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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FORCENERGY INC
(Exact name of Registrant as specified in its charter)
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DELAWARE 1311 65-0429338
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
2730 SW 3RD AVENUE, SUITE 800 E. JOSEPH GRADY
MIAMI, FLORIDA 33129-2237 VICE PRESIDENT -- TREASURER
(305) 856-8500 AND CHIEF FINANCIAL OFFICER
(Address, including zip code, and telephone number, 2730 SW 3RD AVENUE, SUITE 800
including area code, of registrant's principal MIAMI, FLORIDA 33129-2237
executive offices) (305) 856-8500
(Name, Address, including zip code, and telephone
number, including area code, of agent for service)
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Copy to:
T. MARK KELLY
VINSON & ELKINS L.L.P.
2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002-6760
(713) 758-4592
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable following the effectiveness of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of each class of Amount to be maximum offering maximum aggregate Amount of
securities to be registered registered price per share (1) offering price (1) registration fee
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8 1/2% Senior Subordinated
Notes due 2007 . . . . . $200,000,000 100% $200,000,000 $60,607
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(1) Estimated solely for the purpose of calculating the registration fee.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED APRIL 10, 1997
PROSPECTUS
FORCENERGY INC
OFFER TO EXCHANGE
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON _____________, 1997, UNLESS EXTENDED
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Forcenergy Inc, a Delaware corporation (the "Company"), hereby offers, upon
the terms and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal (the "Letter of Transmittal," and together
with this Prospectus, the "Exchange Offer"), to exchange $1,000 principal
amount of its 8 1/2% Senior Subordinated Notes due 2007, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement (as
defined herein) of which this Prospectus constitutes a part, for each $1,000
principal amount of its outstanding 8 1/2% Senior Subordinated Notes due 2007,
Series A (the "Old Notes"), of which $200,000,000 principal amount is
outstanding. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Old Notes except for certain
transfer restrictions and registration rights relating to the Old Notes. The
Exchange Notes will evidence the same debt as the Old Notes and will be issued
under and be entitled to the benefits of the Indenture (as defined herein).
The Exchange Notes and the Old Notes are collectively referred to herein as the
"Notes."
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to Senior Debt. Under certain circumstances,
any future significant subsidiaries 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 to Senior Debt.
The Company will accept for exchange any and all Old Notes that are validly
tendered on or prior to 5:00 p.m., New York City time, on the date the Exchange
Offer expires, which will be _________________, 1997, unless the Exchange Offer
is extended. See "The Exchange Offer -- Expiration Date; Extensions;
Amendment." Tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date (as
defined herein), unless previously accepted for exchange. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company and to the terms and provisions
of the Registration Rights Agreement (as defined herein). Old Notes may be
tendered only in denominations of $1,000 principal amount and integral
multiples thereof. The Company has agreed to pay the expenses of the Exchange
Offer. See "The Exchange Offer."
(Cover continued on next page)
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See "Risk Factors" beginning on Page 13 of this Prospectus for a discussion
of certain factors that should be considered in evaluating 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.
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The date of this Prospectus is April __, 1997
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The Exchange Notes will bear interest at the rate of 8 1/2% per annum,
payable semi-annually on February 15 and August 15 of each year, commencing
August 15, 1997. Holders of Exchange Notes of record on August 1, 1997 will
receive interest on August 15, 1997 from the date of issuance of the Exchange
Notes, plus an amount equal to the accrued interest on the Old Notes from the
date of issuance of the Old Notes, February 14, 1997, to the date of exchange
thereof. Interest on the Old Notes accepted for exchange will cease to accrue
upon issuance of the Exchange Notes.
The Old Notes were sold by the Company on February 14, 1997 to the Initial
Purchasers (as defined herein) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act) and to a limited number of institutional "accredited investors" (as
defined in Rule 501(a)(1),(2),(3) or (7) under the Securities Act), each of
whom agreed to comply with certain transfer restrictions and other conditions.
Accordingly, the Old Notes may not be offered, resold or otherwise transferred
unless registered under the Securities Act or unless an applicable exemption
from the registration requirements of the Securities Act is available. The
Exchange Notes are being offered hereunder in order to satisfy the obligations
of the Company under the Registration Rights Agreement entered into with the
Initial Purchasers in connection with the offering of the Old Notes. See "The
Exchange Offer" and "Description of Notes -- Registration Rights; Liquidated
Damages."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5,
1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action
Letter (available June 5, 1991), the Company believes that the Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by the respective holders thereof (other than a
"Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder is not participating in, and has no arrangement with any person
to participate in, the distribution (within the meaning of the Securities Act)
of such Exchange Notes. Eligible holders wishing to accept the Exchange Offer
must represent to the Company that such conditions have been met. Holders who
tender Old Notes in the Exchange Offer with the intention to participate in a
distribution of the Exchange Notes may not rely upon the Morgan Stanley Letter
or similar no-action letters. See "The Exchange Offer -- General." Each
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). This Prospectus, as it may be amended
or supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that it will
make this Prospectus and any amendment or supplement to this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of up to 180 days after consummation of the Exchange Offer. See "Plan
of Distribution."
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity
of any markets that may develop for the Exchange Notes or as to the ability of
or price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on
many factors, including, among others, prevailing interest rates, the Company's
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Exchange Notes on any securities exchange.
Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation,
Goldman, Sachs & Co., Lehman Brothers and ING Baring (U.S.) Securities, Inc.
(together, the "Initial Purchasers") have informed the Company that they
currently intend to make a market for the Exchange Notes. However, they are
not so obligated, and any such market making may be discontinued at any time
without notice. Accordingly, no assurance can be given that an active public
or other market will develop for the Exchange Notes or as to the liquidity of
or the trading market for the Exchange Notes.
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THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
TABLE OF CONTENTS
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Page No.
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Available Information . . . . . . . . . . . . . . . . . . . . . . 3
Disclosure Regarding Forward Looking Statements . . . . . . . . . 4
Incorporation of Certain Documents by Reference . . . . . . . . . 4
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . 6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Private Placement . . . . . . . . . . . . . . . . . . . . . . . . 18
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 18
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 19
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . 19
Summary of Oil and Gas Reserve Data . . . . . . . . . . . . . . . 21
Summary Operating Data . . . . . . . . . . . . . . . . . . . . . 21
Pro Forma Financial Information . . . . . . . . . . . . . . . . . 22
The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . 23
Description of Existing Securities and Senior Credit Facility . . 28
Description of Notes . . . . . . . . . . . . . . . . . . . . . . 30
Exchange Offer; Registration Rights . . . . . . . . . . . . . . . 55
Certain Federal Income Tax Consequences . . . . . . . . . . . . . 57
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . 60
Transfer Restrictions on Old Notes . . . . . . . . . . . . . . . 61
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Glossary of Oil and Gas Terms . . . . . . . . . . . . . . . . . . 65
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. 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, the Commission
maintains a site on the World Wide Web that contains reports, proxy and
information statements and other information filed electronically by the
Company with the Commission which can be accessed over the Internet at
http://www.sec.gov. While any Old Notes remain outstanding, the Company will
make available, upon request, to any holder and any prospective purchaser of
Old Notes, the information required pursuant to Rule 144A(d)(4) under the
Securities Act during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act. Any such request should be directed to the
Secretary of the Company, 2730 SW 3rd Avenue, Suite 800, Miami, Florida
33129-2237.
This Prospectus constitutes part of a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby. Statements contained
herein concerning the provisions of contracts or other documents are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the copy of the applicable
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contract or other document filed with the Commission. Copies of the
Registration Statement and the exhibits thereto are on file at the offices of
the Commission and may be obtained upon payment of the fee prescribed by the
Commission, or may be examined without charge at the public reference
facilities of the Commission described above.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes (or incorporates by reference) "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act") and Section 21E of the Exchange Act. All
statements other than statements of historical facts included (or incorporated
by reference) in this Prospectus, including without limitation, statements
under "Summary" and "Risk Factors" herein and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained int he
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 incorporated by reference herein regarding the planned capital
expenditures, increases in oil and gas production, the number of anticipated
wells to be drilled in 1997 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 (or
incorporated by reference) 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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act (File No. 0- 26444) and are incorporated herein by
reference:
(1) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "1996 10-K"); and
(2) the Company's Current Reports on Form 8-K filed on:
-- January 14, 1997 and as amended on March 17, 1997;
-- February 21, 1997;
-- July 15, 1996 and as amended on July 23, 1996 and September 12,
1996; and
the financial statements of Ashlawn Energy, Inc. as of December 31,
1994 and the two years in the period then ended and for the period
January 8, 1992 (period of inception) to December 31, 1992 (including
the independent auditor's opinion thereon) and the seven month period
ended July 31, 1995 included on pages 7 - 22 in the Current Report on
form 8-K filed on October 4, 1996.
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 offering made by this Prospectus shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing thereof. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed
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document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon the written or oral request of such person, a copy of any or
all of the information that has been incorporated by reference in this
Prospectus (not including exhibits to the information that is incorporated by
reference herein unless such exhibits are specifically incorporated by
reference in such information). Requests for such copies should be directed to
the Secretary of the Company at 2730 SW 3rd Avenue, Suite 800, Miami, Florida,
33129-2237. In order to ensure timely delivery of such documents prior to the
Expiration Date, any request should be made by ___________________, 1997.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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SUMMARY
The following summary is qualified in its entirety by and should be read in
conjunction with the more detailed information and financial statements,
including the notes thereto, incorporated by reference into this Prospectus.
As used herein, unless the context otherwise requires, the term the "Company"
refers to Forcenergy Inc and its consolidated subsidiaries. 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. The Company has experienced significant
growth in the last six years, primarily through the exploitation, enhancement
and development of acquired working interests in producing properties in the
Gulf of Mexico and the acquisition of producing properties in the Cook Inlet,
Alaska area. See "-- Recent Developments -- Acquisitions." At December 31,
1996, the Company had net proved reserves of 585 Bcfe, 58% of which were
located in the Gulf of Mexico and 27% of which were located in Alaska.
Approximately 56% of the Company's net proved reserves on such date were oil
and approximately 78% of proved reserves were classified as proved developed.
The Company currently operates approximately 75% of its Gulf of Mexico
production. The Company's primary focus is its Gulf of Mexico and Alaska
activities, the Company has also acquired interests in certain high- potential
undeveloped international leasehold acreage, primarily in Guben, Africa and
Australia.
STRATEGY
Gulf of Mexico. The Company's business strategy is to increase reserves and
cash flows primarily through the exploration, exploitation and development of
its producing properties while also acquiring additional properties in the Gulf
of Mexico. Management believes it has assembled a three to five year inventory
of development, exploitation and exploratory drilling opportunities in the Gulf
of Mexico on acreage currently held by production. Most of the prospects
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. 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 exploratory 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 capital costs associated with new production facilities and
minimizes timing delays in commencing production. 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.
The Company prefers to operate its Gulf of Mexico properties because
functioning in that capacity positions it to more effectively manage production
performance and operating expenses and allows it to control the timing and
amount of capital expenditures. Forcenergy operates 91 structures and 177
wells in the Gulf of Mexico, and believes that the operating expertise and
experience of its personnel have been instrumental in its ability to
significantly enhance and improve production rates and cash flows. Of
particular importance, 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.
Cook Inlet, Alaska. The Company's business strategy in the Cook Inlet area
is to increase production and cash flow through exploitation of existing
producing properties as well as conducting selective exploration activities.
The Company believes that it has assembled a high quality producing asset base
with exploitation potential as well as exploratory lease positions that will
give the Company an opportunity to add significant new reserves through
exploratory drilling. Since its discovery, oil and gas activities in the Cook
Inlet area have been dominated by major oil companies. The Company believes
that it will be able to economically exploit opportunities previously not
pursued by the resident major oil companies by
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utilizing proprietary 3-D seismic data, small, automated offshore production
facilities and other methods that have proven successful in the Company's
operations in the Gulf of Mexico.
RECENT DEVELOPMENTS
From January 1996 to February 1997, the Company has spent an aggregate of
approximately $212.4 million on several acquisitions including, (1) Marathon
Oil Company's interest in certain producing crude oil properties in the Cook
Inlet area and Prudhoe Bay Unit, Alaska, (the "Marathon Acquisition") and a 30%
interest in the Cook Inlet Pipeline Company, (2) Great Western Resources, Inc.
, an independent oil and gas company ("Great Western Acquisition"), and (3)
various working interests in other oil and gas properties in the Gulf of Mexico
and the Permian Basin.
The Marathon Acquisition. On December 30, 1996, Forcenergy acquired the
48% average working interest of Marathon Oil Company ("Marathon") in the
McArthur River Field (Trading Bay Unit) and Marathon's 50% interest in the
Trading Bay Field, both in the Cook Inlet, and Marathon's 0.05% working
interest in the Prudhoe Bay Unit for $107.8 million. In January 1997, the
Company acquired Marathon's interest in the Cook Inlet Pipeline Company for
$7.4 million in cash and the guarantee of $6.7 million in Cook Inlet Pipeline
Company debt. Net production from the interests acquired is currently
approximately 7,000 Bbls of oil per day ("BOPD"). Net proved reserves
associated with the Trading Bay Unit, Trading Bay Field and Prudhoe Bay Unit
totaled approximately 25.9 MMbbls of oil as of December 31, 1996.
The UNOCAL Alliance. On December 17, 1996, the Company entered into an
alliance with Union Oil Company of California ("UNOCAL "), operator of the
Company's properties in the Cook Inlet Basin, to jointly pursue lease sale
activities and to further develop Unocal's existing Cook Inlet Basin properties
in Alaska. The agreement requires Forcenergy to expend up to $30 million
within the next five years on lease acquisition and development and exploratory
drilling on prospects generated as a result of this alliance. It also provides
Forcenergy access to Unocal's geologic and geophysical data base in the Cook
Inlet Basin, including approximately 37,000 linear miles of 2-D seismic data
and 6,000 square miles of 3-D seismic data. The agreement also provides that
Forcenergy and Unocal shall each contribute technical staff to the alliance in
a joint effort to identify development prospects in and around Unocal's
existing Cook Inlet properties as well as exploratory opportunities in the
area. The Company has identified a number of prospects that will be further
evaluated for drilling potential. During 1997, the Company plans to spend
$15.0 million on several development and exploitation wells and to undertake a
3-D seismic survey over a Cook Inlet prospect.
As part of its alliance with Unocal, on December 18, 1996, Forcenergy
acquired a 50% interest in 17 State of Alaska lease tracts. The Company's net
expenditure in the lease sale was approximately $1.7 million.
Great Western Acquisition. In January 1997, Forcenergy acquired all of the
outstanding stock of Great Western Resources, Inc. ("Great Western") for
approximately $48.3 million. Great Western had oil and gas operations located
primarily in the onshore Gulf Coast regions of Louisiana and Texas and offshore
Gulf of Mexico. Great Western's highest value asset was South Marsh Island 18,
which is strategically located adjacent to the Company's recent SMI 11 #54
discovery. Great Western also had a 20% interest in an exploration concession
in Peru. As of September 30, 1996, Great Western had total proved reserves of
approximately 33.2 Bcfe of natural gas. Great Western's current net daily
production is approximately 1,000 Bbls of oil and 14,000 Mcf of natural gas.
Other Working Interest Acquisitions. 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 this field to 100%. In December 1996,
the Company acquired interests in eight fields in the Gulf of Mexico in three
separate transactions for an aggregate purchase price of $23.5 million. The
first transaction involved the acquisition of a 33% working interest position
in Mustang Island Block 746, bringing Forcenergy's ownership in the block to
100%. In the second transaction Forcenergy acquired a 33% working interest
position in the South Marsh Island Block 136/137 field, also bringing
Forcenergy's ownership in the field to 100%. In the third transaction,
Forcenergy acquired an average 20% working interest in seven fields in the Gulf
of Mexico. Estimated net proven reserves associated with these acquisitions
include approximately 862 Mbbls of oil and 21.7 Bcfe of natural gas. The
interests acquired currently are producing approximately 500 Bbls of oil per
day and 12,000 Mcf of natural gas per day ("MCFPD"), net to Forcenergy's
interest. In February 1997, the Company acquired an average 75% non-operated
working interest in producing fields in the Permian Basin for an aggregate
purchase price of $14.5 million.
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<PAGE> 9
Estimated proven reserves associated with the properties totaled approximately
3.4 MMbbls of oil and 7.2 Bcf of natural gas as of the acquisition date.
Current average net daily production from the properties is approximately 380
Bbls of oil and 1,000 Mcf of natural gas.
During 1996, the Company also acquired interests in certain undeveloped
leasehold acreage or concessions in international areas primarily offshore
Australia and Gabon, Africa. Exploratory activities in these areas are
expected to begin in 1997.
THE PRIVATE PLACEMENT AND USE OF PROCEEDS
The Old Notes were sold by the Company on February 14, 1997 to the Initial
Purchasers and were thereupon offered and sold by the Initial Purchasers only
to certain qualified buyers. The $193.2 million net proceeds received by the
Company in connection with the sale of the Old Notes were used to repay
indebtedness outstanding under the Senior Credit Facility. See "Private
Placement" and "Capitalization."
THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $200,000,000 principal
amount of Exchange Notes for up to $200,000,000 principal amount of Old Notes.
The form and terms of the Exchange Notes are identical in all material respects
to the form and terms of the Old Notes except that the Exchange Notes have been
registered under the Securities Act and will not contain certain transfer
restrictions and hence are not entitled to the benefits of the Registration
Rights Agreement relating to the contingent increases in the interest rate
provided for pursuant thereto. The Exchange Notes will evidence the same debt
as the Old Notes and will be issued under and be entitled to the benefits of
the Indenture governing the Old Notes. See "Description of the Notes."
The Exchange Offer . . . . . . . . . Each $1,000 principal amount of
Exchange Notes will be issued in
exchange for each $1,000
principal amount of outstanding
Old Notes. As of the date
hereof, $200,000,000 principal
amount of Old Notes are issued
and outstanding. The Company
will issue the Exchange Notes to
tendering holders of Old Notes
on or promptly after the
Expiration Date.
Resale . . . . . . . . . . . . . . . The Company believes that the
Exchange Notes issued pursuant
to the Exchange Offer generally
will be freely transferable by
the holders thereof without
registration or any prospectus
delivery requirement under the
Securities Act, except for
certain Restricted Holders who
may be required to deliver
copies of this Prospectus in
connection with any resale of
the Exchange Notes issued in
exchange for such Old Notes.
See "The Exchange Offer --
General" and "Plan of
Distribution."
Expiration Date . . . . . . . . . . . 5:00 p.m., New York City time,
on ________, 1997, unless the
Exchange Offer is extended, in
which case the term "Expiration
Date" means the latest date to
which the Exchange Offer is
extended. See "The Exchange
Offer -- Expiration Date;
Extensions; Amendments."
