As filed with the Securities and Exchange Commission on May 24, 2002.
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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VINTAGE PETROLEUM, INC.
(Exact name of registrant as specified in its charter)
Delaware 1311 73-1182669
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
110 West Seventh Street
Tulsa, Oklahoma 74119-1029
(918) 592-0101
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
CHARLES C. STEPHENSON, JR.
Chairman of the Board
110 West Seventh Street
Tulsa, Oklahoma 74119-1029
(918) 592-0101
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPY TO:
ROBERT J. MELGAARD, ESQ.
Conner & Winters, P.C.
3700 First Place Tower
15 East 5th Street
Tulsa, Oklahoma 74103-4344
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Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after this Registration Statement becomes effective.
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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. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_]
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Calculation of Registration Fee
===================================================================================-================================================
Title of each class of securities Amount to be Proposed maximum Proposed maximum aggregate Amount of
to be registered registered offering price per unit offering price registration fee
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8 1/4% Senior Notes due 2012 $350,000,000 100% $350,000,000 $32,200
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act of 1933, as amended.
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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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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 24, 2002
PROSPECTUS
[Logo]
VINTAGE PETROLEUM, INC.
$350,000,000
Offer to Exchange all Outstanding
8 1/4% Senior Notes due 2012
for 8 1/4% Senior Notes due 2012
of Vintage Petroleum, Inc.
____________________
Material Terms of the Exchange Offer:
.. We are offering to exchange the outstanding notes that we sold in a private
offering for new registered exchange notes.
.. The exchange offer expires at 5:00 p.m., New York City time, on , 2002,
unless extended by us.
.. Tenders of outstanding notes may be withdrawn at any time prior to the
expiration of the exchange offer.
.. All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged.
.. We believe that the exchange of notes will not be a taxable exchange for U.S.
federal income tax purposes.
.. We will not receive any proceeds from the exchange offer.
.. The terms of the new notes to be issued in the exchange offer are
substantially identical to terms of the outstanding notes, except that the
transfer restrictions and registration rights relating to the outstanding
notes will not apply to the new notes.
.. The notes to be exchanged for the outstanding notes will not be listed on any
securities exchange or stock market.
____________________
You should consider carefully the "Risk Factors" beginning on page 13
before participating in the exchange offer.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This Prospectus is dated , 2002.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information .................................... ii
Forward-Looking Statements ............................................. iii
Summary ................................................................ 1
Risk Factors ........................................................... 13
Use of Proceeds ........................................................ 23
Capitalization ......................................................... 23
The Exchange Offer ..................................................... 24
Description of Certain Indebtedness .................................... 34
Description of the Notes ............................................... 37
Certain U.S. Federal Income Tax Considerations ......................... 70
Plan of Distribution ................................................... 71
Legal Matters .......................................................... 71
Experts ................................................................ 71
Glossary of Oil and Gas Terms .......................................... 73
_________________
You should rely only on the information incorporated by reference or
contained in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front of this prospectus.
i
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our common stock is listed and traded
on the New York Stock Exchange under the trading symbol "VPI." Our reports,
proxy statements and other information filed with the SEC can also be inspected
and copied at the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
This prospectus, which constitutes a part of a registration statement on
Form S-4 filed by us with the SEC under the Securities Act of 1933, as amended,
or the "Securities Act," omits certain of the information set forth in the
registration statement. Accordingly, you should refer to the registration
statement and its exhibits for further information with respect to us and the
exchange notes. Copies of the registration statement and its exhibits are on
file at the offices of the SEC. Furthermore, statements contained in this
prospectus concerning any document filed as an exhibit are not necessarily
complete and, in each instance, we refer you to the copy of such document filed
as an exhibit to the registration statement.
We are incorporating by reference in this prospectus the documents we file
with the SEC. This means that we can disclose important business and financial
information about us to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
information that we file later with the SEC will automatically update and
supersede the information in this prospectus. We incorporate by reference the
documents listed below and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended, or the "Exchange Act," from the initial filing of the registration
statement on Form S-4 until the offering made under this prospectus is
terminated:
. Our Annual Report on Form 10-K for the year ended December 31, 2001;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2002; and
. Our Current Reports on Form 8-K dated May 2, 2001 (as amended May 18,
2001), April 3, 2002, April 17, 2002, and April 26, 2002.
These filings have not been included in or delivered with this prospectus.
You may request a copy of these filings at no cost, by writing or telephoning us
at the following address or telephone number:
William C. Barnes, Secretary
Vintage Petroleum, Inc.
110 West Seventh Street
Tulsa, Oklahoma 74119-1029
(918) 592-0101
To ensure timely delivery, you should request these filings no later than
, 2002.
ii
FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. All statements, other than statements
of historical facts, included or incorporated by reference in this prospectus,
which address activities, events or developments which we expect or anticipate
will or may occur in the future are forward-looking statements. The words
"believe," "intend," "expect," "anticipate," "project," "estimate," "predict"
and similar expressions are also intended to identify forward-looking
statements.
These forward-looking statements include, among others, such things as:
. amounts and nature of future capital expenditures;
. wells to be drilled or reworked;
. oil and gas prices and demand;
. exploitation and exploration prospects;
. estimates of proved oil and gas reserves;
. reserve potential;
. development and infill drilling potential;
. expansion and other development trends of the oil and gas industry;
. business strategy;
. production of oil and gas reserves;
. planned asset sales or dispositions; and
. expansion and growth of our business and operations.
These statements are based on certain assumptions and analyses made by us
in light of our experience and our perception of historical trends, current
conditions and expected future developments as well as other factors we believe
are appropriate in the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties which could cause actual results to differ
materially from our expectations, including:
. risk factors discussed in this prospectus and in the documents we
incorporate by reference;
. oil and gas prices;
. exploitation and exploration successes;
. actions taken and to be taken by Argentina as a result of its economic
instability;
. continued availability of capital and financing;
. general economic, market or business conditions;
. acquisitions and other business opportunities (or lack thereof) that
may be presented to and pursued by us;
. changes in laws or regulations; and
. other factors, most of which are beyond our control.
Consequently, all of the forward-looking statements made in this prospectus
and in the documents we incorporate by reference are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by us will be realized or, even if substantially
realized, that they will have the expected consequences to or effects on us or
our business or operations. We assume no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events or otherwise.
iii
SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. For a more
complete understanding of this exchange offer, we encourage you to read this
entire prospectus and the documents to which we have referred you. The term
"outstanding notes" refers to the 8 1/4% Senior Notes due 2012 that were issued
on May 2, 2002. The term "exchange notes" refers to the 8 1/4% Senior Notes due
2012 issuable in the exchange offer. The term "notes" collectively refers to the
outstanding notes, the exchange notes and any additional notes or additional
series of notes issued under the indenture. Certain oil and gas industry terms
used in this prospectus are defined under the section "Glossary of Oil and Gas
Terms."
Vintage Petroleum, Inc.
We are an independent oil and gas company engaged in the development,
exploitation, exploration and production of oil and gas properties. We are also
focused on the acquisition of oil and gas properties which contain the potential
for increased value through exploitation and exploration. Through our
experienced management and technical staff, we have been successful in realizing
value from prior acquisitions through workovers, recompletions, secondary
recovery operations, operating cost reductions and the drilling of development
and exploratory wells. We believe that our primary strengths are our ability to
add reserves at favorable prices, our technical expertise and our low cost
structure.
At December 31, 2001, we owned and operated producing properties in nine
states in the U.S., with our domestic proved reserves located primarily in four
core areas: West Coast, Gulf Coast, East Texas and Mid-Continent (62.0, 36.9,
20.7 and 11.6 MMBOE, respectively). During 2001, we significantly expanded our
North American operations in Canada through the $617 million acquisition of
Genesis Exploration Ltd. ("Genesis," now Vintage Petroleum Canada, Inc.). The
Genesis acquisition added 62.1 MMBOE of proved reserves (56 percent gas) to our
reserve base. Additionally, we have international core areas located in
Argentina, Bolivia and Ecuador. In Argentina, we own 20 oil concessions, 16 of
which are operated by us. Fourteen of these operated concessions are located in
the south flank of the San Jorge Basin in southern Argentina. We recently
expanded our Argentina core area into the Cuyo Basin in western Argentina with
the purchase of the Piedras Colorados and Cachueta concessions in 2000, and the
purchase of the La Ventana and Rio Tunuyan concessions in 2001. In Bolivia, we
own and operate three blocks in the Chaco Plains area of southern Bolivia and
the Naranjillos concession located in the Santa Cruz Province. We also currently
operate three blocks in the Oriente Basin in Ecuador and this area provides
substantial undeveloped acreage which we believe has significant development and
exploration potential. We operate approximately 82 percent of our productive
wells.
As of December 31, 2001, our properties had proved reserves of 535.0 MMBOE,
comprised of 332.3 MMBbls of oil (62 percent) and 1.2 Tcf of gas (38 percent)
and a relatively long estimated reserve life of 15.5 years. As of December 31,
2001, our proved reserves had a present value of estimated future net revenues
before income taxes (utilizing a 10 percent discount rate) of $1.9 billion and a
standardized measure of discounted future net cash flows of $1.4 billion. As of
December 31, 2001, our North American properties represented approximately 36
percent of our proved reserves and had an estimated reserve life of 9.9 years.
Approximately 81 percent of our North American reserves were proved developed as
of that date. From the first quarter of 1999 through the fourth quarter of 2001,
we increased our average net daily production from 42,100 Bbls of oil to 64,300
Bbls of oil and from 120,900 Mcf of gas to 240,300 Mcf of gas. Pro forma after
giving effect to the Genesis acquisition, for the year ended December 31, 2001,
we generated $542 million of consolidated EBITDA and produced 36.6 MMBOE, 58
percent of which was produced from our North American properties.
1
The following table sets forth (a) estimates of our proved oil and gas
reserves at December 31, 2001 (as estimated by the independent petroleum
consultants of Netherland, Sewell & Associates, Inc. for the U.S., Argentina,
Ecuador, and Trinidad, DeGolyer and MacNaughton for Bolivia and Outtrim Szabo
Associates Ltd. for Canada), (b) our productive wells at December 31, 2001, (c)
our 2001 production and (d) our 2001 oil and gas sales less production (lifting)
costs:
Productive Wells
Reserves at December 31, 2001 at December 31, 2001 2001 Production 2001 Oil and Gas
----------------------------- ------------------------ ------------------------------ Revenues less
Production
Total % of Total % Total % of Total (Lifting) Costs
Region (MMBOE) % Oil Reserves Gross Net Operated (MMBOE) % Oil Production (in thousands)
------ ------- ----- ---------- ----- --- -------- ------- ----- ---------- ---------------
U.S. ............... 131.1 58.7% 24.5% 3,058 2,591 89.1% 14.1 59.6% 40.8% $ 252,791
Canada ............. 61.2 35.7 11.4 808 446 54.8 5.2 29.4 15.1 53,710
------ ----- ----- ----- ---- ----- ---------
North America .... 192.3 51.4 35.9 3,866 3,037 81.9 19.3 51.5 55.9 306,501
Argentina .......... 197.7 88.9 37.0 1,484 1,329 83.0 12.3 86.1 35.4 182,311
Bolivia ............ 82.7 7.4 15.5 15 14 100.0 1.6 6.3 4.7 13,263
Ecuador ............ 50.4 100.0 9.4 9 7 100.0 1.4 100.0 4.0 15,369
Trinidad ........... 11.9 9.9 2.2 2 1 100.0 0.0 100.0 0.0 27
------ ----- ----- ----- ---- ----- ---------
Total ............ 535.0 62.1% 100.0% 5,376 4,388 82.3% 34.6 63.5% 100.0% $ 517,471
====== ===== ===== ===== ===== ===== ==== ===== ===== =========
Business Strategy
Our overall goal is to maximize our value through profitable growth in our
oil and gas reserves and production. We have been successful at achieving this
goal through our ongoing strategy of (a) acquiring producing oil and gas
properties with significant upside potential at favorable prices, (b) focusing
on exploitation, development and exploration activities to maximize production
and ultimate reserve recovery on existing properties, (c) exploring undeveloped
properties, (d) maintaining a low cost structure, and (e) maintaining financial
flexibility. Key elements of our strategy include:
. Acquisitions of Producing Properties. We have an experienced
management and technical team which focuses on acquisitions of
operated producing properties that meet our selection criteria, which
include (a) significant potential for increasing reserves and
production through exploitation, development and exploration, (b)
favorable purchase price, and (c) opportunities for improved operating
efficiency. From January 1, 1999, through December 31, 2001, we spent
$865.5 million acquiring 190.3 MMBOE of proved oil and gas reserves at
an average acquisition cost of $4.55 per BOE. We replaced, through
acquisitions, approximately 215 percent of our production of 88.3
MMBOE during the same period. We are continually identifying and
evaluating acquisition opportunities, including acquisitions that
would be significantly larger than those we have consummated to date.
We cannot assure you that any such acquisitions will be successfully
consummated.
. Exploitation and Development. We pursue workovers, recompletions,
secondary recovery operations and other production optimization
techniques on our properties, as well as development and infill
drilling, to offset normal production declines and replace our annual
production. From January 1, 1999, through December 31, 2001, we spent
approximately $277.7 million on exploitation and development
activities. As a result of all of our exploitation activities,
including development and infill drilling, during the three-year
period ended December 31, 2001, we succeeded in adding 61.9 MMBOE to
our proved reserves (excluding the 35.3 MMBOE positive impact of price
changes and a 10.9 MMBOE upward revision to proved reserves resulting
from the 2001 devaluation of the Argentine peso), replacing
approximately 70 percent of production during the same period at an
average cost of $4.49 per BOE. One example of our success is that over
the past three years, we have drilled 121 net wells in Argentina with
a success rate of 98 percent. We continue to maintain an extensive
inventory of exploitation and development opportunities. Due to the
anticipated lower oil and gas price environment for 2002, as compared
to 2001, and the economic instability in Argentina, we have decreased
our budgeted level of spending to $105 million in 2002 on exploitation
and
2
development projects, primarily in North America and Ecuador. By
comparison, we spent $169 million on exploitation and development
projects in the higher commodity price environment of 2001. We believe
that one of our strengths is our ability to significantly reduce our
capital spending in times of low commodity prices due to the
relatively low amount of committed capital dollars in our annual
spending budgets.
. Exploration. Our overall exploration strategy balances high potential
international prospects with lower risk drilling in known formations
in North America. This prospect mix and our practice of risk-sharing
with industry partners is intended to lower the incidence and costs of
dry holes. We make extensive use of geophysical studies, including 3-D
seismic data, which further reduces the cost of our exploration
program by increasing our success. From January 1, 1999, through
December 31, 2001, we spent approximately $189.8 million on
exploration activities, excluding $53.6 million to acquire the large
acreage inventory of Genesis in May 2001. During this period, we
drilled 92 gross (63 net) exploration wells, of which approximately 62
percent were productive. As a result of all of our exploration
activities during the three-year period ended December 31, 2001, we
succeeded in adding 44.1 MMBOE to our proved reserves, replacing
approximately 50 percent of production during this period at an
average cost of $4.31 per BOE. Our exploration activities in 2001 were
focused on our core areas in the U.S. and Canada and additionally in
Trinidad and Yemen. Due to the anticipated lower oil and gas price
environment for 2002, as compared to 2001, we anticipate reduced 2002
spending of approximately $39 million on exploration projects,
primarily in North America and Yemen, down from the 2001 spending
level of $62 million (excluding the $54 million related to the
acquisition of Genesis).
. Low Cost Structure. We are an efficient operator and capitalize on our
low cost structure in evaluating acquisition opportunities. We
generally achieve substantial reductions in labor and other field
level costs from those experienced by the previous operators. In
addition, we target acquisition candidates which are located in our
core areas and provide opportunities for cost efficiencies through
consolidation with our other operations. Our lower cost structure has
generally allowed us to substantially improve the cash flow of newly
acquired properties.
. Financial Flexibility. We are committed to maintaining financial
flexibility, which we believe is important for the successful
execution of our acquisition, exploitation and exploration strategy.
Since 1990, we have completed five public equity offerings, two public
debt offerings and three private debt offerings under Rule 144A of the
Securities Act, all of which have provided us with aggregate net
proceeds of approximately $1.2 billion. From December 31, 2000, to
December 31, 2001, our net long-term debt-to-book capitalization ratio
increased from 41.6 percent to 57.7 percent, primarily as a result of
the acquisition of Genesis. We plan to reduce this ratio during 2002.
To achieve this reduction, we have restricted our planned
non-acquisition capital expenditures and announced plans to sell
properties in Ecuador and Trinidad and, if necessary, we plan to
pursue potential equity-financed acquisitions or additional capital
markets transactions. Internally generated cash flow, availability
under our credit facility and our ability to adjust our level of
capital expenditures are our major sources of liquidity.
__________________
Vintage Petroleum, Inc. is incorporated under the laws of Delaware. Our
principal office is located at 110 West Seventh Street, Tulsa, Oklahoma 74119,
and our telephone number is (918) 592-0101.
3
The Exchange Offer
On May 2, 2002, we sold the outstanding notes to Deutsche Bank Securities
Inc., BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., Fleet Securities,
Inc., BNY Capital Markets, Inc., Credit Lyonnais Securities (USA) Inc. and SG
Cowen Securities Corporation in a private offering exempt from the registration
requirements of the Securities Act. We collectively refer to these parties as
the "initial purchasers." The initial purchasers subsequently resold these
outstanding notes (i) to qualified institutional buyers pursuant to Rule 144A
under the Securities Act and (ii) outside the United States, or U.S., in
accordance with Regulation S under the Securities Act.
When we issued the outstanding notes, we entered into a registration rights
agreement with the initial purchasers in which we agreed to use our best efforts
to complete the exchange offer.
The Exchange Offer .................. Under the terms of the exchange offer,
we are offering to exchange the exchange
notes, which have been registered under
the Securities Act, for your outstanding
notes. In order to be exchanged, an
outstanding note must be properly
tendered and accepted. The outstanding
notes may be tendered only in integral
multiples of $1,000. All outstanding
notes that are validly tendered and not
validly withdrawn will be exchanged. We
will issue the exchange notes promptly
after the expiration of the exchange
offer.
Resales of Exchange Notes ........... We believe that the exchange notes
issued in the exchange offer may be
offered for resale, resold or otherwise
transferred by you without compliance
with the registration and prospectus
delivery provisions of the Securities
Act, provided that:
. you are acquiring the exchange
notes in the ordinary course of
your business;
. you are not participating, and
have no arrangement or
understanding with any person to
participate, in the distribution
of the exchange notes issued to
you in the exchange offer; and
. you are not an "affiliate" of
ours.
If any of the foregoing are not true and
you transfer any exchange note without
delivering a prospectus meeting the
requirements of the Securities Act or
without an exemption from the
registration requirements of the
Securities Act, you may incur liability
under the Securities Act. We will not
assume, nor will we indemnify you
against, any such liability.
If you are a broker-dealer and receive
exchange notes for your own account in
exchange for outstanding notes that you
acquired as a result of market making or
other trading activities, you must
acknowledge that you will deliver a
prospectus meeting the requirements of
the Securities Act in connection with
any resale of the exchange notes. A
broker-dealer may use this prospectus
for an offer to resell, resale or other
transfer of the exchange notes. See
"Plan of Distribution."
Failure to Exchange Outstanding
Notes May Affect You Adversely .... If you do not exchange your outstanding
notes for exchange notes, you will no
longer be able to require us to register
the outstanding notes under the
Securities Act. In addition, you will
not be able to offer or sell the
outstanding notes unless:
4
. they are registered under the
Securities Act; or
. you offer or sell them under an
exemption from the requirements
of, or in a transaction not
subject to, the Securities Act.
Expiration Date ..................... The exchange offer will expire at 5:00
p.m., New York City time, on
___________, 2002, unless we decide to
extend the expiration date.
Interest on the Exchange Notes ...... The exchange notes will accrue interest
at 8 1/4 percent per year, beginning on
the last date we paid interest on the
outstanding notes you exchanged or, if
no interest has been paid on such
outstanding notes, from May 2, 2002. We
will pay interest on the exchange notes
on May 1 and November 1 of each year,
beginning on November 1, 2002.
Conditions to the Exchange Offer .... We will proceed with the exchange offer,
so long as:
. the exchange offer does not
violate any applicable law or
applicable interpretation of law
by the staff of the SEC;
. no litigation materially impairs
our ability to proceed with the
exchange offer; and
. we obtain all the governmental
approvals we deem necessary for
the exchange offer.
Procedures for Tendering Notes ...... If you wish to accept the exchange
offer, you must:
. complete, sign and date the letter
of transmittal, or a facsimile of
it; and
. send the letter of transmittal
and all other documents required
by it, including the outstanding
notes to be exchanged, to
JPMorgan Chase Bank, as exchange
agent at the address set forth on
the cover page of the letter of
transmittal. Alternatively, you
can tender your outstanding notes
by following the procedures for
book-entry transfer, as described
in this prospectus.
Guaranteed Delivery Procedure ....... If you wish to tender your outstanding
notes and you cannot get your required
documents to the exchange agent by the
expiration date, you may tender your
outstanding notes according to the
guaranteed delivery procedure described
under the section "The Exchange Offer"
under the heading "Terms of the Exchange
Offer--Guaranteed Delivery Procedure."
Withdrawal Rights ................... You may withdraw the tender of your
outstanding notes at any time prior to
5:00 p.m., New York City time, on the
expiration date. To withdraw, you must
send a written or facsimile transmission
notice of withdrawal to the exchange
agent at its address set forth in this
prospectus under the section "The
Exchange Offer" under the heading
"Exchange Agent" by 5:00 p.m., New York
City time, on the expiration date.
5
Acceptance of Outstanding Notes
and Delivery of Exchange Notes ..... If all of the conditions to the
exchange offer are satisfied or
waived, we will accept any and all
outstanding notes that are properly
tendered in the exchange offer prior
to 5:00 p.m., New York City time, on
the expiration date. We will deliver
the exchange notes promptly after the
expiration date.
Use of Proceeds ...................... We will not receive any cash proceeds
from the issuance of the exchange
notes.
Tax Considerations ................... We believe that the exchange of
outstanding notes for exchange notes
will not be a taxable exchange for
federal income tax purposes. However,
you should consult your tax adviser
about the tax consequences of this
exchange as they apply to your
individual circumstances.
Exchange Agent ....................... JPMorgan Chase Bank is serving as
exchange agent for the exchange
offer.
Fees and Expenses .................... We will bear all expenses related to
consummating the exchange offer and
complying with the registration
rights agreement.
6
Description of Exchange Notes
The exchange notes will be freely tradable and otherwise substantially
identical to the outstanding notes. The exchange notes will not have
registration rights or provisions for additional interest. The exchange notes
will evidence the same debt as the outstanding notes, and the outstanding
notes are, and the exchange notes will be, governed by the same indenture.
Issuer ............................... Vintage Petroleum, Inc.
Notes Offered ........................ $350,000,000 aggregate principal
amount of 8 1/4% Senior Notes due
2012.
Maturity ............................. May 1, 2012.
Interest Rate ........................ 8 1/4 percent per year (calculated
using 360-day year).
Interest Payment Dates ............... May 1 and November 1 of each year,
commencing November 1, 2002.
Mandatory Redemption ................. We will not be required to make
mandatory redemption or sinking fund
payments with respect to the exchange
notes.
Optional Redemption .................. Except as described below, we cannot
redeem the exchange notes until May
1, 2007. Thereafter, we may redeem
some or all of the exchange notes at
any time at the redemption prices
described under "Description of the
Notes--Optional Redemption."
Optional Redemption After
Equity Offerings .................... At any time on or before May 1, 2005,
we may redeem on one or more
occasions up to 35 percent of the
original aggregate principal amount
of the exchange notes (including the
original aggregate principal amount
of any additional notes issued after
the date hereof) with the proceeds of
certain underwritten public offerings
of our common stock at a redemption
price of 108.25 percent of the
principal amount thereof, plus
accrued and unpaid interest, if any,
to the date of redemption, if at
least 65 percent of the original
aggregate principal amount of the
exchange notes (including the
original aggregate principal amount
of any additional notes issued after
the date hereof) would remain
outstanding after giving effect to
any such redemption. See "Description
of the Notes--Optional Redemption."
Change of Control .................... If we experience specific kinds of
changes of control, we must offer to
repurchase the exchange notes at 101
percent of the principal amount of
the exchange notes, plus accrued and
unpaid interest, if any, to the date
of repurchase. For more details,
see "Description of the Notes--
Repurchase at the Option of Holders
Upon a Change of Control."
