As filed with the Securities and Exchange Commission on January 26, 2001
Registration Numbers 333-91215
333-91215-01
333-91215-02
333-91215-03
333-91215-04
333-91215-05
333-91215-06
333-91215-07
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
PLAINS RESOURCES INC.
(Exact name of registrant as specified in its charter)
See Table Of Additional Registrants Below
DELAWARE 1311 13-2898764
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number Identification No.)
500 Dallas Street
Houston, Texas 77002
(713) 654-1414
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
--------------
Tim Moore
Vice President and General Counsel
Plains Resources Inc.
500 Dallas Street
Houston, Texas 77002
(713) 654-1414
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
Copy to:
John A. Watson
Fulbright & Jaworski L.l.p.
1301 Mckinney, Suite 5100
Houston, Texas 77010-3095
(713) 651-5151
--------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
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. [_]
--------------
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 this registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
Table of Additional Registrants
==================================================================================================================
Primary Address, Including Zip Code,
Standard and Telephone Number,
State Or Other Industrial I.R.S. Including Area Code, of
Jurisdiction Of Classification Employer Registrants' Principal
Name Incorporation Code No. ID No. Executive Offices
==================================================================================================================
Arguello Inc. Delaware 1311 76-0608465 *
- ------------------------------------------------------------------------------------------------------------------
Calumet Florida, Inc. Delaware 1311 35-1880416 *
- ------------------------------------------------------------------------------------------------------------------
Plains Illinois Inc. Delaware 1311 76-0487569 *
- ------------------------------------------------------------------------------------------------------------------
Plains Resources *
International Inc. Delaware 1311 76-0040974
- ------------------------------------------------------------------------------------------------------------------
PMCT Inc. Delaware 1311 76-0410281 *
- ------------------------------------------------------------------------------------------------------------------
Stocker Resources, Inc. California 1311 33-0421175 *
- ------------------------------------------------------------------------------------------------------------------
Stocker Resources, L.P. California 1311 33-0430755 *
==================================================================================================================
* 500 Dallas Street, Houston, Texas 77002, telephone (713) 654-1414.
Plains Resources Inc.
Cross-Reference Sheet
(Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K)
FORM S-4 ITEM AND CAPTION LOCATION OR PROSPECTUS CAPTION
------------------------- ------------------------------
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover Page
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Prospectus Summary; Risk Factors
Fixed Charges and Other Information
4. Terms of the Transaction Summary; The Exchange Offer;
Description of the Exchange Notes;
Certain Federal Income Tax
Consequences
5. Pro Forma Financial Information Incorporation of Certain Documents
6. Material Contacts with the Company Not Applicable
Being Acquired
7. Additional Information Required for Not Applicable
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Legal Matters; Experts
Counsel
9. Disclosure of Commission Position Not Applicable
on Indemnification for Securities
Act Liabilities
10. Information with Respect to S-3 Prospectus Summary; Risk Factors;
Registrants Description
11. Incorporation of Certain Information Incorporation of Certain Documents
by Reference
12. Information with Respect to S-2 or Not Applicable
S-3 Registrants
13. Incorporation of Certain Information Not Applicable
by Reference
14. Information with Respect to Not Applicable
Registrants Other Than S-3 or
S-2 Registrants
15. Information with Respect to S-3 Not Applicable
Companies
16. Information with Respect to S-2 Not Applicable
or S-3 Companies
17. Information with Respect to Companies Not Applicable
Other Than S-3 or S-2 Companies
18. Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited
19. Information if Proxies, Consents or Incorporation of Certain Documents
Authorizations are not to be Solicited
or in an Exchange Offer
PROSPECTUS
Offer to Exchange
all outstanding
10 1/4% Senior Subordinated Notes Due 2006, Series E
($75,000,000 principal amount outstanding)
for
10 1/4% Senior Subordinated Notes Due 2006, Series F
($75,000,000 principal amount)
of
[LOGO]
Unconditionally Guaranteed by:
Arguello Inc. Plains Illinois Inc. Stocker Resources, Inc.
Calumet Florida, Inc. Plains Resources International Inc. Stocker Resources, L.P.
PMCT Inc.
(_____________)
The Exchange Offer will expire at 5:00 p.m., New York City time, on ________ __,
2001, unless extended.
(_____________)
We, Plains Resources Inc., a Delaware corporation, are offering to you, on
the terms and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal, to exchange up to an aggregate principal
amount of $75,000,000 of our 10 1/4% Senior Subordinated Notes due 2006, Series
F (the "Exchange Notes") for an equal principal amount of our outstanding 10
1/4% Senior Subordinated Notes due 2006, Series E (the "Outstanding Notes"), in
integral multiples of $1,000. The Exchange Notes will be senior subordinated
obligations of us and are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Outstanding Notes, except
that the Exchange Notes do not have certain transfer restrictions and
registration rights (including certain interest provisions) that the Outstanding
Notes do have. We issued the Outstanding Notes, and we will issue the Exchange
Notes, under an indenture dated as of September 15, 1999, among us, the
Subsidiary Guarantors (as defined) and Chase Bank of Texas, National
Association, as trustee (the "Trustee"). See "Description of Exchange Notes".
We will not receive any proceeds from this offering; but, pursuant to the
Registration Rights Agreement dated as of September 22, 1999 among us, the
Subsidiary Guarantors and the Initial Purchasers (as defined) of the Outstanding
Notes (the "Registration Rights Agreement"), we will bear certain offering
expenses.
(Cover text continued on next page)
(____________)
You should carefully consider the risk factors beginning on page 18 of this
prospectus before you decide to participate in this exchange offer.
(____________)
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Exchange Notes or has determined
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
(____________)
The date of this prospectus is January , 2001.
We will accept for exchange any and all Outstanding Notes that you validly
tender on or before 5:00 p.m., New York City time, on ________ __, 2001[28
business days after effective date], unless we extend the date (the "Expiration
Date"). You may withdraw your tender of Outstanding Notes at any time before
5:00 p.m., New York City time, on the Expiration Date; otherwise your tender
will be irrevocable. Chase Bank of Texas, National Association is acting as
Exchange Agent for this exchange offer. We are not conditioning this exchange
offer on any minimum principal amount of Outstanding Notes being tendered for
exchange, but we are subjecting this exchange offer to certain customary
conditions.
The Exchange Notes will bear interest from the date that we issue them (or
the most recent Interest Payment Date (as defined) to which interest on such
Exchange Notes has been paid), at a rate equal to 10 1/4% per annum and on the
same terms as the Outstanding Notes. We will pay interest on the Exchange Notes
semi-annually on March 15 and September 15 of each year beginning on March 15,
2001. We will pay the interest that has accrued and is unpaid through the
Exchange Date on the Outstanding Notes that you tender in exchange for the
Exchange Notes on or before March 15, 2001. Outstanding Notes that we accept
for exchange will no longer accrue interest on and after the date when interest
on the Exchange Notes begins to accrue.
The following subsidiaries of ours will unconditionally guarantee, on a
joint and several basis, our obligation to pay the principal of, premium, if
any, and interest on the Exchange Notes: Arguello Inc., Calumet Florida, Inc.,
Plains Illinois Inc., Plains Resources International Inc., PMCT Inc., Stocker
Resources, Inc., and Stocker Resources, L.P. (collectively "Subsidiary
Guarantors").
We sold the Outstanding Notes on September 22, 1999 to J.P. Morgan & Co.
and First Union Capital Markets, Inc., who are the "Initial Purchasers," in a
transaction that we did not register under the Securities Act and in which we
relied on the exemption that Section 4(2) of the Securities Act provides. The
Initial Purchasers then sold the Outstanding Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. Accordingly, these
qualified institutional buyers may not reoffer, resell or otherwise transfer the
Outstanding Notes in the United States unless the Outstanding Notes are
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. We are offering the Exchange Notes to you
to satisfy our obligations under the Registration Rights Agreement. See "The
Exchange Offer".
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, we believe that you can offer for resale, resell or otherwise transfer
the Exchange Notes that we issue to you pursuant to this exchange offer without
needing to comply 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 and you are not participating in and have no
arrangement or understanding with any person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Notes, and you are
not one of our affiliates. If you wish to exchange Outstanding Notes in the
exchange offer, you must represent to us that these conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the exchange offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
Exchange Notes. A broker-dealer that delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations). A broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, to resell
the Exchange Notes that it receives in exchange for Outstanding Notes if it
acquired such Outstanding Notes as a result of market-making activities or other
trading activities. We have agreed that, if requested by a Participating
Broker-Dealer, we will use our best efforts to make this prospectus available to
any Participating Broker-Dealer to use in connection with any such resale for up
to six months or until such earlier date as a Participating Broker-Dealer
notifies us in writing that it has resold all the Exchange Notes that it
acquired in the exchange offer. See "Plan of Distribution".
We do not intend to list the Exchange Notes on any national securities
exchange or to request the National Association of Securities Dealers Automated
Quotation System to admit them to trading. The Initial Purchasers have advised
us that they intend to make a market in the Exchange Notes, but they are not
obligated to do so and
2
they may discontinue any market-making at any time without notice. Accordingly,
we cannot assure you that an active public or other market will develop for the
Exchange Notes or as to how liquid the trading market for the Exchange Notes
will be.
If you do not tender, or if we do not accept your tender of, your
Outstanding Notes in the exchange offer, then your Outstanding Notes will remain
outstanding. The number of Outstanding Notes that are tendered and that we
accept in the exchange offer may adversely affect your ability to sell
untendered Outstanding Notes. After we complete the exchange offer, any holders
of Outstanding Notes will continue to be subject to the existing transfer
restrictions that restrict the transfer of the Outstanding Notes.
We expect that we will issue the Exchange Notes in the form of a Global
Exchange Note (as defined herein), which we will deposit with, or on behalf of,
The Depository Trust Company (the "DTC"). The Global Exchange Note will be
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Exchange Note representing the Exchange Notes will be
shown on, and transfers of the Global Exchange Note to qualified institutional
buyers will be effected through, records that DTC and its participants maintain.
After we initially issue the Global Exchange Note, we will issue Exchange Notes
in certificated form in exchange for the Global Exchange Note on the terms set
forth in the Indenture. See "Description of Exchange Notes--Book Entry;
Delivery and Form".
________________
We have not authorized any dealer, salesperson or other person to give
information or to make any representations not contained in this prospectus,
and, if given or made, you should not rely on such information or
representations as though we did authorize them. This prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the Exchange Notes offered hereby, nor does it constitute an offer to
sell or the solicitation of an offer to buy any of the Exchange Notes to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any date after the date of
this prospectus.
Until ________ __, 2001 (90 days after we begin this exchange offer), all
dealers effecting transactions in the Exchange Notes, whether or not
participating in the exchange offer, may be required to deliver a
prospectus.
TABLE OF CONTENTS
Page Page
---- ----
Available Information........................... 3 Use of Proceeds........................... 36
Incorporation of Certain Documents.............. 4 Description of Certain Indebtedness....... 37
Summary......................................... 7 Description of the Exchange Notes......... 40
Risk Factors.................................... 19 Plan of Distribution...................... 70
The Exchange Offer.............................. 27 Legal Matters............................. 71
Certain Federal Income Tax Consequences......... 36 Experts................................... 71
Reserve Engineers......................... 71
AVAILABLE INFORMATION
We have filed with the Commission in Washington, D.C., a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
by this prospectus. We have omitted from this prospectus certain of the
information contained in the Registration Statement, and we refer you to the
Registration Statement and its exhibits and schedules for further information
with respect to us and the securities that we are offering by this prospectus.
We are subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and, in accordance therewith, we file
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information are available for inspection at,
and copies of such materials may be obtained upon payment of the prescribed fees
from, the Commission at its principal offices located at Judiciary
3
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and the
Regional Offices of the Commission located at 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at 7 World Trade Center, New York, New
York 10048. In addition, the materials that we electronically file with the
Commission are available at the Commission's World Wide Web site at
http://www.sec.gov. Our Common Stock is traded on the American Stock Exchange,
and such reports, proxy statements and other information may be inspected at the
offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New
York 10005.
So long as we are subject to the periodic reporting requirements of the
Exchange Act, we must furnish the information required to be filed with the
Commission to the Trustee and the holders of the Outstanding Notes and the
Exchange Notes. We have agreed that, even if, under the Exchange Act, we do not
need to furnish this information to the Commission, we will continue to furnish
information that we would be required to furnish by Section 13 of the Exchange
Act to the Trustee and the holders of the Outstanding Notes or Exchange Notes as
if we were subject to these periodic reporting requirements.
In addition, we have agreed that if any of the Outstanding Notes remain
outstanding and are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, we will make available to any prospective purchaser of
the Notes or beneficial owner of the Notes in connection with any sale of the
Notes the information required by Rule 144A(d)(4) under the Securities Act until
we have either exchanged the Outstanding Notes for the Exchange Notes or until
the holders of the Notes have disposed of such Outstanding Notes pursuant to an
effective registration statement that we file.
CAUTIONARY STATEMENT
This prospectus is part of the Registration Statement that we filed with
the Commission and,
. you should rely only on the information or representations that
we provide in this prospectus;
. we have not authorized any person to provide you with information
other than that provided in this prospectus;
. we are not making an offer of these securities in any
jurisdiction in which it would be prohibited; and
. you should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this
document.
INCORPORATION OF CERTAIN DOCUMENTS
We are incorporating by reference into this prospectus our:
. Annual Report on Form 10-K for the fiscal year ended December 31,
1999, as amended by the Annual Report on Form 10-K/A filed on
January 18, 2001;
. Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2000, as amended by the Quarterly Report on Form 10-Q/A filed
on January 18, 2001;
. Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2000, as amended by the Quarterly Report on Form 10-Q/A filed
on January 18, 2001;
. Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2000 as amended by the Quarterly Report on Form 10-
Q/A filed on January 18, 2001;
. Definitive Proxy Statement filed on April 28, 2000;
. Current Report on Form 8-K filed on June 15, 2000;
. Current Report on Form 8-K filed on September 14, 2000; and
. Current Report on Form 8-K filed on December 7, 2000.
4
All documents that we file pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act, after the date of this prospectus and before the termination
of the Registration Statement of which this prospectus is a part with respect to
registration of the Exchange Notes, shall be deemed to be incorporated by
reference in this prospectus and be a part of it from the date we file such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained in this prospectus, or in any other document that we later file that
also is or is deemed to be incorporated by reference, modifies or replaces that
statement.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request of any such person, a copy of any or all of the documents
incorporated by reference herein, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into the information
that this prospectus incorporates. Written or oral requests for such copies
should be directed to: Plains Resources Inc., 500 Dallas Street, Suite 700,
Houston, Texas 77002, Attention: Investor Relations Department, telephone (713)
654-1414.
5
CERTAIN DEFINITIONS
"Present Value of Proved Reserves" means the present value (discounted at
10%) of estimated future cash flows from proved oil and natural gas reserves, as
estimated by our independent engineers, reduced by additional estimated future
operating expenses, development expenditures and abandonment costs (net of
salvage value) associated therewith (before income taxes), calculated using
product prices in effect on the date of determination. "Notes" includes the
Outstanding Notes, the Exchange Notes and any Private Exchange Notes (as
defined).
6
SUMMARY
This summary highlights some information from this prospectus, but it does
not contain all information that you need to make an informed decision to
participate in the offer. We encourage you to read the detailed information and
financial statements and the related notes appearing elsewhere in this
prospectus in their entirety. In this prospectus, "we," "our," and "us"
collectively refer to Plains Resources Inc. and its subsidiaries; and "you" and
"your" refer to any legal holder of the Outstanding Notes immediately before the
Expiration Date, unless the context otherwise indicates.
What Is Our Business?
We are an independent energy company engaged in two related lines of
business. Our first line of business, which we refer to as "upstream",
acquires, exploits, develops, explores and produces crude oil and natural gas.
Our second line of business, which we refer to as "midstream", engages in the
marketing, transportation and terminalling of crude oil. Terminals are
facilities where crude oil is transferred to or from storage or a transportation
system, such as a pipeline, to another transportation system, such as trucks or
another pipeline. The operation of these facilities is called "terminalling".
We conduct this second line of business through our majority ownership in Plains
All American Pipeline, L.P.
One of our wholly owned Unrestricted Subsidiaries (as defined), Plains All
American Inc., is both the general partner and majority owner of Plains All
American. Because it holds the general partner interest and owns approximately
18.2 million common and subordinated units, Plains All American Inc. holds an
approximate 54% interest in Plains All American. For financial statement
purposes, the assets, liabilities and earnings of Plains All American are
included in our consolidated financial statements, with the public unitholders'
interest reflected as a minority interest. The following chart sets forth the
organization relationship of the subsidiaries in our two lines of business:
[ORGANIZATION CHART]
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Upstream: Crude Oil and Natural Gas Production
We own several crude oil and natural gas properties, and we continually
seek to acquire additional crude oil and natural gas properties that fit within
our business strategy. We specialize in acquiring and then effectively
exploiting and developing crude oil and natural gas properties that we believe
have not been exploited and developed to their full potential. Generally, our
business strategy begins with the acquisition of crude oil or natural gas
properties that have produced significant volumes since initial discovery and
that have significant estimated reserves in place. These properties are usually
owned by major integrated or large independent oil and natural gas companies.
After acquiring these properties, we seek to increase the efficiency of existing
wells by improving production and recovery techniques and by reducing production
expenses. We may also drill additional development wells. Our management
believes that it has developed a proven record in increasing cash flow by
acquiring and exploiting these types of properties. Our crude oil and natural
gas producing properties are mainly located in California in the Los Angeles
Basin, the Arroyo Grande Field and the Mt. Poso Field; offshore California in
the Point Arguello Field; the Sunniland Trend of South Florida; and the Illinois
Basin in southern Illinois. In addition, we commit a minor portion of our
capital to pursue higher-risk exploration opportunities that offer potentially
higher rewards in areas that complement our core business strategy discussed
above. We take advantage of the marketing expertise that Plains All American
has developed through our marketing agreement with Plains All American under
which Plains All American is the exclusive purchaser/marketer of all our equity
crude oil production.
During the five-year period ended December 31, 1999, we incurred total
costs of approximately $436.6 million in acquiring, exploiting, developing and
exploring crude oil properties. We spent approximately 97% of this capital in
acquisition, exploitation and development activities, and we spent approximately
3% on our exploration activities. By implementing our business strategy, during
that period we added to our crude oil and natural gas reserves approximately
204.9 million barrels of oil equivalent, at a cost of $2.13 per barrels of oil
equivalent, including revisions of estimates but excluding production.
To manage our exposure to commodity price risk, we routinely hedge a
portion of our crude oil production. Our management intends to continue to
maintain hedging arrangements for a significant portion of our production. Our
hedging arrangements provide us protection on the hedged volumes if crude oil
prices decline below the prices at which these hedges are set; however, the
ceiling prices in some of our hedging arrangements may be less than the market
value of the hedged volumes when actually produced and sold. As a result, our
hedging arrangements may cause us to receive less revenue on the hedged volumes
than we would receive in the absence of hedges. We can estimate unrealized
losses on our hedging arrangements by comparing hedge contract prices to market
prices quoted by independent reporting services and the NYMEX. Based on the
hedging arrangements in effect on December 31, 1999 and September 30, 2000, and
the quoted price of crude oil for each of the future months to which the hedges
relate, our unrealized hedging losses at these dates were approximately $22.0
million and $24.0 million, respectively. See "Our hedging arrangements for our
crude oil production could reduce the price we would receive in the absence of
those arrangements" at page 25.
Midstream: Crude Oil Marketing, Transportation and Terminalling
Our second line of business consists of:
. gathering crude oil from the fields where the crude oil is
produced;
. interstate and intrastate transportation of crude oil through
pipelines, trucks or barges;
. storing crude oil in our storage tanks;
. transferring crude oil from pipelines and storage tanks to
trucks, barges or other pipelines through our terminals;
. marketing crude oil produced by Plains Resources;
. the purchase of crude oil at the well and the bulk purchase of
crude oil at pipeline and terminal facilities; and
8
. the subsequent resale or exchange of crude oil at various points
along the crude oil distribution chain.
We conduct these businesses through Plains All American, which was formed
in 1998 to acquire and operate the business and assets of our subsidiaries in
this business segment. During the third quarter of 2000, Plains All American
handled an average of approximately 600,000 barrels of crude oil per day. This
segment of our business conducts its operations primarily in California, Texas,
Oklahoma, Louisiana and the Gulf of Mexico.
The principal assets used in this segment include:
. a 3.1 million barrel, above-ground crude oil storage and terminal
facility at Cushing, Oklahoma;
. the segment of the All American Pipeline that extends
approximately 140 miles from Las Flores, California to Emidio,
California;
. the San Joaquin Valley Gathering System in California;
. the West Texas Gathering System, the Spraberry Pipeline System,
and the East Texas Pipeline System, which are all located in
Texas;
. the Sabine Pass Pipeline System in southwest Louisiana and
southeast Texas;
. the Ferriday Pipeline System in eastern Louisiana and western
Mississippi;
. the Illinois Basin Pipeline System in southern Illinois; and
. approximately 280 trucks, 325 tractor-trailers and 290 injection
stations, which are owned or leased and used in our gathering and
marketing activities.
Plains All American's Cushing facility is a state-of-the-art, 3.1 million
barrel, above-ground crude oil storage and terminalling facility. Cushing,
Oklahoma is the largest crude oil trading hub in the United States and the
designated delivery point for NYMEX crude oil futures contracts. We also have an
additional 6.6 million barrels of storage and terminalling capacity in our other
facilities, including tankage associated with our pipeline and gathering
systems. Our storage and terminal operations increase our margins in our
business of purchasing and selling crude oil and also generate revenue through a
combination of storage and throughput charges to third parties.
We Recently Sold a Segment of the All American Pipeline.
In March 2000, we sold to a unit of El Paso Energy Corporation for $129.0
million the segment of the All American Pipeline that extends from Emidio,
California to McCamey, Texas. Except for minor third-party volumes, one of our
subsidiaries, Plains Marketing, L.P., has been the sole shipper on this segment
of the pipeline since its predecessor acquired the line from the Goodyear Tire &
Rubber Company in July 1998. We realized net proceeds of approximately $124.0
million after associated transaction costs and estimated costs to remove some
equipment. We used the proceeds from the sale to reduce the outstanding debt of
Plains All American. We recognized a gain of approximately $20.1 million in
connection with this sale. During 1999, we reported gross margin of
approximately $5.0 million from volumes transported on the segment of the line
that was sold.
We had suspended shipments of crude oil on this segment of the pipeline in
November, 1999. At that time, we owned approximately 5.2 million barrels of
crude oil in the segment of the pipeline. We sold this crude oil from November,
1999 to February, 2000 for net proceeds of approximately $100.0 million, which
we used for working capital purposes. We recognized a total gain of
approximately $44.6 million in connection with the sale of the crude oil.
We Recently Experienced a Large Unauthorized Crude Oil Trading Loss
In November 1999, we discovered that a former employee of Plains All
American had engaged in unauthorized trading activity, resulting in a loss of
approximately $174.0 million, which includes estimated associated costs and
legal expenses. During the third quarter of 2000, we recognized an additional
$6.6 million
9
charge for litigation related to the unauthorized trading losses. A full
investigation into the unauthorized trading activities by outside legal counsel
and independent accountants and consultants determined that the vast majority of
the losses occurred from March through November 1999, and the impact warranted a
restatement of previously reported financial information for 1999 and 1998.
Because the financial statements of Plains All American are consolidated with
our financial statements, adverse effects on the financial statements of Plains
All American directly affect our consolidated financial statements. As a result,
we have restated our previously reported 1999 and 1998 results to reflect the
losses incurred from these unauthorized trading activities.
Normally, as Plains All American purchases crude oil, it establishes a
margin by selling crude oil for physical delivery to third-party users or by
entering into a future delivery obligation with respect to futures contracts.
The employee in question violated Plains All American's policy of maintaining a
position that is substantially balanced between crude oil purchases and sales or
future delivery obligations. The unauthorized trading and associated losses
resulted in a default of certain covenants under Plains All American's then-
existing credit facilities and significant short-term cash and letter of credit
requirements. In December 1999, Plains All American executed amended credit
facilities and obtained default waivers from all of its lenders. Plains All
American paid approximately $13.7 million to its lenders in connection with the
amended credit facilities. In connection with the amendments, we loaned
approximately $114.0 million to Plains All American. We financed the $114.0
million that we loaned Plains All American with:
. the issuance of a new series of our Series F preferred stock for
proceeds of $50.0 million;
. cash distributions of approximately $9.0 million made in November
1999 to Plains All American's general partner; and
. $55.0 million of borrowings under our revolving credit facility.
On May 8, 2000, Plains All American entered into new bank credit agreements
to refinance Plains All American's existing bank debt and repay the $114.0
million owed to us. The new bank credit agreements also provide Plains All
American with additional flexibility for working capital, capital expenditures
and other general corporate purposes. At closing, Plains All American had $256.0
million outstanding under a $400.0 million senior secured revolving credit
facility. Plains All American also had at closing letters of credit of
approximately $173.8 million and borrowings of approximately $20.3 million
outstanding under a separate $300.0 million senior secured letter of credit and
borrowing facility. Please see "Management's Discussion and Analysis-Liquidity
and Capital Resources-Credit Facilities" in our Quarterly Report on Form 10-Q/A
filed January 18, 2001 for additional information about the terms of these new
credit facilities.
We have taken appropriate and aggressive steps within our organization to
enhance our processes and procedures to prevent future unauthorized trading. One
of such steps includes the creation of a new professional risk management
position. This risk manager has direct responsibility and authority for our
trading controls and procedures and other aspects of corporate risk management.
But we cannot assure you that such steps will detect and prevent all violations
of our trading policies and procedures, particularly if deception or other
intentional misconduct is involved.
Texas Securities Litigation.
On November 29, 1999, a class action lawsuit was filed in the United States
District Court for the Southern District of Texas entitled Di Giacomo v. Plains
All American Pipeline, L.P., et al. The suit alleged that Plains All American
and certain of its general partner's officers and directors violated federal
securities laws, primarily in connection with unauthorized trading by a former
employee. An additional nineteen cases have been filed in the Southern District
of Texas, some of which name the general partner and us as additional
defendants. All of the federal securities claims are being consolidated into two
actions. The first consolidated action is that filed by purchasers of our common
stock and options, and is captioned Koplovitz v. Plains Resources Inc., et al.
The second consolidated action is that filed by purchasers of Plains All
American's common units, and is captioned Di Giacomo v. Plains All American
Pipeline, L.P., et al. Plaintiffs alleged that the defendants were liable for
securities fraud violations under Rule 10b-5 and Section 20(a) of the Securities
Exchange Act of 1934 and for
10
making false registration statements under Sections 11 and 15 of the Securities
Act of 1933.
We and Plains All American have reached an agreement in principle with
representatives for the plaintiffs for the settlement of all of the federal
securities actions. The total cost of the settlement, including interest and
expenses and after insurance reimbursements, is $14.9 million. Of that amount,
$1.0 million was allocated to us by agreement between special independent
committees of our board of directors and that of Plains All American Inc. and
$7.5 million will be borne by us indirectly through our 54% interest in Plains
All American. Substantially all those amounts had been reserved on our books in
periods prior to the fourth quarter of 2000. The settlement is subject to a
number of conditions, including final approval by the court. The agreement in
principle does not affect the Texas Derivative Litigation and Delaware
Derivative Litigation described below.
Texas Derivative Litigation.
On July 11, 2000, a derivative lawsuit was filed in the United States
District Court of the Southern District of Texas entitled Fernandes v. Plains
All American Inc., et al, naming the general partner, its directors and certain
of its officers as defendants. This lawsuit contains the same claims and seeks
the same relief as the Delaware derivative litigation, described below. A
motion to dismiss was filed on behalf of the defendants on August 14, 2000.
Delaware Derivative Litigation.
On December 3, 1999, two derivative lawsuits were filed in the Delaware
Chancery Court, New Castle County, entitled Susser v. Plains All American Inc.,
et al and Senderowitz v. Plains All American Inc., et al. These suits, and three
others which were filed in Delaware subsequently, named the general partner, its
directors and certain of its officers as defendants, and allege that the
defendants breached the fiduciary duties that they owed to Plains All American
Pipeline, L.P. and its unitholders by failing to monitor properly the activities
of its employees. The court has consolidated all of the cases under the caption
In Re Plains All American Inc. Shareholders Litigation, and has designated the
complaint filed in Susser v. Plains All American Inc. as the complaint in the
consolidated action. A motion to dismiss was filed on behalf of the defendants
on August 11, 2000.
The plaintiffs in the Delaware derivative litigation seek that the
defendants
. account for all losses and damages allegedly sustained by Plains
All American from the unauthorized trading losses;
. establish and maintain effective internal controls ensuring that
our affiliates and persons responsible for our affairs do not
engage in wrongful practices detrimental to Plains All American;
. pay for the plaintiffs' costs and expenses in the litigation,
including reasonable attorneys' fees, accountants' fees, and
experts' fees; and
. provide the plaintiffs any additional relief as may be just and
proper under the circumstances.
We intend to vigorously defend the claims made in the Delaware and Texas
derivative litigation and the Texas securities litigation. However, there can
be no assurance that we will be successful in our defense or that these lawsuits
will not have a material adverse effect on our financial position or results of
operation.
We, in the ordinary course of business, are a claimant and/or a defendant
in various other legal proceedings in which our exposure, individually and in
the aggregate, is not considered material.
--------------
We were incorporated under the laws of the State of Delaware in 1976. Our
executive offices are located at 500 Dallas, Suite 700, Houston, Texas 77002,
and our telephone number is (713) 654-1414.