Interest on the Notes . . . . . . . . The Exchange Notes will bear
interest payable semi-annually
on February 15 and August 15 of
each year, commencing August 15,
1997. Holders of Exchange Notes
of record on August 1, 1997 will
receive interest on August 15,
1997 from the date of issuance
of the Exchange Notes, plus an
amount equal to the accrued
interest on the Old Notes from
the date of issuance of the Old
Notes, February 14, 1997, to the
date of exchange thereof.
Consequently, assuming the
Exchange Offer is consummated
prior to the record date in
respect of the August 15, 1997
interest payment for the Old
Notes, holders who exchange
their Old Notes for Exchange
Notes will receive the same
interest payment on August 15,
1997 that they would have
received had they not
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<PAGE> 10
accepted the Exchange Offer.
Interest on the Old Notes
accepted for exchange will cease
to accrue upon issuance of the
Exchange Notes. See "The
Exchange Offer -- Interest
on the Exchange Notes."
Procedures for Tendering Old Notes . Each holder of Old Notes wishing
to accept the Exchange Offer
must complete, sign and date the
Letter of Transmittal, or a
facsimile thereof, in accordance
with the instructions contained
herein and therein, and mail or
otherwise deliver such Letter of
Transmittal, or such facsimile,
or an Agent's Message (as
defined herein) together with
the Old Notes to be exchanged
and any other required
documentation to the Exchange
Agent at the address set forth
herein and therein or
effect a tender of Old Notes
pursuant to the procedures for
book-entry transfer as provided
for herein. See "The Exchange
Offer -- Procedures for
Tendering."
Special Procedures for Beneficial
Holders . . . . . . . . . . . . . . . Any beneficial holder whose Old
Notes are registered in the name
of a broker, dealer, commercial
bank, trust company or other
nominee and who wishes to tender
in the Exchange Offer should
contact such registered holder
promptly and instruct such
registered holder to tender on
the beneficial holder's behalf.
If such beneficial holder wishes
to tender directly, such
beneficial holder must, prior to
completing and executing the
Letter of Transmittal and
delivering the Old Notes, either
make appropriate arrangements to
register ownership of the Old
Notes in such holder's name or
obtain a properly completed bond
power from the registered
holder. The transfer of record
ownership may take considerable
time. See "The Exchange Offer
-- Procedures for Tendering."
Guaranteed Delivery Procedures . . . Holders of Old Notes who wish to
tender their Old Notes and whose
Old Notes are not immediately
available or who cannot deliver
their Old Notes and a properly
completed Letter of Transmittal
or any other documents required
by the Letter of Transmittal to
the Exchange Agent prior to the
Expiration Date, or who cannot
complete the procedure for
book-entry transfer on a timely
basis and deliver an Agent's
Message, may tender their Old
Notes according to the
guaranteed delivery procedures
set forth in "The Exchange Offer
-- Guaranteed Delivery
Procedures."
Withdrawal Rights . . . . . . . . . . Tenders of Old Notes may be
withdrawn at any time prior to
5:00 p.m., New York City time,
on the business day prior to the
Expiration Date, unless
previously accepted for
exchange. See "The Exchange
Offer -- Withdrawal of Tenders."
Termination of the Exchange Offer . . The Company may terminate the
Exchange Offer if it determines
that the Exchange Offer violates
any applicable law or
interpretation of the staff of
the SEC. Holders of Old Notes
will have certain rights against
the Company under the
Registration Rights Agreement
should the Company fail to
consummate the Exchange Offer.
See "The Exchange Offer --
Termination" and "Description of
the Notes -- Registration
Rights; Liquidated Damages."
Acceptance of Old Notes and
Delivery of Exchange Notes . . . . . Subject to certain conditions
(as summarized above in
"Termination of the Exchange
Offer" and described more fully
in "The Exchange Offer --
Termination"), the Company will
accept for exchange any and all
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<PAGE> 11
Old Notes which are properly
tendered in the Exchange Offer
prior to 5:00 p.m., New York
City time, on the Expiration
Date. The Exchange Notes issued
pursuant to the Exchange Offer
will be delivered promptly
following the Expiration Date.
See "The Exchange Offer --
General."
Exchange Agent . . . . . . . . . . . Bankers Trust Company is serving
as exchange agent (the "Exchange
Agent") in connection with the
Exchange Offer. The mailing
address of the Exchange Agent
is: BT Services Tennessee, Inc.,
Reorganization Unit, P.O. Box
292737, Nashville, TN
37229-2737. Hand deliveries and
deliveries by overnight courier
should be addressed to Bankers
Trust Company, Corporate Trust
and Agency Group, Receipt &
Delivery Window, 123 Washington
St., 1st Floor, New York, NY
10006. For information with
respect to the Exchange Offer,
the telephone number for the
Exchange Agent is (800) 735-
7777 and the facsimile number
for the Exchange Agent is (615)
835-3701. See "The Exchange
Offer -- Exchange Agent."
Use of Proceeds . . . . . . . . . . . There will be no cash proceeds
payable to the Company from the
issuance of the Exchange Notes
pursuant to the Exchange Offer.
See "Use of Proceeds." For a
discussion of the use of the net
proceeds received by the Company
from the sale of the Old Notes,
see "Private Placement."
TERMS OF THE NOTES
Notes Outstanding . . . . . . . . . . $200 million principal amount of
8 1/2% Senior Subordinated Notes
due 2007.
Maturity Date . . . . . . . . . . . . February 15, 2007.
Interest Payment Dates . . . . . . . February 15 and August 15 of
each year, commencing August 15,
1997.
Optional Redemption . . . . . . . . . The Notes are redeemable at the
option of the Company, in whole
or in part, at any time on or
after February 15, 2002 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
February 15, 2002 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 February 15, 1997,
up to $70.0 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
108.500% 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 $130.0 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 purchase their Notes, in
whole or in part, at a price in
cash equal to 101% of the
aggregate principal amount
thereof,
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<PAGE> 12
plus accrued and unpaid interest
to the date of purchase. The
Indenture requires that, prior to
such a purchase 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
purchase. 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."
Ranking . . . . . . . . . . . . . . . The Notes are general, unsecured
obligations of the Company,
which will be subordinated in
right of payment to all Senior
Debt of the Company, pari passu
in right of payment with all
existing and future senior
subordinated indebtedness of the
Company (including the 9 1/2%
Notes) and senior in right of
payment to all future
subordinated indebtedness of the
Company. See "Description of
Notes -- Subordination."
Certain Covenants . . . . . . . . . . The Old Notes have been and the
New 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
disposition of proceeds from
asset sales; (ii) limitation on
Restricted Payments, including
payment of dividends, making of
distributions or certain
investments; (iii) limitation on
additional indebtedness; (iv)
limitation on liens securing
pari passu or subordinated
indebtedness of the Company; (v)
limitation on sale and leaseback
transactions; (vi) limitation on
dividends and other payment
restrictions affecting
Restricted Subsidiaries; (vii)
limitation on mergers,
consolidations and transfers of
substantially all of the
Company's assets; and (viii)
limitation on certain
transactions with affiliates.
See "Description of Notes --
Repurchase at the Option of
Holders" and "-- 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 of Old Notes . . . . The net proceeds of the Old
Notes offered hereby
(approximately $193.2 million)
were used to repay indebtedness
outstanding under the Senior
Credit Facility. See
"Capitalization."
Transfer Restrictions . . . . . . . . The Old Notes were not
registered under the Securities
Act and unless so registered may
not be offered or sold except
pursuant to an exemption from,
or in a transaction not subject
to, the registration
requirements of the Securities
Act. See "Transfer Restrictions
on Old Notes".
Exchange Offer . . . . . . . . . . . Pursuant to a registration
rights agreement (the
"Registration Rights Agreement")
by and among the Company and the
Initial Purchasers, the Company
agreed to (i) file a
registration statement with the
Commission (the "Exchange Offer
Registration Statement") with
11
<PAGE> 13
respect to an offer to exchange
the Old Notes (the "Exchange
Offer") for senior subordinated
debt securities of the Company
with terms substantially
identical to the Notes (the "New
Notes") (except that the New
Notes generally will not contain
terms with respect to transfer
restrictions) within 60 days
after the date of original
issuance of the Old Notes,
February 14, 1997, and (ii) use
its best efforts to cause such
registration statement to become
effective under the Securities
Act within 120 days after such
issue date. The Registration
Statement of which this
Prospectus is a part constitutes
such Exchange Offer Registration
Statement. In the event that
applicable law or interpretations
of the staff of the Commission do
not permit the Company to effect
the Exchange Offer, or if certain
holders of the Notes notify the
Company that they are not
permitted to participate in, or
would not receive freely
tradeable Notes pursuant to, the
Exchange Offer, the Company will
use its best efforts to cause to
become effective a registration
statement (the "Shelf
Registration Statement") with
respect to the resale of the Old
Notes and to keep the Shelf
Registration Statement effective
until three years after the date
of original issuance of the Old
Notes. The interest rate on the
Old Notes is subject to increase
under certain circumstances if
the Company is not in compliance
with its obligations under the
Registration Rights Agreement.
See "Description of Notes --
Registration Rights; Liquidated
Damages."
RISK FACTORS
The Exchange Notes involve certain risks that a potential investor should
carefully evaluate prior to making an investment. See "Risk Factors."
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<PAGE> 14
RISK FACTORS
The following risk factors, as well as the other information set forth in
this Prospectus, should be carefully evaluated prior to making an investment in
the Exchange Notes.
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.
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 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 Memorandum 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
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<PAGE> 15
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.
The present values of estimated future net cash flows referred to in this
Memorandum 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")
previously provided for a commitment of $195 million and a borrowing base of
$195 million. Effective March 31, 1997, the Senior Credit Facility was amended
to extend the maturity date and to reduce the interest rates. As amended, the
total loan amount remains at $195 million. At the Company's direction the
borrowing base was reduced to $50 million in order to lower the commitment fees
on the unused commitment. The Company had availability of approximately $49
million under the Senior Credit Facility at March 31, 1997. On November 6, 1996,
the Company issued $175 million aggregate principal amount of 9 1/2% Notes, and
it issued Old Notes in the aggregate principal amount of $200 million on
February 14, 1997. All of the 9 1/2% Notes and the Old Notes remain
outstanding.
The Company's level of indebtedness has several important effects on its
operations, including (i) the covenants contained in the Senior Credit
Facility, the 9 1/2% Notes indenture and the Indenture 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. 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.
SUBORDINATION OF THE NOTES
The Notes are 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 March 31, 1997, the Company had $100,000 aggregate
principal amount of Senior Debt outstanding and up to $49 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."
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<PAGE> 16
In addition to being subordinated to all existing and future Senior Debt of
the Company, the Notes are not secured by any of the Company's assets. The
Company has provided the lenders under the Senior Credit Facility 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 purchase 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 purchase. The Indenture requires that prior
to such a purchase, the Company must either repay all outstanding Senior Debt
or obtain any required consents to such purchase. 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
(including the 9 1/2% Notes) 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 Subsidiary Guarantees has been incurred for proper purposes and
in good faith, and that, based on forecasts, asset valuations and other
financial information available to the Company at the time of the offering of
the Old Notes, the Company was then solvent, and it had sufficient capital for
carrying on its business and was able to pay its debts as they mature. See,
however, "-- Effects of 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.
LACK OF PUBLIC MARKET
The Company does not intend to apply for a listing or quotation of the
Exchange Notes on any securities exchange or stock market. The Initial
Purchasers have informed the Company that they currently intend to make a
market in the Exchange Notes. However, the Initial Purchasers are not
obligated to do so, and any such market making may be discontinued at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Exchange Notes. Accordingly, there can be no assurance as to
the development or liquidity of any market for the Exchange Notes.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
CONTROL BY PRINCIPAL SECURITYHOLDERS
The Company's principal stockholder, Forcenergy AB ("FAB"), as of November
1996, owned approximately 39% of the outstanding shares of common stock of the
Company. FAB is a publicly traded Swedish company with two classes of stock, A
shares and B shares. As of September 1996, there were 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.
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<PAGE> 17
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, private placements
and public offerings of debt and equity securities and cash generated by
operations. The Company made capital expenditures (including expenditures for
acquisitions) of $144.7 million during 1995 and $284.0 million during 1996.
The Company plans to make capital expenditures, not including expenditures for
acquisitions, of approximately $195 million in 1997. Management believes that
the Company will have sufficient cash provided by operating activities,
borrowings under the Senior Credit Facility and proceeds from the Offering to
fund planned capital expenditures in 1997. If revenues decrease as a result of
lower oil and gas prices or operating difficulties, or the Company does not
complete the Offering, 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.
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.
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 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,
16
<PAGE> 18
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.
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. 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.
17
<PAGE> 19
THE COMPANY
GENERAL
Forcenergy is an independent oil and gas company engaged in the
exploration, acquisition, development, exploitation and production of oil and
natural gas.
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. As of
November 1996 FAB owned approximately 39% of the outstanding shares of common
stock of the Company. FAB is a publicly traded Swedish company with two
classes of stock, A shares and B shares. Each of the 1,000,000 A shares
outstanding as of September 1996 was entitled to one vote per share, and each
of the 13,392,000 then 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.
PRIVATE PLACEMENT
On February 14, 1997, the Company completed the private sale to the Initial
Purchasers of $200,000,000 principal amount of the Old Notes at a price of
96.838% of the principal amount thereof in a transaction not registered under
the Securities Act in reliance upon Section 4(2) of the Securities Act. The
Initial Purchasers thereupon offered and resold the Old Notes only to qualified
institutional buyers and a limited number of institutional accredited investors
at an initial price to such purchasers of 99.338% of the principal amount
thereof. The $193.2 million net proceeds received by the Company in connection
with the sale of the Old Notes were used to repay amounts outstanding under the
Senior Credit Facility.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a like
principal amount of Old Notes, the terms of which are identical in all material
respects to the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any change in
capitalization of the Company.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1996, and as adjusted to give effect to the sale of the Old Notes
and the application of the net proceeds therefrom assuming such transactions
occurred on December 31, 1996. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"contained in the 1996 10-K incorporated by reference in this
Prospectus and the Financial Statements of the Company and the related Notes
thereto incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
At December 31, 1996
---------------------
As
Actual Adjusted
--------- ---------
(in millions)
<S> <C> <C>
Senior Credit Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97.9 $ --
9 1/2% Senior Subordinated Notes due 2006 . . . . . . . . . . . . . . . . . . . . 175.0 175.0
8 1/2% Senior Subordinated Notes due 2007 . . . . . . . . . . . . . . . . . . . -- 200.0
--------- ---------
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272.9 375.0
Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248.9 248.9
--------- ---------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 521.8 $ 623.9
========= =========
</TABLE>
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 three 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
years ended December 31, 1995 and 1996 are derived from the financial
statements of the Company audited by Coopers & Lybrand L.L.P., independent
accountants.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1992 1993 1994 1995 1996
---------- ----------- ---------- ----------- ------------
(in thousands, except per share amounts)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas sales . . . . . . . . . $ 24,937 $ 49,652(1) $ 58,354(1) $ 72,147 $ 138,698
Other . . . . . . . . . . . . . . . 475 441(1) 388(1) 494 683
---------- ----------- ---------- ----------- ------------
25,412 50,093 58,742 72,641 139,381
---------- ----------- ---------- ----------- ------------
Expenses:
Lease operating . . . . . . . . . . 7,769 16,632 23,744 24,507 38,786
Depreciation, depletion and 8,014 19,889 24,572 31,295 58,464
amortization . . . . . . . . . . . . . . . .
Production taxes . . . . . . . . . . 606 1,560 1,701 1,868 3,454
General and administrative, net . . 2,523 3,166 6,463 5,670 7,971
---------- ----------- ---------- ----------- ------------
Total operating expenses . . . . . . 18,912 41,247 56,480 63,340 108,675
---------- ----------- ---------- ----------- ------------
Income from operations . . . . . . . . . 6,500 8,846 2,262 9,301 30,706
Interest and other income (loss) . . . . 197 545 789 (561) 650
Interest expense, net of amounts (2,303) (6,192) (9,529) (11,668) (13,367)
---------- ----------- ---------- ----------- ------------
capitalized . . . . . . . . . . . . . . . . .
Income (loss) before income taxes . . . 4,394 3,199 (6,478) (2,928) 17,989
Income tax provision (benefit) (2) . . . -- 2,337 (2,403) (1,075) 6,711
Minority interest . . . . . . . . . . . 132 107 -- -- --
---------- ----------- ---------- ----------- ------------
Net income (loss) (2) . . . . . . . . . $ 4,262 $ 755 $ (4,075) $ (1,853)$ 11,278
========== =========== ========== =========== ============
Net income (loss) per common and common
equivalent share (2) . . . . . . . . . $ (.50) $ (.14)$ .57
========== =========== ============
UNAUDITED PRO FORMA DATA(2): . . . . . . . .
Income before income taxes, including $ 4,262 $ 3,092
minority interest . . . . . . . . . . .
Income tax provision . . . . . . . . . . 1,639 1,207
---------- -----------
Net Income . . . . . . . . . . . . . . . 2,623 1,885
========== ===========
Net income per share . . . . . . . . . . $ .41 $ .29
========== ===========
Weighted average common and common
equivalent
shares . . . . . . . . . . . . . . . 6,451 6,520 8,188 12,910 19,726
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1992 1993 1994 1995 1996
---------- ----------- ---------- ----------- ------------
(in thousands, except per share amounts)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Property, plant and equipment, net . . . $ 112,441 $ 152,659 $ 186,241 $ 298,832 $ 523,711
Total assets . . . . . . . . . . . . . . 127,685 187,786 220,287 335,090 585,925
Total long-term debt . . . . . . . . . . 75,758 127,234 131,646 130,729 272,932
Stockholders' equity . . . . . . . . . . 45,252 43,336 71,061 154,961 248,936
OTHER FINANCIAL DATA:
Capital Expenditures (3) . . . . . . . . $ 67,660 $ 53,371 58,169 $ 144,689 $ 283,977
EBITDA (4) . . . . . . . . . . . . . . . 14,711 29,280 27,623 40,035 89,820
Ratio of Earnings to Fixed Charges (5) . 2.9x 1.4x N/M N/M 2.0x
EBITDA Interest Coverage (6) . . . . . . 6.4x 4.5x 2.5x 2.8x 5.8x
</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 and 1996 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 1992 and 1993 is described as
unaudited pro forma because of the Company's former partnership status.
(3) Capital expenditures include acquisitions of oil and gas properties
including a non-cash item relating to the 1995 Acquisitions, amounting to
$46.4 million.
(4) EBITDA is defined as earnings (including interest and other income) before
interest expense, 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.
(5) 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 by $5.5 million and $8.0 million, respectively.
(6) Represents multiple by which EBITDA exceeds interest expense.
20
<PAGE> 22
SUMMARY OF 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 and 1996 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 and 1996 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, 1994 were prepared by Collarini Engineering Inc., independent
petroleum engineering consultants and Joe C. Neal & Associates, independent
petroleum engineers. 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" 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 in this Registration
Statement.