Ranking .............................. The exchange notes will be our
unsecured senior obligations. The
exchange notes will rank equally with
all of our existing and future senior
indebtedness and senior to all of our
existing and future subordinated
indebtedness. The exchange notes will
be effectively subordinated to any
existing or future secured
indebtedness, including our new
credit facility to the extent of the
assets securing such indebtedness,
and to indebtedness of our
subsidiaries as to their assets. As
of March 31, 2002, after giving to
the sale of the outstanding notes,
7
including the application of the net
proceeds as described in "Use of
Proceeds" and borrowings under our
new credit facility, we would have
had approximately $172.5 million of
secured senior indebtedness
outstanding.
Certain Covenants .................... We will issue the exchange notes
under an indenture with JPMorgan
Chase Bank, as trustee. The
indenture, among other things,
contains limitations on:
. our ability to incur additional
indebtedness;
. the incurrence of certain liens
on assets to secure debt;
. the payment of dividends and
other distributions with
respect to our capital stock
and the purchase, redemption
or retirement of our capital
stock;
. the making of certain
investments;
. the issuance and sale of
capital stock of our restricted
subsidiaries;
. asset sales;
. transactions with affiliates;
. payment restrictions affecting
the right of our restricted
subsidiaries to make certain
payments and distributions; and
. certain consolidations, mergers
and transfers of assets.
All of these covenants are subject to
a number of important qualifications
and some of these covenants will be
suspended before the exchange notes
mature if the exchange notes attain
investment grade ratings in the
future and no default or event of
default exists under the indenture.
For more details, see the sections
"Description of the Notes--Certain
Covenants" and "Description of the
Notes--Merger, Consolidation and Sale
of Assets."
Risk Factors
For a discussion of certain factors that should be considered in connection
with the exchange offer, see "Risk Factors" beginning on page 13 of this
prospectus.
8
Summary Financial Data
The following table presents a summary of our historical and pro forma
financial information for the periods indicated. The historical and pro forma
financial information should be read in conjunction with our consolidated
financial statements and related notes and our pro forma combined financial
statements and related notes incorporated by reference in this prospectus. The
summary historical financial information as of and for the three months ended
March 31, 2001 and 2002, and the pro forma financial information are unaudited.
Significant acquisitions of producing oil and gas properties in 1997, 1999 and
2001, and significant dispositions of oil and gas properties in 1999 and 2001,
affect the comparability of the financial data for the periods presented below.
Pro Forma
Historical Combined(a)
---------------------------------------------------------------------------------- -----------
Three Months Ended Year Ended
Years Ended December 31, March 31, December
---------------------------------------------------------- ---------------------- 31,
1997(b) 1998 1999 2000 2001 2001 2002 2001
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
(Dollars in thousands, except ratios)
Statement of Operations Data:
Oil and gas sales(c) ............. $ 358,366 $ 270,251 $ 376,924 $ 680,350 $ 731,386 $ 206,879 $ 122,568 $ 790,171
Gas marketing
revenues ....................... 45,981 54,108 60,275 128,836 130,209 59,323 12,328 130,209
Gathering revenues ............... 18,063 7,741 6,955 19,998 17,032 8,109 1,385 17,032
Total revenues(c) ................ 420,466 333,323 502,928 806,181 909,241 275,490 139,818 968,031
Operating expenses(c) ............ 176,552 184,932 184,367 300,477 357,683 113,537 62,500 372,826
Exploration costs ................ 12,667 24,056 14,674 25,242 22,073 2,203 8,953 26,557
Depreciation, depletion
and amortization ............... 96,307 108,975 107,807 100,109 168,944 27,591 49,773 187,394
Impairment of oil and gas
properties ..................... 8,785 70,913 3,306 225 29,050 - - 29,050
Amortization of goodwill ......... - - - - 11,940 - - 17,335
Interest expense ................. 36,762 43,680 58,665 48,437 64,728 10,917 17,437 80,001
Net income (loss) ................ 54,954 (87,665) 73,371 195,893 133,507 70,698 (5,620) 131,117
Cash Flow Data:
Cash provided (used) by:
Operating activities ............ $ 177,665 $ 47,767 $ 160,980 $ 395,687 $ 295,685 $ 129,940 $ 29,980 N/A
Investing activities ............ (291,711) (256,836) (153,400) (261,518) (722,901) (30,043) (28,596) N/A
Financing activities ............ 117,069 208,517 29,862 (157,350) 423,593 (57,686) (133) N/A
Balance Sheet Data (end
of period):
Total assets ..................... $ 915,394 $1,014,175 $1,168,134 $1,338,397 $2,096,788 $1,354,677 $ 2,054,956 N/A
Long-term debt ................... 451,096 672,507 625,318 464,229 1,010,673 399,257 1,011,803 N/A
Stockholders' equity ............. 337,578 273,958 431,129 624,857 729,443 695,239 712,400 N/A
Other Financial Data:
EBITDA(d) ........................ $ 216,350 $ 116,395 $ 282,152 $ 462,866 $ 500,714 $ 149,974 $ 64,276 $ 541,880
Ratio of EBITDA to
interest expense(d) ............ 5.9x 2.7x 4.8x 9.6x 7.7x 13.7x 3.7x 6.8x
Ratio of earnings to fixed
charges(e)(f) .................. 2.6x N/A 2.6x 6.7x 4.0x 10.4x 0.3x 3.4x
----------
(a) The pro forma income statement data and the pro forma other financial
data have been prepared assuming we consummated the acquisition of
Genesis on January 1, 2001, with advances provided under our credit
facility and available cash on hand. See our Current Report on Form 8-K
dated April 17, 2002.
(b) These amounts have been restated to reflect the change in accounting
method for our oil and gas properties effective January 1, 1998, from the
full cost method to the successful efforts method.
(c) The 1997, 1998 and 1999 amounts have been restated to reflect the
reclassification of transportation and storage costs to lease operating
costs.
9
(d) EBITDA represents earnings before interest, income taxes, depreciation,
depletion and amortization, exploration costs, impairment of oil and gas
properties and amortization of goodwill. EBITDA is included as a
supplemental disclosure because it is commonly accepted as providing
useful information regarding a company's ability to service and incur
debt. EBITDA, however, should not be considered in isolation or as a
substitute for net income, cash flow provided by operating activities or
other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's
profitability or liquidity. EBITDA as used by us may not be comparable to
similarly titled measures reported by other companies.
(e) Computed by dividing earnings by fixed charges. For this purpose,
earnings are defined as consolidated income before income taxes and
cumulative effect of change in accounting principle and fixed charges.
Fixed charges consist of interest expense, including amortization of
financing costs and any discount or premium related to any indebtedness.
(f) Earnings for the year ended December 31, 1998, were insufficient to cover
fixed charges by $131.2 million.
10
Summary Operating and Reserve Data
(Unaudited)
The following table presents a summary of our historical and pro forma
operating information and our historical reserve information for the periods
indicated. Significant acquisitions of producing oil and gas properties in 1997,
1999 and 2001, and significant dispositions of oil and gas properties in 1999
and 2001, affect the comparability of the operating and reserve data for the
periods presented below.
Pro Forma
Historical Combined(a)
----------------------------------------------------------------------------- -----------
Three Months Year Ended
Ended
Years Ended December 31, March 31, December
---------------------------------------------------------- -----------------
31,
1997 1998 1999 2000 2001 2001 2002 2001
--------- -------- ---------- ---------- ---------- -------- ------- --------
Production:
Oil (MBbls) ........................... 15,457 16,434 16,877 19,861 21,974 5,080 5,571 22,764
Gas (MMcf) ............................ 42,691 47,238 48,354 53,729 75,641 13,300 16,636 82,991
Oil equivalent (MBOE) ................. 22,573 24,307 24,936 28,816 34,581 7,297 8,344 36,596
Average Sales Prices:
Oil (per Bbl)(b)(c)(d) ................ $ 17.20 $ 11.06 $ 16.92 $ 25.55 $ 21.93 $ 25.38 $ 16.18 $ 21.90
Gas (per Mcf)(b) ...................... 2.17 1.87 1.89 3.22 3.30 5.86 1.95 3.51
Production costs (per
BOE)(b)(e)(f) ......................... 5.24 5.23 4.88 5.54 6.18 6.56 5.86 6.25
Three-year average finding cost
(per BOE)(g) .......................... 3.30 4.50 2.56 2.64 4.05 N/A N/A N/A
Proved reserves (end of period):
Oil (MBbls) ........................... 187,768 164,457 303,190 318,560 332,261 N/A N/A N/A
Gas (MMcf) ............................ 552,163 806,833 988,989 1,023,208 1,216,724 N/A N/A N/A
Total proved reserves
(MBOE) .............................. 279,795 298,929 468,022 489,095 535,048 N/A N/A N/A
Proved developed reserves
(MBOE) .............................. 204,874 207,745 331,932 328,490 338,750 N/A N/A N/A
Annual reserve replacement
ratio(h) .............................. 268% 181% 806% 175% 263% N/A N/A N/A
Estimated reserve life
(in years)(i) ......................... 12.4 12.3 18.8 17.0 15.5 N/A N/A N/A
Present value of estimated future
net revenues before income
taxes (discounted at 10
percent)(in thousands):
Oil and gas properties .............. $1,222,560 $703,211 $2,989,626 $4,338,616 $1,914,073 N/A N/A N/A
Gathering systems and plant ......... 5,940 4,493 13,764 14,188 1,182 N/A N/A N/A
Standardized measure of
discounted future net cash flows
(in thousands) ........................ 1,016,645 648,222 2,247,237 2,951,121 1,438,141 N/A N/A N/A
_______________
(a) The pro forma operating data have been prepared assuming we consummated the
acquisition of Genesis on January 1, 2001. See our Current Report on Form
8-K dated April 17, 2002.
(b) The 1997, 1998 and 1999 amounts have been restated to reflect the
reclassification of transportation and storage costs to lease operating
costs.
11
(c) Reflects the impact of oil hedges, which decreased our average oil price
per Bbl by $0.24, $0.06 and $1.86 for the years ended December 31, 1997,
1999 and 2000, respectively, and which increased our average oil price per
Bbl by $0.89, $1.19 and $0.14 for the year ended December 31, 2001, and
each of the three months ended March 31, 2001 and 2002, respectively.
(d) The average oil price for the three months ended March 31, 2002, before the
impact of Argentine government-mandated settlements was $17.64 per Bbl. No
ongoing impact from these settlements is expected.
(e) Production costs for 1997 have been restated to reflect change in
accounting method for our oil and gas properties effective January 1, 1998,
from the full cost method to the successful efforts method.
(f) Includes lease operating costs, production taxes and ad valorem taxes.
(g) Represents the average finding cost per BOE during the three years ended
December 31 of the year shown in the column.
(h) The annual reserve replacement ratio is a percentage determined on a BOE
basis by dividing the estimated reserves added during a year from
exploitation, development and exploration activities, acquisitions of
proved reserves and revisions of previous estimates, excluding property
sales, by the oil and gas volumes produced during that year.
(i) Estimated reserve life is calculated on a BOE basis by dividing the
estimated proved reserves at year end by the total production during the
year. This calculation can be affected by the timing of major acquisitions
and dispositions.
12
RISK FACTORS
You should consider carefully the following risk factors, together with all
of the other information in this prospectus and the documents that are
incorporated by reference, before you decide to exchange your outstanding notes
for exchange notes in the exchange offer.
Risks Relating to Vintage and the Oil and Gas Industry
Oil and gas prices fluctuate widely, and low oil and gas prices could adversely
affect, and in the past have adversely affected, our financial results.
Our revenues, operating results, cash flow and future rate of growth depend
substantially upon prevailing prices for oil and gas. Historically, oil and gas
prices and markets have been volatile and are likely to continue to be volatile
in the future. The average prices that we currently receive for our production
are comparable to their historical averages. However, a future significant
decrease in oil and gas prices, such as that experienced in 1998 and the first
half of 1999, could have a material adverse effect on our cash flow and
profitability. The substantial and extended decline in oil and gas prices during
1998 and 1999 adversely affected our financial condition and results of
operations. A sustained period of low prices could have a material adverse
effect on our earnings and financial condition.
Prices for oil and gas are subject to wide fluctuations in response to
relatively minor changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors that are beyond our control,
including:
. political conditions in oil producing regions, including the Middle East;
. domestic and foreign supplies of oil and gas;
. levels of consumer demand;
. weather conditions;
. domestic and foreign government regulations;
. prices and availability of alternative fuels; and
. overall economic conditions.
In addition, various factors may adversely affect our ability to market our
oil and gas production, including:
. capacity and availability of oil and gas gathering systems and pipelines;
. effects of federal and state regulation of production and transportation;
. general economic conditions;
. changes in supply due to drilling by other producers;
. availability of drilling rigs; and
. changes in demand.
Lower oil and gas prices may adversely affect our level of capital expenditures,
reserve estimates and borrowing capacity.
Lower oil and gas prices, such as those experienced by us in 1998 and the
first half of 1999, have various adverse effects on our business, including
reducing cash flow, which, among other things, have caused us in the past, and
may cause us in the future, to decrease our capital expenditures. A smaller
capital expenditure program may adversely affect our ability to increase or
maintain our reserve and production levels. Lower prices may also result in
reduced reserve estimates, one-time write-offs of impaired assets and decreased
earnings or losses due to lower reserves and
13
higher depreciation, depletion and amortization expense. For example, in the
fourth quarter of 1998 we recorded a significant non-cash charge for the
impairment of our oil and gas properties due to lower oil and gas prices.
The amount we can borrow under our credit facility is subject to periodic
redetermination based, in part, on expectations of future oil and gas prices
applied to our oil and gas reserve estimates. Lower oil and gas prices could
result in future reductions in the borrowing base under our credit facility
because lower oil and gas reserve values would reduce our liquidity and possibly
trigger mandatory loan repayments. Furthermore, reduction in our liquidity could
impede our ability to fund future acquisitions. Lower prices may also cause us
to not be in compliance with maintenance covenants under our credit facility,
and may negatively affect our credit statistics and coverage ratios.
Our significant level of indebtedness requires that a significant portion of our
cash flow be used to pay interest and may limit our ability to fund capital
expenditures or obtain additional financing to fund other obligations.
We currently have a significant amount of indebtedness. At March 31, 2002,
our total long-term debt outstanding was approximately $1.0 billion and we had a
net long-term debt to total capitalization ratio of 58.3 percent. Our
significant indebtedness could have important consequences to you. For example:
. our ability to obtain any necessary financing in the future for working
capital, capital expenditures, acquisitions, debt service requirements
or other purposes may be limited;
. a portion of our cash flow from operations must be utilized for the
payment of interest on our indebtedness and will not be available for
financing capital expenditures or other purposes; for example, interest
payments for 2001 represented approximately 16 percent of our cash
flows from operations before working capital changes and interest
expense, net of tax;
. our level of indebtedness and the covenants governing our current
indebtedness could limit our flexibility in planning for, or reacting
to, changes in our business because certain financing options may be
limited or prohibited;
. we are more highly leveraged than some of our competitors, which may
place us at a competitive disadvantage;
. our level of indebtedness may make us more vulnerable during periods of
low oil and gas prices or in the event of a downturn in our business
because of our fixed debt service obligations; and
. the terms of our credit facility require interest and principal
payments and maintenance of stated financial covenants. If the
requirements of our credit facility are not satisfied, the lenders
under this facility would be entitled to accelerate the payment of all
outstanding indebtedness under this facility, and a default would be
deemed to have occurred under the terms of the notes as well as under
our outstanding senior subordinated notes. In such event, we cannot
assure you that we would have sufficient funds available or could
obtain the financing required to meet our obligations.
We may incur additional debt to fund our business which would increase the risks
our debt levels pose.
We may be able to incur substantial additional indebtedness in the future.
As of March 31, 2002, our new credit facility would have permitted additional
borrowings of up to approximately $115.2 million (net of letters of credit of
$12.3 million) after giving effect to the sale of the outstanding notes and our
entering into our new credit facility, and such borrowings, to the extent they
are secured, would effectively be senior to the notes. In addition, the terms of
the indentures governing the notes and our outstanding senior subordinated notes
permit us to incur additional indebtedness. If we were to add additional
indebtedness to our current debt levels, the related risks discussed above, that
we now face, could intensify.
14
Our future performance depends upon our ability to find or acquire additional
oil and gas reserves that are economically recoverable.
Unless we successfully replace the reserves that we produce, our reserves
will decline, eventually resulting in a decrease in oil and gas production and
lower revenues and cash flow from operations. We have historically succeeded in
substantially replacing reserves through acquisitions, exploitation, development
and exploration. We have conducted such activities on our existing oil and gas
properties as well as on newly acquired properties. We may not be able to
continue to replace reserves from such activities at acceptable costs. Lower oil
and gas prices may further limit the kinds of reserves that can be developed at
acceptable costs. Lower prices also decrease our cash flow and may cause us to
decrease capital expenditures. The business of exploring for, developing or
acquiring reserves is capital intensive. We may not be able to make the
necessary capital investments to maintain or expand our oil and gas reserves if
cash flow from operations is reduced and external sources of capital become
limited or unavailable. In addition, exploitation, development and exploration
involve numerous risks that may result in dry holes, the failure to produce oil
and gas in commercial quantities and the inability to fully produce discovered
reserves.
We are continually identifying and evaluating acquisition opportunities,
including acquisitions that would be significantly larger than those we have
consummated to date. We cannot assure you that we will successfully consummate
any acquisition, that we will be able to acquire producing oil and gas
properties that contain economically recoverable reserves or that any
acquisition will be profitably integrated into our operations.
Acquisitions carry unknown risks including potential for environmental problems.
Our focus on acquiring producing oil and gas properties may increase our
potential exposure to liabilities and costs for environmental and other problems
existing on such properties. We expect to continue to focus, as we have done in
the past, on acquiring producing oil and gas properties to replace reserves.
Although we perform reviews of the acquired properties that we believe are
consistent with industry practice, such reviews are inherently incomplete. In
general, it is not feasible to review in depth each individual property being
acquired. Ordinarily, we focus our review efforts on the higher-valued
properties and sample the remainder. However, even an in-depth review of all
properties and records may not necessarily reveal existing or potential
problems, nor will it permit us to become sufficiently familiar with the
properties to fully assess their deficiencies and capabilities. Inspections may
not always be performed on each well included in an acquisition, and
environmental problems, such as ground water contamination and surface and
subsurface damages from leakage, spills, disposal or other releases of hazardous
substances on such properties or from adjoining properties that have migrated to
such properties, are not necessarily observable even when an inspection is
performed.
Estimating reserves and future net revenues involves uncertainties and oil and
gas price declines may lead to impairment of oil and gas assets.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
developmental expenditures, including many factors beyond the control of the
producer. The reserve data included or incorporated by reference in this
prospectus represent only estimates. In addition, the estimates of future net
revenues from our proved reserves and the present value of such estimates are
based upon certain assumptions about future production levels, prices and costs
that may not prove to be correct over time.
Quantities of proved reserves are estimated based on economic conditions in
existence during the period of assessment. Lower oil and gas prices may have the
impact of shortening the economic lives of certain fields because it becomes
uneconomic to produce all recoverable reserves on such fields, thus reducing
proved property reserve estimates. If such revisions in the estimated quantities
of proved reserves occur, they would have the effect of increasing the rates of
depreciation, depletion and amortization on the affected properties, which would
decrease earnings or result in losses through higher depreciation, depletion and
amortization expense. The revisions may also be sufficient to trigger impairment
losses on certain properties which would result in a further non-cash charge to
15
earnings. For example, we recorded a significant non-cash charge for the
impairment of oil and gas properties in the fourth quarter of 1998 due to lower
oil and gas prices.
Our international operations may be adversely affected by political and economic
instability, changes in the legal and regulatory environment and other factors.
International investments represent, and are expected to continue to
represent, a significant portion of our total assets. We have international
operations in Canada, Argentina, Bolivia, Ecuador, Yemen and Trinidad. For 2001,
our operations in Argentina accounted for approximately 27 percent of our
revenues, 39 percent of our net operating profit (pre-tax income before
impairments of oil and gas properties, goodwill amortization, and general and
administrative and interest expenses) and 25 percent of our total assets. During
2001, our operations in Argentina represented our only foreign operations
accounting for more than 10 percent of our revenues or net operating profit
(pre-tax income before impairments of oil and gas properties, goodwill
amortization and general and administrative and interest expenses). Our
operations in Canada accounted for approximately 39 percent of our total assets,
including goodwill, at December 31, 2001. A majority of these Canadian assets
were purchased on May 2, 2001, as part of the acquisition of Genesis. Our
exploration and production operations include only eight months of the
operations of Genesis in 2001. At December 31, 2001, none of our other
international operations accounted for more than 10 percent of our total assets.
We continue to identify and evaluate international opportunities, but currently
have no binding agreements or commitments to make any material international
investment.
Our foreign properties, operations or investments in Canada, Argentina,
Bolivia, Ecuador, Yemen and Trinidad may be adversely affected by a number of
factors. For example:
. local political and economic developments could restrict or increase
the cost of our foreign operations;
. exchange controls and currency fluctuations could result in financial
losses;
. royalty and tax increases and retroactive tax claims could increase
costs of our foreign operations;
. expropriation of our property could result in loss of revenue,
property and equipment;
. civil uprisings, riots and war could make it impractical to continue
operations, adversely affect both budgets and schedules and expose us
to losses;
. import and export regulations and other foreign laws or policies could
result in loss of revenues; and
. laws and policies of the U.S. affecting foreign trade, taxation and
investment could restrict our ability to fund foreign operations or
may make foreign operations more costly.
In particular, our Bolivian projects are dependent, at least in part, on
the operation of the Bolivia-to-Brazil gas pipeline. The operation of this
pipeline is subject to various factors outside our control. In addition, in the
event of a dispute arising from foreign operations, we may be subject to the
exclusive jurisdiction of foreign courts or may not be successful in subjecting
foreign persons to the jurisdiction of the courts in the U.S. We may also be
hindered or prevented from enforcing our rights with respect to actions taken by
a foreign government or its agencies.
We do not currently maintain political risk insurance. However, we will
consider obtaining such coverage in the future if conditions so warrant.
16
Our operations have been, and may continue to be, adversely affected by the
recent economic instability in Argentina.
As a result of economic instability and substantial withdrawals from the
banking system, in early December 2001, the Argentine government instituted
restrictions that prohibit foreign money transfers without Central Bank approval
and only allow cash withdrawals from bank accounts for personal transactions in
small amounts with certain limited exceptions. While the legal exchange rate
remained at one peso to one U.S. dollar, financial institutions were allowed to
conduct only limited activity due to these controls, and currency exchange
activity was effectively halted except for personal transactions in small
amounts.
On January 6, 2002, the Argentine government abolished the one peso to one
U.S. dollar legal exchange rate. On January 9, 2002, Decree 71 created a dual
exchange market whereby foreign trade transactions were conducted at an official
exchange rate of 1.4 pesos to one U.S. dollar and other transactions were
conducted in a free floating exchange market. On February 8, 2002, Decree 260
unified the dual exchange markets and allowed the pesos to float freely with the
U.S. dollar. The exchange rate at May 20, 2002, was 3.22 pesos to one U.S.
dollar.
On February 3, 2002, Decree 214 required all contracts that were previously
payable in U.S. dollars to be payable in pesos. U.S. dollars in Argentine banks
on this date were converted to pesos at the government-imposed rate of 1.4 pesos
to one U.S. dollar and U.S. dollar obligations with banks were converted to
pesos at the government-imposed rate of one peso to one U.S. dollar. On January
10, 2002, all bank accounts above a certain amount were converted to fixed-term
deposits scheduled to be returned to deposit holders in pesos beginning in
January 2003. Pursuant to an emergency law passed on January 10, 2002, U.S.
dollar obligations between private parties due after January 6, 2002, are to be
liquidated in pesos at a negotiated rate of exchange which reflects a sharing of
the impact of the devaluation. This emergency law requires the obligor to make
an interim payment of one peso per U.S. dollar of the claim and provides a
period of 180 days for the parties to negotiate the final amount to settle the
U.S. dollar obligation. The settlements in pesos of our existing U.S.
dollar-denominated agreements were substantially completed by March 31, 2002;
thus, future periods should not be impacted by this mandate. This
government-mandated "equitable sharing" of the impact of the devaluation
resulted in a reduction in our first quarter 2002 oil revenues from domestic
sales in Argentina of approximately $8 million, or $2.73 per Argentina Bbl
produced or $1.46 per total Bbl produced. Our Argentine lease operating costs
were also reduced as a result of this mandate, and the positive impact of
devaluation on our peso-denominated costs essentially offset the negative impact
on Argentine oil revenues.