11
The Exchange Note Offering
The Outstanding Notes....... We sold the Outstanding Notes on September 22,
1999, to J.P. Morgan & Co. and First Union Capital
Markets (the "Initial Purchasers") pursuant to a
Purchase Agreement dated as of September 15, 1999
(the "Purchase Agreement"). The Initial Purchasers
later resold the Outstanding Notes to qualified
institutional buyers pursuant to Rule 144A
promulgated under the Securities Act.
Registration Requirements... Pursuant to the Purchase Agreement, we and the
Initial Purchasers entered into the Registration
Rights Agreement which grants the holders of the
Outstanding Notes certain exchange and
registration rights. We intend for the exchange
offer to satisfy such exchange rights, which
terminate once we complete the exchange offer. If
applicable law or applicable interpretations of
the staff of the Commission do not permit us to
effect the exchange offer, or in certain other
circumstances, we have agreed to file a shelf
registration covering resales of Transfer
Restricted Securities (as defined). See "The
Exchange Offer--Can I Resell The Exchange
Notes?".
The Exchange Offer
Securities Offered.......... $75,000,000 aggregate principal amount of the 10
1/4% Senior Notes due 2006, Series F.
The Exchange Offer.......... $1,000 principal amount of the Exchange Notes in
exchange for each $1,000 principal amount of
Outstanding Notes. As of today's date, $75,000,000
aggregate principal amount of Outstanding Notes
are outstanding. We will issue the Exchange Notes
on _________ __, 2001 [30 business days from the
effective date] (the "Exchange Date").
Based on an interpretation of the Commission's
staff set forth in no-action letters issued to
third parties, we believe that you may offer for
resale, resell or otherwise transfer the Exchange
Notes that we issue you pursuant to the exchange
offer in exchange for your Outstanding Notes
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that (1) you acquire the Exchange
Notes in the ordinary course of your business and
that you do not intend to participate and have no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes, and (2) you are not one of our "affiliates"
within the meaning of Rule 405 under the
Securities Act.
Each Participating Broker-Dealer must acknowledge
that it will deliver a prospectus whenever it
resells the Exchange Notes. A broker-dealer that
delivers a prospectus to purchasers when it
resells the Exchange Notes will be subject to
certain of the civil liability provisions under
the Securities Act and will be bound by the
provisions of the Registration Rights Agreement
(including certain indemnification rights and
obligations). A broker-dealer may use this
prospectus, as it may be amended or supplemented
from time to time, to resell Exchange Notes it
receives in exchange for Outstanding Notes if it
acquired those Outstanding Notes as a result of
market-making activities or other trading
activities. We have agreed that, if requested by a
Participating Broker-Dealer, we will use our best
efforts to make this prospectus available to any
Participating Broker-Dealer to resell such
Outstanding Notes for up to six months or until
such earlier date as that
12
Participating Broker-Dealer notifies us in writing
that it resold all Exchange Notes it acquired in the
exchange offer. See "Plan of Distribution".
If you tender your Outstanding Notes in the exchange
offer intending to participate in a distribution of
the Exchange Notes, then you cannot rely on the
position of the Commission's staff enunciated in
Exxon Capital Holdings Corporation (available April
13, 1989) or similar no-action letters and, in the
absence of an exemption under the Securities Act, you
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with the resale transaction. If you fail
to comply with these requirements, you may incur
liability under the Securities Act for which we have
not indemnified you.
Expiration Date.......... 5:00 p.m., New York City time, on ___________ __,
2001.
Interest on the Notes.... The Exchange Notes will bear interest from the date
we issue them. We will pay the interest that has
accrued and is unpaid on the Outstanding Notes that
you tender in exchange for the Exchange Notes through
the Exchange Date on or before March 15, 2001.
Procedures for Tendering
Outstanding Notes........ If you wish to accept the exchange offer, then you
must complete, sign and date the accompanying letter
of transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein,
and mail or otherwise deliver the letter of
transmittal, or the facsimile, together with the
Outstanding Notes and any other required
documentation to the Exchange Agent at the address
set forth in this prospectus. By executing the letter
of transmittal, you represent to us that, among other
things, you or the person who will receive the
Exchange Notes is, whether or not that person is a
holder of Outstanding Notes or the Exchange Notes,
acquiring the Exchange Notes in the ordinary course
of business and that neither you nor any other person
has any arrangement or understanding with any person
to participate in the distribution of the Exchange
Notes. In lieu of physical delivery of the
certificates representing Outstanding Notes, you may
tender your Outstanding Notes pursuant to the
procedure for book-entry transfer set forth under
"The Exchange Offer--How Do I Tender My Outstanding
Notes?".
Special Procedures for
Beneficial Owners........ If you beneficially own Outstanding Notes, and your
Outstanding Notes are registered in the name of a
broker-dealer, commercial bank, trust company or
other nominee, then, if you wish to tender your
Outstanding Notes pursuant to the exchange offer, you
should contact the registered holder promptly and
instruct the registered holder to tender on your
behalf. If you wish to tender on your own behalf, you
must, before completing and executing the letter of
transmittal and delivering your Outstanding Notes,
either make appropriate arrangements to register
ownership of the Outstanding Notes in your name or
obtain a properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time.
Guaranteed Delivery
Procedures............... If you wish to tender your Outstanding Notes and your
Outstanding Notes are not immediately available or
you cannot deliver your Outstanding
13
Notes, the letter of transmittal or any other
documents that the letter of transmittal requires to
the Exchange Agent (or comply with the procedures for
book-entry transfer) before the Expiration Date, then
you must tender your Outstanding Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--How Do I Take Advantage Of The
Guaranteed Delivery Procedures".
Withdrawal Rights........ You may withdraw your tender at any time before 5:00
p.m., New York City time, on the Expiration Date
pursuant to the procedures described under "The
Exchange Offer--How Do I Withdraw My Tender?".
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes........... Subject to certain conditions, we will accept for
exchange any and all Outstanding Notes that are
properly tendered in the exchange offer before 5:00
p.m., New York City time, on the Expiration Date. The
Exchange Notes issued pursuant to the exchange offer
will be delivered on the Exchange Date. See "The
Exchange Offer--What Are The Terms Of The Exchange
Offer?".
Federal Income Tax
Consequences............. The exchange pursuant to the exchange offer should
not be a taxable event for federal income tax
purposes. See "Certain Federal Income Tax
Consequences".
Private Exchange Notes... The Registration Rights Agreement provides that if,
before we complete the exchange offer, the Initial
Purchasers hold any Outstanding Notes that they
acquired and that have, or that are reasonably likely
to be determined to have, the status of an unsold
allotment in the initial distribution, or if any
other holder of Outstanding Notes is not entitled to
participate in the exchange offer, then we, if the
Initial Purchasers or any such holder requests, will
at the same time that we deliver the Exchange Notes
in the exchange offer issue and deliver to the
Initial Purchasers and any such holder, in exchange
for such Outstanding Notes that the Initial
Purchasers and any such holder hold, a like principal
amount of our debt securities that are identical in
all material respects to the Exchange Notes (the
"Private Exchange Notes") (and which we will issue
pursuant to the same Indenture as the Exchange
Notes). The Private Exchange Notes are not covered by
the registration statement of which this prospectus
is a part and we are not offering them by this
prospectus. Any Private Exchange Notes will receive
all the rights and will be subject to all the
limitations applicable to them under the Indenture,
and will be subject to the same restrictions on
transfer that apply to the untendered Outstanding
Notes. See "The Exchange Offer--What Happens If My
Outstanding Notes Are Not Exchanged?". But pursuant
to the Registration Rights Agreement, holders of
Private Exchange Notes have certain rights to require
us to file and maintain a shelf registration
statement that would allow them to resell then
Private Exchange Notes. See "The Exchange Offer--We
May Have To File A Shelf Registration Statement".
Effect on Holders of
Outstanding Notes........ This exchange offer fulfills one of our obligations
under the Registration Rights Agreement, and, with
certain exceptions noted below, if you do not tender
your Outstanding Notes, then you will not have any
further registration rights under the Registration
Rights Agreement or otherwise. If you do not tender
any of your Outstanding Notes, then you will continue
14
to hold the untendered Outstanding Notes and you
will be entitled to all the rights and be
subject to all the limitations applicable to
them under the Indenture, except to the extent
such rights or limitations, by their terms,
terminate or cease to have further effectiveness
as a result of the exchange offer. All
untendered Outstanding Notes will continue to be
subject to certain transfer restrictions.
Accordingly, the exchange offer, if any
Outstanding Notes are tendered and accepted,
could adversely affect the trading market of the
untendered Outstanding Notes.
Shelf Registration Statement... If
. we are unable to consummate the exchange
offer because it is not permitted by any
applicable law or applicable interpretation
of the Commission or the staff of the
Commission;
. any holder of an Outstanding Note notifies us
on or before the Exchange Date that
. due to a change in law or policy, it is
not entitled to participate in the
exchange offer,
. due to a change in law or policy, it may
not resell the Exchange Notes that it
would acquire in the exchange offer to
the public without delivering a
prospectus and this prospectus is not
appropriate or available for such
resales by such holder or
. it is a broker-dealer that owns
Outstanding Notes (including the Initial
Purchasers that hold Outstanding Notes
as part of an unsold allotment from the
original offering of the Outstanding
Notes) that it acquired directly from us
or one of our affiliates; or
. any holder of Private Exchange Notes requests
within 120 days after we complete the
exchange offer,
then we have agreed to file and maintain a shelf
registration statement that would allow these
holders to resell their transfer-restricted
Outstanding Notes, Exchange Notes or Private
Exchange Notes.
Exchange Agent................. Chase Bank of Texas, National Association.
15
Summary of Terms of the Exchange Notes
Securities Offered................ $75,000,000 principal amount of 10 1/4%
Senior Subordinated Notes due 2006, Series F.
Maturity Date..................... March 15, 2006.
Interest Rate and Payment Dates... The Exchange Notes will bear interest at a
rate of 10 1/4% per annum. Interest on the
Exchange Notes will accrue from the date that
we issue them. We will pay accrued interest
semi-annually in cash in arrears on each
March 15 and September 15, commencing March
15, 2001.
Optional Redemption............... We may, at our option, redeem the Exchange
Notes, in whole or in part, from time to time
on or after March 15, 2001, at the redemption
prices set forth in this prospectus, plus
accrued and unpaid interest to the applicable
redemption date. See "Description of the
Exchange Notes--We May Be Able To Or May Be
Required To Redeem Or Repurchase The Notes".
Change of Control................. If a Change of Control (as defined) and a
corresponding Rating Decline (as defined)
occur, then we must offer to repurchase the
Exchange Notes at 101% of the principal
amount of the Exchange Notes, plus accrued
and unpaid interest to the date of
repurchase. See "Description of the Exchange
Notes--A Change of Control May Require Us To
Repurchase The Notes".
Certain Covenants................. We are offering the Exchange Notes under the
Indenture, which contains covenants that
include, but are not limited to, covenants
that: (1) limit the incurrence of additional
indebtedness; (2) limit certain investments;
(3) limit restricted payments; (4) limit the
disposition of assets; (5) limit the payment
of dividends and other payment restrictions
affecting subsidiaries; (6) limit
transactions with affiliates; (7) limit the
creation of liens; and (8) restrict mergers,
consolidations and transfers of assets. See
"Description of the Exchange Notes--The
Indenture Contains Certain Covenants".
Ranking........................... The Exchange Notes will be our unsecured
senior subordinated obligations and will be
subordinated in right of payment to all of
our existing and future Senior Indebtedness,
including our obligations under our Revolving
Credit Facility. See "Description of Certain
Indebtedness--We Have A Revolving Credit
Facility." The Exchange Notes will rank on
parity with our outstanding 10 1/4% Senior
Subordinated Notes due 2006, Series A, 10
1/4% Senior Subordinated Notes due 2006,
Series B, 10 1/4% Senior Subordinated Notes
due 2006, Series C, and 10 1/4% Senior
Subordinated Notes due 2006, Series D
(collectively, the "Series A-D Notes") and
any Outstanding Notes not exchanged. We may
not incur any indebtedness senior to the
Exchange Notes that is expressly subordinated
to any other Senior Indebtedness. As of
September 30, 2000, (1) we had Senior
Indebtedness outstanding of $13.0 million,
(2) the Subsidiary Guarantors had no
Guarantor Senior Indebtedness outstanding
(other than $13.0 million, representing
guarantees of parent Senior Indebtedness),
(3) $200.0 million in principal amount of the
Series A-D Notes was outstanding and (4) $75
million in principal amount of the
Outstanding Notes. See "Description of the
Exchange Notes--The Notes Are Subordinated To
Our Senior Indebtedness".
16
Guarantees.................... The Subsidiary Guarantors, which currently are
all of our subsidiaries that are engaged in our
upstream business segment, will guarantee the
Exchange Notes (the "Guarantees"). Neither
Plains All American nor any of our other
midstream subsidiaries will guarantee the
Exchange Notes. The Guarantees will be unsecured
senior subordinated obligations of the
Subsidiary Guarantors, will be subordinated in
right of payment to all Guarantor Senior
Indebtedness and on a parity with the
obligations of the Subsidiary Guarantors under
the Series A-D Notes and any Outstanding Notes
not exchanged. The Guarantees may be released
under certain circumstances. See "Description of
the Exchange Notes--The Notes Are Guaranteed By
The Senior Subordinated Guarantees".
Risk Factors
Please read "Risk Factors" beginning on Page 18 and carefully consider the
risk factors before you decide to participate in the exchange offer.
Forward-Looking Statements and Associated Risks
All statements, other than statements of historical fact, included in this
prospectus and the documents we have incorporated by reference into this
prospectus are forward-looking statements. These include statements identified
by the words "anticipate," "believe," "estimate," "expect," "plan," "intend" and
"forecast" and similar expressions and statements regarding our business
strategy, plans and objectives of our management for future operations. These
statements reflect our current views with respect to future events, based on
what we believe are reasonable assumptions. These statements, however, are
subject to certain risks, uncertainties and assumptions, including, but not
limited to:
. the availability of adequate supplies of and demand for crude oil
in the areas in which we operate;
. the impact of crude oil price fluctuations;
. the effects of competition;
. the success of our risk management activities;
. the availability (or lack thereof) of acquisition or combination
opportunities;
. the impact of current and future laws and governmental regulations;
. environmental liabilities that are not covered by an indemnity or
insurance; and
. general economic, market or business conditions.
If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially from
the results anticipated in the forward-looking statements. Except as required
by applicable securities laws, we do not intend to update these forward-looking
statements and information.
17
RATIO OF EARNINGS TO FIXED CHARGES
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------- ---------------
1995 1996 1997 1998 1999 2000 1999
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to fixed
charges........................ 1.0 1.6 1.7 --(A) --(B) 2.3 --(C)
- ----------------------------------------------------------------------------------------------------------------------
____________________
(A) The available earnings failed to cover fixed charges by $110.2 million.
Included in earnings for 1998 was a nonrecurring gain of $60.8 million
before income taxes relating to the formation of Plains All American, a
noncash full cost ceiling write down of $173.9 million before income taxes
and $7.1 million in unauthorized trading losses. If such events had not
occurred, the ratio of earnings to fixed charges would have been 1.2.
(B) The available earnings failed to cover fixed charges by $89.9 million.
Include in earnings for 1999 was $166.4 million in unauthorized trading
losses, a $16.5 million gain on the sale of linefill, a $9.8 million gain
related to the sale of units by Plains All American, and restructuring
expenses of $1.4 million. If such events had not occurred, the ratio of
earnings to fixed charges would have been 1.7.
(C) The available earnings failed to cover fixed charges by $80.0 million.
Included in earnings for the nine months ended September 30, 1999 was $114.9
million in unauthorized trading losses and restructuring expenses of $1.4
million. If such events had not occurred, the ratio of earnings to fixed
charges would have been 1.7.
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
The pro forma ratio of earnings to fixed charges gives effect to our
December 29, 2000 exchange offer of our Series G Cumulative Convertible
Preferred Stock for our Series H Convertible Preferred Stock.
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1999 2000
----------- --------------
Pro forma ratio of earnings to
fixed charges......... --(A) 2.5
____________________
(A) The available earnings failed to cover fixed charges by $89.9 million.
Included in earnings for 1999 was $166.4 million in unauthorized trading
losses, a $16.5 million gain on the sale of linefill, a $9.8 million gain
related to the sale of units by Plains All American, and restructuring
expenses of $1.4 million. If such events had not occurred, the ratio of
earnings to fixed charges would have been 1.9.
18
RISK FACTORS
You should carefully examine this entire prospectus and the documents
incorporated by reference herein and you should give particular attention to the
risk factors set forth below.
We Have a Substantial Amount of Debt, Which Could Limit Our Future Financial
Flexibility.
As of September 30, 2000, our total long-term debt and stockholders' equity
were $584.2 million and $60.4 million, respectively. In addition, we may incur
additional indebtedness under our credit facilities. We have a $225.0 million
revolving credit facility under which approximately $13.0 million was
outstanding at September 30, 2000. Plains All American has a $400.0 million
senior secured revolving credit facility under which approximately $292.0
million was outstanding at September 30, 2000. Plains All American also has a
$300.0 million senior secured letter of credit and borrowing facility under
which letters of credit of approximately $79.5 million were outstanding at
September 30, 2000.
Our level of indebtedness will have several important effects on our future
operations, including
. a substantial portion of our cash flow from operations must be
dedicated to the payment of interest on our indebtedness and
will not be available for other purposes,
. covenants contained in our debt obligations will require us to
meet certain financial tests, and other restrictions will limit
our ability to borrow additional funds or to dispose of assets
and may affect our flexibility in planning for, and reacting
to, changes in our business, including possible acquisition
activities and
. our existing debt may impair our ability to obtain additional
financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other
purposes.
Our ability to meet our debt service obligations and to reduce our total
indebtedness will depend on our future performance. Our performance will be
subject to general economic conditions and to financial, business and other
factors affecting our operations. Many of these factors are beyond our control.
We cannot assure you that our business will continue to generate cash flow at or
above current levels. If we are unable to generate sufficient cash flow from
operations in the future to service our debt, we may be required to refinance
all or some of our existing debt or to obtain additional financing. We cannot
assure you that a refinancing would be possible or that we could obtain any
additional financing.
We Spend Substantial Funds In Acquiring, Exploiting, Developing, Exploring and
Producing Oil and Gas Reserves.
We make, and will continue to make, substantial capital expenditures, to
acquire, exploit, develop, explore and produce oil and gas reserves.
Historically, we have financed these expenditures primarily with cash generated
by operations, bank borrowings and the sale of notes, common stock and preferred
stock. We made an aggregate of approximately $89.0 million in capital
expenditures in 2000, excluding acquisitions, and intend to make an aggregate of
approximately $127.0 million in capital expenditures in 2001. This amount
includes approximately $120.0 million that we plan to spend in 2001 to develop
and exploit our upstream properties, and approximately $7.0 million that we
plan to spend in 2001 for midstream activities. In addition, we intend to
continue pursuing the acquisition of underdeveloped producing properties. We
believe that we will have sufficient cash provided by operating activities and
borrowings under the Revolving Credit Facility to fund these planned capital
expenditures. We expect that Plains All American will fund the midstream capital
expenditures through working capital, cash flow and draws under the revolving
credit facility of Plains All American discussed in "Description of Certain
Indebtedness--Plains All American Pipeline Has Its Own Credit Facilities".
19
If our revenues or our borrowing base decreases because oil and gas prices
are low, we encounter operating difficulties, our reserves decline or other
reasons, we may have limited ability to expend the capital necessary to
undertake or complete future drilling programs. We cannot assure you that
additional debt or equity financing or cash generated by operations will be
available to meet these requirements.
We Have Entered Into Credit Agreements With A Group Of Banks And Have Other
Indebtedness That Have A Senior Right To Receive Payment In Full.
Our payment of the principal of, premium, if any, and interest on, the
Notes is subordinated in right of payment to the prior payment in full of all
our Senior Indebtedness, whether outstanding at the date of the Indenture or
later incurred. If any default in the payment of the principal or interest with
respect to any Senior Indebtedness occurs, we will not make any payment with
respect to the principal of, premium, if any, or interest on, the Notes unless
and until such default has been cured or waived. In addition, if any other event
of default entitling the holders of Senior Indebtedness to accelerate the
maturity thereof occurs and the Trustee receives written notice of such
occurrence, then the holders of Senior Indebtedness can block payment on the
Notes for specified periods. All of our subsidiaries that are currently engaged
in our upstream business segment will initially guarantee payments under the
Notes. Neither Plains All American nor any of our other midstream subsidiaries
will guarantee the Notes. Such Guarantees will be subordinated to Guarantor
Senior Indebtedness of our Subsidiary Guarantors and may be released under
certain circumstances, including if we designate a Subsidiary Guarantor as an
Unrestricted Subsidiary (as defined) pursuant to the terms of the Indenture. See
"Description of the Exchange Notes--The Notes Are Guaranteed By The Senior
Subordinated Guarantees".
If any payment or distribution of our assets is made to creditors because
of our dissolution, winding up, liquidation, reorganization, bankruptcy,
insolvency, receivership or assets or because of other proceedings that relate
to us, whether voluntary or involuntary, the holders of Senior Indebtedness will
be entitled first to receive payment in full of all amounts due thereon before
the holders of the Notes will be entitled to receive any payment upon the
principal of, or premium, if any, or interest on, the Notes. Because of such
subordination, if we become insolvent, holders of the Notes may recover less,
ratably, than holders of Senior Indebtedness and other of our creditors or may
recover nothing. The terms and conditions of the subordination provisions
pertinent to the Notes are described in more detail in "Description of the
Exchange Notes--The Notes Are Subordinated To Our Senior Indebtedness".
Our subsidiaries generate substantially all of our operating income. As a
result, we have generally relied, and will continue to rely, on distributions or
advances from our subsidiaries to provide the funds we need to meet our debt
service obligations, including our payment of principal and interest on the
Notes. Should we fail to satisfy any payment obligation under the Notes, the
holders would have a direct claim for our obligations under the Notes against
the Subsidiary Guarantors pursuant to their Guarantees. But the capital stock
of, and substantially all of the assets of, the Subsidiary Guarantors are
pledged to secure their obligations under the Revolving Credit Facility and
related guarantees. Further, none of our midstream subsidiaries will guarantee
the Notes so long as they are Unrestricted Subsidiaries. The Indenture imposes
certain limits on our ability and the ability of our subsidiaries (other than
Unrestricted Subsidiaries) to incur additional indebtedness and to enter into
agreements that would restrict the ability of such subsidiaries to make
distributions, loans or other payments to us. But these limitations are subject
to various qualifications. For additional detail on these Indenture provisions
and the applicable qualifications, see "Description of the Exchange Notes--The
Indenture Contains Certain Covenants."
If We Enter Bankruptcy, Your Ability To Receive Payment On The Notes May Be
Substantially Impaired.
You should carefully consider certain insolvency and bankruptcy
considerations that may affect your investment in the Notes. If we or any
Subsidiary Guarantor becomes a debtor that is subject to insolvency proceedings
under the United States Bankruptcy Code, it would likely cause delays in the
payment of the Notes and in the enforcement of remedies under the Notes or any
Guarantee. Those provisions under the United States Bankruptcy Code or general
principles of equity that could impair your rights include, but are not limited
to, the automatic stay, avoidance of preferential transfers by a trustee or
debtor-in-possession, substantive consolidation, limitations on collectability
of unmatured interest or attorney fees and forced restructuring of the Notes.
20
Under the United States Bankruptcy Code, a trustee or debtor-in-possession
may generally recover payments or transfers of property of a debtor if such
payment or transfer was
. to or for the benefit of a creditor;
. made in payment of an antecedent debt owed before the transfer was
made;
. made while the debtor was insolvent;
. made within 90 days (or one year if the payment was to an "insider" of
the debtor) before the filing of the bankruptcy case; and
. enabled the creditor to receive more than it would have received in a
liquidation under Chapter 7 of the United States Bankruptcy Code if
the transfer had not been made and the creditor received payment of
the debt as provided in the United States Bankruptcy Code.
If we suffer a financial failure, it could impair the payment of the Notes
if a bankruptcy court were to "substantively consolidate" us and our
subsidiaries. If a bankruptcy court substantively consolidated us and our
subsidiaries, the assets of each entity would be subject to the claims of
creditors for all entities. Such a consolidation would expose the holders of the
Notes not only to the usual impairments arising from bankruptcy, but also to
potential dilution of the amount ultimately recoverable because of the larger
creditor base.
You could be forced into restructuring the Notes through the "cram-down"
provision of the United States Bankruptcy Code. Under this provision, the Notes
could be restructured over the objections of holders of the Notes, including
your objections, as to their general terms, primarily interest rate and
maturity.
We May Be Required To Repurchase The Notes Upon A Change Of Control Or Asset
Sales.
If a Change of Control and a corresponding Rating Decline occur, we must
offer to purchase all Notes then outstanding at a purchase price equal to 101%
of the principal amount of the Notes, plus accrued interest to the date of
purchase. If we make certain sales or other dispositions of assets, we may be
required under certain limited circumstances to use the Net Available Proceeds
(as defined) to effect a Net Proceeds Offer. See "Description of the Exchange
Notes--The Indenture Contains Certain Covenants."
Before we would begin such an offer to purchase, we may be required to (1)
repay in full all of our indebtedness that would prohibit the repurchase of the
Notes, including that under the Revolving Credit Facility, or (2) obtain any
requisite consent to permit the repurchase. If we cannot repay all of such
indebtedness or we cannot obtain the necessary consents, then we will be unable
to offer to purchase the Notes, which would constitute an Event of Default under
the Indenture. We cannot assure you that we will have sufficient funds available
at the time of any Change of Control or Net Proceeds Offer to repurchase the
Notes. Moreover, we can make a Net Proceeds Offer only if we have Net Available
Proceeds remaining after we have applied Net Available Proceeds to purchase all
of the Series A/B Notes and Series C/D Notes that their holders tender pursuant
to a corresponding net proceeds offer.
The events that require a Change of Control or Net Proceeds Offer under the
Indenture may also constitute events of default under our Revolving Credit
Facility or other Senior Indebtedness. Such events may permit the lenders under
such debt instruments to accelerate the debt and, if we do not pay the debt, to
commence litigation that could ultimately result in a sale of substantially all
of our assets to satisfy that debt, thereby limiting our ability to raise cash
to repurchase the Notes and reducing the practical benefit of the offer to
purchase provisions to the holders of the Notes.
21
The Subsidiary Guarantees May Be Invalid Under Fraudulent Conveyance Laws.
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the Subsidiary Guarantors' issuance of the Guarantees. To the
extent that a court were to find that
. a Subsidiary Guarantor incurred a Guarantee with intent to hinder,
delay or defraud any present or future creditor or the Subsidiary
Guarantor contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others, or
. a Subsidiary Guarantor did not receive fair consideration or
reasonably equivalent value for issuing its Guarantee,
and such Subsidiary Guarantor
. was insolvent,
. was rendered insolvent because it issued such Guarantee,
. was engaged or about to engage in a business or transaction for which
the remaining assets of such Subsidiary Guarantor constituted
unreasonably small capital to carry on its business or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured,
then the court could avoid or subordinate such Guarantee in favor of the
Subsidiary Guarantor's creditors.
Among other things, a legal challenge of a Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, that the Subsidiary
Guarantor realizes from our issuance of the Notes. The Indenture contains a
savings clause, which generally limits the obligations of each Subsidiary
Guarantor under its Guarantee to the maximum amount as will, after giving effect
to all of the liabilities of such Subsidiary Guarantor, result in such
obligations not constituting a fraudulent conveyance. To the extent a Guarantee
of any Subsidiary Guarantor was avoided as a fraudulent conveyance or held
unenforceable for any other reason, then the holders of the Notes would cease to
have any claim against that Subsidiary Guarantor and would be creditors solely
of us and any Subsidiary Guarantor whose Guarantee was not avoided or held
unenforceable. If this happened, the claims of the holders of the Notes against
the issuer of an invalid Guarantee would be subject to the prior payment of all
liabilities of that Subsidiary Guarantor. We cannot assure you that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of the Notes relating to any avoided portions of any of
the Guarantees.
The measure of insolvency for purposes of the foregoing considerations will
vary depending on the law applied in any such proceeding. But generally, a
Subsidiary Guarantor may be considered insolvent if the sum of its debts,
including contingent liabilities, was greater than the fair marketable value of
all of its assets at a fair valuation or if the present fair marketable value of
its assets was less than the amount that would be required to pay its probable
liability on its existing debts, including contingent liabilities as they become
absolute and mature.
Based on financial and other information, we and the Subsidiary Guarantors
believe that the Guarantees are being incurred for proper purposes and in good
faith and that each of the Subsidiary Guarantors is solvent and will continue to
be solvent after issuing its Guarantee, will have sufficient capital for
carrying on its business and will be able to pay its respective debts as they
mature. But we cannot assure you that a court passing on such standards would
agree with us.
22
Risks Inherent In Our Operations.
We recently suffered a large loss from unauthorized crude oil trading by a
former employee. A loss of this kind could occur again in the future in
spite of our best efforts to prevent it.
Generally, it is our policy that as Plains All American purchases crude
oil, it establishes a margin by selling crude oil for physical delivery to
third-party users, such as independent refiners or major oil companies, or by
entering into a future delivery obligation under futures contracts on the NYMEX.
Through these transactions, we seek to maintain a position that is substantially
balanced between purchases, on the one hand, and sales or future delivery
obligations, on the other hand. Our policy is not to acquire and hold crude oil,
futures contracts or derivative products for the purpose of speculating on price
changes. As discussed more fully under "We Recently Experienced a Large
Unauthorized Crude Oil Trading Loss" at page 9, we discovered in November 1999
that this policy was violated by one of our former employees, which resulted in
losses of approximately $174.0 million, including estimated associated costs and
legal expenses. During the third quarter of 2000, we recognized an additional
$6.6 million charge for litigation related to the unauthorized trading losses.