<TABLE>
<CAPTION>
As of December 31,
-----------------------------------
1994 1995 1996
---------- --------- -----------
<S> <C> <C> <C>
Proved Reserves:
Oil (Mbbls) . . . . . . . . . . . . . . . . . . . . . . . . . . 11,310 24,458 54,659
Natural gas (Mmcf) . . . . . . . . . . . . . . . . . . . . . . . 172,122 218,052 256,913
Total (Mmcfe) . . . . . . . . . . . . . . . . . . . . . . . . . 239,982 364,800 584,867
Present value of future net revenues before income
taxes (000s) (1) . . . . . . . . . . . . . . . . . . . . . . $ 171,391 $ 540,901 $ 1,055,911
Standardized measure of discounted future net cash
flows (000s) (2) . . . . . . . . . . . . . . . . . . . . . . $ 152,627 $ 406,956 $ 802,145
</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>
Year Ended December 31,
------------------------------ ------------
1994 1995 1996
----------- ------------- ------------
<S> <C> <C> <C>
Production:
Liquids (Mbbls) (1) . . . . . . . . . . . . . . . . . . . . . . 1,753(2) 2,343 4,006
Natural gas (Mmcf) . . . . . . . . . . . . . . . . . . . . . . . 17,121 21,112 32,738
Total (Mmcfe) . . . . . . . . . . . . . . . . . . . . . . . . . 27,639 35,170 56,774
Average sales prices:
Liquids (per Bbl) . . . . . . . . . . . . . . . . . . . . . . . $ 15.04 $ 16.46 $ 16.93
Natural gas (per Mcf) . . . . . . . . . . . . . . . . . . . . . 1.87 1.59 2.16
Expenses (per Mcfe):
Lease operating . . . . . . . . . . . . . . . . . . . . . . . . $ .86 $ .70 $ .68
Production taxes . . . . . . . . . . . . . . . . . . . . . . . . .06 .05 .06
Depreciation, depletion and amortization . . . . . . . . . . . . .88 .88 1.03
General and administrative, net . . . . . . . . . . . . . . . . .23 .16 .14
</TABLE>
(1) Includes crude oil, condensate and natural gas liquids.
(2) Includes certain natural gas liquid volumes reclassified to conform with
1995 and 1996 classifications.
21
<PAGE> 23
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma statement of operations for the year ended December
31, 1996 gives effect to the Marathon Acquisition, the Amerada Hess Acquisition
(the "1996 Acquisitions"), the conversion during 1996 of the 7% Exchangeable
Subordinated Notes (the "Exchangeable Notes") into 2,343,048 shares of Common
Stock, the 1996 exercise of 214,866 options to purchase Common Stock by certain
holders of the Exchangeable Notes, the sale of 1,635,408 shares of Common Stock
in 1996 (the "Common Stock Offering"), the 1996 issuance of $175,000,000 of
9-1/2% Senior Subordinated Notes (the "Notes Offering") (collectively, the
"1996 Transactions"),and the 1997 issuance of the Old Notes as if they had
occurred on January 1, 1996. Such unaudited pro forma financial information
includes only revenues and direct operating expenses of the acquisitions and is
not a complete statement of operations. The unaudited pro forma financial
information has been prepared based on estimates and assumptions deemed by the
Company to be appropriate and does not purport to be indicative of the results
of operations which would actually have been obtained if the 1996 Acquisitions,
1996 Transactions and the 1997 issuance of the Old Notes had occurred on
January 1, 1996 or the results which may be obtained in the future. Future
results may vary significantly from the results reflected in such statements
due to price changes, production declines, supply and demand, acquisitions and
other factors.
FORCENERGY INC
PRO FORMA STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Forcenergy Amerada Hess Marathon
Historical Acquisition Acquisition Pro forma
(a) (b) (c) Adjustments Pro Forma
---------- ----------- ----------- ----------- -----------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues
Oil & gas sales . . . . . . . . . . . . . $ 138,698 $ 9,263 $ 49,619 -- $ 197,580
Other . . . . . . . . . . . . . . . . . . 683 -- -- -- 683
---------- ----------- ----------- ----------- -----------
Total revenues . . . . . . . . . . . . 139,381 9,263 49,619 -- 198,263
---------- ----------- ----------- ----------- -----------
Operating expenses
Lease operating . . . . . . . . . . . . . 38,786 2,317 19,338 -- 60,441
Depletion, depreciation and amortization 58,464 -- -- 15,503 (d) 73,967
Production taxes . . . . . . . . . . . . . 3,454 -- 297 -- 3,751
General & administrative, net . . . . . . . 7,971 -- -- -- 7,971
---------- ------------ ------------ ----------- -----------
Total operating expenses . . . . . . . 108,675 2,317 19,635 15,503 146,130
---------- ----------- ----------- ---------- -----------
Income from operations . . . . . . . . . . 30,706 6,946 29,984 (15,503) 52,133
Interest and other income . . . . . . . . . 650 -- -- -- 650
Interest expense, net . . . . . . . . . . . (13,367) -- -- (7,683) (e) (21,050)
Income before income taxes . . . . . . . . 17,989 6,946 29,984 (23,186) 31,733
Income tax provision . . . . . . . . . . . 6,711 -- -- 5,126 (f) 11,837
---------- ------------ ------------ ---------- -----------
Net income . . . . . . . . . . . . . . . . $ 11,278 $ 6,946 $ 29,984 $ (28,312) $ 19,896
========== =========== =========== ========== ===========
Net income per share . . . . . . . . . . . $ .57 $ .83
========== ===========
Weighted average common and common
equivalent
shares . . . . . . . . . . . . . . . . 19,726 23,919
</TABLE>
- --------------------
(a) Forcenergy Historical Results include the historical oil and gas revenues
and direct operating expenses for the Amerada Hess Acquisition from closing
date June 28, 1996 to December 31, 1996 and Marathon Acquisition from
December 30, 1996 to December 31, 1996.
(b) This column includes the historical oil revenues and direct operating
expenses for the Amerada Hess Acquisition from January 1, 1996 to June 27,
1996.
(c) This column indicates the historical oil revenues and direct operating
expenses for the Marathon Acquisition from January 1, 1996 to December 29,
1996.
(d) Adjustment to reflect the depletion, depreciation and amortization of oil
and gas properties giving consideration to the 1996 Acquisitions.
(e) Net increase in interest expense assuming the following transactions
occurred on January 1, 1996: (i) conversion of the Exchangeable Notes;
(ii) the Common Stock Offering; (iii) the Notes Offering; and (iv) the
issuance of the Old Notes; and assuming a weighted average interest rate of
8.97% and average actual debt outstanding for the period (excluding the
Exchangeable Notes) adjusted for 1996 Acquisitions costs, debt issuance
cost and capitalized interest.
(f) Adjustment to income tax expense reflecting the results of the transactions
reflected herein using the combined federal and state statutory rate of
37.3%.
22
<PAGE> 24
THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Notes, the purchasers thereof became
entitled to the benefits of certain registration rights under the Registration
Rights Agreement. The Exchange Notes are being offered hereunder in order to
satisfy the obligations of the Company under the Registration Rights Agreement.
See "Description of Notes -- Registration Rights; Liquidated Damages."
For each $1,000 principal amount of Old Notes surrendered to the Company
pursuant to the Exchange Offer, the holder of such Old Notes will receive
$1,000 principal amount of Exchange Notes. Upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, the Company will accept all Old Notes properly tendered prior to
5:00 p.m., New York City time, on the Expiration Date. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer in integral multiples
of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989),
the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business
and such holder is not participating in, and has no arrangement with any person
to participate in, the distribution (within the meaning of the Securities Act)
of such Exchange Notes. Eligible holders wishing to accept the Exchange Offer
must represent to the Company that such conditions have been met. Any holder
of Old Notes who tenders in the Exchange Offer for the purpose of participating
in a distribution of the Exchange Notes could not rely on the interpretation by
the staff of the SEC enunciated in the Morgan Stanley Letter and similar
no-action letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a
broker-dealer tendering Old Notes acquired directly from the Company for its
own account, (ii) any Exchange Notes to be received by it are being acquired in
the ordinary course of its business and (iii) it is not participating in, and
it has no arrangement with any person to participate in, the distribution
(within the meaning of the Securities Act) of the Exchange Notes. In addition,
in connection with any resales of Exchange Notes, any broker-dealer (a
"Participating Broker-Dealer") who acquired Old Notes for its own account as a
result of market-making activities or other trading activities must acknowledge
that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Notes. The staff of the SEC
has taken the position in no-action letters issued to third parties including
Shearman & Sterling, SEC No-Action Letter (available July 2, 1993), that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the Exchange Notes (other than a resale of an unsold allotment
from the original sale of Old Notes) with this Prospectus, as it may be amended
or supplemented from time to time. Under the Registration Rights Agreement,
the Company is required to allow Participating Broker-Dealers to use this
Prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes. See "Plan of Distribution."
The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Old Notes that have been tendered
and not withdrawn on the date that is 30 days following the commencement of the
Exchange Offer. In such event, holders of Old Notes seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act.
As of the date of this Prospectus, $200,000,000 aggregate principal amount
of Old Notes are issued and outstanding. In connection with the issuance of
the Old Notes, the Company arranged for the Old Notes to be eligible for
trading in the Private Offering, Resale and Trading through Automated Linkages
(PORTAL) Market, the National Association of Securities Dealers' screen based,
automated market trading of securities eligible for resale under Rule 144A.
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<PAGE> 25
The Company shall be deemed to have accepted for exchange validly tendered
Old Notes when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. See "-- Exchange Agent." The Exchange Agent will act as
agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
This Prospectus, together with the accompanying Letter of Transmittal, is
being sent to all registered holders as of the date of this Prospectus.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean ___________, 1997 unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time. The Company reserves the right
(i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "-- Termination"
shall have occurred and shall not have been waived by the Company (if permitted
to be waived by the Company), by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment. Without limiting the manner in which the Company may
choose to make public announcements of any delay in acceptance, extension,
termination or amendment of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest payable semi-annually on February 15
and August 15 of each year, commencing August 15, 1997. Holders of Exchange
Notes of record on August 1, 1997 will receive interest on August 15, 1997 from
the date of issuance of the Exchange Notes, plus an amount equal to the accrued
interest on the Old Notes from the date of issuance of the Old Notes, February
14, 1997, to the date of exchange thereof. Consequently, assuming the Exchange
Offer is consummated prior to the record date in respect of the August 15, 1997
interest payment for the Old Notes, holders who exchange their Old Notes for
Exchange Notes will receive the same interest payment on August 15, 1997 that
they would have received had they not accepted the Exchange Offer. Interest on
the Old Notes accepted for exchange will cease to accrue upon issuance of the
Exchange Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with
the guaranteed delivery procedures described below. The tender by a holder of
Old Notes will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal. Delivery of all documents must be made to the
Exchange Agent at its address set forth herein. Holders may also request that
their respective brokers, dealers, commercial banks, trust companies or nominees
effect such tender for such holders.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering Old Notes which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use
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<PAGE> 26
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company. Only a holder of Old Notes may tender such Old Notes
in the Exchange Offer. The term "holder" with respect to the Exchange Offer
means any person in whose name Old Notes are registered on the books of the
Company or any other person who has obtained a properly completed stock power
from the registered holder.
Any beneficial holder whose Old Notes are registered in the name of such
holder's broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on behalf of the registered holder.
If such beneficial holder wishes to tender directly, such beneficial holder
must, prior to completing and executing the Letter of Transmittal and
delivering his Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such holder's name or obtain a properly completed
bond power from the registered holder. The transfer of record ownership may
take considerable time. If the Letter of Transmittal is signed by the record
holder(s) of the Old Notes tendered thereby, the signature must correspond with
the name(s) written on the face of the Old Notes without alteration,
enlargement or any change whatsoever. If the Letter of Transmittal is signed
by a participant in Depositary Trust Company ("DTC"), the signature must
correspond with the name as it appears on the security position listing as the
holder of the Old Notes. Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible
Institution") unless the Old Notes tendered pursuant thereto are tendered (i)
by a registered holder (or by a participant in DTC whose name appears on a
security position listing as the owner) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
Letter of Transmittal and the Exchange Notes are being issued directly to such
registered holder (or deposited into the participant's account at DTC) or (ii)
for the account of an Eligible Institution. If the Letter of Transmittal is
signed by a person other than the registered holder of any Old Notes listed
therein, such Old Notes must be endorsed or accompanied by appropriate bond
powers which authorize such person to tender the Old Notes on behalf of the
registered holder, in either case signed as the name of the registered holder
or holders appears on the Old Notes. If the Letter of Transmittal or any Old
Notes or bond powers are signed by trustees, executors, administrators,
guardians, attorneys- in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and unless waived by the Company, evidence satisfactory to the Company
of their authority to so act must be submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC) with the
Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Old Notes not properly tendered or any Old Notes the Company's acceptance
of which would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the absolute right to waive any conditions of the
Exchange Offer or defects or irregularities in tender as to particular Old
Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within
such time as the Company shall determine. Neither the Company, the Exchange
Agent nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes nor shall any of
them incur any liability for failure to give such notification. Tenders of Old
Notes will not be deemed to have been made until such irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned without cost by the Exchange Agent to the
tendering holder of such Old Notes unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date. In
addition, the Company reserves the right in its sole discretion to (i) purchase
or make offers for any Old Notes that remain outstanding subsequent to the
Expiration Date, or, as set forth under "-- Termination," to terminate the
Exchange Offer and (ii) to the extent permitted by applicable law, purchase Old
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<PAGE> 27
Notes in the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers may differ from the terms of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will establish an account with respect to the Old Notes
at DTC within two business days after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into the Exchange
Agent's account in accordance with DTC's procedure for such transfer. Although
delivery of Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an Agent's Message must be transmitted to and
received by the Exchange Agent on or prior to the Expiration Date at one of its
addresses set forth below under "-- Exchange Agent", or the guaranteed delivery
procedure described below must be complied with. DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. All references in this
Prospectus to deposit or delivery of Old Notes shall be deemed to include DTC's
book-entry delivery method.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at DTC) and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and (iii) such properly completed
and executed Letter of Transmittal, together with the certificate(s)
representing all tendered Old Notes in proper form for transfer (or a
confirmation of such a book-entry transfer) and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
business days after the Expiration Date.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, certain terms and
conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely confirmation
of a book-entry transfer of such Old Notes into the Exchange Agent's account at
DTC) must be received by the Exchange Agent, with the Letter of Transmittal or
an Agent's Message and any other required documents, by the Expiration Date or
within the time periods set forth above pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. Each holder tendering the Old Notes for
exchange sells, assigns and transfers the Old Notes to the Exchange Agent, as
agent of the Company, and irrevocably constitutes and appoints the Exchange
Agent as the holder's agent and attorney-in-fact to cause the Old Notes to be
transferred and exchanged. The holder warrants that it has full power and
authority to tender, exchange, sell, assign and transfer the Old Notes and to
acquire the Exchange Notes issuable upon the exchange of such tendered Old
Notes, that the Exchange Agent, as agent of the Company, will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances, and that the Old Notes tendered for
exchange are not subject to any adverse claims when accepted by the Exchange
Agent, as agent of the Company. The holder also warrants and agrees that it
will, upon request, execute and deliver any additional documents deemed by the
Company or the Exchange Agent to be necessary or desirable to complete the
exchange, sale, assignment and transfer of the Old Notes. All authority
conferred or agreed to be conferred
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<PAGE> 28
in the Letter of Transmittal by the holder will survive the death, incapacity
or dissolution of the holder and any obligation of the holder shall be binding
upon the heirs, personal representatives, successors and assigns of such
holder.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date, unless previously accepted for exchange. To withdraw a
tender of Old Notes in the Exchange Offer, a written or facsimile transmission
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein prior to 5:00 p.m., New York City time, on the business day prior
to the Expiration Date and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including, if applicable, the registration
number or numbers and total principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee with respect to the Old Notes to register the
transfer of such Old Notes into the name of the Depositor withdrawing the
tender, (iv) specify the name in which any such Old Notes are to be registered,
if different from that of the Depositor and (v) if applicable because the Old
Notes have been tendered pursuant to the book-entry procedures, specify the
name and number of the participant's account at DTC to be credited, if
different than that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such withdrawal notices will be
determined by the Company, whose determination shall be final and binding on
all parties. Any Old Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Old Notes so withdrawn are validly
retendered. Any Old Notes which have been tendered but which are not accepted
for exchange will be returned to the holder thereof without cost to such holder
as soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Old Notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at
any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange any Old Notes not theretofore accepted for
exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of
the SEC.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Notes and return any
Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
EXCHANGE AGENT
Bankers Trust Company, the trustee under the Indenture, has been appointed
as Exchange Agent for the Exchange Offer. Questions and requests for
assistance and requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
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By Mail: By Hand or Overnight Courier:
BT Services Tennessee, Inc. Bankers Trust Company
Reorganization Unit Corporate Trust and Agency Group
P.O. Box 292737 Receipt & Delivery Window
Nashville, TN 37229-2737 123 Washington St., 1st Floor
New York, NY 10006.
Facsimile Transmission: (615) 835-3701
Confirm by Telephone: (615) 835-3572
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection therewith. The Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this
Prospectus, Letters of Transmittal and related documents to the beneficial
owners of the Old Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting
and legal fees, will be paid by the Company. The Company will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Old Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Old Notes tendered, or
if tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. The expenses of the Exchange
Offer will be amortized by the Company over the term of the Exchange Notes
under generally accepted accounting principles.
DESCRIPTION OF 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. 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.
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<PAGE> 30
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 a previous offering of debt securities, Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") 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. DLJ exercised 49,168 warrants on April
1, 1997.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
SENIOR CREDIT FACILITY
The Senior Credit Facility previously provided for a maximum loan amount of
$195 million and a borrowing base of $195 million. Effective March 31, 1997,
the Senior Credit Facility was amended to extend the maturity date and to reduce
the interest rates. As amended, the total loan amount remains at $195 million.
At the Company's direction the borrowing base was reduced to $50 million in
order to lower the commitment fees on the unused commitment. The borrowing base
is subject to redetermination semi-annually based on revised reserve estimates.
At March 31, 1997, the Company had approximately $49 million available under the
Senior Credit Facility. The facility is collateralized by substantially all of
the Company's oil and gas properties. The Senior Credit Facility provides for
borrowings on a revolving basis through December 31, 1998, at which time the
amounts outstanding convert to a term loan with quarterly principal payments
through June 30, 2002. 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 1999, 30% in 2000, 23% in 2001, and 11% in 2002. The term loan
matures on June 30, 2002. Advances under the facility, at the Company's option,
bear interest at either the prime rate or LIBOR plus 1%. 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
annual rates varying between 1/8 of 1% and 1/2 of 1%.
The Senior Credit Facility requires the Company to comply with various
customary 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.
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9 1/2% NOTES
On November 6, 1996, the Company sold $175 million of 9 1/2% Senior
Subordinated Notes due 2006. The following description of the 9 1/2% Notes is
qualified in its entirety by reference to the indenture for the 9 1/2% Notes
(the "Existing Indenture"), a form of which has been filed by the Company with
the Commission. See "Available Information". Capitalized terms have the
meanings assigned to them in the Existing Indenture.