On February 13, 2002, the Argentine government announced a 20 percent tax
on oil exports, effective March 1, 2002. The tax is limited by law to a term of
no more than five years. We currently export approximately 70 percent of our
Argentina oil production. However, we believe that this export tax will have the
effect of decreasing all future Argentina oil revenues (not only export
revenues) by the tax rate for the duration of the tax. We also believe that the
U.S. dollar equivalent value for domestic Argentina oil sales (now paid in
pesos) will move over time to parity with the U.S. dollar-denominated export
values, net of the export tax, thus impacting domestic Argentina values by a
like percentage to the tax. The adverse impact of this tax will be partially
offset by the net cost savings resulting from the devaluation of the peso on
peso-denominated costs and may be further reduced by the Argentina income tax
savings related to deducting such impact.
We continue to monitor the political and economic environment in Argentina.
Because of the recent instability in the country, our capital budgets have been
adjusted to reflect a reduced level of drilling in the country. In addition, the
devaluation of the peso is expected to result in a near-term reduction in
revenues, substantially offset by a reduction in peso-denominated operating,
administrative and capital costs, and the recognition of translation gains and
losses, the impact of which cannot currently be accurately estimated.
The economic and political situation in Argentina evolves continuously and
the Argentine government has adopted numerous decrees, is considering
implementing various alternatives and may enact future regulations or policies
that may materially impact, among other items:
. the realized prices we receive for oil and gas that we produce and
sell;
. the timing and amount of repatriations of cash to the U.S.;
17
. the amount of permitted export sales;
. the Argentine banking system;
. our asset valuations; and
. peso-denominated monetary assets and liabilities.
Our hedging activities may expose us to the risk of financial loss in certain
circumstances.
We have previously engaged in oil and gas hedging activities and intend to
continue to consider various hedging arrangements to realize commodity prices
which we consider favorable. The impact of changes in the market prices for oil
and gas on the average oil and gas prices received by us may be reduced based on
the level of our hedging activities. These hedging arrangements may limit our
potential gains if the market prices for oil and gas were to rise substantially
over the price established by the hedge. In addition, our hedging arrangements
expose us to the risk of financial loss in certain circumstances, including
instances in which:
. production is less than expected;
. a change in the difference between published price indexes established
by pipelines in which our hedged production is delivered and the
reference price established in the hedging arrangements is such that
we are required to make payments to the counterparties to our
arrangements; or
. the counterparties to our hedging arrangements fail to honor their
financial commitments.
During 2001 and 2002, we entered into various oil price swap agreements
covering approximately 2.2 MMBbls of our U.S. and Argentina oil production at a
weighted average NYMEX reference price of $23.77 per Bbl for various periods in
the first half of 2002. As of March 31, 2002, swap agreements remaining covered
approximately 1,055,000 Bbls of future U.S. and Argentina oil production at a
weighted average NYMEX reference price of $23.82 per Bbl. We have also entered
into various gas price swap agreements covering approximately 40,000 MMBtu per
day of our gas production over the period April 1 through October 31, 2002. The
Canadian portion of the gas price swap agreements (approximately 20,000 MMBtu
per day) is at the AECO gas price index reference price of 3.58 Canadian dollars
per MMBtu and will be settled in Canadian dollars. The U.S. portion of the gas
swap agreements (approximately 20,000 MMBtu per day) is at a NYMEX reference
price of $2.60 per MMBtu.
Additionally, we have entered into two costless price collar arrangements
for U.S. gas production. The first price collar covers production of 6,500 MMBtu
per day for the period from June 1 through October 31, 2002, with a floor NYMEX
reference price of $3.50 per MMBtu and a cap NYMEX reference price of $4.00 per
MMBtu. The second price collar covers production of 20,000 MMBtu per day for the
period November 1 through December 31, 2002, with a floor NYMEX reference price
of $3.50 per MMBtu and a cap NYMEX reference price of $5.10 per MMBtu.
In conjunction with each of the U.S. gas price swaps and costless price
collars, we entered into basis swap agreements covering identical periods of
time and volumes. These basis swaps establish a differential between the NYMEX
reference price and the various delivery points at levels that are comparable to
the historical differentials received by us.
We had no derivative or hedging arrangements with Enron Corp. or its
affiliates but do have credit exposure as of March 31, 2002, of approximately
$300,000 to Enron North America Corp., which, along with Enron Corp., filed a
voluntary petition for Chapter 11 reorganization in U.S. bankruptcy court.
If we were required to record an impairment of our goodwill, our results of
operations and stockholders' equity could be materially adversely affected.
As a result of our acquisition of Genesis, we have approximately $156.9
million of net unamortized goodwill recorded on our consolidated balance sheet
as of March 31, 2002. Due to the implementation of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," starting
in the current year goodwill will no longer be amortized but must be tested for
impairment at least annually based on a fair value concept. If we are required
to record a material impairment of our goodwill, our results of operations and
financial position could be materially adversely affected.
Uninsured risks associated with our operations could result in a substantial
financial loss.
Our operations are subject to all of the risks and hazards typically
associated with the exploitation, development and exploration for and the
production and the transportation of oil and gas. These operating risks include
but are not limited to:
. blowouts, cratering and explosions;
. uncontrollable flows of oil, natural gas or well fluids;
. fires;
18
. formations with abnormal pressures;
. pollution and other environmental risks; and
. natural disasters.
Any of such events could result in loss of human life, significant damage
to property, environmental pollution, impairment of our operations and
substantial losses to us. In accordance with customary industry practice, we
maintain insurance against some, but not all, of such risks and losses. The
occurrence of such an event not fully covered by insurance could have a material
adverse effect on our financial position and results of operations.
Governmental and environmental regulations could adversely affect our business.
Our business is subject to certain foreign, federal, state and local laws
and regulations on taxation, the exploration for and development, production and
marketing of oil and gas, and environmental and safety matters. Many laws and
regulations require drilling permits and govern the spacing of wells, rates of
production, prevention of waste and other matters. Such laws and regulations
have increased the costs of planning, designing, drilling, installing, operating
and abandoning our oil and gas wells and other facilities. In addition, these
laws and regulations, and any others that are passed by the jurisdictions where
we have production, could limit the total number of wells drilled or the
allowable production from successful wells, which could limit our revenues.
Our operations are subject to complex environmental laws and regulations
adopted by the various jurisdictions where we operate. We could incur liability
to governments or third parties for any unlawful discharge of oil, gas or other
pollutants into the air, soil or water, including responsibility for remedial
costs. We could potentially discharge such materials into the environment in any
of the following ways:
. from a well or drilling equipment at a drill site;
. leakage from gathering systems, pipelines, transportation facilities
and storage tanks;
. damage to oil and natural gas wells resulting from accidents during
normal operations; and
. blowouts, cratering and explosions.
Because the requirements imposed by such laws and regulations are
frequently changed, we cannot assure you that laws and regulations enacted in
the future, including changes to existing laws and regulations, will not
adversely affect our business. In addition, because we acquire interests in
properties that have been operated in the past by others, we may be liable for
environmental damage caused by such former operators.
Industry competition may impede our growth.
The oil and gas industry is highly competitive, and we may not be able to
compete successfully or grow our business. We compete in the areas of property
acquisitions and the development, production and marketing of, and exploration
for, oil and gas with major oil companies, other independent oil and gas
concerns and individual producers and operators. We also compete with major and
independent oil and gas concerns in recruiting and retaining qualified
employees. Many of these competitors have substantially greater financial and
other resources than we do. We may not be able to successfully expand our
business or attract or retain qualified employees.
19
Risks Related to the Notes
Structural subordination to debt of our subsidiaries resulting from our
company's structure may limit our ability to make payments on the notes.
The notes are our unsecured debt obligations. We conduct a significant
portion of our operations through our subsidiaries. Accordingly, we may be
dependent upon receipt of dividends or advances from our subsidiaries to be able
to meet our debt obligations, including our obligations under the notes. The
notes are not guaranteed by our subsidiaries and our subsidiaries are not
obligated to pay dividends or make advances to us. Creditors of a subsidiary are
entitled to be paid what is due them before assets of the subsidiary become
available for creditors of its parent. Therefore, the liabilities, including
trade payables and accrued liabilities, of our subsidiaries will, in effect, be
prior in right of payment to the notes with regard to the assets of our
subsidiaries. This can substantially reduce the portion of our consolidated
assets which are available for payment of the notes. Also, any agreements of our
subsidiaries which prohibit or limit our subsidiaries' payment of dividends will
eliminate or reduce our access to cash flows of such subsidiaries to pay
interest or principal with regard to the notes. While the indenture governing
the notes permits our foreign subsidiaries to enter into agreements restricting
their ability to pay dividends to us, there are no such agreements currently in
place.
The notes are unsecured and effectively subordinated to our secured
indebtedness.
The notes are not secured. Concurrently with the closing of our sale of the
outstanding notes on May 2, 2002, we entered into a new credit facility. Our new
credit facility will be secured by first mortgage liens and security interests
on our U.S. oil and gas properties constituting at least 80 percent of the then
present value of our U.S. oil and gas reserves. If we become insolvent or are
liquidated, or if payment under our new credit facility or any of our other
secured debt obligations is accelerated, our lenders would be entitled to
exercise the remedies available to a secured lender under applicable law and
would have a claim on those assets before the holders of the notes. As a result,
the notes are effectively subordinated to our secured indebtedness to the extent
of the value of the assets securing such indebtedness and the holders of the
notes may recover ratably less than the lenders of our secured debt in the event
of our bankruptcy or liquidation. As of March 31, 2002, on a pro forma basis
giving effect to our sale of the outstanding notes and our entering into our new
credit facility, we had $172.5 million of senior secured indebtedness
outstanding, and approximately $115.2 million of additional unborrowed funds
available to be borrowed under our new credit facility (net of letters of credit
of $12.3 million), subject to compliance with our financial and other covenants
and the terms of our loan agreement.
We may be unable to repay or repurchase indebtedness, including the notes, if a
change of control occurs.
Upon the occurrence of certain specific change of control events:
. the lenders under our credit facility could demand repayment of all
outstanding indebtedness under the facility; and
. holders of the notes and of our outstanding senior subordinated
indebtedness, in the aggregate principal amount of $850 million (after
giving effect to the planned redemption of a portion of our 9% senior
subordinated notes), will have the right to require us, subject to
certain conditions, to repurchase all or any part of such holders'
indebtedness at a price equal to 101 percent of the principal amount,
plus accrued and unpaid interest, if any, to the date of repurchase.
Upon such an occurrence, we would be required to repay the lenders under
our credit facility and offer to purchase all the outstanding notes and our
outstanding senior subordinated indebtedness. In addition, future indebtedness
of ours may include similar change of control provisions.
A change of control under our credit facility, the indenture governing the
notes and the senior subordinated indentures includes:
20
. the acquisition of 50 percent or more of our voting stock by any
individual or group;
. the sale, lease, transfer or conveyance of substantially all of our
assets;
. the reconstitution of our Board of Directors under certain
circumstances; and
. our merger or consolidation with another entity in any transaction in
which our outstanding voting stock is exchanged for cash, securities
or property, other than a transaction where our outstanding voting
capital stock is reclassified into or exchanged for voting capital
stock of the surviving corporation and the holders of our voting stock
immediately prior to the transaction own not less than a majority of
the voting stock of the surviving corporation after the transaction in
substantially the same proportion as before the transaction.
The term "Change of Control" with respect to the notes is defined in
"Description of the Notes--Repurchase at the Option of Holders Upon a Change of
Control." Except as described above, the indenture for the notes does not
contain any other provisions that permit the holders of the notes to require us
to repurchase or redeem the notes in the event of a takeover, recapitalization
or similar restructuring.
We may not have sufficient funds available and may not be able to obtain
the financing required to repay or repurchase such outstanding indebtedness,
including the notes, following such a change of control. If a change of control
occurred and we had inadequate funds or financing available to pay for such
indebtedness, an event of default would be triggered under the terms of such
indebtedness, which could have adverse consequences for us and the holders of
the indebtedness. In such event, we cannot assure you that we would have
sufficient funds available or could obtain the financing required to meet our
obligations.
There are limited restrictive covenants under the indenture.
The indenture governing the notes contains only limited covenants that
place restrictions on our ability to incur additional indebtedness, to create
liens or other encumbrances, to make payments and investments and to sell or
otherwise dispose of assets, to merge or consolidate with other entities, or to
do other things. Further, certain of the covenants will become inapplicable
during any period of time when the notes have an investment grade rating from
both Moody's Investors Service, Inc. and Standard Poor's Ratings Group and no
default or event of default under such indenture exists. See "Description of the
Notes--Certain Covenants." The indenture governing the notes does not contain
covenants specifically designed to protect holders of the notes in case there is
a material adverse change in our financial position.
If you do not participate in the exchange offer, your outstanding notes will
continue to be subject to transfer restrictions.
If you do not exchange your outstanding notes for exchange notes pursuant
to the exchange offer, your outstanding notes will continue to be subject to the
restrictions on transfer of your outstanding notes. We do not intend to register
the outstanding notes under the Securities Act. To the extent outstanding notes
are tendered and accepted in the exchange offer, the trading market, if any, for
the outstanding notes would be adversely affected.
The lack of public market for the exchange notes may adversely affect the
liquidity and price of the exchange notes.
There is no existing trading market for the exchange notes, and there can
be no assurance a market for the exchange notes will develop in the future, that
holders of the exchange notes will be able to sell the exchange notes or of the
price at which such holders may be able to sell the exchange notes. If a market
for the exchange notes were to develop, future trading prices of the exchange
notes will depend on many factors, including prevailing interest rates, our
financial condition and results of operations and the market for similar notes.
The initial purchasers of the outstanding notes have advised us that they
currently intend to make a market in the exchange notes. However, the initial
purchasers are not obligated to do so, and they may cease their market-making
activities at any time without notice. Therefore, there can be no assurance as
to the liquidity of any trading market for the exchange notes or that an
21
active public market for the exchange notes will develop. If an active market
does not develop, the market price and liquidity of the exchange notes may be
adversely affected. In addition, we do not intend to apply (and are not
obligated to apply) for listing or quotation of the exchange notes on any
securities exchange or stock market.
Arthur Andersen LLP is our independent public accountant. Our access to capital
markets and timely financial reporting may be impaired and we may incur
significant costs if we are required to engage a new independent public
accountant.
On March 14, 2002, Arthur Andersen LLP, our independent public accountant
for the three years ended December 31, 2001, was indicted by the U.S. Department
of Justice on obstruction of justice charges in connection with its role as
auditors for Enron Corp. Arthur Andersen LLP has pled not guilty and has stated
that it intends to contest the indictment. While we are unable to predict the
impact of the indictment on Arthur Andersen LLP or whether other indictments or
other adverse actions may be taken by governmental authorities or private
parties against Arthur Andersen LLP, it is possible that such indictment or
actions may cause Arthur Andersen LLP to file for bankruptcy protection, cease
or curtail the conduct of its business, lose key personnel or merge with or be
acquired by another firm.
The SEC has stated that it will continue accepting financial statements of
an issuer that were audited by Arthur Andersen LLP after March 14, 2002, so long
as Arthur Andersen LLP is able to make representations to the issuer that Arthur
Andersen LLP's audit of the issuer's financial statements was subject to Arthur
Andersen LLP's quality control system for the U.S. accounting and auditing
practice to provide reasonable assurance that the engagement was conducted in
compliance with professional standards, and that there was appropriate
continuity of Arthur Andersen LLP personnel working on the audit, availability
of national office consultation and availability of personnel at foreign
affiliates of Arthur Andersen LLP to conduct relevant portions of the audit.
Even though Arthur Andersen LLP completed its audit of our financial statements
for the year ended December 31, 2001, prior to its indictment on March 14, 2002,
it has provided us with a letter containing such representations with respect
thereto. Arthur Andersen LLP and various of its foreign affiliates, including
its affiliates in Argentina and Canada, have been in discussions, or have signed
agreements, with other public accounting firms to combine the operations of
certain offices or affiliates with such other public accounting firms. Such
combinations could cause Arthur Andersen LLP to be unable to make such
representations with respect to any future audits by it of our financial
statements.
We are considering replacing Arthur Andersen LLP as our independent public
accountant. We are currently soliciting bids for 2002 audit services from
members of the "big five" independent public accounting firms, including Arthur
Andersen LLP. In addition, in the event the SEC ceases accepting financial
statements audited by Arthur Andersen LLP or Arthur Andersen LLP ceases or
curtails the conduct of its business or is otherwise unable to perform required
audit-related functions, we may be compelled to engage another accounting firm
to replace them. The foregoing events could impair our ability to timely file
the registration statement for the exchange of the notes offered hereby. In the
event that we replace Arthur Andersen LLP, it may take our new independent
public accountant some time to become sufficiently acquainted with our business
to enable us to file our financial statements with the SEC by the usual filing
dates or for such accountant to be able to render customary accountants'
letters. While the SEC has permitted companies affected by the indictment of
Arthur Andersen LLP additional time to file their audited financial statements,
use of such additional time may cause investors, including investors in the
notes offered hereby, to receive our audited financial information later than
they usually would, which may have a negative impact on the market prices for
our securities. Since it is customary for securities underwriters to require
certain letters to be delivered to them by an issuer's independent public
accountant, underwriters may be unwilling to underwrite our securities until our
new independent public accountant is able to deliver such letters, and thus our
access to liquidity and capital resources may be impaired until that time.
In addition, in the event Arthur Andersen LLP files for bankruptcy
protection or ceases the conduct of its business, investors in the securities
offered hereby may not have the ability to recover against Arthur Andersen LLP
for any claims they may have under securities or other laws as a result of
Arthur Andersen LLP's activities as our independent public accountant.
22
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the exchange
notes. In consideration for issuing the exchange notes, we will receive in
exchange a like principal amount of outstanding notes, the form and terms of
which are the same as the form and terms of the exchange notes, except as
otherwise described in this prospectus. The outstanding notes surrendered in
exchange for the exchange notes will be retired and canceled and cannot be
reissued. Accordingly, the issuance of the exchange notes will not result in any
change in our capitalization. We have agreed to bear the expenses of the
exchange offer.
The net proceeds received from the sale of the outstanding notes were or
will be used to (i) redeem $100 million of our outstanding $150 million 9%
senior subordinated notes due 2005 and pay a related redemption premium of $3
million, and, (ii) together with borrowings under our new credit facility, repay
all of our outstanding indebtedness under our previous credit facility and the
fees and expenses related to the new credit facility.
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2002: (a)
on an actual basis and (b) as adjusted to give effect to the sale of the
outstanding notes, the application of the net proceeds from such sale as
described above under "Use of Proceeds" and borrowings under our new credit
facility. This table should be read in conjunction with our consolidated
financial statements and related notes incorporated by reference in this
prospectus.
As of March 31, 2002
--------------------
Actual As Adjusted
------ -----------
(In thousands)
Cash and cash equivalents ................................................ $ 16,711 $ 16,711
========== ==========
Long-term debt:
Old credit facility ................................................. $ 412,500 $ -
New credit facility ................................................. - 172,500
8 1/4% Senior Notes due 2012 ........................................ - 350,000
---------- ----------
Total senior debt ............................................... 412,500 522,500
9% Senior Subordinated Notes Due 2005, net of discount .............. 149,847 49,949
8 5/8% Senior Subordinated Notes Due 2009, net of discount .......... 99,521 99,521
9 3/4% Senior Subordinated Notes Due 2009 ........................... 150,000 150,000
7 7/8% Senior Subordinated Notes Due 2011, net of discount .......... 199,935 199,935
---------- ----------
Total long-term debt ............................................ 1,011,803 1,021,905
Stockholders' equity ............................................ 712,400 712,400
---------- ----------
Total capitalization ............................................ $1,724,203 $1,734,305
========== ==========
23
THE EXCHANGE OFFER
Terms of the Exchange Offer
General
In connection with the issuance of the outstanding notes, we entered into a
Registration Rights Agreement dated April 25, 2002, with the initial purchasers
of the outstanding notes. Pursuant to the Registration Rights Agreement, we
agreed to file a registration statement (the "Exchange Offer Registration
Statement"), of which this prospectus is a part, with the SEC with respect to
the exchange of the outstanding notes for registered notes having terms
substantially identical in all material respects. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Exchange Offer Registration
Statement.
Under the Registration Rights Agreement, we also agreed to, at our cost:
. file the Exchange Offer Registration Statement not later than 90 days
of the date of original issuance of the outstanding notes;
. use our best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act not later
than 165 days of the date of original issuance of the outstanding
notes; and
. keep the exchange offer open for not less than 20 business days nor
more than 30 business days (or longer if required by applicable law)
after the date notice of the exchange offer is mailed to the holders
of the outstanding notes.
We are conducting the exchange offer to satisfy our obligations under the
Registration Rights Agreement. The form and terms of the exchange notes are the
same as the form and terms of the outstanding notes, except the exchange notes
will be registered under the Securities Act and not contain transfer
restrictions and holders of the exchange notes will not be entitled to payment
of any additional interest.
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, all outstanding notes validly tendered and not
withdrawn prior to 5:00 p.m., New York City time, on the expiration date will be
accepted for exchange. Exchange notes of the same class will be issued in
exchange for an equal principal amount of outstanding notes accepted in the
exchange offer. Outstanding notes may be tendered only in integral multiples of
$1,000. This prospectus, together with the letter of transmittal, is being sent
to all registered holders of outstanding notes. The exchange offer is not
conditioned upon any minimum principal amount of outstanding notes being
tendered in exchange. However, our obligation to accept outstanding notes for
exchange is subject to certain conditions as set forth in this section under the
heading "-Conditions."
Outstanding notes will be deemed accepted when, as and if we have given
oral (promptly confirmed in writing) or written notice to the exchange agent.
The exchange agent will act as agent for the tendering holders of outstanding
notes for the purposes of receiving the exchange notes and delivering them to
the holders.
Resale of Exchange Notes
Based on interpretations of the SEC staff in no-action letters issued to
third parties, we believe that the exchange notes will be freely transferable by
holders of the outstanding notes, other than our affiliates, 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;
. it has no arrangement or understanding with any person to participate
in the distribution of the exchange notes; and
. it is not an "affiliate" of ours, as that term is defined in Rule 405
under the Securities Act;
24
provided 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 SEC 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
outstanding notes) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, we are required
to allow Participating Broker-Dealers to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
exchange notes.
A holder of outstanding notes who wishes to exchange such notes for
exchange notes in the exchange offer will be required to represent that:
. any exchange notes to be received by it will be acquired in the
ordinary course of its business;
. 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
. it is not an "affiliate" of ours, as defined in Rule 405 under 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 outstanding 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
resale of such exchange notes.
If a holder of outstanding notes is engaged in or intends to engage in a
distribution of the exchange notes or has any arrangement or understanding with
respect to the distribution of the exchange notes to be acquired pursuant to the
exchange offer, the holder may not rely on the applicable interpretations of the
staff of the SEC and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction.
Expiration Date; Extensions; Amendments; Termination
The term "expiration date" shall mean ___________, 2002 (30 calendar days
following the commencement of the exchange offer), unless the exchange offer is
extended by us, 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, we will notify the exchange agent
of any extension and may notify the holders of the outstanding notes by mailing
an announcement or by means of a press release or other public announcement,
each prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our sole discretion, (1) to delay acceptance of
any outstanding notes, to extend the exchange offer or to terminate the exchange
offer and not permit acceptance of outstanding notes not previously accepted if
any of the conditions set forth in this section under the heading "-Conditions"
shall have occurred and shall not have been waived by us (if permitted to be
waived), by giving notice of such delay, extension or termination to the
exchange agent, or (2) to amend the terms of the exchange offer. Any such delay
in acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral (promptly confirmed in writing) or written notice of the
delay to the exchange agent. If the exchange offer is amended in a manner
determined by us to constitute a material change, we will promptly disclose the
amendment in a manner reasonably calculated to inform the holders of the
outstanding notes of the amendment including providing public announcement, or
giving oral or written notice to the holders of the outstanding notes.
25
Interest on the Exchange Notes
Interest on each exchange note will accrue from the last interest payment
date on which interest was paid on the outstanding note surrendered in exchange
thereof or, if no interest has been paid on such outstanding note, from the date
of its original issue.
Single Class of Notes
The outstanding notes and the exchange notes will be treated as a single
class for all purposes under the Indenture (except for provisions dealing
specifically with registration and exchange offer issues).
Procedures for Tendering
To tender in the exchange offer, a holder of outstanding notes must:
. complete, sign and date the letter of transmittal or a facsimile of it;
have the signatures guaranteed if the letter of transmittal so requires;
and mail or otherwise deliver the letter of transmittal or facsimile to
the exchange agent prior to 5:00 p.m., New York City time, on the
expiration date; or
. comply with the Automated Tender Offer Program procedures of the
Depository Trust Company ("DTC") described below.