We have taken steps within our organization to enhance our processes and
procedures to prevent future unauthorized trading. We cannot assure you,
however, that these steps will detect and prevent all violations of our trading
policies and procedures, particularly if deception or other intentional
misconduct is involved.
Our trading loss resulted in the termination of some of our crude oil
purchase contracts. We also are incurring additional expense for letters of
credit to support our trading operations.
In the period immediately following the disclosure of the unauthorized
trading losses, a significant number of Plains All American's suppliers and
trading partners reduced or eliminated the open credit previously extended to
Plains All American. Consequently, the amount of letters of credit Plains All
American needed to support the level of its crude oil purchases then in effect
increased significantly. In addition, the cost of letters of credit increased
under our credit facility. Some of Plains All American's purchase contracts were
terminated. As a result of these changes, aggregate volumes purchased have
declined from an average of 528,000 barrels per day for the fiscal quarter
preceding the trading loss to an average of 286,000 barrels per day in the third
quarter of 2000. Approximately 89,000 barrels per day of the decrease is related
to barrels gathered at producer lease locations and 153,000 barrels per day is
attributable to bulk purchases. Although the impact cannot be precisely
measured, we estimate that the increase in letter of credit costs and reduced
volumes will adversely affect adjusted EBITDA and net income of Plains All
American for the year 2000 by as much as approximately $5.0 to $6.0 million,
excluding the positive impact of current favorable market conditions. We
estimate that the increase in letter of credit costs and reduced volumes will
adversely affect adjusted EBITDA and net income of Plains Resources for the year
2000 by as much as approximately $5.0 to $6.0 million and approximately $1.6
million to $2.0 million, respectively, excluding the positive impact of current
favorable market conditions.
We have a substantial amount of debt, which could limit our future
financial flexibility.
As of September 30, 2000, our total long-term debt and stockholders' equity
were $584.2 million and $60.4 million, respectively. In addition, we may incur
additional indebtedness under our credit facilities. We have a $225.0 million
revolving credit facility under which approximately $13.0 million was
outstanding at September 30, 2000. Plains All American has a $400.0 million
senior secured revolving credit facility under which approximately $292.0
million was outstanding at September 30, 2000. Plains All American also has a
$300.0 million senior secured letter of credit and borrowing facility under
which letters of credit of approximately $79.5 million were outstanding at
September 30, 2000.
Our level of indebtedness will have several important effects on our future
operations, including
23
. a substantial portion of our cash flow from operations must be
dedicated to the payment of interest on our indebtedness and will
not be available for other purposes,
. covenants contained in our debt obligations will require us to
meet certain financial tests, and other restrictions will limit
our ability to borrow additional funds or to dispose of assets
and may affect our flexibility in planning for, and reacting to,
changes in our business, including possible acquisition
activities and
. our existing debt may impair our ability to obtain additional
financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other
purposes.
Our ability to meet our debt service obligations and to reduce our total
indebtedness will depend on our future performance. Our performance will be
subject to general economic conditions and to financial, business and other
factors affecting our operations. Many of these factors are beyond our control.
We cannot assure you that our business will continue to generate cash flow at or
above current levels. If we are unable to generate sufficient cash flow from
operations in the future to service our debt, we may be required to refinance
all or some of our existing debt or to obtain additional financing. We cannot
assure you that a refinancing would be possible or that we could obtain any
additional financing.
Some of our operations are in densely populated areas. This increases our
risk of damages in the event of a catastrophic accident. We are not fully
insured against all risks.
Our operations are subject to all of the risks normally incident to the
exploration for and the production of crude oil and natural gas, including
blowouts, cratering, oil spills and fires, each of which could result in damage
to or destruction of crude oil and natural gas wells, production facilities or
other property, or injury to persons. Our operations in California, including
transportation of crude oil by pipelines within the city of Los Angeles, are
especially susceptible to damage from earthquakes and involve increased risks of
personal injury, property damage and marketing interruptions because of the
population density of the area. Although we maintain insurance coverage
considered to be customary in the industry, we are not fully insured against
some risks, including earthquake risk in California, either because insurance is
not available or because of high premium costs. The occurrence of a significant
event that is not fully insured against could have a material adverse effect on
our financial position.
Our insurance does not cover every potential risk associated with
operating our pipelines, including the potential loss of significant revenues.
Consistent with insurance coverage generally available to the industry, our
insurance policies provide limited coverage for losses or liabilities relating
to pollution, with broader coverage for sudden and accidental occurrences. A
pipeline may experience damage as a result of an accident or other natural
disaster. These hazards can cause personal injury and loss of life, severe
damage to and destruction of property and equipment, pollution or environmental
damages and suspension of operations.
A significant portion of Plains All American's gross margin is derived from
two offshore California oil fields. Production from these fields is
declining.
A significant portion of the gross margin of Plains All American is derived
from the Santa Ynez and Point Arguello fields located offshore California. For
the nine months ended September 30, 2000, gross revenues less fuel and power
expenses were $22.2 million from Santa Ynez and $7.0 million from Point
Arguello. Plains All American has entered into contracts with the producers of
most of the production from these fields under which they have agreed to ship
all of their production from these fields on the All American Pipeline through
August 2007. The contracts do not require the producers to ship any minimum
volumes. Average daily volumes received from the Santa Ynez and Point Arguello
fields have declined from 92,000 and 60,000 barrels, respectively, in 1995 to
58,000 and 18,000 barrels, respectively, for the third quarter of 2000. We
expect that there will continue to be natural production declines from each of
these fields as the underlying reservoirs are depleted. As operator of the Point
Arguello field, we are currently conducting additional drilling and other
activities in this field. We cannot assure you that these activities will
affect the natural decline in production. In addition, if production is
disrupted
24
in these fields because of production problems, transportation problems or other
reasons, then it would have a material adverse effect on our midstream
business.
Our hedging arrangements for our crude oil production could reduce the
price we would receive in the absence of those arrangements.
To manage our exposure to commodity price risk, we routinely enter into
hedging arrangements under which we hedge a portion of our crude-oil production.
See "Summary--Upstream: Crude Oil and Natural Gas Production" at page 8. Our
hedging arrangements provide us protection on the hedged volumes if crude oil
prices decline below the prices at which these hedges are set. But ceiling
prices in our hedges may cause us to receive less revenue on the hedged volumes
than we would receive in the absence of hedges.
For the fourth quarter of 2000, we have entered into various arrangements
which provide for us to receive an average minimum NYMEX WTI price of $16.25 per
barrel on 18,500 barrels of oil per day. Approximately 10,000 barrels per day of
these volumes will participate in price increases up to $19.75 per barrel. For
2001, we have entered into various arrangements, using a combination of swaps,
collars and purchased puts and calls, which will provide for us to receive an
average minimum NYMEX price of approximately $23.10 per barrel on 21,500 barrels
per day with 100% of the hedges participating in NYMEX price increases to $27.00
per barrel; 55% participating beyond a price of $30.00 per barrel and 100%
participating above $36.00 per barrel. For 2002, we have hedged an average of
13,000 barrels per day at a floor price of approximately $23.14 per barrel with
31% of the hedges participating in NYMEX price increases to $35 per barrel and
100% participating above $35.00 per barrel. Location and quality differentials
attributable to our properties are not included in the foregoing prices. The
agreements provide for monthly settlement based on the differential between the
agreement price and the actual NYMEX crude oil price. Gains or losses are
recognized in the month of related production and are included in crude oil and
natural gas sales. Such contracts resulted in a reduction in revenues of $22.2
million and $56.7 million in the third quarter and first nine months of 2000,
respectively. The unrealized loss at September 30, 2000 with respect to such
contracts was $24.0 million.
The quantity of proved reserves we report is especially sensitive to
decreases in crude oil prices.
Because reservoirs deplete over time and a substantial portion of
production costs are fixed, a point is reached when additional reserves from a
reservoir are no longer economically recoverable. Our reserves are mainly crude
oil and are characterized by a long recovery time relative to U.S. industry
averages. As a result, changes in the prices we receive for our production will
affect our total economically recoverable reserve volumes more than if our crude
oil reserves were expected to be recovered at a faster rate. Historically, the
prices for oil and natural gas have been volatile and are likely to continue to
be volatile in the future. The prices that we receive for our oil and natural
gas production and the levels of our production are subject to wide fluctuations
and depend on numerous factors that we do not control. Decreases in the prices
of oil and natural gas have had, and could have in the future, an adverse effect
on the carrying value of our proved reserves and our revenues, profitability and
cash flow.
If Your Notes Are Note Exchanged In The Exchange Offer, The Market For The
Unexchanged Notes May Be Adversely Affected.
We will issue the Exchange Notes for your Outstanding Notes after we have
timely received your Outstanding Notes, a properly completed and duly executed
letter of transmittal and all other required documents. Therefore, if you desire
to tender your Outstanding Notes in exchange for Exchange Notes, then you should
allow sufficient time to ensure timely delivery. We are under no duty to notify
you of defects or irregularities with respect to your tender of Outstanding
Notes for exchange. If you do not tender your Outstanding Notes, or if we do
not accept your tender, then those Outstanding Notes will remain subject to the
existing transfer restrictions on them after we complete the exchange offer.
When we complete the exchange offer, the registration rights under the
Registration Rights Agreement will terminate unless any holder of the
Outstanding Notes notifies us on or before the Exchange Date that
. due to a change in law or policy it is not entitled to participate in
the exchange offer;
25
. due to a change in law or policy it may not resell the Exchange Notes
acquired by it in the exchange offer to the public without delivering
a prospectus and this prospectus is not appropriate or available for
such resales by such holder; or
. it is a broker-dealer that owns Outstanding Notes (including an
Initial Purchaser that holds Outstanding Notes as part of an unsold
allotment from the original offering of the Outstanding Notes) that it
acquired directly from us or from one of our affiliates.
We have agreed to file and maintain, for a period of three years, a shelf
registration statement for any holder in these circumstances. See "Exchange
Offer-We May Have To File A Shelf Registration Statement". In addition, any
holder of Outstanding Notes who tenders in the exchange offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Outstanding Notes, if it
acquired such Outstanding Notes as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution".
To the extent that Outstanding Notes are tendered and accepted in the exchange
offer, the trading market for untendered and tendered but unaccepted Outstanding
Notes could be adversely affected. See "The Exchange Offer".
26
THE EXCHANGE OFFER
Why Are We Making The Exchange Offer?
We sold the Outstanding Notes on September 22, 1999, to the Initial
Purchasers, who then sold the Outstanding Notes to qualified institutional
buyers in reliance on Rule 144A under the Securities Act. When we sold the
Outstanding Notes to the Initial Purchasers, we, the Subsidiary Guarantors and
the Initial Purchasers entered into the Registration Rights Agreement, which
requires, among other things, that we file with the Commission a registration
statement under the Securities Act and offer to exchange your Outstanding Notes
for a like principal amount of Exchange Notes. We must use our best efforts to
cause that Registration Statement to be declared effective by the Commission
under the Securities Act and to begin the exchange offer, and we must use our
best efforts to issue, on or before the Exchange Date, the Exchange Notes. We
will issue the Exchange Notes without a restrictive legend. A holder of
Exchange Notes may reoffer and resell them without restrictions or limitations
under the Securities Act unless he is one of our "affiliates" within the meaning
of Rule 405 under the Securities Act, he participates in the exchange offer
intending to participate in a distribution or he does not acquire the Exchange
Notes in the ordinary course of his business. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this prospectus is a part.
What Are The Terms Of The Exchange Offer?
On the terms and subject to the conditions in this prospectus and in the
letter of transmittal, we will accept any and all Outstanding Notes that you
validly tender and do not withdraw before 5:00 p.m., New York City time, on the
Expiration Date. On the Exchange Date, we will issue to you $1,000 principal
amount of Exchange Notes in exchange for every $1,000 principal amount of
Outstanding Notes that you tender and that we accept in the exchange offer. You
may tender some or all of your Outstanding Notes pursuant to the exchange offer.
You may only tender Outstanding Notes in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Outstanding Notes except that we have registered the Exchange Notes under
the Securities Act and so they will not bear legends restricting their transfer
and the holders of the Exchange Notes will not be entitled to certain rights
under the Registration Rights Agreement. The Exchange Notes will evidence the
same debt as the Outstanding Notes and will be entitled to the benefits of the
Indenture.
As of the date of this prospectus, $75,000,000 aggregate principal amount
of the Outstanding Notes was outstanding and registered in the name of Cede &
Co., as nominee for the Depository Trust Company ("DTC"). We have fixed the
close of business on _________ __, 2001, as the record date for the exchange
offer for purposes of determining those persons to whom we will initially send
this prospectus and the letter of transmittal.
You do not have any appraisal or dissenters' rights under the General
Corporation Law of Delaware or the Indenture in connection with the exchange
offer. We intend to conduct the exchange offer according to the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder, including Rule 14e-1.
We are deemed to accept validly tendered Outstanding Notes when we orally
or in writing notify the Exchange Agent that we accept those tenders. The
Exchange Agent will act as agent for the tendering Holders for the purpose of
receiving the Exchange Notes from us.
If we do not accept any tendered Outstanding Notes for exchange because of
an invalid tender, because certain other events set forth in this prospectus
occur or for whatever other reason, we will return the certificates for any
unaccepted Outstanding Notes, without expense, to the appropriate tendering
holder as soon as we practically can after the Expiration Date.
If you tender your Outstanding Notes in the exchange offer you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the
27
exchange of Outstanding Notes pursuant to the exchange offer. We will pay all
charges and expenses, other than transfer taxes in certain circumstances, in
connection with the exchange offer. See "--Who Bears The Fees and Expenses Of
The Exchange Offer".
When Does Interest Begin Accruing On The Exchange Notes?
The Exchange Notes will bear interest from the date that we issue them.
Interest on the Outstanding Notes will accrue until then. We will pay interest
on the Exchange Notes semi-annually every March 15 and September 15, beginning
on March 15, 2001.
How Do I Tender My Outstanding Notes?
Only a Holder (as defined) of Outstanding Notes may tender Outstanding
Notes in the exchange offer. To tender in the exchange offer, you must
. complete, sign and date the letter of transmittal, or a facsimile
thereof;
. have the signatures on the letter of transmittal guaranteed if
the letter of transmittal so requires; and
. mail or otherwise deliver the letter of transmittal or the
facsimile, together with your Outstanding Notes and any other
required documents, to the Exchange Agent before 5:00 p.m., New
York City time, on the Expiration Date.
To tender your Outstanding Notes effectively, the Exchange Agent must
receive the Outstanding Notes, the letter of transmittal and all other required
documents at the address set forth below under "Exchange Agent" before 5:00
p.m., New York City time, on the Expiration Date. You may deliver your
Outstanding Notes by book-entry transfer in accordance with the procedures that
we describe below. The Exchange Agent must receive confirmation of such book-
entry transfer before the Expiration Date.
We understand that the Exchange Agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the Exchange
Notes at DTC to facilitate the exchange offer, and subject to its establishment,
any financial institution that is a participant in DTC's system may make book-
entry delivery of its Outstanding Notes by causing DTC to transfer its
Outstanding Notes into the Exchange Agent's account according to DTC's
procedures. Although you may deliver the Outstanding Notes through book-entry
transfer into the Exchange Agent's account at DTC, you must transmit to and the
Exchange Agent must receive an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee and all other
required documents at its address set forth below on or before the Expiration
Date, or, if you comply with the guaranteed delivery procedures described below,
within the time period provided under such procedures. However, if you are a
participant in DTC's book-entry system, you may, in accordance with DTC's
Automated Tender Offer Program procedures and in lieu of physical delivery to
the Exchange Agent of a letter of transmittal, electronically acknowledge that
you received and agree to be bound by, the terms of the letter of transmittal.
Just because you deliver documents to DTC does not mean that you have delivered
those documents to the Exchange Agent.
By executing the letter of transmittal, you will represent to us that the
facts are as set forth below in the second paragraph under the heading "Can I
Resell The Exchange Notes?".
Your tender and our acceptance will constitute an agreement between you and
us in accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
YOU CHOOSE AND ELECT AT YOUR OWN RISK THE METHOD YOU DELIVER YOUR
OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS
TO THE EXCHANGE AGENT. WE RECOMMEND AGAINST DELIVERING THESE DOCUMENTS BY MAIL.
WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND DELIVERY
28
SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND THE LETTER OF
TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY REQUEST YOUR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR YOU.
If you beneficially own Outstanding Notes that are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and you
wish to tender, you should contact the registered Holder promptly and instruct
the registered Holder to tender on your behalf.
An Eligible Institution (as defined below) must guarantee the signatures on
the letter of transmittal or a notice of withdrawal unless the Outstanding Notes
are tendered:
. by a registered Holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
. for the account of an Eligible Institution.
As used in this prospectus, the term "Eligible Institution" means 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.
If a person other than the registered Holder of any Outstanding Notes
listed signs the letter of transmittal, then those Outstanding Notes must be
endorsed or accompanied by a properly completed bond power, and signed by that
registered Holder as that registered Holder's name appears on those Outstanding
Notes, and the signature guaranteed by an Eligible Institution.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any Outstanding Notes, then these
persons should so indicate when signing, and unless we waive the requirement,
they must submit with the letter of transmittal evidence that satisfies us that
they have authority to so act.
We will determine in our sole discretion all questions as to the validity,
form, eligibility (including time of receipt), acceptance and withdrawal of
tendered Outstanding Notes and our 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 our acceptance of which would, in the opinion
of our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of 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 amount of time that we
determine. Although we intend to notify you of defects or irregularities with
respect to your tenders of Outstanding Notes, we, the Exchange Agent or any
other person will not incur any liability for failure to give such notification.
You will not be deemed to have tendered your Outstanding Notes until any such
defects or irregularities have been cured or waived. If the Exchange Agent
receives Outstanding Notes that are not properly tendered, and as to which the
defects or irregularities have not been cured or waived, the Exchange Agent will
return them to the tendering Holders, unless otherwise provided in the letter of
transmittal, as soon as practicable after the Expiration Date.
How Do I Take Advantage Of The Guaranteed Delivery Procedures?
If you wish to tender your Outstanding Notes and your Outstanding Notes are
not immediately available, you cannot deliver your Outstanding Notes, the letter
of transmittal or any other required documents to the Exchange Agent or you
cannot complete the procedures for book-entry transfer, before the Expiration
Date, you may tender if:
29
. you tender through an Eligible Institution;
. before the Expiration Date, the Exchange Agent receives from that
Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery by facsimile transmission, mail or
hand delivery setting forth your name and address, the
certificate numbers of your Outstanding Notes and the principal
amount of Outstanding Notes tendered, stating that you are
tendering thereby and guaranteeing that, within five New York
Stock Exchange trading days after the Expiration Date, the
Eligible Institution will deposit the letter of transmittal or
facsimile thereof, together with the certificates representing
the Outstanding Notes, or a confirmation of book-entry transfer
of such Outstanding Notes into the Exchange Agent's account at
DTC, and any other documents that the letter of transmittal
requires, with the Exchange Agent; and
. the Exchange Agent receives within five New York Stock Exchange
trading days after the Expiration Date, such properly completed
and executed letter of transmittal or facsimile thereof, as well
as the certificates representing all tendered Outstanding Notes
in proper form for transfer, or a confirmation of book-entry
transfer of such Outstanding Notes into the Exchange Agent's
account at DTC, and all other documents that the letter of
transmittal requires.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to you if you wish to tender your Outstanding Notes according to the
guaranteed delivery procedures set forth above.
How Do I Withdraw My Tender?
Except as otherwise provided in this prospectus, you may withdraw your
tender of Outstanding Notes at any time before 5:00 p.m., New York City time, on
the Expiration Date.
To withdraw your tender of Outstanding Notes, the Exchange Agent must
receive a written or facsimile transmission notice of withdrawal at its address
set forth in this prospectus before 5:00 p.m., New York City time, on the
Expiration Date. Your notice of withdrawal must
. specify the name of the person who deposited the Outstanding
Notes to be withdrawn;
. identify the Outstanding Notes to be withdrawn, including the
certificate numbers and principal amount of such Outstanding
Notes, or, in the case of Outstanding Notes transferred by book-
entry transfer, the name and number of the account at DTC to be
credited;
. be signed by the Holder in the same manner as the original
signature on the letter of transmittal by which those Outstanding
Notes were tendered including any required signature guarantees
or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Outstanding Notes register the
transfer of such Outstanding Notes into the name of the person
withdrawing the tender;
. specify the name in which those Outstanding Notes are to be
registered, if different from that of the person who deposited
the Outstanding Notes; and
. if applicable because the Outstanding Notes have been tendered
pursuant to book-entry procedures, specify the name and number of
the participant's account at DTC to be credited, if different
from that of the person who deposited the Outstanding Notes.
We will determine all questions as to the validity, form and eligibility,
including time of receipt, of such notices, and our determination will be final
and binding on all parties. Any Outstanding Notes so withdrawn will
30
be deemed not to have been validly tendered for purposes of the exchange offer,
and we will not issue any Exchange Notes with respect to those Outstanding Notes
unless those Outstanding Notes are validly retendered. We will return to you any
Outstanding Notes that you have tendered and that we do not accept for exchange,
without cost to you, as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. Properly withdrawn Outstanding
Notes may be retendered by following one of the procedures described above under
"--How Do I Tender My Outstanding Notes?" at any time before the Expiration
Date.
Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or to issue Exchange Notes for, any Outstanding
Notes, and we may terminate or amend the exchange offer as provided herein
before we accept any Outstanding Notes, if:
. any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the
exchange offer that might materially impair our ability to
proceed with the exchange offer or any material adverse
development has occurred in any existing action or proceeding
with respect to us or any of our subsidiaries;
. any change, or any development involving a prospective change, in
our business or financial affairs or any of our subsidiaries has
occurred that might materially impair our ability to proceed with
the exchange offer;
. any law, statute, rule, regulation or interpretation by the
Commissions's staff is proposed, adopted or enacted that might
materially impair our ability to proceed with the exchange offer
or materially impair the contemplated benefits of the exchange
offer to us; or
. we have not obtained any governmental approval that we, in our
sole discretion, deem necessary to consummate the exchange offer
as contemplated in this prospectus.
If we determine in good faith and in the exercise of our reasonable
discretion that any of the conditions are not satisfied, we may
. refuse to accept any Outstanding Notes and return all tendered
Outstanding Notes to the tendering Holders;
. extend the exchange offer and retain all Outstanding Notes
tendered before the exchange offer expires, subject to the rights
of Holders to withdraw their Outstanding Notes (see "--How Do I
Withdraw My Tender"); or
. waive any unsatisfied conditions with respect to the exchange
offer and accept all properly tendered Outstanding Notes that
have not been withdrawn. If such waiver constitutes a material
change to the exchange offer, we will promptly disclose to you
such waiver by distributing to the registered Holders a
prospectus supplement, and, depending on the significance of the
waiver and the manner of disclosure to the registered Holders, we
will extend the exchange offer for five to 10 business days if
the exchange offer would otherwise expire within five to 10 days
after such waiver.
Who Is The Exchange Agent?
Chase Bank of Texas, National Association has been appointed as Exchange
Agent for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or of the letter
of transmittal and requests for Notice of Guaranteed Delivery to the Exchange
Agent addressed as follows:
31
By Registered or Certified Mail: By Overnight Mail or Hand: By Facsimile:
Chase Bank of Texas, National Chase Bank of Texas, National (For Eligible Institutions Only)
Association Association Chase Bank of Texas, National
Attention: Frank Ivins, Registered Attention: Frank Ivins, Registered Association
Bond Events Bond Events (214) 672-5746
P.O. Box 2320 1201 Main Street, 18/th/ Floor Confirm: (800) 275-2048
Dallas, Texas 75221-2320 Dallas, Texas 75202
Who Bears The Fees And Expenses Of The Exchange Offer?
We will bear the expenses of soliciting tenders pursuant to the exchange
offer. We are principally soliciting tenders by mail; but our officers and
regular employees and those of our affiliates may additionally solicit tenders
by telegraph, telephone or in person.
We have not retained any dealer-manager in connection with the exchange
offer and we will not make any payments to brokers or others soliciting
acceptances of the exchange offer. But we will pay the Exchange Agent
reasonable and customary fees for its services and registration expenses,
including fees and expenses of the Trustee, filing fees, blue sky fees and
printing and distribution expenses.
We will pay all transfer taxes, if any, applicable to the exchange of the
Outstanding Notes pursuant to the exchange offer. But if we are going to
deliver or issue certificates representing the Exchange Notes, or the
Outstanding Notes for the principal amounts not tendered or accepted for
exchange, in the name of, any person other than the person signing the letter of
transmittal, or if a transfer tax is imposed for any reason other than the
exchange of the Outstanding Notes pursuant to the exchange offer, then the
tendering Holder will pay any such transfer taxes (whether imposed on the
registered Holder or any other person).
How Will The Exchange Notes Receive Accounting Treatment?
We will record the Exchange Notes at the same carrying value as the
Outstanding Notes, which is face value as adjusted for original issue premium,
as reflected in our accounting records on the date of exchange. Accordingly, you
will not recognize any gain or loss for accounting purposes. The expenses of
the exchange offer will be amortized over the term of the Exchange Notes.
Can I Resell The Exchange Notes?
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties, we believe that you may offer for resale,
resell and otherwise transfer the Exchange Notes that we issue to you pursuant
to the exchange offer in exchange for Outstanding Notes without needing to
comply with the registration and prospectus delivery provisions of the
Securities Act, provided that
. you acquire such Exchange Notes in the ordinary course of your
business and you do not intend to participate and have no arrangement
or understanding with any person to participate in the distribution of
such Exchange Notes; and
. you are not one of our "affiliates" within the meaning of Rule 405
under the Securities Act.
If you tender in the exchange offer intending to participate, or for the purpose
of participating, in a distribution of the Exchange Notes, then you may not rely
on the position of the Commission's staff enunciated in Exxon Capital Holdings
Corporation (available April 13, 1989) and Morgan Stanley & Co., Incorporated
(June 5, 1991), or similar no-action letters. You must instead comply with the
registration and prospectus delivery requirements of the Securities Act when you
offer or resell your Exchange Notes. In addition, when you resell your Exchange
Notes, an effective registration statement containing the selling security
holders information required by Item 507 of Regulation S-K of the Securities Act
should cover the transaction. Each broker-dealer that receives Exchange
32
Notes for its own account in exchange for Outstanding Notes, if it acquired
those Outstanding Notes as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of those Exchange Notes. See "Plan of Distribution".
If you tender in the exchange offer, you will represent to us that, among
other things,
. you are acquiring the Exchange Notes in the ordinary course of
the business of the person receiving those Exchange Notes,
whether or not such person is you;
. neither you nor any such other person has an arrangement or
understanding with any person to participate in the distribution
of those Exchange Notes; and
. you and such other person acknowledge that if they participate in
the exchange offer for the purpose of distributing the Exchange
Notes,
- you and such person must, in the absence of an exemption,
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on the no-
action letters referenced above and
- if you fail to comply with such requirements, you may incur
liability under the Securities Act for which we will not
indemnify you.
By tendering in the exchange offer, each Holder that may be deemed to be
one of our "affiliates" (as defined under Rule 405 of the Securities Act) will
represent to us that it understands and acknowledges that it may not offer for
resale, resell, or otherwise transfer the Exchange Notes without registration
under the Securities Act or qualifying for an exemption thereunder. Our
affiliates may not rely on the foregoing interpretations of the Commission's
staff with respect to resales of the Exchange Notes without complying with the
registration and prospectus delivery requirements of the Securities Act.
We May Have To Issue Private Exchange Notes.
The Registration Rights Agreement provides that if, before we complete the
exchange offer, the Initial Purchasers hold any Outstanding Notes that they
acquired and that have, or that are reasonably likely to be determined to have,
the status of an unsold allotment in the initial distribution, or any other
holder of Outstanding Notes may not participate in the exchange offer, we must,
if the Initial Purchasers or that Holder requests, issue and deliver to the
Initial Purchasers and that holder, in exchange for such Outstanding Notes,
Private Exchange Notes. We must issue and deliver them at the same time that we
deliver the Exchange Notes in the exchange offer. We will issue any Private
Exchange Notes pursuant to the same Indenture as the Exchange Notes. The
registration statement of which this prospectus is a part does not cover the
Private Exchange Notes and we are not offering them hereby. Any Private Exchange
Notes will receive all the rights and will be subject to all the limitations
applicable to them under the Indenture and will be subject to the same
restrictions on transfer applicable to untendered Outstanding Notes. See "--
What Happens If My Outstanding Notes Are Not Exchanged?". But, pursuant to the
Registration Rights Agreement, holders of Private Exchange Notes have certain
rights to require us to file and maintain a shelf registration statement that
would allow the holders of the Private Exchange Notes to resell their Private
Exchange Notes. See "--We May Have To File A Shelf Registration Statement".
What Happens If My Outstanding Notes Are Not Exchanged?
This exchange offer fulfills one of our obligations under the Registration
Rights Agreement; and, except as described under "--We May Have To File A Shelf
Registration Statement", if you do not tender your Outstanding Notes, then you
will not have any further registration rights under the Registration Rights
Agreement or otherwise. Accordingly, if you do not exchange your Outstanding
Notes for Exchange Notes, then you will continue to hold the untendered
Outstanding Notes and you will be entitled to all the rights and limitations
33
applicable to them under the Indenture, except to the extent those rights or
limitations, by their terms, terminate or cease to have further effectiveness as
a result of the exchange offer.