The 9 1/2% Notes will mature on November 1, 2006. Interest on the 9 1/2%
Notes is payable in cash in arrears semiannually on May 1 and November 1 of
each year, commencing May 1, 1997.
The 9 1/2% Notes are redeemable in whole or in part at the option of the
Company, at any time on or after November 1, 2001, at the redemption prices set
forth in the Existing Indenture, together with accrued and unpaid interest, if
any, to the date of redemption. Notwithstanding the foregoing, prior to
November 1, 2001 the Company may redeem the 9 1/2% Notes, in whole or in part,
at the Make-Whole Price plus accrued and unpaid interest, if any, to the
redemption date. In addition, prior to November 1, 1999, the Company may, on
any one or more occasions, redeem up to $61.25 million in aggregate principal
amount of 9 1/2% Notes at a redemption price of 109.5% 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 9 1/2% 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, each holder of 9 1/2% Notes may require the
Company to purchase all or a portion of such holder's 9 1/2% Notes at a
purchase price equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase. Furthermore,
under certain circumstances, the Company may become obligated to offer to
purchase all or a portion of the 9 1/2% 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.
The 9 1/2% Notes are general, unsecured obligations of the Company, are
subordinated to all Senior Debt of the Company and are senior in right of
payment to, or pari passu with, all existing and future subordinated
indebtedness of the Company. The Notes will rank pari passu with the 9 1/2%
Notes.
The Existing Indenture requires the Company to comply with various
covenants. Such covenants are substantially the same as the covenants to be
contained in the Indenture. See "Description of Notes -- Certain Covenants".
DESCRIPTION OF NOTES
The Exchange Notes will be issued, and the Old Notes were issued, under an
Indenture (the "Indenture") between the Company and Bankers Trust Company, as
trustee (the "Trustee"), dated as of February 14, 1997. 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 forms of
Indenture and Registration Rights Agreement are filed as exhibits to the
Registration Statement of which this Prospectus is a part. The definitions of
certain capitalized terms used in the following summary are set forth below
under "-- Certain Definitions."
GENERAL
The Notes are general unsecured senior subordinated obligations of the
Company limited to $200,000,000 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 is payable, and the Notes are transferable, at the office or agency
of the Company in the City of New York maintained for such purposes, which
initially is 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, with respect to Notes not 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.
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The Notes are general unsecured obligations of the Company and are
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." If appropriate, all references in this Memorandum to
interest include Special Interest.
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.
Any Old Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
MATURITY AND INTEREST
The Notes will mature on February 15, 2007. Interest on the Notes accrue
at the rate of 8 1/2% per annum and is payable semi-annually in arrears on
February 15 and August 15, commencing on August 15, 1997, to Holders of record
on the February 1 and August 1 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, February 14, 1997. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months. The Company will be
obligated to pay Special Interest (as defined) on the Notes if it fails to
satisfy certain provisions of the Registration Rights Agreement. See "Exchange
Offer; Registration Rights."
REDEMPTION
Optional Redemption. At any time on or after February 15, 2002, the Notes
are 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 February 15 of
the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . 104.250%
2003 . . . . . . . . . . . . . . . 102.833%
2004 . . . . . . . . . . . . . . . 101.417%
2005 and thereafter . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may at any time prior to
February 15, 2002, 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 Memorandum, the
Company may, on any one or more occasions, redeem up to $70.0 million in
aggregate principal amount of Notes at a redemption price of 108.500% 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 $130.0 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
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<PAGE> 33
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 purchase 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 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) is 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 rank pari passu with the 9 1/2%
Notes. 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,
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<PAGE> 34
notwithstanding the foregoing, the Company makes any payment or distribution to
the Trustee or the Holder of any Note prohibited by the subordination
provisions 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 further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
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.
The Indenture limits, 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 provides 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 provides 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 or substantially 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 does contain any requirement that any current
Subsidiary execute and deliver a Subsidiary Guarantee, the Indenture requires 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 or a Restricted Subsidiary. 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 if it is then also a Significant Subsidiary that has
guaranteed any Indebtedness of the Company will be required to execute a
Subsidiary Guarantee in accordance with the terms of the Indenture.
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<PAGE> 35
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 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 does 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 Holders 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 provides 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
conclusive evidence of compliance
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<PAGE> 36
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, (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, or (c) to repurchase any Notes or Pari Passu Indebtedness on a
pro rata basis. 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 accredit 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.
BOOK-ENTRY, DELIVERY AND FORM
Except as described in the following paragraph, the Notes will initially be
issued in the form of one or more Global Securities (as defined in the
Indenture) held in book-entry form. The Notes will be deposited with the
Trustee as custodian for the Depository, and the Depository or its nominee will
initially be the sole registered holder of the Notes for all purposes under the
Indenture. Except as set forth below, a Global Security may not be transferred
except as a whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository.
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<PAGE> 37
The Old Notes that were (i) originally issued to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) who are not QIBs or (ii) issued as described below under "-- Certificated
Notes" will be issued in definitive form. Upon the transfer of a Note in
definitive form, such Note will, unless the Global Security has previously been
exchanged for Notes in definitive form, be exchanged for an interest in the
Global Security representing the principal amount of the Notes being
transferred.
Upon the issuance of a Global Security, the Depository or its nominee will
credit, on its internal system, the accounts of persons holding through it with
the respective principal amounts of the individual beneficial interests
represented by such Global Security purchased by such persons in this
Offering. Such accounts shall initially be designated by the Initial Purchasers
with respect to Notes placed by the Initial Purchasers for the Company.
Ownership of beneficial interests in a Global Security will be limited to
persons that have accounts with the Depository ("participants") or persons that
may hold interests through participants. Ownership of beneficial interests by
participants in a Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depository or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by persons that hold through participants
will be shown on, and the transfer of that ownership interest within such
participant will be effected only through, records maintained by such
participant. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Security.
Payment of principal of, premium, if any, on and interest on Notes
represented by any such Global Security will be made to the Depository or its
nominee, as the case may be, as the sole registered owner and the sole Holder
of the Notes represented thereby for all purposes under the Indenture. None of
the Company, the Trustee, any agent of the Company or the Initial Purchasers
will have any responsibility or liability for any aspect of the Depository's
reports relating to or payments made on account of beneficial ownership
interests in a Global Security representing any Notes or for maintaining,
supervising or reviewing any of the Depository's records relating to such
beneficial ownership interests.
The Company has been advised by the Depository that upon receipt of any
payment of principal of, premium, if any, on or interest on, any Global
Security, the Depository will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
or face amount of such Global Security, as shown on the records of the
Depository. The Company expects that payments by participants to owners of
beneficial interests in a Global Security held through such participants will
be governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name" and will
be the sole responsibility of such participants.
So long as the Depository or its nominee, is the registered owner or holder
of such Global Security, the Depository or such nominee, as the case may be,
will be considered the sole owner or holder of the Notes represented by such
Global Security for the purposes of receiving payment on the Notes, receiving
notices and for all other purposes under the Indenture and the Notes.
Beneficial interests in Notes will be evidenced only by, and transfers thereof
will be effected only through, records maintained by the Depository and its
participants. Except as provided above, owners of beneficial interests in a
Global Security will not be entitled to and will not be considered the holders
of such Global Security for any purposes under the Indenture. Accordingly,
each person owning a beneficial interest in a Global Security must rely on the
procedures of the Depository and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the Indenture. The Company understands
that under existing industry practices, in the event that the Company requests
any action of holders or that an owner of a beneficial interest in a Global
Security desires to give or take any action that a Holder is entitled to give
or take under the Indenture, the Depository would authorize the participants
holding the relevant beneficial interest to give or take such action, and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
The Depository has advised the Company that it will take any action
permitted to be taken by a Holder of Notes (including the presentation of Notes
for exchange as described below) only at the direction of one or more
participants to whose account with the Depository interests in the Global
Security are credited and only in respect of such portion of the aggregate
principal amount of the Notes as to which such participant or participants has
or have given such direction.
The Depository has advised the Company that the Depository is a
limited-purpose trust company organized under the Banking Law of the State of
New York, a "banking organization" within the meaning of New York Banking Law,
a member
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of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered under
the Exchange Act. The Depository was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. The Depository's
participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies, clearing corporations and certain other
organizations some of whom (and/or their representatives) own the Depository.
Access to the Depository's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
CERTIFICATED NOTES
The Notes represented by a Global Security are exchangeable for
certificated Notes only if (i) the Depository notifies the Company that it is
unwilling or unable to continue as a depository for such Global Security or if
at any time the Depository ceases to be a clearing agency registered under the
Exchange Act, and a successor depository is not appointed by the Company within
90 days, (ii) the Company executes and delivers to the Trustee a notice that
such Global Security shall be so exchangeable or (iii) there shall have
occurred and be continuing a Default or an Event of Default. Any Global
Security that is exchangeable for certificated Notes pursuant to the preceding
sentence will be transferred to, and registered and exchanged for, certificated
Notes in authorized denominations and registered in such names as the
Depository or its nominee holding such Global Security may direct. Subject to
the foregoing, a Global Security is not exchangeable, except for a Global
Security of like denomination to be registered in the name of the Depository or
its nominee. In the event that a Global Security becomes exchangeable for
certificated Notes, (i) certificated Notes will be issued only in fully
registered form in denominations of $1,000 or integral multiples thereof, (ii)
payment of principal, any repurchase price, and interest on the certificated
Notes will be payable, and the transfer of the certificated Notes will be
registrable, at the office or agency of the Company maintained for such
purposes and (iii) no service charge will be made for any issuance of the
certificated Notes, although the Company may require payment of a sum
sufficient to cover any tax or governmental charge imposed in connection
therewith. In addition, such certificates representing Old Notes will bear the
legend referred to under "Transfer Restrictions on Old Notes" (unless the
Company determines otherwise in accordance with applicable law) subject, with
respect to such Notes, to the provisions of such legend. Holders of
certificated Old Notes may only transfer their Old Notes (i) to the Company or
(ii) to a QIB; provided, however, that the agreement of such Holder is subject
to any requirement of law that the disposition of such Holder's property shall
at all times be and remain within its control.
CERTAIN COVENANTS
In addition to the covenants concerning a Change of Control and Asset Sales
described immediately above, the Indenture contains, among others, the
covenants described below:
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly
or indirectly:
(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
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(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) 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 for the 9 1/2% Notes 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 for the 9 1/2% Notes 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, plus (iv) $10 million.
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 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 $3 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.
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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 provides 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 and any of its Restricted Subsidiaries that
are Guarantors 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 does 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 or
any of its Restricted Subsidiaries 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 (together with all
Indebtedness incurred pursuant to clause (e) of this paragraph in respect of
Indebtedness previously incurred pursuant to this clause (b)) from time to time
outstanding not to exceed the greater of (i) $195 million and (ii) an amount
equal to the sum of (A) $100 million and (B) 20% of Adjusted Consolidated Net
Tangible Assets determined as of the incurrence of such Indebtedness; (c) the
incurrence by the Company of the Existing Indebtedness or the guarantee by any
Guarantor of the 9 1/2% Notes in compliance with the provisions of the Existing
Indenture as in effect on the date of the Indenture; (d) the incurrence by the
Company or any of its Restricted Subsidiaries of 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 Restricted 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 million at any one time outstanding; (i)
accounts payable or other obligations of the Company or any Restricted
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 issuance of preferred stock or
the incurrence of Non-Recourse Debt by the Company's Unrestricted Subsidiaries;
(l) Indebtedness in respect of bid, performance or surety bonds issued for the
account of the Company or any Restricted Subsidiary in the ordinary course of
business, including guaranties and letters of credit supporting such bid,
performance or surety obligations (in each case other
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than for an obligation for money borrowed); and (m) production imbalances of
the Company or any of its Restricted Subsidiaries arising in the ordinary
course of business.
Limitation on Other Senior Subordinated Debt. The Indenture provides 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 Subsidiary 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 provides 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, or
any interests therein or any income or profits therefrom, 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 provides 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 provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any 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 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, (h) the Existing Indenture and the 9
1/2% Notes, both as in effect on the date of the Indenture, or (i) 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.
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Merger, Consolidation, or Sale of Assets. The Indenture provides 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 provides 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"), 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
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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. 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 provides 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," 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 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 aggregate 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.
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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.
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.
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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 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 aggregate 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 purchase
of, or 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--% 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 affects 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--% 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,
among other things, 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.
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CONCERNING THE TRUSTEE
Bankers Trust Company is Trustee under both the Indenture and the Existing
Indenture. The Company may transact other business with Bankers Trust Company
from time to time in the ordinary course of business.
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.
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
are governed by the laws of the State of New York.
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.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (a) the sum of (i) discounted future net revenues
from proved oil and gas reserves of the Company and its Restricted Subsidiaries
calculated in accordance with SEC guidelines before any state or federal income
taxes, as estimated by a nationally recognized firm of independent petroleum
engineers in a reserve report prepared as of the end of the Company's most
recently completed fiscal year, as increased by, as of the date of
determination, the estimated discounted future net revenues from (A) estimated
proved oil and gas reserves acquired since the date of such year-end reserve
report, and (B) estimated oil and gas reserves attributable to upward revisions
of estimates of proved oil and gas reserves since the date of such year-end
reserve report due to exploration, development or exploitation activities, in
each case calculated in accordance with SEC guidelines (utilizing the prices
utilized in such year-end reserve report), and decreased by, as of the date of
determination, the estimated discounted future net revenues from (C) estimated
proved oil and gas reserves produced or disposed of since the date of such
year-end reserve report and (D) estimated oil and gas reserves attributable to
downward revisions of estimates of proved oil and gas reserves since the date
of such year-end reserve report due to changes in geological conditions or
other factors which would, in accordance with standard industry practice, cause
such revisions, in each case calculated in accordance with SEC guidelines
(utilizing the prices utilized in such year-end reserve report); provided
that, in the case of each of the determinations made pursuant to clause (A)
through (D), such increases and decreases shall be as estimated by the
Company's petroleum engineers, unless in the event that there is a Material
Change as a result of such acquisitions, dispositions or revisions, then the
discounted future net revenues utilized for purposes of this clause (a)(i)
shall be confirmed in writing by a nationally recognized firm of independent
petroleum engineers, (ii) the capitalized costs that are attributable to oil
and gas properties of the Company and its Restricted Subsidiaries to which no
proved oil and gas reserves are attributable, based on the Company's books and
records as of a date no earlier than the date of the Company's latest annual or
quarterly financial statements, (iii) the Net Working Capital on a date no
earlier than the date of the Company's latest annual or quarterly financial
statements and (iv) the greater of (i) the net book value on a date no earlier
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than the date of the Company's latest annual or quarterly financial statements
or (ii) the appraised value, as estimated by independent appraisers, of other
tangible assets (including, without duplication, Investments in unconsolidated
Restricted Subsidiaries) of the Company and its Restricted Subsidiaries, as of
the date no earlier than the date of the Company's latest audited financial
statements, minus (b) the sum of (i) minority interests, (ii) any gas balancing
liabilities of the Company and its Restricted Subsidiaries reflected in the
Company's latest audited financial statements, (iii) to the extent included in
(a)(i) above, the discounted future net revenues, calculated in accordance with
SEC guidelines (utilizing the prices utilized in the Company's year-end reserve
report), attributable to reserves which are required to be delivered to third
parties to fully satisfy the obligations of the Company and its Restricted
Subsidiaries with respect to Volumetric Production Payments on the schedules
specified with respect thereto and (iv) the discounted future net revenues,
calculated in accordance with SEC guidelines, attributable to reserves subject
to Dollar-Denominated Production Payments which, based on the estimates of
production and price assumptions included in determining the discounted future
net revenues specified in (a)(i) above, would be necessary to fully satisfy the
payment obligations of the Company and its Restricted Subsidiaries with respect
to Dollar- Denominated Production Payments on the schedules specified with
respect thereto. If the Company changes its method of accounting from the full
cost method to the successful efforts method or a similar method of accounting,
"Adjusted Consolidated Net Tangible Assets" will continue to be calculated as
if the Company was still using the full cost method of accounting.
"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 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) 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
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(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.
"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 one
year 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" or "SEC" 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
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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 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 divided 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.
"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.
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"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 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 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 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.
"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 Exchangeable 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
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<PAGE> 51
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.
"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 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.
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"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 February
15, 2002, 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 February 15, 2002; 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 February 15, 2002.
"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 February 15, 2002, determined
pursuant to the Indenture (104.250% of the principal amount).
"Material Change" means an increase or decrease (excluding changes that
result solely from changes in prices) of more than 20% during a fiscal quarter
in the estimated discounted future net cash revenues from proved oil and gas
reserves of the Company and its Restricted Subsidiaries, calculated in
accordance with clause (a)(i) of the definition of Adjusted Consolidated Net
Tangible Assets; provided, however, that the following will be excluded from
the calculation of Material Change: (i) any acquisitions during the quarter of
oil and gas reserves that have been estimated by a nationally recognized firm
of independent petroleum engineers and on which a report or reports exist and
(ii) any disposition of properties existing at the beginning of such quarter
that have been disposed of as provided in the "Asset Sales" covenant.
"Maturity Date" means February 15, 2007.
"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).
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"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.
"Net Working Capital" means (i) all current assets of the Company and its
Restricted Subsidiaries, minus (ii) all current liabilities of the Company and
its Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements of the Company
prepared in accordance with GAAP.
"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 (including, without
limitation, the 9 1/2% Notes) 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
Restricted Subsidiary of the Company; (b) Investments by the Company or any of
its Restricted Subsidiaries in another Person, if as a result of such
Investment, such Person (i) becomes a Restricted Subsidiary of the Company or
(ii) such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all of its assets to, the Company or a Restricted
Subsidiary; (c) Investments in the form of securities received from Asset
Sales, provided that such Asset Sales are made in compliance with the "Asset
Sales" covenant; (d) any Investment in Cash Equivalents; (e) 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 (e) that are at the time outstanding, not to exceed $10 million; (f)
shares of Capital Stock or other securities received in settlement of debts
owed to the Company or any of its Restricted Subsidiaries as a result of
foreclosure, perfection or enforcement of any Lien or indebtedness or in
connection with any good faith settlement of a bankruptcy proceeding; (g) other
advances and loans to officers and employees of the Company or any Subsidiary,
so long as the aggregate principal amount of such advances and loans does not
exceed $3.0 million at any one time outstanding; and (h) entry into operating
agreements, joint ventures, partnership agreements, working
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interests, royalty interests, mineral leases, processing agreements, farm-in
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 other
than any Investment received pursuant to the Asset Sale provision.