In addition, either:
. the exchange agent must receive certificates for the outstanding notes
along with the letter of transmittal;
. the exchange agent must receive, prior to the expiration date, a timely
confirmation of a book-entry transfer of the outstanding notes into the
exchange agent's account at DTC and an agent's message according to the
procedure for book-entry transfer described below; or
. the holder must comply with the guaranteed delivery procedures described
below.
The method of delivery of outstanding notes, letters of transmittal and all
other required documents is at the election and risk of the holders. As an
alternative to delivery by mail, it is recommended that holders use an overnight
or hand-delivery service. If such delivery is by mail, it is recommended that
registered mail, properly insured, with return receipt requested, be used. In
all cases, sufficient time should be allowed to assure timely delivery. No
letters of transmittal or outstanding notes should be sent to us. Holders of
outstanding notes may request their respective brokers, dealers, commercial
banks, trust companies or nominees to tender outstanding notes for them.
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program ("ATOP") to tender. Participants in ATOP may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent. The term "agent's message" means a
computer generated message transmitted by means of DTC's ATOP, received by the
exchange agent and forming a part of a confirmation of book-entry transfer. The
agent's message contains an express acknowledgment from the participant in the
book-entry transfer facility tendering the outstanding notes that (1) such
participant has received and agrees to be bound by the terms of the letter of
transmittal and (2) we may enforce the agreement against the participant.
The tender by a holder of outstanding notes will constitute an agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth here and in the letter of transmittal.
Only a holder of outstanding notes may tender the outstanding notes in the
exchange offer. The term "holder" for this purpose means any person in whose
name outstanding notes are registered on our books or a person whose name
26
appears on a security position listing provided by DTC or any other person who
has obtained a properly completed bond power from the registered holder.
Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on his or her behalf. If the beneficial owner wishes
to tender on his or her own behalf, such beneficial owner must, prior to
completing and executing the letter of transmittal and delivering his or her
outstanding notes, either make appropriate arrangements to register ownership of
the outstanding notes in such owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
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 (each, an "Eligible Institution"), unless the
outstanding notes are tendered:
. 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
. for the account of an Eligible Institution.
If the letter of transmittal is signed by the recordholder(s) of the
outstanding notes tendered, the signature must correspond with the name(s)
written on the face of the outstanding notes without alteration, enlargement or
any change whatsoever. If the letter of transmittal is signed by a participant
in DTC, the signature must correspond with the name as it appears on the
security position listing as the holder of the outstanding notes.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed therein, those outstanding
notes must be endorsed or accompanied by a properly completed bond power and a
proxy that authorize such person to tender the outstanding notes on behalf of
the registered holder, in each case as the name of the registered holder or
holders appears on the outstanding notes.
If the letter of transmittal or any outstanding 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
us, evidence satisfactory to us 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 outstanding
notes, or a timely confirmation of a book-entry transfer of outstanding 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 outstanding notes tendered
pursuant to a notice of guaranteed delivery by an Eligible Institution will be
made only against receipt of the letter of transmittal and any other required
documents and the tendered outstanding notes by the exchange agent or receipt of
a timely confirmation of a book-entry transfer of outstanding notes with an
agent's message into the exchange agent's account at DTC.
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of the tendered outstanding notes will be determined
by us in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all outstanding notes not properly
tendered or any outstanding notes which, if accepted, would, in our or our
counsel's opinion, be unlawful. We also reserve the absolute right to waive any
conditions of the exchange offer or irregularities or defects in tender as to
particular outstanding notes. Our interpretation of the terms and conditions of
the exchange offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of outstanding notes must be cured
within the time we determine. Neither we, the exchange agent nor any other
person
27
shall be under any duty to give notification of defects or irregularities with
respect to tenders of outstanding notes, nor shall we, the exchange agent or any
other person incur any liability for failure to give such notification. Tenders
of outstanding notes will not be deemed to have been made until the defects or
irregularities have been cured or waived. Any outstanding 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 holders of such outstanding notes, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In addition, we reserve the right in our sole discretion, subject to the
provisions of the Indenture, to:
. purchase or make offers for any outstanding notes that remain outstanding
subsequent to the expiration date or, as set forth in this section under
the heading "-Expiration Date; Extensions; Amendments; Termination," to
terminate the exchange offer in accordance with the terms of the
Registration Rights Agreement; and
. to the extent permitted by applicable law, purchase outstanding notes in
the open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers could differ from the terms of the
exchange offer.
Acceptance of Outstanding Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
all outstanding notes properly tendered will be accepted, promptly after the
expiration date, and the exchange notes will be issued promptly after acceptance
of the outstanding notes. See the heading "-Conditions" below. For purposes of
the exchange offer, outstanding notes shall be deemed to have been accepted as
validly tendered for exchange when, as and if we have given oral (promptly
confirmed in writing) or written notice thereof to the exchange agent.
In all cases, issuance of exchange notes for outstanding notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for such outstanding notes
or a timely book-entry confirmation of such outstanding notes into the exchange
agent's account at DTC, properly completed and duly executed letter of
transmittal and all other required documents or an agent's message in lieu
thereof. If any tendered outstanding notes are not accepted for any reason set
forth in the terms and conditions of the exchange offer or if outstanding notes
are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged outstanding notes will be returned
without expense to the tendering holder as promptly as practicable after the
expiration or termination of the exchange offer. In the case of outstanding
notes tendered by the book-entry transfer procedures described below, the
non-exchanged outstanding notes will be credited to an account maintained with
DTC.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC for purposes of facilitating the exchange offer
promptly after the date of this prospectus. Any financial institution that is a
participant in DTC's system may make book-entry delivery of outstanding notes by
causing DTC to transfer such outstanding notes into the exchange agent's account
at DTC in accordance with DTC procedures for transfer. Although delivery of
outstanding notes may be effected through book-entry transfer into the exchange
agent's account at DTC, unless an agent's message is received by the exchange
agent in compliance with ATOP, a properly completed and signed letter of
transmittal or facsimile thereof with any required signature guarantees and any
other required documents must, in any case, be transmitted to and received by
the exchange agent at one of the addresses set forth below under the heading
"-Exchange Agent" prior to the expiration date or the guaranteed delivery
procedures 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 of outstanding notes shall be deemed to include DTC's
book-entry delivery method.
28
Guaranteed Delivery Procedure
Holders who desire to tender their outstanding notes and (1) whose
outstanding notes are not immediately available, (2) who cannot deliver their
outstanding notes, the letter of transmittal or other required documents to the
exchange agent prior to the expiration date or (3) who cannot complete the
procedures for book-entry transfer prior to the expiration date, may effect a
tender if:
. the tender is made through an Eligible Institution;
. prior to the expiration date, the exchange agent receives from such
Eligible Institution a notice of guaranteed delivery, substantially in
the form provided by us, by facsimile transmission, mail or hand
delivery:
. setting forth the name and address of the holder of the outstanding
notes and the amount of outstanding notes tendered;
. stating that the tender is being made thereby; and
. guaranteeing that within five business days after the expiration
date, the certificates for all physically tendered outstanding notes,
in proper form for transfer, or a book-entry confirmation, as the
case may be, the letter of transmittal or an agent's message in lieu
thereof and any other documents required by the letter of transmittal
will be deposited by the Eligible Institution with the exchange
agent; and
. the certificates for all physically tendered outstanding notes, in
proper form for transfer, or a book-entry confirmation, as the case may
be, the letter of transmittal or an agent's message in lieu thereof and
all other documents required by the letter of transmittal are received
by the exchange agent within five business days after the expiration
date.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent prior to 5:00 p.m., New York City time on the
expiration date at the address set forth below under the heading "-Exchange
Agent" and prior to acceptance for exchange thereof by us. Any notice of
withdrawal must:
. specify the name of the person having tendered the outstanding notes to
be withdrawn (the "Depositor");
. identify the outstanding notes to be withdrawn, including, if
applicable, the registration number or numbers and total principal
amount of such outstanding notes;
. be signed by the Depositor in the same manner as the original signature
on the letter of transmittal by which such outstanding notes were
tendered (including any required signature guarantees) or be accompanied
by documents of transfer sufficient to permit the Trustee with respect
to the outstanding notes to register the transfer of such outstanding
notes into the name of the Depositor withdrawing the tender;
. specify the name in which any such outstanding notes are to be
registered, if different from that of the Depositor; and
. if the outstanding 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, and time of receipt
of such notices will be determined by us, which determination shall be final and
binding on all parties. Any outstanding notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the exchange offer and
no exchange notes will be issued with respect to the withdrawn notes unless the
outstanding notes so withdrawn are validly re-tendered. Any outstanding notes
that have been tendered for exchange and that are not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in the
case of outstanding notes tendered by book-entry transfer, such outstanding
notes will be credited to an account maintained with DTC for the outstanding
notes) as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn outstanding
29
notes may be re-tendered by following one of the procedures described above
under the headings "-Procedures for Tendering" and "-Book-Entry Transfer" at any
time on or prior to the expiration date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or issue exchange notes for, any outstanding
notes, and we may terminate or amend the exchange offer as provided in this
prospectus before the acceptance of the outstanding notes, if:
. because of any change in law, or applicable interpretations of law by
the SEC, we determine that we are not permitted to effect the exchange
offer;
. any action is proceeding or threatened that would materially impair our
ability to proceed with the exchange offer; or
. any government approval that we deem necessary for the consummation of
the exchange offer has not been received.
We have no obligation to, and will not knowingly, permit acceptance of
tenders of outstanding notes:
. from affiliates of ours within the meaning of Rule 405 under the
Securities Act;
. from any other holder or holders who are not eligible to participate in
the exchange offer under applicable law or interpretations by the SEC;
or
. if the exchange notes to be received by such holder or holders of
outstanding notes in the exchange offer, upon receipt, will not be
tradable by such holder without restriction under the Securities Act and
the Exchange Act and without material restrictions under the "blue sky"
or securities laws of substantially all of the states of the United
States.
Accounting Treatment
We will record the exchange notes in our accounting records at the same
carrying value as the outstanding notes, as reflected in our accounting records
on the date of the exchange. Accordingly, we will not recognize any gain or loss
for accounting purposes. The costs of the exchange offer and the unamortized
expenses related to the issuance of the outstanding notes will be amortized over
the term of the exchange notes.
Exchange Agent
JPMorgan Chase Bank has been appointed as exchange agent for the exchange
offer. Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for a notice of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
By Overnight Courier,
Registered/Certified Mail or Hand: By Facsimile:
--------------------------------- ------------
JPMorgan Chase Bank JPMorgan Chase Bank
55 Water Street Facsimile: 212/638-7380
Room 234, North Building Attention: _________________
New York, New York 10041
Attention: ______________________
Fees and Expenses
We will pay the expenses of soliciting tenders under the exchange offer.
The principal solicitation for tenders pursuant to the exchange offer is being
made by mail; however, additional solicitations may be made by telegraph,
telephone, telecopy or in person by officers and regular employees of ours.
30
We have not retained any dealer-manager in connection with the exchange
offer and we will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse the exchange
agent for its reasonable out-of-pocket expenses. We may also pay brokerage
houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of the prospectus,
letters of transmittal and related documents to the beneficial owners of the
outstanding notes, and in handling or forwarding tenders for exchange.
We will pay the expenses to be incurred in connection with the exchange
offer. Such expenses include SEC registration fees, fees and expenses of the
exchange agent and trustee, accounting and legal fees and printing costs, among
others.
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes pursuant to the exchange offer. If, however:
. certificates representing exchange notes or outstanding 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 outstanding notes
tendered; or
. if tendered outstanding 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
outstanding 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 from such taxes is
not submitted with the letter of transmittal, the amount of the transfer taxes
will be billed directly to the tendering holder.
Shelf Registration Statement
We may be required to file a shelf registration statement ("Shelf
Registration Statement") to permit certain holders of outstanding notes or
exchange notes to resell such notes without being limited by transfer
restrictions. We will only be required to file a Shelf Registration Statement
if:
. there is a change in law or applicable interpretations of law by the
staff of the SEC and, as a result, we are not permitted to effect the
exchange offer;
. for any other reason the Exchange Offer Registration Statement is not
declared effective within 165 days of the original issuance date of
the outstanding notes or the exchange offer is not consummated within
45 days after the date the Exchange Offer Registration Statement is
declared effective under the Securities Act;
. under certain circumstances the initial purchasers so request with
respect to outstanding notes that are not eligible to be exchanged for
exchange notes in the exchange offer;
. under certain circumstances any holder of outstanding notes (other
than an initial purchaser) is not eligible to participate in the
exchange offer or does not receive freely tradable exchange notes in
the exchange offer other than by reason of such holder being an
affiliate of ours; or
. in the case that an initial purchaser participates in the exchange
offer or otherwise acquires exchange notes pursuant to the
Registration Rights Agreement, such initial purchaser does not receive
freely tradable exchange notes in exchange for outstanding notes
constituting any portion of an unsold allotment (it being understood
that the requirement that a Participating Broker-Dealer deliver the
prospectus contained in the Exchange Offer Registration Statement in
connection with sales of exchange notes will not result in such
exchange notes being not "freely tradable").
31
In the event we are required to file a Shelf Registration Statement, we
will, at our cost:
. file the Shelf Registration Statement with the SEC covering resales of
the outstanding notes or the exchange notes, as the case may be, as
promptly as practicable;
. use our best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act; and
. use our best efforts to keep the Shelf Registration Statement
effective until two years after its effective date.
A holder selling outstanding 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 copy of the
prospectus to purchasers. If we are required to file a Shelf Registration
Statement, we will:
. provide to each holder for whom the Shelf Registration Statement was
filed copies of the prospectus which 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 outstanding notes or the exchange notes, as the case
may be.
Any such holder 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 Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
Additional Interest
In the event that:
. on or prior to the 90th day of the date of original issuance of the
outstanding notes, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been filed with the SEC;
. on or prior to the 165th day of the date of original issuance of the
outstanding notes, neither the Exchange Offer Registration Statement
nor the Shelf Registration Statement has been declared effective;
. on or prior to the 45th day after the date the Exchange Offer
Registration Statement is declared effective under the Securities Act,
neither the exchange offer has been consummated nor the Shelf
Registration Statement has been declared effective; or
. 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 outstanding notes or
exchange notes in accordance with and during the periods specified in
the Registration Rights Agreement
(each such event referred to above in this paragraph, a "Registration Default");
then, as liquidated damages for such Registration Default, additional interest
("Special Interest") will accrue on the principal amount of the outstanding
notes and the exchange notes (in addition to the stated interest on the
outstanding 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 in an amount equal to $.05 per calendar week
per $1,000 principal amount of the outstanding notes and exchange notes during
the 90-day period immediately following the occurrence of such Registration
Default and shall increase by an amount equal to $.05 per calendar week per
$1,000 principal amount of the outstanding notes and exchange notes at the end
of each subsequent 90-day period, but in no event shall such amount exceed $.30
per calendar week per $1,000 principal amount of the outstanding notes and
exchange notes.
32
Failure to Exchange Outstanding Notes May Affect You Adversely
Upon consummation of the exchange offer, subject to certain exceptions,
holders of outstanding notes who do not exchange their outstanding notes for
exchange notes in the exchange offer will no longer be entitled to registration
rights and will not be able to offer or sell their outstanding notes, unless the
outstanding notes are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, we will have no obligation to do), except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws.
33
DESCRIPTION OF CERTAIN INDEBTEDNESS
New Senior Secured Credit Facility
On May 2, 2002, we entered into a new $300 million senior secured credit
facility (as amended May 24, 2002) with the Bank of Montreal, an affiliate of
one of the initial purchasers of the outstanding notes, which was utilized to
refinance our previous credit facility and will be available to provide for our
ongoing operating and general corporate needs. The credit facility establishes a
borrowing base determined by the banks' evaluations of our oil and gas reserves.
The amount available to be borrowed under the credit facility is limited to the
lesser of the borrowing base, $300 million as of the date of this prospectus, or
the facility size, which is also currently set at $300 million.
Outstanding advances under the credit facility bear interest payable
quarterly at a floating rate based on Bank of Montreal's alternate base rate (as
defined therein) or, at our option, at a fixed rate for up to six months based
on the Eurodollar market rate ("LIBOR"). Our interest rate increments above the
alternate base rate and LIBOR vary based on the level of outstanding senior
secured debt to the borrowing base. In addition, we must pay a commitment fee of
0.50 percent per annum on the unused portion of the banks' commitment.
Our borrowing base is redetermined on a semiannual basis by the banks based
upon their evaluation of our oil and gas reserves. If the sum of outstanding
senior secured debt exceeds the borrowing base, as redetermined, we must repay
such excess. Final maturity of the credit facility is May 2, 2005.
The credit facility is to be secured by a first priority lien on our U.S.
oil and gas properties constituting at least 80 percent of the present value of
our U.S. proved reserves owned now or in the future. The credit facility is
guaranteed by all of our existing and future U.S. subsidiaries, if any, that
grant a lien on oil and gas properties under the credit facility.
The credit facility includes customary covenants, including, among other
things:
. maintenance of consolidated tangible net worth;
. limitations on indebtedness;
. limitations on creation of liens;
. limitations on guarantees, loans or advances;
. limitations on certain consolidations, mergers and transfers of
assets;
. limitations on investments; and
. limitations on transactions with affiliates.
The credit facility includes customary events of default, including among
other things, and subject to applicable grace periods, if any:
. our failure to make any payment of principal of or interest on any
loan under the credit facility when due and payable;
. breaches of any representations or warranties in any material respect
when made;
. a breach of certain agreements and covenants, including all negative
covenants in the credit facility;
. a default in payment under any of our or our subsidiaries' other
indebtedness for borrowed money or contingent liability or any other
default if the effect of such is to permit acceleration of such
indebtedness;
. any judgment or order for the payment of money in excess of $20
million is rendered against us or any of our subsidiaries;
. certain acts of bankruptcy, insolvency or dissolution; and
. certain specific change in control events.
34
Senior Subordinated Notes
We have four series of senior subordinated notes outstanding in addition to
the outstanding notes subject to this exchange offer:
. $150,000,000 aggregate principal amount of 9% Senior Subordinated
Notes due 2005 (the "9% Notes") issued pursuant to an indenture
between us and JPMorgan Chase Bank (formerly known as Chemical Bank)
(the "9% Notes Indenture"). Interest on the 9% Notes is payable on
June 15 and December 15 of each year, and such payments commenced on
June 15, 1996. The 9% Notes are redeemable at our option, in whole or
in part, at the redemption prices set forth in the 9% Notes Indenture,
plus accrued and unpaid interest, if any, to the date of redemption.
The 9% Notes are not subject to any mandatory sinking fund. We intend
to use a portion of the net proceeds from the sale of the outstanding
notes to redeem $100 million of our 9% Notes.
. $100,000,000 aggregate principal amount of 8 5/8% Senior Subordinated
Notes due 2009 (the "8 5/8% Notes") issued pursuant to an indenture
between us and JPMorgan Chase Bank (formerly known as The Chase
Manhattan Bank) (the "8 5/8% Notes Indenture"). Interest on the 8 5/8%
Notes is payable on February 1 and August 1 of each year, and such
payments commenced on August 1, 1997. The 8 5/8% Notes are redeemable
at our option, in whole or in part, at the redemption prices set forth
in the 8 5/8% Notes Indenture, plus accrued and unpaid interest, if
any, to the date of redemption. The 8 5/8% Notes are not subject to
any mandatory sinking fund.
. $150,000,000 aggregate principal amount at maturity of 9 3/4% Senior
Subordinated Notes due 2009 (the "9 3/4% Notes") issued pursuant to an
indenture between us and JPMorgan Chase Bank (formerly known as The
Chase Manhattan Bank) (the "9 3/4% Notes Indenture"). Interest on the
9 3/4% Notes is payable on June 30 and December 30 of each year, and
such payments commenced on June 30, 1999. The 9 3/4% Notes are
redeemable at our option, in whole or in part, at any time on or after
February 1, 2004, at the redemption prices set forth in the 9 3/4%
Notes Indenture, plus accrued and unpaid interest, if any, to the date
of redemption. The 9 3/4% Notes are not subject to any mandatory
sinking fund.
. $200 million aggregate principal amount of 7 7/8% Senior Subordinated
Notes due 2011 (the "7 7/8% Notes") issued pursuant to an indenture
between us and JPMorgan Chase Bank (formerly known as The Chase
Manhattan Bank) (the "7 7/8% Indenture"). Interest on the 7 7/8% Notes
is payable on May 15 and November 15 of each year, and such payments
commenced on November 15, 2001. The 7 7/8% Notes are redeemable at our
option, in whole or in part, at any time on or after May 15, 2006, at
the redemption prices set forth in the 7 7/8% Indenture, plus accrued
and unpaid interest, if any, to the date of redemption. In addition,
prior to May 15, 2004, we may redeem up to 35 percent of the 7 7/8%
Notes with proceeds of certain underwritten public offerings of our
common stock. The 7 7/8% Notes are not subject to any mandatory
sinking fund.
Upon the occurrence of a "change of control" (as defined in the respective
indenture for each series of our senior subordinated notes), we will be required
to make an offer to repurchase each series of senior subordinated notes at 101
percent of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase.
The outstanding senior subordinated notes are our unsecured senior
subordinated obligations and rank, in right of payment, subordinate to all our
existing and future senior indebtedness, including the notes, pari passu with
each other outstanding series and with any future senior subordinated
indebtedness and senior to any future junior subordinated indebtedness. The
outstanding senior subordinated notes are structurally subordinated to the
indebtedness and other liabilities of our subsidiaries.
The indenture for each series of the senior subordinated notes contains
limitations on, among other things:
. our ability to incur additional indebtedness;
. the payment of dividends and other distributions with respect to our
capital stock and the purchase, redemption or retirement of our
capital stock;
35
. the making of certain investments;
. the incurrence of certain liens;
. asset sales;
. the issuance and sale of capital stock of restricted subsidiaries;
. transactions with affiliates;
. payment restrictions affecting the right of restricted subsidiaries to
make certain payments and distributions; and
. certain consolidations, mergers and transfers of assets.
Events of default under each indenture for the outstanding senior
subordinated notes are:
. failure to pay any interest on the respective notes when due, continued
for 30 days;
. failure to pay principal of (or premium, if any, on) the respective
notes when due;
. failure to perform any other covenant of ours in such indenture,
continued for 60 days after written notice thereof has been provided;
. a default under any indebtedness for borrowed money by us or any
restricted subsidiary of ours which results in acceleration of the
maturity of such indebtedness, or failure to pay any such indebtedness
at maturity, in an amount greater than $10 million ($40 million in the
case of indebtedness of a foreign subsidiary the recourse for which is
limited to solely foreign subsidiaries) if such indebtedness is not
discharged or such acceleration is not rescinded or annulled within 10
days after written notice has been provided;
. one or more final judgments or orders by a court of competent
jurisdiction are entered against us or any restricted subsidiary of
ours in an uninsured or unindemnified aggregate amount in excess of $10
million and such judgments or orders are not discharged, waived,
stayed, satisfied or bonded for a period of 60 consecutive days; and
. certain events of bankruptcy, insolvency or reorganization.
36
DESCRIPTION OF THE NOTES
The outstanding notes were, and the exchange notes will be, issued under an
Indenture dated as of May 2, 2002 (the "Indenture"), between Vintage and
JPMorgan Chase Bank, as trustee (the "Trustee"). The terms of the notes include
those provisions contained in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939. In this section, we
collectively refer to the outstanding notes and the exchange notes as the
"Notes."
The following discussion of certain provisions of the Indenture are
summaries and do not purport to be complete, and are qualified in their entirety
by reference to all of the provisions of the Notes and the Indenture, including
the definition of certain terms, and to the Trust Indenture Act of 1939. A copy
of the Indenture has been filed with the SEC as an exhibit to the registration
statement of which this prospectus is a part and is available from us upon
request. Wherever particular sections or defined terms of the Indenture are
referred to herein, such sections or defined terms are incorporated by reference
herein. For purposes of this section, references to "Vintage," "we," "our" or
"us" shall mean Vintage Petroleum, Inc. and does not include our subsidiaries.
You can find the definitions of certain terms used in this section under
"--Certain Definitions."
General
The exchange notes will be issued in exchange for the outstanding notes
pursuant to the Registration Rights Agreement, as further described in "The
Exchange Offer." The terms of the exchange notes are substantially identical to
the terms of outstanding notes except that the exchange notes will have been
registered under the Securities Act and, therefore, will not contain terms with
respect to restrictions on their transfer and will not contain provisions
providing for an increase in the interest rate thereon under circumstances
described under "The Exchange Offer--Additional Interest," the provisions of
which will terminate upon consummation of the exchange offer.
