of the periods indicated. The financial data as of
and for each of the four years in the period ended December 31, 1994 are
derived from the financial statements of the Company audited by Price
Waterhouse LLP, independent accountants. The financial data as of and for the
year ended December 31, 1995 is derived from the financial statements of the
Company audited by Coopers & Lybrand L.L.P., independent accountants. The
financial data for the six months ended June, 1995 and 1996 are derived from
the Company's unaudited financial statements which, in the opinion of
management, include all adjustments (which consist only of normal recurring
adjustments) necessary for a fair presentation of the financial position and
results of operations of the Company for such interim periods.
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended
June 30,
------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(In thousands, except per share amounts) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Oil and gas sales . . . . . . . . $12,680 $24,937 $49,652(1) $58,354(1) $72,147 $34,140 $57,477
Other . . . . . . . . . . . . . . 337 475 441(1) 388(1) 494 235 276
------- ------- ------- ------- ------- ------- -------
13,017 25,412 50,093 58,742 72,641 34,375 57,753
------- ------- ------- ------- ------- ------- -------
Expenses:
Lease operating . . . . . . . . . 4,091 7,769 16,632 23,744 24,507 11,602 16,819
Depreciation, depletion and
amortization . . . . . . . . . . 4,216 8,014 19,889 24,572 31,295 15,560 24,162
Production taxes . . . . . . . . . 280 606 1,560 1,701 1,868 923 1,653
General and administrative, net . 1,947 2,523 3,166 6,463 5,670 2,821 3,575
------- ------- ------- ------- ------- ------- -------
Total operating expenses . . . 10,534 18,912 41,247 56,480 63,340 30,906 46,209
------- ------- ------- ------- ------- ------- -------
Income from operations . . . . . . . . 2,483 6,500 8,846 2,262 9,301 3,469 11,544
Interest and other income (loss) . . . 525 197 545 789 (561) 290 237
Interest expense, net of amounts
capitalized . . . . . . . . . . (233) (2,303) (6,192) (9,529) (11,668) (6,519) (5,913)
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes . . 2,775 4,394 3,199 (6,478) (2,928) (2,760) 5,868
Income tax provision (benefit) (2) . . - - 2,337 (2,403) (1,075) (1,029) 2,188
Minority interest . . . . . . . . . . 83 132 107 - - - -
------- ------- ------- ------- ------- ------- -------
Net income (loss) (2) . . . . . . . . $ 2,692 $ 4,262 $ 755 $(4,075) $ (1,853) $ (1,731) $ 3,680
======== ======= ====== ======= ========= ======== ========
Net income (loss) per share (2) . . . $ (.50) $ (.14) $ (.19) $ .20
======= ========= ======== ========
UNAUDITED PRO FORMA DATA (2):
Income before income taxes, including
minority interest . . . . . . . . $ 2,692 $ 4,262 $ 3,092
Income tax provision . . . . . . . . . $ 1,027 $ 1,639 $ 1,207
-------- ------- --------
Net income . . . . . . . . . . . . . . $ 1,665 $ 2,623 $ 1,885
======== ======= ========
Net income per share . . . . . . . . . $ .26 $ .41 $ .29
======== ======= ========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING . . . . . . . . . . . . . . . 6,451 6,451 6,520 8,188 12,910 9,040 18,261
</TABLE>
<TABLE>
<CAPTION>
December 31, June 30,
---------------------------------------------------- --------
1991 1992 1993 1994 1995 1996
------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property, plant and equipment, net . . $59,691 $112,441 $152,659 $186,241 $298,832 $356,030
Total assets . . . . . . . . . . . . . 71,154 127,685 187,786 220,287 335,090 391,674
Total debt . . . . . . . . . . . . . . 7,922 75,758 127,234 131,646 130,729 175,135
Stockholders' equity . . . . . . . . . 48,612 45,252 43,336 71,061 154,961 158,710
OTHER FINANCIAL DATA:
Ratio of Earnings to Fixed Charges (3) 12.9x 2.9x 1.4x 0.3x 0.6x 1.7x
Capital Expenditures(4) . . . . . . . 13,751 67,660 53,371 58,169 144,689 81,168
EBITDA (4) . . . . . . . . . . . . . . 7,224 14,711 29,280 27,623 40,035 35,943
</TABLE>
- -------------------
(1) Natural gas liquid revenues for 1993 and 1994 have been reclassified from
plant processing and other revenues to oil and gas sales for consistent
presentation with 1995 revenues.
(2) Prior to September 14, 1993, the Company was exempt from United States
federal and certain state income taxes as a result of its partnership
status. The unaudited pro forma data reflects the income tax expense that
would have been recorded had the Company not been exempt from paying such
income taxes. Net income per share data for 1991, 1992 and 1993 is
described as unaudited pro forma because of the Company's former
partnership status.
(3) For purposes of determining the ratio of earnings to fixed charges,
earnings are computed as net income (loss) before income taxes, plus fixed
charges. Fixed charges consist of interest expense, whether expensed or
capitalized, on all indebtedness plus amortization of debt issuance costs.
Earnings did
19
<PAGE> 22
not cover fixed charges in the years ended December 31, 1994 and 1995 and
for the six months ended June 30, 1995 by $5.5 million, $8.0 million and
$3.9 million, respectively.
(4) Capital expenditures include acquisitions of oil and gas properties
including non-cash item relating to the 1995 Ashlawn Acquisition amounting
to $46.4 million.
(5) EBITDA is defined as earnings before interest, taxes, depletion,
depreciation and amortization and is presented because it is a widely
accepted financial indication of a Company's ability to service and incur
debt. EBITDA should not be considered as an alternative to earnings (loss)
as an indicator of the Company's operating performance or to cash flows as
a measure of liquidity.
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is intended to assist in an understanding of the
Company's historical financial position and results of operations for each year
of the three-year period ended December 31, 1995 and the unaudited six-month
periods ended June 30, 1995 and 1996. The Company's historical financial
statements and notes thereto included elsewhere in this Prospectus contain
detailed information that should be referred to in conjunction with the
following discussion.
GENERAL
Forcenergy was organized in September 1993 to succeed by merger to the
ownership of oil and gas properties held by Forcenergy Partners. Forcenergy
Partners and its predecessors commenced oil and gas operations in 1982 and
focused primarily on non-operated working interests in onshore properties.
Since 1990, the Company has primarily focused its activities on acquiring Gulf
of Mexico offshore properties and has completed 22 acquisitions of offshore or
Gulf Coast properties at a total cost of $197.7 million. At December 31, 1995,
the Company had net proved reserves of 365 Bcfe, 71% of which were offshore and
69% of which were classified as proved developed.
The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for natural gas, oil and
condensate, which are dependent upon numerous factors beyond the Company's
control, such as economic, political and regulatory developments and
competition from other sources of energy. The energy markets have historically
been very volatile, and future decreases in oil and gas prices could have a
material adverse effect on the Company's financial position, results of
operations, quantities of oil and gas reserves that may be economically
produced and access to capital.
The Company uses the full cost method of accounting for its investment in
oil and natural gas properties. Under the full cost method of accounting, all
costs of acquisition, exploration and development of oil and natural gas
reserves are capitalized into a "full cost pool" as incurred, and properties in
the pool are depleted and charged to operations using the unit-of-production
method based on the ratio of current production to total proved oil and natural
gas reserves. To the extent that such capitalized costs (net of accumulated
depreciation, depletion and amortization) less deferred taxes exceed the
present value (using a 10% discount rate) of estimated future net cash flow
from proved oil and natural gas reserves, and the lower of cost or fair value
of unproved properties, such excess costs are charged to operations. Once
incurred, a write-down of oil and natural gas properties is not reversible at a
later date even if oil or natural gas prices increase. While the Company has
never been required to write-down its asset base, significant downward
revisions of quantity estimates or declines in oil and gas prices from those in
effect on December 31, 1995 which are not offset by other factors could result
in a writedown for impairment of oil and gas properties.
For accounting purposes, the Company accrues interest on the Subordinated
Notes at 13% per annum, however the current cash interest expense of such
Exchangeable Notes is 7%. The difference is reflected in the Company's cash
flow statement as deferred interest. The deferred interest totaling $6.4
million at August 31, 1996 will be reflected as an extraordinary item upon
conversion of the Subordinated Notes into Common Stock concurrently with the
Common Stock Offering. See "-- Liquidity and Capital Resources."
Revenues from natural gas production are recorded using the sales method,
net of royalties and net profits interests. When sales volumes exceed the
Company's entitled share, an over-produced imbalance occurs. To the extent the
over-produced imbalance exceeds the Company's share of the remaining estimated
proved natural gas reserves for a given property, the Company records a
liability. Management does not believe that the Company has any material over-
produced gas imbalances.
The Company has an aggregate of $11.3 million in net operating loss carry
forwards for federal income tax purposes which are subject to annual
limitations on utilization. Future income tax liabilities and the impact of
the alternative minimum tax will vary depending upon the number of wells
drilled, intangible drilling costs incurred and other investments in oil and
gas properties by the Company.
23
<PAGE> 24
RESULTS OF OPERATIONS
PRODUCTION DATA
The following table sets forth the Company's historical oil and natural gas
production data during the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- ----------------------------
1993 1994 1995 1995 1996
-------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C>
Production:
Liquids (Mbbls)(1) . . . . . . 1,425 1,753 2,343 1,059 1,778
Natural gas (Mmcf) . . . . . . 12,025 17,121 21,112 11,172 12,772
Total (Mmcfe) . . . . . . . . . 20,575 27,639 35,170 17,526 23,440
Average sales prices:
Liquids (per Bbl) . . . . . . . $ 16.65 $ 15.04 $ 16.46 $ 15.91 $ 16.75
Natural gas (per Mcf) . . . . . 2.16 1.87 1.59 1.55 2.17
Expenses (per Mcfe):
Lease operating . . . . . . . . $ .81 $ .86 $ .70 $ .66 $ .72
Production taxes . . . . . . . .08 .06 .05 .05 .07
Depreciation, depletion and
amortization . . . . . . . . . .96 .88 .88 .89 1.03
General and administrative . . .15 .23 .16 .16 .15
</TABLE>
- ------------------
(1) Includes crude oil, condensate and natural gas liquids.
COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
Operating and Net Income. Operating income increased from $3.5 million for
the six month period ended June 30, 1995 to $11.5 million for the six month
period ended June 30, 1996, a 233% increase. The Company reported a net loss
of $1.7 million for the six months ended June 30, 1995 compared to net income
of $3.7 million for the same period of 1996. The improvement in both operating
income and net income for the first six months of 1996 were attributable
primarily to higher production volumes, without a commensurate increase, in
lease operating expenses and higher net realized oil and gas prices.
Production. Net liquids production increased from 1,059 Mbbls in the six
month period ended June 30, 1995 to 1,778 Mbbls for the six month period in
1996, a 68% improvement. Net gas production increased 14%, from 11,172 Mmcf
reported for the six month period ended June 30, 1995 to 12,772 Mmcf reported
for the same period of 1996. On an equivalent unit basis, oil and gas
production was 17,526 Mmcfe for the six month period ended June 30, 1995
compared to 23,440 Mmcfe produced in the same six month period of 1996, an
improvement of 34%. The increase in both oil and gas production was
attributable to new production from oil and gas properties acquired in 1995 and
from successful development and exploratory drilling and workover programs
begun in late 1995 and continuing through 1996.
Revenues. Revenues increased 68% from $34.4 million reported for the 1995
six month period to $57.8 million for the same period in 1996, primarily due to
higher production volumes and higher net realized oil and gas prices. Average
net realized liquids prices increased from $15.91 per barrel for the six month
period ended June 30, 1995 to $16.75 per barrel received in the comparable 1996
period, an increase of 5%. Average net realized gas prices rose 40% from $1.55
per Mcf reported in the first six months of 1995 to $2.17 per Mcf reported for
the same period of 1996.
Average net realized oil prices (excluding natural gas liquids) for the 1996
six month period were $17.01 per barrel compared to an average of $19.03 per
barrel that would have been received before the effects of hedging, resulting in
a hedging related $3.4 million reduction in oil revenues for the period.
Average net realized gas prices for the six months were $2.17 per Mcf compared
to an average of $2.31 per Mcf, that would have been received before the effects
of hedging, resulting in a hedging related $1.8 million reduction in gas
revenues for the six month period ended June 30, 1996. Effects of hedging
activities were not significant in the six months ended June 30,1995.
24
<PAGE> 25
Lease Operating Expenses. Lease operating expenses for the first six
months of 1995 were $11.6 million compared to the $16.8 million reported for the
same period of 1996, an increase primarily due to new fields acquired during
1995 and to non-recurring workover repair and maintenance activities in 1996.
On an equivalent unit of production basis, expenses increased from $.66 per Mcfe
in the 1995 six month period to $.72 in the comparable 1996 period, an increase
attributable primarily to non-recurring repair and maintenance expenditures and
the addition of new Gulf of Mexico properties.
Depletion, Depreciation and Amortization ("DD&A"). DD&A increased from
$15.6 million for the 1995 six month period to $24.2 million reported for the
comparable 1996 period. The increase was attributable to higher production
levels, and to an increase in the DD&A rate per unit of production to $1.03 per
Mcfe in the first six months of 1996 from $.89 in the same period last year.
General and Administrative Expenses. General and administrative expenses
increased from $2.8 million for the first six months of 1995 to $3.6 million
for the comparable 1996 period, primarily due to the overall growth of the
Company during the latter half of 1995 and the first six months of 1996.
However, on an equivalent Mcfe produced basis, general and administrative
expenses have remained relatively constant, $.16 per Mcfe for the first six
months of 1995 compared to $.15 per Mcfe in the 1996 period.
Interest Expense. Interest expense, net of amounts capitalized, declined
9% from $6.5 million in the first six months of 1995 to $5.9 million for the
same period this year. The decrease in interest expense resulted primarily
from lower interest rates on the Company's Senior Credit Facility in 1996,
which was partially offset by higher 1996 debt levels.
Income Tax Provision (Benefit). Income tax expense increased to $2.2
million from a benefit of $1.0 million in the first six months of 1995 due to
the improvement in results of operations compared to the same period last year.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1995
Operating and Net Income. Operating income increased 304%, from $2.3
million in 1994 to $9.3 million in 1995. The Company's net loss for 1994 was
$4.1 million compared with a net loss for 1995 of $1.9 million. These
improvements were attributable to higher oil and gas production and lower per
unit lease operating costs.
Production. Forcenergy's total net equivalent production increased to 35.2
Bcfe in 1995, 28% more than the 27.6 Bcfe produced in 1994, due primarily to
the acquisition of additional offshore properties in late 1994 and in early
1995 and the addition of new production attained from the successful 1995
drilling program. See "Business - 1995 Drilling Program". Net oil production
increased by 34%, from 1,753 Mbbls in 1994 to 2,343 Mbbls in 1995 and net gas
production increased by 23% from 17.1 Bcf in 1994 to 21.1 Bcf in 1995.
Revenues. Total revenues increased 24% from $58.7 million in 1994 to $72.6
million in 1995, primarily because of the higher volume of oil and gas
produced, which in turn resulted from acquisitions closed during 1995 and from
the Company's successful drilling program. Oil revenues for the year increased
by 46% from $26.3 million in 1994 to $38.4 million in 1995. Average net
realized oil prices of $16.46 per barrel in 1995 were 9% higher than the $15.04
per barrel received in 1994. Gas revenues rose from $31.9 million in 1994 to
$33.6 million in 1995 or 5%; however, average net realized gas prices declined
to $1.59 per Mcf in 1995, 15% below the $1.87 average received in 1994.
Lease Operating Expenses. Lease operating expenses increased by $763,000,
or 3%, from 1994 to 1995 due to the addition of new properties; however, on a
per Mcfe produced basis, costs declined 19% from $.86 per Mcfe in 1994 to $.70
per Mcfe in 1995. This decline in the per unit cost was attributable to the
Company's success in adding new production through development of new reserves
from existing properties and facilities and through acquiring new properties
that provide operating synergies with existing properties.
Depletion, Depreciation and Amortization ("DD&A"). Total DD&A increased
27% from $24.6 million during 1994 to $31.3 million during 1995, primarily as a
result of higher production volumes in 1995 as the DD&A rate was substantially
the same for both years.
General and Administrative. General and administrative expenses declined
12% from $6.5 million incurred in 1994 to $5.7 million in 1995. The costs for
1994 reflected higher third-party engineering and consulting fees associated
with several
25
<PAGE> 26
acquisition possibilities that never occurred. Additionally, the Company billed
more general and administrative expenses, as provided for in joint operating
agreements, to joint interest owners in 1995 due to the increased drilling
activity.
Interest Expense. Interest expense, net of amounts capitalized, increased
23% from $9.5 million in 1994 to $11.7 million in 1995. This increase was
primarily attributable to the acquisition related increases in the Company's
debt levels prior to the repayment of a portion of that debt with proceeds from
the Company's initial public offering and amortization of debt issuance costs
associated with the Company's $8.0 million bridge loan that was repaid in 1995.
Interest and Other Income. Interest and other income (loss) reflected a
net charge of $561,000 in 1995 compared with income of $789,000 in 1994. The
1995 charge included a non-cash adjustment to certain balance sheet items
associated with activities in previous years. Interest income was $454,000 in
1994 compared to $474,000 in 1995.
Income Tax Provision (Benefit). The income tax benefit decreased from $2.4
million in 1994 to $1.1 million in 1995, due to the improvement in the results
of operations.
COMPARISON OF YEARS ENDED DECEMBER 31, 1993 AND DECEMBER 31, 1994
Operating and Net Income. Income from operations decreased by 74% from
$8.8 million in 1993 to $2.3 million in 1994. The decline in income from
operations was primarily the result of a decline in the average realized prices
for oil and gas sales and the incurrence of additional operating and
administrative costs as the Company undertook full operations of additional
Gulf of Mexico properties. Net income was $0.8 million in 1993 as compared to
a net loss of $4.1 million in 1994.
Production. The Company's production increased 34% from 20.6 Bcfe in 1993
to 27.6 Bcfe in 1994, primarily as a result of the acquisitions of properties
and higher volumes in the second half of 1994 due to the Company's 1994
development program. Oil production volume of 1,753 Mbbls in 1994 increased by
23% as compared to 1993 production volume of 1,425 Mbbls. Gas production of
17.1 Bcf in 1994 increased by 42% as compared to 1993 production of 12.0 Bcf.
Revenues. Total revenues increased 17% from $50.1 million in 1993 to $58.7
million in 1994. Oil sales increased by 11% from $23.8 million in 1993 to
$26.3 million in 1994. Average net realized oil prices of $16.65 in 1993
decreased by 9% to $15.04 in 1994. Gas sales increased by 23% from $25.9
million in 1993 to $31.9 million in 1994. Average net realized gas prices
declined 13% from $2.16 in 1993 to $1.87 in 1994. The increase in volumes
primarily reflects the acquisition of offshore properties and increases in
production during the second half of 1994 as a result of the Company's
development program.
Lease Operating Expenses. Lease operating expenses increased by $7.1
million or 43% in 1994 as compared to 1993 due to the addition of new offshore
fields acquired in late 1993 and 1994. On an Mcfe basis, lease operating costs
increased by 6% from $.81 in 1993 to $.86 in 1994. This per unit operating
cost increase was primarily the result of increased offshore facility
maintenance on properties acquired during 1994 and increased costs associated
with supplemental bonding requirements for offshore properties, which costs
were incurred prior to the benefit of any development activities on such
properties.
Depletion, Depreciation and Amortization. Total DD&A increased by $4.7
million or 24% from $19.9 million in 1993 to $24.6 million in 1994. The
increase in total DD&A in 1994 was primarily attributable to increased
production added by acquisitions. DD&A per Mcfe declined 8% from $.96 in 1993
to $.88 in 1994 due to the acquisition of additional proved reserves at a lower
cost per Mcfe.
General and Administrative. General and administrative expenses increased
from $3.2 million in 1993 to $6.5 million in 1994. This increase was primarily
the result of increased engineering and support staff for the New Orleans
office which was opened in March 1993 and increased legal and consulting costs
incurred to evaluate potential offshore property acquisitions.
Interest Expense. Interest expense, net of amounts capitalized, increased
by 53% from $6.2 million in 1993 to $9.5 million in 1994. This increase was
attributable to additional borrowings for acquisition financing combined with
an increase in market interest rates in 1994 under the Senior Credit Facility,
inclusion of a full year's interest expense for the Subordinated Notes and a
full year's amortization of debt issuance costs associated with the Senior
Credit Facility and the Subordinated Notes in 1994.
26
<PAGE> 27
Income Tax Provision (Benefit). The provision for income taxes decreased
by $4.7 million from a provision of $2.3 million in 1993 to a benefit of $2.4
million in 1994 due to a pre-tax loss of $6.5 million in 1994 and the FASB 109,
"Accounting for Income Taxes" deferred tax adjustment of $2.4 million recorded
in 1993. This one time adjustment was made to reflect the book and tax timing
differences for assets and liabilities existing on September 14, 1993 as a
result of merger transactions which converted Forcenergy Partners, the
Company's predecessor, into a taxable U.S. corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its operations, acquisitions, capital
expenditures and working capital requirements from cash flow from operations,
bank borrowings and private and public placements of debt and equity
securities. The Company's primary sources of funds for each of the past three
years and the six months ended June 30, 1995 and 1996 are reflected in the
following table (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1993 1994 1995 1995 1996
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities . . . . . . . . $ 19,473 $ 22,433 $ 28,574 $ 17,641 $ 26,815
Net borrowings under the
Senior Credit Facility . . 28,881 6,872 (2,957) 22,604 43,063
Proceeds from issuance of
Subordinated Notes . . . . 34,000 --- --- --- ---
Proceeds from issuance of
Common Stock . . . . . . . 2,200 31,800 55,753 --- ---
Proceeds from Bridge Loan . . . --- --- 8,000 8,000 ---
</TABLE>
In the first six months of 1996, the Company generated approximately $26.8
million in cash from operations and borrowed, net of repayments, approximately
$43.1 million under its Senior Credit Facility. The Company's cash flow from
operations has increased significantly during 1996 because of the additional
production from acquired properties and new production derived from development
drilling and workovers. The Company had negative working capital of $11.8
million at December 31, 1995 and $15.1 million at June 30, 1996. Both the
negative working capital and increase in borrowings under the Senior Credit
Facility are primarily attributable to an increase in drilling expenditures
under the Company's active 1996 drilling program and to acquisitions of oil and
gas properties.
Capital expenditures including accruals were $58.2 million and $144.7
million during 1994 and 1995, respectively. Cash capital expenditures were
$59.2 million during the first six months of 1996, which includes $15.6 million
in cash payments on capital costs accrued at December 31, 1995. In addition,
the Company had capital expenditures accrued at June 30, 1996 equaling to $25.1
million. The Company's capital expenditure budget for 1996 is approximately
$110 million. The Company intends to continue its exploration and development
programs during 1996 and expects that those expenditures will be funded by cash
flow from operations and periodic borrowings under its Senior Credit Facility.
Cash expenditures for acquisitions totaled $16.8 million for the six months
ended June 30, 1996, $4.3 million of which was for amounts accrued at December
31,1995. The Company will continue to pursue property acquisitions of various
sizes, funding for which is expected to be provided by cash flow from
operations, funds available through the Company's Senior Credit Facility or
other financing sources to be negotiated, as needed.
In December 1995, the Company amended its Senior Credit Facility to extend
its maturity date and to lower borrowing rates on amounts advanced under the
facility. The termination date on the revolving credit loan was extended to
December 31, 1997, at which time the outstanding amount becomes a term loan
with future annual principal payments, as a percentage of the principal balance
outstanding at the time of conversion to the term loan, of 36% in 1998, 30% in
1999, 23% in 2000 and 11% in 2001. The term loan matures on June 30, 2001.
Effective April 26, 1996, the Company renegotiated the Senior Credit Facility
to provide for a commitment of $195 million with a current borrowing base of
$175 million. On September 30, 1996, the borrowing base was increased to $195
million. At September 30, 1996, the Company had $26.2 million available under
the Senior Credit Facility.
27
<PAGE> 28
Borrowings under the Senior Credit Facility bear interest, at the
Company's option, at either the prime rate or LIBOR plus 1.375%. Interest on
the prime loans are due quarterly and interest on the LIBOR loans are due at
the end of the designated interest period. The Senior Credit Facility is
secured by substantially all of the Company's oil and gas properties. The
Senior Credit Facility contains certain covenants of the Company, including
maintenance of minimum tangible net worth, certain financial ratios and certain
restrictions on liens.
Revenues generated from operations are highly dependent upon the price of,
and demand for, oil and natural gas. Historically, the markets for oil and
natural gas have been volatile and are likely to continue to be volatile in the
future as prices are subject to wide fluctuations in response to relatively
minor changes in the supply of and demand for oil and natural gas, market
uncertainty and a variety of additional factors that are beyond the control of
the Company. These uncontrollable factors include, but are not limited to, the
level of consumer product demand, weather conditions, domestic and foreign
governmental regulations, the price and availability of alternative fuels and
political and economic conditions in the Middle East and Canada that can affect
the supply and price of foreign oil and natural gas. It is impossible to
predict future oil and natural gas price movements with any certainty. Declines
in oil and natural gas prices may materially adversely affect the Company's
financial condition, liquidity and results of operations. Lower prices also may
reduce the amount of reserves that can be produced economically as well as
limit the ability to continue to exploit and develop the existing reserve base.
The Company utilizes forward sales contracts and commodity swaps for
portions of its current net oil and gas production to achieve more predictable
cash flows and to reduce its exposure to fluctuations in oil and gas prices.
The remaining portion of current net production has not been hedged so as to
provide the Company the opportunity to benefit from increases in prices on that
portion of the production, should price increases materialize. As of October
1,1996, the Company had entered in to future sales and swap contracts as a
hedge against possible price declines that effectively fixed sales prices on
approximately 76% of the Company's estimated net oil production for the
remainder of the year and for approximately 60% of the Company's estimated net
gas production for the remainder of 1996, based on current production levels,
at $18.05 per barrel and $2.03 per Mcf, respectively.
On March 1, 1995, the Company entered into an $8 million bridge loan.
Borrowings under the bridge loan were used to repay $4.9 million of
indebtedness under the Senior Credit Facility and to pay $3.1 million in
connection with the acquisition of producing properties in April 1995. Amounts
outstanding under the bridge loan were repaid with a portion of the proceeds of
the initial public offering.
In August 1995, the Company completed its initial public offering and
received net proceeds of $55.7 million. In addition to repaying borrowings
under the bridge loan, the Company used the proceeds from the offering to
complete the acquisition of Ashlawn and to repay a portion of the Senior Credit
Facility.
Management believes that cash flow from operations, available borrowings
under the Senior Credit Facility and the net proceeds of the Offerings will be
adequate to meet future liquidity needs, including satisfying the Company's
financial obligations and funding its capital program. If revenues decrease as
a result of lower oil or gas prices or operating difficulties or if the Notes
Offering is not consummated, the Company may be required to re-evaluate its
future capital expenditures.
28
<PAGE> 29
BUSINESS
OVERVIEW
Forcenergy Inc ("Forcenergy" or the "Company") is an independent oil and
gas company engaged in the exploration, acquisition, development, exploitation
and production of domestic oil and natural gas properties. The Company has
experienced significant growth in the last five years, primarily through the
exploration, enhancement and development of acquired working interests in
producing properties in the Gulf of Mexico. At December 31, 1995, the Company
had net proved reserves of 365 Bcfe, 71% of which were located in the Gulf of
Mexico. Approximately 60% of the Company's net proved reserves on such date
were natural gas and approximately 69% of proved reserves were classified as
proved developed. The Company operates approximately 72% of its Gulf of Mexico
production.
STRATEGY
The Company's business strategy is to increase its reserves and cash flow
through the development, exploration, acquisition and exploitation of producing
properties in the shallow waters (less than 350 feet) of the Gulf of Mexico.
Management believes that the Company's high quality asset base positions it
for growth through a program of further development through selective
exploitation and exploratory drilling and through the enhancement of production
performance through workovers and recompletions. The Company emphasizes the
use of 3-D seismic and computer-aided exploration technology together with
geologic and engineering studies of its properties to evaluate and prioritize
drilling prospects. Focusing drilling activities on producing properties in a
relatively concentrated area in the Gulf of Mexico permits the Company to
utilize its base of geological, engineering and production experience in the
region to maximize drilling success and to minimize finding and development
costs. The Company plans to continue to pursue acquisitions of working
interests in producing properties that offer further development potential as
well as providing operating synergies with existing properties. As a
complement to its acquisition strategy, the Company also participates in
exploration plays both onshore and in the Gulf of Mexico.
OPERATIONS
Quality of Asset Base; Drilling Prospects The Company holds interests in
or rights to 81 lease blocks in federal and state waters in the Gulf of Mexico,
including a 100% working interest in 32 lease blocks and a 50% or greater
working interest in 18 other lease blocks. The Company believes it has
assembled at least a three to five year inventory of development, exploitation
and exploratory drilling opportunities in the Gulf of Mexico on acreage held by
production. Most of the properties comprising this inventory are located in
fields which have prolific production histories and which the Company believes
may yield additional reserves through the application of modern exploration and
development technologies. The Company is pursuing the development of these
offshore properties through a combination of development drilling,
recompletions and workovers and exploratory drilling. During 1995, the Company
successfully drilled seven of nine exploratory wells and ten of ten development
wells in the Gulf of Mexico and undertook eight recompletions and 24 workover
projects, resulting in initial net production increases of 4,392 Bbls/d of oil
and 27,496 Mcf/d of gas. The Company plans to drill 20 development wells in
1996, of which 14 were successfully completed in the first eight months of
1996, and the Company also has budgeted to drill 20 recompletions and 21
workover projects on its properties in the Gulf of Mexico during 1996 of which
27 have been completed to date. In addition, eight exploratory wells have been
scheduled during the year to provide the Company with exposure to higher risk,
higher potential prospects. Of the eight planned exploratory wells, four of the
wells have been drilled and successfully completed, and four remain to be
drilled. The Company anticipates that approximately $98.6 million of its $110
million capital expenditure budget for 1996 not including acquisition
expenditures, will be spent on these projects.
Control of Operations and Costs. The Company prefers to operate its
offshore properties in order to more effectively manage production performance
while controlling operating expenses and the timing and amount of capital
expenditures. Forcenergy operates 90 structures and 242 wells in the Gulf of
Mexico. Management believes that the operating expertise and experience of its
personnel in the Gulf of Mexico have been instrumental in its ability to
significantly enhance and improve production rates and cash flow with minor
incremental costs. A significant portion of the drilling prospects the Company
expects to pursue during the next three to five years are accessible from
existing production facilities operated by the Company. This base of
operations will enable the Company to reduce its per unit operating costs if
higher production volumes are realized. As a result of these factors, the
Company improved its lease operating expense from $.86 per Mcfe of production
in 1994 to $.70 per Mcfe of production in 1995 to $.69 per Mcfe of production
through August 31, 1996.
29
<PAGE> 30
Technology. The Company uses advanced technology in its exploration and
development activities to reduce drilling risks and finding costs and to more
effectively prioritize drilling prospects based on return potential. The
Company has acquired 3-D seismic surveys on 102 offshore lease blocks and
currently has 825 square miles of 3-D seismic data and 53,000 linear miles of
2-D seismic data on its offshore properties. The Company has nine
geologists/geophysicists with average industry experience of 18 years and has
invested in seven Landmark geophysical stations for use in interpreting 3-D
seismic data. The ability to obtain 3-D seismic data for offshore properties
at reasonable costs has enabled the Company to identify multiple development
and exploratory prospects in mature producing fields which were not identified
through earlier technologies.
Recent Acquisitions. During 1995, the Company spent an aggregate of
approximately $92.1 million for working interests in 15 different fields that
added 121.9 Bcfe of net proved reserves to its reserve base at an average cost
of $.76 per Mcfe. Approximately $81.6 million of such expenditures were for
interests in 10 properties located in the Gulf of Mexico. In the first eight
months of 1996, the Company spent approximately $17.0 million for working
interests in 12 different fields that added 28.3 Bcfe of net proved reserves to
its reserve base at an average cost of $.60 per Mcfe. Major acquisitions in
1995 and 1996 were as follows:
In March 1995, the Company acquired working interests in the South Marsh
Island 136/137 Field and the northern half of South Marsh Island 106 from
Conoco, Inc. (the "Conoco Acquisition") for consideration of $24.5 million. In
April 1995, the Company acquired all the remaining working interests in the
northern half of South Marsh Island 106. The foregoing acquisitions were
particularly attractive because both fields are adjacent to fields in which the
Company holds 100% working interests. The Company had an active drilling
program in Block 106 in 1995 and will have at least one rig in the block for
all of 1996. See "Business -- 1995 and 1966 Offshore and Gulf Coast Drilling
Activity."
In August 1995 in conjunction with the Company's initial public offering,
the Company acquired all of the outstanding capital stock of Ashlawn Energy,
Inc. ("Ashlawn") a privately held Company with substantial working interests in
the South Pass 24 Field, Vermilion 28 Field and Ship Shoal 26 Field (the
"Ashlawn Acquisition"). The purchase price for the Ashlawn Acquisition
consisted of 3,000,000 shares of Common Stock, $3.3 million in cash and the
assumption of $5.7 million in debt. All of the assumed debt was repaid with
the proceeds of the Initial Public Offering. The Company conducted an active
drilling program on these properties in 1995 and has continued to pursue
additional development projects on the properties in 1996. See "Business --
1996 Offshore and Gulf Coast Drilling Activity".
In November 1995, the Company acquired an approximate 50% working interest
in certain leases in the Howard Glasscock/Snyder fields in Howard County,
Texas from Saga Petroleum, Inc. for approximately $3.9 million. The Company's
1996 capital budget includes $1.9 million for its pro rata share of drilling
injection wells to initiate a waterflood project in the field. In May 1996,
the Company acquired an additional 25% interest in these leases and
surrounding acreage for $4.0 million. At August 31,1996, twenty injection
wells had been drilled, five of which had been completed. Additionally, water
injection had commenced on the five completed wells. Initial response to the
water flood, if any, should occur in 1997.
In late 1995, the Company acquired a 100% working interest in the
Vermilion Block 380 Field, located offshore Louisiana, from Texaco Exploration
and Production, Inc. for approximately $650,000. Effective December 1995, the
Company also acquired a 100% working interest in the West Cameron 630 Field,
located offshore Louisiana and an approximate 51.7% working interest in the
Comite Field in East Baton Rouge Parish, Louisiana from Exxon Corporation for
approximately $3.9 million. An exploratory well is planned for the West
Cameron 630 field in early 1997.
In June 1996, the Company acquired working interests in eleven Gulf of
Mexico producing fields from Amerada Hess Corporation (the "Amerada Hess
Acquisition") for a cash consideration of $6.9 million. In August 1996, the
Company acquired an additional working interest in one of these fields,
Mustang Island 742/754, for approximately $4.0 million, increasing its total
working interest in the field to 100%.
As is customary in the oil and gas industry, the Company from time to time
submits bids on oil and gas properties, subject to acceptance by the sellers .
Upon acceptance of a bid by the seller, the finalization of such agreements are
subject to the completion of satisfactory due diligence by the Company,
including title and environmental due. There can be no assurance that any of
the sellers will accept the bids or that any of such transactions will be
consummated.
30
<PAGE> 31
GULF OF MEXICO PROPERTIES
Since January 1, 1990, the Company has acquired working interests in 81
Gulf of Mexico and Gulf Coast lease blocks. The Company owns a 100% working
interest in 32 of these blocks and operates 47 of the producing properties.
The following table lists the working interest, net proved reserves and the
operator for the Company's 14 largest offshore properties, comprising
approximately 67% of the Company's total net proved reserves, as of December
31, 1995:
<TABLE>
<CAPTION>
NET PROVED RESERVES AT
DECEMBER 31, 1995
------------------------------------
AVERAGE
WORKING OIL GAS TOTAL
FIELD INTEREST (MBBLS) (MMCF) (MMCFE) OPERATOR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
South Marsh Island Block 106/115 . . . . . . 100% 4,326 12,659 38,615 Company
South Marsh Island 6 Field Complex . . . . . 100% 1,423 18,504 27,042 Company
Ship Shoal 230 Field, Block 219 . . . . . . . 100% 973 10,615 16,453 Company
West Cameron 205 Field . . . . . . . . . . . 100% 96 11,564 12,140 Company
Ship Shoal 26 Field . . . . . . . . . . . . . 100% 299 8,872 10,666 Company
Chandeleur 25 Field . . . . . . . . . . . . . 100% - 9,819 9,819 Company
High Island A 467 Field . . . . . . . . . . . 100% 51 7,867 8,173 Company
High Island A-280 Field . . . . . . . . . . . 100% 22 5,319 5,451 Company
South Timbalier 72 Field . . . . . . . . . . 100% 626 1,561 5,317 Company
Grand Isle 76 Field . . . . . . . . . . . . . 96% 139 8,133 8,967 Company
Vermilion 262 Field, Block 261 and 262 . . . 77% 903 6,076 11,494 Company
South Pass 24 Field . . . . . . . . . . . . . 67% 7,254 10,817 54,341 Third Party
South Marsh Island 137 Field, Blocks 136/137 67% 708 16,451 20,699 Company
East Cameron 14 Field . . . . . . . . . . . . 50% 374 12,692 14,936 Company
</TABLE>
1995 AND 1996 OFFSHORE AND GULF COAST DRILLING ACTIVITY
During 1995 and 1996 the Company continued to focus on increasing reserves
and cash flow by targeting development exploitation and exploration prospects
on recently acquired properties, developed in most cases through the use of
3-D seismic data. Total capital spent in the 1995 drilling program was
approximately $51.8 million, including capitalized internal costs of $3.7
million with 57.5 Bcfe of proved reserves added at an average cost of $.90 per
Mcfe. For the year, the Company successfully drilled seven of nine exploratory
wells and ten of ten development wells in its offshore drilling program.
Capital spending in 1995 for offshore projects was approximately $45.7 million,
including $1.5 million for the acquisition of additional 3-D seismic data on
offshore lease blocks. The Company has incurred $92.4 million in capital
drilling expenditures as of August 31, 1996 including $2.8 million in
capitalized internal costs. In addition, the Company has spent $1.9 million
on geological and geophysical costs, including 3-D seismic data. The current
budget for 1996 is estimated at $110 million of which $98.6 million is targeted
for the Gulf of Mexico. The following is a brief description of properties
where significant activity has occurred during 1995 and 1996, all of which were
operated by the Company. The working interest ownership of the Company is
noted in parenthesis.
South Marsh Island Block 106 North (SMI 106 N/2) and Block 106 South (SMI
106 S/2) (100% working interest). The Company acquired its working interests
in these fields (accounted for as separate fields) in a series of acquisitions
from 1993 to 1995. An aggressive drilling program was initiated on these
fields in 1995 as two development wells and four exploratory wells were
successfully completed in SMI 106 S/2 and two exploratory wells were completed
in SMI 106 N/2. During the first six months of 1996 one development well and
one exploratory well were drilled and completed on SMI 106 S/2. Initial
production tests from these two wells totaled 931 BOPD (Bbls of oil per day)
and 2,049 ( MCFPD) (Mcf of gas per day), net to the Company. During the six
month period ended June 30, 1996, the Company completed two development wells
on SMI 106 N/2 which began producing at net initial rates of 1,003 BOPD and
2,222 MCFPD. Total production net to the Company in the SMI Block was 2,638
BOPD and 7,888 MCFPD at the end of July compared with average net rates of 475
BOPD and 1,600 MCFPD at the beginning of 1995. Three additional wells, two
development and one exploratory, were also completed in the third quarter of
1996 on SMI 106N/2. These wells began to produce at initial rates of 865 BOPD
and 2,877 MCFD. The Company currently plans to drill and complete at least two
more development wells and one exploratory well in the SMI 106 N/2 area.
31
<PAGE> 32
East Cameron 14 Field (50% average working interest). A development well
was completed in the first quarter of 1996 with production beginning in May at
an initial rate of 3,090 MCFPD, net to the Company, increasing total net
production in this field to 125 BOPD and 4,160 MCFPD. The well encountered
reserves in seven other zones. The Company is currently evaluating plans for
additional drilling in the field.
South Pass 24 Field (approximate 71% average working interest).
Subsequent to the Ashlawn merger, and during 1995, the Company drilled four
development wells and undertook two workovers and recompletions in its effort
to exploit the anticipated potential of this field. During the first six
months of 1996, five development wells were drilled, all of which have been
completed. Initial production tests from the five completed wells totaled 330
BOPD and 240 MCFPD, net to the Company. These 1995 and 1996 activities
increased total net production in this field to 2,623 BOPD and 3,368 MCFPD by
the end of July 1996 compared with net production of 891 BOPD and 501 MCFPD at
the time of acquisition of the properties. Under Louisiana law, new wells
permitted prior to June 30, 1998, or wells which have been shut in for more
than two years and which are permitted prior to that date, qualify for a five
year exemption from the state severance tax of 12.5% on the value of oil
production sold and $.07 per Mcf on the volume of gas products sold during the
five years following June 30, 1996.
West Cameron 205 Field (100% working interest). The Company acquired its
working interest in West Cameron Blocks 205, 206 and 212 in a series of
acquisitions during 1990 through 1992. During 1995 the Company drilled a dry
exploratory test well in this field. Future drilling in this field is
currently being evaluated.
Ship Shoal 230 Field, Block 219 (100% working interest). One dually
completed well has been drilled to date. Completion operations were finalized
in April 1996 and production from this well began in May at initial rates of
346 BOPD and 2,100 MCFPD net to the Company. This increased total net
production in this field to 1,200 BOPD and 7,800 MCFPD. The Company expects to
begin a multi-well development and exploitation program in this field during
1997.
High Island 467 Field (100% working interest). The Company began drilling
operations in this field in the first quarter of 1996 and has completed two of
a three-well drilling project. One development and one exploratory well have
been drilled and have begun producing at initial production rates of 85 BOPD
and 8,214 MCFD, net to Forcenergy. This brings total current net field
production to 102 BOPD and 12,874 MCFD. The Company plans to drill one more
development well and at least one more exploratory well and undertake one
major workover in the field during the remainder of 1996.
South Marsh Island 6/10/11 Complex. In addition to the above discussed
activity the Company plans to drill two exploratory wells and two development
wells in the South Marsh Island 6 Field Complex in which the Company has a 100%
working interest. In September 1996, the Company completed drilling operations
on an exploratory well which has encountered approximately 140 feet of TVD
(true vertical depth) pay in four sands and is expected to add approximately 18
to 20 BCFE in net reserves. This well began producing at initial production
rates of 884 BOPD and 4,592 McFPD.
ONSHORE PROPERTIES
Forcenergy owns working and royalty interests in approximately 1,600
producing oil and gas wells in 147 fields in the Rocky Mountain, Gulf Coast,
Southwest and Appalachian regions of the United States. Management believes
that the long life reserves in these primarily non-operated, onshore properties
complements the Gulf of Mexico reserve base by providing a source of relatively
stable cash flow that require limited management involvement. Onshore
properties accounted for approximately 29% of net proved reserves at December
31, 1995. During 1995, the Company expended approximately $4.0 million in
capital on its onshore properties, including $3.7 million for drilling and
recompletion activities. Approximately $2.4 million in capital has been spent
on onshore properties in the first half of 1996, the majority of which was on
the Howard Glasscock/Snyder field. The following is a summary of the Company's
most significant onshore properties:
Altamont/Bluebell Field. The Altamont/Bluebell Field is located in
Duchesne and Uintah Counties, Utah. The Company owns working interests ranging
from less than 1% to 27.9% (average approximately 7%) in approximately 250
active wells and has overriding royalty interests in another 190 wells. The
Company also owns an 8.125% working interest in the Altamont natural gas
processing plant. As of January 1, 1996, Forcenergy's net production,
including gas plant liquids, was approximately 530 Bbls/d and 1,410 Mcf/d.
Estimated net proved reserves as of December 31, 1995, were 1,139 Mbbls and
3,136 MMcf. In 1995 the Company participated in its share of a field
development and workover program, of which Forcenergy's net share was $270,000.
As of September 1, 1996, the Company has agreed to participate in planned well
workover and recompletion projects of which Forcenergy's share is $278,000.
The current pace of work activity is similar to that in 1995 and is expected to
continue for the remainder of the year.
32
<PAGE> 33
Whitney Canyon Field. Forcenergy owns working interests ranging from
14.1% to 18.9% in three wells in this Uintah County, Wyoming field and a 3.02%
working interest in the Whitney Canyon Gas Processing Plant. The Company's
share of total sales from processed gas and condensate and plant liquids
currently averages 140 Bbls/d and 1,750 Mcf/d. Net proved reserves as of
December 31, 1995 for the Company's Whitney Canyon wells and share of the
processing plant are estimated at 283 Mbbls and 13,106 MMcf. Additional wells
are expected to be connected in 1996 to Whitney Canyon along a recently
installed extension of the gathering system which currently processes gas from
the Yellow Creek field located approximately 35 miles south of the plant.
Mercy Field. The Company owns a non-operated 28.3% working interest in one
well and a 40% non-operated working interest in nine remaining wells in this
San Jacinto County, Texas gas field. As of July 1, 1996, the Company's net
production averaged 2,060 Mcf/d and 110 Bbls/d. The Company and partners began
drilling a planned 11,800 foot Wilcox development well during the first week of
September 1996. Deepening operations of an inactive, shallow well to the main
field gas pays immediately followed drilling operations. The operator has set
production casing on both wells. Drilling is planned for a second development
well during 1997. Net proved reserves as of December 31, 1995 were 278 Mbbls
and 4,470 MMcf.
Howard Glasscock/Snyder Field. During 1995 the Company acquired an
approximate 50% non-operated working interest position in the Howard
Glasscock/Snyder Field located in Howard County, Texas. The field will be
further developed through water flood operations. As of December 31, 1995,
the Company's net proved reserves were estimated at 1,784 Mbbls. During May
1996 the Company increased its recently acquired 50% non operated interest
position in the Howard Glasscock/Snyder Field, Howard County, Texas, to 75%.
Forcenergy and partners initiated a planned secondary waterflood project in
February 1996. One shut in well has been reactivated for water injection and
twenty new water injection wells have been drilled. Partial water injection
began during August 1996 and is expected to reach full capacity by year end,
after the injection wells are completed. Early in 1996, a second phase of the
waterflood project was identified in the southern field area. This project is
expected to add 643 Mbbls of proved reserves to the existing December 31, 1995
net reserves of 1,764 Mbbls. Current daily production from primary recovery
methods is 370 BOPD, or 210 BOPD net to the Company.
ADDITIONAL FUTURE PROJECTS
In addition to the activity described above, the Company has identified a
substantial inventory of additional development, exploratory, workover and
recompletion projects on its existing offshore properties which it may
undertake over the next three to five years. Many of these projects are
currently being reviewed by the Company's geologists and geophysicists
utilizing 3-D seismic data acquired in 1994, 1995, and 1996.
OIL AND GAS RESERVES
The following table summarizes the estimates of the Company's historical
net proved reserves as of December 31, 1995 and the present values attributable
to those reserves on such date using constant prices and operating costs as of
the valuation date, discounted at a rate of 10% per annum, in accordance with
Securities and Exchange Commission ("Commission") guidelines. The reserve data
and present values as of December 31, 1995 for the onshore properties have been
estimated by Netherland, Sewell & Associates, Inc., independent petroleum
engineering consultants. The reserve data and present values as of December
31, 1995 for the offshore properties have been estimated by Collarini
Engineering Inc., independent petroleum engineering consultants.
<TABLE>
<CAPTION>
As of
December 31, 1995
------------------
<S> <C>
NET PROVED RESERVES:
Oil (Mbbls) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,458
Natural gas (MMcf) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,052
Total (MMcfe) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,800
Present value of future net revenues before income taxes (thousands) . . . . . . . . . $540,901
Standardized measure of discounted future net cash flows (thousands)(1) . . . . . . . . $406,956
</TABLE>
- --------------------
(1) The standardized measure of discounted future net cash flows represents
the present value of future net revenues after income taxes discounted at
10%.