Any Outstanding Notes that you do not exchange for Exchange Notes pursuant
to the exchange offer will remain restricted securities. Accordingly, you may
only resell such Outstanding Notes:
. to us, if we redeem them or otherwise;
. pursuant to an effective registration statement under the
Securities Act;
. so long as the Outstanding Notes are eligible for resale pursuant
to Rule 144A, to a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act in a transaction
meeting the requirements of Rule 144A;
. outside the United States to a foreign person pursuant to the
exemption from the registration requirements of the Securities
Act provided by Regulation S thereunder;
. to an institutional accredited investor that, before such
transfer, furnishes to the Trustee a signed letter containing
certain representations and agreements relating to the
restrictions on transfer of the Outstanding Notes evidenced
thereby (the form of which letter can be obtained from such
trustee); or
. pursuant to another available exemption from the registration
requirements of the Securities Act, in each case in accordance
with any applicable securities laws of any state of the United
States.
Accordingly, the exchange offer, to the extent that we exchange Outstanding
Notes for Exchange Notes, could adversely affect the trading market for the
untendered Outstanding Notes.
We May Have To File A Shelf Registration Statement.
If:
. we may not consummate the exchange offer because any applicable
law or applicable interpretation of the Commission or the
Commission's staff does not permit the exchange offer,
. any holder of an Outstanding Note notifies us on or before the
Exchange Date that
. due to a change in law or policy it is not entitled to
participate in the exchange offer,
. due to a change in law or policy it may not resell the
Exchange Notes that it would acquire in the exchange offer
to the public without delivering a prospectus and this
prospectus is not appropriate or available for such resales
by such holder or
. it is a broker-dealer that owns Outstanding Notes, including
Initial Purchasers that hold Outstanding Notes as part of an
unsold allotment from the original offering of the
Outstanding Notes, acquired directly from us or one of our
affiliates or
. any holder of Private Exchange Notes so requests within 120 days
after we consummate the exchange offer,
34
then we have agreed to file and maintain a registration statement that would
allow resales of transfer-restricted Outstanding Notes, Exchange Notes or
Private Exchange Notes that any of these holders own.
Some Other Matters You Should Consider.
Your participation in the exchange offer is voluntary and we strongly urge
you to carefully consider your decision to participate. We urge you to consult
your financial and tax advisors regarding the exchange offer and to decide for
yourself what action you should take.
We may in the future seek to acquire untendered Outstanding Notes in the
open market or privately negotiated transactions, through later exchange offers
or otherwise. We do not presently plan to acquire any Outstanding Notes that
are not tendered in the exchange offer or to file a registration statement to
permit resales of any untendered Outstanding Notes, except for the filing, if
required, of a shelf registration statement pursuant to "-We May Have To File A
Shelf Registration Statement".
35
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations, judicial
authority and administrative rulings and practice. We cannot assure you that
the Internal Revenue Service will not take a contrary view, and no ruling from
the Internal Revenue Service has been or will be sought. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to you. Certain Holders of the Outstanding Notes (including
insurance companies, tax exempt organizations, financial institutions, broker-
dealers, persons who have hedged the risk of owning an Outstanding Note, foreign
corporations and persons who are not citizens or residents of the United States)
may be subject to special rules not discussed below. You should consult your
own tax advisor as to the particular tax consequences of exchanging your
Outstanding Notes for Exchange Notes, including the applicability and effect of
any state, local or foreign tax laws.
Our issuance of the Exchange Notes to Holders of the Outstanding Notes
pursuant to the terms set forth in this prospectus should not constitute a
recognition event for federal income tax purposes. Consequently, you should not
recognize any gain or loss when you receive the Exchange Notes. For purposes of
determining gain or loss if you later sell or exchange the Exchange Notes, your
basis in the Exchange Notes should be the same as your basis in the Outstanding
Notes that you exchange. You should be considered to have held the Exchange
Notes from the time you originally acquired the Outstanding Notes.
USE OF PROCEEDS
We intend that this exchange offer will satisfy certain of our obligations
under the Purchase Agreement and the Registration Rights Agreement. We will not
receive any cash proceeds from our issuance of the Exchange Notes. In
consideration for issuing the Exchange Notes contemplated in this prospectus, we
will receive Outstanding Notes in like principal amount, the form and terms of
which are the same as the form and terms of the Exchange Notes (which they
replace), except as otherwise described in this prospectus. We will retire and
cancel the Outstanding Notes surrendered in exchange for Exchange Notes and we
may not reissue them. Accordingly, our issuance of the Exchange Notes will not
increase or decrease our indebtedness.
The net proceeds that we received when we sold the Outstanding Notes
were approximately $74.6 million. We used these proceeds to reduce indebtedness
outstanding under our $225.0 million Revolving Credit Facility with a group of
banks. The Revolving Credit Facility bears interest at our option of either
LIBOR plus 1 3/8% or the Base Rate. The "Base Rate" is defined as the higher of
the federal funds rate plus 1/2% or Prime. The average interest rate at
September 30, 2000, of all outstanding indebtedness under the Revolving Credit
Facility was approximately 8.0%. The Subsidiary Guarantors other than PMCT
Inc. guarantee the Revolving Credit Facility and the oil and gas properties of
us and the Subsidiary Guarantors other than PMCT Inc. The stock of the
Subsidiary Guarantors collateralizes the Revolving Credit Facility.
36
DESCRIPTION OF CERTAIN INDEBTEDNESS
We and certain of our subsidiaries have established credit facilities with
different commercial lenders to fund working capital requirements, to issue
letters of credit and to fund other obligations to support our crude oil
marketing activities. The following summarizes these credit facilities.
We Have A Revolving Credit Facility.
We have a $225.0 million revolving credit facility with a group of banks.
The Subsidiary Guarantors (except PMCT Inc.) guarantee the revolving credit
facility, and all of our and the Subsidiary Guarantors' (except PMCT Inc.)
property including oil and gas properties and the stock of the Subsidiary
Guarantors secures the revolving credit facility. The borrowing base under the
revolving credit facility at September 30, 2000, is $225.0 million and is
subject to redetermination from time to time by the lenders in good faith, in
the exercise of the lenders' sole discretion, and in accordance with customary
practices and standards in effect from time to time for crude oil and natural
gas loans to borrowers similar to our company. Our borrowing base may be
affected from time to time by the performance of our oil and natural gas
properties and changes in oil and natural gas prices. We incur a commitment fee
of 3/8% per annum on the unused portion of the borrowing base. In addition, we
pay a fee of 13/8% per annum of the face amount of letters of credit that are
issued under our revolving credit facility. The revolving credit facility, as
amended, terminates on July 1, 2002, at which time the remaining outstanding
balance converts to a term loan which is repayable in twelve equal quarterly
installments commencing October 1, 2002, with a final maturity of July 1, 2005.
The revolving credit facility bears interest, at our option, of either LIBOR
plus 13/8% or Base Rate (as defined therein). At September 30, 2000, borrowings
of $13.0 million and letters of credit of $0.6 million were outstanding under
the revolving credit facility.
The revolving credit facility contains covenants which, among other things,
prohibit the payment of cash dividends on common stock, limit repurchases of
common stock, limit the amount of consolidated debt, limit our ability to make
certain loans and investments and provide that we must maintain a specified
relationship between current assets and current liabilities. We are currently
in compliance with the covenants contained in the revolving credit facility. At
September 30, 2000, we could have borrowed the full $225.0 million available
under the revolving credit facility.
We Have Issued Series A-D Notes.
We have $200 million principal amount of 10 1/4% Senior Subordinated Notes
due 2006 outstanding, in addition to the Notes, which bear a coupon rate of 10
1/4% and consist of (in thousands):
. Series A $ 500
. Series B 149,500
. Series C 50
. Series D 49,950
The covenants and other terms of the Series A-D Notes are substantially the
same as the covenants and other terms of the Notes. See "Description of the
Exchange Notes." The Indenture governing the issuance of the Notes provides for
the issuance of an additional $75 million of Notes provided that such debt can
be issued in compliance with the covenants and other terms of the indenture
governing the Series A-D Notes, the Indenture and our revolving credit
facility.
Plains All American Pipeline Has Its Own Credit Facilities Through Its Operating
Subsidiaries.
On May 8, 2000, Plains All American entered into new bank credit
agreements. The borrower under the
37
new facilities is Plains Marketing, L.P., and its obligations under the
facilities are guaranteed by Plains All American and the subsidiaries of Plains
Marketing, L.P. The bank credit agreements were entered into in order to:
. refinance the existing bank debt of Plains Marketing, L.P. and
Plains Scurlock Permian, L.P. in conjunction with the merger of
Plains Scurlock Permian, L.P. into All American Pipeline, L.P.;
. refinance existing bank debt of All American Pipeline, L.P.;
. repay us up to $114.0 million plus accrued interest of
subordinated debt; and
. provide additional flexibility for working capital, capital
expenditures and for other general corporate purposes.
Plains All American's new bank credit agreements consist of:
. a $400.0 million senior secured revolving credit facility. The
revolving credit facility is secured by substantially all of
Plains All American's assets and matures in April 2004. No
principal is scheduled for payment prior to maturity. The
revolving credit facility bears interest, at Plains All
American's option, of either a base rate, as defined, plus an
applicable margin, or LIBOR plus an applicable margin. Plains All
American incurs a commitment fee on the unused portion of the
revolving credit facility. At September 30, 2000, $292.0 was
outstanding under this facility.
. A $300.0 million senior secured letter of credit and borrowing
facility, the purpose of which is to provide standby letters of
credit to support the purchase or exchange of crude oil and,
subject to a $100 million sublimit, borrowings to finance crude
oil inventory that has been hedged against future price risk.
This facility is secured by substantially all of Plains All
American's assets and expires in April 2003. Aggregate
availability under this facility for direct borrowings and
letters of credit is limited to a borrowing base, which is
determined monthly based on certain of Plains All American's
current assets and current liabilities (primarily inventory and
accounts receivable and accounts payable related to the purchase
and sale of crude oil). At September 30, 2000, approximately
$79.5 million in letters of credit were outstanding under the
letter of credit and borrowing facility. At September 30, 2000,
no amounts were outstanding in borrowings under this facility,
other than the amounts outstanding pursuant to the letters of
credit.
Plains All American's bank credit agreements prohibit distributions on, or
purchases or redemptions of, units if any default or event of default is
continuing. In addition, the agreements contain various covenants limiting
Plains All American's ability to, among other things:
. incur indebtedness;
. grant liens;
. sell assets;
. make investments;
. engage in transactions with affiliates;
. enter into prohibited contracts; and
. enter into a merger or consolidation.
Plains All American's bank credit agreements treat a change of control as
an event of default and also require Plains All American to maintain:
. a current ratio (as defined) of 1.0 to 1.0;
. a debt coverage ratio that is not greater that 4.0 to 1.0 for the
period from March 31, 2000 to and including March 31, 2002 and
subsequently 3.75 to 1.0;
. an interest coverage ratio that is not less than 2.75 to 1.0; and
. a debt to capital ratio of not greater than 0.65 to 1.0.
38
A default under Plains All American's bank credit agreements would permit
the lenders to cease or terminate their commitments to make loans or issue
letters of credit, to accelerate the maturity of the outstanding debt and to
foreclose on the assets securing the credit facilities. As long as Plains All
American is in compliance with its bank credit agreements, it may make
distributions of "available cash" as defined in its partnership agreement.
Plains All American is currently in compliance with the covenants contained in
its bank credit agreements.
Each of the credit facilities of Plains All American is without recourse to
us or the Subsidiary Guarantors, and our revolving credit facility is without
recourse to Plains All American.
Some Other Matters You Should Consider.
We have total other indebtedness of approximately $2.0 million at September
30, 2000, of which we have classified approximately $1.5 million as other long-
term debt on the Consolidated Balance Sheet as of September 30, 2000. We issued
this indebtedness to Chevron in connection with the December 1995 purchase of a
production payment on the Los Angeles Basin Properties. This indebtedness to
Chevron bears interest at 8% payable annually, requires equal annual principal
payments of approximately $511,000 and is unsecured.
39
DESCRIPTION OF THE EXCHANGE NOTES
In General.
We are going to issue the Exchange Notes as a separate series of notes
under an indenture (the "Indenture") dated as of September 15, 1999 (the
"Indenture Date"), among the Subsidiary Guarantors, Chase Bank of Texas,
National Association, as trustee (the "Trustee"), and us. The Exchange Notes
will be senior unsecured obligations of us and are substantially identical
(including principal amount, interest rate, maturity and redemption rights) to
the Outstanding Notes for which they may be exchanged pursuant to this offer,
except for certain transfer restrictions and registration rights relating to the
Outstanding Notes and except for certain interest provisions relating to such
rights. Under the terms of the Indenture, the covenants and events of default
will apply equally to the Exchange Notes and the Outstanding Notes, and the
Exchange Notes and the Outstanding Notes will be treated as one class for all
actions to be taken by the holders thereof and for determining their respective
rights under the Indenture. Whenever we refer to the Notes we are including the
Exchange Notes, the Outstanding Notes and the Private Placement Notes unless the
context otherwise requires. We issued the Outstanding Notes under the Indenture
on September 15, 1999 in an aggregate principal amount of $75 million. The
Indenture also provides us the flexibility of issuing additional Notes in the
future in principal amount not to exceed $75 million in the aggregate; however,
any issuance of such additional Notes would be subject to the covenants
described in the first paragraph under "--The Indenture Contains Certain
Covenants--We Are Limited In How We Incur Additional Indebtedness. Upon the
issuance of the Exchange Notes or the effectiveness of the exchange offer
Registration Statement, the Indenture will be subject to and governed by the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act")". The
following summarizes certain provisions of the Indenture and the Registration
Rights Agreement and does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the
Indenture and the Registration Rights Agreement, including the definition of
certain terms contained therein and those terms that are made a part of the
Indenture by reference to the Trust Indenture Act. Copies of the form of
Indenture and Registration Rights Agreement have been filed as an exhibit to the
Registration Statement of which this prospectus is a part. Capitalized terms
not otherwise defined below or elsewhere in this prospectus have the meanings
given to them in the Indenture. The definitions of certain capitalized terms
used in the summary are set forth below under "-- Certain Definitions".
What Is The Principal, Maturity And Interest Of The Notes?
The Exchange Notes:
. will be unsecured senior subordinated general obligations of us;
. will mature on March 15, 2006 (the "Maturity Date");
. will be limited in aggregate principal amount to $75 million;
. will be issued in denominations of $1,000 and integral multiples
thereof in fully registered form; and
. will rank on parity with the Series A-D Notes.
The Notes will accrue interest at the rate of 10 1/4% per annum from the
date of issuance, or from the most recent interest payment date to which
interest has been paid or duly provided for, and we will pay accrued and unpaid
interest semi-annually on March 15 and September 15 of each year, commencing
September 15, 2000. Interest accrued and unpaid through the Exchange Date on the
Outstanding Notes that are tendered in exchange for the Exchange Notes will be
payable on or before September 15, 2000. Outstanding Notes that we accept for
exchange will cease to accrue interest on and after the date on which interest
on the Exchange Notes will begin to accrue. Interest will be paid to the person
in whose name the Exchange Note is registered at the close of business on March
1 or September 1 next preceding such interest payment date. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. We will pay
both the principal and interest on the Exchange Notes at the
40
office or agency that we maintain for such purpose within the City and State of
New York. In addition, if the Exchange Notes do not remain in book-entry form,
then we may, at our option, pay interest, by check mailed to the holders of the
Exchange Notes ("Holders") at their respective addresses set forth in the
register of Holders. Until we otherwise designate, our office or agency in New
York will be the Trustee's office or agency maintained for such purpose. Any
Outstanding Notes that remain outstanding after we complete the exchange offer,
together with the Exchange Notes that we issue in connection with the exchange
offer and any Private Exchange Notes, will be treated as a single class of
securities under the Indenture.
We May Be Able To Or May Be Required To Redeem Or Repurchase The Notes.
When We Can Optionally Redeem The Notes. We can redeem the Exchange Notes
at our option in whole at any time or in part from time to time, on and after
March 15, 2001 at the following redemption prices (expressed as percentages of
the principal amount) if redeemed during the twelve-month period commencing on
March 15 of the year set forth below, plus, in each case, accrued interest
thereon to the date of redemption:
Redemption
Year Price
---- ----------
2001................................ 105.1250%
2002................................ 103.4167%
2003................................ 101.7083%
2004 and thereafter................. 100.0000%
If we redeem less than all of the Notes, the Trustee will select the Notes
for redemption pro rata, by lot or by any other method that the Trustee
considers fair and appropriate and, if the Exchange Notes are listed on any
securities exchange, by a method that complies with the requirements of that
exchange. Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Exchange Notes to be
redeemed at such Holder's registered address. On and after the redemption date,
interest will cease to accrue on Exchange Notes or portions thereof called for
redemption (unless we default in the payment of the redemption price or accrued
interest).
When We Must Offer To Purchase The Notes. As described below, (1) upon the
occurrence of a Change of Control and a corresponding Rating Decline, we must
offer to purchase all outstanding Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of purchase and (2) upon certain sales or other dispositions of assets,
we may be obligated to make offers to purchase Notes with a portion of the Net
Proceeds of such sales or other dispositions at a purchase price equal to 100%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of purchase. See "--A Change Of Control May Require Us To
Repurchase The Notes" and "--The Indenture Contains Certain Covenants-We Are
Limited In How We Dispose Our Assets".
A Change of Control May Require Us To Repurchase The Notes.
Upon the occurrence of a Change of Control and a corresponding Rating
Decline, we must offer to purchase all of the then-outstanding Notes (a "Change
of Control Offer"), and we must purchase, on a Business Day (the "Change of
Control Purchase Date") not more than 60 nor less than 30 days after the
occurrence of a Rating Decline following a Change of Control (or, if the Rating
Decline occurs before the corresponding Change of Control not more than 60 nor
less than 30 days after the occurrence of the Change of Control), all of the
then-outstanding Notes validly tendered pursuant to such Change of Control
Offer, at a purchase price (the "Change of Control Purchase Price") equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the Change of Control Purchase Date. We must keep the Change of Control
Offer open for at least 20 Business Days and until the close of business on the
fifth Business Day before the Change of Control Purchase Date.
To effect such Change of Control Offer, we must, not later than the 30th
day after the occurrence of the Rating Decline corresponding to such Change of
Control (or, if the Rating Decline occurs before the corresponding Change of
Control, then not later than the 30th day following the occurrence of the Change
of Control), mail to the Trustee and to each Holder of the Notes notice of the
Change of Control Offer, and this notice shall govern the
41
terms of the Change of Control Offer and shall state, among other things, the
procedures that Holders of the Notes must follow to accept the Change of Control
Offer.
We, to the extent applicable and if required by law, will comply with
Sections 13 and 14 of the Exchange Act and the provisions of Regulation 14E and
any other tender offer rules under the Exchange Act and any other federal and
state securities laws, rules and regulations that may then be applicable to any
offer by us to purchase the Notes pursuant to the Change of Control covenant.
If a Change of Control and corresponding Rating Decline occur and a
substantial amount of the Notes is presented for purchase, then we cannot assure
you that we would have sufficient financial resources to enable us to purchase
those Notes. If we must purchase Notes pursuant to a Change of Control Offer,
we expect that we would seek third-party financing to the extent we do not have
available funds to meet our purchase obligations. But we cannot assure you that
we could obtain such financing. A Change of Control would constitute an Event
of Default under the Bank Credit Agreement and permit First Union National Bank,
as agent thereunder (in such capacity, the "Credit Facility Agent") to terminate
the commitment of the lenders under the Bank Credit Agreement and declare all
amounts outstanding thereunder to be due and payable, and the rights of the
Holders to receive the Change of Control Purchase Price or any other amounts due
on the Notes would be subordinated to the rights of the holders of Senior
Indebtedness. If the Bank Credit Agreement were not accelerated, we
nevertheless must obtain a consent from the Credit Facility Agent and the
lenders under the present terms of the Bank Credit Agreement to incur any
indebtedness (other than indebtedness under such Bank Credit Agreement) to
repurchase Outstanding Notes pursuant to a Change of Control Offer. See "--What
Are The Events of Default?".
The Indenture provides that a default in the payment of the Change of
Control Purchase Price would constitute an Event of Default under the Indenture
as a remedy for which Holders would be entitled to receive the Change of Control
Purchase Price. If such an Event of Default resulted in a default under Senior
Indebtedness, then the right of the Holders of Notes to receive the Change of
Control Purchase Price (whether at a Change of Control Purchase Date or upon
acceleration) or any other amounts due on acceleration of the Notes would be
subordinated to the rights of the holders of Senior Indebtedness.
The Change of Control provisions of the Indenture as well as the
restrictions in the Indenture on the ability of us and our Subsidiaries to incur
additional Indebtedness, to grant Liens on our property, to make Restricted
Payments and to make Asset Dispositions may make more difficult or discourage a
takeover of us, whether favored or opposed by our current management. To
consummate any such transaction may require in certain circumstances redemption
or repurchase of the Notes, and we cannot assure you that we or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with Related
Persons may, in certain circumstances, make more difficult or discourage any
leveraged buyout of us or any of our Subsidiaries by our management.
The Notes Are Subordinated To Our Senior Indebtedness.
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment as set forth in the Indenture to the prior
payment in full of all Senior Indebtedness, whether outstanding on the date of
the Indenture or thereafter created, incurred, assumed or guaranteed. Such
subordination will not prevent the occurrence of an Event of Default, and no
payment on any Guarantee shall constitute payment "on our behalf" within the
meaning of the following paragraphs; provided that a payment by a Subsidiary
Guarantor on a Guarantee shall constitute a payment "on our behalf" within the
meaning of the following paragraphs if any guarantee by such Subsidiary of
Indebtedness under the Bank Credit Agreement shall have been determined by a
court of competent jurisdiction to be invalid or unenforceable, in whole or in
part.
No payment may be made by us or on our behalf on account of principal of or
interest on the Notes or to acquire or repurchase any of the Notes or on account
of the redemption provisions of the Notes (1) upon the maturity of any Senior
Indebtedness by lapse of time, acceleration or otherwise, unless and until all
such Senior Indebtedness is first paid in full or (2) upon the happening of any
default in payment of any principal of or interest on any Senior Indebtedness
when the same becomes due and payable (a "Payment Default"), unless and until
such
42
Payment Default shall have been cured or waived or shall have ceased to
exist.
Upon the happening of a default (other than a Payment Default) with respect
to any Senior Indebtedness, as such default or event of default is defined
therein or in the instrument or agreement under which it is outstanding, and
upon written notice thereof given to us and the Trustee by any holders of such
Senior Indebtedness or their representative (a "Payment Notice"), then, unless
and until such default or event of default shall have been cured or waived or
shall have ceased to exist or the representative gives its written approval, no
payment shall be made by us or on our behalf on account of principal of or
interest on the Notes or to acquire or repurchase any of the Notes or on account
of the redemption provisions of the Notes; but these provisions will not prevent
the making of any payment for more than 179 days after the due date of the first
principal or interest payment on the Notes after a Payment Notice shall have
been given. Notwithstanding the foregoing, (1) not more than one Payment Notice
shall be given within a period of 360 consecutive days, and (2) a Payment Notice
may only be given (A) if more than $5 million of Senior Indebtedness is
outstanding under the Bank Credit Agreement at the time of such notice, by the
representative or (B) if $5 million or less of Senior Indebtedness is
outstanding under the Bank Credit Agreement at the time of such notice, by a
holder or holders (or the representative of holders) of at least $5 million
principal amount of Senior Indebtedness.
Upon any distribution of the assets of us or payment on the Notes on our
behalf in the event of any Insolvency or Liquidation Proceeding with respect to
us, the holders of Senior Indebtedness will be entitled to receive payment in
full of such Senior Indebtedness before the Holders are entitled to receive any
payment on account of the principal or interest due with respect to the Notes.
Because of these subordination provisions, our creditors who are holders of
Senior Indebtedness may recover more, ratably, than the Holders of the Notes.
The subordination provisions described above will cease to apply to the
Notes upon any legal defeasance or covenant defeasance of the Notes as described
under "--Satisfaction and Discharge of Indenture; Defeasance".
As of September 30, 2000, our total long-term debt and stockholders' equity
were $584.2 million (including $292.0 million of long-term debt under the credit
facilities of Plains All American which is without recourse to us or the
Subsidiary Guarantors) and $60.4 million, respectively. In addition, as
described below under "--The Notes Are Guaranteed By The Senior Subordinated
Guarantees", at September 30, 2000, the Subsidiary Guarantors had no outstanding
Guarantor Senior Indebtedness, other than $13.0 million representing guarantees
of our Senior Indebtedness. We are a holding company, and the Notes will be
structurally subordinated to, and the Guarantees will be subordinated to,
Guarantor Senior Indebtedness. The foregoing amounts include only liabilities
included on our consolidated balance sheet under GAAP; we and our subsidiaries
have other liabilities, including contingent liabilities, which may be
significant. Although the Indenture will contain limitations on the amount of
additional Indebtedness that we and our Subsidiaries may incur, the amounts of
such Indebtedness could be substantial and, in any case, such Indebtedness may
be Senior Indebtedness, Guarantor Senior Indebtedness or Indebtedness of
Unrestricted Subsidiaries (to which the Notes will be structurally
subordinated). See "The Indenture Contains Certain Covenants -- We Are Limited
In How We Incur Additional Indebtedness".
The Notes Are Guaranteed By The Senior Subordinated Guarantees.
The Subsidiary Guarantors, which consist of all of our upstream
subsidiaries, will unconditionally guarantee, jointly and severally, to each
Holder and the Trustee, the full and prompt performance of our obligations under
the Indenture and the Notes, including the payment of principal of and interest
on the Notes. In addition to the initial Subsidiary Guarantors, we will cause
each Person (other than an Unrestricted Subsidiary) that shall become a Material
Subsidiary after the Indenture Date to execute and deliver a supplement to the
Indenture pursuant to which such Person will guarantee the payment of the Notes
on the same terms and conditions as the Guarantees by the Subsidiary Guarantors.
As described below under "The Indenture Contains Certain Covenants -- We Are
Limited In How We Incur Additional Indebtedness", no Subsidiary that is not
already a Subsidiary Guarantor shall incur any Indebtedness with respect to
Indebtedness of us or another Subsidiary unless such Subsidiary becomes a
guarantor of the Notes.
43
The obligations of each Subsidiary Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities (including, but not limited to, Guarantor Senior Indebtedness of
such Subsidiary Guarantor) of such Subsidiary Guarantor and after giving effect
to any collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Guarantee or pursuant to its contribution obligations under the Indenture,
result in the obligations of such Subsidiary Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Subsidiary Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell or
otherwise dispose of all or substantially all of its properties and assets to us
or another Subsidiary Guarantor without limitation, except to the extent any
such transaction is subject to the "We Are Limited In How We May Enter Into A
Transaction Involving A Merger, Consolidation Or Sale Of Substantially All Of
Our Assets" covenant of the Indenture. Each Subsidiary Guarantor may
consolidate with or merge into or sell all or substantially all of its
properties and assets to a Person other than us or another Subsidiary Guarantor
(whether or not affiliated with the Subsidiary Guarantor), provided that (1) if
the surviving Person is not the Subsidiary Guarantor, the surviving Person
agrees to assume such Subsidiary Guarantor's Guarantee and all its obligations
pursuant to the Indenture (except to the extent the following paragraph would
result in the release of such Subsidiary Guarantee) and (2) such transaction
does not (a) violate any of the covenants described below under "-- The
Indenture Contains Certain Covenants" or (b) result in a Default or Event of
Default immediately thereafter that is continuing.
Upon the sale or other disposition (by merger or otherwise) of a Subsidiary
Guarantor (or all or substantially all of its properties and assets) pursuant to
a transaction that is otherwise in compliance with the Indenture (including as
described in the foregoing paragraph), such Subsidiary Guarantor shall be deemed
released from its Subsidiary Guarantee and the related obligations set forth in
the Indenture; but any such termination shall occur only to the extent that all
obligations of such Subsidiary Guarantor under all of its guarantees of, and
under all of its pledges of assets or other security interests that secure,
other Indebtedness of us or any Subsidiary shall also terminate or be released
upon such sale or other disposition. Each Subsidiary Guarantor that is
designated as an Unrestricted Subsidiary in accordance with the Indenture shall
be released from its Subsidiary Guarantee and related obligations set forth in
the Indenture for so long as it remains an Unrestricted Subsidiary.
The Guarantees of each Subsidiary Guarantor are subordinated to the prior
payment in full of all Guarantor Senior Indebtedness of such Subsidiary
Guarantor to substantially the same extent as the Notes are subordinated to
Senior Indebtedness. As of September 30, 2000, the Subsidiary Guarantors had
outstanding no Guarantor Senior Indebtedness, other than $13.0 million
representing guarantees of our Senior Indebtedness.
The Indenture Contains Certain Covenants.
The Indenture contains, among others, the following covenants:
We Are Limited In How We Incur Additional Indebtedness.
We will not, and will not permit any of the Subsidiaries directly or
indirectly, to issue, incur, assume, guarantee, become liable, contingently or
otherwise, with respect to or otherwise become responsible for the payment of
(collectively, "incur") any Indebtedness (other than Permitted Indebtedness);
but if no Default or Event of Default with respect to the Notes shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness, we and the Subsidiaries or any of us may incur Indebtedness
if on the date of the incurrence, (1) both (a) our Consolidated EBITDA Coverage
Ratio would have been greater than 2.5 to 1.0, and (b) our Adjusted Consolidated
Net Tangible Assets are equal to or greater than 150% of Indebtedness of us and
the Subsidiaries, or (2) our Adjusted Consolidated Net Tangible Assets are equal
to or greater than 200% of Indebtedness of us and the Subsidiaries.
For purposes of determining any particular amount of Indebtedness under
this covenant, guarantees of
44
Indebtedness otherwise included in the determination of such amount shall not
also be included.