The Notes will mature on May 1, 2012. The Indenture provides for the
issuance of an unlimited principal amount of additional Notes (the "Additional
Notes") as part of the same or additional series from time to time, and the
Indenture further provides that no such Additional Notes may be issued unless
such Additional Notes are fungible for U.S. federal income tax purposes with the
Notes issued on the Issue Date (as defined below). Any Additional Notes that may
be issued under the Indenture after the Issue Date will be identical in all
respects to the Notes offered hereby other than issue price, issuance date and,
in certain cases, series and may be issued only if permitted under the
limitations set forth under the subheading "--Certain Covenants--Limitation on
Indebtedness." The Notes will bear interest at 8 1/4 percent from May 2, 2002
(the "Issue Date"), or from the most recent interest payment date to which
interest has been paid, payable semiannually on May 1 and November 1 of each
year, beginning on November 1, 2002. We will pay interest to the persons in
whose names the Notes are registered at the close of business on April 15 and
October 15 of each year. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Whenever in this prospectus there is
mentioned, in any context, the payment of interest on any Note, such mention
shall be deemed to include mention of the payment of Special Interest, and
express mention of the payment of Special Interest in any provision hereof
relating to the Notes shall not be construed as excluding the payment of Special
Interest in those provisions hereof where such express mention is not made.
Principal of, premium, if any, and interest on, the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
Vintage in The City of New York maintained for such purposes, which initially
will be the corporate trust office of JPMorgan Chase Bank, 450 West 33rd Street,
New York, New York, as Trustee. In addition, interest may be paid, at our
option, by check mailed to the registered holders at their respective addresses
as shown on the Security Register. The Notes will be issued only in fully
registered form without coupons, in denominations of $1,000 and any integral
multiple thereof. No service charge will be made for any registration of
transfer, exchange or redemption of Notes, except in certain circumstances for
any tax or other governmental charge that may be imposed in connection
therewith.
37
Ranking
The Notes will be our unsecured senior obligations ranking pari passu in
right of payment to all of our existing and future unsubordinated Indebtedness.
The Notes will be effectively subordinated to any of our existing or future
secured indebtedness (including our Senior Credit Facility) to the extent of the
value of the assets securing such Indebtedness and to the obligations of our
Subsidiaries as to their assets. The Notes will be senior in right of payment to
all of our existing and any future Subordinated Indebtedness (including the 9%
Notes, the 8_% Notes, the 9 3/4% Notes, and the 7_% Notes). See "--Certain
Covenants--Limitation on Indebtedness."
Optional Redemption
The Notes will be redeemable at our option at any time on or after May 1,
2007, in whole or in part, on not less than 30 nor more than 60 days' prior
notice, in amounts of $1,000 or an integral multiple thereof. If the Notes are
redeemed during the 12-month period commencing on May 1 of any of the years
indicated below, the redemption price will equal the percentage of the principal
amount of the redeemed Notes opposite that year, plus any accrued and unpaid
interest thereon to the applicable redemption date:
Year Redemption Price
---- ----------------
2007 .............. 104.125%
2008 .............. 102.750%
2009 .............. 101.375%
and thereafter, beginning May 1, 2010, at 100 percent of the principal amount of
the Notes.
At any time prior to May 1, 2005, we may redeem up to 35 percent of the
original aggregate principal amount of the Notes (including the original
aggregate principal amount of any Additional Notes) with the net cash proceeds
of one or more Public Equity Offerings, at a redemption price equal to 108.25
percent of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the redemption date. However, immediately following any such
redemption, at least 65 percent of the original aggregate principal amount of
the Notes (including the original aggregate principal amount of any Additional
Notes) must remain outstanding. Any such redemption shall be made within 75 days
of such Public Equity Offering upon not less than 30 nor more than 60 days'
prior notice.
Sinking Fund
There will be no mandatory sinking fund payments for the Notes.
Repurchase at the Option of Holders Upon a Change of Control
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require us to repurchase all or any part of such holder's Notes in
integral multiples of $1,000 pursuant to the offer described below (the "Change
of Control Offer"). The purchase price paid in such repurchase will be equal to
101 percent of the principal amount of such Notes, plus any accrued and unpaid
interest thereon to the date of repurchase (the "Change of Control Payment").
Within 30 days following any Change of Control, we will mail to each holder
a notice which will govern the terms of the Change of Control Offer. The notice
will specify, among other things, the repurchase date, which may be no earlier
than 30 days and no later than 60 days from the date the notice is mailed, other
than as required by law (the "Change of Control Payment Date"). In addition, the
notice will specify the procedures that holders of Notes must follow in order to
tender their Notes for payment and the procedures that holders of Notes must
follow in order to withdraw an election to tender Notes for payment.
We will comply, to the extent applicable, with the requirements of Rules
13e-4 and 14e-1 under the Exchange Act, and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
38
connection with the repurchase of Notes pursuant to a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
the provisions relating to the Change of Control Offer, we will comply with the
applicable securities laws and regulations and will not be deemed to have
breached our obligations described above by virtue thereof.
Except as described above with respect to a Change of Control, the
Indenture does not contain any other provisions that permit the holders of the
Notes to require that we repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
If we are obligated to make a Change of Control Offer, there can be no
assurance that we will have sufficient funds to repurchase the Notes tendered
and all other existing and future Indebtedness required to be repaid upon that
event. Our existing credit agreement contains, our new credit agreement is
expected to contain, and any future credit agreements or other agreements
relating to our indebtedness may contain, prohibitions or restrictions on our
ability to effect a Change of Control Payment. In the event a Change of Control
occurs at a time when such prohibitions or restrictions are in effect, we could
either seek the consent of our lenders to the repurchase of Notes or attempt to
refinance the borrowings that contain such prohibition. If we cannot obtain such
a consent or repay such borrowings, we will be effectively prohibited from
repurchasing Notes. In such case, our failure to repurchase tendered Notes would
constitute an Event of Default under the Indenture.
A "Change of Control" shall be deemed to occur if:
(i) any "person" or "group" (within the meaning of Sections 13(d)
(3) and 14(d)(2) of the Exchange Act or any successor provision to either
of the foregoing, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)
under the Exchange Act), other than any one or more of the Permitted
Holders, becomes the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) of 50 percent or more of the total voting
power of all classes of our Voting Stock and/or warrants or options to
acquire such Voting Stock, calculated on a fully diluted basis;
(ii) the sale, lease, conveyance or transfer of all or substantially
all of our assets (other than to any Wholly Owned Subsidiary) shall have
occurred;
(iii) the approval by our stockholders of any plan of liquidation or
dissolution;
(iv) we consolidate with or merge into another Person, or any Person
consolidates with or merges into us, in any such event pursuant to a
transaction in which our outstanding Voting Stock is reclassified into or
exchanged for cash, securities or other property, other than any such
transaction where (a) our outstanding Voting Stock is reclassified into or
exchanged for Voting Stock of the surviving corporation that is Capital
Stock and (b) the holders of our Voting Stock immediately prior to such
transaction own, directly or indirectly, not less than a majority of the
Voting Stock of the surviving corporation immediately after such
transaction in substantially the same proportion as before the transaction;
or
(v) during any period of two consecutive years, individuals who at
the beginning of such period constituted our Board of Directors (together
with any new directors whose election or appointment by such board or whose
nomination for election by our stockholders was approved by a vote of a
majority of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of our Board of Directors then in office.
The definition of Change of Control includes a phrase relating to the sale,
lease, conveyance or transfer of "all or substantially all" of our assets.
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
us to repurchase such Notes as a result of a sale, lease, conveyance or transfer
of less than all of our assets to another person may be uncertain. In such a
case, holders of the Notes may not be able to resolve this uncertainty without
resorting to legal action.
39
"Permitted Holders" means Charles C. Stephenson, Jr., S. Craig George,
William C. Barnes, William L. Abernathy and their Permitted Designees.
"Permitted Designee" means (i) a spouse or a child of a Permitted Holder,
(ii) trusts for the benefit of a Permitted Holder or a spouse or child of a
Permitted Holder, (iii) in the event of the death or incompetence of a Permitted
Holder, his estate, heirs, executor, administrator, committee or other personal
representative or (iv) any Person so long as a Permitted Holder owns at least 51
percent of the voting power of all classes of the Voting Stock of such Person.
Certain Covenants
The Indenture will contain covenants including, among others, those
described below:
Covenant Suspension. During any period of time that:
(a) the Notes have an Investment Grade Rating from both of the Rating
Agencies; and
(b) no Default or Event of Default has occurred and is continuing under
the Indenture,
we and our Restricted Subsidiaries will not be subject to the following
provisions of the Indenture:
. "--Limitation on Indebtedness";
. "--Limitation on Indebtedness of Restricted Subsidiaries";
. "--Limitation on Restricted Payments";
. "--Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries";
. "--Limitation on Asset Sales";
. "--Transactions with Affiliates"; and
. "--Limitation on Restrictions on Distributions from Restricted
Subsidiaries"
(collectively, the "Suspended Covenants"). In the event that we and our
Restricted Subsidiaries are not subject to the Suspended Covenants for any
period of time as a result of the preceding sentence and, subsequently, one or
both of the Rating Agencies withdraws its ratings or downgrades the ratings
assigned to the Notes below the required Investment Grade Ratings or a Default
or an Event of Default (other than as a result of any breach of the Suspended
Covenants) occurs and is continuing, then we and our Restricted Subsidiaries
will thereafter again be subject to the Suspended Covenants and compliance with
the Suspended Covenants with respect to Restricted Payments made after the time
of such withdrawal, downgrade, Default or Event of Default will be calculated in
accordance with the terms of the covenant described below under "--Limitation on
Restricted Payments" as though, for purposes of determining whether new
Restricted Payments can be made after such time, such covenant had been in
effect during the entire period of time from the date the Notes are issued.
Limitation on Indebtedness. We will not, and will not permit any of our
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
unless, after giving pro forma effect to the application of the proceeds
thereof, no Default or Event of Default would occur as a consequence of such
Incurrence or be continuing following such Incurrence and either (a) after
giving pro forma effect to the Incurrence of such Indebtedness and the receipt
and application of the proceeds thereof, the Consolidated Interest Coverage
Ratio exceeds 2.5 to 1.0 or (b) such Indebtedness is Permitted Indebtedness.
"Permitted Indebtedness" means any and all of the following:
(a) Indebtedness evidenced by the outstanding notes (other than any
Additional Notes) and any Subsidiary Guarantees thereof;
40
(b) Indebtedness under the Senior Credit Facility, provided that the
principal amount of Indebtedness Incurred pursuant to this clause (b) (plus
any refinancing of the Senior Credit Facility pursuant to clause (l)) at
any one time outstanding does not exceed the greater of
(i) $350 million and
(ii) an amount equal to the sum of (A) $100 million and (B) 15
percent of Adjusted Consolidated Net Tangible Assets determined as of
the date of the Incurrence of such Indebtedness;
provided, however, that the maximum amount available to be outstanding
under the Senior Credit Facility shall be permanently reduced by the amount
of Net Available Cash from Assets Sales used to permanently repay
Indebtedness under the Senior Credit Facility, and not subsequently
reinvested in Additional Assets or used to permanently reduce other
Indebtedness to the extent permitted pursuant to the "--Limitation on Asset
Sales" covenant;
(c) Indebtedness to us or any of our Wholly Owned Subsidiaries by any
of our Restricted Subsidiaries or our Indebtedness to any of our Wholly
Owned Subsidiaries (but only so long as such Indebtedness is held by us or
a Wholly Owned Subsidiary);
(d) Indebtedness in connection with one or more standby letters of
credit, Guarantees, performance bonds or other reimbursement obligations
issued in the ordinary course of business and not in connection with the
borrowing of money or the obtaining of advances or credit (other than
advances or credit on open account, includable in current liabilities, for
goods and services in the ordinary course of business and on terms and
conditions which are customary in the Oil and Gas Business and other than
the extension of credit represented by such letter of credit, Guarantee or
performance bond itself);
(e) Indebtedness of any Person which shall merge or consolidate with or
into Vintage in accordance with the covenant described under "--Merger,
Consolidation and Sale of Assets," which was outstanding prior to such
merger or consolidation;
(f) Indebtedness under Interest Rate Protection Agreements entered into
for the purpose of limiting interest rate risks, provided that the
obligations under such agreements are related to payment obligations on
Indebtedness otherwise permitted by the terms of the "Limitation on
Indebtedness" covenant;
(g) Indebtedness under Exchange Rate Contracts, provided that such
Exchange Rate Contracts were entered into for the purpose of limiting
exchange rate risks in connection with transactions entered into in the
ordinary course of business;
(h) Indebtedness under Oil and Gas Purchase and Sale 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 our and our Subsidiaries' business;
(i) in-kind obligations relating to net oil or gas balancing positions
arising in the ordinary course of business that are customary in the Oil
and Gas Business;
(j) Indebtedness outstanding on the Issue Date not otherwise permitted
in clauses (a) through (i) above;
(k) Indebtedness not otherwise permitted to be Incurred pursuant to
this paragraph, provided that the aggregate principal amount of all
Indebtedness Incurred pursuant to this clause (k), together with all
Indebtedness Incurred pursuant to clause (l) of this paragraph in respect
of Indebtedness previously Incurred pursuant to this clause (k), at any one
time outstanding does not exceed $25 million;
(l) Indebtedness Incurred in exchange for, or the proceeds of which are
used to refinance,
41
(i) Indebtedness referred to in clauses (a), (b), (e), and (j)
of this paragraph (including Indebtedness previously Incurred pursuant
to this clause (l)); and
(ii) Indebtedness Incurred pursuant to clause (a) of the first
paragraph of the "Limitation on Indebtedness" covenant;
provided, however, that
(i) such Indebtedness is in an aggregate principal amount not in
excess of the sum of (A) the aggregate principal amount then
outstanding of the Indebtedness being exchanged or refinanced and (B)
an amount necessary to pay any fees and expenses, including premiums,
related to such exchange or refinancing,
(ii) such Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being exchanged or refinanced,
(iii) such Indebtedness has an Average Life at the time such
Indebtedness is Incurred that is equal to or greater than the Average
Life of the Indebtedness being exchanged or refinanced, and
(iv) such Indebtedness is subordinated in right of payment to
Pari Passu Indebtedness or the Notes to at least the same extent, if
any, as the Indebtedness being exchanged or refinanced;
(m) Indebtedness consisting of obligations in respect of purchase
price adjustments, indemnities or Guarantees of the same or similar matters
in connection with the acquisition or disposition of assets; and
(n) accounts payable or other obligations of ours or any Restricted
Subsidiary to trade creditors created or assumed by us or such Restricted
Subsidiary in the ordinary course of business in connection with the
obtaining of goods or services.
In the event that an item of Indebtedness or proposed Indebtedness meets the
criteria of more than one of the categories of Permitted Indebtedness described
in clauses (a) through (n) above, or is entitled to be Incurred under the above
covenant entitled "--Limitation on Indebtedness" even if not Permitted
Indebtedness, we will be permitted to classify or later reclassify (in whole or
in part in our sole discretion) such item of Indebtedness in any manner that
complies with that covenant.
Limitation on Indebtedness of Restricted Subsidiaries. Notwithstanding the
provisions of the "--Limitation on Indebtedness" covenant, we will not permit
any Restricted Subsidiary to Incur any Indebtedness if the aggregate amount of
Indebtedness of our Restricted Subsidiaries (other than Guarantees of the Notes
or any Pari Passu Indebtedness or Indebtedness to us or to any of our Wholly
Owned Subsidiaries (but only so long as such Indebtedness is held by us or a
Wholly Owned Subsidiary)) would as a result of such Incurrence exceed 10 percent
of our Adjusted Consolidated Net Tangible Assets unless such Restricted
Subsidiary has Guaranteed the Notes and such Indebtedness is subordinated to
such Guarantee of the Notes. Such Guarantee will be automatically released at
any time that the aggregate amount of such Indebtedness of our Restricted
Subsidiaries no longer exceeds 10 percent of our Adjusted Consolidated Net
Tangible Assets.
Limitation on Liens. We will not, and we will not permit any of our
Restricted Subsidiaries to, directly or indirectly, Incur any Lien on or with
respect to any of our or our Restricted Subsidiaries' Property, whether owned on
the Issue Date or acquired after the Issue Date, or any interest therein or any
income or profits therefrom, unless the Notes are secured equally and ratably
with (or prior to) any and all other obligations secured by such Lien, except
that we and our Restricted Subsidiaries may, without restriction, Incur the
following Liens (each a "Permitted Lien"):
(a) Liens existing as of the Issue Date;
(b) any Lien existing on any Property of a Person at the time such
Person is merged or consolidated with or into us (and not Incurred in
anticipation of such transaction), provided that such Liens are not
extended to our other Property;
42
(c) any Lien existing on any Property at the time of the acquisition
thereof (and not Incurred in anticipation of such transaction), provided
that such Liens are not extended to any other Property;
(d) Liens securing the Notes;
(e) Liens securing Indebtedness under the Senior Credit Facility;
(f) Liens securing Indebtedness to us or to any of our Wholly Owned
Subsidiaries by any of our Restricted Subsidiaries (but only so long as
such Indebtedness is held by us or by a Wholly Owned Subsidiary);
(g) Liens of ours on assets of a Restricted Subsidiary;
(h) any Lien that constitutes a purchase money security interest in
Property or improvements thereto hereafter acquired (or, in the case of
improvements, constructed) by us or any of our Restricted Subsidiaries;
provided however that
(i) such security interests and the Indebtedness secured thereby
are Incurred within 90 days of such acquisition (or construction) and
(ii) such security interests do not apply to any other Property of
ours or any of our Restricted Subsidiaries;
(i) 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 (a) through (d) 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, committed amount of the Indebtedness
secured by Liens described under clauses (a) through (d) 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 replacement;
(j) any Liens that are incidental to the normal conduct of our
business, the ownership of our property or the conduct in the ordinary
course of our business (including, without limitation,
(i) easements, rights of way and similar encumbrances,
(ii) rights of lessees under leases,
(iii) rights of collecting banks having rights of setoff,
revocation, refund or chargeback with respect to our money or
instruments or on deposit with or in the possession of such banks,
(iv) Liens imposed by law, including without limitation Liens
under workers' compensation or similar legislation and mechanics',
carriers', warehousemen's, materialmen's, suppliers' and vendors'
Liens,
(v) Oil and Gas Liens, and
(vi) Liens Incurred to secure performance of obligations with
respect to statutory or regulatory requirements, performance or
return-of-money bonds, surety bonds or other obligations of a like
nature and Incurred in a manner consistent with industry practice),
43
in each case which are not Incurred in connection with the borrowing of
money, the obtaining of advances or credit or the payment of the deferred
purchase price of Property and which do not in the aggregate impair in any
material respect the use of Property in the operation of our and our
Restricted Subsidiaries' business taken as a whole;
(k) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, so long as reserves have been established
to the extent required by U.S. GAAP as in effect at such time;
(l) Liens incurred to secure appeal bonds and judgment and attachment
Liens, in each case in connection with litigation or legal proceedings that
are being contested in good faith by appropriate proceedings so long as
reserves have been established to the extent required by U.S. GAAP as in
effect at such time and so long as such Liens do not encumber assets by an
amount in excess of $20 million;
(m) Liens securing Hedging Agreements so long as such Hedging
Agreements are permitted under the "--Limitation on Indebtedness" covenant;
(n) Liens in connection with Sale and Leaseback Transactions permitted
pursuant to the "--Limitation on Indebtedness" covenant;
(o) Liens on assets of a Restricted Subsidiary to secure Indebtedness
of that Restricted Subsidiary that is permitted pursuant to the
"--Limitation on Indebtedness" covenant;
(p) Liens resulting from a pledge of Capital Stock of a Person that is
not a Restricted Subsidiary to secure obligations of such Person and any
refinancings thereof;
(q) Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of decreasing our Indebtedness or the
Indebtedness of any of our Subsidiaries, so long as such deposit of funds
is permitted under the "Limitation on Restricted Payments" covenant; and
(r) Liens securing any Pari Passu Indebtedness, to the extent such
Liens are required by covenants substantially similar to this covenant.
Limitation on Restricted Payments. We will not, and will not permit any of
our Restricted Subsidiaries to, directly or indirectly, make any Restricted
Payment if, at the time of and after giving effect to the proposed Restricted
Payment:
(a) any Default or Event of Default would have occurred and be
continuing;
(b) we could not Incur at least $1.00 of additional Indebtedness
pursuant to clause (a) of the first paragraph of the "--Limitation on
Indebtedness" covenant; or
(c) the aggregate amount expended or declared for all Restricted
Payments from December 20, 1995 (the date of issue of the 9% Notes), would
exceed the sum of
(i) $25 million,
(ii) 100 percent of the aggregate net cash proceeds or the Fair
Market Value of Property other than cash received by us on or
subsequent to December 20, 1995, from capital contributions to us
(other than from one of our Subsidiaries) and from the issuance or sale
(other than to one of our Subsidiaries) of our Capital Stock, including
Capital Stock issued upon conversion of convertible debt or convertible
Redeemable Stock and upon the exercise of options, warrants or rights
to purchase our Capital Stock,
(iii) 50 percent of our aggregate Consolidated Net Income (or, if
Consolidated Net Income shall be a deficit, less 100 percent of such
deficit) subsequent to September 30, 1995, and ending on the last day
of the fiscal quarter ending on or immediately preceding the date of
such Restricted Payment, and
44
(iv) an amount equal to the net reduction in Investments made by
us and our Restricted Subsidiaries subsequent to December 20, 1995, in
any Person resulting from
(A) payments of interest on debt, dividends, repayment of
loans or advances, or other transfers or distributions of Property
(but only to the extent we exclude such transfers or distributions
from the calculation of Consolidated Net Income for purposes of
clause (iii) above), in each case to us or any Restricted
Subsidiary from any Person, or
(B) the redesignation of any Unrestricted Subsidiary as a
Restricted Subsidiary
not to exceed, in the case of (A) or (B), the amount of such
Investments previously made in such Person or such Unrestricted
Subsidiary, as the case may be, which were treated as Restricted
Payments.
Any payments made pursuant to clauses (a) through (i) of the definition of
Permitted Investments below will be excluded for purposes of any calculation of
the aggregate amount of Restricted Payments. Any payments made pursuant to
clause (j) of the definition of Permitted Investments will be included for
purposes of any calculation of the aggregate amount of Restricted Payments.
The foregoing limitations will not prevent (1) the payment of a dividend on
Capital Stock within 60 days after declaration thereof if, on the declaration
date, such dividend could have been paid in compliance with the Indenture or (2)
making Permitted Investments so long as no Default or Event of Default shall
have occurred and be continuing.
"Permitted Investments" is defined to mean any and all of the following:
(a) Permitted Short-Term Investments;
(b) Investments in property, plant and equipment used in the ordinary
course of business and Permitted Business Investments;
(c) Investments by us or any Restricted Subsidiary in a Restricted
Subsidiary and Investments by a Restricted Subsidiary in us;
(d) Investments in any other Person, including the acquisition from
third parties of Capital Stock of a Restricted Subsidiary or any other
Person, as a result of which such other Person becomes a Restricted
Subsidiary in compliance with the "--Restricted and Unrestricted
Subsidiaries" covenant or is merged into or consolidated with or transfers
or conveys all or substantially all of its assets to us or a Restricted
Subsidiary;
(e) negotiable instruments held for collection; lease, utility and
other similar deposits; or stock, obligations or securities received in
settlement of debts owing to us or any Restricted Subsidiary as a result of
foreclosure, perfection or enforcement of any Lien or Indebtedness, in each
of the foregoing cases in the ordinary course of our or such Restricted
Subsidiary's business;
(f) Investments in Persons in the Oil and Gas Business (other than
Restricted Subsidiaries) intended to promote our strategic business
objectives in an amount not to exceed $20 million at any one time
outstanding;
(g) loans made (i) to our and any Subsidiary's officers, directors and
employees approved by the Board of Directors (or by a duly authorized
officer), the proceeds of which are used solely to exercise stock options
received pursuant to an employee stock option plan or other incentive plan,
in a principal amount not to exceed the exercise price of such stock
options and (ii) to refinance loans, together with accrued interest
thereon, made pursuant to this clause (g);
(h) advances and loans to our and any Subsidiary's officers, directors
and employees in the ordinary course of business, provided such loans and
advances do not exceed $3.0 million at any one time outstanding;
45
(i) Investments in the form of securities received from Asset Sales,
provided that such Asset Sales are made in compliance with the
"--Limitation on Asset Sales" covenant; and
(j) Investments pursuant to any agreement or obligation of ours or any
of our Restricted Subsidiaries as in effect on the Issue Date (other than
Investments described in clauses (a) through (i) above).