"Permitted Liens" means (i) any 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 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-in agreements, 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; (xvii) Liens to secure any
permitted extension, renewal, refinancing, refunding or exchange (or successive
extensions, renewals, refinancings, refundings or exchanges), in whole or in
part, of or for any Indebtedness secured by Liens referred to in clauses (iv),
(vi) and (xiv) of this paragraph; provided, however, that (i) such new Lien
shall be limited to all or part of the same property that secured the original
Lien, plus improvements on such property and (ii) the Indebtedness secured by
such Lien at such time is not increased to any amount greater than the sum of
(A) the outstanding principal amount or, if greater, the committed amount of
the Indebtedness secured by Liens described under clauses (iv), (vi) and (xiv)
of this paragraph at the time the original Lien became a Lien permitted in
accordance with the Indenture and (B) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing, refunding,
extension, renewal or exchange; and (xviii) Liens not otherwise permitted by
clauses (i) through (xvii) 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.
Notwithstanding anything in clauses (i) through (xviii) of this definition, the
term "Permitted Liens" does not include any Liens resulting from the creation,
incurrence, issuance, assumption or guarantee of any Production Payments other
than (a) Production Payments that are created, incurred, issued, assumed or
guaranteed in connection with the financing of, and within 30 days after, the
acquisition of the properties or assets that are subject thereto, or (b)
Production Payments other than those described in clause (a) of this sentence
to the extent (x) the Company could incur the Indebtedness associated with such
Production Payments pursuant to the terms of the Indenture and (y) the proceeds
of such Production Payments will be applied as if such Production Payments
constituted Asset Sales made pursuant to and in compliance with the provisions
of the Indenture described above under the caption "-- Asset Sales."
"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,
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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.
"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 Facilities, (ii) any other
Indebtedness 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 and (iii) any amounts due to the Trustee under
the Indenture as fees or indemnities. 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 of
the Indenture.
"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
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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 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.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company has agreed pursuant to a registration agreement (the
"Registration Rights Agreement") with Salomon Brothers Inc, for the benefit of
the Initial Purchasers and the Holders, that the Company will, at its cost, (i)
not later than April 15, 1997, file a registration statement (the "Exchange
Offer Registration Statement") with the Commission with respect to a registered
offer (the "Exchange Offer") to exchange the Notes for new notes of the Company
(the "Exchange Notes") having terms identical in all material respects to the
Notes (except that the Exchange Notes will not contain terms with respect to
transfer restrictions and the Special Interest provisions will be eliminated)
and (ii) use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act not later than June
14, 1997. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company will offer the Exchange Notes in exchange for surrender of the
Notes. The Company will keep the Exchange Offer open for not less than 30 days
(or longer if required by applicable law) after the date notice of the Exchange
Offer is mailed to the Holders. For each Note surrendered to the Company
pursuant to the Exchange Offer, the Holder of such Note will receive an
Exchange Note having a principal amount equal to that of the surrendered Note.
Interest on each Exchange Note will accrue from the last interest payment date
on which interest was paid on the Note surrendered in exchange thereof or, if
no interest has been paid on such Note, from the date of its original issue.
Under existing Commission interpretations, the Exchange Notes would be freely
transferable by
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Holders (other than affiliates of the Company) after the Exchange Offer without
further registration under the Securities Act, if the Holder of the Exchange
Notes represents that it is acquiring the Exchange Notes in the ordinary course
of its business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of the Company, as such terms are interpreted by the Commission;
provided, however, that broker-dealers ("Participating Broker-Dealers")
receiving Exchange Notes in the Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange Notes. The Commission has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to Exchange Notes (other than a
resale of an unsold allotment from the original sale of the Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the Exchange Offer Registration
Statement in connection with the resale of such Exchange Notes.
A Holder of Old Notes (other than certain specified holders) who wishes to
exchange such Old Notes for Exchange Notes in the Exchange Offer will be
required to make certain representations, including representations (i) that
any Exchange Notes to be received by it will be acquired in the ordinary course
of its business, (ii) that at the time of the commencement of the Exchange
Offer it has no arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of the Exchange
Notes and (iii) that it is not an "affiliate" of the Company, as defined in
Rule 405 of the Securities Act, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the Securities
Act to the extent applicable. If the holder is not a broker-dealer, it will be
required to represent that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Notes. If the holder is a broker-dealer
that will receive Exchange Notes for its own account in exchange for Old Notes
that were acquired as a result of market-making activities or other trading
activities, it will be required to acknowledge that it will deliver a
prospectus in connection with any resales of such Exchange Notes.
In the event that changes in law or applicable interpretations of the staff
of the Commission do not permit the Company to effect such a Exchange Offer, or
if for any other reason the Exchange Offer is not consummated by July 14, 1997,
or if the Initial Purchasers so request with respect to Old Notes not eligible
to be exchanged for Exchange Notes in the Exchange Offer, or if any Holder of
Old Notes is not eligible to participate in the Exchange Offer or does not
receive freely tradeable Exchange Notes in the Exchange Offer, the Company
will, at its cost, (i) as promptly as practicable, file a resale shelf
registration statement (the "Shelf Registration Statement") covering resales of
the Old Notes or the Exchange Notes, as the case may be, (ii) use its best
efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act and (iii) keep the Shelf Registration Statement
effective until three years after its effective date or such shorter period
ending when all resales of Old Notes covered by such Shelf Registration
Statement have been made. The Company will, in the event a Shelf Registration
Statement is filed, among other things, provide to each Holder for whom such
Shelf Registration Statement was filed copies of the prospectus that is a part
of the Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Old Notes or the Exchange
Notes, as the case may be. A person who sells such Old Notes or Exchange Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Agreement which are applicable to
such person (including certain indemnification obligations).
If (i) by April 15, 1997, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the Commission, (ii)
by June 14, 1997, the Exchange Offer Registration Statement has not been
declared effective, (iii) by July 14, 1997, neither the Exchange Offer has been
consummated nor the Shelf Registration Statement has been declared effective or
(iv) after either the Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Old Notes or Exchange Notes in accordance with and
during the periods specified in the Registration Agreement (each such event
referred to in clauses (i) through (iv), a "Registration Default"), interest
("Special Interest") will accrue on the Old Notes and the Exchange Notes (in
addition to the stated interest on the Old Notes and the Exchange Notes) from
and including the date on which any such Registration Default shall occur to
but excluding the date on which all Registration Defaults have been cured.
Special Interest will accrue at a rate of 0.5% per annum during the 90-day
period immediately following the occurrence of any Registration Default and
shall increase by 0.25% per annum at the end of each subsequent 90-day period,
but in no event shall such rate exceed 1.50% per annum. The Exchange Offer
Registration Statement was filed with the Commission on April 10, 1997, and it
was declared effective on _________, 1997.
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All accrued Special Interest shall be paid to Holders in the same manner in
which payments of other interest are made pursuant to the Indenture. See
"Description of Notes -- Maturity and Interest."
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is available upon request to the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the material United Stated Federal income tax
consequences of the Exchange Offer is for general information only. It is
based on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. The following relates only to the Old Notes,
and the Exchange Notes received therefor, that are held as "capital assets"
within the meaning of Section 1221 of the Code. It does not discuss state,
local or foreign tax consequences, nor, except as otherwise noted, does it
discuss tax consequences to categories of holders that are subject to special
rules, such as foreign persons, tax-exempt organizations, insurance companies,
banks and dealers in stocks and securities. Tax consequences may vary
depending on the particular status of an investor. No rulings will be sought
from the Internal Revenue Service ("IRS") with respect to the Federal income
tax consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO PURCHASE THE NOTES.
EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE
APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR
SITUATION BEFORE DETERMINING WHETHER TO PURCHASE THE NOTES.
PAYMENTS OF INTEREST AND SPECIAL INTEREST
In general, interest on a Note will be taxable to a beneficial owner who or
which is (i) a citizen or resident of the United States, (ii) a corporation
created or organized under the laws of the United States or any State thereof
(including the District of Columbia), (iii) a person otherwise subject to
United States Federal income taxation on its worldwide income (a "U.S. Holder")
as ordinary income at the time it is received or accrued, depending on the U.S.
Holder's method of accounting for tax purposes.
The Company is obligated to pay Special Interest to the U.S. Holders of Old
Notes under certain circumstances described under "Exchange Offer; Registration
Rights." It is believed that any such payments should be taxable to U.S.
Holders at the time it is received or accrued, depending on the U.S. Holder's
method of accounting for tax purposes.
OPTIONAL REDEMPTION OR REPURCHASE
The Notes are subject to redemption at the option of the Company, on or
after February 15, 2002, at the applicable redemption price plus any accrued
and unpaid interest, and to purchase at the option of each holder thereof upon
a Change of Control for 101% of the principal amount plus any accrued and
unpaid interest. Furthermore, under certain circumstances, the Company may
become obligated to purchase all or a portion of the Notes at 101% of the
principal amount plus any accrued and unpaid interest, with the proceeds of
certain Asset Sales. See "Description of Notes." Upon the optional redemption
or purchase of a Note, it is expected that the difference between the amount
received by such holder and the holder's adjusted tax basis in the Note will be
taxable as capital gain or loss, if the Note is held as a capital asset
(subject to the market discount rules discussed below).
ORIGINAL ISSUE DISCOUNT
If the Old Notes are not issued at a discount or are deemed to be issued
with no discount because such discount is de minimis , a U.S. Holder will
include in income as ordinary interest income the gross amount of interest and
Special Interest paid or payable in respect of the Old Notes as provided above
in "-- Payments of Interest and Special Interest." A discount on original issue
will be considered de minimis and, thus, will be treated as zero discount if
the original issue discount is
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less than one-fourth (1/4) of one percent of the stated redemption price at
maturity, multiplied by the number of complete years to maturity. The Company
expects that the Old Notes will not have original issue discount.
Pursuant to Treasury regulations, if the Old Notes are issued with original
issue discount, a U.S. Holder will generally be required to include the amount
of such discount in income over the life of the Old Notes (and any Exchange
Notes issued in exchange therefor) on a yield to maturity basis. If the
Company determines that the Old Notes have original issue discount, the Company
will provide certain information to the IRS and/or Holders that is relevant to
determining the amount of original issue discount that is required to be
included in income in each accrual period. A U.S. Holder's adjusted tax basis
in a Note will be increased by the amount of any original issue discount
included in its gross income (taking into account any Acquisition Premium (as
defined) which reduces the amount of original issue discount includible in a
U.S. Holder's gross income, as described more fully below).
PAYMENTS OF PRINCIPAL; DISPOSITIONS
Subject to the discussion of the Exchange Offer below, upon the sale,
exchange, redemption, retirement at maturity or other disposition of a Note, a
U.S. Holder will generally recognize taxable gain or loss equal to the
difference between the sum of cash plus the fair market value of all other
property received on such disposition (except to the extent such cash or
property is attributable to accrued but unpaid interest or market discount,
which will be taxable as ordinary income) and such U.S. Holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will
equal the cost of the Note to such U.S. Holder (increased for accrued original
issue discount, if any), less any principal payment received by such U.S.
Holder. Gain or loss realized by a U.S. Holder on the sale, redemption or
other disposition of a Note or an Exchange Note generally will be long-term
capital gain or loss if, at the time of the disposition, the Note has been
held for more than one year.
AMORTIZABLE BOND PREMIUM
If a U.S. Holder pays an amount (exclusive of accrued and unpaid interest
through the acquisition date) in excess of the Note's 's stated redemption
price at maturity at the time of its acquisition ("Bond Premium"), the U.S.
Holder will not be required to include original issue discount, if any, in his
income and may elect to amortize Bond Premium. If Bond Premium is amortized,
the amount of interest that must be included in the U.S. Holder's income from
each period ending on an interest payment date or stated maturity, as the case
may be, will be reduced by the portion of the Bond Premium allocable to such
period based on the Note's 's yield to maturity and the U.S. Holder's adjusted
basis in the Notes s will be reduced accordingly. This election applies to all
Notes acquired by the U.S. Holder during the year of election and thereafter.
ACQUISITION PREMIUM
If a U.S. Holder pays an amount (exclusive of accrued and unpaid interest
through the acquisition date) in excess of the Note's 's adjusted issue price
at the time of its acquisition ("Acquisition Premium"), but less than its
stated redemption price at maturity, the U.S. Holder may be entitled to a
reduction, in the daily portion of any original issue discount includable in
such U.S. Holder's income, for such Acquisition Premium. The reduction will be
an amount equal to the daily portion of original issue discount for that day
multiplied by a fraction, the numerator of which is equal to the Acquisition
Premium, and the denominator of which is the excess of the stated redemption
price at maturity over the adjusted issue price of the Note on the date of
purchase.
MARKET DISCOUNT
A U.S. Holder, other than an initial Holder, will be treated as holding a
Note or an Exchange Note at a market discount (a "Market Discount Note") if the
amount for which such U.S. Holder purchased the Note is less than the Note's
stated redemption price at maturity, or, in the case of a Note issued with
original issue discount, the "revised issue price," as defined in Section 1278
of the Code, subject to a de minimis rule.
In general, any partial payment of principal on, or gain recognized on the
maturity, optional redemption or repurchase, or disposition of, a Market
Discount Note will be treated as ordinary interest income to the extent that
such gain does not exceed the accrued market discount on such Note.
Alternatively, a U.S. Holder of a Market Discount Note may elect to include
market discount in income currently over the life of the Market Discount Note.
Such an election applies to all debt
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instruments with market discount acquired by the electing U.S. Holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
Market discount accrues on a straight-line basis, unless the U.S. Holder
elects to accrue such discount on a constant yield to maturity basis. Such an
election is applicable only to the Note with respect to which it is made and is
irrevocable. A U.S. Holder of a Market Discount Note that does not elect to
include market discount in income currently generally will be required to defer
deductions for interest on borrowings allocable to such Note, in an amount not
exceeding the accrued market discount on such Note, until the maturity or
disposition of such Note. If such Note is disposed of in a non-taxable
transaction (other than a nonrecognition transaction described in Section
1276(c) of the Code) accrued market discount will be includable as ordinary
income to the U.S. Holder as if such U.S. Holder had sold the Note at its then
fair market value.
THE EXCHANGE OFFER
Pursuant to recently-issued Treasury regulations, the exchange of Old Notes
for Exchange Notes pursuant to the Exchange Offer should not constitute a
significant modification of the terms of the Old Notes and, accordingly, such
exchange should be treated as a "non-event" for Federal income tax purposes.
Therefore, such exchange should have no Federal income tax consequences to
Holders of Old Notes, and each Holder of Old Notes would continue to be
required to include interest on the Old Notes in its gross income in accordance
with its method of accounting for Federal income tax purposes.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to withholding of United States
Federal income taxes on payments of principal, premium (if any) or interest
(including original issue discount, if any) on a Note, provided in the case of
interest that (i) the beneficial owner does not actually or constructively own
10% or more of the total combined voting power of all classes of stock of the
Company entitled to vote, (ii) the beneficial owner is not a controlled foreign
corporation that is related to the Company through stock ownership, (iii) the
beneficial owner is not a bank which receives interest on an extension of
credit made pursuant to a loan agreement entered into in the ordinary course of
its trade or business, (iv) the beneficial owner provides the ownership
statement described below, and (v) such interest is not contingent interest
under Section 871(h)(4)(A) of the Code and the regulations thereunder. To
qualify for the exemption from taxation, the last United States payor in the
chain of payment prior to payment to a non-U.S. Holder (the "Withholding
Agent") must have received in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
that (i) is signed by the beneficial owner of the Note under penalties of
perjury, (ii) certifies that such owner is not a U.S. Holder and (iii) provides
the name and address of the beneficial owner. The statement may be made on an
IRS Form W-8 or a substantially similar form, and the beneficial owner must
inform the Withholding Agent of any change in the information on the statement
within 30-days of such change. If a Note is held through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement under penalties of perjury to the
Withholding Agent. In such case, however, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by
the beneficial owner to the organization or institution. The Treasury
Department is considering implementation of further certification requirements
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.
A non-U.S. Holder will not be subject to withholding of United States
Federal income taxes on any amount which constitutes capital gain upon
retirement or disposition of a Note.
If a non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described above, payments of premium and interest
(including original issue discount) made to such non-U.S. Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Note
provides the Company or its paying agent, as the case may be, with a properly
executed (1) IRS Form 1001 (or successor form) claiming an exemption from
withholding under the benefit of a tax treaty or (2) IRS Form 4224 (or
successor form) stating that interest paid on the Note is not subject to
withholding tax because it is effectively connected with the beneficial owner's
conduct of a trade or business in the United States.
If a non-U.S. Holder is engaged in a trade or business in the United States
and interest (including original issue discount) on the Note is effectively
connected with the conduct of such trade or business, the non-U.S. Holder,
although exempt from the withholding tax discussed above, will be subject to
United States federal income tax on such interest and original issue discount
on a net income basis in the same manner as if it were a U.S. Holder. In
addition, if such non-U.S. Holder is a
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foreign corporation, it may be subject to a branch profits tax equal to 30% (or
lower treaty rate) of its effectively connected earnings and profits for the
taxable year, including such premium, if any, and interest (including original
issue discount) on a note or Exchange Note.
Any gain realized upon the sale, exchange, retirement or other disposition
of a Note generally will not be subject to United States federal income tax
unless (i) such gain is effectively connected with a trade or business in the
United States of the non-U.S. Holder, or (ii) in the case of a non-U.S. Holder
who is an individual, such individual is present in the United States for 183
days or more in the taxable year of such sale, exchange, retirement or other
disposition, and certain other conditions are met.
The Notes will not be includible in the estate of a non-U.S. Holder
provided that such individual does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the company
entitled to vote and provided that at the time of such individual's death,
payments in respect of the Notes would not have been effectively connected with
the conduct of such individual of a trade or business in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments of principal, interest, original issue discount or premium
made in respect of the Notes to registered owners who are not "exempt
recipients" and who fail to provide certain identifying information (such as
the registered owner's taxpayer identification number) in the required manner.
Generally, individuals are not exempt recipients, whereas corporations and
certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes and exemption. Compliance
with the identification procedures described in the preceding section would
establish an exemption from backup withholding and information reporting for
those non-U.S. Holders who are not exempt recipients and the payor does not
have actual knowledge that the beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest, original issue discount or premium on a
Note are paid or collected by a foreign office of a custodian, nominee or other
foreign agent on behalf of the beneficial owner of such Note, or if a foreign
office of a broker pays the proceeds of the sale of a Note to the owner
thereof. If, however, such nominee, custodian, agent or broker is a United
States person, a controlled foreign corporation or a foreign person that
derives 50% or more of its gross income from the conduct of a trade or business
in the United States, such payments will not be subject to backup withholding
but will be subject to information reporting, unless (1) such custodian,
nominee, agent or broker has documentary evidence in its records that the
beneficial owner is not a United States person and certain other conditions are
met or (2) the beneficial owner establishes an exemption. Temporary Treasury
regulations provide that the Treasury is considering whether backup withholding
will apply with respect to such payments of principal, interest or the proceeds
of a sale that are not subject to backup withholding under the current
regulations.