33
<PAGE> 34
In accordance with applicable requirements of the Commission, estimates of
the Company's proved reserves and future net revenues are made using sales
prices estimated to be in effect as of the date of such reserve estimates and
are held constant throughout the life of the properties (except to the extent a
contract specifically provides for escalation). Estimated quantities of proved
reserves and future net revenues therefrom are affected by oil and gas prices,
which have fluctuated widely in recent years. There are numerous uncertainties
inherent in estimating oil and natural gas reserves and their estimated values,
including many factors beyond the control of the producer. The reserve data
set forth in this Prospectus represents only estimates. Reservoir engineering
is a subjective process of estimating underground accumulations of oil and
natural 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 and judgment. As a result, estimates
of different engineers, including those used by the Company, may vary. In
addition, estimates of reserves are subject to revision based upon actual
production, results of future development and exploration activities,
prevailing oil and gas prices, operating costs and other factors, which
revisions may be material. Accordingly, reserve estimates are often different
from the quantities of oil and natural gas that are ultimately recovered and
are highly dependent upon the accuracy of the assumptions upon which they are
based. The Company's estimated proved reserves have not been filed with or
included in reports to any federal agency.
DRILLING ACTIVITY
The following table sets forth the drilling activity of the Company on its
properties for the twelve month periods ended December 31, 1993, 1994, 1995 and
the six-month period ended June 30, 1996:
<TABLE>
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
------------------------------------------------- ---------------
1993 1994 1995 1996
--------------- ------------- -------------- ---------------
GROSS NET GROSS NET GROSS NET GROSS NET
------- ------ ----- ----- ------- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OFFSHORE DRILLING ACTIVITY:
Development:
Oil . . . . . . . . . . . . . . 2 0.6 1 1.0 8 5.9 7.0 5.8
Gas . . . . . . . . . . . . . . 2 --(1) 5 3.7 2 1.7 4.0 3.5
Non-productive . . . . . . . . . -- -- 1 1.0 -- -- -- --
-- --- -- --- -- --- ---- ---
Total . . . . . . . . . . . 4 0.6 7 5.7 10 7.6 11.0 9.3
== === == === == === ==== ===
Exploratory:
Oil . . . . . . . . . . . . . . -- -- -- -- 5 5.0 2.0 2.0
Gas . . . . . . . . . . . . . . -- -- 1 0.3 2 1.5 1.0 1.0
Non-productive . . . . . . . . . 2 0.7 -- -- 2 2.0 -- --
-- --- -- --- -- --- ---- ---
Total . . . . . . . . . . . 2 0.7 1 0.3 9 8.5 3.0 3.0
== === == === == === ==== ===
ONSHORE DRILLING ACTIVITY:
Development:
Oil . . . . . . . . . . . . . . . 25 2.0 9 0.5 2 0.1 1.0 --(1)
Gas . . . . . . . . . . . . . . . 6 2.4 4 1.7 -- - -- --
Non-productive . . . . . . . . . -- -- -- -- -- - 1.0 0.2
-- --- -- --- -- - ---- ---
Total . . . . . . . . . . . 31 4.4 13 2.2 2 0.1 2.0 0.2
== === == === = === ==== ===
Exploratory:
Oil . . . . . . . . . . . . . . . -- -- -- -- -- -- -- --
Gas . . . . . . . . . . . . . . . 3 0.9 4 0.2 1 0.5 -- --
Non-productive . . . . . . . . . 3 0.9 4 2.8 3 2.0 -- --
-- --- -- --- -- --- ---- ---
Total . . . . . . . . . . . 6 1.8 8 3.0 4 2.5 -- --
== === == === == === ==== ===
</TABLE>
(1) The Company has less than a 1% working interest in each of these
wells.
34
<PAGE> 35
PRODUCTIVE WELLS
The following table sets forth the number of productive oil and gas wells
in which the Company owned a working interest at June 30, 1996:
<TABLE>
<CAPTION>
TOTAL PRODUCTIVE
WELLS
--------------------
GROSS NET
----- -----
<S> <C> <C> <C>
Oil . . . . . . . . . . . . . . 838 417.4
Gas . . . . . . . . . . . . . . 1,000 428.3
----- -----
Total . . . . . . . . . . 1,838 845.7
===== =====
</TABLE>
Productive wells consist of producing wells and wells capable of
production, including gas wells awaiting pipeline connections. The Company has
15 wells that are completed in more than one producing horizon; those wells
have been counted as single wells.
ACREAGE DATA
The following table sets forth the approximate developed and undeveloped
acreage in which the Company held a leasehold, mineral or other interest at
June 30, 1996. Undeveloped acreage includes leased acres on which wells have
not been drilled or completed to a point that would permit the production of
commercial quantities of oil and gas, regardless of whether or not such acreage
contains proved reserves.
<TABLE>
<CAPTION>
DEVELOPED ACRES UNDEVELOPED ACRES
--------------------- -------------------
GROSS NET GROSS NET
----- --- ----- ----
<S> <C> <C> <C> <C> <C>
Offshore (1) . . . . . . . . . . . . . . 296,955 180,254 20,127 8,205
Onshore . . . . . . . . . . . . . . . . 608,699 55,521 135,605 38,522
------- ------- ------- ------
Total . . . . . . . . . . . . . . . 905,654 235,775 155,732 46,727
======= ======= ======= =======
</TABLE>
(1) Offshore includes acreage in federal waters and the state waters
of coastal South Louisiana.
MARKETING AND CUSTOMERS
The Company sells substantially all of its natural gas to unaffiliated
entities under short-term contracts (maximum of one year in duration) at
pricing based on current spot market indexes. A minor portion of the Company's
gas production is committed to be processed through gas plants. Crude oil and
condensate is typically sold at the wellhead on month-to-month contracts at
posted field prices, plus a slight premium, in the area where production
occurs. Approximately 8% of the Company's daily oil production is subject to
agreements with the Company's predecessors in the properties whereby these
predecessors have the right to purchase that production at prices that could be
less than might otherwise be obtained.
Most of the Company's production is transported through gas gathering
systems and oil and gas pipelines which are not owned by the Company.
Transportation space on such gathering systems and pipelines is occasionally
limited and at times unavailable due to repairs or improvements being made to
such facilities or due to such space being utilized by other gas with priority
transportation agreements. Forcenergy's access to transportation options can
also be affected by regulation of intrastate and interstate gas transportation.
In an attempt to promote competition, the Federal Energy Regulatory Commission
("FERC") has issued a series of orders which have altered significantly the
marketing and transportation of natural gas (See "Government Regulation"). The
effect of these orders to date has been to enable producers such as the Company
to market their natural gas production to purchasers other than the interstate
pipelines located in the vicinity of their producing properties. While the
Company has not experienced any inability to market its production, if
transportation space is restricted or is unavailable, the Company's cash flow
could be adversely affected.
During 1994, 1995 and for the six months ended June 30, 1996, certain
purchasers of the Company's production purchased in excess of 10% of the value
of the Company's oil and gas sold by the Company; however, based on the current
demand for oil and natural gas, the Company does not believe the loss of any of
these purchasers would have a material adverse effect on the Company.
35
<PAGE> 36
The Company utilizes forward sales contracts and commodity swaps for
portions of its current oil and gas production to achieve more predictable cash
flows and to reduce its exposure to fluctuations in oil and gas prices. The
remaining portion of current production has not been hedged so as to provide
the Company the opportunity to benefit from increases in prices on that portion
of the production, should price increases materialize. As of October 1,
1996, the Company had entered into future sales and swap contracts as a hedge
against possible price declines that effectively fixed sales prices on
approximately 76% of the Company's estimated net oil production for the
remainder of the year and for approximately 60% of the Company's estimated net
natural gas production for the remainder of 1996, at $18.05 per barrel and
$2.03 per Mcf, respectively. For this purpose, this estimated net production
for the remainder of the year assumes that current production rates will
continue for the rest of the year; however, in reality, the Company anticipates
that production will be added through its capital program. All of these
arrangements are settled on a monthly basis. The Company accounts for its
commodity swaps as hedging activities and, accordingly, gains or losses are
included in oil and gas revenues for the period the production was hedged.
ABANDONMENT COSTS
The Company is responsible for the costs associated with the plugging of
wells, the removal of facilities and equipment and site restoration on its oil
and gas properties, pro rata to its working interest. The Company provides
for expected future abandonment liabilities by accruing for such costs as a
component of depletion, depreciation and amortization as the properties are
produced. As of December 31, 1995, total undiscounted abandonment costs
estimated to be incurred through the year 2006 were approximately $48 million
for properties in federal and state waters. For onshore properties, salvage
values received for equipment are usually sufficient to offset the abandonment
costs. Estimates of abandonment costs and their timing may change due to many
factors including actual drilling and production results, inflation rates, and
changes in environmental laws and regulations. No significant abandonment
costs are anticipated to be incurred in 1996.
The Minerals Management Service ("MMS") requires lessees of Outer
Continental Shelf ("OCS") properties to post performance bonds in connection
with the plugging and abandonment of wells located offshore and the removal of
all production facilities. Operators in the OCS waters of the Gulf of Mexico
are also currently required to post an area wide bond of the lesser of $3
million, or $500,000 per producing lease. The Company currently has obtained
additional supplemental bonding on its offshore leases as required by the MMS.
Under certain circumstances, the MMS has the authority to suspend or terminate
operations on federal leases for failure to comply with applicable bonding
requirements or other regulations applicable to plugging and abandonment. Any
such suspensions or terminations of the Company's operations could have a
material adverse effect on the Company's financial condition and results of
operations.
TITLE TO PROPERTIES
As is customary in the oil and natural gas industry, the Company makes only
a cursory review of title to farmout acreage and to onshore undeveloped oil and
natural gas leases upon execution of the contracts. Prior to the commencement
of drilling operations, a thorough title examination is conducted and curative
work is performed with respect to significant defects. The Company performs
complete reviews of title to federal and state offshore lease blocks prior to
acquisition. To the extent title opinions or other investigations reflect
material title defects, the seller of the property, rather than the Company, is
typically responsible for curing any such title defects at its expense. If the
Company were unable to remedy or cure any title defect of a nature such that it
would not be prudent to commence drilling operations on undeveloped properties,
the Company could suffer a loss of its entire investment in the property. The
Company has obtained title opinions on substantially all of its producing
properties and believes that it has satisfactory title to such properties in
accordance with standards generally accepted in the oil and gas industry.
Substantially all of the Company's oil and natural gas properties are and will
continue to be mortgaged to secure borrowings under the Senior Credit Facility.
COMPETITION
Forcenergy encounters competition from other oil and gas companies in all
phases of its operations, including the acquisition of producing properties.
Competitors include major integrated oil and natural gas companies, numerous
independent oil and natural gas companies, individuals and drilling and income
programs. Many competitors are large, well-established companies with
substantially larger operating staffs and greater capital resources than the
Company's and which, in many instances, have been engaged in the energy
business for a much longer time. Such companies may be able to pay more for
productive oil and natural gas properties and exploratory prospects and to
define, evaluate, bid for and purchase a greater number of properties and
prospects than the Company's financial or human resources permit. Forcenergy's
ability to acquire
36
<PAGE> 37
additional properties and to discover reserves in the future will be dependent
upon its ability to evaluate and select suitable properties and to consummate
transactions in a highly competitive environment.
OPERATING RISKS OF OIL AND GAS OPERATIONS
The oil and gas business involves certain operating hazards such as well
blowouts, cratering, explosions, uncontrollable flows of oil, natural gas or
well fluids, fires, formations with abnormal pressures, pollution, releases of
toxic gas and other environmental hazards and risks, any of which could result
in substantial losses to the Company through the loss of hydrocarbons,
pollution claims, personal injury suits and damage to properties of the Company
and others. The Company's offshore operations also are subject to the
additional hazards of marine operations, such as severe weather, capsizing and
collision that can cause substantial damage to facilities, and possible
business interruption. The availability of a ready market for the Company's
oil and natural gas production also depends on the proximity of reserves to,
and the capacity of, oil and gas gathering systems, pipelines and trucking or
terminal facilities. Additionally, the Company may be liable for environmental
damages caused by previous owners of property purchased or leased by the
Company. As a result, substantial liabilities to third parties or governmental
entities may be incurred, the payment of which could reduce or eliminate the
funds available for development, acquisitions or exploration, or result in the
loss of the Company's properties. In accordance with customary industry
practices, Forcenergy maintains insurance against some, but not all, of such
risks and losses. The Company does not carry business interruption insurance.
The occurrence of an event not fully covered by insurance could have a material
adverse effect on the financial condition, results of operations and cash flow
of the Company.
GOVERNMENT REGULATION
The Company's drilling, production and marketing operations are subject to
various types of regulation at the federal, state and local levels. Such
regulation includes requiring permits for the drilling of wells, maintaining
bonding requirements in order to drill or operate wells, and regulating the
location of wells, the surface use and restoration of properties upon which
wells are drilled and the plugging and abandonment of wells. Regulations also
can limit production rates, require capital for environmental compliance and
affect the transportation and marketing of hydrocarbons.
Certain operations the Company conducts are on federal oil and gas leases,
which the MMS administers. The MMS issues such leases through competitive
bidding. These leases contain relatively standardized terms and require
compliance with detailed MMS regulations and orders pursuant to the Outer
Continental Shelf Lands Act ("OCSLA") (which are subject to change by the MMS).
For offshore operations, lessees must obtain MMS approval for exploration plans
and development and production plans prior to the commencement of such
operations. In addition to permits required from other agencies (such as the
Coast Guard, the Army Corps of Engineers and the Environmental Protection
Agency), lessees must obtain a permit from the MMS prior to the commencement of
drilling. The MMS has promulgated regulations requiring offshore production
facilities located on the OCS to meet stringent engineering and construction
specifications. The MMS proposed additional safety-related regulations
concerning the design and operating procedures for OCS production platforms and
pipelines. These proposed regulations were withdrawn pending further
discussions among interested federal agencies. The MMS also has issued
regulations restricting the flaring or venting of natural gas, and has recently
proposed to amend such regulations to prohibit the flaring of liquid
hydrocarbons and oil without prior authorization. Similarly, the MMS has
promulgated regulations governing the plugging and abandonment of wells located
offshore and the removal of all production facilities. To cover the various
obligations of lessees on the OCS, the MMS generally requires that lessees post
substantial bonds or other acceptable assurances that such obligations will be
met. The cost of such bonds or other surety can be substantial and there is no
assurance that bonds or other surety can be obtained in all cases. Under
certain circumstances, the MMS may require any Company operations on federal
leases to be suspended or terminated. Any such suspension or termination could
materially and adversely affect the Company's financial condition and
operations.
In November 1995, the MMS issued a notice of proposed rulemaking in which
it proposed to amend its regulations governing the calculation of royalties and
the valuation of natural gas produced from federal leases. The principle
feature in the amendments, as proposed, would establish an alternative
market-index based method to calculate royalties on certain natural gas
production sold to affiliates or pursuant to non-arm's-length sales contracts.
The MMS proposed this rulemaking to facilitate royalty valuation in light of
changes in the gas marketing environment. The MMS has recently announced its
intention to reconsider the proposal and reopen the comment period. The MMS
has also recently proposed a rule describing the types of transportation
components that are deductible for calculating and reporting royalties, as well
as various cost components associated with marketing functions that are not
deductible. The Company cannot predict what action the MMS will take on
37
<PAGE> 38
these matters, nor can it predict at this stage of the rulemaking proceeding
how the Company might be affected if amendments to the regulations are adopted.
In addition, the MMS is conducting an inquiry into certain contract
agreements from which producers on MMS leases have received settlement proceeds
that are royalty bearing and the extent to which producers have paid the
appropriate royalties on those proceeds. The Company believes that this
inquiry will not have a material impact on its financial condition, liquidity
or results of operations.
The FERC regulates interstate natural gas transportation rates and service
conditions, which affect the marketing of natural gas produced by the Company,
as well as the revenues received by the Company for sales of such production.
Since the mid-1980s, the FERC has issued a series of orders, culminating in
Order Nos. 636, 636-A and 636-B ("Order 636"), that have significantly altered
the marketing and transportation of natural gas. Order 636 mandates a
fundamental restructuring of interstate pipeline sales and transportation
service, including the unbundling by interstate pipelines of the sales,
transportation, storage and other components of the city-gate sales services
such pipelines previously performed. One of FERC's purposes in issuing the
orders is to increase competition within all phases of the natural gas
industry. Generally, Order 636 has eliminated or substantially reduced the
interstate pipelines' traditional role as wholesalers of natural gas, and has
substantially increased competition and volatility in natural gas markets.
While significant regulatory uncertainty remains, Order 636 may ultimately
enhance the Company's ability to market and transport its natural gas, although
it may also subject the Company to greater competition and more restrictive
pipeline imbalance tolerances and greater associated penalties for violation of
such tolerances. Numerous parties have filed petitions for review of Order
636, as well as orders in individual pipeline restructuring proceedings. In
July 1996, Order 636 was generally upheld on appeal. The portions remanded for
further action do not appear to materially affect the Company. It is difficult
to predict when all appeals of Order 636 will be completed or their impact on
the Company.
The FERC has recently announced several important transportation-related
policy statements and proposed rule changes. In 1995, the FERC issued a policy
statement on how interstate natural gas pipelines can recover the costs of new
pipeline facilities. In January 1996, the FERC issued a policy statement and a
request for comments concerning alternatives to its traditional cost-of-service
ratemaking methodology, including criteria to be used in evaluating proposals
to charge market-based rates for the transportation of natural gas. In
addition, the FERC recently issued a notice of proposed rulemaking pursuant to
which it proposes to substantially revise its regulations regarding releases of
firm interstate natural gas pipeline capacity. While any resulting FERC action
regarding these matters would affect the Company only indirectly, the FERC's
current rules and policy statements may have the effect of enhancing
competition in natural gas markets by, among other things, encouraging
non-producer natural gas marketers to engage in certain purchase and sale
transactions. The Company cannot predict what action the FERC will take on
these matters, nor can it accurately predict whether the FERC's actions will
achieve the goal of increasing competition in markets in which the Company's
natural gas is sold. However, the Company does not believe that it will be
treated materially differently than other natural gas producers and marketers
with which it competes.
The FERC also regulates rates and service conditions for interstate
transportation of crude oil, liquids and condensate, which can affect the
revenues the Company receives from the sale of these products. Effective
January 1, 1995, the FERC adopted regulations establishing an indexing system
for transportation rates for oil pipelines, which generally indexes such rates
to inflation. These regulations could increase the cost of transporting crude
oil, liquids and condensate by pipeline.
Legislation affecting the oil and gas industry is under constant review for
amendment or expansion by Congress, the FERC, state regulatory bodies and the
courts. The Company cannot predict when or if any such proposals might become
effective, or their effect, if any, on the Company's operations. The natural
gas industry historically has been very heavily regulated; therefore, there is
no assurance that the less stringent regulatory approach recently pursued by
the FERC and Congress will continue indefinitely into the future. The
regulatory burden on the oil and natural gas industry increases the Company's
cost of doing business and, consequently, affects its profitability and cash
flow. In as much as such laws and regulations are frequently expanded, amended
or reinterpreted, the Company is unable to predict the future cost or impact of
complying with such regulations
ENVIRONMENTAL MATTERS
The Company, as an owner or lessee and operator of oil and gas properties,
is subject to federal, state and local laws and regulations governing the
discharge of materials into, and the protection of, the environment. These
laws and regulations may require the acquisition of a permit before drilling
commences, restrict the types, quantities and concentration of various
38
<PAGE> 39
substances that can be released into the environment in connection with
drilling and production activities, limit or prohibit drilling activities on
certain lands lying within wilderness, wetlands and other protected areas, and
impose substantial liabilities for pollution resulting from the Company's
operations. Stricter standards in environmental legislation may be imposed in
the oil and gas industry in the future, such as proposals made in Congress and
at the state level from time to time that would reclassify certain oil and
natural gas exploration and production wastes as "hazardous wastes" and make
the reclassified wastes subject to more stringent and costly handling, disposal
and clean-up requirements. The impact of any such changes, however, would not
likely be any more burdensome to the Company than to any other similarly
situated company involved in oil and gas exploration and production.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as the "Superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on certain classes of
persons who are considered to be responsible for the release of a "hazardous
substance" into the environment. These persons include the owner or operator
of the disposal site or sites where the release occurred and companies that
disposed or arranged for disposal of the hazardous substances. Under CERCLA,
such persons may be subject to joint and several liability for the costs of
cleaning up the hazardous substances, for damages to natural resources, and for
the costs of certain health studies. Furthermore, it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by hazardous substances or other
pollutants released into the environment.
In addition, the U.S. Oil Pollution Act establishes strict liability for
owners of offshore facilities that are the site of a release of oil into "waters
of the United States" (a term that includes the Gulf of Mexico) and the Act
presently requires owners of offshore facilities to demonstrate that they have
$150 million in insurance coverage or other sources of funds available to cover
costs that might be incurred by governmental authorities in responding to an oil
spill. Congress recently amended the Oil Pollution Act to reduce the level of
"financial responsibility" required by the Act to $35 million.
The Company maintains insurance coverages which it believes are customary
in the industry although it is not fully insured against many environmental
risks. Although the Company has not experienced any material adverse effect
from compliance with environmental requirements, nor is it aware of any
environmental claims existing at September 30, 1996, there is no assurance that
this will continue in the future.
EMPLOYEES
As of September 30, 1996, the Company had 155 full time employees, 29 of
whom are located at the Company's headquarters in Miami, Florida and 126 of
whom are located at the Company's regional offices in New Orleans, Lafayette
and Intracoastal City, Louisiana and Denver, Colorado. Most of such regional
employees work offshore in the Gulf of Mexico. None of Forcenergy's employees
are represented by a labor union.
OFFICES
The Company currently leases approximately 12,600 square feet of office
space in Miami, Florida, where its principal offices are located, approximately
900 square feet in Denver, Colorado, approximately 17,900 square feet in New
Orleans, Louisiana and approximately 666 square feet in Lafayette, Louisiana.
LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business, that management
believes would not have a material adverse effect on its financial condition or
results of operations.
39
<PAGE> 40
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert Issal . . . . . . . . . . . . . . . 50 Chairman of the Board
Stig Wennerstrom . . . . . . . . . . . . . 53 President, Chief Executive Officer and Director
J. Russell Porter . . . . . . . . . . . . . 34 Vice President - Corporate Development
John A. Brush . . . . . . . . . . . . . . . 41 Vice President - Land and Marketing, General Counsel,
Secretary
Percy A. Payne . . . . . . . . . . . . . . 55 Vice President - Exploration and Production
E. Joseph Grady . . . . . . . . . . . . . . 43 Vice President - Treasurer and Chief Financial Officer
Eric Forss . . . . . . . . . . . . . . . . 30 Director
Arnold L. Chavkin . . . . . . . . . . . . . 44 Director
Kevin S. Penn . . . . . . . . . . . . . . . 35 Director
Bruce L. Burnham . . . . . . . . . . . . . 62 Director
William F. Wallace . . . . . . . . . . . . 57 Director
Jeffrey A. Weber . . . . . . . . . . . . . 31 Director
</TABLE>
Robert Issal has been Chairman of the Board of Directors of the Company
since May 1994 and has been a director since the Company's inception in
September 1993. Mr. Issal has been Chairman of FAB since May 1994 and served
as Vice Chairman of FAB from April 1992 to April 1994. From 1988 through 1991,
Mr. Issal was President and Chief Executive Officer of Forsheda AB, a Swedish
public company, and from 1991 through 1994 served as President of Abstracta AB.
Since 1994, Mr. Issal has served as Chairman and President of Rejmyre Belysning
AB Sweden, a Swedish lighting manufacturer.
Stig Wennerstrom has been President and Chief Executive Officer of the
Company since its inception in September 1993. Prior to the formation of the
Company, Mr. Wennerstrom was the President and Chief Executive Officer of
Forcenergy Gas Exploration Inc, ("FGE") the general partner of Forcenergy
Partners. FGE managed Forcenergy Partners as its general partner (FAB was the
sole limited partner of Forcenergy Partners) from its inception in 1989 until
FGE and Forcenergy Partners were merged into the Company in September 1993.
J. Russell Porter is Vice President - Corporate Development of the Company.
Mr. Porter joined the Company as Vice President - Financial Planning & Analysis
in April 1994 and served in that capacity functioning as Chief Financial
Officer until being promoted to his current position in October 1995. From
January 1992 until joining the Company, Mr. Porter held the position of Vice
President in the Natural Resources Group of Internationale Nederlanden (U.S.)
Capital Corporation in New York. From July 1990 to December 1991, Mr. Porter
was an Associate in the Energy Group at Manufacturers Hanover and Chemical
Bank.
John A. Brush is Vice President - Land and Marketing, General Counsel,
Secretary of the Company. Mr. Brush joined the Company as Vice President-Land
and General Counsel in November 1993 and served in that capacity until being
appointed to his current position in November 1995. Prior to joining the
Company, Mr. Brush was Manager of Contract Administration with Apache
Corporation from April 1992 to June 1993 and was employed by Hamilton Brothers
Oil Company from July 1985 to January 1992 in various positions.
Percy Payne is Vice President - Exploration and Production of the Company
and has responsibilities for all Gulf of Mexico and Gulf Coast operations.
Prior to joining the Company in August 1996, Mr. Payne served as President of
Payne Energy Associates, Inc., a privately held consulting group formed by Mr.
Payne, serving the international oil industry. Prior to establishing a
consulting business in September 1994, Mr. Payne held various positions during
a tenure of 27 years within Shell Oil Company USA among other positions, most
recently serving as Vice President of Pecten International, Shell Oil Company,
USA's international subsidiary. Mr. Payne also served as General Manager of
Operations for the lower 48 states (less California) and Alaska for Shell
Western E&P from April 1986 to September 1991.
E. Joseph Grady is Vice President, Treasurer and Chief Financial Officer of
the Company. Prior to joining the Company in October 1995, Mr. Grady held
various financial management positions within Southdown, Inc. and its
subsidiaries since
40
<PAGE> 41
1980. Most recently Mr. Grady was Director of Finance for Southdown
Environmental Systems, Inc. from January 1991 until he joined the Company, and
prior to that was with Pelto Oil Company for approximately ten years, finally
serving as Vice President-Finance.
Eric Forss has been a director of the Company since June 1994. Mr. Forss
has been President of FAB since May 1991. Prior to serving as President, Mr.
Forss had been Vice President of FAB from May 1990 through April 1991. Mr.
Forss has served as a director on the Board of FAB since May 1994.
Arnold L. Chavkin has been a director of the Company since its inception in
1993. Mr. Chavkin has been a General Partner of Chase Capital Partners
(formerly Chemical Venture Partners) since January 1992 and has served as the
president of Chemical Investments, Inc. since March 1991. Prior to March 1991,
Mr. Chavkin was a member of Chase Manhattan (formerly Chemical) Bank's merchant
banking group and a member of its corporate finance group since 1986. Mr.
Chavkin serves as a director on the boards of Reading & Bates Corporation,
American Radio Systems, Inc., Bell Sports Corporation and Wireless One, Inc.
Kevin S. Penn has been a director of the Company since its inception in
1993. Since October 1995, Mr. Penn has served as Managing Director of A.C.
Israel Capital Co., Inc. Mr. Penn was Executive Vice President of First Spring
Corporation from September 1991 to October 1995. From April 1991 to September
1991, Mr. Penn was Director, Financial Planning and Analysis for Primerica
Corporation. From 1987 to 1990, Mr. Penn was a principal with the leveraged
buyout firm of Adler & Shaykin. Mr. Penn serves as a director on the Boards of
T-Chem Products, Inc. and HVE Holdings, Inc.
Bruce L. Burnham has served as President of The Burnham Group, a privately
held consulting and marketing firm formed by Mr. Burnham shortly after retiring
from Dayton's Department Stores in 1984. From 1981 to 1984, Mr. Burnham served
as Chairman and Chief Executive Officer of Dayton's Department Stores in
Minneapolis, Minnesota. From 1979 to 1980, Mr. Burnham was President and Chief
Executive Officer of Bonwit Teller in New York City. From 1978 to 1979, Mr.
Burnham was President and Chief Operating Officer of Jordan Marsh. He serves
on the boards of Paxson Communications Corporation, Financial Benefit Group,
Inc. and J.B. Rudolph, Inc.
William F. Wallace currently is an advisory member of the Beacon Alliance
of the Beacon Group, a private investment and advisory partnership. Prior to
joining the Beacon Alliance in early 1996, Mr. Wallace was Vice Chairman of
Barrett Resources/Plains Petroleum Company and President and Chief Operating
Officer of Plains Petroleum Company. Prior to joining Plains Petroleum Company
in 1994, Mr. Wallace spent a combined total of 23 years with Texaco, Inc., the
last seven of which he served as Regional Vice President.
Jeffrey A. Weber was elected as a Director of the Company on August
29,1996. Mr. Weber currently is President and Chief Executive Officer of
Burden Brothers, Inc., the General Partner of William A.M. Burden & Co., L.P.,
a private investment partnership. Prior to joining William A.M. Burden & Co.,
L.P. in April 1992, Mr. Weber was an associate with Chemical Venture Partners.
Mr. Weber is also the Investment Advisor to the Florence V. Burden Foundation
and serves as a director of SemiTest, Inc., Datamax International Corporation
and Digital Telmedia, Inc. Mr. Weber also serves as an Advisory Board Member
and Special Limited Partner of Exeter Venture Lenders, L.P. and Exeter Equity
Partners, L.P., two private investment partnerships, and as a member of the
Advisory Committee of Starwood Capital Group, L.P., a real estate investment
firm.
Members of the Board of Directors are elected each year at the Company's
annual meeting and serve until their successors are duly elected and qualified
or their earlier resignation or removal. Officers serve at the discretion of
the Board of Directors.
41
<PAGE> 42
SELLING STOCKHOLDERS
The following table sets forth the following information with respect to
each Selling Stockholder in connection with the Common Stock Offering: (1)
the number of shares of Common Stock owned of record immediately prior to
the Common Stock Offering; (2) the number of shares of Common Stock being
offered hereby; and (3) the number of shares of Common Stock and, if one
percent or more, the percentage of the outstanding shares of Common Stock to be
owned of record upon the completion of the Common Stock Offering.
<TABLE>
<CAPTION>
Ownership Before Offering Ownership After Offering
--------------------------- Shares to --------------------------
Name Shares Percent(7) be Sold Shares Percent(8)
- --------------------------- ------------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Forcenergy AB 9,040,486 49.5 300,000 8,740,486 39.1
FS Energy Associates, L.P. 626,041(1) 3.0 626,041 - --
Brinson Partners, L.P.(9) 547,786(2) 2.6 547,786 - --
Conseco Capital Corporation(9) 273,893(3) 1.3 273,893 - --
Invesco Fund Corp.(9) 156,510(4) * 18,684 137,826 *(1)
Clark Partners I 117,383(5) * 117,383 - --
Burden Investment Fund I, L.P. 78,255(6) * 78,255 - --
</TABLE>
- ----------------------------------
*Less than 1%.
(1) Gives effect to the conversion of $8.0 million in Subordinated Notes into
551,305 shares of Common Stock and options exercised for 74,736 shares of
Common Stock. Mr. Kevin S. Penn, a director of the Company, served as an
investment advisor to FS Energy Associates, LP.
(2) Gives effect to the conversion of $7.0 million in Subordinated Notes into
482,392 shares of Common Stock and options exercised for 65,394 shares of
Common Stock.
(3) Gives effect to the conversion of $3.5 million in Subordinated Notes into
241,196 shares of Common Stock and options exercised for 32,697 shares of
Common Stock.
(4) Gives effect to the conversion of $2.0 million in Subordinated Notes into
137,826 shares of Common Stock and options exercised for 18,684 shares of
Common Stock.
(5) Gives effect to the conversion of $1.5 million in Subordinated Notes into
103,370 shares of Common Stock and options exercised for 14,013 shares of
Common Stock.
(6) Gives effect to the conversion of $1.0 million in Subordinated Notes into
68,913 shares of Common Stock and options exercised for 9,342 shares of
Common Stock. Mr. Jeffrey Weber, a director of the Company is President of
Burden Brothers, Inc., the general partner of William A.M. Burden & Co.,
L.P., the General Partner of this Fund.
(7) Calculated based on 20,835,698 shares outstanding.
(8) Calculated based on 22,373,656 shares to be outstanding after the Common
Stock Offering.
(9) A manager or general partner of various investment funds invested in the
Subordinated Notes.
Each of the Selling Stockholders is party to a voting agreement (the "Voting
Agreement") pursuant to which, among other rights, FAB has the right to
designate two nominees and holders of the Subordinated Notes have the right to
designate three nominees to the Board of Directors. Messrs. Forss and Issal
were designated by FAB and Messrs. Chavkin, Penn and Weber were designated by
the Note Holders pursuant to this Voting Agreement. Upon completion of the
Common Stock Offering, the Voting Agreement will terminate pursuant to its
terms. See "Management" and "Description of Existing Securities and Senior
Credit Facility -- Voting and Holdback Agreement."
42
<PAGE> 43
DESCRIPTION OF EXISTING SECURITIES AND SENIOR CREDIT FACILITY
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock and 5,000,000 shares of Preferred Stock, par value $0.01 per
share.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of common
stockholders and do not have cumulative voting rights. Holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared by
the Board of Directors out of funds legally available therefore, subject to any
preferential dividend rights of holders of outstanding Preferred Stock. See
"Dividend Policy." Upon the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to receive ratably the net
assets of the Company available after payment of all debts and other
liabilities, subject to the prior rights of any outstanding shares of Preferred
Stock. Holders of Common Stock have no preemptive, subscription, redemption or
conversion rights.
PREFERRED STOCK
The Board of Directors of the Company is empowered, without approval of the
stockholders, to cause shares of Preferred Stock to be issued in one or more
series, with the numbers of shares of each series to be determined by it. The
Board of Directors is authorized to fix and determine variations in the
designations, preferences, and relative, participating, optional or other
special rights (including, without limitation, special voting rights to receive
dividends or assets upon liquidation, rights of conversion into Common Stock or
other securities, redemption provisions and sinking fund provisions) between
series and between the Preferred Stock or any series thereof and the Common
Stock, and the qualifications, limitations or restrictions of such rights; and
the shares of Preferred Stock or any series thereof may have full or limited
voting powers, or be without voting powers.
Although the Company has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holders to block such a transaction; or such issuance might
facilitate a business combination by including voting rights that would provide
a required percentage vote of the stockholders. In addition, under certain
circumstances, the issuance of Preferred Stock could adversely affect the
voting power of the holders of the Common Stock. Although the Board of
Directors is required to make any determination to issue such stock based on
its judgment as to the best interests of the stockholders of the Company, the
Board of Directors could act in a manner that would discourage an acquisition
attempt or other transaction in that some or a majority of the stockholders
might believe to be in their best interest or in which stockholders might
receive a premium for their stock over the then market price for such stock.
The Board of Directors does not at present intend to seek stockholder approval
prior to any issuance of currently authorized stock, unless otherwise required
by law or the regulations of the exchange on which its Common Stock is listed.
WARRANTS
In connection with the offering of the Subordinated Notes, Donaldson,
Lufkin & Jenrette Securities Corporation was granted warrants to purchase
98,337 shares of the Company's Common Stock at an exercise price of $14.51 per
share. The warrants are currently exercisable and have an expiration date of
September 14, 1998. To date, none of these warrants have been exercised.
EXCHANGEABLE SUBORDINATED NOTES
The Company has issued an aggregate principal amount of $34 million in
Subordinated Notes which mature on September 15, 2000, pursuant to the Note
Purchase Agreement among the Company and the Note Holders. Interest accrues on
the Subordinated Notes at a rate of 7% per annum, payable semi-annually in
arrears. Principal of the Subordinated Notes is payable upon maturity. If the
Company has not consummated a Qualified Public Offering (as defined below)
prior to September 15, 1998, two years before the maturity date of the
Subordinated Notes, and the Subordinated Notes are not otherwise exchanged into
Common Stock, the holders of the Subordinated Notes will be entitled to an
additional payment on the maturity date of an amount sufficient to provide the
Note Holders with a compounded annual rate of return of 13% from the issuance
date of the Subordinated Notes. The Company is currently accruing interest on
the Subordinated Notes at 13%.
43
<PAGE> 44
The Subordinated Notes are subordinate to the Senior Credit Facility. The
Company is subject to various covenants pursuant to the Note Purchase
Agreement, including restrictions on other debt, liens, issuance of preferred
stock, and the sale of certain assets, maintenance of certain minimum working
capital, tangible net worth and fixed charge coverage ratios, restrictions on
affiliated transactions, compensation and limitations on the amount of
dividends paid. The Company may pay the principal amount plus accrued interest
on the Subordinated Notes at maturity in shares of Common Stock, subject to a
cash make-whole provision equal to the difference between the cash proceeds of
the sale of such stock (if sold within 30 days after the stock is issued) and
the amount of principal and interest due.
Each of the holders of the Subordinated Notes may elect at any time to
exchange all or a portion of its Subordinated Notes into such number of shares
of the Company's Common Stock determined by dividing the amount of outstanding
principal of the Subordinated Notes to be exchanged by the exchange price of
$14.51, subject to certain adjustments; provided that no such amount to be
exchanged may be less than the lower of (i) $5 million and (ii) all of such
Note Holder's remaining Subordinated Notes. The number of shares of Common
Stock issuable upon exchange of the Subordinated Notes is subject to adjustment
for various dilutive events, including certain stock issuances. As of the date
of this Prospectus, the Subordinated Notes were exchangeable for approximately
2,343,047 shares of the Company's Common Stock.
Under certain circumstances, the Company may require the Note Holders to
exchange all (but not less than all) of the then outstanding Subordinated Notes
into such number of freely tradeable shares of the Company's Common Stock
determined by dividing the amount of total outstanding principal of the
Subordinated Notes by the exchange price of $14.51, subject to certain
adjustments (the "Call Option"). The Company may only elect to exercise the
Call Option upon the consummation of a "Qualified Public Offering" of Common
Stock. A "Qualified Public Offering" is defined as an offering of not less than
2% of the Company's outstanding shares at a price of not less than $21.76 per
share, unless the Company elects (as it has in the case of the Common Stock
Offering) to pay the Note Holders selling shares in the offering an amount per
share equal to the difference, if any, between $21.76 and the public offering
price (the "Spread") and to pay such Note Holders that sell shares in any other
offering prior to September 15, 2000, an amount per share equal to the lesser of
(i) the Spread and (ii) the difference, if any, between $21.76 and the public
offering price. The Note Holders constituting 75% of the aggregate principal
amount outstanding of the Subordinated Notes may elect to require that the
Company exercise the Call Option at any time prior to maturity regardless of
whether a Qualified Public Offering has been consummated.
The Note Holders may at their election require that the Company prepay the
Subordinated Notes upon the occurrence of a "change of control." A "change of
control" under the Note Purchase Agreement occurs if: (i) any person other than
FAB or two or more persons acting as a group acquire beneficial ownership
(within the meaning of Rule 13d-3 of the Commission under the Securities
Exchange Act of 1934, as amended, and including holding proxies to vote for the
election of directors) of 33 1/3% or more of the outstanding shares of voting
Common Stock without the consent of the Note Holders holding more than 75% of
the principal amount of the outstanding Subordinated Notes and except pursuant
to an exchange of the Subordinated Notes or in connection with a public
offering of securities registered pursuant to the Securities Act; or (ii) there
is a sale of all or substantially all of the assets of the Company or a
distribution of assets of the Company upon a dissolution, winding up,
liquidation or reorganization of the Company.
Upon the occurrence of a "change of control," the Note Holders may elect to
require the Company to redeem the Subordinated Notes at the greater of (i)
149.65% of their outstanding principal amount plus accrued interest and (ii) an
amount sufficient to provide the holders with a compounded annual rate of
return of 15% on the outstanding principal amount of the Subordinated Notes.
The Note Holders are entitled, under certain circumstances, to certain
demand and piggyback registration rights with respect to the Common Stock into
which their Subordinated Notes have been exchanged pursuant to the Note
Exchange Agreement. The holders of no less than 25% of the outstanding
principal amount of the Subordinated Notes may require the Company to effect
two registrations of the shares of Common Stock issuable upon the exchange of
the Subordinated Notes. The Note Holders that are not Selling Stockholders
under this offering have waived such registration rights in connection with the
Offering.
Pursuant to the Subordinated Notes, so long as no event of default is in
existence after giving effect to such dividends, the Company may declare and
pay dividends to its stockholders during any fiscal year in an aggregate amount
that may not exceed the lesser of (i) the excess of (a) 60% of the Company's
net income before income taxes and non-cash extraordinary items for the
immediately preceding fiscal year over (b) all income taxes incurred by the
Company during the immediately preceding fiscal year and actually paid, and
(ii) a permitted dividend ceiling which equals $6.1 million in 1995 and
increases by 10% each
44
<PAGE> 45
year; provided that after giving effect to the dividend, the ratio of future
net revenues to total debt on the date of such distribution is greater that 2
to 1.
On May 12, 1994, in connection with the Company's sale of Common Stock to
FAB, the Company granted options to the holders of the Subordinated Notes pro
rata in proportion to their holdings of Subordinated Notes to purchase 317,629
shares of Common Stock at an exercise price of $18.18 per share. In connection
with the Initial Public Offering, the Company reduced the exercise price for
such options to $15.76 per share and extended the term of the options to
September 15, 2000.
VOTING AND HOLDBACK AGREEMENT
The Company, FAB, Wictor Forss and the Note Holders are parties to the
Voting Agreement pursuant to which such persons agree to maintain the size of
the Board of Directors at no more than eight members, designate all eight
nominees to the Board and vote their shares of Common Stock for such nominees.
The Voting Agreement provides that (i) FAB has the right to designate two
nominees, (ii) the Note Holders have the right to designate three nominees,
(iii) the Chief Executive Officer of the Company must be nominated to serve as
a director and shall be Stig Wennerstrom or another person acceptable to the
Note Holders and (iv) two independent directors be nominated by FAB subject to
the approval of the Note Holders. The Voting Agreement provides that as long
as each of FS Energy Associates, L.P. and the Brinson Group holds at least 50%
of the Subordinated Notes (or shares of Common Stock issued in exchange
therefor) originally purchased by such holder, each such holder shall be
entitled to designate one of the three Note Holder nominees to the Board of
Directors. The Voting Agreement, as amended, provides that the independent
director nominees for the Company's 1996 annual meeting have no previous
affiliation with FAB. In connection with the 1996 annual meeting, FAB
nominated Bruce L. Burnham and William F. Wallace. The Note Holders may not
vote any securities of the Company that they own to remove any director
nominated by FAB without the prior consent of FAB. FAB has granted an
irrevocable proxy to the Note Holders to vote its shares of Common Stock solely
in connection with the election of directors pursuant to the provisions, and
for the term, of the Voting Agreement. Pursuant to his Employment Agreement,
Stig Wennerstrom cannot be removed as the Company's President and Chief
Executive Officer without the consent of five of the Company's eight directors.
Without the prior written consent of the holders of a majority of the
shares of Common Stock issuable upon the exchange of the Subordinated Notes,
FAB and Wictor Forss are not permitted to sell any equity securities of the
Company to non-affiliates during (i) the period beginning from the date a
registration statement is filed in connection with a registration of the
Company of its securities pursuant to registration rights being exercised under
the Note Exchange and Registration Rights Agreement and ending 300 days after
the closing date of each underwritten offering made pursuant to such
registration statement and (ii) the period beginning on the date the Company
provides written notice to the Note Holders of its exercise of the Call Option
through and ending on the date on which the closing of the exchange under the
Call Option occurs.
The Voting Agreement terminates on the earliest to occur of: (i) September
15, 2003, (ii) the date on which FAB and its affiliates beneficially own less
than 10% of the then outstanding voting Common Stock and (iii) the date on
which less than $5 million aggregate principal amount of the Subordinated Notes
is outstanding and the Note Holders own less than 5% of the then outstanding
shares of voting Common Stock of the Company. Upon completion of the Common
Stock Offering, the number of shares held by the Note Holders will be reduced
to below 5% of the outstanding shares of Common Stock and the agreement among
FAB, the Company and the Note Holders will terminate pursuant to its terms. See
"Description of Existing Securities and Senior Credit Facility and Holdback
Agreement."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SENIOR CREDIT FACILITY
The Company has entered into a senior credit facility (the "Senior Credit
Facility") with a maximum loan amount of $120 million and a borrowing base of
$120 million at December 31, 1995, subject to certain financial and operational
criteria. The borrowing base is subject to redetermination semi-annually based
on revised reserve estimates. The loan is collateralized by substantially all
of the Company's oil and gas properties. Effective December 1, 1995, the
Senior Credit Facility was amended to extend the maturities of related
borrowings on a revolving basis through December 31, 1997 and to reduce
borrowing rates under the facility. Future annual principal payments, as a
percentage of the principal balance outstanding at the time of conversion to
the term loan, will be 36% in 1998, 30% in 1999, 23% in 2000, and 11% in 2001.
The term loan matures on June 30, 2001. During 1995, advances, at the
Company's option, bore interest at either the prime rate plus a variable
percentage ranging from .25% to .75% or LIBOR plus a variable percentage
ranging from 2% to 2.5%, based on the Company's leverage ratio. Effective
December 1, 1995, under the amended facility, advances, at the Company's
option, bear interest at either the
45
<PAGE> 46
prime rate or LIBOR plus 1.375%. Interest on prime loans is due quarterly,
while interest on LIBOR loans is due the earlier of quarterly, or the end of
each designated interest period. Commitment fees on the unused portion of the
facility are due quarterly at an annual rate of 0.5%.
Effective April 26, 1996, the Company renegotiated its Senior Credit
Facility to provide for a total commitment of $195 million, with a current
borrowing base of $175 million. At September 30, 1996, the borrowing base was
increased to $195 million. At September 30, 1996, the Company had
approximately $26.2 million available under the renegotiated Senior Credit
Facility.
The Senior Credit Facility requires the Company to comply with various
covenants including, but not limited to, the maintenance of various financial
ratios, and limits the Company's ability to pay dividends on its Common Stock.
46
<PAGE> 47
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Company and the Selling Stockholders have
agreed to sell to each of the underwriters named below (the "Underwriters"), and
each of the Underwriters, for whom Goldman, Sachs & Co., Donaldson, Lufkin &
Jenrette Securities Corporation, Howard, Weil, Labouisse, Friedrichs
Incorporated and Prudential Securities Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Stockholders the respective number of shares of
Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
Number of
Shares
Common
Underwriters Stock
------------ -----------
<S> <C>
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities Corporation . . . . . . . . . .
Howard, Weil, Labouisse, Friedrichs Incorporated . . . . . . . . . . .
Prudential Securities Incorporated . . . . . . . . . . . . . . . . . .
---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $. per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $. per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 525,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 3,500,000 shares of Common
Stock offered.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
In connection with the Common Stock Offering, the Company's directors and
officers, the Selling Stockholders and certain of the Company's other
stockholders have agreed that for a period of 90 days from the date of this
Prospectus, such holders will not, without the prior written consent of
Goldman, Sachs & Co., offer, sell, contract to sell, sell any option or
contract to purchase any option or contract to sell, grant any option, right or
warrant for the sale of, pledge, or otherwise dispose of or transfer any shares
of Common Stock other than up to 225,000 shares previously purchased on the
open market. In addition, the Company will not, for a period of 90 days from
the date of this Prospectus, without the prior written consent of Goldman Sachs,
directly or indirectly, offer, contract to sell, sell, grant any option with
respect to, pledge, hypothecate or otherwise dispose of any shares of Common
Stock except for (i) sales of the shares of Common Stock offered hereby, (ii)
issuances pursuant to the exercise of outstanding warrants, stock options and
convertible securities, (iii) grants of options or shares of Common Stock
pursuant to existing employee stock option plans, and (iv) issuances of Common
Stock in connection with bona fide acquisitions wherein the holders have agreed
to be bound by a similar agreement.
47
<PAGE> 48
In connection with this Offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualified market makers
on the Nasdaq National Market may engage in passive market making transactions
in the Common Stock on the Nasdaq National Market in accordance with Rule
10b-6A under the Exchange Act during the ___business day period before
commencement of offers or sales of the Common Stock. Passive market making
transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at
a price not in excess of the highest independent bid for such security; if all
independent bids are lowered below the passive market maker's bid, however,
such bid must then be lowered when certain purchase limits are exceeded.
48
<PAGE> 49
LEGAL MATTERS
Certain legal matters in connection with the securities being offered
hereby are being passed upon for the Company by Vinson & Elkins L.L.P.,
Houston, Texas, and for the Underwriters by Andrews & Kurth L.L.P., Houston,
Texas.