Notwithstanding anything to the contrary in this covenant, no Subsidiary
that is not already a Subsidiary Guarantor shall incur any Indebtedness with
respect to any Indebtedness of us or any other Subsidiary unless such
Subsidiary, we and the Trustee execute and deliver a supplemental indenture
evidencing that Subsidiary's Guarantee of the Notes, such Guarantee to be a
senior subordinated unsecured obligation of such Subsidiary.
For purposes of determining any particular amount of Indebtedness incurred
under this covenant, any Indebtedness incurred by us or any Subsidiary that is
incurred for, or related to, a Person other than another Subsidiary or us, as
applicable, shall be deemed to be in an amount equal to the greater of:
. the lesser of (1) the full amount of the Indebtedness of such other
Person or (2) the fair market value of the assets and properties of us
or such Subsidiary, as to which the holder or holders of such
Indebtedness are expressly limiting the obligations of us or such
Subsidiary, the value of which assets and properties of us or any
Subsidiary, will be as determined in good faith by our Board of
Directors or the Board of Directors of such Subsidiary, as applicable
(which determinations shall be evidenced by a Board Resolution of the
applicable Person); and
. we or such Subsidiary have expressly contractually assumed or
guaranteed the amount of the Indebtedness of such other Person.
The Subsidiary Guarantors Are Limited In How They Incur Senior Subordinated
Indebtedness.
We will not, directly or indirectly, issue, assume, guarantee, incur or
otherwise become liable for any Indebtedness that is both subordinate or junior
in right of payment to any Senior Indebtedness and senior or superior in right
of payment to the Notes. The Subsidiary Guarantors will not, directly or
indirectly, issue, assume, guarantee, incur or otherwise become liable for any
Indebtedness that is both subordinate or junior in right of payment to any
Guarantor Senior Indebtedness and senior or superior in right of payment to the
Guarantees.
We Are Limited In How We Make Restricted Payments.
We will not, and will not permit any of the Subsidiaries to, directly or
indirectly, make any Restricted Payment, if at the time of such Restricted
Payment, or on a pro forma basis after giving effect thereto:
(1) a Default or an Event of Default under the Indenture has occurred and
is continuing;
(2) the aggregate amount expended for all Restricted Payments after the
Issue Date exceeds the sum of (without duplication):
(a) 50% of our aggregate Consolidated Net Income (net of losses
resulting from full costs ceiling write downs attributable to any oil and
gas properties or those of any Subsidiary) (or if such Consolidated Net
Income is a loss, minus 100% of that loss) earned on a cumulative basis
during the period beginning on the Series A/B Issue Date and ending on the
last date of our fiscal quarter immediately preceding such Restricted
Payment; plus
(b) 100% of the aggregate Net Proceeds that we receive from any Person
other than a Subsidiary from the issuance and sale after the Series A/B
Issue Date of Qualified Capital Stock (excluding (A) any Qualified Capital
Stock paid as a dividend on any Capital Stock or as interest on any
Indebtedness, (B) the issuance of Qualified Capital Stock upon the
conversion of, or in exchange for, any Qualified Capital Stock and (C) any
Qualified Capital Stock with regard to issuances and sales financed
directly or indirectly using funds that we or any Subsidiary have
borrowed, until and to the extent such funds are repaid); plus
(c) to the extent not otherwise included in Consolidated Net Income,
dividends, repayments of loans or advances, or other transfers of assets,
in each case to us or a Subsidiary after the Series A/B
45
Issue Date from any Unrestricted Subsidiary or from the redesignation of
an Unrestricted Subsidiary as a Subsidiary (valued in each case as
provided in the definition of Investment) other than amounts constituting
Permitted Unrestricted Subsidiary Investments; and
(d) $15 million; or
(3) We could not incur $1.00 of additional Indebtedness (excluding
Permitted Indebtedness) as provided in the first paragraph of "--We Are
Limited In How We Incur Additional Indebtedness".
The foregoing provisions of this covenant will not prevent the payment of any
dividend within 60 days after the date of its declaration if the dividend would
have been permitted on the date of declaration; but provided payments made in
accordance with this paragraph shall be counted for purposes of computing
amounts expended pursuant to subclause (2) in the immediately preceding
paragraph.
We Are Limited In How We Dispose Our Assets.
We will not, and will not permit any Subsidiary to, make any Asset
Disposition unless:
(1) in the case of any Asset Disposition or series of related Asset
Dispositions having a fair market value of more than $10 million, we receive
or such Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value, the determination of
which, including the value of all non-cash consideration, must be approved in
good faith by our Board of Directors and the Board of Directors of that
Subsidiary, if any,
(2) the proceeds from any Asset Disposition (other than any Asset
Disposition or series of related Asset Dispositions that have a value of less
than $1 million) consist of cash and cash equivalents or Permitted Industry
Investments or any combination of the foregoing; provided that we or such
Subsidiary may accept proceeds from that Asset Disposition in other than cash
and cash equivalents or Permitted Industry Investments or any combination of
the foregoing if the aggregate amount of all proceeds from all Asset
Dispositions after the Series A/B Issue Date, that are other than cash and
cash equivalents or Permitted Industry Investments after that Asset
Disposition, does not exceed 15% of Adjusted Consolidated Net Tangible Assets
at the date of that Asset Disposition,
(3) within 365 days after the receipt of the Net Available Proceeds from
such Asset Disposition, 100% of the Net Available Proceeds from such Asset
Disposition are applied by us or such Subsidiary:
(a) to the payment of Indebtedness under the Bank Credit Agreement and
the payment of any other Senior Indebtedness;
(b) at our option to the extent that such Net Available Proceeds are
not applied to Senior Indebtedness, to Permitted Industry Investments made
by us or a Subsidiary (or, to the extent not so applied during such 365-
day period, to Permitted Industry Investments specifically identified
during such 365-day period reasonably anticipated in good faith by our
Board of Directors to be expended within 180 days after being specifically
identified (such 180-day period, the "Project Period")); and
(c) to the extent that any Net Available Proceeds are not applied to
Senior Indebtedness or applied or to be applied to Permitted Industry
Investments, to offer to purchase (the "Series A/B Net Proceeds Offer")
(on a business day (the "Series A/B Net Proceeds Payment Date") not later
than the later of (A) 365 days after the receipt of such Net Available
Proceeds or (B) in the case of application of proceeds intended to be
applied under clause (b), 35 business days after any Project Period) the
Series A/B Notes at a price equal to 100% of the principal amount of the
Series A/B Notes plus accrued interest to the Series A/B Net Proceeds
Payment Date; and
(d) to the extent that any Net Available Proceeds are not applied to
Senior Indebtedness or applied or to be applied to Permitted Industry
Investments or to a Series A/B Net Proceeds Offer, to
46
make an offer to purchase (the "Series C/D Net Proceeds Offer") (on a
business day (the "Series C/D Net Proceeds Payment Date") not later than
the later of (1) 365 days following the receipt of such Net Available
Proceeds or (2) in the case of application of proceeds intended to be
applied under clause (b), 35 business days following any Project Period or
(3) in the case of application of proceeds intended to be applied under
clause (c), 90 business days following the Series A/B Net Proceeds Payment
Date) the Series C/D Notes at a price equal to 100% of the principal
amount of the Series C/D Notes plus accrued interest to the Series C/D Net
Proceeds Payment Date; and
(4) to the extent that any Net Available Proceeds are not applied to
Senior Indebtedness or applied or to be applied to Permitted Industry
Investments or to a Series A/B Net Proceeds Offer or to a Series C/D Net
Proceeds Offer, to make an offer to purchase (the "Net Proceeds Offer") (on a
business day (the "Net Proceeds Payment Date") not later than 90 business
days following the Series C/D Net Proceeds Payment Date) the Notes at a price
equal to 100% of the principal amount of the Notes plus accrued interest to
the Net Proceeds Payment Date.
Notwithstanding the foregoing, we and our Subsidiaries will not be required
to apply any Net Available Proceeds in accordance with such provisions except to
the extent that the Net Available Proceeds from all Asset Dispositions which are
not applied in accordance with such provisions exceed $5 million.
Notice of a Net Proceeds Offer to purchase the Notes will be made on our
behalf not less than 25 business days nor more than 60 business days before the
Net Proceeds Payment Date. Notes tendered to us pursuant to a Net Proceeds
Offer will cease to accrue interest after the Net Proceeds Payment Date. We
will not be entitled to any credit against the above obligations for the
principal amount of Notes that we previously acquired. For purposes of this
covenant, the term "Net Proceeds Offer Amount" means the principal of
outstanding Notes in an aggregate principal amount equal to any remaining Net
Available Proceeds.
On the Net Proceeds Payment Date, we will:
. accept for payment Notes or portions thereof tendered pursuant to the Net
Proceeds Offer in an aggregate principal amount equal to the Net Proceeds
Offer Amount or such lesser amount of Notes as has been tendered;
. deposit with the paying agent money sufficient to pay the purchase price
of all Notes or portions thereof so tendered in an aggregate principal
amount equal to the Net Proceeds Offer Amount or such lesser amount; and
. deliver or cause to be delivered to the Trustee, Notes so accepted
together with an officers' certificate stating the Notes or portions
thereof tendered to us.
If the aggregate principal amount of Notes tendered exceeds the Net Proceeds
Offer Amount, then the Trustee will select the Notes to be purchased on a pro
rata basis based on the principal amount of Notes so tendered. The paying agent
will promptly mail or deliver to Holders of the Notes so accepted payment in an
amount equal to the purchase price, and we will execute, and the Trustee will
promptly authenticate and mail or make available for delivery to such Holders, a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be promptly mailed or delivered to
the Holder thereof. We will publicly announce the results of the Net Proceeds
Offer on or as soon as practicable after the Net Proceeds Payment Date. For
purposes of this covenant, the Trustee or its agent will act as the paying
agent. We and our Subsidiaries may make Asset Dispositions in accordance with
this covenant and receive consideration in the form of equity, partnership or
other ownership interests where we might not control such resulting entity.
Our ability to repurchase Notes in a Net Proceeds Offer is restricted by the
terms of the Bank Credit Agreement and may be prohibited or otherwise limited by
the terms of any then-existing borrowing arrangements and by our financial
resources.
47
We Are Limited In How We Incur Liens Securing Indebtedness.
We will not, and will not permit any of the Subsidiaries to, create, incur,
assume or suffer to exist any Liens (other than Permitted Liens) upon any of
their respective Properties securing (1) any of our Indebtedness, unless the
Notes are equally and ratably secured or (2) any Indebtedness of any Subsidiary
Guarantor, unless the Notes or the Guarantees are equally and ratably secured;
provided that if such Indebtedness is expressly subordinated to the Notes or the
Guarantees, the Lien securing such Indebtedness will be subordinated and junior
to the Lien securing the Notes or the Guarantees, with the same relative
priority as such Subordinated Indebtedness will have with respect to the Notes
or the Guarantees, as the case may be.
We Are Limited In How We Make Payment Restrictions Affecting Subsidiaries.
We will not, and will not permit any Subsidiary to, directly or indirectly,
create or suffer to exist or allow to become effective any consensual
encumbrance or restriction of any kind (1) on the ability of any of the
Subsidiaries (a) to pay dividends or make other distributions on its Capital
Stock or make payments on any Indebtedness owed to us or any other Subsidiary,
(b) to make loans or advances to us or any other Subsidiary, or (c) to transfer
any of its Property to us or any other Subsidiary; or (2) on the ability of such
Person or any other subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or (c) transfers of
Property (any such restriction being referred to herein as a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of (A) the Bank Credit Agreement as in effect on the Series A/B Issue
Date, (B) customary provisions restricting subletting or assignment of any lease
governing a leasehold interest of us or any Subsidiary, (C) any instrument
governing Indebtedness of a Person acquired by us or a Subsidiary at the time of
such acquisition, which encumbrance or restriction is not applicable to any
Person, other than the Person, or the Property of the Person, so acquired,
provided that such Indebtedness was not incurred in anticipation of such
acquisition, (D) with respect to clauses (1)(c) and (2)(c) above, Purchase Money
Obligations for Property acquired in the ordinary course of business, (E)
Indebtedness existing pursuant to a written agreement in effect on the Series
A/B Issue Date, (F) Indebtedness under the Series A/B Indenture, (G)
Indebtedness under the Series C/D Indenture, (H) Indebtedness under the
Indenture or (I) Indebtedness incurred to refinance, refund, extend or renew
Indebtedness referred to in clauses (A), (C), (D), (E), (F), (G) or (H) above,
provided that the Payment Restrictions contained therein are not materially more
restrictive than those provided for in the Indebtedness being refinanced,
refunded, extended or renewed.
We Are Limited In How We Enter Into Transactions With Related Persons.
Neither we nor any of the Subsidiaries will (1) sell, lease, transfer or
otherwise dispose of any of our or its Property to, (2) purchase any property
from, (3) make any Investment (other than Permitted Unrestricted Subsidiary
Investments and other Investments that do not breach the covenant described
under the caption "--We Are Limited In How We Make Restricted Payments") in, or
(4) enter into any contract or agreement with or for the benefit of, a Related
Person of us or of any Subsidiary (other than us or any such Subsidiary in which
no Related Person (other than us or another Wholly Owned Subsidiary) owns,
directly or indirectly, an equity interest) (a "Related Person Transaction"),
other than Related Person Transactions that are on terms (which terms are in
writing) no less favorable to us or a Subsidiary, as applicable, than could be
obtained in a comparable arm's length transaction from an unaffiliated party;
provided that, if we enter or any Subsidiary enters into a Related Person
Transaction or series of Related Person Transactions involving or having an
aggregate value of more than $5 million, such Related Person Transaction will
have been approved by a majority of our independent directors. Notwithstanding
anything to the contrary in the foregoing, the foregoing restrictions shall not
apply to (1) Related Person Transactions that are approved by our Board of
Directors and the Board of Directors of such Subsidiary, if applicable, as in
our best interests or the best interests of that Subsidiary, which transactions
together with all other Related Person Transactions in a related series involve
or have an aggregate value not exceeding $1 million in each fiscal year; (2)
fees and compensation paid to or agreements with our officers, directors,
employees or consultants or those of any Subsidiary in each case that are
reasonable, as determined by the Board of Directors or senior management thereof
in good faith; and (3) Restricted Payments that are not prohibited by the "We
Are Limited In How We Make Restricted Payments" covenant.
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We Are Limited In How We Conduct Our Business.
We and the Subsidiaries will be operated in a manner such that our and
their business activities will be the oil and gas business, including the
exploration for and the development, acquisition, production, processing,
marketing, storage and transportation of, Hydrocarbons and other related energy
and natural resources businesses, and such other businesses as are reasonably
necessary or desirable to facilitate the conduct and operations of the foregoing
businesses.
We Must Deliver Certain Reports.
We will file on a timely basis with the Commission, to the extent such
filings are accepted by the Commission and whether or not we have a class of
securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that we would be required to file if we were subject
to Section 13 or 15 of the Exchange Act. We also must (1) file with the Trustee
(with exhibits), and provide to each Holder of Notes (without exhibits), without
cost to such Holder, copies of those reports and documents within 15 days after
the date on which we file those reports and documents with the Commission or the
date on which we would be required to file such reports and documents if we were
so required and (2) if filing such reports and documents with the Commission is
not accepted by the Commission or is prohibited under the Exchange Act, supply
at our cost copies of such reports and documents (including any exhibits
thereto) to any Holder of Notes promptly upon written request.
Further Designation Of Restricted And Unrestricted Subsidiaries May Affect
The Covenants.
The foregoing covenants (including calculation of financial ratios and the
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by our designation of any of our existing or future Subsidiaries as an
Unrestricted Subsidiary. The definition of "Unrestricted Subsidiary" set forth
under the caption "--Certain Definitions" describes the circumstances under
which one of our Subsidiaries may be designated as an Unrestricted Subsidiary by
our Board of Directors.
We Are Limited In How We May Enter Into A Transaction Involving A Merger,
Consolidation Or Sale Of Substantially All Of Our Assets.
We will not consolidate with or merge with any other Person or convey,
transfer or lease all or substantially all of our Property to any Person,
unless: (1) we survive such merger or the Person formed by that consolidation or
into which we are merged or that acquires by conveyance or transfer, or which
leases, all or substantially all of our Property is a corporation organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia and expressly assumes, by supplemental indenture, the
due and punctual payment of the principal of (and premium, if any) and interest
on all the Notes and the performance of every other of our covenants and
obligations under the Indenture; (2) immediately before and after giving effect
to such transaction, no Default or Event of Default exists; (3) immediately
after giving effect to such transaction on a pro forma basis, our Consolidated
Net Worth (or the surviving entity if we are not continuing) is equal to or
greater than our Consolidated Net Worth immediately before such transaction and
(4) immediately after giving effect to such transaction on a pro forma basis, we
(or the surviving entity if we are not continuing) could incur $1.00 of
additional Indebtedness (excluding Permitted Indebtedness) under the tests
described in the first paragraph of "We Are Limited In How We Incur Additional
Indebtedness". Upon any such consolidation, merger, conveyance, lease or
transfer in accordance with the foregoing, the successor Person formed by such
consolidation or into which we are merged or to which such conveyance, lease or
transfer is made will succeed to, and be substituted for, and may exercise every
right and power of, us under the Indenture with the same effect as if such
successor had been named as us therein, and thereafter (except in the case of a
lease) the predecessor corporation will be relieved of all further obligations
and covenants under the Indenture and the Notes.
49
What Are The Events of Default?
The following will constitute Events of Default under the Indenture:
(1) default in the payment of principal of, or premium, if any, on, the
Notes when due at maturity, upon repurchase, upon acceleration or
otherwise, including our failure to repurchase the Notes required to
be repurchased upon a Change of Control and corresponding Rating
Decline or a Net Proceeds Offer and our failure to make any optional
redemption payment;
(2) default in the payment of any installment of interest on the Notes
when due (including any interest payable in connection with optional
redemption payment) and continuance of such default for 30 days;
(3) default on any other Indebtedness of us, any Subsidiary Guarantor or
any other Subsidiary if either (a) such default results from the
failure to pay principal of, premium, if any, or interest on any
such Indebtedness when due in excess of $5 million and continuance
of such default beyond any applicable cure, forbearance or notice
period, or (b) as a result of such default, the maturity of such
Indebtedness has been accelerated before its scheduled maturity,
without such default and acceleration having been rescinded or
annulled within a period of 10 days, and the principal amount of
such Indebtedness, together with the principal amount of any other
such indebtedness in default, or the maturity of which has been so
accelerated, aggregates $5 million or more;
(4) default in the performance, or breach, of any other covenant of us
or any Subsidiary Guarantor in the Indenture and failure to remedy
such default within a period of 60 days after written notice thereof
from the Trustee or Holders of 25% in principal amount of the
outstanding Notes;
(5) the entry by a court of one or more judgments or orders against us,
any Subsidiary Guarantor or any other Subsidiary in an aggregate
amount in excess of $10 million and which are not covered by
insurance written by third parties that has not been vacated,
discharged, satisfied or stayed pending appeal within 60 days from
the entry thereof;
(6) certain events of bankruptcy, insolvency or reorganization in
respect of us or any Material Subsidiary; or
(7) a Guarantee by a Subsidiary Guarantor that is a Material Subsidiary
shall cease to be in full force and effect (other than a release of
a Guarantee by designation of a Subsidiary Guarantor as an
Unrestricted Subsidiary) or any Subsidiary Guarantor shall deny or
disaffirm its obligations with respect thereto.
If any Event of Default (other than an Event of Default specified in clause
(6) above) occurs and is continuing, then and in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Notes then
outstanding may declare the unpaid principal of, and accrued and unpaid interest
on, all the Notes, then outstanding to be due and payable, by a notice in
writing to us (and to the Trustee, if given by Holders) and upon any such
declaration such principal amount, premium, if any, and accrued and unpaid
interest shall become immediately due and payable, notwithstanding anything
contained in the Indenture or the Notes to the contrary. If an Event of Default
specified in clause (6) above occurs, all unpaid principal of, premium, if any,
and accrued interest on, the Notes then outstanding will become due and payable,
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in principal amount of the outstanding Notes, by
written notice to us, the Subsidiary Guarantors and the Trustee, may rescind and
annul a declaration of acceleration and its consequences if (1) we have or any
Subsidiary Guarantor has paid or deposited with such Trustee a sum sufficient to
pay (a) all overdue installments of interest on all the Notes, (b) the principal
of, and premium, if any, on, any Notes that have become due otherwise than by
such declaration of acceleration and interest thereon at the rate or rates
prescribed
50
therefor in the Notes, (c) to the extent that payment of such interest is
lawful, interest on the defaulted interest at the rate or rates prescribed
therefor in the Notes, and (d) all money paid or advanced by the Trustee
thereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; (2) all Events of Default, other than
the non-payment of the principal of any Notes that have become due solely by
such declaration of acceleration, have been cured or waived as provided in the
Indenture; and (3) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction. No such rescission will affect any later
Event of Default or impair any right consequent thereon.
No Holder of any of the Notes will have any right to institute any
proceeding, judicial or otherwise, or for the appointment of a receiver or
trustee or pursue any remedy under the Indenture, unless (1) such Holder has
previously given notice to the Trustee of a continuing Event of Default, (2) the
Holders of not less than 25% in principal amount of the outstanding Notes have
made written request to such Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee under the Indenture, (3) such
Holder or Holders have offered to such Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request,
(4) such Trustee for 30 days after it receives such notice, request and offer of
indemnity has failed to institute any such proceeding, and (5) no direction
inconsistent with such written request has been given to such Trustee during
such 30-day period by the Holders of a majority in principal amount of the
outstanding Notes.
The Holder of any Note will have the absolute and unconditional right to
receive payment of the principal of, premium, if any, and interest on such Note
on the stated maturity therefor and to institute suit for the enforcement of any
such payment, and such right may not be impaired without the consent of such
Holder.
The Holders of a majority in principal amount of the 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
such Trustee, provided that (1) such direction is not in conflict with any rule
of law or with the Indenture and (2) the Trustee may take any other action
deemed proper by such Trustee that is not inconsistent with such direction.
How Can We Obtain Modifications And Waivers?
The Indenture may be amended or rights thereunder may be waived with the
consent of us, the Subsidiary Guarantors, and the Holders of at least a majority
of the principal amount of Notes then outstanding, provided that, without the
consent of each Holder of Notes affected thereby, no such modification or waiver
will be made with regard to: (1) a default in the payment of principal, premium
(if any) or interest on the Notes; (2) a reduction of the interest rate on or
principal amount of the Notes, an extension of the maturity schedule of the
Notes, or a modification of the redemption or repurchase provisions of the
Notes; (3) a change that adversely affects subordination rights; (4) a change in
the currency in which the Notes are payable; or (5) a change in the percentage
of Holders of the principal amount of Notes that this provision requires.
Satisfaction And Discharge Of Indenture; Defeasance.
We may at any time terminate our Obligations under the Notes and the
Indenture, and the Subsidiary Guarantors may, at such times, terminate their
corresponding obligations under the Subsidiary Guarantees and the Indenture,
with certain exceptions specified in the Indenture, by irrevocably depositing in
trust cash or obligations of the United States government and its agencies for
payment of principal of, and interest on, the Notes to redemption or maturity,
subject to the satisfaction of certain conditions.
Subject to the conditions described below, at our option, either (1) we and
the Subsidiary Guarantors will be deemed to have been discharged from our and
their obligations with respect to the Notes and Subsidiary Guarantees and the
provisions of the Indenture on the 91st day after the applicable conditions set
forth below have been satisfied or (2) we and the Subsidiary Guarantors will
cease to be under any obligation to comply with certain restrictive covenants,
including those described under "--The Indenture Contains Certain Covenants", at
any time after the applicable conditions set forth below have been satisfied:
51
. we have or any Subsidiary Guarantor has deposited or caused to be
deposited irrevocably with the Trustee as trust funds in trust,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders (a) money or (b) United States government obligations,
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide (without any reinvestment of such
interest or principal), not later than one day before the due date of any
payment, money or (c) a combination of (a) and (b), in an amount
sufficient, in the opinion (with respect to (b) and (c)) of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee at or before the time of
such deposit, to pay and discharge each installment of principal of,
premium, if any, and interest on, the outstanding Notes on the dates such
installments are due;
. no Default or Event of Default has occurred or is continuing on the date
of such deposit or will occur as a result of such deposit and such deposit
will not result in a breach or violation of, or constitute a default
under, any other instrument to which we are or a Subsidiary Guarantor is
or any Subsidiary is a party or by which any of us or them is bound, as
evidenced to the Trustee in an officers' certificate delivered to the
Trustee concurrently with such deposit;
. we have delivered to the Trustee an opinion of counsel (which counsel may
be one of our employees) to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of our
exercise of our option described above and will be subject to federal
income tax on the same amount and in the same manner and at the same time
as would have been the case if such option had not been exercised, and, in
the case of the Notes being discharged pursuant to clause (1) above,
accompanied by a ruling to the effect received from or published by the
Internal Revenue Service (it being understood that (a) such opinion will
also state, if applicable, that such ruling is consistent with the
conclusions reached in such opinion and (b) the Trustee will be under no
obligation to investigate the basis of correctness of such ruling);
. we have delivered to the Trustee an opinion of counsel (which counsel may
be one of our employees) to the effect that our exercise of our option
described above will not result in any of us, the Trustee or the trust
created by our deposit of funds hereunder becoming or being deemed to be
an "investment company" under the Investment Company Act of 1940, as
amended;
. we have or any Subsidiary Guarantor has paid or duly provided for payment
of all amounts then due to the Trustee pursuant to the terms of the
Indenture; and
. we have delivered to the Trustee an officers' certificate and an opinion
of counsel (which counsel may be one of our employees), each stating that
all conditions precedent provided for in the Indenture relating to the
satisfaction and discharge of the Indenture have been complied with.
We or any Subsidiary Guarantor may make an irrevocable deposit pursuant to
this provision only if at such time it is not prohibited from doing so under the
subordination provisions of the Indenture and we have delivered to the Trustee
and any relevant paying agent an officer's certificate to that effect.
Registration Rights Agreement; Penalty Interest.
If
(1) we are not permitted to consummate the exchange offer because the
exchange offer is not permitted by any applicable law or applicable
interpretation of the Commission or the staff of the Commission or
(2) any holder of a Note notifies us on or before the Exchange Date that (a)
due to a change in law or policy it is not entitled to participate in the
exchange offer, (b) due to a change in law or policy it may not resell
the Exchange Notes acquired by it in the exchange offer to the public
without delivering a prospectus and the prospectus contained in the
Exchange Registration Statement is not appropriate or
52
available for those resales by that holder or (c) it is a broker-dealer
that owns Notes (including the Initial Purchaser that holds Notes as part
of an unsold allotment from the original offering of the Notes) acquired
directly from an Issuer or an Affiliate of an Issuer or
(3) any holder of Private Exchange Notes so requests within 120 days after
the consummation of the Private Exchange (each such event referred to in
clauses (1) through (3), a "Shelf Filing Event")
then we shall cause to be filed with the Commission pursuant to Rule 415 a shelf
registration statement (the "Shelf Registration Statement") on or before 30 days
after that Shelf Filing Event occurs, relating to all Transfer Restricted
Securities (the "Shelf Registration") the holders of which have provided the
information required by the Registration Rights Agreement, and shall use their
best efforts to have the Shelf Registration Statement declared effective by the
Commission on or before 90 days after that Shelf Filing Event occurs. We have
agreed that if we have not consummated the exchange offer by March 20, 2000,
then we will cause the Shelf Registration Statement to be filed with the
Commission. We have not filed the Shelf Registration Statement because none of
the conditions in clauses (1) through (3) above have occurred, and we believe
that an exchange of the Outstanding Notes for the Exchange Notes is more
advantageous to the holders of the Outstanding Notes than a Shelf Registration
Statement. If we were to file a Shelf Registration Statement, we must use our
best efforts to keep the Shelf Registration Statement continuously effective
under the Securities Act, until (A) September 22, 2002 (subject to extension
under certain circumstances) or (B) if sooner, the date immediately following
the date that all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto (the "Effectiveness
Period"); but provided that the Effectiveness Period must be extended to the
extent required to permit dealers to comply with the applicable prospectus
delivery requirements of Rule 174 under the Securities Act in the Registration
Rights Agreement.
No holder of Transfer Restricted Securities may include any of its Transfer
Restricted Securities in any Shelf Registration Statement pursuant to this
Agreement unless and until that holder furnishes to us in writing, within 30
days after receipt of a request therefor, such information as we may reasonably
request for use in connection with any Shelf Registration Statement or
prospectus or preliminary prospectus included therein. No holder of Transfer
Restricted Securities shall be entitled to Additional Interest (as defined)
unless and until that holder has provided all such reasonably requested
information. Each holder of Transfer Restricted Securities as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to us all
information required to be disclosed to make the information previously
furnished to us by such holder not materially misleading.
If
(1) the applicable Registration Statement is not filed with the Commission on
or before the date specified for such filing,
(2) the applicable Registration Statement has not been declared effective by
the Commission on or before the date specified for such effectiveness
after such obligation arises,
(3) if the exchange offer is required to be consummated under the
Registration Rights Agreement, we have not exchanged Exchange Notes for
all Notes validly tendered and not validly withdrawn in accordance with
the terms of the exchange offer by the Consummation Date, or
(4) the applicable Registration Statement is filed and declared effective but
shall thereafter cease to be effective without being succeeded
immediately by any additional Registration Statement covering the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be,
which has been filed and declared effective (each such event referred to
in clauses (1) through (4), a "Registration Default"),
then the interest rate on Transfer Restricted Securities will increase
("Additional Interest"), with respect to the first 90-day period immediately
after that Registration Default occurs, by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 2%
per annum with respect to all Registration Defaults. After the cure of a
Registration Default, the accrual of Additional Interest with respect to such
Registration Default will cease and
53
upon the cure of all Registration Defaults the interest rate will revert to the
original rate.