Limitation on Restricted Subsidiary Guarantees. We will not permit any of
our Restricted Subsidiaries to Guarantee any of our Indebtedness, other than
Indebtedness under the Senior Credit Facility, unless the Notes (and any other
of our future Pari Passu Indebtedness that benefits from a similar requirement)
are Guaranteed by such Restricted Subsidiary on a pari passu basis. We will not
permit any of our Restricted Subsidiaries to Guarantee on a secured basis any of
our Indebtedness under the Senior Credit Facility unless such Restricted
Subsidiary Guarantees the Notes (and any other of our future Pari Passu
Indebtedness that benefits from a similar requirement) on a pari passu, but
unsecured, basis. Any Guarantee of the Notes required by this provision will no
longer be required and will be automatically released if the other Guarantee by
that Restricted Subsidiary that caused this paragraph to require a Guarantee of
the Notes is no longer in effect.
Limitation on Issuance and Sale of Capital Stock of Restricted
Subsidiaries. We will not:
(a) permit any Restricted Subsidiary to issue any Capital Stock other
than to us or one of our Wholly Owned Subsidiaries; or
(b) permit any Person, other than us or a Restricted Subsidiary, to own
any Capital Stock of any other Restricted Subsidiary (other than directors'
qualifying shares),
except, in each case, for
(i) a sale of the Capital Stock of a Restricted Subsidiary owned by
us or our Restricted Subsidiaries effected in accordance with the
"--Limitation on Asset Sales" covenant,
(ii) the issuance of Capital Stock by a Restricted Subsidiary to a
Person other than us or a Restricted Subsidiary, and
(iii) the Capital Stock of a Restricted Subsidiary owned by a
Person at the time such Restricted Subsidiary became a Restricted
Subsidiary or acquired by such Person in connection with the formation
of the Restricted Subsidiary, or transfers thereof;
provided, that any sale or issuance of Capital Stock of a Restricted Subsidiary
shall be deemed to be an Asset Sale to the extent the percentage of the total
outstanding Voting Stock of such Restricted Subsidiary owned directly and
indirectly by us is reduced as a result of such sale or issuance; provided,
further, that if a Person whose Capital Stock was issued or sold in a
transaction described in this paragraph is, as a result of such transaction, no
longer a Restricted Subsidiary, then the Fair Market Value of Capital Stock of
such Person retained by us and the other Restricted Subsidiaries shall be
treated as an Investment for purposes of the "--Limitation on Restricted
Payments" covenant.
Limitation on Asset Sales. We will not, and will not permit any Restricted
Subsidiary to, consummate any Asset Sale unless:
(a) we or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair
Market Value of the shares and assets subject to such Asset Sale; and
(b) all of the consideration paid to us or such Restricted Subsidiary
in connection with such Asset Sale is in the form of cash, cash
equivalents, Liquid Securities, or the assumption by the purchaser of
liabilities of ours (other than our liabilities that are by their terms
subordinated to the Notes) or any Restricted Subsidiary as a result of
which we and our remaining Restricted Subsidiaries are no longer liable;
provided, however, that:
46
(i) the Fair Market Value of Exchanged Properties shall be treated
as cash for purposes of this clause (b); and
(ii) we and our Restricted Subsidiaries shall be permitted to
receive property and securities other than cash, cash equivalents,
Exchanged Properties or Liquid Securities, so long as the aggregate
Fair Market Value of all such property and securities received in Asset
Sales held by us or any Restricted Subsidiary at any one time shall not
exceed 10 percent of Adjusted Consolidated Net Tangible Assets.
The Net Available Cash from Asset Sales may be applied by us or a
Restricted Subsidiary, to the extent we or such Restricted Subsidiary elects:
(a) to reinvest in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by us or another Restricted Subsidiary);
(b) to purchase the Notes (excluding Notes owned by us or an Affiliate
of ours) or Pari Passu Indebtedness; or
(c) to repay or prepay Indebtedness outstanding under the Senior Credit
Facility.
Any Net Available Cash from an Asset Sale not applied in accordance with
the preceding paragraph within 365 days from the date of such Asset Sale shall
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10 million, we will be required to make an offer to purchase (a
"Prepayment Offer") on a pro rata basis, from all holders of the Notes and, to
the extent required by the terms of any then outstanding Pari Passu
Indebtedness, such Pari Passu Indebtedness, an aggregate principal amount of
Notes and any such Pari Passu Indebtedness equal to the Excess Proceeds, at a
price in cash at least equal to 100 percent of the outstanding principal amount
thereof plus accrued interest, if any, to the purchase date thereof. If the
aggregate principal amount of Notes surrendered for purchase by the holders
thereof exceeds the pro rata amount of Excess Proceeds allocated for the
purchase thereof, then the Trustee shall select the Notes to be purchased pro
rata according to principal amount with such adjustments as may be deemed
appropriate by us so that any Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased. To the extent that any portion of the
amount of Excess Proceeds remains after compliance with the preceding sentence
and provided that all holders of the Notes have been given the opportunity to
tender their Notes for purchase as described in the following paragraph, we or
such Restricted Subsidiary may use such remaining amount for general corporate
purposes and the amount of Excess Proceeds will be reset to zero.
Within five Business Days after 365 days from the date of an Asset Sale we
shall, if we are obligated to make a Prepayment Offer pursuant to the preceding
paragraph, send a written Prepayment Offer notice, by first-class mail, to the
holders of the Notes, which notice will describe the procedure which holders of
Notes must follow in order to tender their Notes and will be accompanied by such
information regarding us and our Subsidiaries as we, in good faith, believe will
enable holders of the Notes to make an informed decision with respect to the
Prepayment Offer.
We will comply, to the extent applicable, with the requirements of Rules
13e-4 and 14e-1 under the Exchange Act and any other securities laws or
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of Notes as described above. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions relating to the Prepayment Offer, we will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.
Transactions with Affiliates. We will not, and will not permit any of our
Restricted Subsidiaries to, directly or indirectly, conduct any business or
enter into any transaction or series of transactions (including, but not limited
to, the sale, transfer, disposition, purchase, exchange or lease of Property,
the making of any Investment, the giving of any Guarantee or the rendering of
any service) with or for the benefit of any Affiliate of ours, unless:
(a) such transaction or series of transactions is in our or such
Restricted Subsidiary's best interest;
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(b) such transaction or series of transactions is on terms no less
favorable to us or such Restricted Subsidiary than those that could be
obtained in a comparable arm's-length transaction with a Person that is not
an Affiliate of ours or of such Restricted Subsidiary; and
(c) with respect to a transaction or series of transactions involving
aggregate payments by or to us or such Restricted Subsidiary having a Fair
Market Value equal to or in excess of:
(i) $5.0 million but less than $20.0 million, our Board of
Directors (including a majority of the disinterested members of our
Board of Directors) approves such transaction or series of transactions
and, in its good faith judgment, believes that such transaction or
series of transactions complies with clauses (a) and (b) of this
paragraph as evidenced by a certified resolution delivered to the
Trustee; or
(ii) $20.0 million, (A) we receive from an independent, nationally
recognized investment banking firm or appraisal firm, in either case
specializing or having a specialty in the type and subject matter of
the transaction (or series of transactions) at issue, a written opinion
that such transaction (or series of transactions) is fair, from a
financial point of view, to us or such Restricted Subsidiary and (B)our
Board of Directors (including a majority of the disinterested members
of our Board of Directors) approves such transaction or series of
transactions and, in its good faith judgment, believes that such
transaction or series of transactions complies with clauses (a) and (b)
of this paragraph, as evidenced by a certified resolution delivered to
the Trustee.
The limitations of the preceding paragraph do not apply to:
(a) the payment of reasonable and customary regular fees to our or any
of our Restricted Subsidiaries' directors who are not our or any Restricted
Subsidiary's employees;
(b) indemnities of our or any Subsidiary's officers and directors
consistent with such Person's bylaws and applicable statutory provisions;
(c) any employment agreement entered into by us or any of our
Restricted Subsidiaries in the ordinary course of business and consistent
with our or such Restricted Subsidiary's past practice;
(d) loans made (i) to our or any Subsidiary's officers and directors
approved by the Board of Directors (or by a duly authorized officer), the
proceeds of which are used solely to exercise stock options received
pursuant to an employee stock option plan or other incentive plan, in a
principal amount not to exceed the exercise price of such stock options, or
(ii) to refinance loans, together with accrued interest thereon, made
pursuant to this clause (d);
(e) advances and loans to our or any Subsidiary's officers and
directors in the ordinary course of business, provided such loans and
advances do not exceed $3.0 million at any one time outstanding; or
(f) transactions with Restricted Subsidiaries.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
We will not, and will not permit any of our Restricted Subsidiaries to, directly
or indirectly, create, assume or otherwise cause or suffer to exist or become
effective, or enter into any agreement with any Person that would cause to
become effective, any consensual encumbrance or restriction on the legal right
of any Restricted Subsidiary (other than a Foreign Subsidiary) to:
(a) pay dividends, in cash or otherwise, or make any other
distributions on or in respect of its Capital Stock or Redeemable Stock
held by us or a Restricted Subsidiary;
(b) pay any Indebtedness or other obligation owed to us or any other
Restricted Subsidiary;
(c) make any loans or advances to us or any other Restricted
Subsidiary; or
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(d) transfer any of its property or assets to us or any other
Restricted Subsidiary.
Such limitation will not apply:
(1) with respect to clauses (c) and (d) only, to encumbrances and
restrictions
(i) in existence under or by reason of any agreements in effect on
the Issue Date,
(ii) required by the Senior Credit Facility that are not more
restrictive than those in effect under the Senior Credit Facility on
the Issue Date,
(iii) existing at such Restricted Subsidiary at the time it became
a Restricted Subsidiary if (A) such encumbrance or restriction was not
created in anticipation of such acquisition and (B) immediately
following such acquisition, on a pro forma basis, we could incur at
least $1.00 of additional Indebtedness pursuant to clause (a) of the
first paragraph of the "--Limitation on Indebtedness" covenant, or
(iv) which result from the renewal, refinancing, extension or
amendment of an agreement referred to in the immediately preceding
clauses (i), (ii) and (iii), provided, such replacement or encumbrance
or restriction is no more restrictive to us or the Restricted
Subsidiary and is not materially less favorable to the holders of Notes
than those under or pursuant to the agreement evidencing the
Indebtedness so extended, renewed, refinanced or replaced; and
(2) with respect to clause (d) only, to
(i) any restriction on the sale, transfer or other disposition of
assets or Property securing Indebtedness as a result of a Lien
permitted under the "--Limitation on Liens" covenant,
(ii) any encumbrance or restriction in connection with an
acquisition of Property, so long as such encumbrance or restriction
relates solely to the Property so acquired and was not created in
connection with or in anticipation of such acquisition,
(iii) customary provisions restricting subletting or assignment of
leases and customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder,
(iv) any encumbrance or restriction due to applicable law,
(v) customary restrictions contained in asset sale agreements
limiting the transfer of such assets pending the closing of such sale
and
(vi) restrictions contained in purchase money obligations for
Property acquired in the ordinary course of business with respect to
transfers of such Property.
Restricted and Unrestricted Subsidiaries. Generally, any Subsidiary of
ours, whether existing on or after the date of the Indenture, shall be
classified as a Restricted Subsidiary subject to the provisions of the next
paragraph, unless the Subsidiary is designated an Unrestricted Subsidiary. We
may designate a Subsidiary, including a newly formed or newly acquired
Subsidiary, as an Unrestricted Subsidiary if:
(a) such Subsidiary does not own any of our or any Restricted
Subsidiary's Capital Stock, Redeemable Stock or Indebtedness, or own or
hold any Lien on any of our or any other Restricted Subsidiary's property;
(b) such Subsidiary does not have any Indebtedness or other obligations
which, if in Default, would result (with the passage of time or notice or
otherwise) in a default on any of our or any Restricted Subsidiary's
Indebtedness; and
49
(c)(i) such designation is effective immediately upon such Subsidiary
becoming our or a Restricted Subsidiary's Subsidiary, (ii) the Subsidiary
to be so designated has total assets of $1,000 or less, or (iii) if such
Subsidiary has assets greater than $1,000, then such redesignation as an
Unrestricted Subsidiary is deemed to constitute a Restricted Payment in an
amount equal to the Fair Market Value of our direct and indirect ownership
interest in such Subsidiary, and such Restricted Payment would be permitted
to be made at the time of such designation under the "--Limitation on
Restricted Payments" covenant.
Except as provided in clauses (c)(ii) and (iii) of this paragraph, no
Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. The
designation of an Unrestricted Subsidiary or removal of such designation shall
be made by our Board of Directors or a committee thereof pursuant to a certified
resolution delivered to the Trustee and shall be effective as of the date
specified in the applicable certified resolution, which shall not be prior to
the date such certified resolution is delivered to the Trustee.
We will not, and will not permit any of our Restricted Subsidiaries to,
take any action or enter into any transaction or series of transactions that
would result in a Person becoming a Restricted Subsidiary (whether through an
acquisition or otherwise) unless, after giving effect to such action,
transaction or series of transactions, on a pro forma basis,
(i) we could Incur at least $1.00 of additional Indebtedness pursuant
to clause (a) of the first paragraph of the "--Limitation on Indebtedness"
covenant and
(ii) no Default or Event of Default would occur or be continuing.
Merger, Consolidation and Sale of Assets
We will not, in a single transaction or series of related transactions,
merge or consolidate with or into any other entity, other than a merger of a
Restricted Subsidiary into us, or sell, transfer, assign, lease, convey or
otherwise dispose of all or substantially all of our properties and assets
unless:
(a) the entity formed by or surviving any such consolidation or merger
(if we are not the surviving entity) or the Person to which such sale,
assignment, transfer, lease or conveyance is made (the "Surviving Entity")
shall be a corporation organized and existing under the laws of the U.S. or
a State thereof or the District of Columbia and the Surviving Entity
expressly assumes, by supplemental indenture satisfactory to the Trustee,
the due and punctual payment of the principal of, premium, if any, and
interest on all the Notes, according to their tenor, and the due and
punctual performance and observance of all of the covenants and conditions
of the Indenture to be performed by us;
(b) in the case of a sale, transfer, assignment, lease, conveyance or
other disposition of all or substantially all of our properties and assets,
such properties and assets shall have been transferred as an entirety or
virtually as an entirety to one Person;
(c) immediately before and after giving effect to such transaction or
series of transactions, no Default or Event of Default shall have occurred
and be continuing;
(d) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
transaction or series of transactions), we or the Surviving Entity, as the
case may be, would be able to Incur at least $1.00 of additional
Indebtedness under clause (a) of the first paragraph of the "Limitation on
Indebtedness" covenant; provided, however, that this clause (d) shall be
suspended during any period in which we and our Restricted Subsidiaries are
not subject to the Suspended Covenants; and
(e) immediately after giving effect to such transaction or series of
transactions on a pro forma basis (including, without limitation, any
Indebtedness Incurred or anticipated to be Incurred in connection with such
50
transaction or series of transactions), we or the Surviving Entity shall
have a Consolidated Net Worth equal to or greater than our Consolidated Net
Worth immediately prior to the transaction or series of transactions.
Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have our obligations
discharged with respect to the outstanding Notes ("Defeasance"). If we exercise
this Defeasance option, we will be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for:
. obligations to exchange or register the transfer of Notes, to replace
stolen, lost or mutilated Notes, to maintain paying agencies and to
hold moneys for payment in trust; and
. the rights of holders of the Notes to receive payments in respect of
the principal of, premium, if any, and interest on the Notes when such
payments are due.
In order to exercise the Defeasance option, among other things:
. we must irrevocably deposit, in trust for the benefit of the holders of
the Notes, cash or U.S. Government Obligations, or a combination
thereof, in such amounts as will be sufficient, without reinvestment,
to pay the principal of, premium, if any, and interest on the Notes on
the stated dates for payment thereof or on any applicable redemption
date; and
. we must deliver an opinion of counsel to the Trustee confirming:
(i) that (A) we have 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 holders of the
Notes will not recognize gain or loss for federal income tax
purposes as a result of such deposit, Defeasance and discharge and
will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if
such deposit, Defeasance and discharge had not occurred; and
(ii) that the resulting trust will not be an "Investment Company"
within the meaning of the Investment Company Act of 1940 unless
such trust is qualified thereunder or exempt from regulation
thereunder.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
Indenture, including those described under "--Certain Covenants" and in clauses
(d) and (e) under the first paragraph of "--Merger, Consolidation and Sale of
Assets" ("Covenant Defeasance"). Following a Covenant Defeasance, any omission
to comply with such obligations shall not constitute an Event of Default. If a
Covenant Defeasance occurs, certain Events of Default, which are described in
the following section in clause (c) (with respect to such covenants) and clauses
(d) and (e) under "--Events of Default and Notice," will be deemed not to be or
result in an Event of Default. In order to exercise such Covenant Defeasance
option:
. we must irrevocably deposit, in trust for the benefit of the holders of
the Notes, cash or U.S. Government Obligations, or a combination
thereof, which will be sufficient, without reinvestment, to pay the
principal of, premium, if any, and interest on the Notes on the stated
dates for payment thereof or on any applicable redemption date; and
. we must deliver an opinion of counsel to the Trustee confirming:
(i) that holders of the Notes will not recognize gain or loss for
federal income tax purposes as a result of such deposit and
Covenant Defeasance and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would
have been the case if such deposit and Covenant Defeasance were
not to occur; and
51
(ii) that the resulting trust will not be an "Investment Company"
within the meaning of the Investment Company Act of 1940 unless
such trust is qualified thereunder or exempt from regulation
thereunder.
In the event we were to exercise this Covenant Defeasance option and the Notes
were declared due and payable because of the occurrence of any Event of Default,
the amount of money and U.S. Government Obligations so deposited in trust would
be sufficient to pay amounts due on the Notes at the time of their stated
payment dates but may not be sufficient to pay amounts due on the Notes upon any
acceleration resulting from such Event of Default. In such case, we would remain
liable for such payments.
Events of Default and Notice
The following are summaries of Events of Default under the Indenture with
respect to the Notes:
(a) failure to pay any interest on the Notes when due, continued for
30 days;
(b) failure to pay principal of (or premium, if any, on) the Notes
when due;
(c) failure to perform any other of our covenants in the Indenture,
continued for 60 days after written notice as provided in the Indenture;
(d) a default under any Indebtedness for borrowed money by us or any
Restricted Subsidiary which results in acceleration of the maturity of such
Indebtedness, or failure to pay any such Indebtedness at maturity, in an
amount greater than $10 million ($40 million in the case of Indebtedness of
a Foreign Subsidiary the recourse for which is limited to solely Foreign
Subsidiaries) if such Indebtedness is not discharged or such acceleration
is not rescinded or annulled within 10 days after written notice as
provided in the Indenture;
(e) one or more final judgments or orders by a court of competent
jurisdiction are entered against us or any Restricted Subsidiary in an
uninsured or unindemnified aggregate amount in excess of $10 million and
such judgments or orders are not discharged, waived, stayed, satisfied or
bonded for a period of 60 consecutive days; and
(f) certain events of bankruptcy, insolvency or reorganization.
If an Event of Default (other than an Event of Default described in clause
(f) above) with respect to the Notes at the time Outstanding shall occur and be
continuing, either the Trustee or the holders of at least 25percent in aggregate
principal amount of the Outstanding Notes by notice as provided in the Indenture
may declare the principal amount of the Notes to be due and payable immediately.
If an Event of Default described in clause (f) above with respect to the Notes
at the time Outstanding shall occur, the principal amount of all the Notes will
automatically, and without any action by the Trustee or any holder, become
immediately due and payable. After any such acceleration, but before a judgment
or decree based on acceleration, the holders of a majority in aggregate
principal amount of the Outstanding Notes may, under certain circumstances,
rescind and annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal (or other specified amount), have been cured
or waived as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the Notes, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority in aggregate principal amount of the Outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Notes.
No holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or a trustee, or
for any other remedy thereunder, unless:
52
(i) such holder has previously given to the Trustee written notice of
a continuing Event of Default with respect to the Notes;
(ii) the holders of at least 25 percent in aggregate principal amount
of the Outstanding Notes have made written request, and such holder or
holders have offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee; and
(iii) the Trustee has failed to institute such proceeding, and has not
received from the holders of a majority in aggregate principal amount of
the Outstanding Notes a direction inconsistent with such request, within 60
days after such notice, request and offer.
However, such limitations do not apply to a suit instituted by a holder of Notes
for the enforcement of payment of the principal of or any premium or interest on
such Notes on or after the applicable due date specified in such Notes.
Modification of the Indenture; Waiver
From time to time, we and the Trustee, without the consent of any holders
of Notes, may modify or amend the Indenture in certain limited circumstances,
including:
(a) to cure any ambiguity, omission, defect or inconsistency;
(b) to provide for the assumption of our obligations under the
Indenture upon our merger, consolidation or sale or other disposition of
all or substantially all of our assets;
(c) to provide for uncertificated Notes in addition to or in place of
certificated Notes,
(d) to comply with any requirement of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act
of 1939;
(e) to make any change that does not adversely affect the interests or
rights of any holder of Notes in any material respect;
(f) to secure or Guarantee the Notes pursuant to the requirements of
the covenant described under each of "--Limitation on Indebtedness of
Restricted Subsidiaries," "--Limitation on Liens" and "--Limitation on
Restricted Subsidiary Guarantees" or otherwise;
(g) to evidence and provide for the acceptance of appointment
hereunder by a successor trustee in accordance with the requirements of the
Indenture; or
(h) to provide for the issuance of Additional Notes, subject to the
limitations described under the covenant "--Limitation on Indebtedness."
We and the Trustee may execute supplemental indentures or amendments adding
provisions to or changing or eliminating the provisions of the Indenture or
modifying the rights of the holders of the Notes with the written consent of the
holders of a majority in aggregate principal amount of the Outstanding Notes.
However, without the consent of each holder of Outstanding Notes affected
thereby, no such supplemental indenture, amendment or waiver may:
(a) reduce the principal amount of Notes whose holders must consent to
an amendment or waiver;
(b) reduce the rate of or change the time for payment of interest on
any Notes;
(c) change the currency in which any amount due in respect of the
Notes is payable;
53
(d) reduce the principal of or any premium on or change the Stated
Maturity of any Notes or alter the redemption or repurchase provisions with
respect thereto, or impair the right to institute suit for the enforcement
of any payment related thereto after such payment is due and payable;
(e) release any security that may have been granted in respect of the
Notes; or
(f) following the mailing of a notice with respect to a Prepayment
Offer pursuant to the covenant described under "--Limitation on Asset
Sales" or a Change of Control Offer pursuant to "--Repurchase at the Option
of Holders Upon a Change of Control," modify the provisions of the
Indenture relating to such Prepayment Offer or Change of Control Offer in a
manner adverse in any material respect to such holder of the Notes.
The holders of a majority in principal amount of the Outstanding Notes may
waive compliance by us with certain restrictive provisions of the Indenture. The
holders of a majority in principal amount of the Outstanding Notes may waive any
past default under the Indenture, except a default in the payment of principal,
premium or interest and certain covenants and provisions of the Indenture which
cannot be amended without the consent of the holder of each Outstanding Note.
Book-Entry System
The outstanding notes are, and the exchange notes will be, issued in the
form of one or more registered notes in global form ("Global Securities"). The
Global Securities will be deposited with, or on behalf of, The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee of DTC.
Pursuant to procedures established by DTC, purchases and transfers of the
Notes within the DTC system must be made by or through persons that have
accounts with DTC ("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 DTC for
such Global Security. The ownership interests of each investor in the Notes who
is not a participant will, in turn, be recorded in the participant's records,
and the transfer of that ownership interest within such participant will be
effected only through 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.
Payments of principal and interest on the Notes while represented by a
Global Security will be made to DTC or its nominee, as the case may be, as the
registered owner of the Global Security. Neither we, the Trustee nor any paying
agent will have any responsibility or liability for the payment of any amount
due on the Notes to owners of beneficial interests in a Global Security. It is
DTC's practice, upon receipt of any payment, to credit, on its book-entry
registration and transfer system, the accounts of participants in accordance
with their respective holdings as shown on the records of DTC unless DTC has
reason to believe that it will not receive payment. Payments by participants to
owners of beneficial interests in a Global Security 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.
A Global Security may not be transferred except as a whole by DTC to a
nominee of DTC or by a nominee of DTC to DTC. Notes represented by a Global
Security will be exchangeable for certificated Notes only if:
. DTC notifies us that it is unwilling or unable to continue as a
Depositary for such Global Security or if at any time DTC ceases to be
a clearing agency registered under the Exchange Act;
. we execute and deliver to the Trustee a notice that such Global
Security shall be so transferable, registrable, and exchangeable, and
such transfers shall be registrable; or
. there shall have occurred and be continuing an Event of Default or an
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Default with respect to the Notes represented by
such Global Security.