EXPERTS
The financial statements of the Company as of December 31, 1995 and
for the year ended December 31, 1995, incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1995, have been so incorporated in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The historical statement of revenues and direct operating expenses of the
properties acquired by the Company from Amerada Hess Corporation for the year
ended December 31, 1995, incorporated in this Prospectus by reference to the
current report on Form 8-K/A of the Company, have been so incorporated in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of the Company as of December 31, 1994 and for
each two years in the period ended December 31, 1994, incorporated in this
Prospectus by reference to the Annual Report on Form 10-K of the Company for
the year ended December 31, 1995 and the historical statement of revenues and
direct operating expenses of the Conoco properties for each of the two years in
the period ended December 31, 1994 incorporated in this Prospectus by reference
to the Company's report on Form 8-K dated October 4, 1996, have been so
incorporated in reliance on the reports of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Ashlawn Energy, Inc. as of December 31, 1994
and December 31, 1993, and for each two years in the period ended December 31,
1994 and for the period from inception (January 8, 1992) to December 31, 1992
incorporated in this Prospectus by reference to the Current Report on Form 8-K
dated October 4, 1996 have been so incorporated in reliance on the reports of
LaPorte, Sehrt, Romig and Hand APAC, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The estimates of the Company's net proved oil and natural gas reserves
included herein as of January 1, 1996 have been prepared by Collarini
Engineering, Inc. and Netherland, Sewell & Associates, Inc. and by Collarini
Engineering, Inc. and Joe C. Neal & Associates as of January 1, 1995 and 1994.
The reserve estimates prepared by such firms as of January 1, 1995 have also
been audited by Netherland, Sewell & Associates, Inc.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, files reports,
proxy and information statements and other information with the Securities and
Exchange Commission (the "Commission"). Copies of such materials can be
obtained by mail from the Public Reference Section of the Commission, at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, such reports, proxy and information statements and other
information can be inspected and copied at the public reference facility
referenced above and at the Commission's regional offices at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. The Commission maintains a
web site (http:\\www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants, such as the Company,
that file electronically with the Commission.
The Company filed with the Commission a registration statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
securities offered hereby, reference is hereby made to the Registration
Statement, which may be inspected at the Commission's offices without charge,
or copies of which may be obtained from the Commission upon payment of
prescribed fees. Each statement made in this Prospectus as to the contents of
any contract or other document is not necessarily complete and is qualified in
its entirety by reference to the copy of such contract or other document filed
as an exhibit to the Registration Statement.
49
<PAGE> 50
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "1995 10-K");
2. The Company's Quarterly Report on Form 10-Q, including Amendment
No. 1 thereto, for the quarter ended March 31, 1996;
3. The Company's Quarterly Report on Form 10-Q, including Amendment No. 1
thereto, for the quarter ended June 30, 1996;
4. The Company's Current Report on Form 8-K, including Amendments No. 1
and 2 filed with the Commission on July 15, July 24 and September 12,
1996, respectively; and
5. The Company's Current Report on Form 8-K filed with the Commission on
October 7, 1996; and
6. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, filed with the
Commission on July 14, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the Offerings shall be deemed to be incorporated by
reference in this Prospectus and shall be deemed a part hereof from the date of
filing of such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for all purposes to the extent
that a statement contained in the Registration Statement and this Prospectus,
or in any other subsequently filed document which is also, or is deemed to be,
incorporated by reference, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed to constitute a part of
this Prospectus, except as so modified or superseded.
The Company will provide without charge to each person to whom this
Prospectus has been delivered, on written or oral request of such person, a
copy (without exhibits, unless such exhibits are specifically incorporated by
reference into such documents) of any or all documents incorporated by
reference in this Prospectus. Requests for such copies should be addressed to
- -- Attention: Secretary. Forcenergy Inc, 2730 S.W. 3rd Avenue, Suite 800,
Miami, Florida 33129- 2237, telephone number (305) 856-8500.
50
<PAGE> 51
GLOSSARY OF OIL AND GAS TERMS
The definitions set forth below shall apply to the indicated terms as used
in this Prospectus. All volumes of natural gas referred to herein are stated
at the legal pressure base of the state or area where the reserves exist and at
60 degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.
Bcf. Billion cubic feet.
Bcfe. Billion cubic feet equivalent, determined using the ratio of six Mcf
of natural gas to one Bbl of crude oil, condensate or natural gas liquids.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein
in reference to crude oil or other liquid hydrocarbons.
Bbl/d. One Bbl per day.
Btu. British thermal unit, which is the heat required to raise the
temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.
Completion. The installation of permanent equipment for the production of
oil or gas, or in the case of a dry hole, the reporting of abandonment to the
appropriate agency.
Developed acreage. The number of acres which are allocated or assignable
to producing wells or wells capable of production.
Development well. A well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon known to be productive.
Dry hole or well. A well found to be incapable of producing hydrocarbons
in sufficient quantities such that proceeds from the sale of such production
exceed production expenses and taxes.
Exploratory well. A well drilled to find and produce oil or gas reserves
not classified as proved, to find a new reservoir in a field previously found
to be productive of oil or gas in another reservoir or to extend a known
reservoir.
Farm-in or farm-out. An agreement whereunder the owner of a working
interest in an oil and gas lease assigns the working interest or a portion
thereof to another party who desires to drill on the leased acreage.
Generally, the assignee is required to drill one or more wells in order to earn
its interest in the acreage. The assignor usually retains a royalty or
reversionary interest in the lease. The interest received by an assignee is a
"farm-in" while the interest transferred by the assignor is a "farm-out."
Field. An area consisting of a single reservoir or multiple reservoirs all
grouped on or related to the same individual geological structural feature
and/or stratigraphic condition.
Gross acres or gross wells. The total acres or wells, as the case may be,
in which a working interest is owned.
Horizontal drilling. A drilling technique that permits the operator to
contact and intersect a larger portion of the producing horizon than
conventional vertical drilling techniques and can result in both increased
production rates and greater ultimate recoveries of hydrocarbons.
Liquids. Crude oil, condensate and natural gas liquids.
Mbbls. One thousand barrels of crude oil or other liquid hydrocarbons.
Mbbls/d. One thousand barrels of crude oil or other liquid hydrocarbons
per day.
Mcf. One thousand cubic feet.
51
<PAGE> 52
Mcf/d. One thousand cubic feet per day.
Mcfe. One thousand cubic feet equivalent, determined using the ratio of
six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas
liquids.
MMbbls. One million barrels of crude oil or other liquid hydrocarbons.
MMBtu. One million Btus.
MMcf. One million cubic feet.
MMcf/d. One million cubic feet per day.
MMcfe. One million cubic feet equivalent, determined using the ratio of
six Mcf of natural gas to one Bbl of crude oil, condensate or natural gas
liquids.
Net acres or net wells. The sum of the fractional working interests owned
in gross acres or gross wells.
Oil. Crude oil and condensate.
Present value. When used with respect to oil and gas reserves, the
estimated future gross revenue to be generated from the production of proved
reserves, net of estimated production and future development costs, using
prices and costs in effect as of the date indicated, without giving effect to
non-property related expenses such as general and administrative expenses, debt
service and future income tax expenses or to depreciation, depletion and
amortization, discounted using an annual discount rate of 10%.
Productive well. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.
Proved developed producing reserves. Proved developed reserves that are
expected to be recovered from completion intervals currently open in existing
wells and able to produce to market.
Proved developed nonproducing reserves. Proved developed reserves expected
to be recovered from zones behind casing in existing wells.
Proved reserves. The estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions.
Proved undeveloped location. A site on which a development well can be
drilled consistent with spacing rules for purposes of recovering proved
undeveloped reserves.
Proved undeveloped reserves. Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required from recompletion.
Recompletion. The completion for production of an existing well bore in
another formation from that in which the well has been previously completed.
Reservoir. A porous and permeable underground formation containing a
natural accumulation of producible oil and/or gas that is confined by
impermeable rock or water barriers and is individual and separate from other
reservoirs.
Royalty interest. An interest in an oil and gas property entitling the
owner to a share of oil or gas production free of costs of production.
Undeveloped acreage. Lease acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and gas regardless of whether such acreage contains proved reserves.
52
<PAGE> 53
Updip. A higher point in the reservoir.
Working interest. The operating interest which gives the owner the right
to drill, produce and conduct operating activities on the property and a share
of production.
Workover. Operations on a producing well to restore or increase
production.
53
<PAGE> 54
================================================================================
No person has been authorized to give any information
or to make any representations other than those
contained in this Prospectus, and, if given or made,
such information or representations must not be relied
upon as having been authorized. This Prospectus does
not constitute an offer to sell or the solicitation of
an offer to buy any securities other than the
securities to which it relates or an offer to sell or
the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation
is unlawful. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any
circumstances, create any implication that there has
been no change in the affairs of the Company since the
date hereof or that the information contained herein is
correct as of any time subsequent to its date.
-------------------------
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . 8
THE COMPANY . . . . . . . . . . . . . . . . . . . . 15
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS . . . . . . . . . . . . . . . . . . . 15
NOTES OFFERING . . . . . . . . . . . . . . . . . . 16
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . 16
MARKET FOR AND RECENT PRICES OF
COMMON STOCK . . . . . . . . . . . . . . . . . . 17
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . 17
CAPITALIZATION . . . . . . . . . . . . . . . . . . 18
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . 19
PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . 21
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . . 23
BUSINESS . . . . . . . . . . . . . . . . . . . . . 29
MANAGEMENT . . . . . . . . . . . . . . . . . . . . 40
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . 42
DESCRIPTION OF EXISTING SECURITIES
AND SENIOR CREDIT FACILITY . . . . . . . . . . . 43
UNDERWRITING . . . . . . . . . . . . . . . . . . . 47
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . 49
EXPERTS . . . . . . . . . . . . . . . . . . . . . . 49
AVAILABLE INFORMATION . . . . . . . . . . . . . . . 49
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE . . . . . . . . . . . . . . . . . . 50
GLOSSARY OF OIL AND GAS TERMS . . . . . . . . . . . 57
================================================================================
================================================================================
3,500,000 SHARES
FORCENERGY INC
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
-------------------------
, 1996
--------------------
================================================================================
<PAGE> 55
SUBJECT TO COMPLETION, DATED OCTOBER 7, 19946
$175,000,000
FORCENERGY INC
% SENIOR SUBORDINATED NOTES DUE 2006
------------------------------------
The Notes to be issued by the Company are offered by the Company and
may be guaranteed on a senior subordinated basis by certain of the Company's
future Restricted Subsidiaries.
Interest on the Notes will be payable in cash in arrears semiannually
on and of each year , commencing , 1997.
The Notes are redeemable in whole or in part at the option of the Company, in
whole or in part, at any time on or after , 2001, at the
redemption prices set forth herein, together with accrued and unpaid interest,
if any, to the date of redemption. Notwithstanding the foregoing, prior to
, 2001 the Company may redeem the Notes, in whole or in part, at the Make-Whole
Price (as defined) plus accrued and unpaid interest, if any, to the redemption
date. In addition, during the first 36 months after the date of this
Prospectus, the Company may, on any one or more occasions, redeem up to $61.25
million in aggregate principal amount of Notes at a redemption price of %
of the principal amount thereof plus accrued and unpaid interest, if any, to
the redemption date, with the net proceeds of an offering of common equity of
the Company; provided that at least $113.75 million in aggregate principal
amount of Notes must remain outstanding immediately after the occurrence of such
redemption; and provided, further, that any such redemption shall occur within
60 days of the date of the closing of such offering of common equity of the
Company. Upon the occurrence of a Change of Control (as defined), each holder
of Notes may require the Company to repurchase all or a portion of such holders'
Notes at a repurchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase.
Furthermore, under certain circumstances, the Company may become obligated to
offer to purchase all or a portion of the Notes at 100% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
purchase with the net proceeds of certain Asset Sales (as defined herein). See
"Description of Notes."
The net proceeds of the Notes Offering will be used to repay bank debt
and for other general corporate purposes. See "Use of Proceeds." The Notes
will be general, unsecured obligations of the Company, will be subordinated to
all Senior Debt of the Company, and will be senior in right of payment to, or
pari passu with, all existing and future subordinated indebtedness of the
Company.
Concurrently with the Notes Offering, certain selling stockholders and
the Company are offering 3,500,000 shares (4,025,000 shares if the Underwriters'
over-allotment option is exercised in full) of Common Stock of the Company for
sale to the public in a Common Stock Offering. Consummation of the Notes
Offering and the Common Stock Offering are not contingent upon each other.
There can be no assurance that the Common Stock Offering will be consummated
and, if so, on what terms. As of September 30, 1996, giving pro forma effect to
the proceeds of the Offerings, no Senior Debt of the Company would have been
outstanding. See "Use of Proceeds" and "Capitalization."
The Notes will be evidenced by a Global Certificate, in fully
registered form without coupons, deposited with a custodian for and registered
in the name of a nominee of The Depository Trust Company. Except as described
herein, beneficial interests in the Global Certificate will be shown on, and
transfers thereof will be effected only through, records maintained by DTC and
its direct and indirect participants. See "Description of Notes." The Company
does not intend to apply for listing of the Notes on any securities exchange or
for inclusion of the Notes in any automated quotation system. See "Risk
Factors--Absence of a Public Market for the Notes."
SEE "RISK FACTORS" COMMENCING ON PAGE 10, FOR INFORMATION THAT SHOULD
BE CONSIDERED BY PROSPECTIVE INVESTORS IN CONNECTION WITH AN INVESTMENT IN THE
NOTES.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to
Offering Price (1) Discount (2) Company(1) (3)
------------------ ------------ --------------
<S> <C> <C> <C>
Per Note . . . . . . . . $ $ $
Total . . . . . . . . . . $175,000,000 $ $
</TABLE>
- ----------
(1) Plus accrued interest, if any, from , 1996.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at
$________.
-----------------------------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the Notes
will be ready for delivery in New York, New York, in book-entry form only
through the facilities of DTC in New York, New York on or about ____________,
1996, against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
SALOMON BROTHERS INC
-----------------------------
The date of this Prospectus is , 1996.
<PAGE> 56
THE NOTES OFFERING
<TABLE>
<S> <C>
Securities Offered . . . . . . . . . . . . . . . . $175,000,000 principal amount of __% Senior
Subordinated Notes due 2006.
Maturity Date . . . . . . . . . . . . . . . . . . . , 2006
Interest Payment Dates . . . . . . . . . . . . . . and of each year,
commencing , 1997.
Optional Redemption . . . . . . . . . . . . . . . . The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after , 2001 at the redemption prices
set forth herein, plus accrued and unpaid interest
to the applicable redemption date. Notwithstanding
the foregoing, the Company at any time prior to
, 2001 may redeem the Notes, in whole or in
part, at the Make-Whole Price plus accrued and
unpaid interest to the date of redemption. In
addition, during the first 36 months after the date
of this Prospectus, up to $61.25 million in
aggregate principal amount of Notes will be
redeemable at the option of the Company on any one
or more occasions from the net proceeds of an
offering of common equity of the Company, at a price
of % of the aggregate principal amount of
the Notes, together with accrued and unpaid interest
to the date of the redemption; provided, however,
that at least $113.75 million in aggregate
principal amount of Notes must remain outstanding
immediately after the occurrence of such redemption;
and provided, further, that any such redemption
shall occur within 60 days of the date of the
closing of such offering of common equity. See
"Description of Notes--Redemption--Optional
Redemption."
Mandatory Redemption . . . . . . . . . . . . . . . None, except as set forth below under "Offers to
Purchase."
Offers to Purchase . . . . . . . . . . . . . . . . Upon a Change of Control, holders of the Notes will
have the right to require the Company to repurchase
their Notes, in whole or in part, at a price in cash
equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest to the
date of repurchase. The Indenture will require
that, prior to such a repurchase but in any event
within 90 days of such Change of Control, the
Company must either repay all Senior Debt or obtain
any required consent to such repurchase. See
"Description of Notes--Repurchase at the Option of
Holders--Change of Control."
In the event of certain asset dispositions, the
Company will be required, under certain
circumstances, to use the Excess Proceeds to offer
to purchase the Notes at 100% of the principal
amount thereof, plus accrued and unpaid interest to
the date of purchase. See "Description of
Notes--Repurchase at the Option Holders--Asset
Sales.""
</TABLE>
<PAGE> 57
<TABLE>
<S> <C>
Ranking . . . . . . . . . . . . . . . . . . . . . . The Notes will be general unsecured obligations of
the Company, which will be subordinated in right of
payment to all Senior Debt of the Company, or pari
passu in right of payment with all existing and
future senior subordinated indebtedness of the
Company and senior in right of payment to all future
subordinated indebtedness of the Company. The
claims of the holders of the Notes will be
subordinated to Senior Debt, none of which, as of
September 30, 1996, on a pro forma basis, after giving
effect to the sale of the Notes and the application
of the net proceeds therefrom as described under
"Use of Proceeds," was outstanding. See
"Capitalization" and "Description of
Notes--Subordination."
Certain Covenants . . . . . . . . . . . . . . . . . The Notes will be issued pursuant to an indenture
(the "Indenture") containing certain covenants,
including, without limitation, covenants with
respect to the following matters: (i) limitation on
additional indebtedness; (ii) sale and leaseback
transactions; (iii) limitation on Restricted
Payments, including payment of dividends, making of
distributions or certain investments; (iv)
limitation on certain transactions with affiliates;
(v) limitation on disposition of proceeds from asset
sales; (vi) limitation on liens securing pari passu
or subordinated indebtedness of the Company and
(vii) limitation of mergers, consolidations and
transfers of substantially all of the Company's assets.
See "Description of the Notes-- Certain Covenants."
Guarantees . . . . . . . . . . . . . . . . . . . . Under certain circumstances, the Company's payment
obligations under the Notes will be jointly and
severally guaranteed on a senior subordinated basis
(the "Subsidiary Guarantees") by certain of the
Company's future Restricted Subsidiaries (the
"Guarantors"). See "Description of Notes--Subsidiary
Guarantees."
Use of Proceeds . . . . . . . . . . . . . . . . . . The net proceeds of the Notes offered hereby
(estimated to be approximately $___ million) will be
used to repay all indebtedness outstanding under the
Senior Credit Facility, and the balance will be used
for general corporate purposes. See "Use of
Proceeds."
</TABLE>
A-6
<PAGE> 58
<TABLE>
<S> <C>
Common Stock Offering . . . . . . . . . . . . . . . Concurrently with the offering of the Notes (the
"Notes Offering"), the Company and certain selling
stockholders are offering 3,500,000 shares
(4,025,000 shares if the Underwriters' overallotment
option is exercised in full) of Common Stock for
sale to the public (the "Common Stock Offering" and,
together with the Notes Offering, the "Offerings").
The Company will not receive any proceeds from the
sale of Common Stock by the Selling Stockholders in
the Common Stock Offering. The consummation of the
Notes Offering and the Common Stock Offering are not
contingent upon each other.
</TABLE>
RISK FACTORS
Prior to making an investment decision, prospective purchasers of the
Notes should consider all of the information set forth in this Prospectus and
should evaluate the considerations set forth in "Risk Factors."
A-7
<PAGE> 59
RISK FACTORS
The following factors should be considered carefully, together with
the other information contained in this Prospectus before purchasing the
securities offered hereby.
VOLATILITY OF NATURAL GAS AND OIL PRICES
Revenues generated from the Company's operations are highly dependent
upon the price of, and demand for, oil and natural gas. Historically, the
markets for oil and natural gas have been volatile and are likely to continue
to be volatile in the future. Prices for oil and natural gas are subject to
wide fluctuations in response to relatively minor changes in the supply of and
demand for oil and natural gas, market uncertainty and a variety of additional
factors that are beyond the control of the Company. These factors include the
level of consumer product demand, weather conditions, domestic and foreign
governmental regulations, the price and availability of alternative fuels,
political conditions in the Middle East, the foreign supply of oil and natural
gas, the price of foreign imports and overall economic conditions. It is
impossible to predict future oil and natural gas price movements with any
certainty. Declines in oil and natural gas prices may materially adversely
affect the Company's financial condition, liquidity and results of operations.
Lower oil and natural gas prices also may reduce the amount of the Company's
oil and natural gas that can be produced economically. In order to reduce its
exposure to price risks in the sale of its oil and natural gas, the Company
enters into hedging arrangements from time to time. The Company's hedging
arrangements apply to only a portion of its production and provide only limited
price protection against fluctuations in the oil and natural gas markets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - General" and "Business - Marketing and Customers."
The Company uses the full cost method of accounting for its investment
in oil and natural gas properties. Under the full cost method of accounting,
all costs of acquisition, exploration and development of oil and natural gas
reserves are capitalized into a "full cost pool" as incurred, and properties in
the pool are depleted and charged to operations using the unit-of-production
method based on the ratio of current production to total proved oil and natural
gas reserves. To the extent that such capitalized costs (net of accumulated
depreciation, depletion and amortization) less deferred taxes exceed the
present value (using a 10% discount rate) of estimated future net cash flow
from proved oil and natural gas reserves, and the lower of cost or fair value
of unproved properties after income tax effects, such excess costs are charged
to operations. Once incurred, a write-down of oil and natural gas properties
is not reversible at a later date even if oil or natural gas prices increase.
While the Company has never been required to write-down its asset base,
significant downward revisions of quantity estimates or declines in oil and gas
prices from those in effect on December 31, 1995 which are not offset by other
factors could result in a write-down for impairment of oil and gas properties.
REPLACEMENT OF RESERVES
In general, the volume of production from oil and gas properties
declines as reserves are depleted. The rate of decline depends on reservoir
characteristics, and varies from the steep decline rate characteristic of Gulf
of Mexico reservoirs, where the Company has a significant portion of its
production, to the relatively slow decline rate characteristic of the
long-lived fields in the Rocky Mountain, Gulf Coast, Southwest and Appalachian
regions. Except to the extent the Company acquires properties containing
proved reserves or conducts successful development and exploration activities,
or both, the proved reserves of the Company will decline as reserves are
produced. The Company's future oil and natural gas production is, therefore,
highly dependent upon its level of success in finding or acquiring additional
reserves. The business of exploring for, developing or acquiring reserves is
capital intensive. To the extent cash flow from operations is reduced and
external sources of capital become limited or unavailable, the Company's
ability to make the necessary capital investment to maintain or expand its
asset base of oil and natural gas reserves would be impaired. In addition,
there can be no assurance that the Company's future development, acquisition
and exploration activities will result in additional proved reserves or that
the Company will be able to drill productive wells at acceptable costs.
A-11
<PAGE> 60
UNCERTAINTY OF RESERVE INFORMATION AND FUTURE NET REVENUE ESTIMATES
There are numerous uncertainties inherent in estimating oil and
natural gas reserves and their estimated values, including many factors beyond
the control of the producer. The reserve data set forth in this Prospectus
represents only estimates. Reservoir engineering is a subjective process of
estimating underground accumulations of oil and natural gas that cannot be
measured in an exact manner. Estimates of economically recoverable oil and gas
reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions concerning future oil and
gas prices, future operating costs, severance and excise taxes, development
costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. For these reasons, estimates of the
economically recoverable quantities of oil and natural gas attributable to any
particular group of properties, classifications of such reserves based on risk
of recovery, and estimates of the future net cash flows expected therefrom
prepared by different engineers or by the same engineers at different times may
vary substantially and such reserve estimates may be subject to downward or
upward adjustment based upon such factors. Actual production, revenues and
expenditures with respect to the Company's reserves will likely vary from
estimates, and such variances may be material. See "Business - Oil and Gas
Reserves."
The present values of estimated future net cash flows referred to in
this Prospectus should not be construed as the current market value of the
estimated oil and natural gas reserves attributable to the Company's
properties. In accordance with applicable requirements of the Commission, the
estimated discounted future net cash flows from proved reserves are generally
based on prices and costs as of the date of the estimate, whereas actual future
prices and costs may be materially higher or lower. Actual future net cash
flows also will be affected by factors such as the amount and timing of actual
production, supply and demand for oil and natural gas, curtailments or
increases in consumption by gas purchasers and changes in governmental
regulations or taxation. The timing of actual future net cash flows from
proved reserves, and their actual present value, will be affected by the timing
of both the production and the incurrence of expenses in connection with
development and production of oil and gas properties. In addition, the
calculation of the present value of the future net revenues using a 10%
discount as required by the Commission, is not necessarily the most appropriate
discount factor based on interest rates in effect from time to time and risks
associated with the Company's reserves or the oil and gas industry in general.
EFFECTS OF LEVERAGE
At August 31, 1996, the Company had total debt of approximately $192.6
million. Effective April 26, 1996, the Company renegotiated its senior secured
credit facility (the "Senior Credit Facility") to provide for a commitment of
$195 million, with an initial borrowing base of $175 million. On September 30,
1996, the borrowing base was increased to $195 million. At September 30, 1996
the Company had availability of approximately $26.2 million under the Senior
Credit Facility. The Company's level of indebtedness has several important
effects on its operations, including (i) the covenants contained in the Senior
Credit Facility and the Subordinated Note agreements require the Company to
meet certain financial tests, and other restrictions limit its ability to
borrow additional funds or to dispose of assets and may affect the Company's
flexibility in planning for, and reacting to, changes in business conditions
and (ii) the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired. Moreover, future acquisition or development
activities may require the Company to alter its capitalization significantly.
These changes in capitalization may significantly alter the leverage of the
Company or, in the case of the issuance of additional equity securities, may be
dilutive to holders of Common Stock. The Company's ability to meet its debt
service obligations and to reduce its total indebtedness will be dependent upon
the Company's future performance, which will be subject to general economic
conditions and to financial, business and other factors affecting the
operations of the Company, many of which are beyond its control. There can be
no assurance that the Company's future performance will not be adversely
affected by such economic conditions and financial, business and other factors.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
A-12
<PAGE> 61
SUBORDINATION OF THE NOTES
The Notes will be subordinated in right of payment to all existing and
future Senior Debt of the Company, which includes all indebtedness under the
Senior Credit Facility. As of June 30, 1996, after giving pro forma effect of
the Offerings and the application of the net proceeds therefrom, the Company
would have no Senior Debt outstanding but would have up to $195 million
available under the Senior Credit Facility which, if borrowed, would be
included as Senior Debt. In the event of a liquidation, dissolution,
reorganization, bankruptcy or any similar proceeding regarding the Company, the
assets of the Company will be available to pay obligations on the Notes only
after Senior Debt of the Company has been paid in full. Accordingly, there may
not be sufficient funds remaining to pay amounts due on all or any of the
Notes. See "Description of Notes--Subordination."
In addition to being subordinated to all existing and future Senior
Debt of the Company, the Notes will not be secured by any of the Company's
assets. The Company's oil and natural gas properties will serve as collateral
under the Senior Credit Facility if certain events occur. The Company has
provided the lenders with first lien deeds of trust on substantially all of the
Company's oil and natural gas properties.
PAYMENT UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of the Notes
may require the Company to repurchase all or a portion of such holder's Notes
at 101% of the principal amount of the Notes, together with accrued and unpaid
interest, if any, to the date of repurchase. The Indenture will require that
prior to such a repurchase, the Company must either repay all outstanding
Senior Debt or obtain any required consents to such repurchase. The
occurrence of a change of control may result in a default under the Senior
Credit Facility. If a Change of Control were to occur, the Company may not
have the financial resources to repay all of the Senior Debt, the Notes and the
other indebtedness that would become payable upon the occurrence of such Change
of Control. See "Description of Notes --Repurchase at the Option of
Holders--Change of Control."
FRAUDULENT CONVEYANCE
Management of the Company believes that the indebtedness represented
by the Notes and the guarantees is being incurred for proper purposes and in
good faith, and that, based on present forecasts, asset valuations and other
financial information, after the consummation of the Notes Offering, the
Company will be solvent, will have sufficient capital for carrying on its
business and will be able to pay its debts as they mature. See, however,
"--Leverage." Notwithstanding management's belief, however, if a court of
competent jurisdiction in a suit by an unpaid creditor or a representative of
creditors (such as a trustee in bankruptcy or a debtor-in-possession) were to
find that, at the time of the incurrence of such indebtedness, the Company or
any of the guarantors were insolvent, were rendered insolvent by reason of such
incurrence, were engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they
matured, or intended to hinder, delay or defraud its creditors, and that the
indebtedness was incurred for less than reasonably equivalent value, then such
court could, among other things, (i) void all or a portion of the Company's or
the Guarantors' obligations to the holders of the Notes, the effect of which
would be that the holders of the Notes may not be repaid in full and/or
(ii)subordinate the Company's or the Guarantors' obligations to the holders of
the Notes to other existing and future indebtedness of the Company to a greater
extent than would otherwise be the case, the effect of which would be to
entitle such other creditors to be paid in full before any payment could be
made on the Notes or the Guarantees.
ABSENCE OF A PUBLIC MARKET FOR NOTES
There is no existing market for the Notes and there can be no
assurance as to the liquidity of any markets that may develop for the Notes,
the ability of holders of the Notes to sell their Notes or the price at which
holders would be able to sell their Notes. Future trading prices of the Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Company has been advised by the Underwriters that, subject to applicable
laws and regulations, such firms currently intend to make a market in the Notes
after the consummation of the Notes Offering, although they are not obligated
to do so and may discontinue
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any market-making activities with respect to the Notes at any time without
notice. The Company does not intend to apply for listing of the Notes on any
securities exchange. See "Underwriting."
CONTROL BY PRINCIPAL SECURITYHOLDERS
The Company's principal stockholder, FAB, currently owns approximately
49.5% of the outstanding shares of Common Stock. Following the Common Stock
Offering and the sale of a portion of the shares held by FAB in the Common
Stock Offering, FAB ownership in the Company will be reduced to approximately
39% of the outstanding shares of Common Stock. See "Selling Stockholders."
FAB is a publicly traded Swedish company with two classes of stock, A shares
and B shares. There are 1,000,000 outstanding A shares, each of which is
entitled to one vote per share, and 13,392,000 outstanding B shares, each of
which is entitled to 1/10th of a vote per share. The B shares of FAB are
listed on the Stockholm Stock Exchange. The Forss family and its affiliates
owned all 1,000,000 A shares and 1,665,333 B shares of FAB as of September 17,
1996. Accordingly, the Forss family had a 51.3% voting interest and a 20.9%
economic interest in FAB. Under Swedish law, new issues of FAB securities are
subject to preferential rights of existing stockholders which gives the Forss
family the ability to maintain voting control over FAB in the event of future
stock issuances.
SUBSTANTIAL CAPITAL REQUIREMENTS
The Company makes, and will continue to make, substantial capital
expenditures for the development, exploration, acquisition and production of
oil and natural gas reserves. Historically, the Company has financed these
expenditures primarily with proceeds from bank borrowings, the sale of the
Subordinated Notes, sales of Common Stock and cash generated by operations.
The Company made capital expenditures (including expenditures for acquisitions)
of $144.7 million during 1995 and plans to make capital expenditures, not
including expenditures for acquisitions, of approximately $110 million in 1996.
Management believes that the Company will have sufficient cash provided by
operating activities, borrowings under the Senior Credit Facility and proceeds
from the Offerings to fund planned capital expenditures in 1996. If revenues
decrease as a result of lower oil and gas prices or operating difficulties, or
the Company does not complete each of the Offerings, the Company may be limited
in its ability to expend the capital necessary to undertake or complete its
drilling program in future years. There can be no assurance that additional
debt or equity financing or cash generated by operations will be available to
meet these requirements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
CERTAIN PROVISIONS OF THE SUBORDINATED NOTES
It is currently anticipated that in connection with the Common Stock
Offering, all of the outstanding Subordinated Notes will be converted into
2,343,047 shares of Common Stock, equal to approximately 13% of the outstanding
shares of Common Stock, prior to the Common Stock Offering. In the event the
Common Stock Offering does not occur, the Subordinated Notes may remain
outstanding. In addition, if the Common Stock Offering does not occur, the
Subordinated Notes will be redeemable at a substantial premium in the event of
a change of control. See "Description of Existing Securities and Senior Credit
Facility--Exchangeable Subordinated Notes."
DRILLING RISKS
Drilling involves numerous risks, including the risk that no
commercially productive natural gas or oil reservoirs will be encountered. The
cost of drilling, completing and operating wells is often uncertain, and
drilling operations may be curtailed, delayed or canceled as a result of a
variety of factors, including unexpected drilling conditions, pressure or
irregularities in formations, equipment failures or accidents, adverse weather
conditions and shortages or delays in the delivery of equipment. The Company's
future drilling activities may not be successful and, if unsuccessful, such
failure will have an adverse effect on the Company's future results of
operations and financial condition.
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ACQUISITION RISKS
The Company's rapid growth in recent years has been largely the result
of acquisitions of producing properties. The Company expects to continue to
evaluate and pursue acquisition opportunities which are available on terms
management considers favorable to the Company. The successful acquisition of
producing properties requires an assessment of recoverable reserves, future oil
and gas prices, operating costs, potential environmental and other liabilities
and other factors beyond the Company's control. Such assessments are
necessarily inexact and their accuracy inherently uncertain. In connection
with such an assessment, the Company performs a review of the subject
properties that it believes to be generally consistent with industry practices.
Such a review, however, will not reveal all existing or potential problems nor
will it permit a buyer to become sufficiently familiar with the properties to
fully assess their deficiencies and capabilities. Inspections may not always
be performed on every platform or well, and structural and environmental
problems are not necessarily observable even when an inspection is undertaken.
The Company is generally not entitled to contractual indemnification for
pre-closing liabilities, including environmental liabilities, and generally
acquires interests in the properties on an "as is" basis.
DEPENDENCE ON KEY PERSONNEL
The Company depends to a large extent on the services of its founder,
Stig Wennerstrom, and certain other senior management personnel. The loss of
the services of Mr. Wennerstrom and other senior management personnel could
have a material adverse effect on the Company's operations. The Company has
entered into an employment agreements with Messrs. Wennerstrom, J. Russell
Porter and E. Joseph Grady. The Company believes that its success is also
dependent upon its ability to continue to employ and retain skilled technical
personnel.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
The Company's business is regulated by certain local, state and
federal laws and regulations relating to the exploration for, and the
development, production, marketing, pricing, transportation and storage of, oil
and natural gas. The Company's business is also subject to extensive and
changing environmental and safety laws and regulations governing plugging and
abandonment, the discharge of materials into the environment or otherwise
relating to environmental protection. As with any owner of property, the
Company is also subject to cleanup costs and liability for hazardous materials,
asbestos or any other toxic or hazardous substance that may exist on or under
any of its properties. In addition, the Company is subject to changing and
extensive tax laws, and the effect of newly enacted tax laws cannot be
predicted. The implementation of new, or the modification of existing, laws or
regulations, including amendments to the Oil Pollution Act of 1990 or
regulations which may be promulgated thereunder, could have a material adverse
effect on the Company. See "Business - Abandonment Costs," "- Regulation" and
"- Environmental Matters."
COMPETITION
The oil and gas industry is highly competitive. The Company
encounters competition from other oil and gas companies in all areas of its
operations, including the acquisition of producing properties. The Company's
competitors include major integrated oil and natural gas companies and numerous
independent oil and natural gas companies, individuals and drilling and income
programs. Many of its competitors are large, well-established companies with
substantially larger operating staffs and greater capital resources than the
Company's and which, in many instances, have been engaged in the energy
business for a much longer time than the Company. Such companies may be able
to pay more for productive oil and natural gas properties and exploratory
prospects and to define, evaluate, bid for and purchase a greater number of
properties and prospects than the Company's financial or human resources
permit. The Company's ability to acquire additional properties and to discover
reserves in the future will be dependent upon its ability to evaluate and
select suitable properties and to consummate transactions in a highly
competitive environment.
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OPERATING RISKS OF OIL AND GAS OPERATIONS
The oil and gas business involves certain operating hazards such as
well blowouts, cratering, explosions, uncontrollable flows of oil, natural gas
or well fluids, fires, formations with abnormal pressures, pollution, releases
of toxic gas and other environmental hazards and risks, any of which could
result in substantial losses to the Company. The Company's offshore operations
also are subject to the additional hazards of marine operations, such as severe
weather, capsizing and collision. The availability of a ready market for the
Company's oil and natural gas production also depends on the proximity of
reserves to, and the capacity of, oil and gas gathering systems, pipelines and
trucking or terminal facilities. In addition, the Company may be liable for
environmental damages caused by previous owners of property purchased and
leased by the Company. As a result, substantial liabilities to third parties
or governmental entities may be incurred, the payment of which could reduce or
eliminate the funds available for development, acquisitions or exploration, or
result in the loss of the Company's properties. In accordance with customary
industry practices, the Company maintains insurance against some, but not all,
of such risks and losses. The Company does not carry business interruption
insurance. The occurrence of such an event not fully covered by insurance
could have a material adverse effect on the financial condition and results of
operations of the Company.
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conjunction with the forward-looking statements included in this Prospectus.
All subsequent written and oral forward- looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by such factors.
COMMON STOCK OFFERING
Concurrently with the Notes Offering, the Company and the Selling
Stockholders are offering 1,537,958 shares and 1,962,042 shares, respectively,
to the public. In addition, in the Common Stock Offering the Company has
granted the Underwriters an option to purchase up to 525,000 additional shares
of Common Stock to cover over allotments. The consummation of the Notes
Offering and the Common Stock Offering are not contingent upon each other and
there can be no assurance that the Common Stock Offering will be consummated,
and if so, on what terms.
USE OF PROCEEDS
The net proceeds of the Common Stock Offering are estimated to be
approximately $______ million ($_____ million if the underwriters'
over-allotment option is exercised in full). The net proceeds of the Notes
Offering are estimated to be approximately $____ million, after deducting
underwriting discounts and estimated expenses. The consummation of the Common
Stock Offering and the Notes Offering are not contingent on each other. The
Company intends to apply the net proceeds of the Offerings to repay outstanding
indebtedness under the Senior Credit Facility, which had an outstanding balance
of $158.0 million at September 30, 1996. The Senior Credit Facility had a
weighted average interest rate at September 30, 1996, of approximately 6.9% and
matures on December 31, 1997, at which time the amounts outstanding convert to a
term loan with quarterly principal payments due through June 30, 2001. Amounts
under the Senior Credit Facility have been used to fund the Company's capital
expenditure program for acquisitions of oil and gas properties and for general
working capital purposes. The balance of the net proceeds from the Offerings,
if any, will be used for general corporate purposes. The Company may reborrow
amounts available under the Senior Credit Facility to fund the Company's
on-going capital expenditure program and for general working capital purposes.
The Company will not receive any of the proceeds from the sale of Common Stock
by the Selling Stockholders in the Common Stock Offering. Commitment fees on the
unused portion of the facility are due quarterly at an annual rate of 0.5%.
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<PAGE> 66
Effective April 26, 1996, the Company renegotiated its Senior Credit
Facility to provide for a total commitment of $195 million, with a current
borrowing base of $175 million. At September 30, 1996, the borrowing base was
increased to $195 million. At September 30, 1996, the Company had
approximately $26.2 million available under the renegotiated Senior Credit
Facility.
The Senior Credit Facility requires the Company to comply with various
covenants including, but not limited to, the maintenance of various financial
ratios, and limits the Company's ability to pay dividends on its Common Stock.
DESCRIPTION OF NOTES
The Notes will be issued under an Indenture (the "Indenture") between
the Company and Banker's Trust Company, as trustee (the "Trustee"). A copy of
the Indenture in substantially the same form in which it is to be executed has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(the "Trust Indenture Act"). The Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Indenture
does not purport to be complete and is qualified in its entirety by reference to
the Indenture, including the definitions therein of certain terms used below.
Copies of the proposed form of Indenture are available as set forth under "--
Additional Information." The definitions of certain capitalized terms used in
the following summary are set forth below under "-- Certain Definitions."
GENERAL
The Notes will be general unsecured senior subordinated obligations of
the Company limited to $175,000,000 aggregate principal amount. The Notes will
be issued only in registered form, without coupons, in denominations of $1,000
and integral multiples thereof. Principal of, premium, if any, on and interest
on the Notes will be payable, and the Notes will be transferable, at the office
or agency of the Company in the City of New York maintained for such purposes,
which initially will be the corporate trust office or agency of the Trustee
maintained at Four Albany Street - 4th Floor, Mail Stop 5041, New York, NY
10006. In addition, in the event the Notes do not remain in book-entry form,
interest may be paid, at the option of the Company, by check mailed to the
registered holders of the Notes at their respective addresses as shown on the
Note Register. No service charge will be made for any transfer, exchange or
redemption of the Notes, but the Company or the Trustee may require payment of a
sum sufficient to cover any tax or other governmental charge that may be payable
in connection therewith.
The Notes will be general unsecured obligations of the Company and
will be subordinated in right of payment to Senior Debt. See "--
Subordination" and "Risk Factors -- Subordination of Notes." The Company
currently has no Significant Subsidiaries. Under certain circumstances, any
future Significant Subsidiaries that are also Restricted Subsidiaries
("Guarantors") will be obligated to guarantee the Notes on a senior
subordinated basis. The obligation of the Restricted Subsidiaries under such
guarantees will be general unsecured obligations of such Restricted
Subsidiaries and will be subordinated in right of payment to all obligations of
such Restricted Subsidiaries in respect of Senior Debt. See "-- Subsidiary
Guarantees" and "Risk Factors -- Subordination of Notes."
Under certain circumstances, the Company will be able to designate
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants set forth in the Indenture.
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MATURITY AND INTEREST
The Notes will mature on ____________ , 2006. Interest on the Notes
will accrue at the rate of % per annum and will be payable semi-annually
in arrears on and , commencing on , 1997,
to Holders of record on the and immediately
preceding such interest payment date. Interest on the Notes will accrue from
the most recent date on which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on
the basis of a 360-day year comprised of twelve 30-day months.
REDEMPTION
Optional Redemption. At any time on or after ________, 2001, the
Notes will be subject to redemption at the option of the Company, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus, in
each case, accrued and unpaid interest, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
_______ of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- -----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . %
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
Notwithstanding the foregoing, the Company may at any time prior to
________, 2001, at its option, redeem all or any portion of the Notes at the
Make-Whole Price plus accrued and unpaid interest to the date of redemption.
In addition, during the first 36 months after the date of this Prospectus, the
Company may, on any one or more occasions, redeem up to $61.25 million in
aggregate principal amount of Notes at a redemption price of __________% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the redemption date, with the net proceeds of an offering of common equity of
the Company; provided, that at least $113.75 million in aggregate principal
amount of Notes must remain outstanding immediately after the occurrence of
such redemption; and provided further, that any such redemption shall occur
within 60 days of the date of the closing of such offering of common equity of
the Company.
Selection and Notice. If less than all of the Notes are to be
redeemed at any time, selection of Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed, or, if the Notes
are not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; provided that no Notes of $1,000 or less shall
be redeemed in part. Notices of redemption shall be mailed by first class mail
at least 30 but not more than 60 days before the redemption date to each Holder
of Notes to be redeemed at its registered address. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Note. On and
after the redemption date, interest will cease to accrue on Notes or portions of
them called for redemption.
Mandatory Redemption. Except as set forth below under "--Repurchase
at the Option of Holders," the Company is not required to make mandatory
redemption or sinking fund payments with respect to the Notes.
Offers to Purchase. As described below under "--Repurchase at the
Option of Holders," (a) upon a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase and (b)
when the aggregate amount of Excess Proceeds of certain sales or other
dispositions of assets exceeds $10.0 million, the Company will be required to
make an offer to all Holders of Notes and, to the extent required by the terms
thereof, to all holders or lenders
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of Pari Passu Indebtedness to purchase the maximum principal amount of Notes
and any such Pari Passu Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, thereon. See "--
Repurchase at the Option of Holders -- Change of Control" and "--Repurchase at
the Option of Holders --Asset Sales."
SUBORDINATION
The payment of principal of, premium, if any, and interest, on the
Notes and any other payment obligations of the Company in respect of the Notes
(including any obligation to repurchase the Notes) will be subordinated in
certain circumstances in right of payment, as set forth in the Indenture, to
the prior payment in full of all Senior Debt, whether outstanding on the date
of the Indenture or thereafter incurred. The Notes will rank prior in right of
payment only to other indebtedness of the Company which is, by its terms,
expressly subordinated in right of payment to the Notes. There is currently no
indebtedness of the Company which would constitute such subordinated
indebtedness.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all amounts due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) before the Holders of Notes will be entitled to
receive any payment with respect to the Notes, and until all amounts due with
respect to Senior Debt are paid in full, any distribution to which the Holders
of Notes would be entitled shall be made to the holders of Senior Debt (except
that Holders of Notes may receive securities that are subordinated at least to
the same extent as the Notes to Senior Debt and any securities issued in
exchange for Senior Debt and payments made from the trust described under
"--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the
Notes (except in such subordinated securities or from the trust described under
"-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits, or with the giving of notice or passage of time or both (unless cured
or waived) will permit, holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Senior Debt. Payments on the Notes shall be resumed (a) in the
case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until (i) 360 days have elapsed since the date of
commencement of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice, unless such default has been cured or waived for a period of not less
than 90 consecutive days commencing after the date of delivery of such Payment
Blockage Notice. In no event will a payment blockage period extend beyond 179
days from the date of the receipt by the Trustee of the notice and there must be
a 181 consecutive day period in any 360-day period during which no payment
blockage period is in effect. In the event that, notwithstanding the foregoing,
the Company makes any payment or distribution to the Trustee or the Holder of
any Note prohibited by the subordination provision of the Indenture, then such
payment or distribution will be required to be paid over and delivered forthwith
to the holders (or their representative) of Designated Senior Debt.
If the Company fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions described above, such failure would constitute an Event of
Default under the Indenture and would enable the Holders of the Notes to
accelerate the maturity thereof. See "-- Events of Default and Remedies."
The Indenture will further require that the Company promptly notify
holders of Senior Debt if payment of the Notes is accelerated because of an
Event of Default.
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As a result of the subordination provisions described above, in the
event of a liquidation or insolvency of the Company, Holders of Notes may
recover less ratably than creditors of the Company who are Holders of Senior
Debt, and funds which would be otherwise payable to the Holders of the Notes
will be paid to the holders of the Senior Debt to the extent necessary to pay
the Senior Debt in full, and the Company may be unable to meet its obligations
in full with respect to the Notes.
As of September 30, 1996, on a pro forma basis, after giving effect to
the Offerings and the application of the proceeds therefrom, no Senior Debt
would have been outstanding. See "Use of Proceeds," "Capitalization" and
"Description of Existing Securities and Senior Credit Facility--Senior Credit
Facility." The Indenture will limit, subject to certain financial tests, the
amount of additional Indebtedness, including Senior Debt, that the Company and
any Restricted Subsidiaries can incur. See "--Certain Covenants--Limitations
on Incurrence of Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
Under the circumstances described below, the Company's payment
obligations under the Notes will be jointly and severally guaranteed (the
"Subsidiary Guarantees") by Guarantors. The Subsidiary Guarantee of each
Guarantor will be subordinated (to the same extent and in the same manner as
the Notes are subordinated to the Senior Debt) to the prior payment in full of
all Senior Debt of such Guarantor. The obligations of each Guarantor under its
Subsidiary Guarantee will be limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Conveyances."
The Indenture will provide that no Guarantor may consolidate with or
merge with or into (whether or not such Guarantor is the surviving Person),
another Person, whether or not affiliated with such Guarantor, unless (i)
subject to the provisions of the following paragraph, the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee in
respect of the Notes, the Indenture and such Guarantor's Subsidiary Guarantee;
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists; and (iii) such transaction does not violate any of the
covenants described under the heading "--Certain Covenants."
The Indenture will provide that in the event of a sale or other
disposition of all or substantially all of the assets of any Guarantor to a
third party or an Unrestricted Subsidiary in a transaction that does not
violate any of the covenants in the Indenture, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock
of such Guarantor) or the Person acquiring the property (in the event of a sale
or other disposition of all of the assets of such Guarantor) will be released
from and relieved of any obligations under its Subsidiary Guarantee; provided
that the Net Proceeds of such sale or other disposition are applied in
accordance with the covenant described under the caption "--Repurchase at the
Option of Holders--Asset Sales."