Payments of principal, interest, original issue discount and premium on a
Note paid to the beneficial owner of a Note by a United States office of a
custodian, nominee or agent, or the payment by the United States office of a
broker of the proceeds of sale of a Note will be subject to both backup
withholding and information reporting unless the beneficial owner provides the
statement referred to above and the payer does not have actual knowledge that
the beneficial owner is a United States person, or the beneficial owner
otherwise establishes as exemption.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to any
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broker-dealer for use in connection with any such resale for a period of 180
days after consummation of the Exchange Offer, or such shorter period as will
terminate when all Old Notes acquired by broker-dealers for their own accounts
as a result of market-making activities or other trading activities have been
exchanged for Exchange Notes and resold by such broker-dealers. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations).
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. For a period of 180 days after consummation of the Exchange
Offer, or such shorter period as will terminate when all Old Notes acquired by
broker-dealers for their own accounts as a result of market-making activities
or other trading activities have been exchanged for Exchange Notes and resold
by such broker-dealers, the Company will promptly send additional copies of
this Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed in the Registration Rights Agreement to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
TRANSFER RESTRICTIONS ON OLD NOTES
OFFERS AND SALES BY THE INITIAL PURCHASERS
The Old Notes were not registered under the Securities Act and may not be
offered or sold in the United States or to, or for the account or benefit of,
U.S. persons except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Old Notes were offered and
sold only (i) in the United States to QIBs under Rule 144A under the Securities
Act and other Institutional Accredited Investors who, prior to their purchase
of Old Notes, delivered to the Initial Purchasers a letter containing certain
representations and agreements, in a private sale exempt from the registration
requirements of the Securities Act, and (ii) outside the United States to non-
U.S. persons ("foreign purchasers") in reliance upon Regulation S under the
Securities Act.
INVESTOR REPRESENTATIONS AND RESTRICTIONS ON RESALE
Each purchaser of the Old Notes was deemed to have represented and agreed
as follows:
(1) it is acquiring the Old Notes for its own account or for an account
with respect to which it exercises sole investment discretion, and that it or
such account is a QIB, an Institutional Accredited Investor acquiring the Old
Notes for investment purposes and not for distribution or a foreign purchaser
outside the United States;
(2) it acknowledges that the Old Notes have not been registered under the
Securities Act and may not be sold except as permitted below;
(3) it understands and agrees (x) that such Old Notes are being offered
only in a transaction not involving any public offering within the meaning of
the Securities Act, and (y) that (A) if within three years after the date of
original issuance of the Old Notes or if within three months after it ceases to
be an affiliate (within the meaning of Rule 144 under the Securities Act) of
the Company, it decides to resell, pledge or otherwise transfer such Old Notes
on which the legend set forth below appears, such Old Notes may be resold,
pledged or transferred only (i) to the Company, (ii) so long as such security
is eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a QIB that purchases for its own account or for the
account of a QIB to whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A (as indicated by the box
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checked by the transferor on the Certificate of Transfer on the reverse of the
Note if such Note is not in book-entry form), (iii) in an offshore transaction
in accordance with Regulation S (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the Note), but, if
such transfer is being effected by an Initial Foreign Purchaser or any foreign
purchaser who has purchased Old Notes from an Initial Foreign Purchaser or from
any person other than a QIB or an Institutional Accredited Investor pursuant to
this clause (iii) prior to the expiration of the "40-day restricted period"
(within the meaning of Rule 903(c)(3) of Regulation S under the Securities
Act), the transferee shall have certified to the Company and the Trustee for
the Old Notes that such transferee is a non-U.S. person (within the meaning of
Regulation S) and that such transferee is acquiring the Old Notes in an
offshore transaction, (iv) to an Institutional Accredited Investor (as
indicated by the box checked by the transferor on the Certificate of Transfer
on the reverse of the Note if such Note is not in book-entry form) who has
certified to the Company and the Trustee for the Old Notes that such transferee
is an Institutional Accredited Investor and is acquiring the Old Notes for
investment purposes and not for distribution (provided that no Initial Foreign
Purchaser or any foreign purchaser who has purchased Old Notes from an Initial
Foreign Purchaser or from any person other than a QIB or an Institutional
Accredited Investor pursuant to clause (iii) shall be permitted to transfer any
Old Notes so purchased by it to an Institutional Accredited Investor pursuant
to this clause (iv) prior to the expiration of the "40-day restricted period"
(within the meaning of Rule 903(c)(3) of Regulation S under the Securities
Act)), (v) pursuant to an exemption from the registration requirements of the
Securities Act provided by Rule 144 (if applicable) under the Securities Act or
(vi) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States, (B) the purchaser will, and each subsequent holder is
required to, notify any purchaser of Old Notes from it of the resale
restrictions referred to in (A) above, if then applicable, and (C) with respect
to any transfer of Old Notes by an Institutional Accredited Investor, such
holder will deliver to the Company and the Trustee such certificates and other
information as they may reasonably require to confirm that the transfer by it
complies with the foregoing restrictions including, without limitation, a
certificate in the form of Exhibit A hereto;
(4) it understands that the notification requirement referred to in (3)
above will be satisfied, in the case only of transfers by physical delivery of
Certificated Notes other than a Global Certificate, by virtue of the fact that
the following legend will be placed on the Old Notes unless otherwise agreed by
the Company:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS NOTE,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF THE ISSUANCE
HEREOF (OR A PREDECESSOR NOTE HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE
OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS
THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS NOTE), (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
NOTE), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED
IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40-DAY
RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER
THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR
THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4)
TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
NOTE) THAT IS ACQUIRING THIS NOTE FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS NOTE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS
SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS NOTE PURSUANT TO THIS CLAUSE
(4) PRIOR TO THE EXPIRATION OF THE "40-DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT)), (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE
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SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED
INVESTOR HOLDING THIS NOTE AGREES IT WILL FURNISH TO THE COMPANY AND THE
TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE
TO CONFIRM THAT ANY TRANSFER BY IT OF THIS NOTE COMPLIES WITH THE FOREGOING
RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, REPRESENTS AND
AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT AND THAT IT IS HOLDING THIS NOTE FOR INVESTMENT PURPOSES AND NOT
FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT."
(5) it (i) is able to fend for itself in the transactions contemplated by
this Memorandum; (ii) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of its
prospective investment in the Old Notes; and (iii) has the ability to bear the
economic risks of its prospective investment and can afford the complete loss
of such investment;
(6) it has received a copy of the Offering Memorandum relating to the
offering of Old Notes and acknowledges that it has had access to such financial
and other information, and has been afforded the opportunity to ask questions
of the Company and receive answers thereto, as it deemed necessary in
connection with its decision to purchase the Old Notes; and
(7) it understands that the Company, the Initial Purchasers and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that if any of the acknowledgments,
representations and warranties deemed to have been made by it by its purchase
of the Old Notes are no longer accurate, it shall promptly notify the Company
and the Initial Purchasers. If it is acquiring the Old Notes as a fiduciary or
agent for one or more investor accounts, it represents that it has sole
investment discretion with respect to each such account and it has full power
to make the foregoing acknowledgments, representations and agreements on behalf
of such account.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered hereby is being
passed upon for the Company by Vinson & Elkins L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and 1995, and for the years then ended, incorporated in this Prospectus by
reference to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1996, 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 historical statements of revenues and direct operating expenses of the
properties acquired by the Company from Marathon Oil Company for the years
ended December 31, 1996 and 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 for the year 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, 1996, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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The financial statements of Ashlawn Energy, Inc. as of December 31, 1993
and December 31, 1994, 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 and 1997 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.
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<PAGE> 66
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.
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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.
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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.
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.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. 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, 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
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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 21. EXHIBITS AND FINANCIAL SCHEDULES
The following instruments and documents are included as Exhibits to
this Registration Statement. Exhibits incorporated by reference are so
indicated by parenthetical information.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C> <C>
4.1 -- Amended and Restated Certificate of Incorporation of the Company dated
July 25, 1995 (filed as Exhibit 3.1 to the Quarterly Form on 10-Q filed on
November 14, 1995 for the nine month period ending September 30, 1995 and
is included herein by reference (File No. 0-26444)) and Amendment No. 1
thereto (filed with Amendment No. 2 to the Registration Statement on Form
S-1 filed on June 6, 1996 and is included herein by reference (File No.
333-4600))
4.2 -- By-Laws of the Company (filed as Exhibit 3.2 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))
4.3 -- Indenture dated as of February 14, 1997 among the Company, as issuer, and
Bankers Trust, as trustee (filed as Exhibit 4.4 to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 and is included
herein by reference (File No. 000-26444)))
4.4* -- Registration Rights Agreement dated February 11, 1997 by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities
Corporation, Lehman Brothers and ING Baring (U.S.) Securities, Inc.
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1** -- Fourth Amendment to Third Restatement of Credit Agreement by and among
Forcenergy Inc and Internationale Nederlanden (U.S.) Capital Corporation
and certain financial institutions named therein as Lenders.
</TABLE>
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<TABLE>
<S> <C> <C>
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Price Waterhouse LLP
23.3* -- Consent of LaPorte, Sehrt, Romig & Hand, APAC
23.4* -- Consent of Netherland, Sewell & Associates, Inc.
23.5* -- Consent of Collarini Engineering, Inc.
23.6* -- Consent of Joe C. Neal & Associates
23.7* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
24.1* -- Power of Attorney (included on the signature pages of this Registration
Statement)
25.1* -- Statement of Eligibility of Bankers Trust Company
99.1* -- Form of Letter of Transmittal
</TABLE>
* Filed herewith
** To be filed by amendment
ITEM 22. UNDERTAKINGS
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the provisions described under Item 15 above, or
otherwise, the Company 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 of expenses incurred or paid by a director, officer
or controlling person of the Company 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 Company will, unless,
in the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, the State of
Florida on April 9, 1997.
FORCENERGY INC
By: /s/ STIG WENNERSTROM
--------------------------------------
Stig Wennerstrom
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stig Wennerstrom and E. Joseph Grady, and each
of them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign on
his behalf individually and in each capacity stated below any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, 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, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents and either of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ STIG WENNERSTROM President and Chief Executive Officer April 9, 1997
- -------------------------------------- (Principal Executive Officer)
Stig Wennerstrom
/s/ E. JOSEPH GRADY Vice President - Chief Financial Officer April 9, 1997
- -------------------------------------- (Principal Financial and Accounting
E. Joseph Grady Officer)
/s/ BRUCE L. BURNHAM
- -------------------------------------- April 9, 1997
Bruce L. Burnham Director
/s/ ARNOLD L. CHAVKIN
- -------------------------------------- April 9, 1997
Arnold L. Chavkin Director
/s/ ERIC FORSS
- -------------------------------------- April 9, 1997
Eric Forss Director
/s/ ROBERT ISSAL
- -------------------------------------- April 9, 1997
Robert Issal Chairman of the Board of Directors
/s/ KEVIN S. PENN
- -------------------------------------- April 9, 1997
Kevin S. Penn Director
/s/ WILLIAM F. WALLACE
- -------------------------------------- April 9, 1997
William F. Wallace Director
/s/ JEFFREY A. WEBER
- -------------------------------------- April 9, 1997
Jeffrey A. Weber Director
</TABLE>
II-4
<PAGE> 73
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C> <C>
4.1 -- Amended and Restated Certificate of Incorporation of the Company dated
July 25, 1995 (filed as Exhibit 3.1 to the Quarterly Form on 10-Q filed on
November 14, 1995 for the nine month period ending September 30, 1995 and
is included herein by reference (File No. 0-26444)) and Amendment No. 1
thereto (filed with Amendment No. 2 to the Registration Statement on Form
S-1 filed on June 6, 1996 and is included herein by reference (File No.
333-4600))
4.2 -- By-Laws of the Company (filed as Exhibit 3.2 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))
4.3 -- Indenture dated as of February 14, 1997 among the Company, as issuer, and
Bankers Trust, as trustee (filed as Exhibit 4.4 to the Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 and is included
herein by reference (File No. 000-26444)))
4.4* -- Registration Rights Agreement dated February 11, 1997 by and among the
Company and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities
Corporation, Lehman Brothers and ING Baring (U.S.) Securities, Inc.
5.1* -- Opinion of Vinson & Elkins L.L.P.
10.1** -- Fourth Amendment to Third Restatement of Credit Agreement by and among
Forcenergy Inc and Internationale Nederlanden (U.S.) Capital Corporation
and certain financial institutions named therein as Lenders.
21.1* -- Subsidiaries of the Company
23.1* -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Price Waterhouse LLP
23.3* -- Consent of LaPorte, Sehrt, Romig & Hand, APAC
23.4* -- Consent of Netherland, Sewell & Associates, Inc.
23.5* -- Consent of Collarini Engineering, Inc.
23.6* -- Consent of Joe C. Neal & Associates
23.7* -- Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
24.1* -- Power of Attorney (included on the signature pages of this Registration
Statement)
25.1* -- Statement of Eligibility of Bankers Trust Company
99.1* -- Form of Letter of Transmittal
</TABLE>
* Filed herewith
** To be filed by amendment
<PAGE> 1
EXHIBIT 4.4
FORCENERGY INC
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007
REGISTRATION AGREEMENT
New York, New York
February 11, 1997
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Dear Sirs:
Forcenergy Inc, a Delaware corporation (the "Company"), proposes to
issue and sell to certain purchasers (the "Purchasers"), upon the terms set
forth in a purchase agreement of even date herewith (the "Purchase Agreement"),
its 8 1/2% Senior Subordinated Notes due 2007 (the "Securities") (the "Initial
Placement"). As an inducement to the Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to your obligations thereunder,
the Company agrees with you, (i) for your benefit and the benefit of the other
Purchasers and (ii) for the benefit of the holders of record from time to time
of the Securities (including you and the other Purchasers) (each of the
foregoing a "Holder" and together the "Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase Agreement.
<PAGE> 2
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the 1 year period following
the consummation of the Registered Exchange Offer, exclusive of any period
during which any stop order shall be in effect suspending the effectiveness of
the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration statement
of the Company on an appropriate form under the Act with respect to the
Registered Exchange Offer, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Purchasers) which is a broker-dealer, electing to exchange Securities acquired
for its own account as a result of market-making activities or other trading
activities, for New Securities.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities dated as of
February 14, 1997, between the Company and Bankers Trust Company as trustee, as
the same may be amended from time to time in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble hereto.
"Majority Holders" means the Holders of a majority of the aggregate
principal amount of securities registered under a Registration Statement.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering.
"New Securities" means debt securities of the Company identical in all
material respects to the Securities (except that the interest rate step-up
provisions and the transfer restrictions will be modified or eliminated, as
appropriate), to be issued under the Indenture or the New Securities Indenture.
"New Securities Indenture" means an indenture between the Company and
the New Securities Trustee, identical in all material respects with the
Indenture (except that the interest rate step-up provisions and the transfer
restrictions will be modified or eliminated, as appropriate).
<PAGE> 3
"New Securities Trustee" means a bank or trust company reasonably
satisfactory to the Purchasers, as trustee with respect to the New Securities
under the New Securities Indenture.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by
such Registration Statement, and all amendments and supplements to the
Prospectus, including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the Holders to
issue and deliver to such Holders, in exchange for the Securities, a like
principal amount of the New Securities.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to Section
3 hereof.
"Shelf Registration Period" has the meaning set forth in Section 3(b)
hereof.
"Shelf Registration Statement" means a "shelf" registration statement
of the Company pursuant to the provisions of Section 3 hereof which covers some
or all of the Securities or New Securities, as applicable, on an appropriate
form under Rule 415 under the Act, or any similar rule that may be adopted by
the Commission, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Trustee" means the trustee with respect to the Securities under the
Indenture.
"underwriter" means any underwriter of Securities in connection with
an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Company shall prepare and, not
later than 60 days following the Closing Date, shall file with the Commission
the Exchange Offer Registration Statement with respect to the Registered
Exchange Offer. The Company shall use its best efforts to cause the Exchange
Offer Registration Statement to become effective under the Act within 120 days
of the Closing Date.
<PAGE> 4
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer,
it being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder
is not an affiliate of the Company within the meaning of the Act, acquires the
New Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt without
any limitations or restrictions under the Act and without material restrictions
under the securities laws of a substantial proportion of the several states of
the United States.
(c) In connection with the Registered Exchange Offer, the Company
shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less
than 30 days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law);
(iii) utilize the services of a depositary for the
Registered Exchange Offer with an address in the Borough of Manhattan,
The City of New York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancellation all
Securities so accepted for exchange; and
(iii) cause the Trustee or the New Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder
of Securities New Securities equal in principal amount to the
Securities of such Holder so accepted for exchange.
(e) The Purchasers and the Company acknowledge that, pursuant to
interpretations by the Commission's staff of Section 5 of the Act, and in the
absence of an applicable exemption therefrom, each Exchanging Dealer is
required to deliver a Prospectus in connection with a sale of any New
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Securities acquired for its own account as a
result of market-making activities or other trading activities. Accordingly,
the Company shall:
<PAGE> 5
(i) include the information set forth in Annex A hereto
on the cover of the Exchange Offer Registration Statement, in Annex B
hereto in the forepart of the Exchange Offer Registration Statement in
a section setting forth details of the Exchange Offer, and in Annex C
hereto in the underwriting or plan of distribution section of the
Prospectus forming a part of the Exchange Offer Registration
Statement, and include the information set forth in Annex D hereto in
the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery by Exchanging Dealers
in connection with sales of New Securities received pursuant to the
Registered Exchange Offer, as contemplated by Section 4(h) below.
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Purchaser, the Company shall issue and deliver to such
Purchaser or the party purchasing New Securities registered under a Shelf
Registration Statement as contemplated by Section 3 hereof from such Purchaser,
in exchange for such Securities, a like principal amount of New Securities.
The Company shall seek to cause the CUSIP Service Bureau to issue the same
CUSIP number for such New Securities as for New Securities issued pursuant to
the Registered Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to
effect the Registered Exchange Offer as contemplated by Section 2 hereof, or
(ii) if for any other reason the Registered Exchange Offer is not consummated
within 150 days of the date hereof, or (iii) if any Purchaser so requests with
respect to Securities held by it following consummation of the Registered
Exchange Offer, or (iv) if any Holder (other than a Purchaser) is not eligible
to participate in the Registered Exchange Offer or (v) in the case of any
Purchaser that participates in the Registered Exchange Offer or acquires New
Securities pursuant to Section 2(f) hereof, such Purchaser does not receive
freely tradeable New Securities in exchange for Securities constituting any
portion of an unsold allotment (it being understood that, for purposes of this
Section 3, (x) the requirement that a Purchaser deliver a Prospectus containing
the information required by Items 507 and/or 508 of Regulation S-K under the
Act in connection with sales of New Securities acquired in exchange for such
Securities shall result in such New Securities being not "freely tradeable" but
(y) the requirement that an Exchanging Dealer deliver a Prospectus in
connection with sales of New Securities acquired in the Registered Exchange
Offer in exchange for Securities acquired as a result of market- making
activities or other trading activities shall not result in such New Securities
being not "freely tradeable"), the following provisions shall apply:
(a) The Company shall as promptly as practicable (but in no event
more than 30 days after so required or requested pursuant to this Section 3),
file with the Commission and thereafter shall use its best efforts to cause to
be declared effective under the Act a Shelf Registration
<PAGE> 6
Statement relating to the offer and sale of the Securities or the New
Securities, as applicable, by the Holders from time to time in accordance with
the methods of distribution elected by such Holders and set forth in such Shelf
Registration Statement; provided, that with respect to New Securities received
by a Purchaser in exchange for Securities constituting any portion of an unsold
allotment, the Company may, if permitted by current interpretations by the
Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation S-K
Items 507 and/or 508, as applicable, in satisfaction of its obligations under
this paragraph (a) with respect thereto, and any such Exchange Offer
Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration
Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of three years from
the date the Shelf Registration Statement is declared effective by the
Commission or such shorter period that will terminate when all the Securities
or New Securities, as applicable, covered by the Shelf Registration Statement
have been sold pursuant to the Shelf Registration Statement (in any such case,
such period being called the "Shelf Registration Period"). The Company shall
be deemed not to have used its best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of securities covered thereby not being
able to offer and sell such securities during that period, unless (i) such
action is required by applicable law, or (ii) such action is taken by the
Company in good faith and for valid business reasons (not including avoidance
of the Company's obligations hereunder), including the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies with
the requirements of Section 4(k) hereof, if applicable.