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Any Global Security that is exchangeable for certificated Notes will be
transferred to, and registered and exchanged for, certificated Notes in
authorized denominations and registered in such names as DTC or any substitute
Depositary 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 Depositary 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 maintained by us for such purposes, and (iii)no service charge will be
made for any registration of transfer or exchange of the certificated Notes,
although we may require payment of a sum sufficient to cover any tax or
governmental charge imposed in connection therewith.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Security for the purposes of
receiving payment on the Notes, receiving notices, and for all other purposes
under the Indenture and the Notes. Ownership of beneficial interests in the
Notes will be evidenced only by, and transfers thereof will be effected only
through, records maintained by DTC 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 thereof for any purposes under the
Indenture. Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures of DTC, 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. We
understand that under existing industry practices, in the event that we request
any action of holders or that an owner of a beneficial interest in a Global
Security desires to give or take any action which a holder is entitled to give
or take under the Indenture, the Depositary 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.
DTC has advised us that DTC is a limited-purpose trust company organized
under New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the Exchange Act. DTC holds the securities of
its participants and facilitates 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. DTC's participants include
securities brokers and dealers (which may include the initial purchasers),
banks, trust companies, clearing corporations, and certain other organizations
some of whom (and/or their representatives) own DTC. Access to DTC'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. The rules applicable to DTC and its
participants are on file with the SEC.
DTC may discontinue providing its services as securities depository with
respect to any of the Notes at any time by giving reasonable notice to the
Trustee and us. In the event that a successor securities depository is not
obtained, definitive certificates representing such notes are required to be
printed and delivered. We, at our option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depository). In any
such event, definitive certificates for such notes will be printed and
delivered.
We have obtained the information in this section concerning DTC from
sources that we believe are accurate, however we do not assume any
responsibility for its accuracy. We do not assume any responsibility for the
performance by DTC or its participants of their respective obligations under the
rules and procedures governing their operations.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the SEC, so long as any Notes are outstanding, we will file with
the SEC and furnish to the Trustee and holders of Notes all quarterly and annual
financial information required to be contained in a filing with the SEC on Forms
10-Q and 10-K, including a
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"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual consolidated financial statements
only, a report thereon by our independent auditors.
Notices
Notices to holders of Notes will be given by mail to the addresses of such
holders as they may appear in the Security Register.
Governing Law
The Indenture and the Notes are governed by and construed in accordance
with the internal laws of the State of New York without reference to principles
of conflicts of law.
The Trustee
JPMorgan Chase Bank is the Trustee under the Indenture. The Trustee
maintains normal banking relationships with us and our Subsidiaries and may
perform certain services for and transact other business with us and our
Subsidiaries from time to time in the ordinary course of business. The Trustee
is also the trustee under the 9% Indenture, the 8 5/8% Indenture, the 9 3/4%
Indenture and the 7 7/8% Indenture. In the event the Notes are issued under the
Indenture, the occurrence of any default under the Indenture or any of the 9%
Indenture, the 8 5/8% Indenture, the 9 3/4% Indenture or the 7 7/8% Indenture
could create a conflicting interest for the Trustee under the Trust Indenture
Act of 1939. If such default has not been cured or waived within 90 days after
the Trustee has or acquires a conflicting interest, the Trustee generally would
be required by the Trust Indenture Act of 1939 to eliminate such conflicting
interest or resign as Trustee under either the Indenture or the 9% Indenture,
the 8 5/8% Indenture, the 9 3/4% Indenture and the 7 7/8% Indenture. In the
event of the Trustee's resignation, we are required to promptly appoint a
successor trustee with respect to the affected indenture.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Additional Assets" means:
(a) any property (other than cash, cash equivalents or securities)
used in any business in which we or any Restricted Subsidiary is engaged as
of the date of the Indenture or any business ancillary thereto;
(b) Investments in any other Person engaged in the Oil and Gas
Business or any business ancillary thereto (including the acquisition from
third parties of Capital Stock of such Person) as a result of which such
other Person becomes a Restricted Subsidiary in compliance with the
"Restricted and Unrestricted Subsidiaries" covenant;
(c) the acquisition from third parties of Capital Stock of a
Restricted Subsidiary;
(d) the costs of acquiring, exploiting, developing and exploring in
respect of oil and gas properties; or
(e) Permitted Business Investments.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination,
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(a) the sum of
(i) discounted future net revenues from our and our Restricted
Subsidiaries' proved oil and gas reserves calculated in accordance
with SEC guidelines before any state, federal or foreign income taxes,
as estimated by a nationally recognized firm of independent petroleum
engineers in a reserve report prepared as of the end of our most
recently completed fiscal year for which financial statements are
available, 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
clauses (A) through (D), such increases and decreases shall be as estimated
by our petroleum engineers, unless there is a Material Change as a result
of such acquisitions, dispositions or revisions, in which event 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 our and our
Restricted Subsidiaries' oil and gas properties to which no proved oil
and gas reserves are attributable, based on our books and records as
of a date no earlier than the date of our latest annual or quarterly
financial statements,
(iii) the Net Working Capital on a date no earlier than the date
of our latest annual or quarterly financial statements, and
(iv) the greater of
(A) the net book value on a date no earlier than the date
of our latest annual or quarterly financial statements; or
(B) the appraised value, as estimated by independent
appraisers, of our and our Restricted Subsidiaries' other
tangible assets (including, without duplication, Investments in
unconsolidated Restricted Subsidiaries), as of the date no
earlier than the date of our latest audited financial statements,
minus
(b) the sum of
(i) minority interests,
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(ii) any of our or our Restricted Subsidiaries' gas balancing
liabilities reflected in our 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 our year-end reserve report),
attributable to reserves which are required to be delivered to third
parties to fully satisfy our or our Restricted Subsidiaries'
obligations 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 our or our restricted Subsidiaries' payment
obligations with respect to Dollar-Denominated Production Payments on
the schedules specified with respect thereto.
"Affiliate" of any specified Person means any other Person
(a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such
specified Person or
(b) which beneficially owns or holds directly or indirectly 10
percent or more of any class of the Voting Stock of such specified Person
or of any Subsidiary of such specified Person.
For the purposes of this definition, "control," when used with respect to any
specified Person, means the power to direct the management and policies of such
Person directly or indirectly, whether through the ownership of Voting Stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Asset Sale" means, with respect to any Person, any transfer, conveyance,
sale, lease or other disposition (including, without limitation, dispositions
pursuant to any consolidation or merger) by such Person or any of its Restricted
Subsidiaries in any single transaction or series of transactions of:
(a) shares of Capital Stock or other ownership interests of another
Person (including Capital Stock of Unrestricted Subsidiaries); or
(b) any other Property of such Person or any of its Restricted
Subsidiaries;
provided, however, that the term "Asset Sale" shall not include:
(i) the sale or transfer of Permitted Short-Term Investments,
inventory, accounts receivable or other Property in the ordinary
course of business;
(ii) the liquidation of Property received in settlement of debts
owing to us or any Restricted Subsidiary as a result of foreclosure,
perfection or enforcement of any Lien or debt, which debts were owing
to us or any Restricted Subsidiary in the ordinary course of our or
such Restricted Subsidiary's business;
(iii) when used with respect to us, any asset disposition
permitted pursuant to the covenant described under "--Merger,
Consolidation and Sale of Assets" which constitutes a disposition of
all or substantially all of our properties and assets;
(iv) the sale or transfer of any Property by us or a Restricted
Subsidiary to us or a Restricted Subsidiary; or
(v) the sale or transfer of any asset with a Fair Market Value
of less than $1 million.
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"Capital Lease Obligation" of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other arrangement conveying the
right to use) real or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on the face of a
balance sheet of such Person in accordance with U.S. GAAP. For purposes of the
"Limitation on Liens" covenant, a Capital Lease Obligation shall be deemed to be
secured by a Lien on the property being leased.
"Capital Stock" in any Person means any and all shares, interests,
participations or other equivalents in the equity interest (however designated)
in such Person and any rights (other than debt securities convertible into an
equity interest), warrants or options to subscribe for or to acquire an equity
interest in such Person; provided, however, that "Capital Stock" shall not
include Redeemable Stock.
"Consolidated Interest Coverage Ratio" means, as of the date of the
transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date"), the ratio determined by dividing
(i) the aggregate amount of our and our consolidated Restricted
Subsidiaries' EBITDA for the four full fiscal quarters immediately prior to
the Transaction Date for which financial statements are available by
(ii) our and our Restricted Subsidiaries' aggregate Consolidated
Interest Expense that is anticipated to accrue during a period consisting
of the fiscal quarter in which the Transaction Date occurs and the three
fiscal quarters immediately subsequent thereto (based upon the pro forma
amount and maturity of, and interest payments in respect of, our and our
Restricted Subsidiaries' Indebtedness expected by us to be outstanding on
the Transaction Date), assuming for the purposes of this measurement the
continuation of market interest rates prevailing on the Transaction Date
and base interest rates in respect of floating interest rate obligations
equal to the base interest rates on such obligations in effect as of the
Transaction Date;
provided, that if we or any of our Restricted Subsidiaries are a party to any
Interest Rate Protection Agreement which would have the effect of changing the
interest rate on any of our or our Restricted Subsidiaries' Indebtedness for
such four quarter period (or a portion thereof), the resulting rate shall be
used for such four quarter period or portion thereof; provided further that any
Consolidated Interest Expense with respect to Indebtedness Incurred or retired
by us or any of our Restricted Subsidiaries during the fiscal quarter in which
the Transaction Date occurs shall be calculated as if such Indebtedness was so
Incurred or retired on the first day of the fiscal quarter in which the
Transaction Date occurs. In addition, if since the beginning of the four full
fiscal quarter period preceding the Transaction Date,
(x) we or any of our Restricted Subsidiaries shall have engaged in
any Asset Sale, EBITDA for such period shall be reduced by an amount equal
to the EBITDA (if positive), or increased by an amount equal to the EBITDA
(if negative), directly attributable to the assets which are the subject of
such Asset Sale for such period calculated on a pro forma basis as if such
Asset Sale and any related retirement of Indebtedness had occurred on the
first day of such period; or
(y) we or any of our Restricted Subsidiaries shall have acquired any
material assets, EBITDA shall be calculated on a pro forma basis as if such
asset acquisitions had occurred on the first day of such four fiscal
quarter period.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication,
(i) the sum of
(a) the aggregate amount of cash and noncash interest expense
(including capitalized interest) of such Person and its Restricted
Subsidiaries for such period as determined on a consolidated basis in
accordance with U.S. GAAP in respect of Indebtedness (including,
without limitation,
(A) any amortization of debt discount,
(B) net costs associated with Interest Rate Protection Agreements
(including any amortization of discounts),
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(C) the interest portion of any deferred payment obligation,
(D) all accrued interest, and
(E) all commissions, discounts, commitment fees, origination
fees and other fees and charges owed with respect to the Senior
Credit Facility and other Indebtedness)
paid, accrued or scheduled to be paid or accrued during such period;
(b) Redeemable Stock dividends of such Person (and of its
Restricted Subsidiaries if paid to a Person other than such Person or
its Wholly Owned Subsidiaries) declared and payable other than in kind;
(c) the portion of any rental obligation of such Person or its
Restricted Subsidiaries in respect of any Capital Lease Obligation
allocable to interest expense in accordance with U.S. GAAP;
(d) the portion of any rental obligation of such Person or its
Restricted Subsidiaries in respect of any Sale and Leaseback
Transaction that is Indebtedness allocable to interest expense
(determined as if such obligation were treated as a Capital Lease
Obligation); and
(e) to the extent any Indebtedness of any other Person (other than
Restricted Subsidiaries) is Guaranteed by such Person or any of its
Restricted Subsidiaries, the aggregate amount of interest paid, accrued
or scheduled to be paid or accrued by such other Person during such
period attributable to any such Indebtedness;
less
(ii) to the extent included in (i) above, amortization or write-off of
deferred financing costs of such Person and its Restricted Subsidiaries
during such period;
in the case of both (i) and (ii) above, after elimination of intercompany
accounts among such Person and its Restricted Subsidiaries and as determined in
accordance with U.S. GAAP.
"Consolidated Net Income" of any Person means, for any period, the
aggregate net income (or net loss, as the case may be) of such Person and its
Restricted Subsidiaries for such period on a consolidated basis, determined in
accordance with U.S. GAAP; provided that there shall be excluded therefrom,
without duplication:
(a) items classified as extraordinary (other than the tax benefit of
the utilization of net operating loss carry-forwards and alternative
minimum tax credits);
(b) any gain or loss, net of taxes, on the sale or other disposition
of assets (including the Capital Stock of any other Person) in excess of
$5.0 million, from any sale or disposition, or series of related sales or
dispositions (but in no event shall this clause (b) apply to the sale of
oil and gas inventories in the ordinary course of business);
(c) the net income of any Subsidiary of such specified Person to the
extent the transfer to that Person of that income is restricted by contract
or otherwise, except for any cash dividends or cash distributions actually
paid by such Subsidiary to such Person during such period;
(d) the net income (or loss) of any other Person in which such
specified Person or any of its Restricted Subsidiaries has an interest
(which interest does not cause the net income of such other Person to be
consolidated with the net income of such specified Person in accordance
with U.S. GAAP or is an interest in a consolidated Unrestricted
Subsidiary), except to the extent of the amount of cash dividends or other
cash distributions actually paid to such Person or its Restricted
Subsidiaries by such other Person during such period;
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(e) the net income of any Person acquired by such specified Person or
any of its Restricted Subsidiaries in a pooling-of-interests transaction
for any period prior to the date of such acquisition;
(f) any gain or loss, net of taxes, realized on the termination of any
employee pension benefit plan;
(g) any adjustments of a deferred tax liability or asset pursuant to
Statement of Financial Accounting Standards No. 109 which result from
changes in enacted tax laws or rates;
(h) the cumulative effect of a change in accounting principles; and
(i) impairment losses on oil and gas properties.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person and its Restricted Subsidiaries, as determined on a consolidated
basis in accordance with U.S. GAAP, less (to the extent included in
stockholders' equity) amounts attributable to Redeemable Stock of such Person or
its Restricted Subsidiaries.
"Default" means any event, act or condition the occurrence of which is, or
after notice or the passage of time or both would be, an Event of Default.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with U.S. GAAP, together with
all undertakings and obligations in connection therewith.
"EBITDA" means with respect to any Person for any period, the Consolidated
Net Income of such Person and its consolidated Restricted Subsidiaries for such
period, plus
(a) the sum of, to the extent reflected in the consolidated income
statement of such Person and its Restricted Subsidiaries for such period
from which Consolidated Net Income is determined and deducted in the
determination of such Consolidated Net Income, without duplication,
(i) income tax expense (but excluding income tax expense
relating to sales or other dispositions of assets (including the
Capital Stock of any other Person) the gains and losses from which are
included in the determination of such Consolidated Net Income),
(ii) Consolidated Interest Expense,
(iii) depreciation and depletion expense,
(iv) amortization expense,
(v) exploration expense, and
(vi) any other noncash charges including, without limitation,
unrealized foreign exchange losses (but excluding losses on sales or
other dispositions of assets which are included in the determination of
such Consolidated Net Income);
less
(b) the sum of, to the extent reflected in the consolidated income
statement of such Person and its Restricted Subsidiaries for such period
from which Consolidated Net Income is determined and added in the
determination of such Consolidated Net Income, without duplication
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(i) income tax recovery (but excluding income tax recovery
relating to sales or other dispositions of assets (including the
Capital Stock of any other Person) the gains and losses from which are
included in the determination of such Consolidated Net Income) and
(ii) unrealized foreign exchange gains.
"Event of Default" has the meaning set forth under the caption "--Events of
Default and Notice."
"Exchanged Properties" means oil and gas properties received by us or a
Restricted Subsidiary in trade or as a portion of the total consideration for
other such properties.
"Exchange Rate Contract" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or any combination thereof, designed to provide
protection against fluctuations in currency exchange rates.
"Fair Market Value" means, with respect to any assets to be transferred
pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash
consideration or property transferred or received by any Person, the fair market
value of such consideration or property as determined in good faith by:
(a) any of our officers if such fair market value is less than $10
million; and
(b) our Board of Directors, as evidenced by a certified resolution
delivered to the Trustee, if such fair market value is equal to or in
excess of $10 million; provided that if such resolution indicates that such
fair market value is equal to or in excess of $20 million and such
transaction involves any Affiliate of ours (other than a Restricted
Subsidiary), such resolution shall be accompanied by the written opinion of
an independent, nationally recognized investment banking firm or appraisal
firm, in either case specializing or having a specialty in the type and
subject matter of the transaction (or series of transactions) at issue, to
the effect that such consideration or property is fair, from a financial
point of view, to such Person.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in
a jurisdiction other than the U.S. or a State thereof or the District of
Columbia and engages in the Oil and Gas Business exclusively outside the U.S.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, and including, without limitation, any Lien on the
assets of such Person securing obligations of the primary obligor and any
obligation of such Person:
(a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or to purchase (or to advance or supply funds
for the purchase or payment of) any security for the payment of such
Indebtedness;
(b) to purchase Property, securities or services for the purpose of
assuring the holder of such Indebtedness of the payment of such
Indebtedness; or
(c) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness (and "Guaranteed", "Guaranteeing"
and "Guarantor" shall have meanings correlative to the foregoing);
provided, however, that a Guarantee by any Person shall not include:
(i) endorsements by such Person for collection or deposit, in either
case, in the ordinary course of business; or
62
(ii) a contractual commitment by one Person to invest in another Person
for so long as such Investment is reasonably expected to constitute a
Permitted Investment under clause (b) of the definition of Permitted
Investments.
"Hedging Agreements" means Interest Rate Protection Agreements, Exchange
Rate Contracts and Oil and Gas Purchase and Sale Contracts.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to U.S. GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in U.S. GAAP
that results in an obligation of such Person that exists at such time, and is
not theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness. For purposes of this definition, our
or any Restricted Subsidiary's Indebtedness held by a Wholly Owned Subsidiary
shall be deemed to be Incurred by us or such Restricted Subsidiary in the event
such Wholly Owned Subsidiary ceases to be a Wholly Owned Subsidiary or in the
event such Indebtedness is transferred to a Person other than us or a Wholly
Owned Subsidiary.
"Indebtedness" means at any time (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person,
and whether or not contingent:
(a) any obligation of such Person for borrowed money;
(b) any obligation of such Person evidenced by bonds, debentures,
notes, Guarantees or other similar instruments, including, without
limitation, any such obligations Incurred in connection with the
acquisition of Property, assets or businesses;
(c) any reimbursement obligation of such Person with respect to
letters of credit, bankers' acceptances or similar facilities issued for
the account of such Person;
(d) any obligation of such Person issued or assumed as the deferred
purchase price of Property or services;
(e) any Capital Lease Obligation of such Person;
(f) the maximum fixed redemption or repurchase price of Redeemable
Stock of such Person at the time of determination;
(g) any payment obligation of such Person under Hedging Agreements at
the time of determination;
(h) any obligation to pay rent or other payment amounts of such Person
with respect to any Sale and Leaseback Transaction to which such Person is
a party; and
(i) any obligation of the type referred to in clauses (a) through (h)
of this paragraph of another Person and all dividends of another Person the
payment of which, in either case, such Person has Guaranteed or is
responsible or liable, directly or indirectly, as obligor, Guarantor or
otherwise;
provided that Indebtedness shall not include Production Payments and Reserve
Sales; provided further, that the amount of Indebtedness resulting solely from a
Guarantee resulting solely from a Lien on the Property or assets of a Person is
the lesser of the Fair Market Value of such Property or assets or the amount of
the obligation so secured. For purposes of this definition, the maximum fixed
repurchase price of any Redeemable Stock that does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable Stock
as if such Redeemable Stock were repurchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture; provided, however,
that if such Redeemable Stock is not then permitted to be repurchased, the
repurchase price shall be the book value of such Redeemable Stock. The amount of
Indebtedness of any Person at any date shall
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be the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability at such date in respect of any
contingent obligations described above.
"Interest Rate Protection Agreement" means, with respect to any Person, any
interest rate swap agreement, forward rate agreement, interest rate cap or
collar agreement or other financial agreement or arrangement designed to protect
such Person or its Restricted Subsidiaries against fluctuations in interest
rates, as in effect from time to time.
"Investment" means, with respect to any Person:
(a) any amount paid by such Person, directly or indirectly (such
amount to be the fair market value of such Capital Stock, securities or
Property at the time of transfer), to any other Person for Capital Stock or
other Property of, or as a capital contribution to, any other Person; or
(b) any direct or indirect loan or advance to any other Person (other
than accounts receivable of such Person arising in the ordinary course of
business); provided, however, that Investments shall not include extensions
of trade credit on commercially reasonable terms in accordance with normal
trade practices and any increase in the equity ownership in any Person
resulting from retained earnings of such Person.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's or BBB- (or the equivalent) by S&P.
"Lien" means, with respect to any Property, any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, security interest, lien
(statutory or other), charge, easement, encumbrance, preference, priority or
other security or similar agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such Property (including, without
limitation, any conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing). For purposes of
the "Limitation on Liens" covenant, a Capital Lease Obligation shall be deemed
to be secured by a Lien on the property being leased.
"Liquid Securities" means securities:
(a) of an issuer that is not us or one of our Affiliates;
(b) that are publicly traded on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market; and
(c) as to which we are not subject to any restrictions on sale or
transfer (including any volume restrictions under Rule 144 under the
Securities Act or any other restrictions imposed by the Securities Act) or
as to which a registration statement under the Securities Act covering the
resale thereof is in effect for as long as the securities are held;
provided, that securities meeting the requirements of clauses (a), (b) and (c)
above shall be treated as Liquid Securities from the date of receipt thereof
until and only until the earlier of
(i) the date on which such securities are sold or exchanged for cash
or cash equivalents; and
(ii) 180 days following the date of receipt of such securities. In the
event such securities are not sold or exchanged for cash or cash
equivalents within 180 days of receipt thereof, for purposes of determining
whether the transaction pursuant to which we or a Restricted Subsidiary
received the securities was in compliance with the "Limitation on Asset
Sales" covenant, such securities shall be deemed not to have been Liquid
Securities at any time.
"Material Change" means an increase or decrease (except to the extent
resulting from changes in prices) of more than 30 percent during a fiscal
quarter in the estimated discounted future net revenues from our and our
Restricted Subsidiaries' proved oil and gas reserves, calculated in accordance
with clause (a)(i) of the definition of Adjusted
64
Consolidated Net Tangible Assets; provided, however, that the following will be
excluded from the calculation of Material Change:
(a) any acquisitions during the quarter of oil and gas reserves with
respect to which our estimate of the discounted future net revenues from
proved oil and gas reserves has been confirmed by independent petroleum
engineers; and
(b) any dispositions of Properties during such quarter that were
disposed of in compliance with the "Limitation on Asset Sales" covenant.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Available Cash" from an Asset Sale means cash proceeds received
(including any cash proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, and excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to such properties or assets) therefrom, in each case net of:
(a) all legal, title and recording expenses, commissions and other fees
and expenses incurred, and all federal, state, foreign and local taxes
required to be paid or accrued as a liability under U.S. GAAP as a
consequence of such Asset Sale;
(b) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Sale, in accordance with the terms of any Lien
upon such assets, or which must by its terms, or in order to obtain a
necessary consent to such Asset Sale or by applicable law, be repaid out of
the proceeds from such Asset Sale;
(c) all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a result of
such Asset Sale; and
(d) the deduction of appropriate amounts to be provided by the seller
as a reserve, in accordance with U.S. GAAP, against any liabilities
associated with the assets disposed of in such Asset Sale and retained by
us or any Restricted Subsidiary after such Asset Sale;
provided, however, that in the event that any consideration for an Asset Sale
(which would otherwise constitute Net Available Cash) is required to be held in
escrow pending determination of whether a purchase price adjustment will be
made, such consideration (or any portion thereof) shall become Net Available
Cash only at such time as it is released to such Person or its Restricted
Subsidiaries from escrow; and provided, further, however, that any non-cash
consideration received in connection with an Asset Sale which is subsequently
converted to cash shall be deemed to be Net Available Cash at such time and
shall thereafter be applied in accordance with the "Limitation on Asset Sales"
covenant.
"Net Working Capital" means:
(a) all our and our Restricted Subsidiaries' current assets; less
(b) all our and our Restricted Subsidiaries' current liabilities,
except current liabilities included in Indebtedness,
in each case as set forth in our financial statements prepared in accordance
with U.S. GAAP.
"Oil and Gas Business" means the business of exploiting, exploring for,
developing, acquiring, producing, processing, gathering, marketing, storing and
transporting hydrocarbons and other related energy businesses.