Although the Indenture will not contain any requirement that any
current Subsidiary execute and deliver a Subsidiary Guarantee, the Indenture
will require a future Restricted Subsidiary that is also a Significant
Subsidiary to execute and deliver a Subsidiary Guarantee prior to the guarantee
of other Indebtedness of the Company. In addition, any Guarantor that is
designated an Unrestricted Subsidiary in accordance with the terms of the
Indenture shall be released from and relieved of its obligations under its
Subsidiary Guarantee and any Unrestricted Subsidiary that ceases to be an
Unrestricted Subsidiary will be required to execute a Subsidiary Guarantee in
accordance with the terms of the Indenture.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control. Upon the occurrence of a Change of Control, each
Holder of Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price (the "Change of Control
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Payment") in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, thereon to the date of purchase, which
shall be a business day not more than 70 nor less than 30 days following the
Change of Control (the "Change of Control Payment Date"). Within 30 days
following any Change of Control, the Company will mail a notice to the Trustee
and each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes pursuant to the procedures
required by the Indenture and described in such notice. The Change of Control
Offer is required to remain open for at least 20 Business Days and until the
close of business on the fifth business day prior to the Change of Control
Payment Date.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the aggregate principal amount of Notes or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture will
provide that, prior to complying with the provisions of this covenant, but in
any event within 70 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture will not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
If a Change of Control Offer is made, there can be no assurance that
the Company will have available funds sufficient to pay the Change of Control
Payment for all of the Notes that might be delivered by Noteholders seeking to
accept the Change of Control Offer. If on a Change of Control Payment Date the
Company does not have available funds sufficient to pay the Change of Control
Payment or is prohibited from purchasing the Notes, an Event of Default would
occur under the Indenture. The definition of Change of Control includes a
phrase relating to the sale, lease, transfer, conveyance or other disposition
of "all or substantially all" of the assets of the Company. Although there is
a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company to another
Person or group may be uncertain.
The Company intends to comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, if applicable, in the
event that a Change of Control occurs and the Company is required to purchase
Notes as described above. The existence of a Holder's right to require,
subject to certain conditions, the Company to repurchase its Notes upon a
Change of Control may deter a third party from acquiring the Company in a
transaction that constitutes, or results in, a Change of Control.
Asset Sales. The Indenture will provide that the Company will not,
and will not permit any Restricted Subsidiaries to, engage in an Asset Sale
unless (i) the Company (or such Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value (as determined by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee, which determination
shall be
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conclusive evidence of compliance with this provision) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary in
such Asset Sale, plus all other Asset Sales since the date of the Indenture, on
a cumulative basis, is in the form of cash or Cash Equivalents; provided that
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such assets pursuant to a customary novation agreement
that releases the Company or such Restricted Subsidiary from further liability
and (y) any Liquid Securities received by the Company or any such Restricted
Subsidiary from such transferee that are converted by the Company or such
Restricted Subsidiary into cash within 180 days of closing such Asset Sale,
shall be deemed to be cash for purposes of this provision (to the extent of the
cash received).
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to reduce
indebtedness under the Senior Credit Facility or to the permanent reduction of
other Senior Debt or (b) to acquire a controlling interest in another Oil and
Gas Business to make capital expenditures in respect of the Company's or any
Restricted Subsidiary's Oil and Gas Business, or to purchase long-term assets
that are used or useful in the Company's or any Restricted Subsidiary's Oil and
Gas Business. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph will (after the
expiration of the periods specified in this paragraph) be deemed to constitute
"Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company will be required to make an offer to all Holders of Notes and, to the
extent required by the terms thereof, to all holders or lenders of Pari Passu
Indebtedness (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and any such Pari Passu Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, thereon to
the date of purchase, in accordance with the procedures set forth in the
Indenture or the agreements governing the Pari Passu Indebtedness, as
applicable. To the extent that the aggregate amount of Notes tendered or Pari
Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the
Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof and Pari Passu Indebtedness surrendered by holders or lenders
thereof, collectively, exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and Pari Passu Indebtedness to be purchased on a pro rata
basis, based on the aggregate principal amount (or accredited value, as
applicable) thereof surrendered in such Asset Sale Offer. Upon completion of
such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
The Senior Credit Facility may prohibit the Company from purchasing
any Notes and also provides that certain change of control events with respect
to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions. In the event
a Change of Control or Asset Sale Offer occurs at a time when the Company is
prohibited from purchasing Notes, the Company could seek the consent of its
lenders to the purchase of or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company may remain prohibited from purchasing Notes.
In such case, the Company's failure to purchase tendered Notes would constitute
an Event of Default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
Holders of Notes.
The Company intends to comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder, if applicable, in the
event that an Asset Sale occurs and the Company is required to purchase Notes
as described above.
CERTAIN COVENANTS
In addition to the covenants concerning a Change of Control and Asset
Sales described immediately above, the Indenture will contain, among others,
the covenants described below:
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Limitation on Restricted Payments. The Indenture will provide that
the Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly:
(i) declare or pay any dividend or make any other payment
or distribution on account of the Company's Equity Interests
(including, without limitation, any payment in connection with any
merger or consolidation involving the Company) or to the direct or
indirect holders of the Company's Equity Interests in their capacity
as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for
value any Equity Interests of the Company or any direct or indirect
parent or other Affiliate of the Company that is not a Subsidiary of
the Company;
(iii) make any principal payment on, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that
is pari passu with or subordinated to the Notes (other than the
Notes), except at final maturity or in accordance with the mandatory
redemption or repayment provisions set forth in the original
documentation governing such Indebtedness; or
(iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described below
under the caption "--Limitations on Incurrence of Indebtedness and
Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate
of all other Restricted Payments made by the Company and its
Subsidiaries after the date of the Indenture (including Restricted
Payments permitted by clauses (1), (2) and (4) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the
date of the Indenture to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale since the date of the Indenture of Equity
Interests of the Company or of debt securities of the Company that
have been converted into or exchanged for such Equity Interests (other
than Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus
(iii) to the extent not otherwise included in Consolidated Net Income,
the net reduction in Investments in Unrestricted Subsidiaries
resulting from dividends, repayments of loans or advances, or other
transfers of assets (with such assets being valued at the lesser of
their fair market value and the Unrestricted Subsidiary's net book
value thereof), in each case to the Company or a Restricted Subsidiary
after the date of the Indenture from any Unrestricted Subsidiary or
from the redesignation of an Unrestricted Subsidiary as a Restricted
Subsidiary.
The foregoing provisions will not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (2) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company)
of other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds
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that are utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(3) the defeasance, redemption or repurchase of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Debt or the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock); provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (4) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the
Company or any Subsidiary of the Company held by any of the Company's (or any
of its Subsidiaries') management pursuant to any stock option agreement in
effect as of the date of the Indenture; provided, that the aggregate price paid
to all Persons other than Stig Wennerstrom under his employment agreement as in
effect on the date of the Indenture for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $5 million in any
twelve-month period (plus the aggregate cash proceeds received by the Company
during such twelve-month period from any issuance of Equity Interests by the
Company to members of management of the Company and its Subsidiaries); and
provided further, that no Default or Event of Default shall have occurred and
be continuing immediately after such transaction.
The amount of all Restricted Payments (other than cash) shall be the
fair market value (as determined by a resolution of the Board of Directors set
forth in an Officers' Certificate delivered to the Trustee, which determination
shall be conclusive evidence of compliance with this provision) on the date of
the Restricted Payment of the asset(s) proposed to be transferred by the
Company or the applicable Restricted Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than five days after the date of making
any Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under clause (c) of the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the time
of such designation, (y) the fair market value of such Investments at the time
of such designation and (z) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
Limitations on Incurrence of Indebtedness and Issuance of Preferred
Stock. The Indenture will provide that the Company will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Subsidiaries to issue any
shares of preferred stock; provided, however, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock
if:
(i) the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.5 to 1, determined on a pro
forma basis(including a pro forma application of the net proceeds
therefrom) as set forth in the definition of Fixed Charge Coverage
Ratio; and
(ii) no Default or Event of Default shall have occurred
and be continuing at the time such additional Indebtedness is incurred
or such Disqualified Stock is issued or would occur as a consequence
of the incurrence of the additional Indebtedness or the issuance of
the Disqualified Stock.
Notwithstanding the foregoing, the Indenture will not prohibit any of
the following (collectively, "Permitted Indebtedness"): (a) the Indebtedness
evidenced by the Notes and any Guarantees; (b) the incurrence by the Company
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of Indebtedness and letters of credit pursuant to the Senior Credit Facility
(with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder) in
an aggregate amount not to exceed the amount of the Borrowing Base then
applicable under the Senior Credit Facility; (c) in the incurrence by the
Company of the Existing Indebtedness; (d) Indebtedness obligations in respect
of Currency Hedge Obligations, and obligations in respect of Interest Rate
Protection Obligations, but only to the extent that the stated aggregate
notional amounts of such obligations do not exceed 105% of the aggregate
principal amount of the Indebtedness covered by such Interest Rate Protection
Obligations; (e) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness; (f) the incurrence by the
Company or any of its Restricted Subsidiaries of intercompany Indebtedness
between or among the Company and any of its Wholly Owned Restricted
Subsidiaries; (g) Indebtedness under Oil and Gas Hedging Contracts, provided
that such contracts were entered into in the ordinary course of business for
the purpose of limiting risks that arise in the ordinary course of business of
the Company and its Subsidiaries; (h) the incurrence by the Company of
Indebtedness not otherwise permitted to be incurred pursuant to this paragraph,
provided that the aggregate principal amount (or accredited value, as
applicable) of all Indebtedness incurred pursuant to this clause (h), together
with all Permitted Refinancing Debt incurred pursuant to clause (e) of this
paragraph in respect of Indebtedness previously incurred pursuant to this
clause (h), does not exceed $25 million at any one time outstanding; (i)
accounts payable or other obligations of the Company or any Subsidiary to trade
creditors created or assumed by the Company or such Subsidiary in the ordinary
course of business in connection with the obtaining of goods or services; (j)
Indebtedness consisting of obligations in respect of purchase price
adjustments, guarantees or indemnities in connection with the acquisition or
disposition of assets; (k) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt, and (l) production imbalances arising in the
ordinary course of business.
Limitation on Other Senior Subordinated Debt. The Indenture will
provide that (i) the Company will not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior
in right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes and (ii) no Guarantor will directly or indirectly incur,
create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any
Guarantees issued in respect of Senior Debt and senior in any respect in right
of payment to the Subsidiary Guarantees, provided, however, that the foregoing
limitations will not apply to distinctions between categories of Indebtedness
that exist by reason of any Liens arising or created in respect of some but not
all such Indebtedness.
Limitation on Liens. The Indenture will provide that the Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien securing Indebtedness of any kind (other than
Permitted Liens) upon any of its property or assets, now owned or hereafter
acquired, unless all payments under the Notes are secured on an equal and
ratable basis with the obligations so secured until such time as such
obligations are no longer secured by a Lien.
Sale and Leaseback Transactions. The Indenture will provide that the
Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company may
enter into a sale and leaseback transaction if (i) the Company could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the test set forth in the first
paragraph of the covenant described above under the caption "--Incurrence of
Additional Indebtedness and Issuance of Preferred Stock" and (b) incurred a
Lien to secure such Indebtedness pursuant to the covenant described above under
the caption "--Liens," (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by a resolution the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee, which determination shall be conclusive
evidence of compliance with this provision) of the property that is the subject
of such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company applies the net
proceeds of such transaction in compliance with, the covenant described above
under the caption "--Repurchase at the Option of Holders--Asset Sales."
Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture will provide that the Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary
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to (i)(x) pay dividends or make any other distributions to the Company or any
of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to
any other interest or participation in, or measured by, its profits, or (y) pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries,
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries or (iii) transfer any of its properties or assets to the Company
or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reason of (a) the Senior Credit Facility as
in effect as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof or any other Credit Facility, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements, refinancings or other Credit Facilities are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the Senior Credit Facility as in effect on the date of the
Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except, in the case of Indebtedness, to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred, (e) by reason of
customary non-assignment provisions in leases, and customary provisions in
other agreements that restrict assignment of such agreements or rights
thereunder, (f) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale, (g)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, or (h) Permitted Refinancing Debt, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Debt are no more restrictive than those contained in the agreements
governing the Indebtedness being refinanced.
Merger, Consolidation, or Sale of Assets. The Indenture will provide
that the Company may not consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets,
in one or more related transactions, to another Person, and the Company may not
permit any of its Restricted Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions would, in
the aggregate, result in a sale, assignment, transfer, lease, conveyance, or
other disposition of all or substantially all of the properties or assets of
the Company and its Restricted Subsidiaries, taken as a whole, to another
Person, in either case unless: (i) the Company is the surviving corporation or
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Company under the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and after giving effect
to such transaction or series of transactions on a pro forma basis (and
treating any Indebtedness not previously an obligation of the Company or any of
its Restricted Subsidiaries in connection with or as a result of such
transaction as having been incurred at the time of such transaction), no
Default or Event of Default shall have occurred and be continuing; and (iv)
except in the case of a consolidation or merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Total Assets immediately after the
transaction equal to or greater than the Total Assets of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Coverage Ratio Test set forth in the first paragraph of the covenant
described above under the caption "--Limitations on Incurrence of Indebtedness
and Issuance of Preferred Stock."
Transactions with Affiliates. The Indenture will provide that the
Company will not, and will not permit any of its Subsidiaries to, make any
payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any of its Affiliates (each of the
foregoing, an "Affiliate Transaction"),
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unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
Person, (ii) the Company delivers to the Trustee with respect to any Affiliate
Transaction or series of related Affiliated Transactions involving aggregate
consideration in excess of $1 million an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (i) above and (iii) the Company
delivers to the Trustee with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of $5
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
members of the Board of Directors who are disinterested with respect to such
Affiliate Transaction, which resolution shall be conclusive evidence of
compliance with this provision, provided, that the following shall not be deemed
Affiliate Transactions: (1) transactions contemplated by any employment
agreement or other employee or director stock option or other compensation plan
or arrangement entered into by the Company or any of its Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Subsidiary, including those described in this Prospectus under the
caption "Risk Factors -- Dependence on Key Personnel," (2) transactions between
the Company and/or its Subsidiaries, (3) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company or
any of its Subsidiaries, (4) indemnities of officers, directors and employees of
the Company or any Subsidiary pursuant to bylaw or statutory provisions, and (5)
Restricted Payments and Permitted Investments that are permitted by the
provisions of the Indenture described above under the caption "-- Restricted
Payments."
Business Activities. The Company will not, and will not permit any
Restricted Subsidiary to, engage in any business other than the Oil and Gas
Business.
Reports. The Company and any Guarantors will file with the
Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that
the Company and the Guarantors would be required to file if the Company were
subject to Section 13 or 15 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in each case on or before the dates on which such reports
and other documents would have been required to have been filed with the
Commission if the Company had been subject to Section 13 or 15 of the Exchange
Act. The Company will also be required (a) to file with the Trustee (with
exhibits), and provide to each Holder of Notes (without exhibits), without cost
to such Holder, copies of such reports and documents within 15 days after the
date on which the Company files such reports and documents with the Commission
or the date on which the Company would be required to file such reports and
documents if the Company were so required and (b) if filing such reports and
documents with the Commission is not accepted by the Commission or is
prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents (including any exhibits thereto) to any Holder of
Notes promptly upon written request.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on the Notes, whether or not prohibited by the subordination provisions of the
Indenture; (ii) default in payment when due of the principal of or premium, if
any, on the Notes, whether or not prohibited by the subordination provisions of
the Indenture; (iii) failure by the Company to comply with the provisions
described under the captions "--Repurchase at the Option of Holders--Change of
Control," "--Repurchase at the Option of Holders--Asset Sales," "--Certain
Covenants--Restricted Payments," "--Certain Covenants--Limitation on Incurrence
of Indebtedness and Issuance of Preferred Stock" or "--Certain
Covenants--Merger, Consolidation, or Sale of Assets"; (iv) failure by the
Company for 60 days after notice from the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding to comply with
any of its other agreements in the Indenture or the Notes; (v) except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any such Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; (vi) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment
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of which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there is then existing a Payment Default or the
maturity of which has been so accelerated, aggregates in excess of $5 million ,
provided that if any such default is cured or waived or any such acceleration
rescinded, or such Indebtedness is repaid, within a period of 10 days from the
continuation of such default beyond the applicable grace period or the
occurrence of such acceleration, as the case may be, such Event of Default
under the Indenture and any consequential acceleration of the Notes shall be
automatically rescinded, so long as such rescission does not conflict with any
judgment or decree; (vii) failure by the Company or any of its Restricted
Subsidiaries to pay final, non-appealable judgments aggregating in excess of $5
million, which judgments are not paid, discharged or stayed for a period of 60
days; and (viii) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries that constitute a Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute
a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Restricted
Subsidiary that constitutes a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to
have the obligations of the Company released with respect to certain covenants
that are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default and
Remedies" will no longer constitute an Event of Default with respect to the
Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee and opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit; (v) such Legal Defeasance or Covenant
Defeasance will not result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the Indenture) to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;(vi) the Company must have delivered to the
Trustee an opinion of counsel to the effect that after the 91st day following
the deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally; (vii) the Company must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, which, taken
together, state that all conditions precedent provided for relating to the
Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or
exchange any Note selected for redemption. Also the Company is not required to
transfer or exchange any Note for a period of 15 days before a selection of
Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it
for all purposes.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further
effect (except as to surviving rights or registration of transfer or exchange
of the Notes, as expressly provided for in the Indenture) as to all outstanding
Notes when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable or will become due and payable at
their Stated Maturity within one year, or are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the serving
of notice of redemption by the Trustee in the name, and at the expense, of the
Company, and the Company has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on the Notes not
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theretofore delivered to the Trustee for cancellation, for principal of (and
premium, if any, on) and interest on the Notes to the date of deposit (in the
case of Notes which have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be, together with instructions from the
Company irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be, (ii) the Company has
paid all other sums payable under the Indenture by the Company; and (iii) the
Company has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel satisfactory to the Trustee, which, taken together, state that all
conditions precedent under the Indenture relating to the satisfaction and
discharge of the Indenture have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Notes held by a non-consenting Holder): (i)
reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of interest on any
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders") or (viii) make any change in the
foregoing amendment and waiver provisions. Without the consent of at least 66
2/3% in aggregate principal amount of the Notes then outstanding (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes), no waiver or amendment to the Indenture may make any change
in the provisions described above under the captions "--Repurchase at the
Option of Holders--Change of Control" and "--Repurchase at the Option of
Holders--Assets Sales" that adversely affect the rights of any Holder of Notes.
In addition, any amendment to the provisions of Article 10 of the Indenture
(which relate to subordination) will require the consent of the Holders of at
least 66 2/3% in aggregate principal amount of the Notes then outstanding if
such amendment would adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of Notes in
the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any conflicting interest
it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
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The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees provide that
they will be governed by the laws of the State of New York.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Forcenergy Inc, 2730 SW 3rd Avenue, Suite 800,
Miami, Florida 33129-2237, Attention: Corporate Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The Notes to be sold as set forth herein will be issued in the form of
a fully registered Global Certificate (the "Global Certificate"). The Global
Certificate will be deposited on the date of the closing of the sale of the
Notes offered hereby (the "Closing Date") with, or on behalf of, The Depository
Trust Company, New York, New York (the "Depositary") and registered in the name
of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Certificate Holder").
Except as set forth below, the Global Certificate may be transferred,
in whole and not in part, only to another nominee of the Depositary or to a
successor of the Depositary or its nominee.
The Depositary has advised the Company and the Underwriters as
follows: It is a limited-purpose trust company which was created to hold
securities for its participating organizations (the "Participants") and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("indirect participants"). Persons who are not
Participants may beneficially own securities held by the Depositary only
through Participants or indirect participants.
The Depositary has also advised that pursuant to procedures
established by it (i) upon the issuance by the Company of the Notes, the
Depositary will credit the accounts of Participants designated by the
Underwriters with the principal amount of the Notes purchased by the
Underwriters, and (ii) ownership of beneficial interests in the Global
Certificate will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the Depositary (with respect to
Participants' interests), the Participants and the indirect participants. The
laws of some states require that certain persons take physical delivery in
definitive form of securities which they own. Consequently, the ability to
transfer beneficial interests in the Global Certificate is limited to such
extent.
All payments on the Global Certificate registered in the name of the
Depositary's nominee will be made by the Company through the Paying Agent to
the Depositary's nominee as the registered owner of the Global Certificate.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes are registered as the owners of such Notes for
the purpose of receiving payments of principal and interest on such Notes and
for all other purposes whatsoever. Therefore, neither the Company, the Trustee
nor the Paying Agent has any direct responsibility or liability for the payment
of principal or interest on the Notes to owners of beneficial interests in the
Global Certificate. The Depositary has advised the Company and the Trustee
that its present practice is, upon receipt
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of any payment of principal or interest, to credit immediately the accounts of
the Participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Certificate
as shown on the records of the Depositary. Payments by Participants and
indirect participants to owners of beneficial interests in the Global
Certificate will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name" and will be the responsibility of such
Participants or indirect participants.
As long as the Notes are represented by a Global Certificate, the
Depositary's nominee will be the holder of the Notes and therefore will be the
only entity that can exercise a right to repurchase the Notes. See "Certain
Covenants--Repurchase at the Option of Holders." Notice by Participants or
indirect participants or by owners of beneficial interests in a Global
Certificate held through such Participants or indirect participants of the
exercise of the option to elect repurchase of beneficial interests in Notes
represented by a Global Certificate must be transmitted to the Depositary in
accordance with its procedures on a form required by the Depositary and
provided to Participants. In order to ensure that the Depositary's nominee
will timely exercise a right to repurchase with respect to a particular Note,
the beneficial owner of such Note must instruct the broker or other Participant
or indirect participant through which it holds an interest in such Note to
notify the Depositary of its desire to exercise a right to repurchase.
Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the
broker or other Participant or indirect participant through which it holds an
interest in a Note in order to ascertain the cut-off time by which such an
instruction must be given in order for timely notice to be delivered to the
Depositary. The Company will not be liable for any delay in delivery to the
Paying Agent of notices of the exercise of any option to elect repurchase.
The Company will issue Notes in definitive form in exchange for the
Global Certificate if, and only if, either (1) the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is not
appointed by the Company within 90 days, (2) an Event of Default has occurred
and is continuing and the Notes registrar has received a request from the
Depositary to issue Notes in definitive form in lieu of all or a portion of the
Global Certificate (in which case the Company shall deliver Notes in definitive
form within 30 days of such request), or (3) the Company determines not to have
the Notes represented by a Global Certificate. In any instance, an owner of a
beneficial interest in the Global Certificate will be entitled to have Notes
equal in principal amount to such beneficial interest registered in its name
and will be entitled to physical delivery of such Notes in definitive form.
Notes so issued in definitive form will be issued in denominations of $1,000
and integral multiples thereof and will be issued in registered form only,
without coupons.
So long as the Global Certificate Holder is the registered owner of
the Global Certificate, the Global Certificate Holder will be considered the
sole Holder under the Indenture of any Notes evidenced by the Global
Certificate. Beneficial owners of Notes evidenced by the Global Certificate
will not be considered the owners or Holders thereof under the Indenture for
any purpose, including with respect to the giving of any directions,
instructions or approvals to the Trustee thereunder. Neither the Company nor
the Trustee will have any responsibility or liability for any aspect of the
records of the Depositary or for maintaining, supervising or reviewing any
records of the Depositary relating to the Notes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
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"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition (but excluding the creation of a Lien, pledge or security interest)
of any assets including, without limitation, by way of merger or consolidation
or a sale and leaseback transaction (provided that the sale, lease, conveyance
or other disposition of all or substantially all of the assets of the Company
and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture that are described above under the caption
"--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants --Merger,
Consolidation, or Sale of Assets" and not by the provisions described above
under "--Repurchase at the Option of Holders --Asset Sales"), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Subsidiaries (including the sale by a
Restricted Subsidiary of Equity Interests in an Unrestricted Subsidiary), in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$5 million or (b) for net proceeds in excess of $5 million. Notwithstanding
the foregoing, the following shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Subsidiary of the Company
or by a Wholly Owned Subsidiary of the Company to the Company or to another
Wholly Owned Subsidiary of the Company, (ii) an issuance of Equity Interests by
a Wholly Owned Subsidiary of the Company to the Company or to another Wholly
Owned Subsidiary of the Company, (iii) a Restricted Payment or Permitted
Investment that is permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments," (iv) the sale or transfer (whether
or not in the ordinary course of business) of oil and gas properties or direct
or indirect interests in real property, provided that at the time of such sale
or transfer such properties do not have associated with them any proved
reserves, (v) the abandonment, farm-out, lease or sublease of developed or
undeveloped oil and gas properties in the ordinary course of business, (vi) the
trade or exchange by the Company or any Restricted Subsidiary of the Company of
any oil and gas property owned or held by the Company or such Subsidiary for
any oil and gas property owned or held by another Person provided that (x) the
fair market value of the properties traded or exchanged by the Company or such
Subsidiary (including any cash or Cash Equivalents, not to exceed 15% of such
fair market value, to be delivered by the Company or such Subsidiary) is
reasonably equivalent to the fair market value of the properties (together with
any cash or Cash Equivalents, not to exceed 15% of such fair market value) to
be received by the Company or such Subsidiary as determined in good faith by
(i) any officer of the Company if such fair market value is less than $5
million and (ii) the Board of Directors of the Company as certified by a
certified resolution delivered to the Trustee if such fair market value is
equal to or in excess of $5 million; and (y) such exchange is approved by a
majority of the Disinterested Directors of the Company; or (vii) the sale or
transfer of hydrocarbons or other mineral products or surplus or obsolete
equipment in the ordinary course of business.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including
any period for which such lease has been extended or may, at the option of the
lessor, be extended). As used in the preceding sentence, the "net rental
payment" under any lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease which is terminable by the lessee
upon payment of a penalty, such net rental payment shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Average Life" means, with respect to any Indebtedness, as of the date
of determination the quotient obtained by dividing (i) the product of (x) the
number of years (or any portion thereof) from such date to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund or mandatory redemption
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payment requirements) of such Indebtedness multiplied by (y) the amount of each
such principal payment by (ii) the sum of all such principal payments.
"Borrowing Base" means, as of any date, the aggregate amount of
borrowing availability as of such date under the Senior Credit Facility that
determines availability on the basis of a borrowing base or other asset-based
calculation.
"Capital Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP, and, for the
purpose of the Indenture, the amount of such obligation at any date shall be
the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
corporation or similar entity, any membership or other similar interests
therein and (v) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any lender party to the
Senior Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having a rating of at
least P-1 from Moody's Investors Service, Inc. (or its successors) and a rating
of at least A-1 from Standard & Poor's Ratings Group (or its successors), (vi)
deposits available for withdrawal on demand with any commercial bank not
meeting the qualifications specified in clause (iii) above, provided all such
deposits do not exceed $5 million in the aggregate at any one time and (vii)
investments in money market or other mutual funds substantially all of whose
assets comprise securities of the types described in clauses (ii) through (v)
above.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any purchase, sale, acquisition,
disposition, merger or consolidation) the result of which is that any "person"
(as defined above) becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of
more than 50% of the aggregate voting power of all classes of Capital Stock of
the Company having the right to elect directors under ordinary circumstances,
provided that the sale of Equity Interests in the Company to a Person or Persons
acting as underwriter(s) in connection with a firm commitment underwriting shall
not constitute a Change of Control or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.
"Commission" means the Securities and Exchange Commission.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (together with any related provision for taxes), to the
extent such losses were deducted in computing such Consolidated Net Income,
plus (ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest
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payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Interest Rate
Hedging Agreements), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, depletion and
amortization expenses (including amortization of goodwill and other intangibles
but excluding amortization of prepaid cash expenses that were paid in a prior
period) for such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, depletion and amortization expenses were
deducted in computing such Consolidated Net Income, plus (v) other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of
a prepaid cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such other non-cash
charges were deducted in computing such Consolidated Net Income, in each case,
on a consolidated basis and determined in accordance with GAAP, decreased (to
the extent included in determining Consolidated Net Income) by the sum of (x)
the amount of deferred revenues that are amortized during such period and are
attributable to reserves that are subject to Volumetric Production Payments and
(y) amounts recorded in accordance with GAAP as repayments of principal and
interest pursuant to Dollar-Denominated Production Payments. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation, depletion and amortization and other non-cash charges and
expenses of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in same proportion) that the Net Income of such Restricted Subsidiary was
included in calculating the Consolidated Net Income of such Person and only if
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded and (v) the Net Income of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, production payments, receivables
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time. Indebtedness under Credit Facilities outstanding on the date on
which Notes are first issued and authenticated under the Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clause (b) of the definition of Permitted Indebtedness.
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"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) the Senior Credit Facility and (ii)
any other Senior Debt permitted under the Indenture the principal amount of
which is $5 million or more and that has been designated by the Company as
"Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature or which is
exchangeable or convertible into debt securities of the Company or any
Restricted Subsidiary, except to the extent that such exchange or conversion
rights cannot be exercised prior to the Maturity Date.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of the Indenture, until such Indebtedness
is repaid.
"Fixed Charges" means, with respect to any Person for any period, the
sum of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Interest Rate
Hedging Agreements but excluding any interest accrued but not paid on any of
the Company's 7% Exchangeable Subordinated Notes that have been exchanged for
the Company's common stock), (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
(iii) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or any of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or any of its Restricted Subsidiaries (whether or not
such Guarantee or Lien is called upon) and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person or
any of its Restricted Subsidiaries, to the extent such preferred stock is owned
by Persons other than such Person or its Restricted Subsidiaries, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation
Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, Guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock, as if the same
had occurred at the
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beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the referent Person or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date (including, without
limitation, any acquisition to occur on the Calculation Date) shall be deemed
to have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, (ii) the net proceeds of Indebtedness incurred or
Disqualified Stock issued by the referent Person pursuant to the first
paragraph of the covenant described under the caption " --Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" during
the four-quarter reference period or subsequent to such reference period and on
or prior to the Calculation Date shall be deemed to have been received by the
Company on the first day of the four-quarter reference period and applied to
its intended use on such date, (iii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iv) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means any Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and,
in each case, their respective successors and assigns.
"Indebtedness" means, with respect to any Person, without duplication,
(a) any indebtedness of such Person, whether or not contingent, (i) in respect
of borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) evidenced by letters of credit (or reimbursement agreements
in respect thereof) or banker's acceptances, (iv) representing Capital Lease
Obligations, (v) representing the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable, (vi) representing any obligations in respect of
Currency Hedge Obligations, Interest Rate Hedging Agreements or Oil and Gas
Hedging Contracts, (vii) in respect of obligations to pay rent or other amounts
with respect to a sale and leaseback transaction to which such Person is a
party, and (viii) in respect of any Production Payment, (b) all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person), (c) obligations of such Person in
respect of production imbalances and (d) to the extent not otherwise included
in the foregoing, the Guarantee by such Person of any Indebtedness of any other
Person, provided that the indebtedness described in clauses (a)(i), (ii), (iv)
and (v) shall be included in this definition of Indebtedness only if, and to
the extent that, the indebtedness described in such clauses would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP.
"Interest Rate Hedging Agreements" means, with respect to any Person,
the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other
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securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP; provided that
the following shall not constitute Investments: (i) an acquisition of assets,
Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company, (ii) Interest Rate
Hedging Agreements entered into in accordance with the limitations set forth in
clause (d) of the second paragraph of the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock", (iii) Oil and Gas Hedging Agreements entered into in accordance with
the limitations set forth in clause (h) of the second paragraph of the covenant
described under the caption "--Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock," (iv) Currency Hedge Obligations, (v)
extensions of trade credit or other advances to customers on commercially
reasonable terms in accordance with normal trade practices or otherwise in the
ordinary course of business and (vi) endorsements of negotiable instruments and
documents in the ordinary course of business. If the Company or any Subsidiary
of the Company sells or otherwise disposes of any Equity Interests of any
direct or indirect Restricted Subsidiary of the Company such that, after giving
effect to any such sale or disposition, such Person is no longer a Subsidiary
of the Company, the Company shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction
other than a precautionary financing statement respecting a lease not intended
as a security agreement).
"Liquid Securities" means securities (i) of an issuer that is not an
Affiliate of the Company and (ii) that are publicly traded on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
provided, that securities meeting the requirements of clauses (i) and (ii)
above shall be treated as Liquid Securities from the date of receipt thereof
until and only until the earlier of (x) the date on which such securities are
sold or exchanged for cash or Cash Equivalents and (y) 180 days following the
date of the closing of the Asset Sale in connection with which such Liquid
Securities were received. In the event such securities are not sold or
exchanged for cash or Cash Equivalents within such 180-day period, for purposes
of determining whether the transaction pursuant to which the Company or a
Restricted Subsidiary received the securities was in compliance with the
covenant described under the caption "--Repurchase at the Option of Holders
- --Asset Sales," such securities shall be deemed not to have been Liquid
Securities at any time.
"Make-Whole Amount" with respect to a Note means an amount equal to
the excess, if any, of (i) the present value of the remaining interest premium
and principal payments due on such Note as if such Note were redeemed on
_________, 2001, computed using a discount rate equal to the Treasury Rate plus
50 basis points, over (ii) the outstanding principal amount of such Note.
"Treasury Rate" is defined as the yield to maturity at the time of the
computation of United States Treasury securities with a constant maturity (as
compiled by and published in the most recent Federal Reserve Statistical
Release H.15(519), which has become publicly available at least two business
days prior to the date of the redemption notice or, if such Statistical Release
is no longer published, any publicly available source of similar market date)
most nearly equal to the then remaining maturity of the Notes assuming
redemption of the Notes on ________, 2001; provided, however, that if the
Make-Whole Average Life of such Note is not equal to the constant maturity of
the United States Treasury security for which a weekly average yield is given,
the Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given, except that if the Make-
Whole Average Life of such Notes is less than one year, the weekly average
yield on actually traded United States Treasury securities adjusted to a
constant maturity of one year shall be used. "Make-Whole Average Life" means
the number of years (calculated to the nearest one-twelfth) between the date of
redemption and _________, 2001.
"Make-Whole Price" with respect to a Note means the greater of (i) the
sum of the outstanding principal amount and Make-Whole Amount of such Note, and
(ii) the redemption price of such Note on ________, 2001, determined pursuant
to the Indenture (_____% of the principal amount).
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"Maturity Date" means _________, 2006.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of Liquid Securities or any other any non-cash consideration
received in any Asset Sale, but excluding cash amounts placed in escrow, until
such amounts are released to the Company), net of the direct costs relating to
such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under any Credit Facility) secured by a Lien on the
asset or assets that were the subject of such Asset Sale, amounts required to
be paid to any Person (other than the Company or any Restricted Subsidiary)
owning a beneficial interest in the asset or assets that were the subject of
such Asset Sale, and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP and any reserve
established for future liabilities.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Oil and Gas Business" means any business relating to (i) the
acquisition, exploration, development, operation and disposition of interests
in oil, gas and other hydrocarbon properties and other minerals and products
produced in association therewith, (ii) the gathering, marketing, treating,
processing, storage, selling and transporting of any production from such
interests or properties and minerals and products produced in association
therewith, or (iii) any activity that is ancillary to or necessary or
appropriate for the activities described in clauses (i) and (ii) of this
definition.
"Oil and Gas Hedging Contracts" means any oil and gas purchase or
hedging agreement, and other agreement or arrangement, in each case, that is
designed to provide protection against oil and gas price fluctuations.
"Pari Passu Indebtedness" means Indebtedness that ranks pari passu in
right of payment to the Notes.
"Permitted Indebtedness" has the meaning given in the covenant
described under the caption "--Certain Covenants --Incurrence of Indebtedness
and Issuance of Preferred Stock."
"Permitted Investments" means (a) any Investment in the Company or in
a Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in
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value), when taken together with all other Investments made pursuant to this
clause (c) that are at the time outstanding, not to exceed the greater of $10
million; (d) shares of Capital Stock received in connection with any good faith
settlement of a bankruptcy proceeding involving a trade creditor; and (e) entry
into operating agreements, joint ventures, partnership agreements, working
interests, royalty interests, mineral leases, processing agreements, farm-out
agreements, contracts for the sale, transportation or exchange of oil and
natural gas, unitization agreements, pooling arrangements, area of mutual
interest agreements, production sharing agreements or other similar or
customary agreements, transactions, properties, interests or arrangements, and
Investments and expenditures in connection therewith or pursuant thereto, in
each case made or entered into in the ordinary course of the Oil and Gas
Business, excluding, however, Investments in corporations.
"Permitted Liens" means (i) Any Liens, currently outstanding or future,
securing Indebtedness of a Subsidiary or Senior Debt that is outstanding on the
date of issuance of the Notes or that is permitted by the terms of the Indenture
to be incurred; (ii) Liens securing Attributable Debt with respect to sale and
leaseback transactions permitted by the terms of the Indenture; (iii) Liens in
favor of the Company; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company and Liens on property or
assets of a Subsidiary existing at the time it became a Subsidiary, provided
that such Liens were in existence prior to the contemplation of the acquisition
and do not extend to any assets other than the acquired property; (v) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance or other kinds of social security,
or to secure the payment or performance of tenders, statutory or regulatory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business (including lessee or
operator obligations under statutes, governmental regulations or instruments
related to the ownership, exploration and production of oil, gas and minerals on
state or federal lands or waters); (vi) Liens existing on the date of the
Indenture; (vii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (viii) statutory liens of
landlords, mechanics, suppliers, vendors, warehousemen, carriers or other like
Liens arising in the ordinary course of business; (ix) judgment Liens not giving
rise to an Event of Default so long as any appropriate legal proceeding that may
have been duly initiated for the review of such judgment shall not have been
finally terminated or the period within which such proceeding may be initiated
shall not have expired; (x) Liens on, or related to, properties or assets to
secure all or part or the costs incurred in the ordinary course of the Oil and
Gas Business for the acquisition, exploration, drilling, development, or
operation thereof; (xi) Liens on pipeline or pipeline facilities that arise
under operation of law; (xii) Liens arising under operating agreements, joint
venture agreements, partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil or natural gas, unitization and pooling declarations and agreements, area
of mutual interest agreements and other agreements that are customary in the Oil
and Gas Business; (xiii) Liens reserved in oil and gas mineral leases for bonus
or rental payments and for compliance with the terms of such leases; (xiv) Liens
securing the Notes; (xv) Liens securing obligations in respect of Currency Hedge
Obligations, Interest Rate Protection Obligations and Oil and Gas Hedging
Contracts, but only to the extent that the same constitute Permitted
Indebtedness; (xvi) Liens on the Capital Stock of Unrestricted Subsidiaries; and
(xvii) Liens not otherwise permitted by clauses (i) through (xv) and that are
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed $5 million at any one
time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted
Subsidiaries;provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date on or later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained
A-65
<PAGE> 90
in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is
incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Production Payments" means Dollar-Denominated Production Payments and
Volumetric Production Payments, collectively.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Senior Credit Facility" means that certain Third Restatement of
Credit Agreement, dated as of April 26, 1996, by and among the Company and
Internationale Nederlanden (U.S.) Capital Corporation, as agent and as a
lender, and certain other financial institutions, as lenders, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, restated,
modified, renewed, refunded, replaced or refinanced, in whole or in part, from
time to time.
"Senior Debt" means (i) Indebtedness of the Company or any Subsidiary
of the Company under or in respect of any Credit Facility and (ii) any other
Indebtedness, including Acquired Senior Debt, permitted to be incurred by the
Company or any Subsidiary under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing sentence, Senior Debt
will not include (w) any liability for federal, state, local or other taxes owed
or owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness
that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Total Assets" means, with respect to any Person, the total
consolidated assets of such Person and its Restricted Subsidiaries, as shown on
the most recent balance sheet of such Person.
"Unrestricted Subsidiary" means any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, and any Subsidiary of an Unrestricted Subsidiary; but only to the
extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse
Debt; (b) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the terms
of any such agreement, contract, arrangement or understanding are no less
favorable to the Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company; (c) is
a Person with respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; (d) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries; and (e) has at least one director on its board of
directors that is not a director or executive officer of the Company
A-66
<PAGE> 91
or any of its Restricted Subsidiaries and has at least one executive officer
that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries, provided, however, that the death or resignation of
any such director or executive officer shall not cause a Subsidiary that would
otherwise be an Unrestricted Subsidiary to be deemed to be a Restricted
Subsidiary unless ten days have elapsed in which the Company has failed to
appoint or elect a successor to replace such director or executive officer who
satisfies the criteria set forth in this clause (e). Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
the Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Certain Covenants --Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company
of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," and (ii) no Default or Event of
Default would be in existence following such designation.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person to the extent (i) all of the outstanding Capital
Stock or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned, directly or indirectly, by such Person or
(ii) such Restricted Subsidiary is organized in a foreign jurisdiction and is
required by the applicable laws and regulations of such foreign jurisdiction to
be partially owned by the government of such foreign jurisdiction or individual
or corporate citizens of such foreign jurisdiction in order for such Restricted
Subsidiary to transact business in such foreign jurisdiction, provided that the
Company, directly or indirectly, owns the remaining Capital Stock or ownership
interests in such Restricted Subsidiary and, by contract or otherwise, controls
the management and business of such Restricted Subsidiary and derives the
economic benefits of ownership of such Restricted Subsidiary to substantially
the same extent as if such Restricted Subsidiary were a wholly owned
Subsidiary.
A-67
<PAGE> 92
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement"), the Company has agreed to sell to each
of the underwriters named below (the "Underwriters"), and each of the
Underwriters, for whom Goldman, Sachs & Co., Donaldson Lufkin & Jenrette
Securities Corporation, Lehman Brothers Inc. and Salomon Brothers Inc are
acting as representatives (the "Representatives"), has severally agreed to
purchase the principal amount of Notes set forth below opposite its name:
Principal
Amount
Underwriter of Notes
----------- --------
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . . .
Donaldson Lufkin & Jenrette Securities Corporation . . . . . . .
Lehman Brothers Inc. . . . . . . . . . . . . . . . . . . . . . .
Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . . . .
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $175,000,000
=============
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of _____% of the principal amount of the Notes. The Underwriters
may allow, and such dealers may reallow, a concession not to exceed ____% of
the principal amount of the Notes to certain brokers and dealers. After the
Notes are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
The Notes are a new issue of securities with no established trading
market. The Company has been advised by the representatives of the
Underwriters that the representatives intend to make a market in the Notes but
are not obligated to do so and may discontinue market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Notes.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the Underwriters are also acting as underwriters in the
Company's concurrent Common Stock Offering for which they will receive
customary underwriting discounts and commissions.
A-68
<PAGE> 93
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . .
THE COMPANY . . . . . . . . . . . . . . . . . . .
USE OF PROCEEDS . . . . . . . . . . . . . . . . .
DIVIDEND POLICY . . . . . . . . . . . . . . . . .
MARKET FOR AND RECENT PRICES OF
COMMON STOCK . . . . . . . . . . . . . . . . .
CAPITALIZATION . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . .
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . .
BUSINESS . . . . . . . . . . . . . . . . . . . .
MANAGEMENT . . . . . . . . . . . . . . . . . . .
SELLING STOCKHOLDERS . . . . . . . . . . . . . .
DESCRIPTION OF EXISTING SECURITIES
AND SENIOR CREDIT FACILITY . . . . . . . . . .
DESCRIPTION OF NOTES . . . . . . . . . . . . . .
UNDERWRITING . . . . . . . . . . . . . . . . . .
LEGAL MATTERS . . . . . . . . . . . . . . . . . .
EXPERTS . . . . . . . . . . . . . . . . . . . . .
GLOSSARY OF OIL AND GAS TERMS . . . . . . . . . .
================================================================================
================================================================================
$175,000,000
FORCENERGY INC
% SENIOR SUBORDINATED
NOTES DUE 2006
---------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
SALOMON BROTHERS INC
---------------------------
, 1996
---------------------
================================================================================
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses of the offering are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . . . . . . . . . . . . . . . . . $ 82,533
------------
NASD Filing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,736
------------
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
------------
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
------------
Blue Sky Fees and Expenses (including legal fees) . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
------------
Printing Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
------------
Rating Agency Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
------------
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ *
============
</TABLE>
- -------------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that a director of the Company will not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (I) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware Law, which
concerns unlawful payments of dividends, stock purchases or redemptions, or
(iv) for any transaction from which the director derived an improper personal
benefit. If the Delaware Law is amended after the approval by the stockholders
of the Certificate to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Company shall be eliminated or limited to the fullest extent permitted
by the Delaware Law, as so amended from time to time.
The Certificate and Bylaws provide that each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
suit, or proceeding whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative is or was a director, officer or employee of
the Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Company, whether the basis of such
Proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, will, in the case of directors and officers and may
in the case of employees and agents, be indemnified and held harmless by the
Company to the fullest extent authorized by Delaware law as the same exists or
may in the future be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification will continue as to a person who has ceased
to be a director, officer, employee or agent and will inure to the benefit of
his or her heirs, executors and administrators; however, except as described in
the following paragraph with respect to Proceedings to enforce rights to
indemnification, the Company will indemnify any such person seeking
indemnification in connection with Proceeding (or part thereof) initiated by
such person only if such Proceeding (or part thereof) was authorized by the
Board.
Pursuant to the Certificate and Bylaws, if a claim described in the preceding
paragraph is not paid in full by the Company within thirty days after a written
claim has been received by the Company, the claimant may at any time thereafter
bring suit against the Company to recover the unpaid amount of the claim and,
if successful in whole or in part,
II-1
<PAGE> 95
the claimant will be entitled to be paid also the expense of prosecuting such
claim. The Certificate and Bylaws provide that it will be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any Proceeding in advance of its final disposition where
the required undertaking, if any is required, has been rendered to the Company)
that the claimant has not met the standards of conduct which make it
permissible under the Delaware Law for the Company to indemnify the claimant
for the amount claimed, but the burden of proving such defense will be on the
Company. Neither the failure of the Company (including the Board, independent
legal counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Delaware Law, nor an actual determination by the Company
(including the Board, independent legal counsel or stockholders) that the
claimant has not met such applicable standard of conduct, will be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
The Certificate and Bylaws provide that the right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in the Certificate and Bylaws will not be exclusive of
any other right which any person may have or may in the future acquire under
any statute, provision of the Certificate, the Bylaws, Indemnification
Agreement, vote of stockholders or disinterested directors or otherwise. The
Certificate permits the Company to maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Company or
any person serving as the request of the Company as a director, officer,
employee or agent of another corporation, or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans maintained or sponsored by the Company, against any such expense,
liability or loss, whether or not the Company would have the power to indemnify
such person against such expense, liability or loss under the Delaware Law.
The Company intends to obtain directors and officers liability insurance
providing coverage to its directors and officers.
The Bylaws provide that the right to indemnification conferred therein is a
contract right and includes the right to be paid by the Company the expenses
incurred in defending any such Proceeding in advance of its final disposition,
except that if Delaware law requires the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a Proceeding will be made
only upon delivery to the Company of an undertaking by or on behalf of such
director or officer, to repay all amounts so advanced if it is ultimately
determined that such director or officer is not entitled to be indemnified
under the Certificate or otherwise.
The Company has also entered into an indemnification agreement with certain
of its directors and certain of its officers indemnifying such persons
substantially to the extent set forth above in the Certificate and Bylaws
except with respect to advance expenses.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit No. Index to Exhibits
----------- -----------------
<S> <C> <C>
1.1 -- Form of Common Stock Underwriting Agreement
1.2 -- Form of Notes Underwriting Agreement
2.1 -- Agreement and Plan of Merger, dated as of September 14, 1993, among Forcenergy
Partners, L.P., Forcenergy Gas Exploration, Inc., and the Company. (Filed as
Exhibit 4.2 to the Registration Statement on Form S-1 filed on June 2, 1995, as
amended on July 6, 1995 and July 25, 1995 and is included herein by reference
(File No. 33-93020))
</TABLE>
<PAGE> 96
<TABLE>
<S> <C> <C>
2.2 -- Supplemental Agreement and Plan of Merger, dated as of September 14, 1993, among
Forcenergy Partners, L.P., Forcenergy Gas Exploration, Inc., and the Company,
Stig Wennerstrom, and Forcenergy AB. (Filed as Exhibit 4.3 to the Registration
Statement on Form S-1 filed on June 2, 1995, as amended on July 6, 1995 and July
25, 1995 and is included herein by reference (File No. 33-93020))
2.3 -- Registration Rights Agreement dated as of October 10, 1995 by and between
Forcenergy Inc and Forcenergy AB (filed as Exhibit 4.3 with the Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 and is included herein by
reference).
2.4 -- Agreement for Purchase and Sale dated April 19, 1996 by and between Amerada Hess
Corporation as seller and Forcenergy Inc as Buyer (Filed as Exhibit 2 to Form 8-
K filed on July 15, 1996 as amended on July 24 and September 12, 1996 and
incorporated herein by reference.)