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration
Statement and any Exchange Offer Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the
Prospectus included therein and shall use its best efforts to reflect
in each such document, when so filed with the Commission, such
comments as you reasonably may propose.
(b) The Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations
thereunder, (ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, 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 and
(iii) any Prospectus forming part of any Registration Statement, and
any
<PAGE> 7
amendment or supplement to such Prospectus, does not include an untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
(c)(1) The Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any
amendment thereto has been filed with the Commission and when
the Registration Statement or any post-effective amendment
thereto has become effective; and
(ii) of any request by the Commission for
amendments or supplements to the Registration Statement or the
Prospectus included therein or for additional information.
(2) The Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, in the case of an Exchange Offer Registration Statement,
any Exchanging Dealer which has provided in writing to the Company a
telephone or facsimile number and address for notices, and, if
requested by you or any such Holder or Exchanging Dealer, confirm such
advice in writing:
(i) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the securities included therein for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(iii) of the happening of any event that requires
the making of any changes in the Registration Statement or the
Prospectus so that, as of such date, the statements therein
are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes
have been made).
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of
securities included within the coverage of any Shelf Registration
Statement, without charge, at least one copy of such Shelf
<PAGE> 8
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits (including those incorporated by
reference).
(f) The Company shall, during the Shelf Registration
Period, deliver to each Holder of securities included within the
coverage of any Shelf Registration Statement, without charge, as many
copies of the Prospectus (including each preliminary Prospectus)
included in such Shelf Registration Statement and any amendment or
supplement thereto as such Holder may reasonably request; and the
Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of securities in
connection with the offering and sale of the securities covered by the
Prospectus or any amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer
which so requests, without charge, at least one copy of the Exchange
Offer Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, any documents
incorporated by reference therein, and, if the Exchanging Dealer so
requests in writing, all exhibits (including those incorporated by
reference).
(h) The Company shall, during the Exchange Offer
Registration Period, promptly deliver to each Exchanging Dealer,
without charge, as many copies of the Prospectus included in such
Exchange Offer Registration Statement and any amendment or supplement
thereto as such Exchanging Dealer may reasonably request for delivery
by such Exchanging Dealer in connection with a sale of New Securities
received by it pursuant to the Registered Exchange Offer; and the
Company consents to the use of the Prospectus or any amendment or
supplement thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other
offering of securities pursuant to any Registration Statement, the
Company shall register or qualify or cooperate with the Holders of
securities included therein and their respective counsel in connection
with the registration or qualification of such securities for offer
and sale under the securities or blue sky laws of such jurisdictions
as any such Holders reasonably request in writing and do any and all
other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the securities covered by such
Registration Statement; provided, however, that the Company will not
be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such
jurisdiction where it is not then so subject.
(j) The Company shall cooperate with the Holders of
Securities to facilitate the timely preparation and delivery of
certificates representing Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request
prior to sales of securities pursuant to such Registration Statement.
<PAGE> 9
(k) Upon the occurrence of any event contemplated by
paragraph (c)(2)(iii) above, the Company shall promptly prepare a
post-effective amendment to any Registration Statement or an amendment
or supplement to the related Prospectus or file any other required
document so that, as thereafter delivered to purchasers of the
securities included therein, the Prospectus will not include an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(l) Not later than the effective date of any such
Registration Statement hereunder, the Company shall provide a CUSIP
number for the Securities or New Securities, as the case may be,
registered under such Registration Statement, and provide the
applicable trustee with certificates for such Securities or New
Securities, in a form eligible for deposit with The Depository Trust
Company.
(m) The Company shall use its best efforts to comply with
all applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable
after the effective date of the applicable Registration Statement an
earnings statement satisfying the provisions of Section 11(a) of the
Act.
(n) The Company shall cause the Indenture or the New
Securities Indenture, as the case may be, to be qualified under the
Trust Indenture Act in a timely manner.
(o) The Company may require each Holder of securities to
be sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
such securities as the Company may from time to time reasonably
require for inclusion in such Registration Statement.
(p) The Company shall, if requested, promptly incorporate
in a Prospectus supplement or post- effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective
amendment.
(q) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to
expedite or facilitate the registration or the disposition of the
Securities, and in connection therewith, if an underwriting agreement
is entered into, cause the same to contain indemnification provisions
and procedures no less favorable than those set forth in Section 6 (or
such other provisions and procedures acceptable to the Majority
Holders and the Managing Underwriters, if any, with respect to all
parties to be indemnified pursuant to Section 6 from Holders of
Securities to the Company.
<PAGE> 10
(r) In the case of any Shelf Registration Statement, the
Company shall (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company
and its subsidiaries; (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by
the Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such information
shall be kept confidential by the Holders or any such underwriter,
attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
securities registered thereunder and the underwriters, if any, in
form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase
Agreement; (iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters, if any)
addressed to each selling Holder and the underwriters, if any,
covering such matters as are customarily covered in opinions requested
in underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (v) obtain "cold comfort"
letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to each selling Holder of
securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten
offerings; and (vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, including those to evidence compliance with
Section 4(k) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 4(r) shall be performed at (A) the effectiveness of
such Registration Statement and each post-effective amendment thereto
and (B) each closing under any underwriting or similar agreement as
and to the extent required thereunder.
(s) In the case of any Exchange Offer Registration
Statement, the Company shall (i) make reasonably available for
inspection by such Purchaser, and any attorney, accountant or other
agent retained by such Purchaser, all relevant financial and other
records, pertinent corporate documents and properties of the Company
and its subsidiaries; (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably
<PAGE> 11
requested by such Purchaser or any such attorney, accountant or agent
in connection with any such Registration Statement as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such information
shall be kept confidential by such Purchaser or any such attorney,
accountant or agent, unless such disclosure is made in connection with
a court proceeding or required by law, or such information becomes
available to the public generally or through a third party without an
accompanying obligation of confidentiality; (iii) make such
representations and warranties to such Purchaser, in form, substance
and scope as are customarily made by issuers to underwriters in
primary underwritten offerings and covering matters including, but not
limited to, those set forth in the Purchase Agreement; (iv) obtain
opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to such Purchaser and its counsel), addressed to such
Purchaser, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such Purchaser or its counsel; (v)
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to such Purchaser,
in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with primary underwritten
offerings, or if requested by such Purchaser or its counsel in lieu of
a "cold comfort" letter, an agreed-upon procedures letter under
Statement on Auditing Standards No. 35, covering matters requested by
such Purchaser or its counsel; and (vi) deliver such documents and
certificates as may be reasonably requested by such Purchaser or its
counsel, including those to evidence compliance with Section 4(k) and
with conditions customarily contained in underwriting agreements. The
foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of
this Section 4(s) shall be performed at the close of the Registered
Exchange Offer and the effective date of any post-effective amendment
to the Exchange Offer Registration Statement.
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections
2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel designated by the Majority Holders to act as counsel for the Holders in
connection therewith, and, in the case of any Exchange Offer Registration
Statement, will reimburse the Purchasers for the reasonable fees and
disbursements of counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with any
Registration Statement, the Company agrees to indemnify and hold harmless each
Holder of securities covered thereby (including each Purchaser and, with
respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each person who controls any such Holder within the meaning of
either the Act or
<PAGE> 12
the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Act, the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof 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 agrees to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any such Holder specifically for inclusion
therein. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 6(d), any underwriters of Securities registered under a
Shelf Registration Statement, their officers and directors and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Purchaser and the selling Holders provided in this
Section 6(a) and shall, if requested by any Holder, enter into an underwriting
agreement reflecting such agreement, as provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration Statement
(including each Purchaser and, with respect to any Prospectus delivery as
contemplated in Section 4(h) hereof, each Exchanging Dealer) severally agrees
to indemnify and hold harmless (i) the Company, (ii) each of its directors,
(iii) each of its officers who signs such Registration Statement and (iv) each
person who controls the Company within the meaning of either the Act or the
Exchange Act to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 or notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party
shall be entitled to appoint counsel of the indemnifying party's choice at the
<PAGE> 13
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants
in, or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action
or (iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. An indemnifying
party will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to
any pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Registration Statement which resulted in such Losses;
provided, however, that in no case shall any Purchaser or any subsequent Holder
of any Security or New Security be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to such
Security, or in the case of a New Security, applicable to the Security which
was exchangeable into such New Security, as set forth on the cover page of the
Final Memorandum, nor shall any underwriter be responsible for any amount in
excess of the underwriting discount or commission applicable to the securities
purchased by such underwriter under the Registration Statement which resulted
in such Losses. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the indemnifying party and the
indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which
<PAGE> 14
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the sum of (x)
the total net proceeds from the Initial Placement (before deducting expenses)
as set forth on the cover page of the Final Memorandum and (y) the total amount
of additional interest which the Company was not required to pay as a result of
registering the securities covered by the Registration Statement which resulted
in such Losses. Benefits received by the Purchasers shall be deemed to be
equal to the total purchase discounts and commissions as set forth on the cover
page of the Final Memorandum, and benefits received by any other Holders shall
be deemed to be equal to the value of receiving Securities or New Securities,
as applicable, registered under the Act. Benefits received by any underwriter
shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Registration Statement which resulted in such Losses. Relative fault shall
be determined by reference to whether any alleged untrue statement or omission
relates to information provided by the indemnifying party, on the one hand, or
by the indemnified party, on the other hand. The parties agree that it would
not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), 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. For
purposes of this Section 6, each person who controls a Holder within the
meaning of either the Act or the Exchange Act and each director, officer,
employee and agent of such Holder shall have the same rights to contribution as
such Holder, and each person who controls the Company within the meaning of
either the Act or the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of securities
covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with
the rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding
aggregate principal amount of Securities (or, after the consummation of any
Exchange Offer in accordance with
<PAGE> 15
Section 2 hereof, of New Securities); provided that, with respect to any matter
that directly or indirectly affects the rights of any Purchaser hereunder, the
Company shall obtain the written consent of each such Purchaser against which
such amendment, qualification, supplement, waiver or consent is to be
effective. Notwithstanding the foregoing (except the foregoing proviso), a
waiver or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other Holders may be given by the Majority
Holders, determined on the basis of securities being sold rather than
registered under such Registration Statement.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by
such holder to the Company in accordance with the provisions of this
Section 7(c), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture, with a copy in like manner to Salomon Brothers Inc;
(2) if to you, initially at the respective addresses set
forth in the Purchase Agreement; and
(3) if to the Company, initially at its address set forth
in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
The Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent
by the Company thereto, subsequent Holders of Securities and/or New Securities.
The Company hereby agrees to extend the benefits of this Agreement to any
Holder of Securities and/or New Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE> 16
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in said State.
(h) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Securities
or New Securities is required hereunder, Securities or New Securities, as
applicable, held by the Company or its Affiliates (other than subsequent
Holders of Securities or New Securities if such subsequent Holders are deemed
to be Affiliates solely by reason of their holdings of such Securities or New
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
FORCENERGY INC
By:
Name: Stig Wennerstrom
Title: President and Chief
Executive Officer
Accepted in New York, New York
February 11, 1997
SALOMON BROTHERS INC
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN SACHS & CO.
LEHMAN BROTHERS INC.
ING BARING (U.S.) SECURITIES, INC.
By: SALOMON BROTHERS INC
By:
Name: Franklin D. McMahon
Title: Vice President
<PAGE> 17
ANNEX A
Annex A
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Securities received in exchange for Securities where such
New Securities were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting
on the Expiration Date (as defined herein) and ending on the close of business
on the first anniversary of the Expiration Date, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
<PAGE> 18
ANNEX B
Annex B
Each broker-dealer that receives New Securities for its own account in
exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Securities. See "Plan of Distribution."
<PAGE> 19
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business on
the first anniversary of the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any broker-dealer for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such New Securities may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
of any such resale of New Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of 1 year after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE> 20
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND
WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE
PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
Rider B
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities, it represents that
the Securities to be exchanged for New Securities were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such New
Securities; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE> 1
[VINSON & ELKINS LETTERHEAD]
April 9, 1997
Forcenergy Inc
2730 SW 3rd Avenue, Suite 800
Miami, FL 33129-2237
Dear Sirs:
We have acted as counsel for Forcenergy Inc, a Delaware corporation
(the "Company"), in connection with the proposed offer by the Company to
exchange (the "Exchange Offer") for all outstanding 8 1/2% Senior Subordinated
Notes Due 2007, Series A ($200 million principal amount outstanding) (the "Old
Notes") its 8 1/2% Senior Notes Due 2007, Series B ($200 million principal
amount) (the "Exchange Notes"). The Old Notes have been, and the Exchange
Notes will be, issued pursuant to an Indenture dated as of February 14, 1997
(the "Indenture"), among the Company and Bankers Trust Company, as trustee (the
"Trustee").
In connection with such matters we have examined the Indenture, the
Registration Statement on Form S-4, filed by the Company with the Securities
and Exchange Commission, for the registration of the Exchange Notes (the
"Securities") under the Securities Act of 1933 (the Registration Statement, as
amended at the time it becomes effective, being referred to as the
"Registration Statement") and such corporate records of the Company,
certificates of public officials and such other documents as we have deemed
necessary or appropriate for the purpose of this opinion.
Based upon the foregoing, subject to the qualifications hereinafter
set forth, and having regard for such legal considerations as we deem relevant,
we are of the opinion that the Securities proposed to be issued pursuant to the
Exchange Offer have been duly authorized for issuance and, subject to the
Registration Statement becoming effective under the Securities Act of 1933, and
to compliance with any applicable state securities laws, when issued, delivered
and sold in accordance with the Exchange Offer and the Indenture, will be valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms.
The opinions expressed herein are subject to the following: The
enforceability of the Securities may be limited or affected by (i) bankruptcy,
insolvency, reorganization, moratorium, liquidation, rearrangement, fraudulent
transfer, fraudulent conveyance and other similar laws (including court
decisions) now or hereafter in effect and affecting the rights and remedies of
<PAGE> 2
Forcenergy Inc
Page 2
April 9, 1997
creditors generally or providing for the relief of debtors, (ii) the refusal of
a particular court to grant equitable remedies, including without limitation
specific performance and injunctive relief, and (iii) general principles of
equity (regardless of whether such remedies are sought in a proceeding in
equity or at law).
The opinions expressed herein are limited exclusively to the laws of
the State of New York and the General Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Vinson & Elkins L.L.P. under
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933 and the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
VINSON & ELKINS L.L.P.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Subsidiary State of Incorporation
---------- ----------------------
<S> <C>
Forcenergy International Inc. Delaware
Forcenergy Resources Inc. Texas
Forcenergy Management Co. Nevada
Forcenergy Onshore Inc. Delaware
Forcenergy GOM Inc. Delaware
Forcenergy Ltd. Cayman Islands
Forcenergy Drilling Inc. Delaware
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-4 (Registration No. ) of our report dated February 17, 1997, on our
audits of the consolidated financial statements of Forcenergy Inc as of
December 31, 1996 and 1995 and for the years then ended, 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-4 (Registration No. ) 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 consent to the incorporation by
reference in this registration statement on Form S-4 (Registration No.
) of our report dated March 13, 1997, on our audits of the historical
statements of revenues and direct operating expenses of the properties acquired
by Forcenergy Inc from Marathon Oil company for the years ended December 31,
1996 and 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."
COOPERS & LYBRAND L.L.P.
Miami, Florida
April 9, 1997
<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-4 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,
1996 relating to the financial statements of Forcenergy Inc (formerly
Forcenergy Gas Exploration, Inc.). 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."
PRICE WATERHOUSE LLP
Houston, Texas
April 9, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this registration statement on Form S-4 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 8, 1992) to December 31, 1992.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
LaPorte, Sehrt, Romig and Hand
A Professional Accounting Corporation
Metairie, Louisiana
April 9, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF NETHERLAND, SEWELL & ASSOCIATES,
To the Board of Directors of Forcenergy, Inc:
We hereby consent to the use of our reports dated March 3, 1997 and of the
estimates of net proved oil and natural gas reserves of Forcenergy Inc, and
their present values, as of January 1, 1997 and 1996, respectively, 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-4 Registration
Statement and the prospectus incorporated therein, and all references to our
firm therein.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By:__________________________________
Frederick D. Sewell
President
Dallas, Texas
April 9, 1997
<PAGE> 1
EXHIBIT 23.5
April 9, 1997
To the Board of Directors of Forcenergy Inc
We hereby consent to the use of our reports dated February 7, 1997 and
February 9, 1996, and May 26, 1995, and our estimates of the net proved natural
gas and oil reserves of Forcenergy Inc (the "Company"), as of January 1, 1997,
1996 and 1995, and to all references to our estimates of the net proved natural
gas and oil reserves of the Company as of those dates, and to the reference to
our firm under the heading "Experts" in the prospectus.
COLLARINI ENGINEERING INC.
____________________________
Dennis Jordan, P. E.
Senior Vice President
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS
As independent petroleum engineers, we hereby consent to the use of our
reports dated 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.
Joe C. Neal & Associates
Midland, Texas
April 9, 1997
<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)
$200,000,000 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, as amended on September 17,
1996. - Incorporated herein by reference
to Exhibit 4 filed with Form T-1
Statement, Registration No. 333-15263.
-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
December 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 9th day
of April, 1997.
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: 12/31/96 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 December 31, 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 1,545,000 |1.a.
b. Interest-bearing balances(2) ................................................. | 0071 2,494,000 |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 4,368,000 |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 3,651,000 |3.a.
b. Securities purchased under agreements to resell ....................................| 0277 3,230,000 |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 28,889,000 |4.d.
5. Assets held in trading accounts ..........................................................| 3545 38,272,000 |5.
6. Premises and fixed assets (including capitalized leases) .................................| 2145 914,000 |6.
7. Other real estate owned (from Schedule RC-M) .............................................| 2150 213,000 |7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 184,000 |8.