We must notify the Trustee and paying agent under the Indenture immediately
when each and every Registration Default occurs. We must pay the Additional
Interest due on the Transfer Restricted Securities by depositing with the paying
agent (which cannot be us for these purposes) for the Transfer Restricted
Securities, in trust, for the benefit of the holders thereof, before 11:00 A.M.
on the next interest payment date specified by the Indenture (or such other
indenture), sums sufficient to pay the Additional Interest then due. The
Additional Interest due shall be payable on each interest payment date specified
by the Indenture (or such other indenture) to the record holder entitled to
receive the interest payment to be made on such date. Each obligation to pay
Additional Interest shall be deemed to accrue from and including the date of the
applicable Registration Default.
What Is The Governing Law?
The Indenture provides that it is governed by, and construed in accordance
with, the laws of the State of New York but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of
another jurisdiction would be required thereby.
Who Is The Trustee?
Chase Bank of Texas, National Association ("Chase") is the Trustee under the
Indenture and we have appointed Chase as initial Registrar and paying agent with
respect to the Notes. Chase is also the Trustee under the Series A/B Indenture
and the Series C/D Indenture.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee need perform only those duties that are specifically set
forth (or incorporated by reference) in the Indenture and no others. During the
existence of an Event of Default, the Trustee will exercise such rights and
powers that the Indenture vests in it, and use the same degree of care and skill
in such exercise as a prudent person would exercise or use under the
circumstances in the conduct of that person's own affairs.
The Indenture contains certain limitations on the rights of the Trustee, if
it becomes one of our creditors, to obtain payments of claims in certain cases
or to realize on certain property received in respect of any such claims as
security or otherwise.
Book Entry; Delivery And Form.
Except as described in the next paragraph, the Exchange Notes initially will
be represented by a single, permanent global certificate in definitive, fully
registered form (the "Global Exchange Note"). The Global Exchange Note will be
deposited on the Exchange Date with, or on behalf of, DTC and registered in the
name of a nominee of DTC.
The Global Exchange Note.
We expect that pursuant to procedures established by DTC (1) when we issue
the Global Exchange Note, DTC or its custodian will credit, on its internal
system, the principal amount of Exchange Notes of the individual beneficial
interests represented by such Global Exchange Note to the respective accounts of
exchanging Holders who have accounts with DTC and (2) ownership of beneficial
interests in the Global Exchange Note will be shown on, and the transfer of
such ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
Ownership of beneficial interests in the Global Exchange Note will be limited
to persons who have accounts with DTC ("participants") or persons who invest
through participants. Qualified Institutional Buyers will hold their interests
in the Global Exchange Note directly through DTC, if they are participants in
such system, or indirectly through organizations which are participants in such
system.
So long as DTC or its nominee is the registered owner or holder of the
Exchange Notes, DTC or such
54
nominee, as the case may be, will be considered the sole owner or holder of the
Exchange Notes represented by such Global Exchange Note for all purposes under
the Indenture. No beneficial owners of an interest in any Global Exchange Note
can transfer that interest except in accordance with DTC's procedures in
addition to those provided for under the Indenture.
Payment on the Global Exchange Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. We, the Trustee or any of our
paying agents will have no responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Exchange Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
We expect that DTC or its nominee, when it receives any payment of principal,
premium, if any, or interest in respect of the Global Exchange Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Exchange
Note as shown on the records of DTC or its nominee. We also expect that payments
by participants to owners of beneficial interests in the Global Exchange Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way in
accordance with DTC rules and will be settled in immediately available funds. If
a Holder requires physical delivery of Exchange Notes in registered certificated
form ("Certificated Securities") for any reason, including to sell Exchange
Notes to persons in states that require physical delivery of the Certificated
Securities, or to pledge those Certificated Securities, that Holder must
transfer its interest in the Global Exchange Note in accordance with the normal
procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised us that it will take any action permitted to be taken by a
holder of Outstanding Notes (including the presentation of Outstanding Notes for
exchange pursuant to the exchange offer) only at the direction of one or more
participants to whose account the interests in the Outstanding Global Note are
credited and only in respect of such portion of the aggregate principal amount
of Outstanding Notes as to which such participant or participants have given
such direction. But if there is an Event of Default under the Indenture, DTC
will exchange the Global Exchange Note for Certificated Securities, which it
will distribute to its participants.
DTC has informed us that it:
. is a limited purpose trust company organized under laws of the State of
New York;
. a member of the Federal Reserve System;
. a "clearing corporation" within the meaning of the Uniform Commercial
Code;
. a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act; and
. was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants,
thereby eliminating the need for physical movement of certificates.
DTC's participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is 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.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Exchange Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. We, the Initial Purchasers or the Trustee will not
have any
55
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
When Will We Issue Certificated Securities?
If DTC at any time will not or cannot continue as a depositary for the Global
Exchange Note and we do not appoint a successor depositary within 90 days, or at
our election at any time, we will issue Certificated Securities in exchange for
the Global Exchange Note.
Certain Definitions.
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, (1) the sum of (a) discounted future net cash
flows from our proved oil and gas reserves and those of our consolidated
Subsidiaries, calculated in accordance with Commission guidelines (before any
state or federal income tax), as estimated by independent petroleum engineers as
of a date no earlier than the date of our latest annual consolidated financial
statements (or, in the case that the date of determination is after the end of
the first fiscal quarter of our fiscal year, as estimated by our engineers as of
a date no earlier than the end of the most recent fiscal quarter, which
estimates shall be confirmed in writing by a report by independent petroleum
engineers in accordance with Commission guidelines in the event of a Material
Change if the amount of Adjusted Consolidated Net Tangible Assets is required to
be computed under the Indenture), (b) the Net Working Capital on a date no
earlier than the date of our latest consolidated annual or quarterly financial
statements, and (c) with respect to each other tangible asset of us or our
consolidated Subsidiaries, the greater of (i) the net book value of such other
tangible asset on a date no earlier than the date of our latest consolidated
annual or quarterly financial statements, and (ii) the appraised value, as
estimated by a qualified independent appraiser, of such other tangible asset, as
of a date no earlier than the date that is three years before the date of
determination (or such later date on which we shall have a reasonable basis to
believe that there has occurred a material decrease in value since the
determination of such appraised value), minus (2) minority interests and, to the
extent not otherwise taken into account in determining Adjusted Consolidated Net
Tangible Assets, any of our gas balancing liabilities and those of our
consolidated Subsidiaries. In addition to, but without duplication of, the
foregoing, for purposes of this definition, "Adjusted Consolidated Net Tangible
Assets" shall be calculated after giving effect, on a pro forma basis, to (1)
any Investment not prohibited by the Indenture, to and including the date of the
transaction giving rise to the need to calculate Adjusted Consolidated Net
Tangible Assets (the "Assets Transaction Date"), in any other Person that, as a
result of such Investment, becomes a Subsidiary, (2) the acquisition, to and
including the Assets Transaction Date (by merger, consolidation or purchase of
stock or assets), of any business or assets, including, without limitation,
Permitted Industry Investments, and (3) any sales or other dispositions of
assets permitted by the Indenture (other than sales of Hydrocarbons or other
mineral products in the ordinary course of business) occurring on or before the
Assets Transaction Date. For purposes of calculating the ratio of our Adjusted
Consolidated Net Tangible Assets to Indebtedness of us and our Subsidiaries,
Indebtedness of a Subsidiary that is not a Wholly Owned Subsidiary (which
Indebtedness is non-recourse to us or any other Subsidiary or any of our or
their assets) shall be included only to the extent of our pro rata ownership
interest in such Subsidiary.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the
lesser of the amount by which (1) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Guarantee, of such Subsidiary Guarantor at such date and
(2) the present fair saleable value of the assets of such Subsidiary Guarantor
at such date exceeds the amount that will be required to pay the probable
liability of such Subsidiary Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities incurred or assumed on such date and
after giving effect to any collection from any Subsidiary of such Subsidiary
Guarantor in respect of the obligations of such Subsidiary under the Guarantee),
excluding debt in respect of the Guarantee, as they become absolute and matured.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies
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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" means each of the assets that are owned by us or a Subsidiary on the
Issue Date or that are acquired by us or a Subsidiary after the Issue Date.
"Asset Disposition" means any sale, lease, transfer, exchange or other
disposition (or series of related sales, leases, transfers, exchanges or
dispositions) of shares of Capital Stock of a Subsidiary (other than directors'
qualifying shares), or of property or assets (including any interests therein)
(each referred to for purposes of this definition as a "disposition") by us or
any of our Subsidiaries, including any disposition by means of a merger,
consolidation or similar transaction (other than (1) by us to a Subsidiary or by
a Subsidiary to us or a Subsidiary (in the case of a transfer to a Subsidiary
that is not a Wholly Owned Subsidiary, dispositions shall be excluded pursuant
to clause (1) only to the extent of our interest in such Subsidiary after giving
effect to such transfer), (2) any Investment in an Unrestricted Subsidiary not
prohibited under the provisions described in the "We Are Limited In How We Make
Restricted Payments" covenant, (3) a disposition of Hydrocarbons or other
mineral products in the ordinary course of business, and (4) the disposition of
all or substantially all of our assets in compliance with the "We Are Limited In
How We May Enter Into A Transaction Involving Merger, Consolidation or Sale of
Substantially All Assets" covenant).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (1) the sum of the products of
(a) the number of years from such date to the date of each successive scheduled
principal payment of such Indebtedness multiplied by (b) the amount of such
principal payment by (2) the sum of all such principal payments.
"Bank Credit Agreement" means the Fourth Amended and Restated Credit
Agreement, dated May 22, 1998, among us, First Union National Bank, Fleet
National Bank, Bank of America, N.A., Wells Fargo Bank (Texas), National
Association, Chase Bank of Texas, National Association, Comerica Bank-Texas,
MeesPierson Capital Corp., Bank of Scotland, U.S. Bank National Association,
Hibernia National Bank, General Electric Capital Corporation, and First Union
National Bank, as agent, as amended, modified (without limitation as to amount),
supplemented, extended, restated, replaced, renewed or refinanced from time to
time in whole or in part in one or more credit agreements, loan agreements,
instruments or similar agreements, as such may be further amended, modified
(without limitation as to amount), supplemented, extended, restated, replaced,
renewed or refinanced) from time to time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the board of directors of such
Person duly authorized to act on behalf of the board of directors of such
Person.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock and any and all warrants, options and rights with respect thereto,
including each class of common stock and preferred stock of such Person.
"Capitalized Lease Obligation" means the discounted present value of the
rental obligations of any Person under any lease of Property, which in
accordance with GAAP, is required to be capitalized on the balance sheet of such
Person.
"Change of Control" means (1) an event or series of events by which any
Person or other entity or group of Persons or other entities acting in concert
as a partnership or other group (a "Group of Persons") shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases,
merger, consolidation or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the combined
voting power of our then-outstanding Voting Stock, (2) during any period of two
consecutive years, Continuing Directors cease for any reason to constitute a
majority of the Board of Directors then in office, or (3) the direct or indirect
sale, lease, exchange or other transfer of all or substantially all of the
Assets to any Person or Group of Persons.
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"Company Properties" means all Properties, and equity, partnership or other
ownership interests therein, that are related or incidental to, or used or
useful in connection with, the conduct or operation of any of our business
activities or the business activities of the Subsidiaries, which business
activities are not prohibited by the terms of the Indenture.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period increased (to the extent
deducted in determining Consolidated Net Income) by the sum of: (1) all income
taxes of such Person and its subsidiaries paid or accrued according to GAAP for
such period (other than income taxes attributable to extraordinary, unusual or
non-recurring gains or losses), (2) all interest expense of such Person and its
subsidiaries paid or accrued in accordance with GAAP for such period (including
amortization of original issue discount and the interest portion of deferred
payment obligations), (3) depreciation and depletion of such Person and its
subsidiaries, (4) amortization of such Person and its subsidiaries including,
without limitation, amortization of capitalized debt issuance costs and (v) any
other non-cash charges to the extent deducted from Consolidated Net Income.
"Consolidated EBITDA Coverage Ratio" means, with respect to any Person, the
ratio of (1) Consolidated EBITDA of such Person for the period (the "Pro Forma
Period") consisting of the most recent four full fiscal quarters for which
financial information in respect thereof is available immediately before the
date of the transaction giving rise to the need to calculate the Consolidated
EBITDA Coverage Ratio (the "Transaction Date") to (2) the aggregate Fixed
Charges which such Person will accrue during the fiscal quarter in which the
Transaction Date occurs and the three fiscal quarters immediately after such
fiscal quarter (the "Forward Period") on the aggregate amount of Indebtedness
outstanding on the Transaction Date, including any Indebtedness proposed to be
incurred on such date and excluding any Indebtedness repaid with the proceeds of
such Indebtedness (as though all such Indebtedness was incurred or repaid on the
first day of the quarter in which the Transaction Date occurred). In addition
to, but without duplication of, the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated after giving effect (without
duplication), on a pro forma basis for the Pro Forma Period (but no longer), to
(1) any Investment, during the period commencing on the first day of the Pro
Forma Period to and including the Transaction Date (the "Reference Period"), in
any other Person that, as a result of such Investment, becomes a subsidiary of
such Person, (2) the acquisition, during the Reference Period (by merger,
consolidation or purchase of stock or assets) of any business or assets, which
acquisition is not prohibited by the Indenture, including but not limited to
Permitted Industry Investments, as if such acquisition had occurred on the first
day of the Reference Period, (3) any sales or other dispositions of assets
(other than sales of Hydrocarbons and other mineral products in the ordinary
course of business) occurring during the Reference Period, in each case as if
such incurrence, Investment, repayment, acquisition or asset sale had occurred
on the first day of the Reference Period and (4) interest income that we
reasonably anticipate to receive during the Pro Forma Period from Investments in
Permitted Obligations, which Investments exist on the Transaction Date or will
exist as a result of the transaction giving rise to the need to calculate the
Consolidated EBITDA Coverage Ratio. For purposes of this definition, "Fixed
Charges" must be calculated after giving effect (without duplication), on a pro
forma basis for the Forward Period, to any Indebtedness incurred or repaid on or
after the first day of the Forward Period and before the Transaction Date. For
purposes of calculating our Consolidated EBITDA Coverage Ratio, Indebtedness of
a Subsidiary that is not a Wholly Owned Subsidiary (which Indebtedness is non-
recourse to us or any other Subsidiary or any of their assets) shall be included
only to the extent of our pro rata ownership interest in such Subsidiary.
"Consolidated Net Income" of any Person means, for any period, the aggregate
net income (or loss) of such Person and its subsidiaries for such period on a
consolidated basis, determined in accordance with GAAP, provided that (1) the
net income of (a) any Unrestricted Subsidiary and (b) any other Person in which
such Person or any subsidiary thereof has an interest (which interest, in the
case of those Persons referred to in clause (b), does not cause the net income
of such other Person to be consolidated with the net income of such Person in
accordance with GAAP) will be included only to the extent of the amount of
dividends or distributions actually paid to such Person or its subsidiaries by
such other Person in such period; (2) the net income of any subsidiary of such
Person that is subject to any Payment Restriction will be excluded to the extent
of such Payment Restriction; and (3) (a) the net income (or loss) of any other
Person acquired in a pooling of interests transaction for any period before the
date of such acquisition, (b) any net gain (but not loss) on the sale or other
disposition by such Person or any of its subsidiaries of assets and of the
Capital Stock of any subsidiary of such Person, and (c) items that are
58
extraordinary, will each be excluded; provided, in no event shall the
computation of our Consolidated Net Income include or take into effect the
premium or write-off of debt issuance costs, if any, that we optionally pay to
redeem or otherwise prepay the 12% Notes issued pursuant to the Prior Indenture
or the Series A-D Notes.
"Consolidated Net Worth" as of any date means with respect to any Person the
amount by which the assets of such Person and its subsidiaries on a consolidated
basis exceed (1) the total liabilities of such Person and its subsidiaries on a
consolidated basis, plus (2) Disqualified Capital Stock of such Person or
Disqualified Capital Stock of any subsidiary of such Person issued to any Person
other than such Person or another wholly owned Subsidiary of such Person, in
each case determined in accordance with GAAP.
"Contango Market Transaction" means a transaction in which we or any
Subsidiary either (1) establish or establishes a position using New York
Mercantile Exchange Crude Oil Futures contracts to purchase Hydrocarbons for
future delivery to us or it, or (2) purchase or purchases or commit or commits
to purchase Hydrocarbons for future delivery to us or it, and contemporaneous
with such purchase transaction either (y) establishes one or more positions
using New York Mercantile Exchange Crude Oil Futures contracts to resell at a
date after such delivery date, or (z) enters into a contract with that Person or
another Person to resell at a date after such delivery date, a similar aggregate
quantity and quality of Hydrocarbons as so purchased by us or such Subsidiary,
as applicable, and at an aggregate price greater than the Indebtedness incurred
for the Hydrocarbons so purchased by us or such Subsidiary.
"Continuing Directors" means any member of our Board of Directors on the
Series A/B Issue Date, any director elected since the date thereof in any annual
meeting of the stockholders upon the recommendation of our Board of Directors
and any other member of our Board of Directors who will be recommended or
elected to succeed a Continuing Director by a majority of Continuing Directors
who are then members of our Board of Directors.
"Currency Agreement" means the obligations of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such Person or any of its subsidiaries against
fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time would
be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person or its subsidiaries that, by its terms, by the terms of any
agreement related thereto or by the terms of any security into which,
mandatorily or at the option of the holder, it is convertible or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased by such Person or its subsidiaries, including at
the option of the holder, in whole or in part, or has, upon the happening of an
event or the passage of time would have, a redemption or similar payment due, in
each such case on or before the Maturity Date.
"Fixed Charges" means, with respect to any Person, for any period, the
aggregate amount of (1) interest, whether expensed or capitalized, paid, accrued
or scheduled to be paid or accrued during such period (except to the extent
accrued in a prior period) in respect of all Indebtedness of such Person and its
consolidated subsidiaries (including (a) original issue discount on any
Indebtedness and (b) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method, in each case to the
extent attributable to such period) and (2) dividend requirements on
Disqualified Capital Stock of such Person and its consolidated subsidiaries
(whether in cash or otherwise (except dividends payable in shares of Qualified
Capital Stock) (non-cash dividends being valued as determined in good faith by
the Board of Directors of such Person, as evidenced by a Board Resolution))
paid, accrued or scheduled to be paid or accrued during such period (except to
the extent accrued in a prior period) and excluding items eliminated in
consolidation.
For purposes of the definition of Fixed Charges, (1) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Board of Directors of such Person (as evidenced by
a Board Resolution) to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP; (2) interest on Indebtedness that is
determined on a fluctuating basis shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest of such Indebtedness in effect on
the date Fixed Charges are being
59
calculated, subject to the proviso in clause (3); (3) interest on Indebtedness
that may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rate,
shall be deemed to have been based upon the rate actually chosen, or, if none,
then based upon such optional rate chosen as we may designate, (provided that,
for the period following the date on which the rate actually chosen ceases to be
in effect, we may designate an optional rate other than that actually chosen,
which optional rate shall be deemed to accrue at a fixed per annum equal to the
rate of interest on such optional rate in effect on the date Fixed Charges are
being calculated); and (4) Fixed Charges shall be increased or reduced by the
net cost (including amortization of discount) or benefit associated with
obligations under Interest Rate Agreements attributable to such period.
"GAAP" means generally accepted accounting principles as in effect in the
United States of America as of any date of determination.
"Guarantor Senior Indebtedness" means all Indebtedness of a Subsidiary
Guarantor (present and future) created, incurred, assumed or guaranteed by the
Subsidiary Guarantor (and all renewals, extensions, increases or refundings
thereof) (including the principal of, interest on and fees, premiums, expenses
(including costs of collection), indemnities and other amounts payable in
connection with such Indebtedness, and including any Post-Commencement Amounts),
unless the instrument governing such Indebtedness expressly provides that such
Indebtedness is not senior or superior in right of payment to the Guarantee.
Notwithstanding the foregoing, Guarantor Senior Indebtedness does not include
(1) any Indebtedness of the Subsidiary Guarantor to us or any Subsidiary or any
Unrestricted Subsidiary, and (2) any amounts payable or other liabilities to
trade creditors.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all constituents, elements or compounds thereof and products refined or
processed therefrom.
"Indebtedness" means, with respect to any Person, without duplication, any
liability, contingent or otherwise, of such Person (i) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes, debentures
or similar instruments, (iii) representing the deferred and unpaid balance of
the purchase price of any property or interest therein (other than any such
balance that represents an account payable or any other monetary obligation to a
trade creditor created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of such Person in connection with obtaining goods,
materials or services and due within twelve months (or such longer period for
payment as is customarily extended by such trade creditor) of the incurrence
thereof, which account is not overdue by more than 150 days, according to the
original terms of sale, unless such account payable is being contested in good
faith or has been extended), (iv) for the payment of a Capitalized Lease
Obligation of such Person, (v) with respect to the reimbursement of any letter
of credit, banker's acceptance or similar credit transaction, (vi) with respect
to Indebtedness (as otherwise defined in this definition) of another Person
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person (provided that if the obligations so secured have not
been assumed in full by such Person or are not otherwise such Person's legal
liability in full, then such obligations shall be deemed to be in an amount
equal to the greater of (A) the lesser of (1) the full amount of such
obligations, and (2) the fair market value of such assets, as determined in good
faith by the Board of Directors of such Person, which determination shall be
evidenced by a Board Resolution, and (B) the amount of obligations as have been
assumed by such Person or which are otherwise such Person's legal liability),
(vii) with respect to production payments in connection with oil and gas
properties of such Person, other than any Permitted Production Payment
Obligations, (viii) to the extent not otherwise included, under Currency
Agreements and Interest Rate Agreements entered into other than in the ordinary
course of such Person's business, (ix) in the case of such Person, the
liquidation preference and any mandatory redemption payment obligations in
respect of Disqualified Capital Stock, and, in the case of a subsidiary of such
Person, the liquidation preference and any mandatory redemption payment
obligations in respect of preferred stock of such subsidiary, and (x) in respect
of all Indebtedness of others which such Person has guaranteed, endorsed with
recourse (otherwise than for collection, deposit or other similar transactions
in the ordinary course of business), agreed to purchase or repurchase or in
respect of which such Person has agreed contingently to supply or advance funds
or for which such Person has otherwise become liable; provided, however,
Indebtedness arising pursuant to clause (iii)(A) of this definition as a result
of such account payable becoming overdue by more than 150 days shall only be
deemed to be incurred at a
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time when Indebtedness, other than such Indebtedness, is incurred.
"Insolvency or Liquidation Proceeding" means, with respect to any Person, (1)
an insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization proceeding or other similar case or proceeding,
relative to such Person or to its creditors, as such, or its assets, (2) any
liquidation, dissolution, or reorganization proceeding of such Person, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (3) any assignment for the benefit of creditors or any other marshaling of
assets and liabilities of such Person.
"Interest Rate Agreement" means the obligations of any Person pursuant to any
interest swap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"Investment" means, in respect of any Person, any investment in another
Person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
similar credit extension constituting Indebtedness of such other Person and any
guaranty of Indebtedness of any other Person. For purposes of the "We Are
Limited In How We Make Restricted Payments" covenant and the definition of
Permitted Unrestricted Subsidiary Investments, (1) an "Investment" in an
Unrestricted Subsidiary shall be deemed to include and be valued at the fair
market value of the net assets of any Subsidiary at the time that such
Subsidiary is designated an Unrestricted Subsidiary, and (2) any Investment in
an Unrestricted Subsidiary shall be valued at fair market value at the time of
such Investment (except however, when such Investment consists of a loan or
advance by a Person to another Person that is of an intercompany or similar
nature between such Persons and arises pursuant to an agreement or understanding
in the ordinary course of business relating to tax sharing, administrative or
other similar arrangements, then such Investment shall be valued at fair market
value at the time that the investing Person shall have paid monies or
transferred other consideration to another Person for the benefit of the Person
in whom the agreement to make such loan or advance was made), in each case as
determined by our Board of Directors and the Board of Directors of such
Subsidiary, as applicable, in good faith.
"Issue Date" means the date of first issuance of the Outstanding Notes under
the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to sell,
in each case securing obligations of such Person and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statute or statutes) of any jurisdiction).
"Material Change" means an increase or decrease of more than 10% during a
fiscal quarter in the discounted future net cash flows (excluding changes that
result solely from changes in prices) from our proved oil and gas reserves and
the proved oil and gas reserves of the consolidated Subsidiaries (before any
state or federal income tax); provided, however, that the following will be
excluded from the Material Change calculation: (1) any acquisitions during the
quarter of oil and gas reserves that have been estimated by independent
petroleum engineers and on which a report or reports exist, (2) any reserves
added during the quarter attributable to the drilling or recompletion of wells
not included in previous reserve estimates, but which will be included in future
quarters, and (3) any disposition of properties existing at the beginning of
such quarter that have been disposed of as provided in "We Are Limited In How We
Dispose Our Assets".
"Material Subsidiary" means any Subsidiary that, as of the relevant date of
determination, would be a "significant subsidiary" as defined in Reg. (S)
230.405 promulgated pursuant to the Securities Act as in effect on the Series
A/B Issue Date, assuming that we are the "registrant" referred to in such
definition, except that the 10% amounts referred to in such definition shall be
deemed to be 5%.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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"Net Available Proceeds" means, with respect to any Asset Disposition of any
Person, cash proceeds received (including any cash proceeds received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, and excluding any other consideration
until such time as such consideration is converted into cash) therefrom, in each
case net of all legal, title and recording tax expenses, commissions and other
fees and expenses incurred, and all federal, state or local taxes required to be
accrued as a liability as a consequence of such Asset Disposition, and in each
case net of all Indebtedness which is secured by such Assets, in accordance with
the terms of any Lien upon or with respect to such Assets, or which must, by its
terms or in order to obtain a necessary consent to such Asset Disposition or by
applicable law, be repaid out of the proceeds from such Asset Disposition and
which is actually so repaid.
"Net Proceeds" means (1) in the case of any sale by us of Qualified Capital
Stock, the aggregate net cash proceeds that we receive, after payment of
expenses, commissions and the like incurred in connection therewith, and (2) in
the case of any exchange, exercise, conversion or surrender of any outstanding
securities or Indebtedness of us for or into shares of Qualified Capital Stock
of us, the net book value of such outstanding securities or Indebtedness as
adjusted on our books on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder of such
Indebtedness or securities to us upon such exchange, exercise, conversion or
surrender and less any and all payments made to the holders of such Indebtedness
or securities, and all other expenses that we incur).
"Net Working Capital" means (1) all our current assets and the current assets
of our consolidated Subsidiaries, minus (2) all of our current liabilities and
the current liabilities of our consolidated Subsidiaries, except current
liabilities included in Indebtedness.
"Non-Recourse Indebtedness" means Indebtedness that, under the terms thereof
or pursuant to applicable law, neither we nor any Subsidiary (other than a
Subsidiary being designated as an Unrestricted Subsidiary) is directly or
indirectly liable for and there is no recourse against any of our assets or
properties or the assets or properties of such Subsidiary.
"Obligations" mean the due and punctual payment of principal of and interest
on the Securities when due, whether at maturity, by acceleration, by redemption
or otherwise, and all of our other monetary obligations under the Indenture and
the Notes and the due and punctual performance of all of our other obligations
under the Indenture and the Notes.
"Oil and Gas Properties" means all Properties, including equity or other
ownership interests therein, owned by such Person which have been assigned
"proved oil and gas reserves" as defined in Rule 4-10 of Regulation S-X of the
Securities Act as in effect on the Series A/B Issue Date.
"Permitted Acquisition Indebtedness" means Indebtedness of us or any
Subsidiary to the extent such Indebtedness is incurred to finance the
acquisition of Oil and Gas Properties (and development costs related thereto)
and does not exceed the principal amount of $50 million with respect to any such
acquisition transaction or series of related acquisition transactions, if on the
date of the incurrence (1) (a) the Adjusted Consolidated Net Tangible Assets
acquired are equal to or greater than 200% of the Indebtedness incurred, and (b)
our Adjusted Consolidated Net Tangible Assets (after giving effect to such
acquisition) are equal to or greater than 125% of the consolidated Indebtedness
of us and our Subsidiaries, or (2) (a) the Property Net Revenue Coverage Ratio
would have been equal to or greater than 2.5 to 1.0, (b) the Adjusted
Consolidated Net Tangible Assets acquired are equal to or greater than 150% of
the Indebtedness incurred, and (c) our Adjusted Consolidated Net Tangible Assets
(after giving effect to such acquisition) are equal to or greater than 125% of
the consolidated Indebtedness of us and our Subsidiaries.
"Permitted Contango Market Transaction Obligations" means Indebtedness of us
or any Subsidiary under letter of credit or borrowed money obligations, or in
lieu of or in addition to such letters of credit or borrowed money, guarantees
of such Indebtedness or other obligations of us or any Subsidiary by us or any
other Subsidiary, as applicable, related to a Contango Market Transaction,
provided that, (1) if we have or such Subsidiary has entered into such a
contract to resell at a subsequent date, as distinguished from establishing a
position using New
62
York Mercantile Exchange Crude Oil Future contracts to resell at a subsequent
date, (a) the Person with which we have or such Subsidiary has such contract to
sell has an investment grade credit rating by S&P or Moody's, or in lieu
thereof, a Person guaranteeing the payment of such obligated Person has an
investment grade credit rating by S&P or Moody's, or (b) such Person posts a
letter of credit in favor of us or such Subsidiary with respect to such contract
and (2) for the period commencing on the date we are or such Subsidiary is
obligated to take delivery of such Hydrocarbons so purchased by it and until and
including the date on which delivery to the purchaser is fulfilled, we have or
such Subsidiary has the right and ability to store such quantity and quality of
Hydrocarbons in storage facilities owned, leased, operated or otherwise
controlled by us or any Subsidiary.