2.5 -- Form of Second Amendment to Note Exchange and Registration Rights Agreement
4.1 -- Specimen Common Stock certificate. (Filed as Exhibit 4.1 to the Registration
Statement on Form S-1 on June 2, 1995, as amended on July 6, 1995 and July 25,
1995 and is included herein by reference (File No. 33-93020))
4.2 -- Form of Indenture
5.1* -- Opinion of Vinson & Elkins L.L.P.
12.1 -- Computation of ratios of earnings to fixed charges
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of Netherland, Sewell & Associates, Inc.
23.4 -- Consent of Collarini Engineering Inc.
23.5 -- Consent of Joe C. Neal & Associates.
23.6 -- Consent of Vinson & Elkins L.L.P. (to be included in Exhibit 5.1 hereto).
23.7 -- Consent of LaPorte, Sehrt, Romig and Hand APAC
24.1 -- Powers of Attorney of the Company's Directors (included on the original
signature page of this Registration Statement)
25.1 -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
on Form T-1 of Bankers Trust Company.
</TABLE>
- ------------
* To be filed by amendment.
(b) Financial Statement Schedules, Years ended December 31, 1992, 1993, and
1994:
Not Applicable.
II-3
<PAGE> 97
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an Employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in this registration statement shall
be deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
II-4
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on October 7, 1996.
FORCENERGY INC
By /s/ STIG WENNERSTROM
-------------------------------------
Stig Wennerstrom
President and Chief Executive Officer
KNOW BY ALL THESE PRESENTS, that each of the undersigned directors and
officers of Forcenergy Inc. hereby constitutes and appoints Stig Wennerstrom,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and on his behalf and in his name, place and stead
in any and all capacities, to sign, execute and file with the Securities and
Exchange Commission and any state securities regulatory board or commission any
documents relating to the proposed issuance and registration of the securities
offered pursuant to this Registration Statement on Form S-3 under the
Securities Act of 1933, including any and all amendments (including post-
effective amendments and amendments thereto) to this Registration Statement on
Form S-3 and any registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
with all exhibits and any and all documents required to be filed with respect
thereto with any regulatory authority, granting unto said attorney-in-fact and
agent, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could
do if personally present, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do
or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities indicated and on October 7, 1996.
Name Title Date
---- ----- ----
/s/ STIG WENNERSTROM President and Chief Executive October 7, 1996
---------------------- Officer (Principal Executive
Stig Wennerstrom Officer)
/s/ E. JOSEPH GRADY Vice President--Chief Financial October 7, 1996
---------------------- Officer (Principal Financial and
E. Joseph Grady Accounting Officer)
/s/ ROBERT ISSAL Director and Chairman of the Board October 7, 1996
---------------------- of Directors
Robert Issal
/s/ KEVIN S. PENN Director October 7, 1996
----------------------
Kevin S. Penn
/s/ ARNOLD L. CHAVKIN Director October 7, 1996
----------------------
Arnold L. Chavkin
/s/ JEFFREY A. WEBER Director October 7, 1996
----------------------
Jeffrey A. Weber
/s/ ERIC FORSS Director October 7, 1996
----------------------
Eric Forss
Director October 7, 1996
----------------------
Bruce L. Burnham
/s/ WILLIAM F. WALLACE Director October 7, 1996
----------------------
William F. Wallace
II-5
<PAGE> 99
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Index to Exhibits
----------- -----------------
<S> <C> <C>
1.1 -- Form of Common Stock Underwriting Agreement
1.2 -- Form of Notes Underwriting Agreement
2.1 -- Agreement and Plan of Merger, dated as of September 14, 1993, among Forcenergy
Partners, L.P., Forcenergy Gas Exploration, Inc., and the Company. (Filed as
Exhibit 4.2 to the Registration Statement on Form S-1 filed on June 2, 1995, as
amended on July 6, 1995 and July 25, 1995 and is included herein by reference
(File No. 33-93020))
2.2 -- Supplemental Agreement and Plan of Merger, dated as of September 14, 1993, among
Forcenergy Partners, L.P., Forcenergy Gas Exploration, Inc., and the Company,
Stig Wennerstrom, and Forcenergy AB. (Filed as Exhibit 4.3 to the Registration
Statement on Form S-1 filed on June 2, 1995, as amended on July 6, 1995 and July
25, 1995 and is included herein by reference (File No. 33-93020))
2.3 -- Registration Rights Agreement dated as of October 10, 1995 by and between
Forcenergy Inc and Forcenergy AB (filed as Exhibit 4.3 with the Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 and is included herein by
reference).
2.4 -- Agreement for Purchase and Sale dated April 19, 1996 by and between Amerada Hess
Corporation as seller and Forcenergy Inc as Buyer (Filed as Exhibit 2 to Form 8-K
filed on July 15, 1996 as amended on July 24 and September 12, 1996 and
incorporated herein by reference.)
2.5 -- Form of Second Amendment to Note Exchange and Registration Rights Agreement
4.1 -- Specimen Common Stock certificate. (Filed as Exhibit 4.1 to the Registration
Statement on Form S-1 on June 2, 1995, as amended on July 6, 1995 and July 25,
1995 and is included herein by reference (File No. 33-93020))
4.2 -- Form of Indenture
5.1* -- Opinion of Vinson & Elkins L.L.P.
12.1* -- Computation of ratios of earnings to fixed charges
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of Netherland, Sewell & Associates, Inc.
23.4* -- Consent of Collarini Engineering Inc.
23.5 -- Consent of Joe C. Neal & Associates.
23.6 -- Consent of Vinson & Elkins L.L.P. (to be included in Exhibit 5.1 hereto).
23.7 -- Consent of LaPorte, Sehrt, Romig and Hand APAC
24.1 -- Powers of Attorney of the Company's Directors (included on the original
signature page of this Registration Statement)
25.1 -- Statement of Eligibility and Qualification under the Trust Indenture Act of 1939
on Form T-1 of Bankers Trust Company.
</TABLE>
- --------------
* To be filed by amendment.
(b) Financial Statement Schedules, Years ended December 31, 1992,
1993, and 1994:
Not Applicable.
<PAGE> 1
FORCENERGY INC
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
----------------------------------
UNDERWRITING AGREEMENT
, 1996
Goldman, Sachs & Co. --------------
Donaldson, Lufkin & Jenrette
Securities Corporation
Howard, Weil, Labouisse, Friedrichs
Incorporated
Prudential Securities Incorporated
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Forcenergy Inc, a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
1,537,958 shares and, at the election of the Underwriters, up to 525,000
additional shares of Common Stock, par value $.01 per share ("Stock"), of the
Company and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 1,962,042 shares. The
aggregate of 3,500,000 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of 525,000
additional shares to be sold by the Company is herein called the "Optional
Shares". The Firm Shares and the Optional Shares that the Underwriters elect
to purchase pursuant to Section 2 hereof are herein collectively called the
"Shares".
1. (a) The Company represents and warrants to, and
agrees with, each of the Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-....)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore
delivered to you, and, excluding exhibits thereto but including all
documents incorporated by reference in the prospectus contained
therein, to you for each of the other Underwriters, have been declared
effective by the Commission in such form; other than a registration
statement, if any, increasing the size of
<PAGE> 2
the offering (a "Rule 462(b) Registration Statement"), filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document with
respect to the Initial Registration Statement or document incorporated
by reference therein has heretofore been filed with the Commission;
and no stop order suspending the effectiveness of the Initial
Registration Statement, any post- effective amendment thereto or the
Rule 462(b) Registration Statement, if any, has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424(a) of the
rules and regulations of the Commission under the Securities Act of
1933, as amended (the "Act"), is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including (i) the information contained in the
form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed
by virtue of Rule 430A under the Act to be part of Initial
Registration Statement at the time it was declared effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereinafter becomes effective, and (ii) the documents incorporated by
reference in the prospectus contained in the registration statement at
the time such part of the registration statement became effective,
each as amended at the time such part of the registration statement
became effective, are hereinafter collectively called the
"Registration Statement"; and such final prospectus, in the form first
filed pursuant to Rule 424(b) under the Act, is hereinafter called the
"Prospectus"; and any reference herein to any Preliminary Prospectus
or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Act, as of the date of such Preliminary Prospectus
or Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Section 13(a) or 15(d)
of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration
Statement);
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein or by a Selling Stockholder expressly for
use in the preparation of the answers therein to Item 7 of Form S-3;
2
<PAGE> 3
(iii) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration
Statement or the Prospectus will conform, in all material respects to
the requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto, and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its subsidiaries has not
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock, or long-term debt or short-term debt of the Company or
any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries (the adverse effect of such change to be hereinafter
referred to as a "Material Adverse Effect"), otherwise than as set
forth or contemplated in the Prospectus;
(vi) Except as described in the Prospectus, the Company and its
subsidiaries have (1) generally satisfactory or good and indefeasible
title to all its interests in its oil and gas properties, title
investigations having been carried out by or on behalf of such person
in
3
<PAGE> 4
accordance with good practice in the oil and gas industry in the areas
in which the Company and its subsidiaries operate and (2) good and
indefeasible title to all other real property and good and marketable
title to all other material properties and assets described in the
Prospectus as owned by the Company or its subsidiaries and valid,
subsisting and enforceable leases for all of the properties and
assets, real or personal, described in the Prospectus as leased by
them, in each case free and clear of any security interests,
mortgages, pledges, liens, encumbrances or charges of any kind, other
than those described in the Prospectus and those that could not,
individually or in the aggregate, have a Material Adverse Effect;
(vii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, except where the
failure to so qualify would not have a Material Adverse Effect; and
each subsidiary of the Company has been duly incorporated and is
validly existing as a Corporation in good standing under the laws of
its jurisdiction of incorporation;
(viii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued are fully
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus;
(ix) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued and fully paid and
non-assessable and the Firm Shares to be sold by the Selling
Stockholders to the Underwriters hereunder have been duly and validly
authorized and, have been or, if not issued, will be issued, and when
issued and delivered prior to the Time of Delivery will be, duly and
validly issued and fully paid and non-assessable, and all such Shares
and will conform to the description of the Stock contained in the
Prospectus under the caption "Description of Capital Stock" which
description, insofar as it purports to constitute a summary of the
terms of the Stock is accurate and complete;
(x) The issue and sale of the Shares to be sold by the Company
hereunder and the compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or Forcenergy
AB, a Swedish corporation and stockholder of the Company ("Forcenergy
AB") is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or
Forcenergy AB is subject, other than such breaches, violations or
defaults that would not, individually or in the aggregate, have a
Material Adverse Effect, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of
the
4
<PAGE> 5
Company or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company or
Forcenergy AB or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any
such court or governmental agency or body is required for the issue
and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state or foreign securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and
the International Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture, mortgage,
deed of trust, loan agreement lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be
bound other than, with respect to any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument, such
defaults that would not individually or in the aggregate, have a
Material Adverse Effect;
(xii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries , would
individually or in the aggregate have a Material Adverse Effect; and,
to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;
(xiii) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or an entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xiv) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(xv) Coopers & Lybrand L.L.P. and Price Waterhouse LLP, who
have certified certain financial statements of the Company and its
subsidiaries, and LaPorte, Sehrt, Roming and Hand APAC, who have
certified certain financial statements of Ashlawn Energy, Inc.
("Ashlawn"), are each independent public accountants as required by
the Act and the rules and regulations of the Commission thereunder;
(xvi) Each of Collarini Engineering Inc., Joe C. Neal &
Associates and Netherland, Sewell & Associates, Inc. are independent
petroleum engineers with respect to the Company and Forcenergy AB;
(xvii) The Company and its subsidiaries (1) are in compliance
with any and all applicable federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or waste, pollutants or
contaminants ("Environmental Laws"), (2) have received all permits,
licenses or other
5
<PAGE> 6
approvals required of it under applicable Environmental Laws to
conduct its business and (3) are in compliance with all terms and
conditions of any such permit, license or approval, except for such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals that would
not, singly or in the aggregate, have a Material Adverse Effect.
There has been no storage, disposal, generation, transportation,
handling or treatment of hazardous substances or solid wastes by the
Company or its subsidiaries (or to the knowledge of the Company, any
of its predecessors in interest) at, upon or from any of the property
now or previously owned or leased by the Company or its subsidiaries
in violation of any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit or which would require remedial
action by the Company or its subsidiaries under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except
for any violation or remedial action which would not result in, or
which would not be reasonably likely to result in, singularly or in
the aggregate with all such violations and remedial actions, a
Material Adverse Effect; there has been no material spill, discharge,
leak, emission, injection, escape, dumping or release of any kind onto
such property or into the environment surrounding such property of any
solid wastes or hazardous substances due to or caused by the Company
or its subsidiaries, except for any such spill, discharge, leak,
emission, injection, escape, dumping or release which would not result
in or would not be reasonably likely to result in, singularly or in
the aggregate with all such spills, discharges, leaks, emissions,
injections, escapes, dumpings and releases, a Material Adverse Effect;
and the terms "hazardous substances" and "solid wastes" shall have the
meanings specified in any applicable local, state and federal laws or
regulations with respect to environmental protection;
(xviii) Neither the Company, Forcenergy AB or any other Forcenergy
AB subsidiaries have, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item of property, however
characterized, to any finder, agent, government official or other
party, in the United States or any other country, which is in any
manner related to the business or operations of the Company,
Forcenergy AB and its subsidiaries, which the Company knows or has
reason to believe to have been illegal under any federal, state, or
local laws of the United States or any other country having
jurisdiction;
(xix) There are no persons with registration or other similar
rights, which have not been duly and effectively waived, to require
registration of any securities of the Company under the Act because of
the filing of the Registration Statement or sale of the Shares by the
Company or the Selling Stockholders;
(xx) Except as described in the Prospectus, as of the date
hereof, (1) all royalties, rentals, deposits and other amounts due on
the oil and gas properties of the Company have been properly and
timely paid, and no proceeds from the sale or production attributable
to the oil and gas properties of the Company are currently being held
in suspense by any purchaser thereof, except where such amounts due
could not, singly or in the aggregate, have a Material Adverse Effect
and (2) there are no claims under take-or-pay contracts pursuant to
which natural gas purchasers have any make-up rights affecting the
interest of the Company in its oil and gas properties, except where
such claims could not, singly or in the aggregate, have a Material
Adverse Effect;
6
<PAGE> 7
(xxi) As of the date hereof, the aggregate undiscounted monetary
liability of the Company for petroleum taken or received under any
operating or gas balancing and storage agreement relating to its oil
and gas properties that permits any person to receive any portion of
the interest of the Company in any petroleum or to receive cash or
other payments to balance any disproportionate allocation of petroleum
could not, singly or in the aggregate, have a Material Adverse Effect;
and
(xxii) No consents, authorizations or approvals from the
stockholders of Forcenergy AB are required in connection with the
issuance and sale of the Shares contemplated hereby.
(b) Each of the Selling Stockholders severally represents and
warrants to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder
of this Agreement, [the Power of Attorney and the Custody Agreement
hereinafter referred to], and for the sale and delivery of the Shares
to be sold by such Selling Stockholder hereunder, have been obtained;
and such Selling Stockholder has full right, power and authority to
enter into this Agreement [the Power of Attorney and the Custody
Agreement] and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling Stockholder
with all of the provisions of this Agreement, [the Power of Attorney
and the Custody Agreement] and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation or By-laws of
such Selling Stockholder if such Selling Stockholder is a corporation,
the Partnership Agreement of such Selling Stockholder if such Selling
Stockholder is a partnership or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder;
(iii) Such Selling Stockholder [has good and valid title to the
Exchangeable Subordinated Notes covering the Shares to be sold by such
Selling Stockholder, and immediately prior to each Time of Delivery
(as defined in Section 4 hereof) such Selling Stockholder will have
good and valid title to the Shares to be sold by such Selling
Stockholder] [has good and valid title to the Shares being sold by
such Selling Stockholder] hereunder, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such Shares
and payment therefor pursuant hereto and thereto, good and valid title
to such Shares, free and clear of all liens, encumbrances, equities or
claims, will pass to the several Underwriters or the International
Underwriters, as the case may be;
(iv) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or
7
<PAGE> 8
otherwise dispose of, except as provided hereunder, any securities of
the Company that are substantially similar to the Shares, including
but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, Stock or any
such substantially similar securities (other than pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of
this Agreement), without your prior written consent;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement
and the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-8 or
W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof);
[(viii) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been
placed in custody under a Custody Agreement, in the form heretofore
furnished to you (the "Custody Agreement"), duly executed and
delivered by such Selling Stockholder to [NAME OF CUSTODIAN], as
custodian (the "Custodian"), and such Selling Stockholder has duly
executed and delivered a Power of Attorney, in the form heretofore
furnished to you (the "Power of Attorney"), appointing the persons
indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with
authority to execute and deliver this Agreement on behalf of such
Selling Stockholder, to determine the purchase price to be paid by the
Underwriters to the Selling Stockholders as provided in Section 2
hereof, to authorize the delivery of the Shares to be sold by such
Selling Stockholder hereunder and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated
by this Agreement and the Custody Agreement;] and
[(ix) The Shares represented by the certificates held in custody
for such Selling Stockholder under the Custody Agreement are subject
to the interests of the Underwriters hereunder; the arrangements made
by such Selling Stockholder for such custody, and the
8
<PAGE> 9
appointment by such Selling Stockholder of the Attorneys-in-Fact by
the Power of Attorney, are to that extent irrevocable; the obligations
of the Selling Stockholders hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual
Selling Stockholder or, in the case of an estate or trust, by the
death or incapacity of any executor or trustee or the termination of
such estate or trust, or in the case of a partnership or corporation,
by the dissolution of such partnership or corporation, or by the
occurrence of any other event; if any individual Selling Stockholder
or any such executor or trustee should die or become incapacitated, or
if any such estate or trust should be terminated, or if any such
partnership or corporation should be dissolved, or if any other such
event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on
behalf of the Selling Stockholders in accordance with the terms and
conditions of this Agreement and of the Custody Agreements; and
actions taken by the Attorneys-in-Fact pursuant to the Powers of
Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or
not the Custodian, the Attorneys-in-Fact, or any of them, shall have
received notice of such death, incapacity, termination, dissolution or
other event.]
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $......................, the
number of Firm Shares (to be adjusted by you so as to eliminate fractional
shares) determined by multiplying the aggregate number of Firm Shares to be
sold by the Company and each of the Selling Stockholders as set forth opposite
their respective names in Schedule II hereto by a fraction, the numerator of
which is the aggregate number of Firm Shares to be purchased by such
Underwriter as set forth opposite the name of such Underwriter in Schedule I
hereto and the denominator of which is the aggregate number of Firm Shares to
be purchased by all of the Underwriters from the Company and all of the Selling
Stockholders hereunder and (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as
provided below, the Company agrees to sell to each of the Underwriters, and
each of the Underwriters agrees, severally and not jointly, to purchase from
the Company, at the purchase price per share set forth in clause (a) of this
Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by
a fraction the numerator of which is the maximum number of Optional Shares
which such Underwriter is entitled to purchase as set forth opposite the name
of such Underwriter in Schedule I hereto and the denominator of which is the
maximum number of Optional Shares that all of the Underwriters are entitled to
purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 525,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
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<PAGE> 10
defined in Section 4 hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of
such notice.
3. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company and the Selling Stockholders
shall be delivered by or on behalf of the Company and the Selling Stockholders
to Goldman, Sachs & Co., through the facilities of The Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf
of such Underwriter of the purchase price therefor by certified or official
bank check or checks, payable to the order of the Company and each of the
Selling Stockholders, as their interests may appear, the Selling Stockholders
in Federal (same day) funds. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at
least twenty-four hours prior to the Time of Delivery (as defined below) with
respect thereto at the office of DTC or its designated custodian(the
"Designated Office"). The time and date of such delivery and payment shall be,
with respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1996 on such other time and date as Goldman, Sachs & Co., the
Company and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs
& Co. of the Underwriters' election to purchase such Optional Shares, or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called
the "First Time of Delivery", such time and date for delivery of the Firm
Optional Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for delivery is herein
called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(m) hereof, and the check or checks specified
in subsection (a) above, will be delivered at the offices of Vinson & Elkins,
L.L.P., First City Tower, 36th Floor, Houston, Texas 77002 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
each Time of Delivery. A meeting will be held at the Closing Location at
..............p.m., New York City time, on the New York Business Day next
preceding each Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under
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<PAGE> 11
the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement
has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you
copies thereof; to file promptly all reports and any definitive proxy
or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to file a general consent to service of process
in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and,
if the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary during
such period to amend or supplement the Prospectus or to file under the
Exchange Act any document incorporated by reference in the Prospectus
in order to comply with the Act or the Exchange Act, to notify you and
upon your request to file such document and to prepare and furnish
without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection
with sales of any of the Shares at any time nine months or more after
the time
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<PAGE> 12
of issue of the Prospectus, upon your request but at the expense of
such Underwriter, to prepare and deliver to such Underwriter as many
copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company that
are substantially similar to the Shares, including but not limited to
any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially
similar securities (other than pursuant to employee stock option plans
existing on, or upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and cash
flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the
end of each of the first three quarters of each fiscal year (beginning
with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable
detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of the Company and its subsidiaries are consolidated in
reports furnished to its stockholders generally or to the Commission);
(h) If the Company elects to rely upon rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m., Washington
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the
Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act;
(i) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds"; and
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<PAGE> 13
(j) To use its best efforts to list for quotation the Shares
on the Nasdaq National Market ("NASDAQ");
6. The Company and each of the Selling Stockholders, jointly and
severally, covenant and agree with one another and with the several
Underwriters that (a) the Company will pay or cause to be paid the following:
(i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky surveys;
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
and (v) the filing fees incident to, and the fees and disbursements of counsel
for the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of
the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section; and (b) such Selling
Stockholder will pay or cause to be paid all costs and expenses incident to the
performance of such Selling Stockholder's obligations hereunder which are not
otherwise specifically provided for in this Section, including (i) any fees and
expenses of counsel for such Selling Stockholder, [(ii) such Selling
Stockholder's pro rata share of the fees and expenses of the Attorneys-in-Fact
and the Custodian] and (iii) all expenses and taxes incident to the sale and
delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder. In connection with Clause (b) (iii) of the preceding
sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax,
and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that the Company shall bear, and the Selling Stockholders shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, and Sections 8 and 11
hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them, and any advertising expenses connected with any offers they
may make.
7. The obligations of the Underwriters hereunder, as to the Shares
to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and of the Selling Stockholders herein are, at and as
of such Time of Delivery, true and correct, the condition that the Company and
the Selling Stockholders shall have performed all of its and their obligations
hereunder theretofore to be performed, and the following additional conditions:
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<PAGE> 14
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction if the Company has
elected to rely upon rule 462(b), the Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., Washington, D.C.
time, on the date of this Agreement;
(b) Andrews & Kurth L.L.P., counsel for the Underwriters,
shall have furnished to you such opinion or opinions (a draft of each
such opinion is attached as Annex II(a) hereto), dated such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii),
(vi), (ix), (xiii) and (xiv) of subsection (c) below as well as such
other related matters as you may reasonably request, and such counsel
shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) Vinson & Elkins L.L.P., counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion
is attached as Annex II(b) hereto), dated such Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with corporate power and
authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus;
(ii) The Company has an authorized capital stock as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the Shares being delivered to
you at such Time of Delivery against payment therefor in
accordance with this Agreement) have been duly and validly
authorized and issued and are fully paid and non-assessable; and
insofar as such descriptions relate to legal matters or
descriptions of provisions of the governing instruments, the
Shares conform in all material respects to the description
thereof contained in the Prospectus under the heading
"Description of Capital Stock" which such description, insofar
as it purports to describe the provisions of the laws and
documents referred to therein is accurate in all material
respects;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of Colorado, Florida, Louisiana,
Michigan, Montana, Nebraska, New Mexico, North Dakota, Oklahoma,
Pennsylvania, South Dakota, Texas, Utah, West Virginia and
Wyoming, which such jurisdictions are all of the jurisdictions
identified by management of the Company to such counsel in which
the Company owns property, has operations or conducts business;
(iv) The Company has no subsidiaries (such counsel being
entitled to rely in respect of the opinion in this clause solely
upon a review of the books and records of the Company and upon
certificates of officers of the Company provided that such
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<PAGE> 15
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates and
further provided that copies of such certificates be provided to
you or your counsel);
(v) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party
or of which any property of the Company is the subject which, if
determined adversely to the Company, would individually or in
the aggregate have a Material Adverse Effect; and, to the best
of such counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by
others;
(vi) This Agreement has been duly authorized, executed
and delivered by the Company;
(vii) The issue and sale of the Shares being delivered at
such Time of Delivery to be sold by the Company and the
compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument identified to such
counsel as being material to the Company the Company, nor will
such action contravene any provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any
order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company
or any of its properties except for any such conflicts, breaches
or violations under any indenture, mortgage, deed of trust, loan
agreement or instrument that would not, individually or in the
aggregate, have a Material Adverse Effect (except that such
counsel need express no opinion with respect to federal or state
securities laws or Blue Sky laws with respect to this
subparagraph);
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state or foreign securities or Blue Sky
laws in connection with the purchase and distribution of the
Shares by the Underwriters;
(ix) The statements set forth in the Prospectus under
the caption "Underwriting", insofar as they purport to describe
the provisions of the laws and documents referred to therein,
are accurate in all material respects;
(x) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act;
(xi) To the best of such counsel's knowledge, except as
have been waived at the Time of Delivery, there are no persons
with registration or other similar rights to
15
<PAGE> 16
have any securities of the Company registered pursuant to the
Registration Statement;
(xii) To the best of such counsel's knowledge, there are
no contracts or other documents of a character which are
required to be filed as exhibits to the Registration Statement
which have not been filed as required; and
(xiii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which
such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xiv) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, the reserve report and
other information of a financial or reserve nature included
therein as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the
Act and the rules and regulations thereunder; although they do
not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus, except for those referred to in the
opinion in subsections (ii) and (ix) of this Section 7(c), they
have no reason to believe that, as of its effective date, the
Registration Statement or any further amendment thereto made by
the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, the reserve
report and other information of a financial or reserve nature
included therein as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules therein, the reserve report and other information of a
financial or reserve nature included therein as to which such
counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the
16
<PAGE> 17
Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules therein, the reserve report and other
information of a financial or reserve nature included therein as
to which such counsel need express no opinion) contains an
untrue statement of a material fact or omits to state a material
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
and they do not know of any amendment to the Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by
reference into the Prospectus or required to be described in the
Registration Statement or the Prospectus which are not filed or
incorporated by reference or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(d) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their written
opinion with respect to each of the Selling Stockholders for whom they are
acting as counsel, dated the First Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) A Power of Attorney [and a Custody Agreement] have
been duly executed and delivered by such Selling Stockholder and
constitute valid and binding agreements of such Selling
Stockholder in accordance with their terms;
(ii) This Agreement have been duly executed and
delivered by or on behalf of such Selling Stockholder; and the
sale of the Shares to be sold by such Selling Stockholder
hereunder and thereunder and the compliance by such Selling
Stockholder with all of the provisions of this Agreement, the
Power of Attorney [and the Custody Agreement] and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any
terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which
such Selling Stockholder is a party or by which such Selling
Stockholder is bound, or to which any of the property or assets
of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of such Selling Stockholder if such
Selling Stockholder is a corporation, or the Partnership
Agreement of such Selling Stockholder if such Selling
Stockholder is a partnership, or any order, rule or regulation
known to such counsel of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the
property of such Selling Stockholder;
(iii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
in connection with the Shares to be sold by such Selling
Stockholder hereunder or thereunder, except [NAME ANY SUCH
CONSENT, APPROVAL, AUTHORIZATION OR ORDER] which [HAS] [HAVE]
been duly obtained and [IS] [ARE] in full force and effect, such
as have been obtained under the Act and such as may be
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<PAGE> 18
required under state or foreign securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by
the Underwriters;
(iv) Immediately prior to the First Time of Delivery
such Selling Stockholder had good and valid title to the Shares
to be sold at the First Time of Delivery by such Selling
Stockholder under this Agreement, free and clear of all liens,
encumbrances, equities or claims, and full right, power and
authority to sell, assign, transfer and deliver the Shares to be
sold by such Selling Stockholder hereunder and thereunder; and
(v) Good and valid title to such Shares, free and clear
of all liens, encumbrances, equities or claims, has been
transferred to each of the several Underwriters, as the case may
be, who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any
other adverse claim within the meaning of the Uniform Commercial
Code.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate.
(e) John A. Brush, General Counsel of the Company, shall have
furnished to you his written opinion (a draft of such opinion is attached as
Annex II(c) hereto), dated at such at such Time of Delivery, to the effect
that:
(i) The Company is not in violation of its Certificate of
Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which
it is a party or by which it is a party or by which it or any of
its properties may be bound, which default has not been waived.
(f) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent to
the date of this Agreement and also at each Time of Delivery, each of Coopers &
Lybrand L.L.P., Price Waterhouse LLP and LaPorte, Sehrt, Romig & Hand APAC
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letters delivered prior to
the execution of this Agreement are attached hereto as Annex I(a)(1), (2) and
(3), respectively hereto and a draft of the form of letter to be delivered on
the effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached hereto as Annex I(b)(1),
(2) and (3), respectively;
(g) Each of Netherland, Sewell & Associates, Inc., Collarini
Engineering Inc. and Joe C. Neal & Associates, each such firm constituting
independent petroleum engineering consultants (the "Engineering Consultants"),
shall have delivered to you on the date of this Agreement a letter (the
"Reserve Letter") and also on the Closing Date a letter dated the Closing Date,
in each case in form
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<PAGE> 19
and substance reasonably satisfactory to you and substantially in the forms
attached hereto as Annex III (a), (b) and (c), respectively, stating, as of the
date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified information with
respect to the oil and gas reserves is given or incorporated in the Effective
Prospectus and the Final Prospectus as of the date not more than five days
prior to the date of such letter), the conclusions and findings of such firm
with respect to the Company's oil and gas reserves;
(h)(i) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock, long-term
debt or short term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries, otherwise than as
set forth or contemplated in the Prospectus, the effect of which, in any such
case described in Clause (i) or (ii), is in the judgment of the Representatives
so material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in the Prospectus;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the NASDAQ; (ii) a suspension or material limitation in
trading in the Company's securities on the NASDAQ; (iii) a suspension or
material limitation in trading in Forcenergy AB's securities on the Stockholm
Stock Exchange; (iv) a general moratorium on commercial banking activities
declared by either Federal or New York or Texas state authorities; or (v) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this Clause (vi) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;
(j) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly listed for quotation
on the NASDAQ;
(k) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of the Company's officers and
directors, Chase Equity Associates and A.C. Israel Enterprises, Inc. [ \and
other ESN holders not selling in offering], to the effect set forth in
Subsection 1(b)(iv) hereof in form and substance satisfactory to you;
(l) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(m) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating
19
<PAGE> 20
organization", as that term is defined by the Commission for purposes of Rule
436(g)(2) under the Act, and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities; and
(n) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of officers
of the Company and of the Selling Stockholders, respectively, satisfactory to
you as to the accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (f) of this
Section, and as to such other matters as you may reasonably request.
8. (a) The Company and Forcenergy AB will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company and
Forcenergy AB shall not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs
& Co. expressly for use therein; provided further, Forcenergy AB shall not be
liable for any amount in excess of the amount received by Forcenergy AB from
the sale of Shares owned by Forcenergy AB.
(b) Each of the Selling Stockholders set forth on Schedule II
(excluding Forcenergy AB) attached hereto will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder expressly for use therein;
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in
20
<PAGE> 21
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that such Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein; provided further, such Selling Stockholder shall not
be liable for any amount in excess of the amount received by such Selling
Stockholder from the sale of Shares owned by such Selling Stockholder.
(c) Each Underwriter will indemnify and hold harmless the Company
and each Selling Stockholder against any losses, claims, damages or liabilities
to which the Company or such Selling Stockholder may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising
21
<PAGE> 22
out of such action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c)above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Selling Stockholders on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (before deducting expenses) received by
the Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (e) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e)to
contribute are several in proportion to their respective underwriting
obligations and not joint.
22
<PAGE> 23
(f) The obligations of the Company and the Selling Stockholders
under this Section 8 shall be in addition to any liability which the Company
and the respective Selling Stockholders may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company or any Selling Stockholder within the
meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company and the Selling Stockholders
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to you to purchase such
Shares on such terms. In the event that, within the respective prescribed
periods, you notify the Company and the Selling Stockholders that you have so
arranged for the purchase of such Shares, or the Company and the Selling
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or the Company and the Selling Stockholders shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person
had originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all of the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
and the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all of the Shares to be purchased at such Time of Delivery,
or if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to the Second Time of Delivery, the obligations of
the Underwriters to purchase and of the Company to sell the Optional
23
<PAGE> 24
Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company or the Selling Stockholders, except
for the expenses to be borne by the Company and the Selling Stockholders and
the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and
the several Underwriters, as set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any Underwriter or any controlling
person of any Underwriter, or the Company, or any of the Selling Stockholders,
or any officer or director or controlling person of the Company, or any
controlling person of any Selling Stockholder, and shall survive delivery of
and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, neither the Company nor the Selling Stockholders shall then be under
any liability to any Underwriter except as provided in Sections 6 and 8 hereof;
but, if for any other reason any Shares are not delivered by or on behalf of
the Company and the Selling Stockholders as provided herein, the Company [AND
EACH OF THE SELLING STOCKHOLDERS PRO RATA (BASED ON THE NUMBER OF SHARES TO BE
SOLD BY THE COMPANY AND SUCH SELLING STOCKHOLDER HEREUNDER)] will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholders shall
then be under no further liability to any Underwriter in respect of the Shares
not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made
or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder,
you and the Company shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of such Selling Stockholder made or
given by any or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Goldman,
Sachs & Co., at 85 Broad Street, New York, New York 10004, Attention:
Registration Department; if to any Selling Stockholder shall be delivered or
sent by mail, telex or facsimile transmission to counsel for such Selling
Stockholder at its address set forth in Schedule II hereto; and if to the
Company shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8 (d) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by you upon request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
24
<PAGE> 25
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder
or any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us ten (10) counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Forcenergy Inc
By:
Name:
Title:
Forcenergy AB
[FS Energy Associates, L.P.
Brinson MAP Venture Capital Fund III
(Brinson Trust Company, as Trustee)
Brinson Venture Capital Fund III, L.P.
(Brinson Partners, Inc., its
General Partner)
Virginia Retirement System
(Brinson Partners, Inc., under Power
of Attorney)
Conseco Capital
Invesco Corp.
The Clark Estates, Inc.
Burden Direct Investment Fund I, L.P.,
(William A. Burden & Co., it General
Partner)]
25
<PAGE> 26
By:
Name:
Title:
As Attorney-in-Fact acting on behalf
of each of the Selling Stockholders
named in Schedule II to this Agreement.
Accepted as of the date hereof at New York,
New York:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
Howard, Weil, Labouisse, Friedrichs
Incorporated
Prudential Securities Incorporated
By:
(Goldman, Sachs & Co.)
26
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ---------
<S> <C> <C>
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities
Corporation . . . . . . . . . . . . . . . . . . . . .
Howard, Weil, Labouisse, Friedrichs Incorporated . . . . . .
Prudential Securities Incorporated . . . . . . . . . . . . . .
[NAMES OF OTHER UNDERWRITERS] . . . . . . . . . . . . . . . . .
--------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . 3,500,000 525,000
========= ===========
</TABLE>
S-I
<PAGE> 28
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
--------------- --------------
<S> <C> <C>
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . 1,537,958 525,000
The Selling Stockholder(s):
Forcenergy AB (a) . . . . . . . . . . . . . . . . . . 300,000
[FS Energy Associates, L.P. (b) . . . . . . . . . . . 626,041
Brinson MAP Venture Capital Fund III (c) . . . . . . .
Brinson Venture Capital Fund III, L.P. (d) . . . . . .
Virginia Retirement System (e) . . . . . . . . . . . .
Conseco Capital (f) . . . . . . . . . . . . . . . . . 273,893
Invesco Corp. (g) . . . . . . . . . . . . . . . . . . 156,510
The Clark Estates, Inc. (h) . . . . . . . . . . . . . . 117,383
Burden Direct Investment Fund I, L.P. (i)] . . . . . . . 78,255
-----------
Total . . . . . . . . . . . . . . . . . . . . . 3,500,000 525,000
=========== ==========
</TABLE>
- ---------------------
(a) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(b) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(c) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(d) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(e) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(f) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(g) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
S-II
<PAGE> 29
(h) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
(i) This Selling Stockholder is represented by [NAME AND ADDRESS
OF COUNSEL] and has appointed [NAMES OF ATTORNEYS-IN-FACT (NOT LESS THAN TWO)],
and each of them, as the Attorneys-in-Fact for such Selling Stockholder.
S-III
<PAGE> 30
Draft of September 23, 1996
ANNEX I
FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined
by them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's Quarterly
Report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been
separately furnished to the Representatives; and on the basis of
specified procedures including inquiries of officials of the Company
who have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in all
material respects with the applicable accounting requirements of the
Act and the Exchange Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the
related published rules and regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of
the Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
<PAGE> 31
Draft of September 23, 1996
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of
Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included or incorporated by
reference in the Company's Quarterly Reports on Form 10-Q incorporated
by reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations, or (ii)
any material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus or
included in the Company's Quarterly Reports on Form 10-Q incorporated
by reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived the unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
2
<PAGE> 32
Draft of September 23, 1996
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest balance sheet
included or incorporated by reference in the Prospectus) or any
increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
stockholders' equity or other items specified by the Representatives,
or any increases in any items specified by the Representatives, in
each case as compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus, except in
each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such
letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E) there were any decreases
in consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
increases or decreases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and
other procedures referred to in paragraphs (iii) and (vi) above, they
have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear
in the Prospectus (excluding documents incorporated by reference) or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
3
<PAGE> 1
FORCENERGY INC
___% SENIOR SUBORDINATED NOTES DUE 2006
UNDERWRITING AGREEMENT
,1996
-----------------------
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
Salomon Brothers Inc
As representatives (the "Representatives") of the several Underwriters
named in Schedule 1 hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Forcenergy Inc, a Delaware corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
$.......... principal amount of the Subordinated Notes specified above (the
"Securities").
1. The Company represents and warrants to, and agrees with, each o
the Underwriters that:
(a) A registration statement on Form S-3 (File No.
333-.....)(the "Initial Registration Statement") in respect of the
Securities, and as a part thereof the respective forms of prospectus
relating to the distribution of the Securities in an underwritten
public offering and of the Securities has been filed with the
Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each
in the form heretofore delivered to you, and, excluding exhibits
thereto but including all documents incorporated by reference in the
prospectus contained therein, to the Representatives for each of the
other Underwriters, have been declared effective by the Commission in
such form; other than a registration statement, if any, increasing the
size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document
with respect to the Initial Registration Statement or document
incorporated by reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Registration Statement, any post-effective amendment thereto
or the Rule 462(b) Registration Statement, if any, has been issued and
no proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under
<PAGE> 2
Draft of October 2, 1996
the Act), is hereinafter called a "Preliminary Prospectus"; the
various parts of the Initial Registration Statement and the Rule
462(b) Registration Statement, if any, including all exhibits thereto
but excluding Form T-1 and (i) including the information contained in
the form of final prospectus filed with the Commission pursuant to
Rule 424(b) under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective and (ii)
the documents incorporated by reference in the prospectus contained in
the registration statement at the time such part of the registration
statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereinafter becomes
effective, each as amended at the time such part of the registration
statement became effective, are hereinafter collectively called the
"Registration Statement"; such form of final prospectus in the form
first filed pursuant to Rule 424(b) under the Act, is hereinafter
called the "Prospectus"; and any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include
the documents incorporated by reference therein pursuant to Item 12 of
Form S-3 under the Act, as of the date of such Preliminary Prospectus
or Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Preliminary Prospectus or Prospectus, as the case may be, under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; and any reference to any amendment to
the Registration Statement shall be deemed to refer to and include any
annual report of the Company filed pursuant to Section 13(a) or 15(d)
of the Exchange Act after the effective date of the Registration
Statement that is incorporated by reference in the Registration
Statement);
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in
all material respects to the requirements of the Act and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the
rules and regulations of the Commission thereunder, and did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(c) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an
2
<PAGE> 3
Draft of October 2, 1996
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co.
expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and do not and will not, as
of the applicable effective date as to the Registration Statement and
any amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(e) The Company has not sustained since the date of the latest
audited financial statements included or incorporated by reference in
the Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated
in the Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not been any change in the capital stock, long-term debt, or
short-term debt of the Company or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company,
otherwise than as set forth or contemplated in the Prospectus;
(f) Except as described in the Prospectus, the Company has (1)
generally satisfactory or good and indefeasible title to all its
interests in its oil and gas properties, title investigations having
been carried out by or on behalf of such person in accordance with
good practice in the oil and gas industry in the areas in which the
Company operates and (2) good and indefeasible title to all other real
property and good and marketable title to all other material
properties and assets described in the Prospectus as owned by the
Company and valid, subsisting and enforceable leases for all of the
properties and assets, real or personal, described in the Prospectus
as leased by them, in each case free and clear of any security
interests, mortgages, pledges, liens, encumbrances or charges of any
kind, other than those described in the Prospectus and those that
could not, individually or in the aggregate, have a material adverse
effect on the condition, financial or otherwise, or on the earnings,
business affairs or business prospects of the Company (such an adverse
effect to be hereinafter referred to as a "Material Adverse Effect");
(g) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing
3
<PAGE> 4
Draft of October 2, 1996
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, except where the failure to so qualify would not have a
Material Adverse Effect; and the Company has no subsidiaries;
(h) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued and are
fully paid and non-assessable;
(i) The Securities have been duly authorized and, when issued
and delivered pursuant to this Agreement, will have been duly
executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company entitled to the
benefits provided by the Indenture [TO BE] dated as of
................, 1996 (the "Indenture") between the Company and
............, as Trustee (the "Trustee"), under which they are to be
issued, which [WILL BE] [IS] substantially in the form filed as an
exhibit to the Registration Statement; the Indenture has been duly
authorized and duly qualified under the Trust Indenture Act and[, WHEN
EXECUTED AND DELIVERED BY THE COMPANY AND THE TRUSTEE, WILL
CONSTITUTE] [CONSTITUTES] a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement,
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general equity principles; and the Securities and the Indenture will
conform to the descriptions thereof in the Prospectus;
(j) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the
Indenture and this Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
sale/leaseback agreement, loan agreement or other similar financing
agreement or instrument or other agreement or instrument to which the
Company or Forcenergy AB, a Swedish corporation and principal
stockholder of the Company ("Forcenergy AB") is a party or by which
the Company or Forcenergy AB is bound or to which any of the property
or assets of the Company or Forcenergy AB is subject other than such
breaches, violations or defaults that would not, individually or in
the aggregate, have a Material Adverse Effect, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the
Securities or the consummation by the Company of the transactions
contemplated by this Agreement or the Indenture, except the
registration under the Act of the Securities, such as have been
obtained under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Underwriters;
(j) The Company is not in violation of its Certificate of
Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound other than,
4
<PAGE> 5
Draft of October 2, 1996
with respect to any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument, such defaults that
would not individually or in the aggregate, have a Material Adverse
Effect;
(k) The statements set forth in the Prospectus under the
caption "Description of Notes", insofar as they purport to constitute
a summary of the terms of the Securities, under the caption
"Taxation", and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred
to therein, are accurate, complete and fair;
(l) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company is a
party or of which any property of the Company is the subject which, if
determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of the
Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(m) The Company is not and, after giving effect to the offering
and sale of the Securities, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(n) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes;
(o) Each of Coopers & Lybrand and Price Waterhouse LLP, who
have certified certain financial statements of the Company and
LaPorte, Sehrt, Romig and Hand APAC, who have certified certain
financial statements of Ashlawn Energy, Inc. ("Ashlawn"), are
independent public accountants as required by the Act and the rules
and regulations of the Commission thereunder;
(p) Each of Collarini Engineering Inc., Joe C. Neal and
Associates and Netherland, Sewell & Associates, Inc. are independent
petroleum engineers with respect to the Company and Forcenergy AB;
(q) The Company (A) is in compliance with any and all
applicable federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or
hazardous or toxic substances or waste, pollutants or contaminants
("Environmental Laws"), (B) has received all permits, licenses or
other approvals required of it under applicable Environmental Laws to
conduct its business and (C) is in compliance with all terms and
conditions of any such permit, license or approval, except for such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals that would
not, singly or in the aggregate, have a Material Adverse Effect.
There has been no storage, disposal, generation, transportation,
handling or treatment of hazardous substances or solid wastes by the
Company (or to the knowledge of the Company, any of its predecessors
in interest) at, upon or from any of the property now or previously
owned or leased by the Company in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or
which would require remedial action by the Company under any
applicable law, ordinance, rule, regulation, order, judgment,
5
<PAGE> 6
Draft of October 2, 1996
decree or permit, except for any violation or remedial action which
would not result in, or which would not be reasonably likely to result
in, singularly or in the aggregate with all such violations and
remedial actions, a Material Adverse Effect; there has been no
material spill, discharge, leak, emission, injection, escape, dumping
or release of any kind onto such property or into the environment
surrounding such property of any solid wastes or hazardous substances
due to or caused by the Company, except for any such spill, discharge,
leak, emission, injection, escape, dumping or release which would not
result in or would not be reasonably likely to result in, singularly
or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material
Adverse Effect; and the terms "hazardous substances" and "solid
wastes" shall have the meanings specified in any applicable local,
state and federal laws or regulations with respect to environmental
protection;
(r) Neither the Company, Forcenergy AB or any other Forcenergy
AB subsidiaries have, directly or indirectly, paid or delivered any
fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, government official or other
party, in the United States or any other country, which is in any
manner related to the business or operations of the Company,
Forcenergy AB and its subsidiaries, which the Company knows or has
reason to believe to have been illegal under any federal, state, or
local laws of the United States or any other country having
jurisdiction;
(s) There are no persons with registration or other similar
rights, which have not been duly and effectively complied with or
waived, to require registration of any securities of the Company under
the Act because of the filing of the Registration Statement or sale of
the Shares by the Selling Stockholders;
(t) Except as described in the Prospectus, as of the date
hereof, (i) all royalties, rentals, deposits and other amounts due on
the oil and gas properties of the Company have been properly and
timely paid, and no proceeds from the sale or production attributable
to the oil and gas properties of the Company are currently being held
in suspense by any purchaser thereof, except where such amounts due
could not, singly or in the aggregate, have a Material Adverse Effect
and (ii) there are no claims under take-or-pay contracts pursuant to
which natural gas purchasers have any make-up rights affecting the
interest of the Company in its oil and gas properties, except where
such claims could not, singly or in the aggregate, have a Material
Adverse Effect;
(u) As of the date hereof, the aggregate undiscounted monetary
liability of the Company for petroleum taken or received under any
operating or gas balancing and storage agreement relating to its oil
and gas properties that permits any person to receive any portion of
the interest of the Company in any petroleum or to receive cash or
other payments to balance any disproportionate allocation of petroleum
could not, singly or in the aggregate, have a Material Adverse Effect;
and
(v) No consents, authorizations or approvals from the
stockholders of Forcenergy AB are required in connection with the sale
of the Shares contemplated hereby.
6
<PAGE> 7
Draft of October 2, 1996
2. Subject to the terms and conditions herein set forth, the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price of ....% of the principal amount thereof, plus accrued
interest, if any, from . . . . . . . . . . . . . , 1996 to the Time of
Delivery hereunder, the principal amount of Securities set forth opposite the
name of such Underwriter in Schedule I hereto.
3. Upon the authorization by the Representatives of the release of
the Securities, the several Underwriters propose to offer the Securities for
sale upon the terms and conditions set forth in the Prospectus.