9. Customers' liability to this bank on acceptances outstanding .............................| 2155 597,000 |9.
10. Intangible assets (from Schedule RC-M) ....................................................| 2143 17,000 |10.
11. Other assets (from Schedule RC-F) .........................................................| 2160 6,056,000 |11.
12. Total assets (sum of items 1 through 11) ..................................................| 2170 90,430,000 |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: 12/31/96 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-2
City, State ZIP: New York, NY 10006 12
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 11,985,000 |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 | / / / / / / / / / / / |
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: | / / / / / / / / / / / / |
part II) | RCFN 2200 21,619,000 |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 6,560,000 |14.a.
b. Securities sold under agreements to repurchase .................................. | RCFD 0279 120,000 |14.b.
15. a. Demand notes issued to the U.S. Treasury .......................................... | RCON 2840 0 |15.a.
b. Trading liabilities ............................................................. | RCFD 3548 19,172,000 |15.b.
16. Other borrowed money: | / / / / / / / |
a. With original maturity of one year or less ...................................... | RCFD 2332 15,909,000 |16.a.
b. With original maturity of more than one year .................................... | RCFD 2333 3,097,000 |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 597,000 |18.
19. Subordinated notes and debentures ...................................................... | RCFD 3200 1,229,000 |19.
20. Other liabilities (from Schedule RC-G) ................................................. | RCFD 2930 5,235,000 |20.
21. Total liabilities (sum of items 13 through 20) ......................................... | RCFD 2948 85,554,000 |21.
| / / / / / / |
22. Limited-life preferred stock and related surplus ....................................... | RCFD 3282 0 |22.
EQUITY CAPITAL | / / / / / / |
23. Perpetual preferred stock and related surplus .......................................... | RCFD 3838 600,000 |23.
24. Common stock ........................................................................... | RCFD 3230 1,001,000 |24.
25. Surplus (exclude all surplus related to preferred stock) ............................... | RCFD 3839 540,000 |25.
26. a. Undivided profits and capital reserves ............................................ | RCFD 3632 3,131,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities .......... | RCFD 8434 ( 14,000) |26.b.
27. Cumulative foreign currency translation adjustments .................................... | RCFD 3284 ( 382,000) |27.
28. Total equity capital (sum of items 23 through 27) ...................................... | RCFD 3210 4,876,000 |28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21, 22,| / / / / / / |
and 28) .............................................................................. | RCFD 3300 90,430,000 |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 N/A | 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."
<PAGE> 9
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
<PAGE> 1
EXHIBIT 99.1
FORCENERGY INC
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _________________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE
DELIVER TO THE EXCHANGE AGENT:
BANKERS TRUST COMPANY
By Hand/Overnight Courier: By Mail:
Bankers Trust Company BT Services Tennessee, Inc.
Corporate Trust and Agency Group Reorganization Unit
Receipt & Delivery Window P. O. Box 292737
123 Washington St., 1st Floor Nashville, TN 37229-2737
New York, NY 10006
By Facsimile:
(615) 835-3701
Confirm by Telephone:
(615) 835-3572
-------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the Prospectus
dated _____________, 1997 (the "Prospectus") of Forcenergy Inc, a Delaware
corporation (the "Company") and this Letter of Transmittal (the "Letter of
Transmittal"), which together describe the Company's offer (the "Exchange
Offer") to exchange its 8 1/2% Senior Subordinated Notes due 2007, Series B
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which the Prospectus is a part, for a like principal amount of its issued
and outstanding 8 1/2% Senior Subordinated Notes due 2007, Series A (the "Old
Notes"). Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest date to which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by oral or
written notice and will mail to the record holders of Old Notes an announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Old Notes either if
original Old Notes, if available, are to be forwarded herewith or if delivery
of Old Notes is to be made by book-entry transfer to the account maintained by
the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus
<PAGE> 2
under the caption "The Exchange Offer -- Procedures for Tendering" and
"Book-Entry Transfer." Holders of Old Notes whose Old Notes are not
immediately available, or who are unable to deliver their Old Notes and all
other documents required by this Letter of Transmittal to the Exchange Agent on
or prior to the Expiration Date, or who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- --------------------------------------------------------------------------------
Name(s) and Address(es) of Registered
Holder(s) Exactly as Name(s)
Appear(s) on Old Notes
(Please Fill In, If Blank) Old Note(s) Tendered
- --------------------------------------------------------------------------------
Aggregate Principal Principal
Registered Amount Represented by Amount
Number(s)* Note(s) Tendered**
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Old Notes. All tenders must be in integral multiples of $1,000.
</TABLE>
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering
Institution:
--------------------------------------------------------------------
Account
Number:
-------------------------------------------------------------------------
Transaction Code
Number:
-------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered holder(s)
of Old Notes:
------------------------------------------------------------------
Date of Execution of Notice of
Guaranteed Delivery:
------------------------------------------------------------
<PAGE> 3
Window Ticket Number (if
available):
---------------------------------------------------------------------
Name of Eligible Institution that
Guaranteed Delivery:
------------------------------------------------------------
Account Number (if delivered by
book-entry transfer):
-----------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with
full knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms of the
Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim, when the same are
accepted for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co. Inc., SEC No-Action Letter (available
June 5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes
directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders are not participating in, and have no arrangement
with any person to participate in, the distribution of such Exchange Notes.
The undersigned specifically represent(s) to the Company that (i) any Exchange
Notes acquired in exchange for Old Notes tendered hereby are being acquired in
the ordinary course of business of the person receiving such Exchange Notes,
whether or not the undersigned, (ii) the undersigned is not participating in,
and has no arrangement with any person to participate in, the distribution of
Exchange Notes, and (iii) neither the undersigned nor any such other person is
an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company
or a broker-dealer tendering Old Notes acquired directly from the Company for
its own account.
If the undersigned or the person receiving the Exchange Notes is a
broker-dealer that is receiving Exchange Notes for its own account pursuant to
the Exchange Offer, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such Exchange Notes.
The undersigned acknowledges that if the undersigned is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) the
undersigned cannot rely on the position of the staff of the SEC in the Morgan
Stanley Letter and similar SEC no-action letters, and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes, in which case the registration statement
must contain the selling security holder information required by Item 507 or
Item 508, as applicable, of Regulation S-K of the SEC, and (ii) a broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
<PAGE> 4
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to
have accepted for exchange validly tendered Old Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any
tendered Old Notes that are not accepted for exchange pursuant to the Exchange
Offer for any reason will be returned, without expense, to the undersigned at
the address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions" as promptly as practicable after the
Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer -- Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the Exchange Notes issued in exchange for the Old Notes accepted
for exchange and return any Old Notes not tendered or not exchanged, in the
name(s) of the undersigned. Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail or deliver the Exchange Notes
issued in exchange for the Old Notes accepted for exchange and any Old Notes
not tendered or not exchanged (and accompanying documents, as appropriate) to
the undersigned at the address shown below the undersigned's signature(s). In
the event that both "Special Issuance Instructions" and "Special Delivery
Instructions" are completed, please issue the Exchange Notes issued in exchange
for the Old Notes accepted for exchange in the name(s) of, and return any Old
Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered for exchange.
<TABLE>
<CAPTION>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6) (SEE INSTRUCTIONS 5 AND 6)
<S> <C>
To be completed ONLY (i) if Old Notes in a To be completed ONLY if Old Notes in a principal
principal amount not tendered, or Exchange Notes amount not tendered, or Exchange Notes issued in
issued in exchange for Old Notes accepted for exchange for Old Notes accepted for exchange, are to be
exchange, are to be issued in the name of someone mailed or delivered to someone other than the
other than the undersigned, or (ii) if Old Notes undersigned, or to the undersigned at an address other
tendered by book-entry transfer which are not than that shown below the undersigned's signature.
exchanged are to be returned by credit to an account
maintained at the Book-Entry Transfer Facility. Issue Mail or deliver Exchange Notes and/or Old Notes to:
Exchange Notes and/or Old Notes to:
Name: Name:
------------------------------------------- -------------------------------------------
(Please Type or Print) (Please Type or Print)
- -------------------------------------------------- ------------------------------------------------
Address: Address:
----------------------------------------- ------------------------------------------
- -------------------------------------------------- ------------------------------------------------
(include Zip Code) (include Zip Code)
- -------------------------------------------------- ------------------------------------------------
(Tax Identification or Social Security Number) (Tax Identification or Social Security Number)
(Complete Substitute Form W-9)
- -------------------------------------------------- ------------------------------------------------
</TABLE>
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility set forth below:
<PAGE> 5
Book-Entry Transfer Facility Account Number:
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
X
-------------------------------------------------------------------------------
X
-------------------------------------------------------------------------------
(Signature(s) of Registered Holders or Old Notes)
Dated , 1997
-------------------------------------------------------
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed
bond power from the registered holder(s), a copy of which must be transmitted
with this Letter of Transmittal. If Old Notes to which this Letter of
Transmittal relate are held of record by two or more joint holders, then all
such holders must sign this Letter of Transmittal. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii)
unless waived by the Company, submit evidence satisfactory to the Company
of such person's authority so to act. See Instruction 5 regarding the
completion of this Letter of Transmittal, printed below.)
Name(s):
----------------------------------------------------------------------
(Please Type or Print)
Capacity:
----------------------------------------------------------------------
Address:
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an
Eligible Institution:
------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address, Include Zip Code)
- --------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1997
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the holder
use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the Exchange Agent before the
Expiration Date. No Letter of Transmittal or Old Notes should be sent to the
Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot
complete the procedure for book-entry transfer on a time basis, must tender
their Old Notes according to the guaranteed delivery procedures set forth in
the Prospectus. Pursuant to such procedures: (1) such tender must be made by
or through a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers Inc., a
commercial bank or a trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution"); (ii) prior to the
Expiration Date, the Exchange Agent must have received from the Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder of the Old Notes, the registration number(s) of
such Old Notes and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
business days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the Old Notes in proper form for transfer (or a
Book-Entry Confirmation) and any other documents required hereby, must be
deposited by the Eligible Institution with the Exchange Agent within five
business days after the Expiration Date; and (iii) the certificates for all
physically tendered shares of Old Notes, in proper form for transfer (or
Book-Entry Confirmation, as the case may be) and all other documents required
hereby are received by the Exchange Agent within five business days after the
Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a
Notice of Guaranteed Delivery will be sent to holders who wish to tender their
Old Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in such holder's name or obtain a properly completed bond power from
the registered holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the third column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted
for exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Medallion Guarantee of Signatures. If this Letter of Transmittal
(or facsimile hereof) is signed by the record holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by a
participant in the Book-Entry Transfer Facility, the signature must correspond
with the name as it appears on the security position listing as the holder of
the Old Notes.
<PAGE> 7
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power. In any other case, such holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement
or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a person
other than the registered holder or holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered holder or holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal (or
facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the Book-Entry Transfer Facility whose
name appears on a security position listing as the owner of the tendered Old
Notes) and the Exchange Notes are to be issued directly to such registered
holder(s) (or, if signed by a participant in the Book-Entry Transfer Facility,
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all
other cases, all signatures on this Letter of Transmittal (or facsimile hereof)
must be guaranteed by an Eligible Institution.
6. Special Registration and Delivery Instructions. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which Exchange Notes or
substitute Old Notes for principal amounts not tendered or not accepted for
exchange are to be issued or sent, if different from the name and address of
the person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual is his or her social
security number. If the Company is not provided with the correct TIN, the
holder may be subject to a $50 penalty imposed by Internal Revenue Service.
(If withholding results in an over-payment of taxes, a refund may be obtained).
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the Old Notes are registered in more than one name or are not
in the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number of Substitute Form W-9" for information on
which TIN to report.
<PAGE> 8
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive
any conditions of the Exchange Offer or defects or irregularities in tenders as
to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (includes this Letter of Transmittal and the
instructions hereto) shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any person shall be under any duty to give notification
of defects or irregularities with regard to tenders of Old Notes nor shall any
of them incur any liability for failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal
will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
<PAGE> 9
<TABLE>
<S> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT RIGHT AND CERTIFY BY SIGNING AND OR Employer Identification Number
FORM W-9 DATING BELOW
------------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PART 2 -- Certification -- Under penalties of PART 3 --
perjury, I certify that:
(1) The number shown on this form is my correct Awaiting TIN [ ]
Taxpayer Identification Number (or I am waiting
for a number to be issued to me) and
(2) I am not subject to backup withholding either Please complete the
PAYER'S REQUEST FOR TAXPAYER because I have not been notified by the Certificate of Awaiting
IDENTIFICATION NUMBER (TIN) Internal Revenue Service ("IRS") that I am Taxpayer Identification
Number below.
subject to backup withholding as a result of
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
Certificate Instructions -- You must cross out item (2) in Part 2 above if you
have been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2).
SIGNATURE DATE , 1997
--------------------------------------------------- -------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number to the payor within 60 days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a number.
, 1997
-------------------------------- --------------------
Signature Date
<PAGE> 10
CERTIFICATE FOR FOREIGN RECORD HOLDERS
Under penalties of perjury, I certify that I am not a United States
citizen or resident (or I am signing for a foreign corporation, partnership,
estate or trust).
, 1997
----------------------------------- ----------------------------
Signature Date
<PAGE> 11
FORCENERGY INC
LETTER TO CLIENTS
FOR
TENDER OF ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ______________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated ____________, 1997, of
Forcenergy Inc, a Delaware corporation (the "Company") and a related Letter of
Transmittal, which together constitute (the "Exchange Offer") relating to the
offer by the Company, to exchange its 8 1/2% Senior Subordinated Notes due
2007, Series B (the "Exchange Notes"), which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") for a like principal
amount of its issued and outstanding 8 1/2% Senior Subordinated Notes due 2007,
Series A (the "Old Notes"), upon the terms and subject to the conditions set
forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
We are the holder of record of Old Notes held by us for your own
account. A tender of such Old Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Old Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations and warranties contained in the Letter of
Transmittal.
Very truly yours,
<PAGE> 12
PLEASE RETURN YOUR INSTRUCTIONS TO US IN THE ENCLOSED ENVELOPE WITHIN
AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE
EXPIRATION DATE.
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK
ENTRY TRANSFER PARTICIPANT
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
____________, 1997 (the "Prospectus") of Forcenergy Inc, a Delaware corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange its 8 1/2% Senior Subordinated Notes due 2007, Series B
(the "Exchange Notes"), for all of its outstanding 8 1/2% Senior Subordinated
Notes due 2007, Series A (the "Old Notes"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Old Notes held by you for the account of
the undersigned.
The aggregate face amount of the Old Notes held by you for the account
of the undersigned is (FILL IN AMOUNT):
$____________________ of the 8 1/2% Senior Subordinated Notes due
2007, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] To TENDER the following Old Notes held by your for the
account of the undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE
TENDERED) (IF ANY): $_______________________.
[ ] NOT to TENDER any Old Notes held by you for the account
of the undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned by its signature below,
hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i)
the Exchange Notes acquired in exchange for Old Notes pursuant to the Exchange
Offer are being acquired in the ordinary course of business of the person
receiving such Exchange Notes, whether or not undersigned, (ii) the undersigned
is not participating in, and has no arrangement with any person to participate
in, the distribution within the meaning of the Securities Act of Exchange
Notes, and (iii) neither the undersigned nor any such other person is an
"affiliate" (within the meaning of Rule 405 under the Securities Act) of the
Company or a broker-dealer tendering Old Notes acquired directly from the
Company. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
---------------------------------------------------------------------------
<PAGE> 13
FORCENERGY INC
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
TENDER OF ALL OUTSTANDING 8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ____________, 1997. UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by Forcenergy Inc, a Delaware corporation (the "Company"), to exchange
its 8 1/2% Senior Subordinated Notes due 2007, Series B (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding 8
1/2% Senior Subordinated Notes due 2007, Series A (the "Old Notes") upon the
terms and subject to the conditions set forth in the Company's Prospectus,
dated ___________, 1997, and the related Letter of Transmittal (which together
constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated _______________, 1997;
2. Letter of Transmittal (together with accompanying
Substitute Form W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account
you hold Old Notes in your name or in the name of your nominee; and
5. Letter which may be sent from your clients to you with
such client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the Exchange Notes acquired in exchange for
Old Notes pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
the holder, (ii) the holder is not participating in, and has no arrangement
with any person to participate in, the distribution of Exchange Notes within
the meaning of the Securities Act, and (iii) neither the holder nor any such
other person is an "affiliate" (within the meaning of Rule 405 under the
Securities Act) of the Company or a broker-dealer tendering Old Notes acquired
directly from the Company. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Old Notes, it acknowledges
that it will deliver a prospectus in connection with any resale of such
Exchange Notes.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Old Notes to it, except as otherwise provided in Instruction 7 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
BANKERS TRUST COMPANY
<PAGE> 14
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
8 1/2% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
This form, or one substantially equivalent hereto, must be used by a
holder to accept the Exchange Offer of Forcenergy Inc, a Delaware corporation
(the "Company"), and to tender 8 1/2% Senior Subordinated Notes due 2007,
Series A (the "Old Notes") to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer --Guaranteed Delivery
Procedures" of the Company's Prospectus, dated __________, 1997 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON_____________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES
TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
BANKERS TRUST COMPANY
By Hand/Overnight Courier: By Mail:
Bankers Trust Company BT Services Tennessee, Inc.
Corporate Trust and Agency Group Reorganization Unit
Receipt & Delivery Window P. O. Box 292737
123 Washington St., 1st Floor Nashville, TN 37229-2737
New York, NY 10006
By Facsimile:
(615) 835-3701
Confirm by Telephone:
(615) 835-3572
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DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE IN THE BOX PROVIDED ON
THE LETTER OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 15
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
Certificate Number(s) (if known) of Old Notes Aggregate Principal Amount Aggregate Principal Amount
or Account Number at the Book-Entry Facility Represented Tendered
- ---------------------------------------------- ---------------------------- --------------------------
<S> <C> <C>
</TABLE>
PLEASE SIGN AND COMPLETE
Names of Record Holders: Signatures:
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Address:
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Dated: , 1997
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Area Code and Telephone Numbers:
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This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
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Capacity:
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Address(es):
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<PAGE> 16
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17 Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility described in
the Prospectus under the caption "The Exchange Offer--Book-Entry Transfer" and
in the Letter of Transmittal) and any other required documents, all by 5:00
p.m., New York City time, within five business days following the Expiration
Date.
Name of Firm:
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(AUTHORIZED SIGNATURE)
Address:
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(INCLUDE ZIP CODE) Name:
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Area Code and Tel. Number: Title:
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- ------------------------------------------ (PLEASE TYPE OR PRINT)
Date: , 1997
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DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE> 17
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole risk
of the holder, and the delivery will be deemed made only when actually received
by the Exchange Agent. If delivery is by mail, registered mail with return
receipt requested, properly insured, is recommended. As an alternative to
delivery by mail, the holders may wish to consider using an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. For a description of the guaranteed delivery procedures, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice
of Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executor, administrator, guardian, attorney-in- fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing and submit with the Letter of Transmittal
evidence satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