"Permitted Indebtedness" means (1) Indebtedness under the Outstanding Notes
and any Exchange Note issued in exchange for Outstanding Notes of equal
principal amount; (2) Indebtedness outstanding in an aggregate principal amount
at any one time outstanding not to exceed $100 million under the Bank Credit
Agreement, plus all interest and fees under such agreements and any guarantee of
any such Indebtedness; (3) the Guarantees of the Notes and the Series A-D Notes
(and any assumption of the obligations guaranteed thereby); (4) Permitted
Refinancing Indebtedness; (5) Indebtedness of us to any Wholly Owned Subsidiary,
and any Indebtedness of any Wholly Owned Subsidiary to us or to any Wholly Owned
Subsidiary of us; provided, that in each case, such Indebtedness has not been
incurred in contemplation of any subsequent issuance or transfer of any Capital
Stock or any other event which would result in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any other subsequent transfer of any
such Indebtedness (except to us or a Wholly Owned Subsidiary), and if incurred
in contemplation of any of the foregoing events, then such Indebtedness shall be
deemed to be incurred and shall be treated as an incurrence of Indebtedness for
purposes of the "We Are Limited In How We Incur Additional Indebtedness"
covenant at the time the Wholly Owned Subsidiary in question ceased to be a
Wholly Owned Subsidiary; (6) Permitted Marketing Obligations and Permitted
Contango Market Transaction Obligations; (7) Permitted Acquisition Indebtedness;
(8) Permitted Operating Obligations; (9) other Indebtedness outstanding at any
time in an aggregate principal amount not to exceed the greater of $15 million
or 2.5% of our Adjusted Consolidated Net Tangible Assets; and (10) Indebtedness
outstanding on the Series A/B Issue Date. Permitted Refinancing Indebtedness
that constitutes a refinancing of amounts referred to in clauses (2) and (9)
shall be deemed to be incurred pursuant to and subject to the limitations in
clauses (2) and (9), respectively. We may elect at any time that amounts of
Indebtedness incurred under clauses (2) or (9) be deemed to be incurred pursuant
to the first paragraph of the "We Are Limited In How We Incur Additional
Indebtedness" covenant (if then permitted to be so incurred), in which event
such amounts so incurred shall be deemed not to be incurred under clause (2) or
(9); but provided that any such Indebtedness deemed not to be incurred under
clause (2) shall still be treated as Indebtedness under and governed by the Bank
Credit Agreement for purposes of all other provisions of the Indenture.
"Permitted Industry Investments" means (1) capital expenditures, including,
without limitation, acquisitions of Company Properties and interests therein;
(2)(a) entry into operating agreements, joint ventures, working interests,
royalty interests, mineral leases, unitization agreements, pooling arrangements
or other similar or customary agreements, transactions, properties, interests or
arrangements, and Investments and expenditures in connection therewith or
pursuant thereto, in each case made or entered into in the ordinary course of
the oil and gas business, or (b) exchanges of Company Properties for other
Company Properties of at least equivalent value as determined in good faith by
our Board of Directors; (3) Investments by us or any Subsidiary in any
Subsidiary (or in any Person that becomes a Subsidiary as a result of such
Investment) that are not subject to any Payment Restriction; (4) Investments in
us or another Subsidiary that are not subject to any Payment Restriction by any
Subsidiary; and (5) Investments of operating funds on behalf of co-owners of Oil
and Gas Properties of us or the Subsidiaries pursuant to joint operating
agreements.
"Permitted Investments" means Permitted Obligations and Permitted Industry
Investments (in each case, other than Investments in Unrestricted Subsidiaries).
"Permitted Liens" means (1) Liens for taxes, assessments and governmental
charges not yet delinquent or being contested in good faith and for such
adequate reserves have been established to the extent required by GAAP, (2)
landlord's, carriers, warehouseman's, storage, mechanics', workmen's,
materialmen's, operator's or similar Liens arising in the ordinary course of
business, (3) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions,
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easements, licenses, restrictions on the use of Company Properties or minor
imperfections in title thereto which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the Company
Properties subject thereto or interfere with the ordinary conduct of our
business or the business of the Subsidiaries, (4) Liens on, or related to,
Properties to secure all or part of the costs incurred in the ordinary course of
business of exploration, drilling, development, production, processing,
transportation, marketing or storage, or operation thereof, (5) Liens on
pipeline or pipeline facilities, Hydrocarbons or Company Properties that arise
out of operation of law, (6) judgment and attachment Liens not giving rise to an
Event of Default or Liens created by or existing from any litigation or legal
proceeding that are currently being contested in good faith by appropriate
proceedings and for which adequate reserves have been made, (7) (a) Liens upon
any Property of any Person existing at the time that we acquired that Property,
(b) Liens upon any Property of a Person existing at the time such Person is
merged or consolidated with us or any Subsidiary or existing at the time of the
sale or transfer of any such Property of such Person to us or any Subsidiary, or
(c) Liens upon any Property of a Person existing at the time such Person becomes
a Subsidiary; provided that in each case such Lien has not been created in
contemplation of such sale, merger, consolidation, transfer or acquisition, and
provided further that in each such case no such Lien shall extend to or cover
any Property of us or any Subsidiary other than the Property being acquired and
improvements thereon, (8) Liens existing on the Series A/B Issue Date, (9) Liens
on deposits made in the ordinary course of business, including, without
limitation, pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation and deposits to secure the
performance of bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a similar nature incurred in the ordinary course of business,
(10) Liens in favor of collecting or payor banks having a right of setoff,
revocation, refund or chargeback with respect to money or instruments of us or
any Subsidiary on deposit with or in possession of such bank, (11) royalties,
overriding royalties, revenue interests, net revenue interests, net profit
interests, reversionary interests, production payments, production sales
contracts, operating agreements and other similar interests, properties,
arrangements and agreements, all as ordinarily exist with respect to Company
Properties, (12) Liens upon any Property which were created solely for the
purpose of securing Indebtedness representing, or incurred to finance, refinance
or refund, the cost (including the cost of construction) of such Property;
provided that no such Lien shall extend to or cover any Property of ours or any
Subsidiary other than the Property so acquired and improvements thereon, (13)
Liens securing Senior Indebtedness or Guarantor Senior Indebtedness, whether in
whole or part thereof, (14) with respect to any Company Properties, Liens
arising under, or in connection with, or related to, farm-out, farm-in, joint
operating, area of mutual interest agreements and/or other similar or customary
arrangements, agreements or interests that we determine or any Subsidiary
determines in good faith to be necessary for the economic development of such
Property, and (15) Liens upon any Property securing obligations under hedging
agreements, swap agreements or other similar agreements entered into for the
purpose of protecting against fluctuations in oil or natural gas prices.
"Permitted Marketing Obligations" means, other than Permitted Operating
Obligations or Indebtedness relating to Contango Market Transactions,
Indebtedness of us or any Subsidiary under letter of credit or borrowed money
obligations, or in lieu of or in addition to such letters of credit or borrowed
money, guarantees of such Indebtedness or other obligations of us or any
Subsidiary by any other Subsidiary or us, as applicable, related to the purchase
by us or any Subsidiary of Hydrocarbons for which we have or such Subsidiary has
contracts to sell; provided, that if such Indebtedness or obligations are
guaranteed by us or any Subsidiary, then either (1) the Person with which we
have or such Subsidiary has contracts to sell has an investment grade credit
rating from S&P or Moody's, or in lieu thereof, a Person guaranteeing the
payment of such obligated Person has an investment grade credit rating from S&P
or Moody's, or (2) such Person posts, or has posted for it, a letter of credit
in favor of us and such Subsidiary with respect to all of such Person's
obligations to us or such Subsidiary under such contracts.
"Permitted Obligations" means (1) the following kinds of instruments if, in
the case of instruments referred to in clauses (a)-(d) below, on the date of
purchase or other acquisition of any such instrument by us or any Subsidiary,
the remaining term to maturity is not more than one year: (a) readily marketable
obligations issued or unconditionally guaranteed as to principal and interest by
the United States of America or by any agency or authority controlled or
supervised by and acting as an instrumentality of the United States of America;
(b) repurchase obligations for instruments of the type described in clause (a)
for which delivery of the instrument is made against payment; (c) obligations
(including, but not limited to, demand or time deposits, bankers' acceptances
and certificates of deposit) issued by a depository institution or trust company
incorporated or doing business under the laws of the United States of America,
any state thereof or the District of Columbia or a branch or subsidiary of
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any such depository institution or trust company operating outside the United
States, provided that such depository institution or trust company has, at the
time of our or such Subsidiary's investment therein or contractual commitment
providing for such investment, capital, surplus or undivided profits (as of the
date of such institution's most recently published financial statements), in
excess of $100,000,000; and (d) commercial paper issued by any Person, if such
commercial paper has, at the time of our or any Subsidiary's investment therein
or contractual commitment providing for such investment, credit ratings of A-1
by S&P and P-1 by Moody's; and (2) money market mutual or similar funds having
assets in excess of $100,000,000.
"Permitted Operating Obligations" means Indebtedness of us or any Subsidiary
in respect of one or more standby letters of credit, bid, performance or surety
bonds, or other reimbursement obligations, issued for the account of, or entered
into by, us or any Subsidiary in the ordinary course of business (excluding
obligations related to the purchase by us or any Subsidiary of Hydrocarbons for
which we have or such Subsidiary has contracts to sell), or in lieu of any
thereof or in addition to any thereto, guarantees and letters of credit
supporting any such obligations and Indebtedness (in each case, other than for
an obligation for borrowed money, other than borrowed money represented by any
such letter of credit, bid, performance or surety bond, or reimbursement
obligation itself, or any guarantee and letter of credit related thereto).
"Permitted Production Payment Obligations" means obligations with respect to
production payments entered into in the ordinary course of our or any
Subsidiary's business, which obligations are non-recourse to us and our
Subsidiaries other than to Hydrocarbon production from the properties subject to
such obligations.
"Permitted Refinancing Indebtedness" means (1) Senior Indebtedness of us or
any Subsidiary, the net proceeds of which are used solely to renew, extend,
refinance, refund or repurchase the Notes, including the amount of reasonable
fees and expenses and premium, if any, incurred by us or such Subsidiary in
connection therewith; or (2) Indebtedness of us or any Subsidiary, the net
proceeds of which are used to renew, extend, refinance, refund or repurchase
(including, without limitation, pursuant to a Change of Control Offer as
required by the terms of the Notes) outstanding Indebtedness of us or any
Subsidiary, provided that (1) if the Indebtedness (including the Notes) being
renewed, extended, refinanced, refunded or repurchased is pari passu with or
subordinated in right of payment to either the Notes or the Subsidiary
Guarantees, then such Indebtedness is pari passu with or subordinated in right
of payment to, as the case may be, the Notes or the Subsidiary Guarantees at
least to the same extent as the Indebtedness being renewed, extended,
refinanced, refunded or repurchased, (2) such Indebtedness is scheduled to
mature no earlier than the Indebtedness being renewed, extended, refinanced,
refunded or repurchased, and (3) such Indebtedness has an Average Life at the
time such Indebtedness is incurred that is greater than the Average Life of the
Indebtedness being renewed, extended, refinanced, refunded or repurchased;
provided, further, that such Indebtedness (to the extent that such Indebtedness
constitutes Permitted Refinancing Indebtedness) is in an aggregate principal
amount (or, if such Indebtedness is issued at a price less than the principal
amount thereof, the aggregate amount of gross proceeds therefrom is) not in
excess of the aggregate principal amount then outstanding of the Indebtedness
being renewed, extended, refinanced, refunded or repurchased (or if the
Indebtedness being renewed, extended, refinanced, refunded or repurchased was
issued at a price less than the principal amount thereof, then not in excess of
the amount of liability in respect thereof determined in accordance with GAAP)
plus the amount of reasonable fees and expenses and premium, if any, incurred by
us or such Subsidiary in connection therewith.
"Permitted Unrestricted Subsidiary Investments" means Investments in
Unrestricted Subsidiaries in a cumulative aggregate amount (in cash or the fair
market value of property other than cash, as determined in good faith by our
Board of Directors) not to exceed the sum of (1) $25 million and (2) cash or
cash equivalent distributions made from any Unrestricted Subsidiary and
received, after the Series A/B Issue Date, as such by us, provided that any
amount included in this clause (2) shall be deducted from any amounts referred
to in clause (2)(c) of the "We Are Limited In How We Make Restricted Payments"
covenant. Notwithstanding the foregoing, Permitted Unrestricted Subsidiary
Investments shall also include any Investments in Unrestricted Subsidiaries to
the extent such Investment consists of (1) our Qualified Capital Stock or (2)
amounts referred to in clause (2)(b) of the "We Are Limited In How We Make
Restricted Payments" covenant, which Investments shall be excluded from the sum
in the previous sentence, provided that the amount of any Investments pursuant
to clause (2) shall be deducted from amounts referred to in clause (2)(c) of the
"We Are Limited In How We Make Restricted Payments" covenant.
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"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Post-Commencement Amounts" means all interest and fees accrued or accruing
after the commencement of any Insolvency or Liquidation Proceeding in accordance
with and at the contract rate (including, without limitation, any non-usurious
rate applicable upon default) and all premiums, expenses (including costs of
collection), indemnities and other amounts that would have accrued or been
incurred after the commencement of any Insolvency or Liquidation Proceeding in
any case as specified in any agreement or instrument creating, evidencing, or
governing any Senior Indebtedness or any Guarantor Senior Indebtedness, as the
case may be, whether or not, pursuant to applicable law or otherwise, the claim
for such interest, fees, premiums, expenses, indemnities or other amounts is
allowed and non-avoidable as a claim in such Insolvency or Liquidation
Proceeding.
"Prior Indenture" means the Indenture dated as of October 1, 1992, among us,
the "Subsidiary Guarantors" (as therein defined) and Texas Commerce Bank
National Association, successor to Ameritrust Texas National Association, as
trustee, and providing for the issue of our 12% Senior Subordinated Notes due
1999 in the aggregate principal amount of $100 million.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act, as amended.
"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, partnership interests
and other equity or ownership interests in any other Person.
"Property Net Revenue Coverage Ratio" means, with respect to Property to be
acquired by us or any Subsidiary, the ratio of (1) the amount equal to (a) the
revenues attributable to the sale of Hydrocarbons from such Property for the
most recent four full fiscal quarters for which financial information is
available immediately before the acquisition date, (the "Pro Forma Period")
minus (b) the production and general and administrative expenses attributable to
such Property during the Pro Forma Period (the "Property Net Revenue") to (2)
the aggregate Fixed Charges we or any Subsidiary will accrue during the fiscal
quarter in which the acquisition date occurs and the three fiscal quarters
immediately after such fiscal quarter as a result of Indebtedness incurred for
the purpose of making such acquisition (as though all such Indebtedness was
incurred or repaid on the first day of the quarter in which the acquisition date
occurs). For purposes of this definition, Property Net Revenue shall be
calculated, after giving effect on a pro forma basis for the Pro Forma Period,
to (1) any adjustments in revenues from the sale of Hydrocarbons as a result of
fixed price or other contract arrangements entered into as of the acquisition
date and (2) any adjustments in production and general and administrative
expenses which are fixed or determinable as of the acquisition date.
"Public Equity Offering" means an underwritten public offer and sale of our
common stock (that is Qualified Capital Stock) pursuant to a registration
statement that the Commission has declared effective pursuant to the Securities
Act (other than a registration statement on Form S-8 or otherwise relating to
equity securities issuable under one of our employee benefit plans).
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Rating Agency" means S&P and Moody's or, if S&P or Moody's shall have ceased
to be a "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Act) or shall have ceased to make publicly available a rating
on any outstanding securities of any company engaged primarily in the oil and
gas business, such other organization or organizations, as the case may be, then
making publicly available a rating on the Notes that we select.
"Rating Date" means, in respect of each Change of Control, the date that is
immediately before the date of the first public announcement of an event or
series of events that results in a Change of Control.
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"Rating Decline" means the occurrence on any date following the Rating Date
and before a date that is 90 days after the occurrence of a corresponding Change
of Control (which period shall be deemed to be extended so long as before the
end of such 90-day period and continuing thereafter the rating of the Notes is
under publicly announced consideration for possible downgrade by either Rating
Agency) of either of the following: (1) the rating of the Notes by either Rating
Agency within such period shall be at least one gradation below the rating of
the Notes by such Rating Agency on the Rating Date, or (2) either Rating Agency
shall withdraw its ratings of the Notes. A gradation shall include changes
within rating categories (e.g., with respect to S&P a decline in a rating from
BB+ to BB, or from B to B-, will constitute a decrease of one gradation).
"Related Person" means (1) one of our Affiliates, (2) any individual or other
Person who directly or indirectly holds 10% or more of the combined voting power
of our then-outstanding Voting Stock, (3) any relative of any individual
referred to in clauses (1), (2) and (4) hereof by blood, marriage or adoption
not more remote than first cousin and (4) one of our officers or directors.
"Restricted Debt Prepayment" means any purchase, redemption, defeasance
(including, but not limited to, in substance or legal defeasance) or other
acquisition or retirement for value, directly or indirectly, by us or a
Subsidiary, before the scheduled maturity or before any scheduled repayment of
principal or sinking fund payment, as the case may be, in respect of
Indebtedness of us or any Subsidiary that is subordinate in right to the Notes
or the Guarantees, but provided that any such acquisition shall be deemed not to
be a Restricted Debt Prepayment to the extent it is made (1) in exchange for or
with the proceeds from the substantially concurrent issuance of Qualified
Capital Stock or (2) in exchange for or with the proceeds from the substantially
concurrent issuance of Indebtedness, in a principal amount (or, if such
Indebtedness provides for an amount less than the principal amount thereof to be
due and payable upon the acceleration thereof, with an original issue price) not
to exceed the lesser of (a) the principal amount of Indebtedness being acquired
in exchange therefor (or with the proceeds therefrom) and (b) if such
Indebtedness being acquired was issued at an original issue discount, the
original issue price thereof plus amortization of the original issue discount at
the time of the incurrence of the Indebtedness being issued in exchange therefor
(or the proceeds of which will finance such acquisition), and provided further
that any such Indebtedness shall have an Average Life not less than the Average
Life of the Indebtedness being acquired, and shall contain subordination and
default provisions no less favorable, in any material respect, to holders of the
Securities than those contained in such Indebtedness being acquired.
"Restricted Payment" means any (1) Stock Payment, (2) Investment (other than
Permitted Investments and other than Permitted Unrestricted Subsidiary
Investments) or (3) Restricted Debt Prepayment.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Senior Indebtedness" means all of our Indebtedness (present and future)
created, incurred, assumed or guaranteed by us (and all renewals, extensions or
refundings thereof) (including the principal of, interest on and fees, premiums,
expenses (including costs of collection), indemnities and other amounts payable
in connection with such Indebtedness, and including any Post-Commencement
Amounts), unless the instrument governing such Indebtedness expressly provides
that such Indebtedness is not senior or superior in right of payment to the
Securities. Notwithstanding the foregoing, our Senior Indebtedness does not
include (1) any Indebtedness of us to any Subsidiary or any Unrestricted
Subsidiary, and (2) any amounts payable or other liabilities to trade creditors.
"Series A Notes" means the "Notes" designated "Series A" issued and sold
pursuant to the Series A/D Indenture.
"Series A/B Indenture" means the Indenture dated as of March 15, 1996, among
us, the "Subsidiary Guarantors" (as defined therein) and Texas Commerce Bank
National Association, as trustee, and providing for the issue of our 10 1/4%
Senior Subordinated Notes due 2006 in the aggregate principal amount of $150
million.
"Series A/B Issue Date" means the date of the first issuance of Series A
Notes under the Series A/B Indenture, March 19, 1996.
"Series A/B Notes" means the "Notes" issued by us pursuant to the Series A/B
Indenture.
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"Series A-D Notes" means the Series A/B Notes and the Series C/D Notes.
"Series C/D Indenture" means the Indenture dated as of July 21, 1997, among
us, the "Subsidiary Guarantors" (as therein defined) And Texas Commerce Bank
National Association, as trustee, and providing for the issuance of our 10 1/4%
Senior Subordinated Notes due 2006 in the aggregate principal amount of $50
million.
"Series C/D Notes" means the "Securities" that we issued pursuant to the
Series C/D Indenture.
"Stock Payment" means, with respect to any Person, (1) the declaration or
payment by such Person, either in cash or in property, of any dividend on
(except, in the case of us, dividends payable solely in our Qualified Capital
Stock), or the making by such Person or any of its subsidiaries of any other
distribution in respect of, such Person's Capital Stock or any warrants, rights
or options to purchase or acquire shares of any class of such Capital Stock
(except for the issuance of Qualified Capital Stock pursuant to the exercise
thereof), or (2) the redemption, repurchase, retirement or other acquisition for
value by such Person or any of its subsidiaries, directly or indirectly, of such
Person's or any of its subsidiaries' Capital Stock or any warrants, rights or
options to purchase or acquire shares of any class of such Capital Stock other
than, in the case of us, through the issuance in exchange therefor solely of our
Qualified Capital Stock; but provided that in the case of a Subsidiary, the term
"Stock Payment" shall not include (1) any such payment with respect to its
Capital Stock or warrants, rights or options to purchase or acquire shares of
any class of its Capital Stock payable to us or a Wholly Owned Subsidiary, or
(2) the payment of pro rata dividends to holders of minority interests in
Capital Stock of a Subsidiary.
A "subsidiary" of any Person means (1) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more wholly owned subsidiaries of such Person or by such Person and one
or more wholly owned subsidiaries of such Person, (2) a partnership in which
such Person or a wholly owned subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but only if
such Person or its wholly owned subsidiary is entitled to receive more than
fifty percent of the assets of such partnership upon its dissolution, or (3) any
other Person (other than a corporation or partnership) in which such Person, a
wholly owned subsidiary of such Person or such Person and one or more wholly
owned subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, has (a) at least a majority ownership interest or (b) the
power to elect or direct the election of a majority of the directors or other
governing body of such Person.
"Subsidiary" means any one of our subsidiaries; provided, that an
Unrestricted Subsidiary shall not be deemed one of our subsidiaries for purposes
of the Indenture.
"Subsidiary Guarantor" means (1) Arguello Inc., a Delaware corporation,
Calumet Florida, Inc., a Delaware corporation, Plains Illinois Inc., a Delaware
corporation, Plains Resources International Inc., a Delaware corporation, PMCT
Inc., a Delaware corporation, Stocker Resources, Inc., a California corporation,
and Stocker Resources, L.P., a California limited partnership, (2) each of our
Subsidiaries that becomes a guarantor of the Notes in compliance with the
provisions of the Indenture and (3) each of our Subsidiaries executing a
supplemental indenture in which such Subsidiary agrees to be bound by the terms
of the Indenture.
"Unrestricted Subsidiary" means (1) each of (a) Plains All American Inc., a
Delaware corporation, PAAI LLC, a Delaware limited liability company, Plains All
American Pipeline, L.P., a Delaware limited partnership, Plains Marketing, L.P.,
a Delaware limited partnership, All American Pipeline, L.P., a Texas limited
partnership, Plains Scurlock Permian, L.P., a Delaware limited partnership,
Scurlock Permian LLC, a Delaware limited liability company, and Scurlock Permian
Pipe Line LLC, a Delaware limited liability company, and (b) any other of our
subsidiaries that at the time of determination shall be an Unrestricted
Subsidiary (as designated by our Board of Directors, as provided below) and (2)
any subsidiary of an Unrestricted Subsidiary. Our Board of Directors may
designate any of our subsidiaries (including any newly acquired or newly formed
subsidiary or a Person becoming a subsidiary through merger or consolidation or
Investment therein) to be an Unrestricted Subsidiary only if: (a) such
subsidiary does not own any Capital Stock of, or own or hold any Lien on any
property of, any other of our subsidiaries that is not a subsidiary of the
subsidiary to be so designated or otherwise an Unrestricted Subsidiary; (b) all
the Indebtedness of such subsidiary shall at the date of designation, and will
at all times thereafter, consist of Non-Recourse Indebtedness; (c) we certify
that such designation complies with the "We Are Limited In How We
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Make Restricted Payments" covenant; and (d) such subsidiary, either alone or in
the aggregate with all other Unrestricted Subsidiaries, does not operate,
directly or indirectly, all or substantially all of our and the Subsidiaries'
business. Any such designation by our Board of Directors shall be evidenced to
the Trustee by filing with the Trustee a Board Resolution of our Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions. If, at
any time, such Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred as of such date. Our Board of
Directors may designate any Unrestricted Subsidiary to be a Subsidiary; provided
that immediately after giving effect to such designation, we could incur at
least $1.00 of additional Indebtedness (excluding Permitted Indebtedness)
pursuant to the first paragraph of the "We Are Limited In How We Incur
Additional Indebtedness" covenant on a pro forma basis taking into account such
designation.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the board of
directors or other governing body of such Person.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock (other
than directors' qualifying shares, if applicable) of which we own or another
Wholly Owned Subsidiary owns.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. A broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, to resell
Exchange Notes that it received in exchange for Outstanding Notes if it acquired
those Outstanding Notes as a result of market-making activities or other trading
activities. We have agreed that for 90 days after the Expiration Date, we will
make this prospectus, as amended or supplemented, available to any broker-dealer
to use in connection with any such resale. In addition, until _______ __, 2001,
all dealers effecting transactions in the Exchange Notes may be required to
deliver a prospectus.
We will not receive any proceeds from any sales of the Exchange Notes by
broker-dealers. Broker-dealers may sell Exchange Notes that they receive for
their own account pursuant to the exchange offer from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to or through brokers or dealers who may receive
commissions or concessions from any such broker-dealer and/or the purchasers of
any such Exchange Notes. Any broker-dealer that resells the Exchange Notes that
it received for its own account pursuant to the exchange offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any of these persons may be deemed to be underwriting compensation under the
Securities Act. A broker-dealer that delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
For 90 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 certain expenses incident to the exchange offer, other than
commissions or concession of any brokers or dealers, and will indemnify the
holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
By accepting this exchange offer, each broker-dealer that receives Exchange
Notes for its own account pursuant to the exchange offer agrees that, when it
receives notice from us in which (1) we state that an event has happened that
makes any statement in this prospectus untrue in any material respect or (2) we
propose changes to the prospectus to make the statements we make in this
prospectus not misleading (and we agree to deliver this notice promptly to such
broker-dealer), such broker-dealer will not use the prospectus until we have
amended or supplemented this prospectus to correct such misstatement or omission
and we have furnished copies of the amended or supplemental prospectus to such
broker-dealer. If we do notify such broker-dealers to suspend their use of the
prospectus, it shall extend the 90-day period referred to above by the number of
days equal to the time from when broker-dealers receive this notice and when
they receive an amended prospectus.
70
LEGAL MATTERS
Michael R. Patterson, Esq., our former general counsel, issued an opinion to
us about the legality of the Exchange Notes and beneficially owned 138,316
shares of our common stock at the time of the issuance of such opinion.
Fulbright & Jaworski L.L.P., Houston, Texas will pass on the validity of the
Exchange Notes for us.
EXPERTS
The financial statements incorporated in this Registration Statement by
reference to the Annual Report on Form 10-K/A of Plains Resources Inc. for the
year ended December 31, 1999 have been so incorporated in reliance on the report
(which contains a statement relating to the Company's restatement as described
in Note 3 to the financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
RESERVE ENGINEERS
Information relating to the estimated proved reserves of oil and natural
gas and the related estimates of future net revenues and present values thereof
for certain periods has been prepared by H. J. Gruy and Associates, Inc.,
Netherland, Sewell & Associates, Inc. and Ryder Scott Company independent
petroleum engineers, and we have incorporated it by reference into this
prospectus in reliance on the authority of those firms as experts in petroleum
engineering.
71
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification Of Directors And Officers
Article Tenth of our Second Restated Certificate of Incorporation provides
that we must indemnify to the full extent authorized or permitted by law any
person made, or threatened to be made, a party to any action, suit or proceeding
(whether civil, criminal or otherwise) by reason of fact that he, his testator
or intestate, is or was one of our directors or officers or by reason of the
fact that such director or officer, at our request, is or was serving any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, in any capacity. The rights to indemnification set forth above are
not exclusive of any other rights to which such person may be entitled under any
statute, provision of our Second Restated Certificate of Incorporation or
bylaws, agreements, vote of stockholders or disinterested directors or
otherwise.
Additionally, Article VIII of our Bylaws provides for mandatory
indemnification to at least the extent specifically allowed by Section 145 of
the General Corporation Law of the State of Delaware (the "GCL"). Our Bylaws
generally follow the language of Section 145 of the GCL, but in addition specify
that any director, officer, employee or agent may apply to any court of
competent jurisdiction in the State of Delaware for indemnification to the
extent otherwise permissible under the Bylaws, notwithstanding any contrary
determination denying indemnification made by the Board, by independent legal
counsel, or by the stockholders, and notwithstanding the absence of any
determination with respect to indemnification. The Bylaws also specify certain
circumstances in which a finding is required that the person seeking
indemnification acted in good faith, for purposes of determining whether
indemnification is available. Under the Bylaws, a person shall be deemed to have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to our best interests, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on our records or books of account or those of another
enterprise, or on information supplied to him by our officers or the officers of
another enterprise in the course of their duties, or on the advice of our legal
counsel or the legal counsel of another enterprise or on information or records
given or reports made to us or to another enterprise by an independent certified
public accountant or by an appraiser or other expert selected with reasonable
care by us or another enterprise.