4. The Securities to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours'
prior notice to the Company, shall be delivered by or on behalf of the Company
to Goldman, Sachs & Co., through the facilities of The Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf
of such Underwriter of the purchase price therefor by certified or official
bank check or checks, payable to the order of the Company in Federal (same day)
funds. The Securities to be purchased by each Underwriter hereunder will be
represented by one or more definitive global Securities in book-entry form
which will be deposited by or on behalf of the Company with The Depository
Trust Company ("DTC") or its designated custodian. The Company will deliver
the Securities to Goldman, Sachs & Co., for the account of each Underwriter,
against payment by or on behalf of such Underwriter of the purchase price
therefor by certified or official bank check or checks, payable to the order of
the Company in Federal (same day) funds, by causing DTC to credit the
Securities to the account of Goldman, Sachs & Co. at DTC. The Company will
cause the certificates representing the Securities to be made available to
Goldman, Sachs & Co. for checking at least twenty-four hours prior to the Time
of Delivery (as defined below) at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment
shall be 9:30 a.m., New York City time, on ....................., 19.. or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date are herein called the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities and any additional documents requested by the
Underwriters pursuant to Section 7(i) hereof, will be delivered at the offices
of Vinson & Elkins L.L.P., First City Tower, 36th Floor, Houston, Texas 77002
(the "Closing Location"), and the Securities will be delivered at the
Designated Office, all at the Time of Delivery. A meeting will be held at the
Closing Location at ......... p.m., New York City time, on the New York
Business Day next preceding the Time of Delivery, at which meeting the final
drafts of the documents to be delivered pursuant to the preceding sentence will
be available for review by the parties hereto. For the purposes of this
Section 5, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New
York are generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable,
7
<PAGE> 8
Draft of October 2, 1996
such earlier time as may be required by Rule 430A(a)(3) under the Act;
to make no further amendment or any supplement to the Registration
Statement or Prospectus which shall be disapproved by the
Representatives promptly after reasonable notice thereof; to advise
the Representatives, promptly after it receives notice thereof, of the
time when the Registration Statement, or any amendment thereto, has
been filed or becomes effective or any supplement to the Prospectus or
any amended Prospectus has been filed and to furnish the
Representatives with copies thereof; to advise the Representatives,
promptly after it receives notice thereof, of the issuance by the
Commission of any stop order or of any order preventing or suspending
the use of any Preliminary Prospectus or prospectus, of the suspension
of the qualification of the Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Securities for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as the Representatives may reasonably
request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the
Prospectus in connection with the offering or sale of the Securities,
and if at such time any event shall have occurred as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such same period to amend or supplement the
Prospectus in order to comply with the Act or the Trust Indenture Act,
to notify the Representatives and upon the request of the
Representatives to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance; and in case any
Underwriter is required to deliver a prospectus in connection with
sales of any of the Securities at any time nine months or more after
the time of issue of the Prospectus, upon request of the
Representatives but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as the Representatives may
request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;
8
<PAGE> 9
Draft of October 2, 1996
(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the later of the Time of Delivery and such
earlier time as you may notify the Company not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder
any securities of the Company that are substantially similar to the
Securities;
(f) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report
(including a balance sheet and statements of income, stockholders'
equity and cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the
effective date of the Registration Statement), consolidated summary
financial information of the Company and its subsidiaries for such
quarter in reasonable detail; and to furnish to the holders of the
Securities all other documents specified in Section[s] ...... [and
..... ] of the Indenture, all in the manner so specified;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to the Representatives copies
of all reports or other communications (financial or other) furnished
to stockholders, and to deliver to the Representatives (i) as soon as
they are available, (A) copies of any reports and financial statements
furnished to or filed with the Commission or any national securities
exchange on which the Securities or any class of securities of the
Company is listed and (B) the documents specified in Section[s] ...
[and ......] of the Indenture as in effect at the Time of Delivery;
and (ii) such additional information concerning the business and
financial condition of the Company as the Representatives may from
time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission); and
(h) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds" .
(i) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of
filing either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and all other
expenses in
9
<PAGE> 10
Draft of October 2, 1996
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing any Agreement
among Underwriters, this Agreement, the Indenture, the Blue Sky and Legal
Investment Memoranda, closing documents (including any compilations thereof)
and any other documents in connection with the offering, purchase, sale and
delivery of the Securities; (iii) all expenses in connection with the
qualification of the Securities for offering and sale under state securities
laws as provided in Section 5 (b) hereof, including the fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky and legal investment surveys; (iv) any fees
charged by securities rating services for rating the Securities; (v) the filing
fees incident to, and fees and the disbursements of counsel for the
Underwriters in connection with, any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) the cost of preparing the Securities; (viI) the fees and
expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 10 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
transfer taxes on resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder shall be subject, in the
sole discretion of the Representatives to the condition that all
representations and warranties and other statements of the Company herein are,
at and as of the Time of Delivery, true and correct, the condition that the
Company shall have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section (a) hereof; no stop order suspending the
effectiveness of the Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the reasonable satisfaction of the Representatives;
if the Company has elected to rely upon Rule 462(b), the Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement;
(b) Andrews & Kurth L.L.P., counsel for the Underwriters, shall
have furnished to the Representatives such opinion or opinions (a
draft of each such opinion is attached as Annex II(a) hereto), dated
the Time of Delivery, with respect to the matters covered in
paragraphs (i), (ii), (vii), (viii), (ix), (xiii), and (xv) of
subsection (c) below as well as such other related matters as the
Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Vinson & Elkins L.L.P., counsel for the Company, shall have
furnished to the Representatives their written opinion (a draft of
such opinion is attached as Annex II(b) hereto),
10
<PAGE> 11
Draft of October 2, 1996
dated the Time of Delivery, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the Delaware, with power and authority (corporate and other)
to own its properties and conduct its business as described in
the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of Colorado, Florida, Louisiana,
Michigan, Montana, Nebraska, New Mexico, North Dakota, Oklahoma,
Pennsylvania, South Dakota, Texas, Utah, West Virginia and
Wyoming, which such jurisdictions are all of the jurisdictions
identified by management of the Company to such counsel in which
the Company owns property, has operations or conducts business;
(iv) The Company has no subsidiaries (such counsel being
entitled to rely in respect of the opinion in this clause solely
upon a review of the books and records of the Company and upon
certificates of officers of the Company provided that such
counsel shall state that they believe that both you and they are
justified in relying upon such opinions and certificates and
further provided that copies of such certificates be provided to
you or your counsel);
(v) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company is a party
or of which any property of the Company is the subject which, if
determined adversely to the Company, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed
and delivered by the Company;
(vii) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and
legally binding obligations of the Company entitled to the
benefits provided by the Indenture; and the Securities and the
Indenture conform to the descriptions thereof in the Prospectus;
(viii) The Indenture has been duly authorized, executed
and delivered by the parties thereto and constitutes a valid and
legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity
principles; and the Indenture has been duly qualified under the
Trust Indenture Act;
(ix) The issue and sale of the Securities and the
compliance by the Company with all of the provisions of the
Securities, the Indenture, and this Agreement and the
consummation of the transactions herein and therein contemplated
will not conflict with or
11
<PAGE> 12
Draft of October 2, 1996
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed
of trust, sale/leaseback agreement, loan agreement or other
financing agreement or any other agreement or instrument known to
such counsel to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any
of its subsidiaries is subject, nor will such action result in
any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its
subsidiaries or any of their properties except for any such
conflicts, breaches or violations under any indenture, mortgage,
deed of trust, loan agreement or instrument that would not,
individually or in the aggregate, have a Material Adverse Effect
(except that such counsel need express no opinion with respect to
federal or state securities laws or Blue Sky laws with respect to
this subparagraph);
(x) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of
the Securities or the consummation by the Company of the
transactions contemplated by this Agreement or the Indenture
except such as have been obtained under the Act and the Trust
Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(xi) The statements set forth in the Prospectus under
the caption "Description of Notes", insofar as they purport to
constitute a summary of the terms of the Securities under the
caption "Taxation," and under the caption "Underwriting", insofar
as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(xii) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act;
(xiii) To the best of such counsel's knowledge, there are
no contracts or other documents of a character which are required
to be filed as exhibits to the Registration Statement which have
not been filed as required;
(xvi) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made by
the Company prior to the Time of Delivery (other than the
financial statements and related schedules therein, as to which
such counsel need express no opinion), when they were filed with
the Commission, complied as to form in all material respects with
the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, and they have no reason
to believe that any of such documents, when such documents were
so filed, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made when such documents were so filed, not misleading;
and
12
<PAGE> 13
Draft of October 2, 1996
(xv) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the
Company prior to the Time of Delivery (other than the financial
statements and related schedules therein, the reserve reports and
other information of a financial or reserve nature included
therein, as to which such counsel need express no opinion) comply
as to form in all material respects with the requirements of the
Act and the Trust Indenture Act and the rules and regulations
thereunder; although they do not assume any responsibility for
the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except
for those referred to in the opinion in subsection (xiii) of this
Section 7(c), they have no reason to believe that, as of its
effective date, the Registration Statement or any further
amendment thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related
schedules therein, the reserve reports and other information of a
financial or reserve nature included therein, as to which such
counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company prior to the
Time of Delivery (other than the financial statements and related
schedules therein, the reserve reports and other information of a
financial or reserve nature included therein, as to which such
counsel need express no opinion) contained an untrue statement of
a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading or that, as of the
Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by
the Company prior to the Time of Delivery (other than the
financial statements and related schedules therein, the reserve
reports and other information of a financial or reserve nature
included therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits
to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any
contracts or other documents of a character required to be filed
as an exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus or required to be
described in the Registration Statement or the Prospectus which
are not filed or incorporated by reference or described as
required;
(d) John A. Brush, General Counsel of the Company, shall have
furnished to you his written opinion (a draft of such opinion is
attached as Annex II(c) hereto), dated at such at such Time of
Delivery, to the effect that:
(i) The Company is not in violation of its
Certificate of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed
of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it is a party or by which it
or any of its properties may be bound, which default has not been
waived.
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the
13
<PAGE> 14
Draft of October 2, 1996
Registration Statement filed subsequent to the date of this Agreement
and also at each Time of Delivery, each of Coopers & Lybrand and Price
Waterhouse LLP and LaPorte, Sehrt, Romig & Hand APAC shall have
furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the
effect set forth in Annex I hereto (the executed copy of the letter
delivered prior to the execution of this Agreement is attached as
Annex I(a) hereto and a draft of the form of letter to be delivered on
the effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b)
hereto;
(g) Each of Netherland, Sewell & Associates, Inc., Collarini
Engineering, Inc. and Joe C. Neal & Associates, each such firm
constituting independent petroleum engineering consultants (the
"Engineering Consultants"), shall have delivered to you on the date of
this Agreement a letter (the "Reserve Letter") and also on the Closing
Date a letter dated the Closing Date, in each case in form and
substance reasonably satisfactory to you and substantially in the
respective forms attached hereto as Annex III, stating, as of the date
of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
information with respect to the oil and gas reserves is given or
incorporated in the Prospectus as of the date not more than five days
prior to the date of such letter), the conclusions and findings of
such firm with respect to the Company's oil and gas reserves;
(h)(i) The Company has not sustained since the date of the
latest audited financial statements included or incorporated by
reference in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated
in the Prospectus, and (ii) since the respective dates as of which
information is given in the Prospectus there shall not have been any
change in the capital stock, long-term debt or short-term debt of the
Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set
forth or contemplated in the Prospectus, the effect of which, in any
such case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities on the terms and in the manner contemplated in the
Prospectus;
(i) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities;
(j) (i) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on the New York Stock Exchange or
on the Nasdaq National Market; (ii) a suspension or material
limitation in trading in the Company's securities on the Nasdaq
National Market; (iii) a suspension or material limitation in trading
in Forcenergy AB's securities on the Stockholm Stock Exchange; (iv) a
general moratorium on commercial banking activities declared by either
Federal or New York or Texas
14
<PAGE> 15
Draft of October 2, 1996
state authorities; or (v) the outbreak or escalation of hostilities
involving the United States or the declaration by the United States of
a national emergency or war, if the effect of any such event specified
in this Clause (vi) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being delivered at such Time of Delivery on
the terms and in the manner contemplated in the Prospectus;
(k) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement; and
(l) The Company shall have furnished or caused to be furnished to
the Representatives at the Time of Delivery certificates of officers
of the Company satisfactory to the Representatives as to the accuracy
of the representations and warranties of the Company herein at and as
of such Time of Delivery, as to the performance by the Company of all
of its obligations hereunder to be performed at or prior to such Time
of Delivery, as to the matters set forth in subsections (a) and (h) of
this Section and as to such other matters as the Representatives may
reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein;
15
<PAGE> 16
Draft of October 2, 1996
and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any such
action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such subsection. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company on the one
hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and
16
<PAGE> 17
Draft of October 2, 1996
opportunity to correct or prevent such statement or omission. The Company and
the Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any liability
which the respective Underwriters may otherwise have and shall extend, upon the
same terms and conditions, to each officer and director of the Company and to
each person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, the Representatives
may in their discretion arrange for the Representatives or another party or
other parties to purchase such Securities on the terms contained herein. If
within thirty-six hours after such default by any Underwriter the
Representatives do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to the Representatives
to purchase such Securities on such terms. In the event that, within the
respective prescribed periods, the Representatives notify the Company that they
have so arranged for the purchase of such Securities, or the Company notifies
the Representatives that it has so arranged for the purchase of such
Securities, the Representatives or the Company shall have the right to postpone
the Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of such Securities which remains unpurchased does
not exceed one-eleventh of the aggregate principal amount of all the
Securities, then the Company shall have the
17
<PAGE> 18
Draft of October 2, 1996
right to require each non-defaulting Underwriter to purchase the principal
amount of Securities which such Underwriter agreed to purchase hereunder and,
in addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the principal amount of Securities which such Underwriter
agreed to purchase hereunder) of the Securities of such defaulting Underwriter
or Underwriters for which such arrangements have not been made; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of Securities which remains unpurchased exceeds
one-eleventh of the aggregate principal amount of all the Securities, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company,
except for the expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter
from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Securities.
If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through the Representatives for all
out-of-pocket expenses approved in writing by the Representatives, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of the Securities, but
the Company shall then be under no further liability to any Underwriter except
as provided in and Sections 6 and 8 hereof.
11. In all dealings hereunder, the Representatives shall act on behalf of
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by the Representatives jointly or by Goldman, Sachs &
Co. on behalf of the Representatives.
All statements, requests, notices, and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to the Representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any
notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters'
18
<PAGE> 19
Draft of October 2, 1996
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by the Representatives upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
12. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of
the Securities from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one
and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us seven (7) counterparts hereof, and upon the acceptance hereof by
the Representatives, on behalf of each of the Underwriters, this letter and
such acceptance hereof shall constitute a binding agreement between each of the
Underwriters and the Company. It is understood that the Representatives'
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company for examination, upon request, but
without warranty on the part of the Representatives as to the authority of the
signers thereof.
Very truly yours,
Forcenergy Inc
By:
-----------------------------
Name:
Title:
19
<PAGE> 20
Draft of October 2, 1996
Accepted as of the date hereof:
Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lehman Brothers
Salomon Brothers Inc
By:
----------------------------------
(Goldman, Sachs & Co.)
20
<PAGE> 21
Draft of October 2, 1996
SCHEDULE I
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
UNDERWRITER PURCHASED
----------- ---------
Goldman, Sachs & Co. . . . . . . . . . . . $
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . .
Lehman Brothers . . . . . . . . . . . . .
Salomon Brothers Inc. . . . . . . . . . . .
[NAMES OF OTHER UNDERWRITERS] . . . . . . .
Total . . . . . . . . . . . . . . . $
21
<PAGE> 22
Draft of October 2, 1996
ANNEX I
FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
FOR REGISTRATION STATEMENT ON FORM S-3
Pursuant to Section 7 (d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included or incorporated by reference in the Registration Statement or
the Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been
separately furnished to the Representatives; and on the basis of
specified procedures including inquiries of officials of the Company
who have responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in the
related in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations, nothing came to their attention that caused
them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
<PAGE> 23
Draft of September 23, 1996
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of
Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements
of cash flows included or incorporated by reference in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Exchange Act as it applies to Form 10-Q and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included or
incorporated by reference in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus, for them
to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included
in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for
the audited financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon
earn-outs of
2
<PAGE> 24
Draft of September 23, 1996
performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of
the latest balance sheet included or incorporated by reference in
the Prospectus) or any increase in the consolidated long-term
debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other
items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared
with amounts shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding year
and with any other period of corresponding length specified by
the Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear
in the Prospectus (excluding documents incorporated by reference) or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of
the Company and its subsidiaries and have found them to be in
agreement.
3
<PAGE> 1
EXHIBIT 2.5
Execution Copy
SECOND AMENDMENT TO
NOTE EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This SECOND AMENDMENT TO NOTE EXCHANGE AND REGISTRATION RIGHTS
AGREEMENT, dated as of __________ __, 1996 is made and entered into by and
among FORCENERGY INC, a Delaware corporation, formerly named Forcenergy Gas
Exploration, Inc. (the "Company"), and certain of the Holders referred to in
the Original Agreement (defined below).
WHEREAS, the parties hereto have entered into a Note Exchange
and Registration Rights Agreement, dated as of September 15, 1993, as amended
by an amendment dated June 1, 1995 (the "Original Agreement"); and
WHEREAS, the Company is contemplating conducting a Qualified
IPO (as defined in the Original Agreement);
WHEREAS, the parties hereto desire to modify the Original
Agreement in order to facilitate the Qualified IPO.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I.
AMENDMENTS
A. The Original Agreement is amended by adding the following at
Section 4.2(d) thereof:
(d) If the Company files a Registration Statement for an
underwritten offering pursuant to which authorized but
unissued common shares offered by the Company (the "Company's
Shares") amount to at least two percent (2%) of the Company's
primary common shares outstanding and Registrable Shares are
included in the underwriting arrangements under the same price
and terms, and such offering would not constitute a Qualified
IPO solely because of its pricing terms (e.g., the aggregate
Current Market Price of 20% of the fully diluted then
outstanding shares of Common Stock is less than $40 million),
then such offering shall nonetheless constitute a Qualified
IPO if either:
<PAGE> 2
1. The gross selling price of the Registrable Shares and
Company's Shares pursuant to the underwriting agreement for
such offering (i.e., the "Price to Public") is adequate to
imply a value of $1499.42 for the number of shares of Common
Stock issuable upon exchange of each $1,000 aggregate
principal amount of Notes then outstanding (the "Required
Price"); or
2. Prior to filing the registration statement with
respect to an underwritten offering, the Company notifies the
holders of Notes and Registrable Shares in writing that the
Company elects (the "Election") to pay with respect to such
underwritten offering (the "Offering") (a) in respect of each
Registrable Share included in the Offering, an amount equal to
the difference (the "Spread") between the Required Price and
the gross selling price for each Registrable Share sold
pursuant to the underwriting agreement for the Offering, and
(b) in respect of each other Registrable Share that is sold
before September 15, 2000, the Make-Whole Amount (as defined
below). "Make-Whole Amount" shall mean an amount per
Registrable Share equal to the lesser of (i) the Spread, and
(ii) the difference, if positive, between the Required Price
and the gross selling price of such Registrable Share in an
open market arm's length sale made by a Holder ("Arm's Length
Sale").
With respect to the Offering, of which the Company
gave notice to Holders on September 17, 1996, the Company
hereby makes the Election and no further notice of same need
be given to Holders. With respect to any other Offerings, the
Election shall be delivered on or prior to the written notice
given to the Holders pursuant to Section 6.2 of the Original
Agreement. With respect to any Offering, regardless of
whether or not the Company makes the Election, the Company
shall retain the right to terminate and decline to consummate
the Offering in its sole discretion, provided that no such
terminated Offering shall constitute a Qualified IPO.
If the Company makes the Election, it may not reduce
the number of Registrable Shares in the Offering.
-2-
<PAGE> 3
If the Company makes the Election, (i) it shall pay
the Spread in immediately available funds at the closing of
the Offering in respect of each Registrable Share sold in the
Offering, and (ii) it shall pay the Make-Whole Amount in
immediately available funds for each Registrable Share that is
thereafter sold upon demand of the Holder made before
September 30, 2000, accompanied by a copy of the confirmation
of the Arm's Length Sale.
The Holders will be responsible to pay the brokerage
discounts and commissions incurred to sell Registrable Shares,
except that for Registrable Shares sold pursuant to an
Offering the Company will pay, in addition to the Spread, that
portion of such discounts and commissions as required to
assure that, in all events, such Holders receive net sale
proceeds (i.e., Price to Public plus the Spread and minus that
portion of the discounts and commissions borne by the Holders)
of at least $21.16 for each Registrable Share so sold.
1.2 The provisions of Section 1.1 hereof shall not become effective
until this instrument has been signed by Holders of not less than 75% of the
aggregate number of Registrable Shares outstanding and/or issuable upon
exchange of the Notes pursuant to the terms of the Original Agreement.
ARTICLE II.
CERTAIN REPRESENTATIONS
Each party hereto hereby represents and warrants to each other party
that (i) it has full power and authority to execute and deliver this instrument
and to consummate the transactions contemplated hereby and (ii) this instrument
has been duly executed and delivered by such party and, assuming this
instrument constitutes a valid and binding obligation of each other party, this
instrument constitutes a valid and binding agreement of such party, enforceable
against such party in accordance with its terms.
ARTICLE III.
GENERAL PROVISIONS
A. Headings. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of the Agreement.
-3-
<PAGE> 4
B. Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings given thereto in the Original Agreement.
C. No Third Party Beneficiaries. This instrument shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other person any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of the Agreement.
D. Counterparts. This instrument may be executed in one or more
counterparts, and by the different parties thereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
E. Full Force and Effect. Except as otherwise expressly modified
hereby, the Original Agreement shall remain in full force and effect, and, to
the extent that there areA any inconsistencies between this instrument and the
Original Agreement, the terms and provisions hereof shall govern. All
references to the term "Agreement" herein and in the Original Agreement shall
be deemed to refer to the Original Agreement as modified hereby.
F. Expenses. The Company shall pay the Holders' reasonable legal
fees incurred in the negotiation and execution of this Amendment.
G. Governing Law. THIS INSTRUMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF DELAWARE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
In Witness Whereof, this Second Amendment has been executed and
delivered as of the date first above written.
FORCENERGY INC
By
----------------------------------
Title
CHASE EQUITY ASSOCIATES, a
California Limited Partnership
(successor to Chemical Equity
Associates)
-4-
<PAGE> 5
By: Chase Capital Partners, its
General Partner
By
----------------------------------
Title
FIRST SPRING CORPORATION
By:
----------------------------------
Title
FINANCIAL STRATEGIC PORTFOLIOS, INC.-
Energy Portfolio
By:
----------------------------------
Title
FINANCIAL STRATEGIC PORTFOLIOS, INC.-
Utilities Portfolio
By:
----------------------------------
Title
BURDEN DIRECT INVESTMENT FUND I, a
Delaware General Partnership
By: William A.M. Burden & Co., L.P., a
Delaware Limited Partnership, its
General Partner
By: Burden Brothers, Inc., its General
Partner
By:
----------------------------------
Title
-5-
<PAGE> 6
A.C. ISRAEL ENTERPRISES, INC.,
By:
----------------------------------
Title
CONSECO CAPITAL
By:
----------------------------------
Title
CLARK PARTNERS, I, a Limited
Partnership
By: Ninth Floor Corp., its General
Partner
By:
----------------------------------
Title
BRINSON VENTURE CAPITAL FUND III, L.P.,
a Delaware Limited Partnership,
By: Brinson Partners, Inc., a Delaware
Corporation, its General Partner
By:
----------------------------------
Title
BRINSON TRUST COMPANY AS TRUSTEE OF THE
BRINSON MAP VENTURE CAPITAL FUND III
TRUST, a Group Collective Investment
Trust
By:
----------------------------------
Title
-6-
<PAGE> 7
VIRGINIA RETIREMENT SYSTEM
By: Brinson Partners, Inc., under Power
of Attorney
By:
----------------------------------
Title
-7-
<PAGE> 1
EXHIBIT 4.1
================================================================================
FORCENERGY INC
As Issuer
_____% SENIOR SUBORDINATED NOTES DUE 2006
_________________
INDENTURE
Dated as of __________, 1996
_________________
_________________
____________________________________________
As Trustee
_________________
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03-10.05
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
</TABLE>
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N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . .
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . .
Section 1.03. Incorporation by Reference of Trust Indenture Act
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . .
ARTICLE 2
THE NOTES
Section 2.01. Forms of Notes Generally . . . . . . . . . . . . . . . . . .
Section 2.02. Title and terms . . . . . . . . . . . . . . . . . . . . . .
Section 2.03. Denominations . . . . . . . . . . . . . . . . . . . . . . .
Section 2.04. Execution, Authentication, Delivery and Dating
Section 2.05. Temporary Notes . . . . . . . . . . . . . . . . . . . . . .
Section 2.06. Registration, Registration of Transfer and Exchange
Section 2.07. Book-Entry Provisions for Global Notes . . . . . . . . . . .
Section 2.08. Mutilated, Destroyed, Lost and Stolen Notes. . . . . . . . .
Section 2.09. Payment of Interest; Interest Rights Preserved . . . . . . .
Section 2.10. Paying Agent . . . . . . . . . . . . . . . . . . . . . . . .
Section 2.11. Paying Agent to Hold Money in Trust . . . . . . . . . . . .
Section 2.12. Persons Deemed Owners . . . . . . . . . . . . . . . . . . .
Section 2.13. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . .
Section 2.14. Outstanding Notes . . . . . . . . . . . . . . . . . . . . .
Section 2.15. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . .
Section 2.16. Cancellation . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . .
Section 3.02. Selection of Notes to Be Redeemed . . . . . . . . . . . . .
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . .
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . .
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . .
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . .
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . .
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . . .
</TABLE>
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<TABLE>
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Section 3.09 Offer to Purchase by Application of Excess Proceeds
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes . . . . . . . . . . . .
Section 4.02. Maintenance of Office or Agency . . . .
Section 4.03. Reports . . . . . . . . . . . . . . . .
Section 4.04. Compliance Certificate . . . . . . . . .
Section 4.05. Taxes . . . . . . . . . . . . . . . . .
Section 4.06. Stay, Extension and Usury Laws . . . . .
Section 4.07. Restricted Payments . . . . . . . . . .
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries . . . . . . . . . . . . .
Section 4.09. Incurrence of Indebtedness and Issuance of
Disqualified Stock . . . . . . . . . .
Section 4.10. Asset Sales . . . . . . . . . . . . . .
Section 4.11. Transactions with Affiliates . . . . . .
Section 4.12. Liens . . . . . . . . . . . . . . . . .
Section 4.13. Offer Repurchase Upon Change of Control
Section 4.14. Additional Subsidiary Guarantees . . . .
Section 4.15. Corporate Existence . . . . . . . . . .
Section 4.16. No Senior Subordinated Debt . . . . . .
Section 4.17. Sale and Leaseback Transactions . . . .
Section 4.18. Business Activities . . . . . . . . . .
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of All
or Substantially All Assets . . . . .
Section 5.02. Successor Corporation
Substituted . . . . . . . . . . . . . .
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . .
Section 6.02. Acceleration . . . . . . . . . . . . . .
Section 6.03. Other Remedies . . . . . . . . . . . . .
Section 6.04. Waiver of Past Defaults . . . . . . . .
Section 6.05. Control by Majority . . . . . . . . . .
Section 6.06. Limitation on Suits . . . . . . . . . .
Section 6.07. Rights of Holders of Notes to Receive Payment
</TABLE>
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<TABLE>
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Section 6.08. Collection Suit by Trustee . . . . . . .
Section 6.09. Trustee May File Proofs of Claim . . . .
Section 6.10. Priorities . . . . . . . . . . . . . . .
Section 6.11. Undertaking for Costs . . . . . . . . .
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . .
Section 7.02. Rights of Trustee . . . . . . . . . . .
Section 7.03. Individual Rights of Trustee . . . . . .
Section 7.04. Trustee's Disclaimer . . . . . . . . . .
Section 7.05. Notice of Defaults . . . . . . . . . . .
Section 7.06. Reports by Trustee to Holders of the Notes
Section 7.07. Compensation and Indemnity . . . . . . .
Section 7.08. Replacement of Trustee . . . . . . . . .
Section 7.09. Successor Trustee by
Merger, etc. . . . . . . . . . . . . .
Section 7.10. Eligibility; Disqualification . . . . .
Section 7.11. Preferential Collection of Claims Against Company
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance . . . . . . . . . . . . . .
Section 8.02. Legal Defeasance and Discharge . . . . .
Section 8.03. Covenant Defeasance . . . . . . . . . .
Section 8.04. Conditions to Legal or Covenant Defeasance
Section 8.05. Deposited Money and Government Securities to be
Held in Trust; Other Miscellaneous Provisions
Section 8.06. Repayment to Company . . . . . . . . . .
Section 8.07. Reinstatement . . . . . . . . . . . . .
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes . .
Section 9.02. With Consent of Holders of Notes . . . .
Section 9.03. Compliance with Trust Indenture Act . .
Section 9.04. Revocation and Effect of Consents. . . .
Section 9.05. Notation on or Exchange of Notes . . . .
Section 9.06. Trustee to Sign Amendments, etc. . . . .
</TABLE>
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<TABLE>
ARTICLE 10
SUBORDINATION
<S> <C>
Section 10.01. Agreement to Subordinate . . . . . . . .
Section 10.02. Certain Definitions . . . . . . . . . .
Section 10.03. Liquidation; Dissolution; Bankruptcy . .
Section 10.04. Default on Designated Senior Debt . . .
Section 10.05. Acceleration of Notes . . . . . . . . .
Section 10.06. When Distribution Must Be Paid Over . .
Section 10.07. Notice by Company
Section 10.08. Subrogation . . . . . . . . . . . . . .
Section 10.09. Relative Rights . . . . . . . . . . . .
Section 10.10. Subordination May Not Be Impaired by Company
Section 10.11. Distribution or Notice to Representative
Section 10.12. Rights of Trustee and Paying Agent . . .
Section 10.13. Authorization to Effect Subordination .
Section 10.14. Amendments . . . . . . . . . . . . . . .
Section 10.15. No Waiver of Subordination Provisions .
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01. Subsidiary Guarantees
Section 11.02. Execution and Delivery of Subsidiary Guarantees
Section 11.03. Guarantors May Consolidate, etc., on Certain Terms
Section 11.04. Releases of Subsidiary Guarantees . . .
Section 11.05. Limitation on Guarantor Liability . . .
Section 11.06. "Trustee" to Include Paying Agent . . .
Section 11.07. Subordination of Subsidiary Guarantee .
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls . . . . . .
Section 12.02. Notices . . . . . . . . . . . . . . . .
Section 12.03. Communication by Holders of Notes with Other
Holders of Notes . . . . . . . . . . .
Section 12.04. Certificate and Opinion as to Conditions Precedent
Section 12.05. Statements Required in Certificate or Opinion
Section 12.06. Rules by Trustee and Agents . . . . . .
Section 12.07. No Personal Liability of Directors,
Officers Employees and Stockholders. .
Section 12.08. Governing Law . . . . . . . . . . . . .
</TABLE>
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<TABLE>
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Section 12.09. No Adverse Interpretation of Other Agreements
Section 12.10. Successors . . . . . . . . . . . . . . .
Section 12.11. Severability . . . . . . . . . . . . . .
Section 12.12. Counterpart Originals . . . . . . . . .
Section 12.13. Table of Contents, Headings, etc. . . .
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B GUARANTORS
Exhibit C SUBSIDIARY GUARANTEE
Exhibit D FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
</TABLE>
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<PAGE> 8
INDENTURE dated as of _________, 1996 among Forcenergy Inc, a Delaware
corporation (the "Company") and ______________________, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the ____% Senior Subordinated Notes due 2006 of the Company (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Acquired Debt" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(but excluding the creation of a Lien) of any assets including, without
limitation, by way of a sale and leaseback (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
the Company and its Restricted Subsidiaries taken as a whole shall be governed
by Sections 4.13 and/or 5.01 hereof and not by Section 4.10 hereof), and (ii)
the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of any of the Company's Subsidiaries (including the sale by a
Restricted Subsidiary of Equity Interests in an Unrestricted Subsidiary), in
the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$5.0 million or (b) for net proceeds in excess of $5.0 million. Notwithstanding
the foregoing, the following shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Subsidiary of the Company or
by a Wholly Owned Subsidiary of the Company to the Company or to another Wholly
Owned Subsidiary of the
<PAGE> 9
Company, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary of
the Company to the Company or to another Wholly Owned Subsidiary of the Company,
(iii) a Restricted Payment or Permitted Investment that is permitted by Section
4.07, (iv) the sale or transfer (whether or not in the ordinary course of
business) of oil and gas properties or direct or indirect interests in real
property, provided that at the time of such sale or transfer such properties do
not have associated with them any proved reserves, (v) the abandonment,
farm-out, lease or sublease of developed or undeveloped oil and gas properties
in the ordinary course of business, (vi) the trade or exchange by the Company or
any Restricted Subsidiary of the Company of any oil and gas property owned or
held by the Company or such Subsidiary for any oil and gas property owned or
held by another Person, provided that (x) the fair market value of the
properties traded or exchanged by the Company or such Subsidiary (including any
cash or Cash Equivalents, not to exceed 15% of such fair market value, to be
delivered by the Company or such Subsidiary) is reasonably equivalent to the
fair market value of the properties (together with any cash or Cash Equivalents,
not to exceed 15% of such fair market value) to be received by the Company or
such Subsidiary as determined in good faith by (i) any officer of the Company if
such fair market value is less than $5 million and (ii) the Board of Directors
of the Company as certified by a certified resolution delivered to the Trustee
if such fair market value is equal to or in excess of $5 million; or (vii) the
sale or transfer of hydrocarbons or other mineral products or surplus or
obsolete equipment in the ordinary course of business.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended). As used in the preceding sentence, the "net rental
payment" under any lease for any such period shall mean the sum of rental and
other payments required to be paid with respect to such period by the lessee
thereunder, excluding any amounts required to be paid by such lessee on account
of maintenance and repairs, insurance, taxes, assessments, water rates or
similar charges. In the case of any lease which is terminable by the lessee
upon payment of a penalty, such net rental payment shall also include the
amount of such penalty, but no rent shall be considered as required to be paid
under such lease subsequent to the first date upon which it may be so
terminated.
"Average Life" means, with respect to any Indebtedness, as of the date of
determination the quotient obtained by dividing (i) the product of (x) the
number of years (or any portion thereof) from such date to the date or dates of
each successive scheduled principal payment (including, without limitation, any
sinking fund or mandatory redemption payment requirements) of such Indebtedness
multiplied by (y) the amount of each such principal payment by (ii) the sum of
all such principal payments.
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
-2-
<PAGE> 10
"Borrowing Base" means, as of any date, the aggregate amount of borrowing
availability as of such date under the Senior Credit Facility that determines
availability on the basis of a borrowing base or other asset-based calculation.
"Capital Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed) that is required to be classified
and accounted for as a capital lease obligation under GAAP, and, for the
purpose of the Indenture, the amount of such obligation at any date shall be
the capitalized amount thereof at such date, determined in accordance with
GAAP.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability
corporation or similar entity, any membership or other similar interests
therein, and (v) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any lender party to the Credit
Agreement or with any domestic commercial bank having capital and surplus in
excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having a rating of at least P-1 from Moody's
Investors Service, Inc. (or its successors) and a rating of at least A-1 from
Standard & Poor's Rating Group (or its successors), (vi) deposits available for
withdrawal on demand with any commercial bank not meeting the qualifications
specified in clause (iii) above, provided all such deposits do not exceed $5
million in the aggregate at any one time and (vii) investments in money market
or other mutual funds substantially all of whose assets comprise securities of
the types described in clauses (ii) through (v) above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any purchase,
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<PAGE> 11
sale, acquisition, disposition, merger or consolidation) the result of which is
that any "person" (as defined above) becomes the "beneficial owner" (as such
term is described in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the aggregate voting power of all classes of
Capital Stock of the Company having the right to elect directors under ordinary
circumstances, provided that the sale of Equity Interests in the Company to a
Person or Persons acting as underwriter(s) in connection with a firm commitment
underwriting shall not constitute a Change of Control or (iv) the first day on
which a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Commission" means the Securities and Exchange Commission.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, any Vice
President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with
an Asset Sale (together with any related provision for taxes), to the extent
such losses were deducted in computing such Consolidated Net Income, plus (ii)
provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Interest Rate Hedging
Agreements), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, depletion and amortization
expenses (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) for such Person and its Restricted Subsidiaries for such period to the
extent that such depreciation, depletion and amortization expenses were
deducted in computing such Consolidated Net Income, plus (v) other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of
a prepaid cash expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such other non- cash
charges were deducted in computing such Consolidated Net Income, in each case,
on a consolidated basis and determined in accordance with GAAP, decreased (to
the extent included in determining Consolidated Net Income) by the sum of (x)
the amount of deferred revenues that are amortized during such period and are
attributable to reserves that are subject to Volumetric Production Payments and
(y) amounts recorded in accordance with GAAP as repayments of principal and
interest pursuant to Dollar-Denominated Production Payments. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation, depletion and
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<PAGE> 12
amortization and other non-cash charges and expenses of, a Restricted Subsidiary
of the referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in same proportion) that the Net
Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded and (v) the Net Income of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the Company or one
of its Subsidiaries.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities with banks or other institutional lenders providing
for revolving credit loans, term loans, production payments, receivables
financing (including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or in part from
time to time. Indebtedness under Credit Facilities outstanding on the date on
which Notes are
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<PAGE> 13
first issued and authenticated under the Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (b) of the
definition of Permitted Indebtedness.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depository" means the Person specified in Section 2.03 hereof as the
Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature or which is
exchangeable or convertible into debt securities of the Company or any
Restricted Subsidiary, except to the extent that such exchange or conversion
rights cannot be exercised prior to the Maturity Date.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the date of this Indenture, until such
Indebtedness is repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the
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<PAGE> 14
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had Draft of 10/6/96 occurred at
the beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date (including, without
limitation, any acquisition to occur on the Calculation Date) shall be deemed to
have occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in the definition of
Consolidated Net Income, (ii) the net proceeds of Indebtedness incurred or
Disqualified Stock issued by the Company pursuant to the first paragraph of the
covenant described under the caption"--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock" during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have been received by the Company on the first day of
the four- quarter reference period and applied to its intended use on such date,
(iii) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and (iv) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Interest Rate
Hedging Agreements) and (ii) the consolidated interest expense of such Person
and its Restricted Subsidiaries that was capitalized during such period, and
(iii) any interest expense on Indebtedness of another Person that is Guaranteed
by such Person or any of its Restricted Subsidiaries or secured by a Lien on
assets of such Person or any of its Restricted Subsidiaries (whether or not
such Guarantee or Lien is called upon) and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person or
any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
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<PAGE> 15
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Global Certificate" means a Note that contains the paragraph referred to
in footnote 1 and the additional schedule referred to in footnote 2 to the form
of the Note attached hereto as Exhibit A.
"Government Securities" means securities that are (a) direct obligations
of the United States of America for the timely payment of which its full faith
and credit is pledged or (b) obligations of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Security
or a specific payment of principal of or interest on any such Government
Security held by such custodian for the account of the holder of such
depository receipt; provided, that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in respect
of the Government Security or the specific payment of principal of or interest
on the Government Security evidenced by such depository receipt.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means any Subsidiary of the Company that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture, and,
in each case, their respective successors and assigns.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, without duplication, (a)
any indebtedness of such Person, whether or not contingent, (i) in respect of
borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) evidenced by letters of credit (or reimbursement agreements
in respect thereof) or banker's acceptances, (iv) representing Capital Lease
Obligations, (v) representing the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable, (vi) representing any obligations in respect of
Currency Hedge Obligations, Interest Rate Hedging Agreements or Oil and Gas
Hedging Contracts, (vii) in respect of obligations to pay rent or other amounts
with respect to a sale
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<PAGE> 16
and leaseback transaction to which such Person is a party, and (viii) in respect
of any Production Payment, (b) all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person), (c) obligations of such Person in respect of production imbalances and
(d) to the extent not otherwise included in the foregoing, the Guarantee by such
Person of any Indebtedness of any other Person, provided that the indebtedness
described in clauses (a)(i), (ii), (iv) and (v) shall be included in this
definition of Indebtedness only if, and to the extent that, the indebtedness
described in such clauses would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Interest Rate Hedging Agreements" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations, but
excluding trade credit and other ordinary course advances customarily made in
the oil and gas industry), advances or capital contributions (excluding
commission, travel and similar advances to officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP; provided that the following shall not constitute
Investments: (i) an acquisition of assets, Equity Interests or other securities
by the Company for consideration consisting of common equity securities of the
Company, (ii) Interest Rate Hedging Agreements entered into in accordance with
the limitations set forth in clause (d) of the definition of "Permitted
Indebtedness" set forth in Section 4.09 hereof and (iii) Oil and Gas Hedging
Agreements entered into in accordance with the limitations set forth in clause
(g) of the definition of "Permitted Indebtedness" (iv) Currency Hedge
Obligations, (v) extensions of trade credit or other advances to customers on
commercially reasonable terms in accordance with normal trade practices or
otherwise in the ordinary course of business and (vi) endorsements of
negotiable instruments and documents in the ordinary course of business. If
the Company or any Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
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<PAGE> 17
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction)
other than a precautionary financing statement respecting a lease not intended
as a security agreement.
"Liquid Securities" means securities (i) of an issuer that is not an
Affiliate of the Company and (ii) that are publicly traded on the New York
Stock Exchange, the American Stock Exchange or the Nasdaq National Market;
provided, that securities meeting the requirements of clauses (i) and (ii)
above shall be treated as Liquid Securities from the date of receipt thereof
until and only until the earlier of (x) the date on which such securities are
sold or exchanged for cash or Cash Equivalents and (y) 180 days following the
date of the closing of the Asset Sale in connection with which such Liquid
Securities were received. In the event such securities are not sold or
exchanged for cash or Cash Equivalents within such 180-day period, for purposes
of determining whether the transaction pursuant to which the Company or a
Restricted Subsidiary received the securities was in compliance with the
provisions of the first paragraph of Section 4.10 hereof, such securities
shall be deemed not to have been Liquid Securities at any time.
"Make-Whole Amount" with respect to a Note means an amount equal to the
excess, if any, of (i) the present value of the remaining interest premium and
principal payments due on such Note as if such Note were redeemed on _________,
2001, computed using a discount rate equal to the Treasury Rate plus 50 basis
points, over (ii) the outstanding principal amount of such Note. "Treasury
Rate" is defined as the yield to maturity at the time of the computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15(519),
which has become publicly available at least two business days prior to the
date of the redemption notice or, if such Statistical Release is no longer
published, any publicly available source of similar market date) most nearly
equal to the then remaining maturity of the Notes assuming redemption of the
Notes on ________, 2001; provided, however, that if the Make-Whole Average Life
of such Note is not equal to the constant maturity of the United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Make-Whole
Average Life of such Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used. "Make-Whole Average Life" means the number
of years (calculated to the nearest one-twelfth) between the date of redemption
and _________, 2001.
"Make-Whole Price" with respect to a Note means the greater of (i) the sum
of the outstanding principal amount and Make-Whole Amount of such Note, and
(ii) the redemption price of such Note on __________, 2001, determined pursuant
to the Indenture (______% of the principal amount).
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<PAGE> 18
"Maturity Date" means ________, 2006.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain
(but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
Liquid Securities or any other any non-cash consideration received in any Asset
Sale, but excluding cash amounts placed in escrow, until such amounts are
released to the Company), net of the direct costs relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking fees,
and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements),
amounts required to be applied to the repayment of Indebtedness (other than
Indebtedness under any Credit Facility) secured by a Lien on the asset or
assets that were the subject of such Asset Sale , amounts required to be paid
to any Person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the asset or assets that were the subject of such Asset
Sale, and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP and any reserve established for
future liabilities.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and (iii) as to which the lenders have been
notified in writing that they will not have any recourse to the stock or assets
of the Company or any of its Restricted Subsidiaries.
"Note Registrar" initially means the Trustee, as registrar with respect to
the Notes in global form, or any successor entity thereto.
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<PAGE> 19
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, the Assistant Secretary or any Vice-President of
such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company, by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Oil and Gas Business" means any business relating to (i) the acquisition,
exploration, development, operation and disposition of interests in oil, gas
and other hydrocarbon properties and other minerals and products produced in
association therewith, (ii) the gathering, marketing, treating, processing,
storage, selling and transporting of any production from such interests or
properties and minerals and products produced in association therewith, or
(iii) any activity that is ancillary to or necessary or appropriate for the
activities described in clauses (i) and (ii) of this definition.
"Oil and Gas Hedging Contracts" means any oil and gas purchase or hedging
agreement, and other agreement or arrangement, in each case, that is designed
to provide protection against oil and gas price fluctuations.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Guarantor or
the Trustee.
"Pari Passu Indebtedness" means indebtedness which ranks pari passu in
right of payment to the Notes.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (c) that are at the time
outstanding, not to exceed the greater of $10 million; and (d) shares of
Capital Stock received in connection with any good faith settlement of a
bankruptcy proceeding involving a trade creditor and (e) entry into operating
agreements, joint venturers, partnership agreements, working interests, royalty
interests, mineral leases, processing agreements, farm- out agreements,
contract for the sale, transportation or
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<PAGE> 20
exchange of oil and natural gas, unitization agreements, pooling arrangements,
area of mutual interest agreements, production sharing agreements or other
similar or customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered in to in the ordinary course of
the Oil and Gas Business, excluding, however, Investments in corporations.
"Permitted Liens" means (i) Liens securing Indebtedness of a Subsidiary
or Senior Debt that is outstanding on the date of issuance of the Notes or that
is permitted by the terms of the Indenture to be incurred; (ii) Liens securing
Attributable Debt with respect to sale and leaseback transactions permitted by
the terms of the Indenture; (iii) Liens in favor of the Company; (iv) Liens on
property existing at the time of acquisition thereof by the Company or any
Subsidiary of the Company and Liens on property or assets of a Subsidiary
existing at the time it became a Subsidiary, provided that such Liens were in
existence prior to the contemplation of the acquisition and do not extend to any
assets other than the acquired property; (v) Liens incurred or deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance or other kinds of social security, or to secure the
payment or performance of tenders, statutory or regulatory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business (including lessee or operator
obligations under statutes, governmental regulations or instruments related to
the ownership, exploration and production of oil, gas and minerals on state or
federal lands or waters); (vi) Liens existing on the date of the Indenture;
(vii) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (viii) statutory liens of landlords,
mechanics, suppliers, vendors, warehousemen, carriers or other like Liens
arising in the ordinary course of business; (ix) judgment Liens not giving rise
to an Event of Default so long as any appropriate legal proceeding that may have
been duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall not
have expired; (x) Liens on, or related to, properties or assets to secure all or
part or the costs incurred in the ordinary course of the Oil and Gas Business
for the exploration, drilling, development, or operation thereof; (xi) Liens on
pipeline or pipeline facilities that arise under operation of law; (xii) Liens
arising under operating agreements, joint venture agreements, partnership
agreements, oil and gas leases, farm-out agreements, division orders, contracts
for the sale, transportation or exchange of oil or natural gas, unitization and
pooling declarations and agreements, area of mutual interest agreements and
other agreements that are customary in the Oil and Gas Business; (xiii) Liens
reserved in oil and gas mineral leases for bonus or rental payments and for
compliance with the terms of such leases; (xiv) Liens securing the Notes; (xv)
Liens securing obligations in respect of Currency Hedge Obligations, Interest
Rate Protection Obligations and Oil and Gas Hedging Contract, but only to the
extent that the same constitute Permitted Indebtedness; (xvi) Liens on the
Capital Stock of Unrestricted Subsidiaries; and (xvii) Liens not otherwise
permitted by clauses (i) through (xvi) and that are incurred in the ordinary
course of business of the Company or any Subsidiary of the Company with respect
to obligations that do not exceed $5 million at any one time outstanding.
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<PAGE> 21
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Indebtedness incurred under the Senior
Credit Facility) of the Company or any of its Restricted Subsidiaries; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date on or later than the final maturity date of, and has
a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated
in right of payment to the Notes, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Notes on terms at least as favorable to the Holders
of Notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Production Payments" means Dollar-Denominated Production Payments and
Volumetric Production Payments, collectively.
"Prospectus" means the prospectus included as part of the registration
statement (Registration No. 333-_______) filed with the Commission in
connection with the Offering.
"Repurchase Offer" means an offer made by the Company to purchase all or
any portion of a Holder's Notes pursuant to Section 4.10 or 4.13 hereof.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
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<PAGE> 22
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Third Restatement of Credit
Agreement, dated as of April 26, 1996, by and among the Company and
Internationale Nederlanden (U.S.) Capital Corporation, as agent and as a
lender, and certain other financial institutions, as lenders, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, restated,
modified, renewed, refunded, replaced or refinanced, in whole or in part, from
time to time.
"Senior Guarantees" means the Guarantees of Obligations payable under the
documentation governing any Senior Debt.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act of 1933, as amended, as such Regulation is in
effect on the date hereof.