65
"Oil and Gas Liens" means:
(a) Liens on any specific property or any interest therein,
construction thereon or improvement thereto to secure all or any part of
the costs incurred for surveying, exploration, drilling, extraction,
development, operation, production, construction, alteration, repair or
improvement of, in, under or on such property and the plugging and
abandonment of wells located thereon (it being understood that, in the case
of oil and gas producing properties, or any interest therein, costs
incurred for "development" shall include costs incurred for all facilities
relating to such properties or to projects, ventures or other arrangements
of which such properties form a part or which relate to such properties or
interests);
(b) Liens on an oil and/or gas producing property to secure
obligations Incurred or guarantees of obligations Incurred in connection
with or necessarily incidental to commitments for the purchase or sale of,
or the transportation or distribution of, the products derived from such
property;
(c) Liens arising under partnership agreements, oil and gas leases,
overriding royalty agreements, net profits agreements, production payment
agreements, royalty trust agreements, master limited partnership
agreements, farm-out agreements, division orders, contracts for the sale,
purchase, exchange, transportation, gathering or processing of oil, gas or
other hydrocarbons, unitizations and pooling designations, declarations,
orders and agreements, development agreements, operating agreements,
production sales contracts, area of mutual interest agreements, gas
balancing or deferred production agreements, injection, repressuring and
recycling agreements, salt water or other disposal agreements, seismic or
geophysical permits or agreements, and other agreements which are customary
in the Oil and Gas Business, provided in all instances that such Liens are
limited to the assets that are the subject of the relevant agreement;
(d) Liens arising in connection with Production Payments and Reserve
Sales; and
(e) Liens on pipelines or pipeline facilities that arise by operation
of law.
"Oil and Gas Purchase and Sale Contract" means, with respect to any Person,
any oil and gas agreements, and other agreements or arrangements, or any
combination thereof, designed to provide protection against oil and gas price
fluctuations.
"Pari Passu Indebtedness" means the principal of, premium (if any) and
accrued and unpaid interest on (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization with respect to us,
regardless of whether or not a claim for post-filing interest is allowed in such
proceedings) and fees and other amounts owing in respect of, Indebtedness of
ours for borrowed money and all other Indebtedness of ours, whether outstanding
on the Issue Date or thereafter Incurred; provided, however, that Pari Passu
Indebtedness shall not include (a) any obligation of ours to any of our
Subsidiaries, (b) any liability for federal, state, local or other taxes owed or
owing by us, (c) any accounts payable or other liability of ours to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (d) any Indebtedness or
obligation of ours (and any accrued and unpaid interest in respect thereof) that
by its terms is subordinate or junior in any respect to any other Indebtedness
or obligation of ours, including any Subordinated Indebtedness, (e) any
obligations with respect to any Capital Stock, (f) any Indebtedness Incurred in
violation of the terms hereof or (g) in-kind obligations relating to net oil and
gas balancing positions.
"Permitted Business Investments" means Investments and expenditures made in
the ordinary course of, and of a nature that is or shall have become customary
in, the Oil and Gas Business as means of actively exploiting, exploring for,
acquiring, developing, processing, gathering, marketing or transporting oil and
gas through agreements, transactions, interests or arrangements which permit one
to share risks or costs, comply with regulatory requirements regarding local
ownership or satisfy other objectives customarily achieved through the conduct
of Oil and Gas Business jointly with third parties, including, without
limitation:
(a) ownership interests in oil and gas properties or gathering,
transportation, processing, storage or related systems; and
66
(b) Investments and expenditures in the form of or pursuant to
operating agreements, processing agreements, farm-in agreements, farm-out
agreements, development agreements, area of mutual interest agreements,
unitization agreements, pooling arrangements, joint bidding agreements,
service contracts, joint venture agreements, partnership agreements
(whether general or limited), subscription agreements, stock purchase
agreements and other similar agreements with third parties (including
Unrestricted Subsidiaries).
"Permitted Short-Term Investments" means:
(a) Investments in U.S. Government Obligations maturing within one
year of the date of acquisition thereof;
(b) Investments in demand accounts, time deposit accounts,
certificates of deposit, bankers acceptances and money market deposits
maturing within one year of the date of acquisition thereof issued by a
bank or trust company which is organized under the laws of the U.S. or any
State thereof that is a member of the Federal Reserve System having
capital, surplus and undivided profits aggregating in excess of $500
million and whose long-term indebtedness is rated "A" (or higher) according
to Moody's;
(c) Investments in demand accounts, time deposit accounts,
certificates of deposit, bankers acceptances and money market deposits
maturing within one year of the date of acquisition thereof issued by a
Canadian bank to which the Bank Act (Canada) applies having capital,
surplus and undivided profits aggregating in excess of U.S. $500 million;
(d) Investments in deposits available for withdrawal on demand with
any commercial bank which is organized under the laws of any country in
which we or any Restricted Subsidiary maintains an office or is engaged in
the Oil and Gas Business, provided that (i) all such deposits have been
made in such accounts in the ordinary course of business and (ii) such
deposits do not at any one time exceed $20 million in the aggregate;
(e) repurchase and reverse repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clause (a) entered into with a bank meeting the qualifications described in
either clause (b) or (c);
(f) Investments in commercial paper, maturing not more than one year
after the date of acquisition, issued by a corporation (other than us or an
Affiliate of ours) organized and in existence under the laws of the U.S. or
any State thereof with a rating at the time as of which any Investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P; and
(g) Investments in any money market mutual fund having assets in
excess of $250 million substantially all of which consist of other
obligations of the types described in clauses (a), (b), (e) and (f) hereof.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends and/or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person; provided, however, that
"Preferred Stock" shall not include Redeemable Stock.
"Production Payments and Reserve Sales" means the grant or transfer to any
Person of a royalty, overriding royalty, net profits interest, production
payment (whether volumetric or dollar denominated), master limited partnership
interest or other interest in oil and gas properties, reserves or the right to
receive all or a portion of the production or the proceeds from the sale of
production attributable to such properties where the holder of such interest has
recourse solely to such production or proceeds of production, subject to the
obligation of the grantor or transferor to operate and maintain, or cause the
subject interests to be operated and maintained, in a reasonably prudent manner
or other customary standard or subject to the obligation of the grantor or
transferor to indemnify for environmental matters.
67
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Capital Stock in any other Person
(but excluding Capital Stock or other securities issued by such first mentioned
Person).
"Public Equity Offering" means an underwritten public offering of our
common stock pursuant to an effective registration statement under the
Securities Act.
"Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both
shall not make a rating on the Notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by us (as
certified by a resolution of our Board of Directors) which shall be substituted
for S&P or Moody's or both, as the case may be.
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could become required to be redeemed for cash or other Property or
is or could become redeemable for cash or other Property at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of the
Stated Maturity of the Notes; or is or could become exchangeable at the option
of the holder thereof for Indebtedness at any time in whole or in part, on or
prior to the first anniversary of the Stated Maturity of the Notes; provided,
however, that Redeemable Stock shall not include any security by virtue of the
fact that it may be exchanged or converted at the option of the holder for our
Capital Stock having no preference as to dividends or liquidation over any other
of our Capital Stock.
"Restricted Payment" means:
(a) a dividend or other distribution declared or paid on our Capital
Stock or Redeemable Stock or to our stockholders (other than dividends,
distributions or payments made solely in our Capital Stock), or declared
and paid to any Person other than us or any of our Restricted Subsidiaries
on the Capital Stock or Redeemable Stock of any Restricted Subsidiary;
(b) a payment made by us or any of our Restricted Subsidiaries (other
than to us or any Restricted Subsidiary) to purchase, redeem, acquire or
retire any of our or a Restricted Subsidiary's Capital Stock or Redeemable
Stock;
(c) a payment made by us or any of our Restricted Subsidiaries to
redeem, repurchase, defease or otherwise acquire or retire for value
(including pursuant to mandatory repurchase covenants), prior to any
scheduled maturity, scheduled sinking fund or scheduled mandatory
redemption, our Indebtedness (other than the 9% Notes) which is subordinate
(whether pursuant to its terms or by operation of law) in right of payment
to the Notes;
(d) an Investment by us or a Restricted Subsidiary in any Person other
than us or a Restricted Subsidiary; or
(e) the sale or issuance of Capital Stock of a Restricted Subsidiary
to a Person other than us or another Restricted Subsidiary if the result
thereof is that such Restricted Subsidiary shall cease to be a Restricted
Subsidiary, in which event the amount of such "Restricted Payment" shall be
the Fair Market Value of the remaining interest in such former Restricted
Subsidiary held by us and our other Restricted Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of ours that has not been
designated an Unrestricted Subsidiary in the manner provided in the covenant
described under "--Certain Covenants--Restricted and Unrestricted Subsidiaries."
"S&P" means Standard Poor's Ratings Group, or any successor to the rating
agency business thereof.
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement (excluding, however, any such arrangement between
such Person and a Wholly Owned Subsidiary of such Person or between one or more
Wholly Owned Subsidiaries of such Person) pursuant to which Property is sold or
transferred by
68
such Person or a Restricted Subsidiary of such Person and is thereafter leased
back from the purchaser or transferee thereof by such Person or one of its
Restricted Subsidiaries.
"Senior Credit Facility" means the Second Amended and Restated Credit
Agreement dated November 30, 2000, among us and certain banks, or any successor
or replacement agreement and whether with the same or any other agent, lender or
group of lenders, together with related documents thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
similar agreements extending the maturity of, refinancing, replacing, increasing
or otherwise restructuring all or any portion of the Indebtedness under such
agreements.
"Stated Maturity" when used with respect to any security or any installment
of principal thereof or interest thereon, means the date specified in such
security as the fixed date on which the principal of such security or such
installment of principal or interest is due and payable, including pursuant to
any mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Indebtedness" means any Indebtedness evidenced by the 9%
Notes, the 8 5/8% Notes, the 9 3/4% Notes and the 7 7/8% Notes and any other
Indebtedness of ours that is by its terms subordinate in right of payment to the
Notes.
"Subsidiary" of a Person means:
(a) another Person which is a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned or controlled by
(i) the first Person;
(ii) the first Person and one or more of its Subsidiaries; or
(iii) one or more of the first Person's Subsidiaries; or
(b) another Person which is not a corporation
(x) at least 50 percent of the ownership interest of which; and
(y) the power to elect or direct the election of a majority of
the directors or other governing body of which are controlled by
Persons referred to in clause (i), (ii) or (iii) above.
"Unrestricted Subsidiary" means:
(a) each Subsidiary of ours that we have designated pursuant to the
covenant described under "--Certain Covenants--Restricted and Unrestricted
Subsidiaries" as an Unrestricted Subsidiary; and
(b) any Subsidiary of an Unrestricted Subsidiary.
"U.S. GAAP" means United States generally accepted accounting principles as
in effect on the date of the Indenture, unless stated otherwise.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with U.S. GAAP, together with all
undertakings and obligations in connection therewith.
69
"Voting Redeemable Stock" of any Person means Redeemable Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Voting Stock" of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person whether at all times or only so long as no
senior class of securities has such voting power by reason of any contingency.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary, all
of the Voting Stock of which (except directors' qualifying shares) is at the
time owned, directly or indirectly, by us and our other Wholly Owned
Subsidiaries.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. federal income tax
consequences of the exchange of the outstanding notes for exchange notes that
may be relevant to a beneficial owner of notes that is a citizen or resident of
the U.S. or a U.S. domestic corporation or that otherwise is subject to U.S.
federal income taxation on a net income basis in respect of such notes (a "U.S.
holder"). This summary is based on laws, regulations, rulings and decisions now
in effect, all of which are subject to change. This summary deals only with U.S.
holders that hold the outstanding notes as capital assets.
We do not address tax considerations applicable to holders that may be
subject to special tax treatments, including, but not limited to, banks, thrift
institutions, real estate investment trusts, tax-exempt entities, insurance
companies, dealers in securities or currencies, traders in securities electing
to mark to market, or persons that hold the outstanding notes in a "straddle" or
as part of a "hedging," "conversion" or other integrated transaction or whose
"functional currency" is not the U.S. dollar.
We believe that the exchange of outstanding notes for exchange notes
pursuant to the exchange offer will not be treated as an "exchange" for federal
income tax purposes because the exchange notes will not be considered to differ
materially in kind or extent from the outstanding notes. Rather, the exchange
notes received by a holder will be treated as a continuation of the outstanding
notes in the hands of such holder. As a result, there will be no federal income
tax consequences to holders exchanging outstanding notes for exchange notes
pursuant to the exchange offer, the holding period of an exchange note will
include the holding period of the outstanding note and the basis of an exchange
note will be the same as the basis for the outstanding note immediately before
the exchange.
Holders should consult their own tax advisors in determining the tax
consequences to them, as a result of their individual circumstances, of the
exchange of the outstanding notes for the exchange notes and of the ownership
and disposition of exchange notes received in the exchange offer, including the
application of state, local, foreign or other tax laws.
70
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 outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that, starting on the expiration date and ending on the close of business 180
days after the expiration date, we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale.
We 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 at 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 resulting
from any such resale of exchange notes and any commission 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 180 days after the expiration date, we 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. We have agreed to pay all expenses incident to the exchange offer,
including the expenses of one counsel for the holders of the outstanding notes,
other than commissions or concessions of any brokers or dealers. We will
indemnify the holders of the outstanding notes, including any broker-dealers,
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Conner &
Winters, P. C., Tulsa, Oklahoma.
EXPERTS
The audited financial statements of Vintage Petroleum, Inc. incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited, and the pro forma statement of income for the year ended December
31, 2000, incorporated by reference in this prospectus and elsewhere in the
registration statement has been examined, by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated by reference in reliance upon the authority of said firm as experts
in giving said reports. Reference is made to said report on the audited
financial statements of Vintage Petroleum, Inc., which includes an explanatory
paragraph with respect to the change in method of accounting for derivatives as
discussed in Note 1 to the audited financial statements.
The financial statements of Genesis Exploration Ltd. as at December 31,
2000 and 1999, and for each of the years in the two-year period ended December
31, 2000, incorporated in this prospectus by reference to the Current Report on
Form 8-K/A dated May 18, 2001, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The estimated reserve evaluations and related calculations of Netherland,
Sewell & Associates, Inc. for the U.S., Argentina, Ecuador and Trinidad set
forth or incorporated by reference in this prospectus have been included or
incorporated by reference in reliance upon the authority of such firm as experts
in petroleum engineering.
71
The estimated reserve evaluations and related calculations of DeGolyer and
MacNaughton for Bolivia set forth or incorporated by reference in this
prospectus have been included or incorporated by reference in reliance upon the
authority of such firm as experts in petroleum engineering.
The estimated reserve evaluations and related calculations of Outtrim Szabo
Associates Ltd. for Canada set forth or incorporated by reference in this
prospectus have been included or incorporated by reference in reliance upon the
authority of such firm as experts in petroleum engineering.
72
GLOSSARY OF OIL AND GAS TERMS
"Annual reserve replacement ratio" means a percentage determined on a
barrel of oil equivalent basis by dividing the estimated reserves added during a
year from exploitation, development and exploration activities, acquisitions of
proved reserves and revisions of previous estimates, excluding property sales,
by the oil and gas volumes produced during the year.
"Bbl" means one barrel, or 42 U.S. gallons liquid volume.
"Bcf" means one billion cubic feet.
"BOE" means barrels of oil equivalent, using the ratio of six thousand
cubic feet of natural gas to one barrel of oil.
"Btu" means British Thermal Unit, the quantity of heat required to raise
the temperature of one pound of water by one degree Fahrenheit.
"Condensate" means hydrocarbons which are in a gaseous state under
reservoir conditions but which become liquid at the surface and may be recovered
by conventional separators.
"Developed acreage" means the number of acres which are allocated or
assignable to producing wells or wells capable of production.
"Development well" means a well drilled within the proved area of an oil or
gas reservoir, as indicated by reasonable interpretation of available date, to
the depth of a stratigraphic horizon known to be productive.
"Dry hole" means a well found to be incapable of producing either oil or
gas in sufficient quantities to justify completion of the well.
"Exploratory well" means a well drilled to find and produce oil or gas in
an unproved area, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir, or to extend the proved limits of
a known reservoir.
"Finding cost" means an amount per barrel of oil equivalent equal to the
sum of all costs incurred relating to oil and gas property acquisition,
exploration and development activities divided by the sum of all additions and
revisions to estimated proved reserves, including reserve purchases.
"Gas" means natural gas.
"Gross acres" or "gross wells" means the total acres or wells, as
applicable, in which a working interest is owned.
"Infill drilling" means drilling of an additional well or wells provided
for by an existing spacing order to more adequately drain a reservoir.
"MBbl" means one thousand barrels.
"Mcf" means one thousand cubic feet. For purposes of this document, this
volume is stated at the legal pressure base of the state or area in which the
reserves are located and at 60 degrees Fahrenheit.
"MMBbl" means one million barrels.
"MBOE" means one thousand barrels of oil equivalent.
"MMBOE" means one million barrels of oil equivalent.
73
"MMBtu" means one million Btu.
"MMcf" means one million cubic feet.
"Natural gas liquids" means hydrocarbons found in natural gas which may be
extracted as liquified petroleum gas and natural gasoline.
"Net acres or net wells" mean the gross acres or wells, as applicable,
multiplied by the working interest owned.
"Oil" means crude oil, condensate and natural gas liquids.
"Productive well" means a well that is producing oil or gas or that is
capable of production including gas wells awaiting pipeline connections to
commence deliveries and oil wells awaiting connection to production facilities.
"Proved developed reserves" means reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
"Proved reserves" or "proved oil and gas reserves" means 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 reserves" means reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.
"Recompletion" means the completion for production of an existing wellbore
in a different formation or producing horizon, either deeper or shallower, from
that in which the well was previously completed.
"Reserve life" means the estimated productive life of a proved reservoir
based upon the economic limit of such reservoir producing hydrocarbons in
economic quantities, assuming certain price and cost parameters. For purposes of
this document, reserve life is determined on a barrel of oil equivalent basis by
dividing the estimated proved reserves and revisions of previous estimates
excluding property sales, at the end of the year by the oil and gas volumes
produced during the year.
"Royalty interest" means an interest in an oil and gas property entitling
the owner to a share of oil and gas production free of cost of production.
"Tcf" means one trillion cubic feet.
"Undeveloped acreage" means the number of acres on which wells have not
been drilled or completed to a point that would permit the production of
commercial quantities of oil and gas regardless of whether such acreage contains
proved oil and gas reserves.
"Working interest" means the operating interest that gives the owner the
right to drill, produce and conduct operating activities on the property and to
receive a share of production, subject to all royalties, overriding royalties
and other burdens and to all costs of exploration, development and operations
and all risks in connection therewith.
"Workover" means remedial operations on a well with the intention of
restoring or increasing production from the same zone, including plugging back,
squeeze cementing, reperforating, cleanout and acidizing.
74
PROSPECTUS , 2002
$350,000,000
[LOGO]
Vintage Petroleum, Inc.
Exchange Offer for
8 1/4% Senior Subordinated
Notes due 2012
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
provides generally that a corporation may indemnify any person who was or is a
party to or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative in nature, by reason of the fact that he is or was a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees) and, in
a proceeding not by or in the right of the corporation, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him in
connection with such suit or proceeding, if he acted in good faith and in a
manner believed to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no reason to believe
his conduct was unlawful. Delaware law further provides that a corporation may
not indemnify any person against expenses incurred in connection with an action
by or in the right of the corporation if such person shall have been adjudged to
be liable in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine that, despite the adjudication of liability but in the view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for the expenses which such court shall deem proper. The Restated
By-laws of the Registrant provide that the Registrant shall indemnify an officer
or director against liability incurred by such person as authorized under the
General Corporation Law of the State of Delaware. In addition, the Registrant
has entered into specific agreements with the directors and officers of the
Registrant providing for indemnification of such persons under certain
circumstances. The Registrant's Restated Certificate of Incorporation also
eliminates the liability of the Registrant's directors for monetary damages for
breach of their fiduciary duty as directors. This provision, however, does not
eliminate a director's liability (a) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) in respect of certain unlawful dividend payments or stock redemptions
or repurchases, or (d) for any transaction from which a director derived an
improper personal benefit.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following is a list of all exhibits filed as a part
of this Registration Statement on Form S-4, including those incorporated by
reference herein.
Exhibit
Number Description
-------------- --------------------------------------------------------------
3.1** Restated Certificate of Incorporation, as amended, of the
Registrant.
3.2*** Restated By-laws of the Registrant.
4.1* Indenture dated as of May 2, 2002, between JPMorgan Chase
Bank, as Trustee, and the Registrant, relating to the 8 1/4%
Senior Notes due 2012 of the Registrant (the "Indenture"),
which includes the form of global note.
4.2* Registration Rights Agreement, dated April 25, 2002, among the
Registrant, Deutsche Bank Securities Inc. and BMO Nesbitt
Burns Inc.
5.* Opinion of Conner & Winters, P.C.
12.* Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of PricewaterhouseCoopers LLP.
II-1
Exhibit
Number Description
-------------- --------------------------------------------------------------
23.3* Consent of Conner & Winters, P.C. (included in Exhibit 5).
23.4* Consent of Netherland, Sewell & Associates, Inc.
23.5* Consent of DeGolyer and MacNaughton.
23.6* Consent of Outtrim Szabo Associates Ltd.
24.* Power of Attorney (set forth on the signature page to this
Registration Statement).
25.* Form T-1 with respect to the eligibility of the Trustee with
respect to the Indenture.
-------------------
* Filed herewith.
** Previously filed as Exhibit 3.2 to the Registrant's Form 10-Q for the
quarter ended June 30, 2000, and incorporated by reference herein.
*** Previously filed as Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (No. 33-35289) and incorporated by reference
herein.
(b) Financial Statement Schedules. All schedules are omitted as
inapplicable or because the required information is contained in the
Registrant's consolidated financial statements or included in the notes thereto.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in this effective Registration Statement;
and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-2
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referred to in Item 20 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned 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 this Registration Statement through the date
of responding to such 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 this Registration Statement when it became effective.
* * *
II-3
SIGNATURES
The Registrant. 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 Tulsa,
State of Oklahoma, on the 24/th/ day of May, 2002.
VINTAGE PETROLEUM, INC.
By: /s/ S. Craig George
----------------------------------------
S. Craig George
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints C. C. Stephenson, Jr., S. Craig George
and William C. Barnes, and each of them, his true and lawful attorneys-in-fact
and agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, 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, or his 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.
Name Title Date
---- ----- ----
Director and Chairman of
----------------------------- the Board
C. C. Stephenson, Jr.
/s/ S. Craig George Director, President and Chief May 24, 2002
------------------------------ Executive Officer (Principal
S. Craig George Executive Officer)
/s/ William L. Abernathy Director, Executive Vice May 24, 2002
------------------------------ President and Chief
William L. Abernathy Operating Officer
/s/ William C. Barnes Director, Executive Vice May 24, 2002
------------------------------ President, Chief Financial
William C. Barnes Officer, Secretary and
Treasurer (Principal
Financial Officer)
/s/ Bryan H. Lawrence Director May 24, 2002
------------------------------
Bryan H. Lawrence
Director
------------------------------
Joseph D. Mahaffey
Director
------------------------------
John T. McNabb, II
/s/ Michael F. Meimerstorf Vice President and Controller May 24, 2002
------------------------------ (Principal Accounting
Michael F. Meimerstorf Officer)
II-4
INDEX TO EXHIBITS
Exhibit
Number Description
---------- ---------------------------------------------------------------------
3.1** Restated Certificate of Incorporation, as amended, of the
Registrant.
3.2*** Restated By-laws of the Registrant.
4.1* Indenture dated as of May 2, 2002, between JPMorgan Chase Bank, as
Trustee, and the Registrant, relating to the 8 1/4% Senior Notes due
2012 of the Registrant (the "Indenture"), which includes the form of
global note.
4.2* Registration Rights Agreement, dated April 25, 2002, among the
Registrant, Deutsche Bank Securities Inc. and BMO Nesbitt Burns Inc.
5.* Opinion of Conner & Winters, P.C.
12.* Computation of Ratio of Earnings to Fixed Charges.
23.1* Consent of Arthur Andersen LLP.
23.2* Consent of PricewaterhouseCoopers LLP.
23.3* Consent of Conner & Winters, P.C. (included in Exhibit 5).
23.4* Consent of Netherland, Sewell & Associates, Inc.
23.5* Consent of DeGolyer and MacNaughton.
23.6* Consent of Outtrim Szabo Associates Ltd.
24.* Power of Attorney (set forth on the signature page to this
Registration Statement).
25.* Form T-1 with respect to the eligibility of the Trustee with respect
to the Indenture.
-----------------------
* Filed herewith.
** Previously filed as Exhibit 3.2 to the Registrant's Form 10-Q for the
quarter ended June 30, 2000, and incorporated by reference herein.
*** Previously filed as Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (No. 33-35289) and incorporated by reference
herein.