"Special Record Date" for the payment of Defaulted Interest means a date
fixed by the Trustee pursuant to Section 2.09 hereof.
"Subordinated Indebtedness" means any Indebtedness of the Company or any
of its Restricted Subsidiaries which is expressly by its terms subordinated in
right of payment to any other Indebtedness.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the Guarantees by the Guarantors of the
Obligations under this Indenture and the Notes.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Total Assets" means, with respect to any Person, the total consolidated
assets of such Person and its Restricted Subsidiaries, as shown on the most
recent balance sheet of such Person.
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<PAGE> 23
"Trustee" means the party named as such in the preamble to this Indenture
until a successor replaces it in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
and any Subsidiary of an Unrestricted Subsidiary; but only to the extent that
such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is
not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries, provided, however, that the
death or resignation of any such director or executive officer shall not cause a
Subsidiary that would otherwise be an Unrestricted Subsidiary to be deemed to be
a Restricted Subsidiary unless ten days has elapsed in which the Company has
failed to appoint or elect a successor to replace such director or executive
officer who satisfies the criteria set forth in this clause (e). Any such
designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet
the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the Company
shall be in default of such provision). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof and
(ii) no Default or Event of Default would be in existence following such
designation.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
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<PAGE> 24
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person to the extent (i) all of the outstanding Capital
Stock or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned, directly or indirectly, by such Person,
(ii) such Restricted Subsidiary is organized in a foreign jurisdiction and is
required by the applicable laws and regulations of such foreign jurisdiction to
be partially owned by the government of such foreign jurisdiction or individual
or corporate citizens of such foreign jurisdiction in order for such Restricted
Subsidiary to transact business in such foreign jurisdiction, provided that the
Company, directly or indirectly, owns the remaining Capital Stock or ownership
interests in such Restricted Subsidiary and, by contract or otherwise, controls
the management and business of such Restricted Subsidiary and derives the
economic benefits of ownership of such Restricted Subsidiary to substantially
the same extent as if such Restricted Subsidiary were a wholly owned
Subsidiary.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . 4.11
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . 4.13
"Change of Control Payment" . . . . . . . . . . . . . . . . . . 4.13
"Change of Control Payment Date" . . . . . . . . . . . . . . . . 4.13
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . 8.03
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Defaulted Interest" . . . . . . . . . . . . . . . . . . . . . . 2.09
"Designated Senior Debt" . . . . . . . . . . . . . . . . . . . . 10.02
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . 4.10
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
</TABLE>
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<PAGE> 25
<TABLE>
<S> <C>
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . 8.02
"Note Register" . . . . . . . . . . . . . . . . . . . . . . . . 2.06
"Note Registrar" . . . . . . . . . . . . . . . . . . . . . . . . 2.06
"Notice of Default" . . . . . . . . . . . . . . . . . . . . . . 6.01
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . 2.10
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . 10.04
"Payment Default" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Permitted Indebtedness" . . . . . . . . . . . . . . . . . . . . 4.09
"Physical Certificates" . . . . . . . . . . . . . . . . . . . . 2.01
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Representative" . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . . 4.07
"Senior Debt" . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"Stated Maturity" . . . . . . . . . . . . . . . . . . . . . . . 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes and the Subsidiary Guarantees means the
Company and the Guarantors, respectively, and any successor obligor upon
the Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined by
TIA reference to another statute or defined by rule enacted by the Commission
under the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction. For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise
requires:
(1) The terms defined in This Article have the meanings assigned to
them, except as otherwise expressly provided or unless the context
otherwise requires;
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<PAGE> 26
(2) all accounting terms not otherwise defined has the meaning
assigned to them in accordance with GAAP;
(3) unless the Context otherwise requires, the word "or" is not
exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the Commission from time to time.
(7) the words "herein" "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
(8) references to agreements and other instruments include
subsequent amendments and waivers but only to the extent not prohibited by
this Indenture.
ARTICLE 2
THE NOTES
Section 2.01. Forms of Notes Generally. The definitive Notes shall
be printed, lithographed or engraved on steel-engraved borders or may be
produced in any other manner, all as determined by the officers executing such
Notes or notations of Subsidiary Guarantees, as the case may be, as evidenced by
their execution of such Notes or notations of Subsidiary Guarantees, as the case
may be.
Notes (including the notations thereon relating to the Subsidiary
Guarantees and the Trustees certificate of authentication) bought and sold
shall be issued initially in the form of one or more permanent global Notes
substantially in the form set forth on Exhibit A hereof (the "Global
Certificate") deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Subject to the limitation set forth in Section 2.02, the principal
amount of the Global Certificates may be increased or decreased from time to
time by adjustments made on the records of the Trustee as custodian for the
Depository, as hereinafter provided.
Notes (including the notations thereon relating to the Subsidiary
Guarantees and the Trustees certificate of authentication) offered and sold
other than as described in the preceding paragraph shall be issued in the form
of permanent certificated Notes in registered form in substantially the for set
forth in Exhibit A hereto ("Physical Certificates").
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<PAGE> 27
The Notes, the notations thereon relating to the Subsidiary Guarantees and
the Trustee's certificate of authentication shall be in substantially the forms
set forth in this Article, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined by the officers executing such Notes or notations of Subsidiary
Guarantees, as the case may be, as evidenced by their execution of the Notes or
notations of Subsidiary Guarantees, as the case may be. Any portion of the
text of any Note may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Note. In addition to the requirements of
Exhibit A, the Notes may also have set forth on the reverse side thereof a form
of assignment and forms to elect purchase by the Company pursuant to Sections
3.09 and 4.13 hereof.
Section 2.02. Title and Terms. The aggregate principal amount of Notes
which may be authenticated and delivered under this Indenture is limited to
$175,000,000 except for Notes authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Notes pursuant to Section
2.5, 2.6, 2.7, 2.8, [9.6], 4.13, 3.09 or 3.06 hereof.
The Notes shall be known and designated as the "__% Senior Subordinated
Notes Due 2006" of the Company. Their Stated Maturity shall be ___________,
2006, and they shall bear interest at the rate of ______% per annum from
_______, 1996, or from the most recent Interest Payment Date to which interest
has been paid or duly provided for, payable semiannually on ______ 1 and
________ 1 in each year, commencing _______, 1997, and at said Stated Maturity,
until the principal thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the Notes shall
be payable at the office or agency of the Company maintained for such purpose
in The City of New York, or at such other office or agency of the Company as
may be maintained for such purpose; provided, however, that, at the option of
the Company, interest will be paid by check mailed to addresses of the Persons
entitled thereto as such addresses shall appear on the Note Register.
The Notes shall be redeemable as provided in Article 3 hereof.
The Notes shall be subject to defeasance at the option of the Company as
provided in Article 8 hereof.
The Notes shall be guaranteed by Subsidiary Guarantors as provided in
Article 11 hereof.
The Notes shall be subordinated in right of payment to Senior Indebtedness
as provided in Article 10 hereof.
Section 2.03. Denominations. The Notes shall be issuable only in
registered form without coupons and only in denominations of $1,000 and any
integral multiple thereof.
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<PAGE> 28
Section 2.04. Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Company by its Chairman, its President or a
Vice President of the Company, under its corporate seal reproduced thereon and
attested by its Secretary or an Assistant Secretary of the Company. The
signature of any of these officers on the Notes may be manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Notes executed by the Company and having the
notation of Subsidiary Guarantees in
substantially the form of Exhibit C hereto executed by the Subsidiary
Guarantors to the Trustee for authentication, together with a Company Order for
the authentication and delivery of such Notes, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Notes in
substantially the form of Exhibit D hereto with the notation of Subsidiary
Guarantees thereon as provided in this Indenture.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose unless there appears on such Note a certificate
of authentication substantially in the form provided for herein duly executed
by the Trustee by manual signature of an authorized officer, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Section 5.01
hereof, shall be consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise dispose of its Properties substantially as
an entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to Section 5.02 hereof, any of
the Notes authenticated or delivered prior to such consolidation, merger,
conveyance, transfer, lease or other disposition may, from time to time, at the
request of the successor Person, be exchanged for other Notes executed in the
name of the successor Person with such changes in phraseology and form as may
be appropriate, but otherwise in substance of like tenor as the Notes
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Request of the successor Person, shall authenticate and deliver
Notes as specified in such request for the purpose of such exchange. If Notes
shall at any time be authenticated and delivered in any new name of a successor
Person pursuant to this Section in exchange or substitution for or upon
registration of transfer of any Notes, such successor Person, at the option of
the Holders but
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<PAGE> 29
without expense to them, shall provide for the exchange of all Notes at the time
Outstanding for Notes authenticated and delivered in such new name.
Section 2.05. Temporary Notes. Pending the preparation of definitive
Notes, the Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Notes in lieu of
which they are issued and having the notations of Subsidiary Guarantees thereon
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes and notations of Subsidiary
Guarantees may determine, as conclusively evidenced by their execution of such
Notes and notations of Subsidiary Guarantees.
If temporary Notes are issued, the Company will cause definitive Notes to
be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 10.2 hereof, without charge to
the Holder. Upon surrender for cancellation of any one or more temporary
Notes, the Company shall execute and the Trustee shall authenticate and deliver
in exchange therefor a like principal amount of definitive Notes of authorized
denominations having notations of Subsidiary Guarantees thereon. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
Section 2.06. Registration, Registration of Transfer and Exchange. The
Company shall cause to be kept at the Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or
agency designated pursuant to Section 4.02 hereof being herein sometimes
referred to as the "Note Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and of transfers of Notes. The Note Register shall be in written form
or any other form capable of being converted into written form within a
reasonable time. At all reasonable times and during normal business hours, the
Note Register shall be open to inspection by the Trustee. The Trustee is
hereby initially appointed as security registrar (the "Note Registrar") for
the purpose of registering Notes and transfers of Notes as herein provided.
Upon surrender for registration of transfer of any Note at the office or
agency of the Company designated pursuant to Section 4.02 hereof, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Notes of any
authorized denomination or denominations of a like aggregate principal amount,
each such Note having notation of the Subsidiary Guarantees thereon.
Furthermore, any Holder of the Global Certificate shall, by acceptance of
such Global Certificate, agree that transfers of beneficial interest in such
Global Certificate may be effected only through a book-entry system maintained
by the Holder of such Global Certificate (or its agent), and that ownership of
a beneficial interest in the Note shall be required to be reflected in a book
entry.
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<PAGE> 30
At the option of the Holder, Notes may be exchanged for other Notes of any
authorized denomination and of a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, the Company shall execute, the
Subsidiary Guarantors shall execute notations of Subsidiary Guarantees on, and
the Trustee shall authenticate and deliver, the Notes which the Holder making
the exchange is entitled to receive.
All Notes and the Subsidiary Guarantees noted thereon issued upon any
registration of transfer or exchange of Notes shall be the valid obligations of
the Company and the respective Subsidiary Guarantors, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company or the Note Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Note Registrar, duly executed by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.05, 2.07, 3.06 or 9.05 hereof not involving any
transfer.
Neither the Trustee, the Note Registrar nor the Company shall be required
(i) to issue, register the transfer of or exchange any Note during a period
beginning at the opening of business 15 days before the mailing of a notice of
redemption of Notes selected for redemption under Section 11.4 hereof and
ending at the close of business on the day of such mailing of the relevant
notice of redemption, or (ii) to register the transfer of or exchange any Note
so selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part.
Section 2.07. Book-Entry Provisions for Global Certificate.
(a) The Global Certificate initially shall be registered in the name of
the Depository for such Global Certificate or the nominee of such Depository
and be delivered to the Trustee as custodian for such Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Certificate held
on their behalf by the Depository, or the Trustee as its custodian, or under
the Global Certificate, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by the Depository or shall impair,
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<PAGE> 31
as between the Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a holder of any Note.
(b) Transfers of the Global Certificate shall be limited to transfers of
such Global Certificate in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial owners in the
Global Certificate may be transferred in accordance with the rules and
procedures of the Depository. Physical Certificates shall be transferred to
all beneficial owners in exchange for their beneficial interests in the Global
Certificate if, and only if, either (1) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for the Global
Certificate and a successor Depository is not appointed by the Company within
90 days of such notice, (2) an Event of Default has occurred and is continuing
and the Note Registrar has received a request from the Depository to issue
Physical Certificates in lieu of all or a portion of the Global Certificate (in
which case the Company shall deliver Physical Certificates within 30 days of
such request) or (3) the Company determines not to have the Notes represented
by a Global Certificate.
(c) In connection with any transfer of a portion of the beneficial
interest in the Global Certificate to beneficial owners pursuant to subsection
(b) of this Section, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of the Global Certificate in an
amount equal to the principal amount of the beneficial interest in the Global
Certificate to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Physical Certificates of like tenor
and amount.
(d) In connection with the transfer of the entire Global Certificate to
beneficial owners pursuant to subsection (b) of this Section, the Global
Certificate shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall authenticate and deliver,
to each beneficial owner identified by the Depository in exchange for its
beneficial interest in the Global Certificate, an equal aggregate principal
amount of Physical Certificates of authorized denominations.
(e) The registered holder of the Global Certificate may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
Section 2.08. Mutilated, Destroyed, Lost and Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee or (ii) the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, and there is delivered to the Company and the Trustee such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Company or the Trustee that such Note has
been acquired by a bona fide purchaser, the Company shall execute, the
Subsidiary Guarantors shall execute the notations of Subsidiary Guarantees, and
upon Company Order the Trustee shall authenticate and deliver, in exchange for
any such mutilated Note or in lieu of any such destroyed, lost or stolen Note,
a new
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<PAGE> 32
Note of like tenor and principal amount, having the notations of Subsidiary
Guarantees thereon bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any mutilated,
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company and the respective Subsidiary Guarantors,
whether or not the mutilated, destroyed, lost or stolen Note shall be at any
time enforceable by anyone, and shall be entitled to all benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.09. Payment of Interest; Interest Rights Preserved. Interest
on any Note which is payable, and is punctually paid or duly provided for, on
any Interest Payment Date shall be paid to the Person in whose name such Note
(or one or more Predecessor Notes) is registered at the close of business on
the Regular Record Date for such interest at the office or agency of the
Company maintained for such purpose pursuant to Section 4.02 hereof.
Any interest on any Note which is payable, but is not punctually paid or
duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular Record Date by virtue of having been such
Holder, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Notes (such defaulted interest and
interest thereon herein collectively called "Defaulted Interest") may be paid
by the Company, at its election in each case, as provided in clause (a) or (b)
below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Notes (or their respective Predecessor Notes)
are registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Note and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited shall be held in trust for the benefit of the Persons
entitled to such
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<PAGE> 33
Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix
a Special Record Date for the payment of such Defaulted Interest which shall be
not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date, and in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be given in the manner provided for in
Section 12.02 hereof, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so given, such Defaulted Interest shall be paid to the
Persons in whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note delivered
under this Indenture upon registration of transfer of or in exchange for or in
lieu of any other Note shall carry the rights to interest accrued and unpaid,
and to accrue, which were carried by such other Note.
Section 2.10. Paying Agent. The Company shall also maintain an office or
agency where Notes may be presented for payment ("Paying Agent"). The Company
may appoint one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent. The Company may change any Paying Agent
without notice to any Holder. The Company shall notify the Trustee in writing
of the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Paying Agent, the
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent.
The Company initially appoints the Trustee to act as the Paying Agent with
respect to the Global Certificates.
Section 2.11. Paying Agent to Hold Money in Trust. The Company shall
require each Paying Agent, including the Trustee (who shall be deemed to have
agreed by its execution of this Indenture), to agree in writing that the Paying
Agent shall hold in trust for the benefit of Holders or the Trustee (unless the
Paying Agent is the Trustee, in which case it shall hold in trust for the
Holders) all money held by the Paying Agent for the payment of principal,
premium, if any, or interest, on the Notes, and shall notify the Trustee of any
default by the Company or any Guarantor in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If
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<PAGE> 34
the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in
a separate trust fund for the benefit of the Holders all money held by it as
Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the
Company or a Guarantor, the Trustee shall serve as sole Paying Agent for the
Notes.
Section 2.12. Persons Deemed Owners. Prior to the due presentment of a
Note for registration of transfer, the Company, the Subsidiary Guarantors, the
Note Registrar, the Trustee and any agent of the Company, the Subsidiary
Guarantors or the Trustee may treat the Person in whose name such Note is
registered as the owner of such Note for the purpose of receiving payment of
principal of (and premium, if any, on) and (subject to Section 3.8 hereof)
interest on such Note and for all other purposes whatsoever, whether or not
such Note be overdue, and none of the Company, the Subsidiary Guarantors, the
Note Registrar, the Trustee or any agent of the Company, the Subsidiary
Guarantors or the Trustee shall be affected by notice to the contrary.
Section 2.13. Holder Lists. The Trustee shall preserve in as current a
form as is reasonably practicable the most recent list available to it of the
names and addresses of all Holders and shall otherwise comply with TIA (S)
312(a). If the Trustee is not the Registrar, the Company and/or the Guarantors
shall furnish to the Trustee at least seven Business Days before each interest
payment date and at such other times as the Trustee may request in writing, a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of the Holders of Notes and the Company and the
Guarantors shall otherwise comply with TIA (S) 312(a).
Section 2.14. Outstanding Notes. The Notes outstanding at any time are
all the Notes authenticated by the Trustee except for those cancelled by it,
those delivered to it for cancellation, those reductions in the interest in a
Global Certificate effected by the Trustee in accordance with the provisions
hereof, and those described in this Section as not outstanding. Except as set
forth in Section 2.15 hereof, a Note does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.08 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.15. Treasury Notes. In determining whether the Holders of the
required principal amount of Notes have concurred in any direction, waiver or
consent, Notes owned by the Company, any Guarantor, or by any Affiliate of the
Company or any Guarantor, shall be considered as though
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not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that a Trustee actually knows are so owned shall be so disregarded.
Section 2.16. Cancellation. All Notes surrendered for payment,
redemption, registration of transfer or exchange shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Company may at any time deliver to the Trustee
for cancellation any Notes previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Notes so
delivered shall be promptly cancelled by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes cancelled as provided in
this Section, except as expressly permitted by this Indenture. All cancelled
Notes held by the Trustee shall be destroyed and a certificate of their
destruction delivered to the Company unless by a Company Order the Company
shall direct that cancelled Notes be returned to it.
Section 2.17. Computation of Interest. Interest on the Notes shall be
computed on the basis of a 360-day year comprised of twelve 30-day months.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee. If the Company elects to redeem Notes
pursuant to the optional redemption provisions of Section 3.07 hereof, it shall
furnish to the Trustee, at least 30 days but not more than 60 days before a
redemption date, an Officers' Certificate setting forth (i) the paragraph of
the Notes and/or Section of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Notes to
be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed. If less than all of the
Notes are to be redeemed at any time, selection of Notes for redemption shall
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or, if the
Notes are not so listed, on a pro rata basis, by lot or by such method as the
Trustee shall deem fair and appropriate; provided that no Notes of $1,000 or
less shall be redeemed in part. In the event of partial redemption by lot, the
particular Notes to be redeemed shall be selected, unless otherwise provided
herein, not less than 30 nor more than 60 days prior to the redemption date by
the Trustee from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof shall be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the
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redemption date, unless the Company defaults in payment of the redemption price,
interest ceases to accrue on Notes or portions of them called for redemption.
Except as provided in this Section 3.02, provisions of this Indenture that apply
to Notes called for redemption also apply to portions of Notes called for
redemption.
Section 3.03. Notice of Redemption. Subject to the provisions of Section
3.09 hereof, at least 30 days but not more than 60 days before a redemption
date, the Company shall mail or cause to be mailed, by first class mail, a
notice of redemption to each Holder of Notes to be redeemed at such Holder's
registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, and interest on Notes called for redemption cease to accrue on
and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request and expense, the Trustee shall give the notice of
redemption in the Company's name; provided, however, that the Company shall
have delivered to the Trustee, at least 45 days prior to the redemption date,
an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption. Once notice of redemption
is mailed in accordance with Section 3.03 hereof, Notes called for redemption
become irrevocably due and
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payable on the redemption date at the redemption price. A notice of redemption
may not be conditional.
Section 3.05. Deposit of Redemption Price. On or prior to the redemption
date, the Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Notes to
be redeemed on that date. The Trustee or the Paying Agent shall promptly
return to the Company any money deposited with the Trustee or the Paying Agent
by the Company in excess of the amounts necessary to pay the redemption price
of and accrued interest on all Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date and interest, if any, shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest, if any, shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be
so paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case
at the rate provided in the Notes and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part. Upon surrender of a Note that is
redeemed in part, the Company shall issue and, upon the receipt of a written
authentication order of the Company signed by two Officers of the Company, the
Trustee shall authenticate for the Holder at the expense of the Company a new
Note equal in principal amount to the unredeemed portion of the Note
surrendered.
Section 3.07. Optional Redemption. (a) Except as set forth in clauses
(b) or (c) of this Section 3.07, the Company shall not have the option to
redeem the Notes pursuant to this Section 3.07 prior to ________, 2001. From
and after ________, 2001, the Company shall have the option to redeem the
Notes, in whole or in part, at the redemption prices (expressed as percentages
of principal amount) set forth below plus accrued and unpaid interest, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on _______ of each of the years indicated below:
<TABLE>
<CAPTION>
Percentage of
Year Principal Amount
---- ----------------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . %
2002 . . . . . . . . . . . . . . . . . . . %
2003 . . . . . . . . . . . . . . . . . . . %
2004 and thereafter . . . . . . . . . . . . 100.000%
</TABLE>
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<PAGE> 38
(b) Notwithstanding the provisions of clauses (a) or (c) of this Section
3.07, at any time prior to ______, 2001, the Company may, at its option, on one
or more occasions, redeem all or any portion of the Notes at the Make-Whole
Price plus accrued and unpaid interest to the date of redemption.
(c) Notwithstanding the provisions of clauses (a) or (b) of this Section
3.07, at any time prior to _____________, 1999, the Company may, at its option,
on any one or more occasions, redeem up to $61.25 million in aggregate
principal amount of Notes at a redemption price of ______% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
redemption date, with the net proceeds of an offering of common equity of the
Company; provided that at least $113.75 million in aggregate principal amount
of Notes remains outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 60
days of the date of the closing of such offering of common equity of the
Company.
(d) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption. Except as set forth under Sections
4.10 and 4.13 hereof, the Company shall not be required to make mandatory
redemption or sinking fund payments with respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds. In
the event that, pursuant to Section 4.10 hereof, the Company shall be required
to commence an offer to all Holders of Notes and, to the extent required by the
terms thereof, to all holders or lenders of Pari Passu Indebtedness, to
purchase Notes and any such Pari Passu Indebtedness (an "Asset Sale Offer"), it
shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same
manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain
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all instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer,
shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a
Depository, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three Business Days before the Purchase
Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depository or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered
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pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were accepted for
payment by the Company in accordance with the terms of this Section 3.09. The
Company, the Depository or the Paying Agent, as the case may be, shall promptly
(but in any case not later than five days after the Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Note, and the Trustee, upon receipt of a
written authentication order of the Company signed by two Officers of the
Company shall authenticate and mail or deliver such new Note to such Holder, in
a principal amount equal to any unpurchased portion of the Note surrendered.
Any Note not so accepted shall be promptly mailed or delivered by the Company to
the Holder thereof. The Company shall publicly announce the results of the
Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes. The Company shall pay or cause to be
paid the principal of, premium, if any, and interest on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest shall be considered paid on the date due if the Paying Agent, if other
than the Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time
on the due date money deposited by the Company in immediately available funds
and designated for and sufficient to pay all principal, premium, if any, and
interest then due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency. The Company shall
maintain in the Borough of Manhattan, the City of New York, an office or agency
(which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Company
in respect of the Notes and this Indenture may be served. The Company shall
give prompt written notice to the Trustee of the location, and any change in
the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.
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<PAGE> 41
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
Section 4.03. Reports. The Company and the Guarantors shall file with
the Commission, to the extent such filings are accepted by the Commission and
whether or not the Company has a class of securities registered under the
Exchange Act, the annual reports, quarterly reports and other documents that
the Company and the Guarantors would be required to file if the Company were
subject to Section 13 or 15 of the Exchange Act, in each case on or before the
dates on which such reports and other documents would have been required to
have been filed with the Commission if the Company had been subject to Section
13 or 15 of the Exchange Act, beginning with the Company's fiscal quarter ended
September 30, 1996. The Company shall also (i) file with the Trustee (with
exhibits), and provide to each Holder of Notes (without exhibits), without cost
to such Holder, copies of such reports and documents within 15 days after the
date on which the Company files such reports and documents with the Commission
or the date on which the Company would be required to file such reports and
documents if the Company were so required and (ii) if filing such reports and
documents with the Commission is not accepted by the Commission or is prohibited
under the Exchange Act, supply at the Company's cost copies of such reports and
documents (including any exhibits thereto) to any Holder of Notes promptly upon
written request. The Company shall at all times comply with TIA (S) 314(a).
Section 4.04. Compliance Certificate. (a) The Company shall deliver to
the Trustee, within 90 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the Company and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event
of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of, premium, or interest, if any, on the
Notes is prohibited or if such event has occurred, a description of the event
and what action the Company is taking or proposes to take with respect thereto.
As of the date hereof, the Company's fiscal year ends on December 31 of each
calendar year. In the event the Company changes its fiscal year, it shall
promptly notify the Trustee of such change.
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<PAGE> 42
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the fiscal year-end
financial statements delivered pursuant to Section 4.03(a) above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that the Company has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, within five Business Days of any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes. The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws. Each of the Company and
the Guarantors covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants
or the performance of this Indenture; and each of the Company and the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and permit the execution of
every such power as though no such law has been enacted.
Section 4.07. Restricted Payments. The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution on
account of the Company's Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
or to the direct or indirect holders of the Company's Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company); (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or any direct or indirect parent or other Affiliate of the Company that
is not a Subsidiary of the Company; (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is pari passu with or subordinated to the Notes (other than
the Notes), except at final maturity or in accordance with the mandatory,
redemption or repayment provisions set forth in the original documentation
governing such Indebtedness; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
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collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of all
other Restricted Payments made by the Company and its Subsidiaries after
the date of this Indenture (including Restricted Payments permitted by
clauses (1), (2), and (4) of the next succeeding paragraph), is less than
the sum of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of this Indenture to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since the date of this
Indenture of Equity Interests of the Company or of debt securities of the
Company that have been converted into or exchanged for such Equity
Interests (other than Equity Interests (or convertible debt securities)
sold to a Subsidiary of the Company and other than Disqualified Stock or
debt securities that have been converted into Disqualified Stock), plus
(iii) to the extent not otherwise included in Consolidated Net Income, the
net reduction in Investments in Unrestricted Subsidiaries resulting from
dividends, repayments of loans or advances, or other transfers of assets
(with such assets being valued at the lesser of their fair market value
and the Unrestricted Subsidiary's book value), in each case to the Company
or a Restricted Subsidiary after the date of the Indenture from any
Unrestricted Subsidiary or from the redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary.
The foregoing provisions shall not prohibit: (1) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (2) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Subsidiary of the Company)
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of other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (3) the defeasance,
redemption or repurchase of Subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Debt or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity Interests
of the Company (other than Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (4) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary of
the Company held by any of the Company's (or any of its Subsidiaries')
management pursuant to any stock option agreement in effect as of the date of
this Indenture; provided that the aggregate price paid to all Persons, other
than Stig Wennerstrom [under his employment agreement as in effect on the date
of the Indenture,] for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $5 million in any twelve-month period [(plus
the aggregate cash proceeds received by the Company during such twelve-month
period from any issuance of Equity Interests by the Company to members of
management of the Company and its Subsidiaries)]; and provided further, that no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (as determined by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee, which determination shall
be conclusive evidence of compliance with this provision) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company or
the applicable Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. Not later than five days after the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated shall be deemed to be Restricted Payments at
the time of such designation and shall reduce the amount available for
Restricted Payments under clause (c) of the first paragraph of this covenant.
All such outstanding Investments shall be deemed to constitute Investments in
an amount equal to the greatest of (x) the net book value of such Investments
at the time of such designation, (y) the fair market value of such Investments
at the time of such designation and (z) the original fair market value of such
Investments at the time they were made. Such designation shall only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(x) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (y) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any
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of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) the Senior
Credit Facility as in effect as of the date of this Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof or any other Credit Facility,
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements, refinancings or other Credit
Facilities are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Senior Credit Facility as in
effect on the date of this Indenture, (b) this Indenture and the Notes, (c)
applicable law, (d) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except, in the case of Indebtedness, to
the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person and its Subsidiaries, or the property or assets of the Person and
its Subsidiaries, so acquired, provided that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (e)
by reason of customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (f) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, or (g) Permitted Refinancing Debt, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Debt are no more restrictive than those contained in the agreements governing
the Indebtedness being refinanced.
Section 4.09. Incurrence of Indebtedness and Issuance of Disqualified
Stock. The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of preferred stock; provided, however, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if:
(i) the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have
been at least 2.5 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom) as set forth in the
definition of Fixed Charge Coverage Ratio; and
(ii) no Default or Event of Default shall have occurred and be
continuing at the time such additional Indebtedness is incurred or such
Disqualified Stock is issued or would occur as a consequence of the
incurrence of the additional Indebtedness or the issuance of the
Disqualified Stock.
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Notwithstanding the foregoing, this Indenture shall not prohibit any of
the following (collectively, "Permitted Indebtedness"): (a) the Indebtedness
evidenced by the Notes and any Guarantees; (b) the incurrence by the Company of
Indebtedness and letters of credit pursuant to the Senior Credit Facility (with
letters of credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Subsidiaries thereunder) in an
aggregate amount not to exceed the amount of the Borrowing Base then applicable
under the Senior Credit Facility; (c) the incurrence by the Company of the
Existing Indebtedness; (d) Indebtedness obligations in respect of Currency
Hedge Obligations, and obligations in respect of Interest Rate Protection
Obligations, but only to the extent that the stated aggregate notional amounts
of such obligations do not exceed 105% of the aggregate principal amount of the
Indebtedness covered by such Interest Rate Protection Obligations; (e) the
incurrence by the Company or any of its Restricted Subsidiaries of Permitted
Refinancing Indebtedness; (f) the incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Wholly Owned Restricted Subsidiaries; (g) Indebtedness
under Oil and Gas Hedging Contracts, provided that such contracts were entered
into in the ordinary course of business for the purpose of limiting risks that
arise in the ordinary course of business of the Company and its Subsidiaries;
(h) the incurrence by the Company of Indebtedness not otherwise permitted to be
incurred pursuant to this paragraph, provided that the aggregate principal
amount (or accreted value, as applicable) of all Indebtedness incurred pursuant
to this clause (h), together with all Permitted Refinancing Debt incurred
pursuant to clause (e) of this paragraph in respect of Indebtedness previously
incurred pursuant to this clause (h), does not exceed $25.0 million at any one
time outstanding; (i) accounts payable or other obligations of the Company or
any Subsidiary to trade creditors created or assumed by the Company or such
Subsidiary in the ordinary course of business in connection with the obtaining
of goods or services; (j) Indebtedness consisting of obligations in respect of
purchase price adjustments, guarantees or indemnities in connection with the
acquisition or disposition of assets; (k) the incurrence by the Company's
Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any
such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary,
such event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company; and (l) production imbalances arising in
the ordinary course of business.
Section 4.10. Asset Sales. The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee, which determination shall be
conclusive evidence of compliance with this provision) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 85% of the
consideration therefor received by the Company or such Restricted Subsidiary in
such Asset Sale plus all other Asset Sales, since the date of the Indenture, on
a cumulative basis, is in the form of cash or Cash Equivalents; provided that
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any guarantee thereof) that are assumed by
the transferee of any such
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assets pursuant to a customary novation agreement that releases the Company or
such Restricted Subsidiary from further liability and (y) any Liquid Securities
received by the Company or any such Restricted Subsidiary from such transferee
that are converted by the Company or such Restricted Subsidiary into cash
within 180 days of closing such Asset Sale, shall be deemed to be cash for
purposes of this provision (to the extent of the cash received).
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to reduce
indebtedness under the Senior Credit Facility or to the permanent reduction of
other Senior Debt, (b) to acquire a controlling interest in another Oil and Gas
Business, to make capital expenditures in respect of the Company's or any
Restricted Subsidiaries' Oil and Gas Business, or to purchase long-term assets
that are used or useful in the Company's or any Restricted Subsidiary's Oil and
Gas Business. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph shall (after the
expiration of the periods specified in this paragraph) be deemed to constitute
"Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall make an Asset Sale Offer to purchase the maximum principal amount
of Notes and any Pari Passu Indebtedness to which the Asset Sale Offer applies
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, thereon to the date of purchase, in accordance with the
procedures set forth in Section 3.09 hereof or the agreements governing the
Pari Passu Indebtedness, as applicable. To the extent that the aggregate
amount of Notes tendered or Pari Passu Indebtedness tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof and Pari Passu
Indebtedness surrendered by holders or lenders thereof, collectively, exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes and Pari
Passu Indebtedness to be purchased on a pro rata basis, based on the aggregate
principal amount (or accreted value, as applicable) thereof surrendered in such
Asset Sale Offer. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero.
Section 4.11. Transactions with Affiliates. The Company shall not, and
shall not permit any of its Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any of its Affiliates (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person, (ii) the Company delivers to the Trustee
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1 million an
Officers' Certificate certifying that such Affiliate Transaction
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<PAGE> 48
complies with clause (i) above and (iii) the Company delivers to the Trustee
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the members
of the Board of Directors who are disinterested with respect to such Affiliate
Transaction, which resolution shall be conclusive evidence of compliance with
this provision; provided that the following shall not be deemed Affiliate
Transactions: (1) transactions contemplated by any employment agreement or other
employee or director stock option or other compensation plan or arrangement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, including those described in the Prospectus under
the caption "Executive Compensation and Other Information-Employment
Agreements," (2) transactions between the Company and/or its Restricted
Subsidiaries, (3) the payment of reasonable and customary regular fees to
directors of the Company who are not employees of the Company or any of its
Subsidiaries, (4) indemnities of officers, directors and employees of the
Company or any Subsidiary pursuant to bylaw or statutory provisions, and (5)
Restricted Payments and Permitted Investments that are permitted by Section 4.07
hereof.
Section 4.12. Liens. The Company shall not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or otherwise cause or suffer to exist or become effective any Lien securing
Indebtedness of any kind (other than Permitted Liens) upon any of its property
or assets, now owned or hereafter acquired, unless all payments under the Notes
are secured on an equal and ratable basis with the obligations so secured until
such time as such obligations are no longer secured by a Lien.
Section 4.13. Offer to Repurchase Upon Change of Control. (a) Upon the
occurrence of a Change of Control, each Holder of Notes shall have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, thereon to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company shall
mail a notice to the Trustee and each Holder stating: (1) that the Change of
Control Offer is being made pursuant to this Section 4.13 and that all Notes
tendered shall be accepted for payment; (2) the purchase price and the purchase
date described below (the "Change of Control Payment Date"); (3) that any Note
not tendered shall continue to accrue interest; (4) that, unless the Company
defaults in the payment of the Change of Control Payment, all Notes accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest, if any, after the Change of Control Payment Date; (5) that Holders
electing to have any Notes purchased pursuant to a Change of Control Offer
shall be required to surrender the Notes, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes completed, to the Paying
Agent at the address specified in the notice prior to the close of business on
the fifth Business Day preceding the Change of Control Payment Date; (6) that
Holders shall be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (7) that Holders
whose
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Notes are being purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Change of Control Offer is required to remain open for at
least 20 Business Days and until the close of business on the fifth business day
prior to the Change of Control Payment Date. The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
(b) On a date that is no earlier than 30 days nor later than 70 days from
the date that the Company mails or causes to be mailed notice of the Change of
Control to the Holders (the "Change of Control Payment Date"), the Company
shall, to the extent lawful, (i) accept for payment all Notes or portions
thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered and (iii) deliver or cause
to be delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. Prior to complying with the provisions of this Section 4.13, but in
any event within 60 days following a Change of Control, the Company shall
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this Section 4.13. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Indenture are applicable.
The Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.13 and purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer.
Section 4.14. Additional Subsidiary Guarantees. In the event that any
Restricted Subsidiary of the Company is or shall become a Significant
Subsidiary, such Subsidiary shall be deemed to make the guarantee set forth in
Section 11.01 and the Company shall cause such Subsidiary to evidence such
guarantee in the manner set forth in Section 11.02. Notwithstanding the
foregoing, this Section 4.14 shall not apply to any Subsidiary that has been
properly designated as an Unrestricted Subsidiary in accordance with this
Indenture for so long as it continues to constitute an Unrestricted Subsidiary.
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Section 4.15. Corporate Existence. Subject to Article 5 hereof, the
Company and the Guarantors shall do or cause to be done all things necessary to
preserve and keep in full force and effect (i) its corporate existence, and the
corporate, partnership or other existence of each of its Restricted
Subsidiaries, in accordance with the respective organizational documents (as
the same may be amended from time to time) of the Company or any such
Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company, the Guarantors and their respective Restricted
Subsidiaries; provided, however, that the Company and the Guarantors shall not
be required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of their respective Restricted
Subsidiaries, if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company or
such Guarantor, as applicable, and its Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not adverse in any material respect to the
Holders of the Notes.
Section 4.16. No Senior Subordinated Debt. Notwithstanding the
provisions of Section 4.09 hereof, (i) the Company shall not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that
is subordinate or junior in right of payment to any Senior Debt and senior in
any respect in right of payment to the Notes and (ii) no Guarantor shall
directly or indirectly incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Guarantees issued in respect of Senior Debt and senior in any
respect in right of payment to the Subsidiary Guarantees, provided, however,
that the foregoing limitations shall not apply to distinctions between
categories of Indebtedness that exist by reason of any Liens arising or created
in respect of some but not all such Indebtedness.
Section 4.17. Sale and Leaseback Transactions. The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, enter into any sale
and leaseback transaction; provided that the Company may enter into a sale and
leaseback transaction if (i) the Company could have (a) incurred Indebtedness
in an amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the test set forth in the first paragraph of Section
4.09 hereof and (b) incurred a Lien to secure such Indebtedness pursuant to
Section 4.12 hereof (ii) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by a resolution the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee, which determination shall be conclusive
evidence of compliance with this provision) of the property that is the subject
of such sale and leaseback transaction and (iii) the transfer of assets in such
sale and leaseback transaction is permitted by, and the Company applies the net
proceeds of such transaction in compliance with, Section 4.10 hereof.
Section 4.18. Business Activities. The Company and the Guarantors shall
not, and shall not permit any Restricted Subsidiary to, engage in any material
respect in any business other than the Oil and Gas Business.
ARTICLE 5
SUCCESSORS
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<PAGE> 51
Section 5.01. Merger, Consolidation, or Sale of All or Substantially All
Assets. The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person,
and the Company may not permit any of its Restricted Subsidiaries to enter into
any such transaction or series of transactions if such transaction or series of
transactions would, in the aggregate, result in a sale, assignment, transfer,
lease, conveyance, or other disposition of all or substantially all of the
properties or assets of the Company and its Restricted Subsidiaries, taken as a
whole, to another Person, in either case unless: (i) the Company is the
surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the Person formed
by or surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Notes and this Indenture pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee; (iii) immediately before and after
giving effect to such transaction or series of transactions on a pro forma
basis (and treating any Indebtedness not previously an obligation of the
Company or any of its Restricted Subsidiaries in connection with or as a result
of such transaction as having been incurred at the time of such transaction),
no Default or Event of Default shall have occurred and be continuing; and (iv)
except in the case of a consolidation or merger of the Company with or into a
Wholly Owned Subsidiary of the Company, the Company or the Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) shall have Total Assets immediately after the
transaction equal to or greater than the Total Assets of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction
had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
test set forth in the first paragraph of Section 4.09 hereof. Notwithstanding
the foregoing clauses (iii) and (iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company and (b) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating in another jurisdiction.
Section 5.02. Successor Corporation Substituted. Upon any consolidation
or merger, or any sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01 hereof, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from
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the obligation to pay the principal of and interest on the Notes except in the
case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default. An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on the Notes
when the same becomes due and payable and the Default continues for a
period of 30 days, whether or not such payment is prohibited by the
provisions of Article 10 hereof;
(2) the Company defaults in the payment of the principal of or
premium, if any, on the Notes when the same become due and payable at
maturity, upon redemption or otherwise, whether or not such payment is
prohibited by the provisions of Article 10 hereof;
(3) the Company fails to observe or perform any covenant, condition
or agreement on the part of the Company to be observed or performed
pursuant to Sections 4.07, 4.09, 4.10, 4.13 and 5.01 hereof and the
Default continues for the period and after the notice specified below;
(4) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Notes or this Indenture and the
Default continues for the period and after the notice specified below;
(5) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is Guaranteed by the Company or any
of its Subsidiaries), whether such Indebtedness or Guarantee now exists or
shall be created hereafter, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness
on the date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there is
then existing a Payment Default or the maturity of which has been so
accelerated, aggregates in excess of $5 million; provided that if any such
default is cured or waived or any such acceleration rescinded, or such
Indebtedness is repaid, within a period of 10 days from the continuation
of such default beyond the applicable grace period or the occurrence of
such acceleration, as the case may be, such Event of Default under the
Indenture and any consequential acceleration of the Notes shall be
automatically rescinded, so long as such rescission does not conflict with
any judgment or decree;
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(6) a final, nonappealable judgment or final, nonappealable
judgments for the payment of money are entered by a court or courts of
competent jurisdiction against the Company or any of its Subsidiaries and
such judgment or judgments remain unpaid or undischarged for a period
(during which execution shall not be effectively stayed) of 60 days,
provided that the aggregate of all such undischarged judgments exceeds $5
million;
(7) the Company or any of its Subsidiaries that constitute a
Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, pursuant to or within the
meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become due;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any of its
Subsidiaries that constitute a Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary, in an involuntary case,
(b) appoints a Custodian of the Company or any of its
Subsidiaries that constitute a Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary, or for all or substantially all of the property of the
Company or any of its Subsidiaries that constitute a Significant
Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, or
(c) orders the liquidation of the Company or any of its
Subsidiaries that constitute a Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a Significant
Subsidiary,
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
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<PAGE> 53
(9) except as otherwise permitted under the provisions of this
Indenture, any Subsidiary Guarantee of a Significant Subsidiary is held in
any judicial proceeding to be unenforceable or invalid or ceases for any
reason to be in full force and effect or any Guarantor that is a
Significant Subsidiary, or any Person acting on behalf of any such
Guarantor, denies or disaffirms such Guarantor's obligations under its
Subsidiary Guarantee.
The term "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
An Event of Default shall not be deemed to have occurred under clause (5)
or (6) until the Trustee shall have received written notice from the Company or
any of the Holders or unless a Responsible Officer shall have actual knowledge
of such Event of Default. A Default under clause (3) is not an Event of
Default until the Trustee notifies the Company, or the Holders of at least 25%
in principal amount of the then outstanding Notes notify the Company and the
Trustee, of the Default and the Company does not cure the Default within 30
days after receipt of the notice. A Default under clause (4) is not an Event
of Default until the Trustee notifies the Company, or the Holders of at least
25% in principal amount of the then outstanding Notes notify the Company and
the Trustee, of the Default and the Company does not cure the Default within 60
days after receipt of the notice. The notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default."
Section 6.02. Acceleration. If an Event of Default (other than an Event
of Default specified in clauses (7) and (8) of Section 6.01 hereof) relating to
the Company or any Restricted Subsidiary occurs and is continuing, the Trustee
by notice to the Company, or the Holders of at least 25% in principal amount
of the then outstanding Notes by written notice to the Company and the
Trustee, may declare the unpaid principal amount of and any accrued interest
on all the Notes to be due and payable immediately. Upon such declaration the
principal and interest shall be due and payable immediately (together with the
premium referred to in Section 6.01 hereof, if applicable); provided, however,
that so long as any Senior Debt or any commitment therefor is outstanding under
the Senior Credit Facility, any such notice or declaration shall not become
effective until the earlier of (a) five Business Days after such notice is
delivered to the representative for the Senior Debt or (b) the acceleration of
any Indebtedness under the Senior Credit Facility. Notwithstanding the
foregoing, if an Event of Default specified in clause (7) or (8) of Section
6.01 hereof relating to the Company, any Subsidiary that would constitute a
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary occurs, such an amount shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Holder. The Holders of a majority in
principal amount of the then outstanding Notes by written notice to the Trustee
may rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal or interest that has become due solely because
of the acceleration) have been cured or waived.
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Section 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal, premium and interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults. Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive an
existing Default or Event of Default and its consequences hereunder, except a
continuing Default or Event of Default in the payment of principal of, premium
or interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal
amount of the then outstanding Notes may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority. Holders of a majority in principal
amount of the then outstanding Notes may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of other Holders of
Notes or that may involve the Trustee in personal liability.
Section 6.06. Limitation on Suits. A Holder of a Note may pursue a
remedy with respect to this Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
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(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of principal, premium and interest on the Note, on
or after the respective due dates expressed in the Note (including in
connection with an offer to purchase), or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee is
authorized to recover judgment in its own name and as trustee of an express
trust against the Company or any Guarantor for the whole amount of principal
of, premium and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim. The Trustee is
authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including
any claim for the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders of the Notes allowed in
any judicial proceedings relative to the Company or any of the Guarantors (or
any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
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Section 6.10. Priorities. If the Trustee collects any money pursuant to
this Article, it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Sections 6.08 and 7.07 hereof, including payment of all
compensation, expense and liabilities incurred, and all advances made, by
the Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and Liquidated
Damages, if any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as a Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a
suit by Holders of more than 10% in principal amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in
its exercise, as a prudent man would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have furnished to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee. (a) The Trustee may conclusively rely
upon any document believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
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(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have furnished to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Sections 4.01 and 4.04 hereof, the Trustee
shall have no duty to inquire as to the performance of the Company's covenants
in Article 4 hereof. In addition, the Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Sections 4.01, 4.04 and 6.01(1) or (2) hereof or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
Section 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company, the Guarantors or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to
continue as trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this
Indenture, the Notes or the Subsidiary Guarantees, it shall not be accountable
for the Company's use of the proceeds from the Notes or any money paid to the
Company or upon the Company's direction under any provision of this Indenture,
it shall not be responsible for the use or application of any money received by
any Paying Agent other than the Trustee, and it shall not be responsible for
any statement or recital herein or in any certificate delivered pursuant hereto
or any statement in the Notes or any other document in connection with the sale
of the Notes or pursuant to this Indenture other than its certificate of
authentication.
Section 7.05. Notice of Defaults. If a Default or Event of Default
occurs and is continuing and if it is actually known to the Trustee, the
Trustee shall mail to Holders of Notes a notice of the Default or Event
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of Default in payment of principal of, premium, if any, or interest on,
any Note, the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice
is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes. Within 60 days
after each May 15 beginning with the May 15 following the date of this
Indenture, and for so long as Notes remain outstanding, the Trustee shall mail
to the Holders of the Notes a brief report dated as of such reporting date that
complies with TIA (S) 313(a) (but if no event described in TIA (S) 313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA (S) 313(b)(2) and
transmit by mail all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.07. Compensation and Indemnity. The Company and the Guarantors
shall pay to the Trustee from time to time reasonable compensation for its
acceptance of this Indenture and services hereunder, including, without
limitation, extraordinary services such as default administration. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company and the Guarantors shall reimburse
the Trustee promptly upon request for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company and the Guarantors shall indemnify the Trustee against any and
all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company and the Guarantors (including this Section 7.07) and defending
itself against any claim (whether asserted by the Company, the Guarantors or
any Holder or any other person) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent any
such loss, liability or expense may be attributable to its negligence or bad
faith. The Trustee shall notify the Company and the Guarantors promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company and the Guarantors shall not relieve the Company and the Guarantors of
their obligations hereunder. The Company and the Guarantors shall defend the
claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company and the Guarantors shall pay the reasonable
fees and expenses of such counsel. The Company and the Guarantors need not pay
for any settlement made without their consent, which consent shall not be
unreasonably withheld.
The obligations of the Company and the Guarantors under this Section 7.07
are joint and several and shall survive the satisfaction and discharge of this
Indenture.
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To secure the Company's and the Guarantors' payment obligations in this
Section, the Trustee shall have a Lien prior to the Notes on all money or
property held or collected by the Trustee, except that held in trust to pay
principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(7) or (8) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition
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any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc. If the Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation, the successor corporation
without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification. There shall at all times
be a Trustee hereunder that is a corporation organized and doing business under
the laws of the United States of America or of any state thereof that is
authorized under such laws to exercise corporate trustee power, that is subject
to supervision or examination by federal or state authorities and that has a
combined capital and surplus of at least $50 million as set forth in its most
recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company. The
Trustee is subject to TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge. Upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section
8.02, the Company and the Guarantors shall, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, be deemed to have been discharged
from their obligations with respect to all outstanding Notes on the date the
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conditions set forth below are satisfied (hereinafter, "Legal Defeasance").
For this purpose, Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive payments in respect of the principal
of, premium and interest on such Notes when such payments are due from the
trust fund described in Section 8.04 hereof, and as more fully set forth in
such Section, (b) the Company's obligations with respect to such Notes under
Article 2 and Section 4.02 hereof, (c) the rights, powers, trusts, duties and
immunities of the Trustee hereunder and the Company's obligations in connection
therewith and (d) this Article 8. Subject to compliance with this Article 8,
the Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance. Upon the Company's exercise under
Section 8.01 hereof of the option applicable to this Section 8.03, the Company
and the Guarantors shall, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, be released from their obligations under the
covenants contained in Sections 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13,
4.14, 4.16, 4.17 and 4.18 hereof and in clause (iv) of Section 5.01 and the
covenants contained in the Subsidiary Guarantees with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any compliance certificate,
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture, such
Notes and such Subsidiary Guarantees shall be unaffected thereby. In addition,
upon the Company's exercise under Section 8.01 hereof of the option applicable
to this Section 8.03 hereof, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, Sections 6.01(3) through 6.01(4) hereof shall not
constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance. The following
shall be the conditions to the application of either Section 8.02 or 8.03
hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(a) the Company or the Guarantors must irrevocably deposit with the
Trustee, in trust, for the benefit of the Holders of the Notes, cash in
United States dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case
may be, and the Company or the Guarantors must specify whether the Notes
are being defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company or the Guarantors shall have delivered to the Trustee an Opinion
of Counsel in the United States reasonably acceptable to the Trustee
confirming that (A) the Company or the Guarantors have received from, or
there has been published by, the Internal Revenue Service a ruling or (B)
since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company or the Guarantors shall have delivered to the Trustee an Opinion
of Counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Section 6.01(7) or 6.01(8) hereof is concerned, at
any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company
or any of its Restricted Subsidiaries is a party or by which the Company
or any of its Restricted Subsidiaries is bound;
(f) the Company or the Guarantors shall have delivered to the
Trustee an Opinion of Counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
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(g) the Company or the Guarantors shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was not made by
the Company or the Guarantors, as applicable, with the intent of
preferring the Holders of Notes over the other creditors of the Company or
the Guarantors, as applicable, with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or the Guarantors, as
applicable, or others; and
(h) the Company or the Guarantors shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, which, taken
together, state that all conditions precedent provided for or relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all
money and non-callable Government Securities (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof
in respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company and the Guarantors shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the cash or non-
callable Government Securities deposited pursuant to Section 8.04 hereof or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company. Any money deposited with the
Trustee or any Paying Agent, or then held by the Company, in trust for the
payment of the principal of, premium or interest on any Note and remaining
unclaimed for two years after such principal, premium or interest has become
due and payable shall be paid to the Company on its request or (if then held by
the Company) shall be discharged from such trust; and the Holder of such Note
shall thereafter, as a general creditor, look only to the Company for payment
thereof, and all liability of the Trustee or
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such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.
Section 8.07. Reinstatement. If the Trustee or Paying Agent is unable
to apply any United States dollars or non-callable Government Securities in
accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, then the obligations of
the Company and the Guarantors under this Indenture, the Notes and the
Subsidiary Guarantees shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the
Company or any Guarantor makes any payment of principal of, premium or interest
on any Note following the reinstatement of its obligations, the Company or such
Guarantor shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes. Notwithstanding
Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may
amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Notes in the case of a merger or consolidation pursuant
to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note; or
(e) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA.
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Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each of the Guarantors, as the case may be,
authorizing the execution of any such amended or supplemental Indenture, and
upon receipt by the Trustee of the documents described in Section 7.02 hereof,
the Trustee shall join with the Company and the Guarantors in the execution of
any amended or supplemental Indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
that may be therein contained, but the Trustee shall not be obligated to enter
into such amended or supplemental Indenture that affects its own rights, duties
or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes. Except as provided
below in this Section 9.02, the Company, the Guarantors and the Trustee may
amend or supplement this Indenture and the Notes with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes). Notwithstanding the foregoing,
without the consent of at least 66-2/3% in aggregate principal amount of the
Notes then outstanding (including consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes), no waiver or
amendment to this Indenture may make any change in the provisions of Sections
3.09, 4.10 and 4.13 hereof that adversely affect the rights of any Holder of
Notes. In addition, any amendment to the provisions of Article 10 of this
Indenture shall require the consent of the Holders of at least 66-2/3% in
aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of Holders of Notes.
Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in
aggregate principal amount of the Notes then outstanding may waive compliance
in a particular instance by the Company or any Guarantor with any provision of
this Indenture or the Notes. However, without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes
(except as provided above with respect to Sections 3.09, 4.10 and 4.13
hereof);
(c) reduce the rate of or change the time for payment of interest on
any Note;
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(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of premium if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (except as
provided above with respect to Sections 3.09, 4.10 and 4.13 hereof); or
(h) make any change in the foregoing amendment and waiver
provisions.
Upon the request of the Company accompanied by a resolution of the Board
of Directors of the Company and each of the Guarantors, as the case may be,
authorizing the execution of any such amended or supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee
of the documents described in Section 7.02 hereof, the Trustee shall join with
the Company and the Guarantors in the execution of such amended or supplemental
Indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver.
Section 9.03. Compliance with Trust Indenture Act. Every amendment or
supplement to this Indenture or the Notes shall be set forth in a amended or
supplemental Indenture that complies with the TIA as then in effect.
Section 9.04. Revocation and Effect of Consents. Until an amendment,
supplement or waiver becomes effective, a consent to it by a Holder of a Note
is a continuing consent by the Holder of a Note and every subsequent Holder of
a Note or portion of a Note that evidences the same debt
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as the consenting Holder's Note, even if notation of the consent is not made on
any Note; provided, that no such consent to an amendments supplement or waiver
shall be deemed effective unless it shall become effective within twelve months
after it is given. However, any such Holder of a Note or subsequent Holder of
a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes. The Trustee may place
an appropriate notation about an amendment, supplement or waiver on any Note
thereafter authenticated. The Company in exchange for all Notes may issue and
the Trustee shall authenticate new Notes that reflect the amendment, supplement
or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc. The Trustee shall sign
any amended or supplemental Indenture authorized pursuant to this Article 9 if
the amendment or supplement does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. Neither the Company nor any
Guarantor may sign an amendment or supplemental Indenture until its respective
Board of Directors approves it. In executing any amended or supplemental
Indenture, the Trustee shall be entitled to receive and (subject to Section
7.01) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture and that there has been
compliance with all conditions precedent.
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate. The Company agrees, and each
Holder by accepting a Note agrees, that the Indebtedness evidenced by the Note
is subordinated in right of payment, to the extent and in the manner provided
in this Article, to the prior payment in full of all Senior Debt (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Debt.
Section 10.02. Certain Definitions.
"Bankruptcy Law" means title 11, U.S. Code or any similar Federal or
state law for the relief of debtors.
"Designated Senior Debt" means (i) the Senior Credit Facility and (ii) any
other Senior Debt permitted under this Indenture the principal amount of which
is $5 million or more and that has been designated by the Company as
"Designated Senior Debt."
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"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Senior Debt" means (i) Indebtedness of the Company or any Subsidiary of
the Company under or in respect of any Credit Facility and (ii) any other
Indebtedness permitted to be incurred by the Company or any Subsidiary under
the terms of this Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes. Notwithstanding anything to the
contrary in the foregoing sentence, Senior Debt will not include (w) any
liability for federal, state, local or other taxes owed or owing by the
Company, (x) any Indebtedness of the Company to any of its Subsidiaries or
other Affiliates, (y) any trade payables or (z) any Indebtedness that is
incurred in violation of this Indenture.
A "distribution" may consist of cash, securities or other property, by
set-off or otherwise.
All Designated Senior Debt now or hereafter existing and all other
Obligations relating thereto shall not be deemed to have been paid in full
unless the holders or owners thereof shall have received payment in full in
cash (or other form of payment consented to by the holders of Designated Senior
Debt) with respect to such Designated Senior Debt and all other Obligations
with respect thereto.
Section 10.03. Liquidation; Dissolution; Bankruptcy. Upon any
distribution to creditors of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property, or in an assignment for the
benefit of creditors or any marshaling of the Company's assets and liabilities:
(1) the holders of Senior Debt shall be entitled to receive payment
in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of Notes shall
be entitled to receive any payment with respect to the Notes (except that
Holders of Notes may receive (i) securities that are subordinated to at
least the same extent as the Notes to (a) Senior Debt and (b) any
securities issued in exchange for Senior Debt, provided that the operation
of this clause (b) shall not cause the Notes to be treated in any case or
proceeding or similar event described in this Section 10.03 in the same
class of claims as the Senior Debt or any class of claims pari passu with
the Senior Debt for any payment or distribution and (ii) payments and
other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as provided
in subsection (1) above) are paid in full, any distribution to which the
Holders of Notes would be entitled shall be made to holders of Senior Debt
(except that Holders of Notes may receive (i) securities that are
subordinated at least to the same extent as the Notes to (a) Senior Debt
and (b) any securities issued in exchange for Senior Debt, provided that
the operation of this clause (b) shall not cause the Notes to be treated
in any case or proceeding or similar event
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described in this Section 10.03 in the same class of claims as the Senior
Debt or any class of claims pari passu with the Senior Debt for any
payment or distribution and (ii) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof).
Under the circumstances described in this Section 10.03, the Company or
any receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person making any payment or distribution of cash or other property is
authorized or instructed to make any payment or distribution to which the
Holders of the Notes would otherwise be entitled (other than the securities and
payments made from any defeasance trust referred to in the second parenthetical
clause of each of clauses (1) and (2) above, which shall be delivered or paid
to the Holders of Notes as set forth in such clauses) directly to the holders
of the Senior Debt (pro rata to such holders on the basis of the respective
amounts of Senior Debt held by such holders) or their representatives, or to
any trustee or trustees under any other indenture pursuant to which any such
Senior Debt may have been issued, as their respective interests appear, to the
extent necessary to pay all such Senior Debt in full, in cash or cash
equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
To the extent any payment of Senior Debt (whether by or on behalf of the
Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by, or
paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent
or other similar Person, the Senior Debt or part thereof originally intended to
be satisfied shall be deemed to be reinstated and outstanding as if such
payment had not occurred. To the extent the obligation to repay any Senior
Debt is declared to be fraudulent, invalid or otherwise set aside under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then the obligation so declared fraudulent, invalid or otherwise set aside (and
all other amounts that would come due with respect thereto had such obligation
not been so affected) shall be deemed to be reinstated and outstanding as
Senior Debt for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred.
Section 10.04. Default on Designated Senior Debt. The Company may not
make any payment or distribution to the Trustee or any Holder in respect of
Obligations with respect to the Notes and may not acquire from the Trustee or
any Holder any Notes for cash or property (other than (i) securities that are
subordinated to at least the same extent as the Notes to (a) Senior Debt and
(b) any securities issued in exchange for Senior Debt, provided that the
operation of this clause (b) shall not cause the Notes to be treated in any
case or proceeding or similar event described in section 10.03 in the same
class of claims as the Senior Debt or any class of claims pari passu with the
Senior Debt for any payment or distribution and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
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(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits, or with the giving of
notice or passage of time or both (unless cured or waived) would permit,
holders of the Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from a Person who may give it pursuant to
Section 10.12 hereof. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (i) at least 360 days shall have
elapsed since the date of commencement of the payment blockage period
resulting from the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the
Notes that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice; provided that, in the case of a
breach of a particular financial covenant, the Company shall have been in
compliance for at least one full 90 consecutive day period commencing
after the date of delivery of such Payment Blockage Notice.
The Company shall resume payments on and distributions in respect of the
Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days past the date on which the Payment Blockage Notice is
received if the maturity of such Designated Senior Debt has not been
accelerated, if this Article otherwise permits the payment, distribution
or acquisition at the time of such payment or acquisition.
In no event will a payment blockage period extend beyond 179 days from the
date of the receipt by the Trustee of the notice and there must be a 181
consecutive day period in any 360-day period during which no payment blockage
period is in effect. In the event that, notwithstanding the foregoing, the
Company makes any payment or distribution to the Trustee or the holder of any
Note prohibited by the subordination provision of the Indenture, then such
payment or distribution will be required to be paid over and delivered
forthwith to the holders (or their representative) of Designated Senior Debt.
Section 10.05. Acceleration of Notes. If payment of the Notes is
accelerated because of an Event of Default, the Company shall promptly notify
holders of Senior Debt of the acceleration.
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Section 10.06. When Distribution Must Be Paid Over. In the event that
the Trustee or any Holder receives any payment of any Obligations with respect
to the Notes at a time when the Trustee or such Holder, as applicable, has
actual knowledge that such payment is prohibited by Section 10.03 or Section
10.04 hereof, such payment shall be held by the Trustee or such Holder, in
trust for the benefit of, and shall be paid forthwith over and delivered, upon
written request, to, the holders of Senior Debt as their interests may appear
or their Representative under the indenture or other agreement (if any)
pursuant to which such Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 10, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders of Notes or the
Company or any other Person money or assets to which any holders of Senior Debt
shall be entitled by virtue of this Article 10, except if such payment is made
as a result of the willful misconduct or gross negligence of the Trustee.
Section 10.07. Notice by Company. The Company shall promptly notify the
Trustee and the Paying Agent of any facts known to the Company that would cause
a payment of any Obligations with respect to the Notes to violate this Article,
but failure to give such notice shall not affect the subordination of the Notes
to the Senior Debt as provided in this Article.
Section 10.08. Subrogation. After all Senior Debt is paid in full and
until the Notes are paid in full, Holders of Notes shall be subrogated (equally
and ratably with all other Indebtedness pari passu with the Notes) to the
rights of holders of Senior Debt to receive distributions applicable to Senior
Debt to the extent that distributions otherwise payable to the Holders of Notes
have been applied to the payment of Senior Debt. A distribution made under
this Article to holders of Senior Debt that otherwise would have been made to
Holders of Notes is not, as between the Company and Holders of Notes, a payment
by the Company on the Notes.
Section 10.09. Relative Rights. This Article defines the relative
rights of Holders of Notes and holders of Senior Debt. Nothing in this
Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior Debt;
or
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(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.10. Subordination May Not Be Impaired by Company. No right
of any present or future holders of any Senior Debt to enforce subordination as
provided in this Article Ten will at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance
by the Company with the terms of this Indenture, regardless of any knowledge
thereof that any such holder of Senior Debt may have or otherwise be charged
with. The provisions of this Article Ten are intended to be for the benefit
of, and shall be enforceable directly by, the holders of Senior Debt.
Section 10.11. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Debt, the
distribution may be made and the notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon
any certificate of such Representative or of the liquidating trustee or agent
or other Person making any distribution to the Trustee or to the Holders of
Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
10.
Section 10.12. Rights of Trustee and Paying Agent. Notwithstanding the
provisions of this Article 10 or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts that
would prohibit the making of any payment or distribution by the Trustee, and
the Trustee and the Paying Agent may continue to make payments on the Notes,
unless the Trustee shall have received at its Corporate Trust Office at least
two Business Days prior to the date of such payment written notice of facts
that would cause the payment of any Obligations with respect to the Notes to
violate this Article, which notice shall specifically refer to Section 10.04
hereof. Only the Company or a Representative may give the notice. Nothing in
this Article 10 shall impair the claims of, or payments to, the Trustee under
or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights.
Section 10.13. Authorization to Effect Subordination. Each Holder by
the Holder's acceptance thereof authorizes and directs the Trustee on the
Holder's behalf to take such action as
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may be necessary or appropriate to effectuate the subordination as provided in
this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, a Representative or each lender under, or holder
of, Senior Debt is hereby authorized to file an appropriate claim for and on
behalf of the Holders of the Notes.
Section 10.14. Amendments. The provisions of this Article 10 shall not
be amended or modified without the written consent of the holders of all Senior
Debt.
Section 10.15. No Waiver of Subordination Provisions. Without in any
way limiting the generality of Section 10.09 of this Indenture, the holders of
Senior Debt may, at any time and from time to time, without the consent of or
notice to the Trustee or the Holders, without incurring responsibility to the
Holders and without impairing or releasing the subordination provided in this
Article Ten or the obligations hereunder of the Holders to the holders of
Senior Debt, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Debt or any instrument evidencing the same or any agreement under which Senior
Debt is outstanding or secured; (b) sell, exchange, release or otherwise deal
with any property pledged, mortgaged or otherwise securing Senior Debt; (c)
release any Person liable in any manner for the collection of Senior Debt; and
(d) exercise or refrain from exercising any rights against the Company and any
other Person.
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01. Subsidiary Guarantees. Each Guarantor, jointly and
severally, shall unconditionally guarantee to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Company hereunder or thereunder,
that: (a) the principal of and premium and interest on the Notes shall be
promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and interest
on premium and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or
thereunder shall be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
shall be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same immediately. The Guarantors hereby
agree that their obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which
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might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenant that this Subsidiary
Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes and this Indenture. If any Holder or the
Trustee is required by any court or otherwise to return to the Company or
Guarantors, or any Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or Guarantors, any amount paid by
either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor agrees that it shall not be entitled to any right of subrogation in
relation to the Holders of Notes in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantors for the
purpose of this Subsidiary Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Subsidiary
Guarantees.
Section 11.02. Execution and Delivery of Subsidiary Guarantees. To
evidence its Subsidiary Guarantee set forth in Section 11.01, each Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form of Exhibit C shall be endorsed by an officer of such Guarantor on each
Note authenticated and delivered by the Trustee, that this Indenture shall be
executed on behalf of such Guarantor by its President or one of its Vice
Presidents and attested to by an Officer and that such Guarantor shall deliver
to the Trustee an Opinion of Counsel that the foregoing have been duly
authorized, executed and delivered by such Guarantor and that such Guarantor's
Subsidiary Guarantee is a valid and legally binding obligation of such
Guarantor, enforceable against such Guarantor in accordance with its terms.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
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Section 11.03. Guarantors May Consolidate, etc., on Certain Terms. No
Guarantor may consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another corporation, Person or entity
whether or not affiliated with such Guarantor unless:
(a) subject to the provisions of Section 11.04 hereof, the Person
formed by or surviving any such consolidation or merger (if other than
such Guarantor) assumes all the obligations of such Guarantor, pursuant to
a supplemental indenture in form and substance reasonably satisfactory to
the Trustee in respect of the Notes, this Indenture and such Guarantor's
Subsidiary Guarantee;
(b) immediately after giving effect to such transaction, no Default
or Event of Default exists; and
(c) such transaction does not violate any of Sections 4.03, 4.07,
4.08, 4.09, 4.11, 4.12, 4.14, 4.16, 4.17 and 4.18.
Notwithstanding the foregoing, no Guarantor shall be permitted to
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person), another corporation, Person or entity pursuant to the
preceding sentence if such consolidation or merger would not be permitted by
Section 5.01 hereof.
In case of any such consolidation or merger and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee
endorsed upon the Notes and the due and punctual performance of all of the
covenants and conditions of this Indenture to be performed by the Guarantor,
such successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a Guarantor.
Such successor corporation thereupon may cause to be signed any or all of the
Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Subsidiary Guarantees so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Guarantees
theretofore and thereafter issued in accordance with the terms of this
Indenture as though all of such Subsidiary Guarantees had been issued at the
date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company, or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an entirety to
the Company.
Section 11.04. Releases of Subsidiary Guarantees. In the event of a
sale or other disposition of all or substantially all of the assets of any
Guarantor to a third party or an Unrestricted Subsidiary in a transaction that
does not violate any provisions of this Indenture, by way of merger,
consolidation or otherwise, or a sale or other disposition (including, without
limitation, by
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foreclosure) of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition (including, without limitation, by
foreclosure), by way of such a merger, consolidation or otherwise, of all of
the capital stock of such Guarantor) or the corporation acquiring the property
(in the event of a sale or other disposition of all of the assets of such
Guarantor) shall be released and relieved of any obligations under its
Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with Section 4.10 hereof. Upon delivery
by the Company to the Trustee of an Officers' Certificate and an Opinion of
Counsel to the effect that such sale or other disposition was made by the
Company in accordance with the provisions of this Indenture, including without
limitation Section 4.10, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from its obligations
under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
Any Guarantor that is designated an Unrestricted Subsidiary in accordance
with the terms of this Indenture shall be released from and relieved of its
obligations under its Subsidiary Guarantee and any Unrestricted Subsidiary that
ceases to be an Unrestricted Subsidiary shall be required to execute a
Subsidiary Guarantee in accordance with the terms of this Indenture.
Section 11.05. Limitation on Guarantor Liability. For purposes hereof,
each Guarantor's liability shall be that amount from time to time equal to the
aggregate liability of such Guarantor thereunder, but shall be limited to the
lesser of (i) the aggregate amount of the Obligations of the Company under the
Notes and this Indenture and (ii) the amount, if any, which would not have (A)
rendered such Guarantor "insolvent" (as such term is defined in the federal
Bankruptcy Law and in the Debtor and Creditor Law of the State of New York) or
(B) left it with unreasonably small capital at the time its Guarantee of the
Notes was entered into, after giving effect to the incurrence of existing
Indebtedness immediately prior to such time; provided that, it shall be a
presumption in any lawsuit or other proceeding in which such Guarantor is a
party that the amount guaranteed pursuant to its Guarantee is the amount set
forth in clause (i) above unless any creditor, or representative of creditors
of such Guarantor, or debtor in possession or trustee in bankruptcy of such
Guarantor, otherwise proves in such a lawsuit that the aggregate liability of
such Guarantor is limited to the amount set forth in clause (ii). In making
any determination as to the solvency or sufficiency of capital of a Guarantor
in accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may
have, contractual or otherwise, shall be taken into account.
Section 11.06. "Trustee" to Include Paying Agent. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the
Company and be then acting hereunder, the term "Trustee" as used in this
Article 11 shall in such case (unless the context shall otherwise require) be
construed as extending to and including such Paying Agent within
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its meaning as fully and for all intents and purposes as if such Paying Agent
were named in this Article 11 in place of the Trustee.
Section 11.07. Subordination of Subsidiary Guarantee. The obligations
of each Guarantor under its Subsidiary Guarantee pursuant to this Article 11
shall be junior and subordinated to a Senior Guarantee of such Guarantor on the
same basis as the Notes are junior and subordinated to Senior Debt of the
Company. For the purposes of the foregoing sentence, the Trustee and the
Holders shall have the right to receive and/or retain payments by any of the
Guarantors only at such times as they may receive and/or retain payments in
respect of the Notes pursuant to this Indenture, including Article 10 hereof.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls. If any provision of this
Indenture limits, qualifies or conflicts with the duties imposed by TIA
(S)318(c), the imposed duties shall control.
Section 12.02. Notices. Any notice or communication by the Company, the
Guarantors or the Trustee to the others is duly given if in writing and
delivered in Person or mailed by first class mail (registered or certified,
return receipt requested), telecopier or overnight air courier guaranteeing
next day delivery, to the others' address:
If to the Company or any Guarantors:
Forcenergy Inc
Forcenergy Center
2730 SW 3rd Avenue, Suite 800
Miami, FL 33129-2237
Telecopier No.: (305) 856-4300
Attention: Stig Wennerstrom
With a copy to:
Vinson & Elkins L.L.P.
First City Tower, Suite 2300
Houston, Texas 77002-6760
Telecopier No.: 713-615-5531
Attention: T. Mark Kelly, Esq.
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<PAGE> 76
If to the Trustee:
_______________________________
Telecopier No.: (____) ____________
Attention: Corporate Trust Department
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA (S) 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of
Notes. Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Guarantors, the Trustee, the Registrar and anyone else shall have the
protection of TIA (S) 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent. Upon
any request or application by the Company or any Guarantor to the Trustee to
take any action under this Indenture, the Company or such Guarantor, as the
case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
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(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
Section 12.05. Statements Required In Certificate Or Opinion. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate provided pursuant to
TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S) 314(e) and shall
include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or
her to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
Section 12.06. Rules By Trustee And Agents. The Trustee may make
reasonable rules for action by or at a meeting of Holders. The Registrar or
Paying Agent may make reasonable rules and set reasonable requirements for its
functions.
Section 12.07. No Personal Liability Of Directors, Officers, Employees
And Stockholders. No director, officer, employee, incorporator or stockholder
of the Company, as such, shall have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes,
by accepting a Note, waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public policy.
Section 12.08. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE
SUBSIDIARY GUARANTEES. THE COMPANY AND EACH SUBSIDIARY GUARANTOR IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW
YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING
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OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR A SUBSIDIARY GUARANTEE,
AND THE COMPANY AND EACH SUBSIDIARY GUARANTOR IRREVOCABLY AGREE THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED BY ANY SUCH
COURT.
Section 12.09. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret any other indenture, loan or debt
agreement of the Company or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture
and the Subsidiary Guarantees.
Section 12.10. Successors. All agreements of the Company and each
Guarantor in this Indenture and the Notes shall bind its respective successors.
All agreements of the Trustee in this Indenture shall bind its successors.
Section 12.11. Severability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 12.12. Counterpart Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
Section 12.13. Table of Contents, Headings, etc. The Table of Contents,
Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part of this Indenture and shall in no way modify or restrict any
of the terms or provisions hereof.
[Signatures on following page]
<PAGE> 79
SIGNATURES
Dated as of _____________, 1996
FORCENERGY INC
Attest: By: ________________________________________
Name: Stig Wennerstrom
Title: President; Chief Executive Officer
[TRUSTEE]
Attest: By: ________________________________________
Name: ______________________________________
Title:______________________________________
<PAGE> 80
EXHIBIT A
(Face of Note)
____% Senior Subordinated Notes due 2006
No. $___________________
FORCENERGY INC
promises to pay to
or registered assigns,
the principal sum of
Dollars on _________, 2006.
Interest Payment Dates: ___________ and ____________
Record Dates: ___________ 15 and ____________ 15
Dated: ,
------------------------------
1996
FORCENERGY INC
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
Cusip Number: By: _______________________________________
Name: _____________________________________
Title: ____________________________________
This is one of the Notes referred to (SEAL)
in the within-mentioned Indenture:
____________________________,
as Trustee
By:
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<PAGE> 81
(Back of Note)
____% Senior Subordinated Note due 2006
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depository to a nominee of the Depository or by a nominee of the Depository to
the Depository or another nominee of the Depository or by the Depository or any
such nominee to a successor Depository or a nominee of such successor
Depository. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.]1
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. Forcenergy Inc, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at the rate of
____% per annum, which interest shall be payable in cash semi-annually in
arrears on ___________ and ___________, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date");
provided that the first Interest Payment Date shall be ____________, 1996.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months.
2. Method of Payment. On each Interest Payment Date the Company will
pay interest to the Person who is the Holder of record of this Note as of the
close of business on the _________ or ___________ immediately preceding such
Interest Payment Date, even if this Note is cancelled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. Principal, premium if any
and interest, if any, on this Note will be payable at the office or agency of
the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest may be made by check
mailed to the Holder of this Note at its address set forth in the register of
Holders of Notes. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
_______________________________________
1This paragraph should be included only if the Note is issued in global form.
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<PAGE> 82
3. Paying Agent and Registrar. Initially,
_______________________________, the Trustee under the Indenture, will act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company, any Guarantor or any
other of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as
of ___________, 1996 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are general unsecured obligations of the
Company limited in an aggregate principal amount to $175,000,000 and will
mature on ____________, 2006.
5. Optional Redemption. (a) The Notes are not redeemable at the
Company's option prior to ____________, 2001. Thereafter, the Notes will be
subject to redemption at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on ____________ of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . %
2002 . . . . . . . . . . . . . . . . . . . . . . . . . %
2003 . . . . . . . . . . . . . . . . . . . . . . . . . %
2004 and thereafter . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding clauses (a) or (c) of this Paragraph 5, prior to
___________, 2001, the Company may, at its option, on one or more occasions
redeem all or any portion of the Notes at the Make-Whole Price plus accrued and
unpaid interest to the date of redemption.
(c) Notwithstanding the provisions of clauses (a) or (b) of this
Paragraph 5, prior to ___________, 1999 the Company may, at its option, on any
one or more occasions, redeem up to $61.25 million in aggregate principal
amount of Notes at a redemption price equal to ______% of the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, with
the net proceeds of an offering of common equity of the Company; provided that
at least $113.75 million in aggregate principal amount of Notes must remain
outstanding immediately after the occurrence of such redemption; and provided,
further, that any such redemption shall occur within 60 days of the date of the
closing of such offering of common equity of the Company.
6. Mandatory Redemption. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with
respect to the Notes.
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<PAGE> 83
7. Repurchase At Option of Holder. (a) Upon the occurrence of a Change
of Control, each Holder of Notes shall have the right to require the Company to
repurchase all or any part (equal to $1,000 or an integral multiple thereof) of
such Holder's Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of a Change of Control.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sales
permitted by the Indenture, when the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall make an Asset Sale Offer to purchase
the maximum principal amount of Notes and any Pari Passu Indebtedness to which
the Asset Sale Offer applies that may be purchased out of the Excess Proceeds,
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon to the date of purchase, in
accordance with the procedures set forth in Section 3.09 of the Indenture or
the agreements governing the Pari Passu Indebtedness, as applicable. To the
extent that the aggregate amount of Notes tendered or Pari Passu Indebtedness
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes.
If the aggregate principal amount of Notes surrendered by Holders thereof and
Pari Passu Indebtedness surrendered by holders or lenders thereof,
collectively, exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes and Pari Passu Indebtedness to be purchased on a pro rata basis,
based on the aggregate principal amount (or accreted value, as applicable)
thereof surrendered in such Asset Sale Offer. Upon completion of such Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
8. Notice of Redemption. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. Denominations, Transfer, Exchange. The Notes initially sold are in
registered form without coupons in minimum denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not register the transfer of any
Note or portion of a Note selected for redemption, except for the unredeemed
portion of any Note being redeemed in part. Also, it need
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<PAGE> 84
not register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date
and the corresponding Interest Payment Date.
10. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
12. Defaults and Remedies. Events of Default include: (i) default for
30 days in the payment when due of interest on the Notes (whether or not
prohibited by the provisions of Article 10 of the Indenture); (ii) default in
payment when due of the principal of or premium, if any, on the Notes (whether
or not prohibited by the provisions of Article 10 of the Indenture); (iii)
failure by the Company for 30 days after notice from the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding to
comply with the provisions of Sections 4.07, 4.09, 4.10, 4.13 and 5.01 of the
Indenture; (iv) failure by the Company for 60 days after notice from the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding to comply with any of its other agreements in the
Indenture or the Notes; (v) except as permitted by the Indenture, any
Subsidiary Guarantee of a Significant Subsidiary shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be
in full force and effect or any Guarantor that is a Significant Subsidiary, or
any Person acting on behalf of any such Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; (vi) default under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Subsidiaries) whether such Indebtedness or Guarantee now exists,
or is created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there is then
existing a Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more; (vii) failure by the Company or any of its
Restricted Subsidiaries to pay final, non-appealable
A-5
<PAGE> 85
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries
that constitute a Significant Subsidiary or any group of Subsidiaries that,
taken together, would constitute a Significant Subsidiary. If any Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency, with
respect to the Company, any Subsidiary that constitutes a Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute
a Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the Notes notice of any continuing Default
or Event of Default (except a Default or Event of Default relating to the
payment of principal or interest) if it determines that withholding notice is
in their interest. The Holders of a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required, upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
13. Trustee Dealings with Company. The Indenture contains certain
limitations on the rights of the Trustee, should it become a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
14. No Recourse Against Others. No director, officer, employee,
incorporator or stockholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes, by accepting a Note, waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that
such a waiver is against public policy.
15. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
16. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT
A-6
<PAGE> 86
TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
Forcenergy Inc
Forcenergy Center
2730 SW 3rd Avenue, Suite 800
Miami, FL 33129-2237
Telecopier No.: (305) 856-4300
Attention: Secretary
[FOOTNOTE 2: THE FORM OF SUBSIDIARY GUARANTEE ATTACHED AS EXHIBIT C TO THE
INDENTURE IS TO BE ATTACHED TO THIS NOTE]
A-7
<PAGE> 87
Assignment Form
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
___________________________________________________________________________
(Insert assignee's Social Security or tax I.D. No.)
___________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint
_________________________________________________________ agent to transfer
this Security on the books of the Company. The agent may substitute another to
act for him.
Date:______________
Your Signature: ______________________________________
(Sign exactly as your name appears on the face of this
Security)
Signature Guarantee: /*/ __________________________
________________________
/*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-8
<PAGE> 88
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.13 of the Indenture, check the box below:
[_] Section 4.10 [_]Section 4.13
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.13 of the Indenture, state the
amount you elect to have purchased: $___________
Date: Your Signature:
(Sign exactly as your name appears on the
Security)
Tax Identification No.:__________________________
Signature Guarantee: /*/ _________________________
_____________________
/*/ Participant in a recognized Signature Guarantee Medallion Program (or
other signature guarantor acceptable to the Trustee).
A-9
<PAGE> 89
Exhibit B
GUARANTORS
As of the initial date of this Indenture, there are no Guarantors.
B-1
<PAGE> 90
Exhibit C
Form of Subsidiary Guarantee
Each of the Guarantors hereby, jointly and severally, unconditionally
guarantees to each Holder of a Note authenticated and delivered by the Trustee
and to the Trustee and its successors and assigns, irrespective of the validity
and enforceability of this Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that: (a) the principal of and premium and
interest on the Notes shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on premium and interest on the Notes, if any, if
lawful, and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other obligations,
that same shall be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever reason, the Guarantors
shall be jointly and severally obligated to pay the same immediately.
The obligations of the Guarantors to the Holders of Notes and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 11 of the Indenture, and reference is hereby made to such
Indenture for the precise terms of this Subsidiary Guarantee. The terms of
Article 11 of the Indenture are incorporated herein by reference.
This is a continuing Subsidiary Guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its respective
successors and assigns to the extent set forth in the Indenture until full and
final payment of all of the Company's Obligations under the Notes and the
Indenture and shall inure to the benefit of the Trustee and the Holders of
Notes and their successors and assigns and, in the event of any transfer or
assignment of rights by any Holder of Notes or the Trustee, the rights and
privileges herein conferred upon that party shall automatically extend to and
be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Notwithstanding the foregoing, any Guarantor that satisfies
the provisions of Section 11.04 of the Indenture shall be released of its
obligations hereunder. This is a Subsidiary Guarantee of payment and not a
guarantee of collection.
This Subsidiary Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Subsidiary
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
For purposes hereof, each Guarantor's liability will be that amount from
time to time equal to the aggregate liability of such Guarantor hereunder, but
shall be limited to the lesser of (i) the aggregate amount of the obligations
of the Company under the Notes and the Indenture and (ii) the amount, if any,
which would not have (A) rendered such Guarantor "insolvent" (as such term is
C-1
<PAGE> 91
defined in the federal Bankruptcy Law and in the Debtor and Creditor Law of the
State of New York) or (B) left it with unreasonably small capital at the time
its Subsidiary Guarantee of the Notes was entered into, after giving effect to
the incurrence of existing Indebtedness immediately prior to such time;
provided that, it shall be a presumption in any lawsuit or other proceeding in
which such Guarantor is a party that the amount guaranteed pursuant to its
Subsidiary Guarantee is the amount set forth in clause (i) above unless any
creditor, or representative of creditors of such Guarantor, or debtor in
possession or trustee in bankruptcy of such Guarantor, otherwise proves in such
a lawsuit that the aggregate liability of such Guarantor is limited to the
amount set forth in clause (ii). The Indenture provides that, in making any
determination as to the solvency or sufficiency of capital of a Guarantor in
accordance with the previous sentence, the right of such Guarantor to
contribution from other Guarantors and any other rights such Guarantor may
have, contractual or otherwise, shall be taken into account.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
By: _______________________________________
Name: _________________________________
Title: ________________________________
<PAGE> 92
Exhibit D
Form of Trustee's Certificate of Authentication
The Trustee's certificate of authentication shall be in substantially the
following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the ____% Senior Subordinated Notes due 2006 referred
to in the within-mentioned Indenture.
Authenticated:
Dated: ____________________ ___________________________________________
Trustee
By: _______________________________________
Authorized Officer
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement on Form S-3 (Registration No. 333- xxxx) of our report dated February
27, 1996, on our audit of the financial statements of Forcenergy Inc as of
December 31, 1995 and for the year ended December 31, 1995, which report is
included in the annual report on Form 10-K filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934. We
consent to the incorporation by reference in this registration statement on
Form S-3 (Registration No. 333-xxxx) of our report dated August 30, 1996, on
our audit of the historical statement of revenues and direct operating expenses
of the properties acquired by Forcenergy Inc from Amerada Hess Corporation for
the year ended December 31, 1995, which report is included in the Form 8-K/A
filed with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934. We also consent to the reference to our firm under the
captions "Experts" and "Selected Financial Data."
/s/ COOPERS & LYBRAND L.L.P.
Miami, Florida
October 4, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated June 1, 1995, except as to the common stock reclassification and
conversion described in Note 1 which is as of July 6, 1995, appearing on page
F-3 of the Company's Annual Report on Form 10-K for the year ended December 31,
1995 relating to the financial statements of Forcenergy Inc. (formerly
Forcenergy Gas Exploration, Inc.) and our report dated May 12, 1995, appearing
on page 2 of the Company's Report on Form 8-K dated October 4, 1996
relating to the Historical Statement of Revenues and Direct Operating Expenses
of South Marsh Island Blocks 106, 136 and 137. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
/s/ PRICE WATERHOUSE LLP
Houston, Texas
October 4, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF NETHERLAND, SEWELL & ASSOCIATES, INC.
To the Board of Directors of Forcenergy Gas Exploration, Inc.:
We hereby consent to the use of our report dated March 1, 1996, of the
estimates of net proved oil and natural gas reserves of Forcenergy Inc., and
their present values, as of January 1, 1996, and the inclusion of our audit
report dated May 25, 1995, of the estimates of the net proved oil and natural
gas reserves of Forcenergy Gas Exploration, Inc. and their present values, as
of January 1, 1995, in this Form S-3 Registration Statement and the prospectus
incorporated therein, and all references to our firm therein.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ FREDERICK D. SEWELL
------------------------------------
Frederick D. Sewell
President
Dallas, Texas
October 4, 1996
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
AS INDEPENDENT PETROLEUM ENGINEERS, WE HEREBY CONSENT TO THE USE OF OUR REPORTS
DATED FEBRUARY 24, 1994 AND MAY 24, 1995 AND OUR ESTIMATES OF NET PROVED OIL
AND NATURAL GAS RESERVES OF FORCENERGY INC AS OF JANUARY 1, 1994 AND 1995 AND
TO ALL REFERENCES TO OUR FIRM INCLUDED IN THIS REGISTRATION STATEMENT.
/s/ JOE C. NEAL & ASSOCIATES
MIDLAND, TEXAS
October 4, 1996
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this registration statement on Form S-3 of our report dated
April 12, 1995 except for Note J for which date is May 25, 1995 included in the
Company's Current Report on Form 8-K dated October 4, 1996 relating to the
financial statements of Ashlawn Energy, Inc. for the years ended December 31,
1994 and 1993 and each of the two years in the period ended December 31, 1994
and for the period from inception (January 2, 1992) to December 31, 1992. We
also consent to the reference to us under the headings "Experts" in such
Prospectus.
/s/ LaPorte, Sehrt, Romig and Hand
A Professional Accounting Corporation
<PAGE> 1
-----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
FORCENERGY INC
(Exact name of obligor as specified in its charter)
DELAWARE 63-1098468
(State or other jurisdiction of (I.R.S. employer
Incorporation or organization) Identification no.)
2730 SW 3RD AVENUE
SUITE 800
MIAMI, FLORIDA 33129-2237
(Address of principal executive offices) (Zip Code)
$175,000,000 SENIOR SUBORDINATED NOTES
(Title of the indenture securities)
<PAGE> 2
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate
trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
Item 3. -15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of
Bankers Trust Company dated August 7, 1990,
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
June 21, 1995 Incorporated herein by
reference to Exhibit 1 filed with Form T-1
Statement, Registration No. 33-65171, and
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
March 21, 1996, copy attached.
Exhibit 2 - Certificate of Authority to commence
business - Incorporated herein by reference
to Exhibit 2 filed with Form T-1 Statement,
Registration No. 33-21047.
Exhibit 3 - Authorization of the Trustee to exercise
corporate trust powers - Incorporated herein
by reference to Exhibit 2 filed with Form
T-1 Statement, Registration No. 33-21047.
Exhibit 4 - Existing By-Laws of Bankers Trust
Company, dated as amended on October 19,
1995. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1
Statement, Registration No. 33-65171.
-2-
<PAGE> 3
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company
required by Section 321(b) of the Act. -
Incorporated herein by reference to Exhibit
4 filed with Form T-1 Statement,
Registration No. 22-18864.
Exhibit 7 - A copy of the latest report of condition of
Bankers Trust Company dated as of
July 31, 1996.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on the 4th day
of October, 1996.
BANKERS TRUST COMPANY
By: /s/ Matthew Seeley
-------------------
Matthew Seeley
Vice President
-4-
<PAGE> 5
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks June 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
<TABLE>
<S> <C> <C>
------------
| C400 |
Dollar Amounts in Thousands | RCFD Bil Mil Thou |
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS | / / / / / / / / / |
1. Cash and balances due from depository institutions (from Schedule RC-A): | / / / / / / / / / / / |
a. Noninterest-bearing balances and currency and coin(1) ....................... | 0081 1,631,000 |1.a.
b. Interest-bearing balances(2) ................................................. | 0071 2,066,000 |1.b.
2. Securities: | / / / / / / / / / / / |
a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... | 1754 0 |2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)...................... | 1773 3,761,000 |2.b.
3 Federal funds sold and securities purchased under agreements to resell in domestic offices| / / / / / // / / / / / |
of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / // / / / / / / / / |
a. Federal funds sold .................................................................| 0276 5,162,000 |3.a.
b. Securities purchased under agreements to resell ....................................| 0277 4,192,000 |3.b.
4. Loans and lease financing receivables: | / / / / / / / / / / / |
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 24,849,000 | / / / / / / / / / / / |4.a.
b. LESS: Allowance for loan and lease losses...................RCFD 3123 923,000 | / / / / / / / / / / / |4.b.
c. LESS: Allocated transfer risk reserve ..................... RCFD 3128 0 | / / / / / / / / / / / |4.c.
d. Loans and leases, net of unearned income, | / / / / / / / / / / / |
allowance, and reserve (item 4.a minus 4.b and 4.c) ................................| 2125 23,926,000 |4.d.
5. Assets held in trading accounts ..........................................................| 3545 33,052,000 |5.
6. Premises and fixed assets (including capitalized leases) .................................| 2145 858,000 |6.
7. Other real estate owned (from Schedule RC-M) .............................................| 2150 216,000 |7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 271,000 |8.
9. Customers' liability to this bank on acceptances outstanding .............................| 2155 572,000 |9.
10. Intangible assets (from Schedule RC-M) ....................................................| 2143 18,000 |10.
11. Other assets (from Schedule RC-F) .........................................................| 2160 7,612,000 |11.
12. Total assets (sum of items 1 through 11) ..................................................| 2170 83,337,000 |12.
-------------------------------
</TABLE>
- --------------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 6
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 6/30/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
</TABLE>
<TABLE>
<S> <C> <C>
Schedule RC--Continued
--------------------------
Dollar Amounts in Thousands | ///// Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits: |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) | RCON 2200 9,040,000 |13.a.
(1) Noninterest-bearing(1) ............RCON 6631 3,569,000.......... | / / / / / / / / / / / / |13.a.(1)
(2) Interest-bearing ...................RCON 6636 5,471,000.......... | / / / / / / / / / / / / |13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E | / / / / / |
part II) | RCFN 2200 19,648,000 |13.b.
(1) Noninterest-bearing ...............RCFN 6631 494,000 | / / / / / / / / / / / / |13.b.(1)
(2) Interest-bearing ........RCFN 6636 19,154,000 | / / / / / / |13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in | / / / / / / |
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / / / / / |
a. Federal funds purchased ......................................................... | RCFD 0278 2,564,000 |14.a.
b. Securities sold under agreements to repurchase .................................. | RCFD 0279 790,000 |14.b.
15. a. Demand notes issued to the U.S. Treasury .......................................... | RCON 2840 0 |15.a.
b. Trading liabilities ............................................................. | RCFD 3548 18,177,000 |15.b.
16. Other borrowed money: | / / / / / / / |
a. With original maturity of one year or less ...................................... | RCFD 2332 16,421,000 |16.a.
b. With original maturity of more than one year .................................... | RCFD 2333 3,388,000 |16.b.
17. Mortgage indebtedness and obligations under capitalized leases ......................... | RCFD 2910 31,000 |17.
18. Bank's liability on acceptances executed and outstanding ............................... | RCFD 2920 572,000 |18.
19. Subordinated notes and debentures ...................................................... | RCFD 3200 1,227,000 |19.
20. Other liabilities (from Schedule RC-G) ................................................. | RCFD 2930 6,911,000 |20.
21. Total liabilities (sum of items 13 through 20) ......................................... | RCFD 2948 78,769,000 |21.
| / / / / / / |
22. Limited-life preferred stock and related surplus ....................................... | RCFD 3282 0 |22.
EQUITY CAPITAL | / / / / / / |
23. Perpetual preferred stock and related surplus .......................................... | RCFD 3838 500,000 |23.
24. Common stock ........................................................................... | RCFD 3230 1,002,000 |24.
25. Surplus (exclude all surplus related to preferred stock) ............................... | RCFD 3839 528,000 |25.
26. a. Undivided profits and capital reserves ............................................ | RCFD 3632 2,915,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities .......... | RCFD 8434 ( 5,000) |26.b.
27. Cumulative foreign currency translation adjustments .................................... | RCFD 3284 ( 372,000) |27.
28. Total equity capital (sum of items 23 through 27) ...................................... | RCFD 3210 4,568,000 |28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22,| / / / / / / |
and 28) .............................................................................. | RCFD 3300 83,337,000 |29.
----------------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the
number of the statement below that
best describes the most comprehensive
level of auditing work performed Number
for the bank by independent external --------
auditors as of any date during 1995 ....| RCFD 6724 2 | M.1
-----------------------
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation
3 = Directors' examination of the bank conducted in work)
accordance with generally accepted auditing standards 8 = No external audit work
by a certified public accounting firm (may be required
by state chartering authority)
</TABLE>
- ----------------------
(1) Including total demand deposits and noninterest-bearing time
and savings deposits.
<PAGE> 7
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated March 20, 1996, providing for an increase in
authorized capital stock from $1,351,666,670 consisting of 85,166,667 shares
with a par value of $10 each designated as Common Stock and 500 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$1,501,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of
New York, this 21st day of March in the Year of our Lord one thousand
nine hundred and ninety-six.
Peter M. Philbin
Deputy Superintendent of Banks
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock in
conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Three Hundred Fifty One Million, Six Hundred
Sixty-Six Thousand, Six Hundred Seventy Dollars ($1,351,666,670),
divided into Eighty-Five Million, One Hundred Sixty-Six Thousand, Six
Hundred Sixty-Seven (85,166,667) shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Five Hundred One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,501,666,670), divided into
One Hundred Million, One Hundred Sixty Six Thousand, Six Hundred
Sixty-Seven (100,166,667) shares with a par value of $10 each
designated as Common Stock and 500 shares with a par value of One
Million Dollars ($1,000,000) each designated as Series Preferred
Stock."
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6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
20th day of March , 1996.
James T. Byrne, Jr.
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
Lea Lahtinen
Lea Lahtinen
Sworn to before me this 20th day of March, 1996.
Sandra L. West
Notary Public
SANDRA L. WEST Counterpart filed in the
Notary Public State of New York Office of the Superintendent of
No. 31-4942101 Banks, State of New York,
Qualified in New York County This 21st day of March, 1996
Commission Expires September 19, 1996