Pursuant to Section 145 of the GCL, we generally have the power to
indemnify our current and former directors, officers, employees and agents
against expenses and liabilities that they incur in connection with any suit to
which they are, or are threatened to be made, a party by reason of their serving
in such positions so long as they acted in good faith and in a manner they
reasonably believed to be in, or not opposed to, our best interests, and with
respect to any criminal action, they had no reasonable cause to believe their
conduct was unlawful. With respect to suits by or in our right, however,
indemnification is generally limited to attorneys' fees and other expenses and
is not available if such person is adjudged to be liable to us unless the court
determines that indemnification is appropriate. The statute expressly provides
that the power to indemnify authorized thereby is not exclusive of any rights
granted under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise. We also have the power to purchase and maintain
insurance for such persons.
The above discussion of our Second Restated Certificate of Incorporation
and Bylaws and Section 145 of the GCL is not intended to be exhaustive and is
qualified in its entirety by each of those documents and that statute.
We have entered into employment agreements containing indemnification
provisions with Mr. Greg L. Armstrong, our President and Chief Executive Officer
and Harry N. Pefanis, our Executive Vice President -Midstream. Pursuant to such
agreements, we have agreed to indemnify and hold them harmless to the fullest
extent permitted by law, from any loss, damage or liability incurred in the
course of their employment. The amount paid by us is reducible by the amount of
insurance paid to or on their behalf with respect to any event giving rise to
indemnification. Their right to indemnification is to survive their death or
termination of employment and the termination of their employment agreement.
Our board of directors has also authorized an employment agreement with Mr.
William C. Egg, Jr., our Executive Vice President and Chief Operating Officer -
Upstream, which, as authorized, will have indemnification provisions
substantially the same as Messrs. Armstrong's and Pefanis'
II-1
agreements described above.
II-2
Item 21. Exhibits And Financial Statement Schedules
(a) Exhibits
2.1 -- Stock Purchase Agreement dated as of March 15, 1998, among Plains
Resources Inc., Plains All American Inc. and Wingfoot Ventures
Seven Inc. (incorporated by reference to Exhibit 2(b) to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997).
3.1 -- Amendment No. 2 to the Second Amended and Restated Agreement of
Limited Partnership of Plains All American Pipeline, L.P.
(incorporated by reference to Exhibit 3.1 to Plains All American
Pipeline, L.P.'s quarterly report on Form 10-Q for the period
ended September 30, 2000).
4.1 -- Indenture dated as of March 15, 1996, among the Company, the
Subsidiary Guarantors named therein and Texas Commerce Bank
National Association, as Trustee for the Company's 10 1/4% Senior
Subordinated Notes due 2006, Series A and Series B (incorporated
by reference to Exhibit 4(b) to the Company's Form S-3
(Registration No. 333-1851)).
4.2 -- Indenture dated as of July 21, 1997, among the Company, the
Subsidiary Guarantors named therein and Texas Commerce Bank
National Association, as Trustee for the Company's 10 1/4% Senior
Subordinated Notes due 2006, Series C and Series D (incorporated
by reference to Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997).
4.3 -- Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4 to the Company's Form S-1 Registration Statement (Reg.
No. 33-33986)).
4.4 -- Purchase Agreement for Stock Warrant dated May 16, 1994, between
Plains Resources Inc. and Legacy Resources, Co., L.P.
(incorporated by reference to Exhibit 4(d) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1994).
4.5 -- Warrant dated November 12, 1997, to Shell Land & Energy Company
for the purchase of 150,000 shares of Common Stock (incorporated
by reference to Exhibit 4(d) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1997).
4.6 -- Indenture dated as of September 15, 1999, among Plains Resources
Inc., the Subsidiary Guarantors named therein and Chase Bank of
Texas, National Association, as Trustee (incorporated by
reference to Exhibit 4(a) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1999).
4.7 -- Registration Rights Agreement dated as of September 22, 1999,
among Plains Resources Inc., the Subsidiary Guarantors named
therein, J.P. Morgan Securities Inc. and First Union Capital
Markets Corp. (incorporated by reference to Exhibit 4(b) to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999).
4.8 -- Stock Purchase Agreement dated as of December 15, 1999, among
Plains Resources Inc. and the purchasers named therein
(incorporated by reference to Exhibit 4(g) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999).
4.9 -- Amendment to Stock Purchase Agreement dated as of December 17,
1999, among
II-3
Plains Resources Inc. and the purchasers named therein
(incorporated by reference to Exhibit 4(h) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999)
*5.1 -- Opinion of Michael R. Patterson, Esq.
10.1 -- Employment Agreement dated as of March 1, 1993, between the
Company and Greg L. Armstrong (incorporated by reference to
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993).
10.2 -- The Company's 1991 Management Options (incorporated by reference
to Exhibit 4.1 to the Company's Form S-8 Registration Statement
(Reg. No. 33-43788)).
10.3 -- The Company's 1992 Stock Incentive Plan (incorporated by
reference to Exhibit 4.3 to the Company's Form S-8 Registration
Statement (Reg. No. 33-48610)).
10.4 -- The Company's Amended and Restated 401(k) Plan (incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on Form
10-K for the year ended December 31, 1996).
10.5 -- The Company's 1996 Stock Incentive Plan (incorporated by
reference to Exhibit 4 to the Company's Form S-8 Registration
Statement (Reg. No. 333-06191)).
10.6 -- Stock Option Agreement dated August 27, 1996 between the Company
and Greg L. Armstrong (incorporated by reference to Exhibit 10(l)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.7 -- Stock Option Agreement dated August 27, 1996 between the Company
and William C. Egg Jr. (incorporated by reference to Exhibit
10(m) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996).
10.8 -- First Amendment to the Company's 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996).
10.9 -- Second Amendment to the Company's 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1997).
10.10 -- Fourth Amended and Restated Credit Agreement dated May 22,1998,
among the Company and ING (U.S.) Capital Corporation, et. al.
(incorporated by reference to Exhibit 10(y) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998)
10.11 -- First Amendment to Plains Resources Inc. 1996 Stock Incentive
Plan dated May 21, 1998 (incorporated by reference to Exhibit
10(z) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998)
10.12 -- Third Amendment to Plains Resources Inc. 1992 Stock Incentive
Plan dated May 21, 1998 (incorporated by reference to Exhibit
10(aa) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1998)
10.13 -- First Amendment to Fourth Amended and Restated Credit Agreement
dated as of November 17, 1998, among the Company and ING (U.S.)
Capital Corporation, et. al. (incorporated by reference to
Exhibit 10(m) to the Company's Annual Report on Form
II-4
10-K for the year ended December 31, 1998).
10.14 -- Second Amendment to Fourth Amended and Restated Credit Agreement
dated as of March 15, 1999, among the Company and ING (U.S.)
Capital Corporation, et. al. (incorporated by reference to
Exhibit 10(n) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998).
10.15 -- Employment Agreement dated as of November 23, 1998, between
Harry N. Pefanis and the Company (incorporated by reference to
Exhibit 10(o) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998).
10.16 -- Purchase and Sale Agreement dated June 4, 1999, by and among the
Company, Chevron U.S.A., Inc., and Chevron Pipe Line Company
(incorporated by reference to Exhibit 10(h) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1999).
10.17 -- Third Amendment to Fourth Amended and Restated Credit Agreement
dated June 21, 1999, among the Company and ING (U.S.) Capital
Corporation, et. al. (incorporated by reference to Exhibit 10(p)
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1999).
10.18 -- Second Amendment to Plains Resources 1996 Stock Incentive Plan
dated May 20, 1999 (incorporated by reference to Exhibit 10(q) to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1999).
10.19 -- Fourth Amendment to Fourth Amended and Restated Credit Agreement
dated September 15, 1999, among the Company and First Union
National Bank, et al. (incorporated by reference to Exhibit 10(q)
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1999).
10.20 -- Fifth Amendment to Fourth Amended and Restated Credit Agreement
dated December 1, 1999, among the Company and First Union
National Bank, et al. (incorporated by reference to Exhibit 10(t)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999).
10.21 -- Sixth Amendment to the Fourth Amended and Restated Credit
Agreement dated June 12, 2000, among the Company and First Union
National Bank, et al. (incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000).
10.22 -- Seventh Amendment to Fourth Amended and Restated Credit
Agreement, dated as of October 11, 2000 by and among Plains
Resources Inc., First Union National Bank as Agent and the
Lenders named therein (incorporated by reference to the Company's
quarterly report on Form 10-Q for the priod ended September 30,
2000).
10.23 -- Contribution, Conveyance and Assumption Agreement among Plains
All American Pipeline, L.P. and certain other parties dated as of
November 23, 1998 (incorporated by reference to Exhibit 10.03 to
Annual Report on Form 10-K for Plains All American Pipeline, L.P.
for the Year Ended December 31, 1998).
10.24 -- Plains All American Inc., 1998 Long-Term Incentive Plan
(incorporated by reference to Exhibit 10.04 to Annual Report on
Form 10-K for Plains All American Pipeline, L.P. for the Year
Ended December 31, 1998).
10.25 -- Plains All American Inc., 1998 Management Incentive Plan Plains
All American Inc.,
II-5
1998 Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.05 to Annual Report on Form 10-K for Plains All
American Pipeline, L.P. for the Year Ended December 31, 1998).
10.26 -- Crude Oil Marketing Agreement among Plains Resources Inc.,
Plains Illinois Inc., Stocker Resources, L.P., Calumet Florida,
Inc. and Plains Marketing, L.P. dated as of November 23, 1998
(incorporated by reference to Exhibit 10.07 to Annual Report on
Form 10-K for Plains All American Pipeline, L.P. for the Year
Ended December 31, 1998).
10.27 -- Omnibus Agreement among Plains Resources Inc., Plains All
American Pipeline, L.P., Plains Marketing, L.P., All American
Pipeline, L.P., and Plains All American Inc. dated as of November
23, 1998 (incorporated by reference to Exhibit 10.08 to Annual
Report on Form 10-K for Plains All American Pipeline, L.P. for
the Year Ended December 31, 1998).
10.28 -- Transportation Agreement dated July 30, 1993, between All
American Pipeline Company and Exxon Company, U.S.A. (incorporated
by reference to Exhibit 10.9 to Registration Statement filed by
Plains All American Pipeline, L.P., file No. 333-64107).
10.29 -- Transportation Agreement dated August 2, 1993, between All
American Pipeline Company and Texaco Trading and Transportation
Inc., Chevron U.S.A. and Sun Operating Limited Partnership
(incorporated by reference to Exhibit 10.10 to Registration
Statement filed by Plains All American Pipeline, L.P., file No.
333-64107).
10.30 -- Form of Transaction Grant Agreement (Payment on Vesting)
(incorporated by reference to Exhibit 10.12 to Registration
Statement filed by Plains All American Pipeline, L.P., file No.
333-64107).
10.31 -- First Amendment to Contribution, Conveyance and Assumption
Agreement dated as of December 15, 1998 (incorporated by
reference to Exhibit 10.13 to Annual Report on Form 10-K for
Plains All American Pipeline, L.P. for the Year Ended December
31, 1998).
10.32 -- Agreement for Purchase and Sale of Membership Interest in
Scurlock Permian LLC between Marathon Ashland LLC and Plains
Marketing, L.P. dated as of March 17, 1999 (incorporated by
reference to Exhibit 10.16 to Annual Report on Form 10-K for
Plains All American Pipeline, L.P. for the Year Ended December
31, 1998).
10.33 -- Asset Sales Agreement between Chevron Pipe Line Company and
Plains Marketing, L.P. dated as of April 16, 1999 (incorporated
by reference to Exhibit 10.17 to Quarterly Report on Form 10-Q
for Plains All American Pipeline, L.P. for the Quarter Ended
March 31, 1999).
10.34 -- Transaction Grant Agreement with Greg L. Armstrong (incorporated
by reference to Exhibit 10.20 to Registration Statement on Form
S-1 for Plains All American Pipeline, L.P., file no. 333-86907).
10.35 -- Pipeline Sale and Purchase Agreement dated January 31, 2000,
among Plains All American Pipeline, L.P., All American Pipeline,
L.P., El Paso Natural Gas Company and El Paso Pipeline Company
(incorporated by reference to Exhibit 10.27 to Annual Report on
Form 10-K for Plains All American Pipeline, L.P. for the Year
Ended December 31, 1999).
10.36 -- Credit Agreement [Letter of Credit and Hedged Inventory
Facility] dated May 8, 2000,
II-6
among Plains Marketing, L.P., All
American Pipeline, L.P., Plains All American Pipeline, L.P. and
Fleet National Bank and certain other lenders. (incorporated by
reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q
for Plains All American Pipeline, L.P. for the quarterly period
ended March 31, 2000).
10.37 -- Credit Agreement [Revolving Credit Facility] dated May 8, 2000,
among Plains Marketing, L.P., All American Pipeline, L.P., Plains
All American Pipeline, L.P. and Fleet National Bank and certain
other lenders (incorporated by reference to Exhibit 10.02 to the
Quarterly Report on Form 10-Q for Plains All American Pipeline,
L.P. for the quarterly period ended March 31, 2000).
5* -- Opinion of Michael R. Patterson, Esq.
12** -- Computation of Ratio of Earnings to Fixed Charges.
23.1* -- Consent of Michael R. Patterson, Esq. (contained in Exhibit 5).
23.2** -- Consent of PricewaterhouseCoopers LLP
23.3* -- Consent of Netherland, Sewell & Associates, Inc.
23.4* -- Consent of H. J. Gruy and Associates, Inc.
23.5* -- Consent of Ryder Scott Company
24* -- Powers of Attorney (contained on pages II-4 through II-15 of the
initial filing of this Registration Statement).
25* -- Statement of Eligibility of Trustee.
99* -- Form of Letter of Transmittal.
*Previously filed.
**Filed herewith.
II-7
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11, or 13 of Form S-4 within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the 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 policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
PLAINS RESOURCES INC.
By: GREG L. ARMSTRONG
Name: Greg L. Armstrong
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
GREG L. ARMSTRONG President, Chief Executive Officer and Director
Greg L. Armstrong (Principal Executive Officer)
CYNTHIA A. FEEBACK Vice President-Accounting and Assistant Treasurer
Cynthia A. Feeback (Principal Accounting Officer)
PHILLIP D. KRAMER Executive Vice President, Chief Financial Officer and
Phillip D. Kramer Treasurer (Principal Financial Officer)
JERRY L. DEES* Director
Jerry L. Dees
TOM H. DELIMITROS* Director
Tom H. Delimitros
WILLIAM M. HITCHCOCK* Director
William M. Hitchcock
DAN M. KRAUSSE*
Dan M. Krausse Chairman of the Board and Director
JOHN H. LOLLAR* Director
John H. Lollar
ROBERT V. SINNOTT* Director
Robert V. Sinnott
J. TAFT SYMONDS* Director
J. Taft Symonds
*By: /s/ Phillip D. Kramer
Phillip D. Kramer, as attorney-in-fact for
the persons indicated
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
ARGUELLO INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
GREG L. ARMSTRONG President and Director (Principal Executive Officer)
Greg L. Armstrong
WILLIAM C. EGG, JR.* Vice President and Director
William C. Egg, Jr.
PHILLIP D. KRAMER Vice President and Treasurer
Phillip D. Kramer (Principal Financial Officer and Principal Accounting
Officer)
TIM MOORE Vice President, Secretary and Director
Tim Moore
*By: /s/ Phillip D. Kramer
Phillip D. Kramer, as attorney-in-fact for
the persons indicated
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
CALUMET FLORIDA, INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
GREG L. ARMSTRONG Director
Greg L. Armstrong
WILLIAM C. EGG, JR. President (Principal Executive Officer)
William C. Egg, Jr.
PHILLIP D. KRAMER Vice President and Director
Phillip D. Kramer (Principal Financial Officer)
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
HARRY N. PEFANIS* Director
Harry N. Pefanis
*By: /s/ Phillip D. Kramer
Phillip D. Kramer, as attorney-in-fact for
the persons indicated
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
PLAINS ILLINOIS INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President (Principal Financial
Officer)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
GREG L. ARMSTRONG Director
Greg L. Armstrong
WILLIAM C. EGG, JR.* President and Director
William C. Egg, Jr. (Principal Executive Officer)
PHILLIP D. KRAMER Vice President (Principal Financial Officer)
Phillip D. Kramer
TIM MOORE Vice President, Secretary and Director
Tim Moore
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
*By: /s/ Phillip D. Kramer
Phillip D. Kramer, as attorney-in-fact for
the persons indicated
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
PLAINS RESOURCES INTERNATIONAL INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President (Principal Financial
Officer)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
GREG L. ARMSTRONG President and Chief Executive Officer and Director
Greg L. Armstrong
PHILLIP D. KRAMER Vice President and Director
Phillip D. Kramer
TIM MOORE Vice President, Secretary and Director
Tim Moore
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
PMCT INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
HARRY N. PEFANIS President (Principal Executive Officer)
Harry N. Pefanis and Director
PHILLIP D. KRAMER Vice President and Director
Phillip D. Kramer (Chief Financial Officer)
GREG L. ARMSTRONG Director
Greg L. Armstrong
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
TIM MOORE Vice President and Secretary
Tim Moore
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
STOCKER RESOURCES, INC.
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
LARRY T. MORTON*
Larry T. Morton President and Chief Executive Officer
PHILLIP D. KRAMER
Phillip D. Kramer Vice President and Chief Financial Officer
GREG L. ARMSTRONG
Greg L. Armstrong Director
WILLIAM C. EGG, JR*.
William C. Egg, Jr. Director
TIM MOORE
Tim Moore Vice President, Secretary and Director
CYNTHIA A. FEEBACK
Cynthia A. Feeback Treasurer (Principal Accounting Officer)
*By: /s/ Phillip D. Kramer
Phillip D. Kramer, as attorney-in-fact
for the persons indicated
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this amendment to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 26, 2001.
STOCKER RESOURCES, L.P., BY STOCKER RESOURCES,
INC., ITS GENERAL PARTNER
By: PHILLIP D. KRAMER
Name: Phillip D. Kramer
Title: Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment to
Registration Statement has been signed by the following persons in the
capacities indicated on January 26, 2001.
Signature Title
--------- -----
LARRY T. MORTON* President and Chief Executive Officer
Larry T. Morton
PHILLIP D. KRAMER Vice President and Chief Financial Officer
Phillip D. Kramer
GREG L. ARMSTRONG Director
Greg L. Armstrong
WILLIAM C. EGG, JR*. Director
William C. Egg, Jr.
TIM MOORE Vice President, Secretary and Director
Tim Moore
CYNTHIA A. FEEBACK Treasurer (Principal Accounting Officer)
Cynthia A. Feeback
*By: /s/ Phillip D. Kramer
Phillip D. Kramer, as attorney-in-fact for
the persons indicated
II-16
INDEX TO EXHIBITS
2.1 -- Stock Purchase Agreement dated as of March 15, 1998, among Plains
Resources Inc., Plains All American Inc. and Wingfoot Ventures Seven
Inc. (incorporated by reference to Exhibit 2(b) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997).
3.1 -- Amendment No. 2 to the Second Amended and Restated Agreement of
Limited Partnership of Plains All American Pipeline, L.P.
(incorporated by reference to Exhibit 3.1 to Plains All American
Pipeline, L.P.'s quarterly report on Form 10-Q for the period ended
September 30, 2000).
4.1 -- Indenture dated as of March 15, 1996, among the Company, the
Subsidiary Guarantors named therein and Texas Commerce Bank National
Association, as Trustee for the Company's 10 1/4% Senior Subordinated
Notes due 2006, Series A and Series B (incorporated by reference to
Exhibit 4(b) to the Company's Form S-3 (Registration No. 333-1851)).
4.2 -- Indenture dated as of July 21, 1997, among the Company, the Subsidiary
Guarantors named therein and Texas Commerce Bank National Association,
as Trustee for the Company's 10 1/4% Senior Subordinated Notes due
2006, Series C and Series D (incorporated by reference to Exhibit 4 to
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1997).
4.3 -- Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4 to the Company's Form S-1 Registration Statement (Reg. No.
33-33986)).
4.4 -- Purchase Agreement for Stock Warrant dated May 16, 1994, between
Plains Resources Inc. and Legacy Resources, Co., L.P. (incorporated by
reference to Exhibit 4(d) to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1994).
4.5 -- Warrant dated November 12, 1997, to Shell Land & Energy Company for
the purchase of 150,000 shares of Common Stock (incorporated by
reference to Exhibit 4(d) to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1997).
4.6 -- Indenture dated as of September 15, 1999, among Plains Resources Inc.,
the Subsidiary Guarantors named therein and Chase Bank of Texas,
National Association, as Trustee (incorporated by reference to Exhibit
4(a) to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1999).
4.7 -- Registration Rights Agreement dated as of September 22, 1999, among
Plains Resources Inc., the Subsidiary Guarantors named therein, J.P.
Morgan Securities Inc. and First Union Capital Markets Corp.
(incorporated by reference to Exhibit 4(b) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1999).
4.8 -- Stock Purchase Agreement dated as of December 15, 1999, among Plains
Resources Inc. and the purchasers named therein (incorporated by
reference to Exhibit 4(g) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1999).
4.9 -- Amendment to Stock Purchase Agreement dated as of December 17, 1999,
among Plains Resources Inc. and the purchasers named therein
(incorporated by reference to Exhibit 4(h) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1999).
*5.1 -- Opinion of Michael R. Patterson, Esq.
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10.1 -- Employment Agreement dated as of March 1, 1993, between the Company
and Greg L. Armstrong (incorporated by reference to Exhibit 10(b) to
the Company's Annual Report on Form - Employment Agreement dated as of
March 1, 1993, between the Company and Greg L. 10-K for the year ended
December 31, 1993).
10.2 -- The Company's 1991 Management Options (incorporated by reference to
Exhibit 4.1 to the Company's Form S-8 Registration Statement (Reg. No.
33-43788)).
10.3 -- The Company's 1992 Stock Incentive Plan (incorporated by reference to
Exhibit 4.3 to the Company's Form S-8 Registration Statement (Reg. No.
33-48610)).
10.4 -- The Company's Amended and Restated 401(k) Plan (incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996).
10.5 -- The Company's 1996 Stock Incentive Plan (incorporated by reference to
Exhibit 4 to the Company's Form S-8 Registration Statement (Reg. No.
333-06191)).
10.6 -- Stock Option Agreement dated August 27, 1996 between the Company and
Greg L. Armstrong (incorporated by reference to Exhibit 10(l) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1996).
10.7 -- Stock Option Agreement dated August 27, 1996 between the Company and
William C. Egg Jr. (incorporated by reference to Exhibit 10(m) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1996).
10.8 -- First Amendment to the Company's 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10(n) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996).
10.9 -- Second Amendment to the Company's 1992 Stock Incentive Plan
(incorporated by reference to Exhibit 10(b) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997).
10.10 -- Fourth Amended and Restated Credit Agreement dated May 22,1998, among
the Company and ING (U.S.) Capital Corporation, et. al. (incorporated
by reference to Exhibit 10(y) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1998).
10.11 -- First Amendment to Plains Resources Inc. 1996 Stock Incentive Plan
dated May 21, 1998 (incorporated by reference to Exhibit 10(z) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998).
10.12 -- Third Amendment to Plains Resources Inc. 1992 Stock Incentive Plan
dated May 21, 1998 (incorporated by reference to Exhibit 10(aa) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998).
10.13 -- First Amendment to Fourth Amended and Restated Credit Agreement dated
as of November 17, 1998, among the Company and ING (U.S.) Capital
Corporation, et. al. (incorporated by reference to Exhibit 10(m) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1998).
10.14 -- Second Amendment to Fourth Amended and Restated Credit Agreement dated
as of March 15, 1999, among the Company and ING (U.S.) Capital
Corporation, et. al. (incorporated by reference to Exhibit 10(n) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1998).
II-18
10.15 -- Employment Agreement dated as of November 23, 1998, between Harry N.
Pefanis and the Company (incorporated by reference to Exhibit 10(o) to
the Company's Annual Report on Form 10-K for the year ended December
31, 1998).
10.16 -- Purchase and Sale Agreement dated June 4, 1999, by and among the
Company, Chevron U.S.A., Inc., and Chevron Pipe Line Company
(incorporated by reference to Exhibit 10(h) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1999).
10.17 -- Third Amendment to Fourth Amended and Restated Credit Agreement dated
June 21, 1999, among the Company and ING (U.S.) Capital Corporation,
et. al. (incorporated by reference to Exhibit 10(p) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1999).
10.18 -- Second Amendment to Plains Resources 1996 Stock Incentive Plan dated
May 20, 1999 (incorporated by reference to Exhibit 10(q) to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1999).
10.19 -- Fourth Amendment to Fourth Amended and Restated Credit Agreement dated
September 15, 1999, among the Company and First Union National Bank,
et al. (incorporated by reference to Exhibit 10(q) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1999).
10.20 -- Fifth Amendment to Fourth Amended and Restated Credit Agreement dated
December 1, 1999, among the Company and First Union National Bank, et
al. (incorporated by reference to Exhibit 10(t) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999).
10.21 -- Sixth Amendment to the Fourth Amended and Restated Credit Agreement
dated June 12, 2000, among the Company and First Union National Bank,
et al. (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2000).
10.22 -- Seventh Amendment to Fourth Amended and Restated Credit Agreement,
dated as of October 11, 2000 by and among Plains Resources Inc., First
Union National Bank as Agent and the Lenders named therein
(incorporated by reference to the Company's quarterly report on Form
10-Q for the priod ended September 30, 2000).
10.23 -- Contribution, Conveyance and Assumption Agreement among Plains All
American Pipeline, L.P. and certain other parties dated as of November
23, 1998 (incorporated by reference to Exhibit 10.03 to Annual Report
on Form 10-K for Plains All American Pipeline, L.P. for the Year Ended
December 31, 1998).
10.24 -- Plains All American Inc., 1998 Long-Term Incentive Plan (incorporated
by reference to Exhibit 10.04 to Annual Report on Form 10-K for Plains
All American Pipeline, L.P. for the Year Ended December 31, 1998).
10.25 -- Plains All American Inc., 1998 Management Incentive Plan Plains All
American Inc., 1998 Long-Term Incentive Plan (incorporated by
reference to Exhibit 10.05 to Annual Report on Form 10-K for Plains
All American Pipeline, L.P. for the Year Ended December 31, 1998).
10.26 -- Crude Oil Marketing Agreement among Plains Resources Inc., Plains
Illinois Inc., Stocker Resources, L.P., Calumet Florida, Inc. and
Plains Marketing, L.P. dated as of November 23, 1998 (incorporated by
reference to Exhibit 10.07 to Annual Report on Form 10-K for Plains
All American Pipeline, L.P. for the Year Ended December 31,
1998).
II-19
10.27 -- Omnibus Agreement among Plains Resources Inc., Plains All
American Pipeline, L.P., Plains Marketing, L.P., All American
Pipeline, L.P., and Plains All American Inc. dated as of November
23, 1998 (incorporated by reference to Exhibit 10.08 to Annual
Report on Form 10-K for Plains All American Pipeline, L.P. for
the Year Ended December 31, 1998).
10.28 -- Transportation Agreement dated July 30, 1993, between All
American Pipeline Company and Exxon Company, U.S.A. (incorporated
by reference to Exhibit 10.9 to Registration Statement filed by
Plains All American Pipeline, L.P., file No. 333-64107).
10.29 -- Transportation Agreement dated August 2, 1993, between All
American Pipeline Company and Texaco Trading and Transportation
Inc., Chevron U.S.A. and Sun Operating Limited Partnership
(incorporated by reference to Exhibit 10.10 to Registration
Statement filed by Plains All American Pipeline, L.P., file No.
333-64107).
10.30 -- Form of Transaction Grant Agreement (Payment on Vesting)
(incorporated by reference to Exhibit 10.12 to Registration
Statement filed by Plains All American Pipeline, L.P., file No.
333-64107).
10.31 -- First Amendment to Contribution, Conveyance and Assumption
Agreement dated as of December 15, 1998 (incorporated by
reference to Exhibit 10.13 to Annual Report on Form 10-K for
Plains All American Pipeline, L.P. for the Year Ended December
31, 1998).
10.32 -- Agreement for Purchase and Sale of Membership Interest in
Scurlock Permian LLC between Marathon Ashland LLC and Plains
Marketing, L.P. dated as of March 17, 1999 (incorporated by
reference to Exhibit 10.16 to Annual Report on Form 10-K for
Plains All American Pipeline, L.P. for the Year Ended December
31, 1998).
10.33 -- Asset Sales Agreement between Chevron Pipe Line Company and
Plains Marketing, L.P. dated as of April 16, 1999 (incorporated
by reference to Exhibit 10.17 to Quarterly Report on Form 10-Q
for Plains All American Pipeline, L.P. for the Quarter Ended
March 31, 1999).
10.34 -- Transaction Grant Agreement with Greg L. Armstrong (incorporated
by reference to Exhibit 10.20 to Registration Statement on Form
S-1 for Plains All American Pipeline, L.P., file no. 333-86907).
10.35 -- Pipeline Sale and Purchase Agreement dated January 31, 2000,
among Plains All American Pipeline, L.P., All American Pipeline,
L.P., El Paso Natural Gas Company and El Paso Pipeline Company
(incorporated by reference to Exhibit 10.27 to Annual Report on
Form 10-K for Plains All American Pipeline, L.P. for the Year
Ended December 31, 1999).
10.36 -- Credit Agreement [Letter of Credit and Hedged Inventory Facility]
dated May 8, 2000, among Plains Marketing, L.P., All American
Pipeline, L.P., Plains All American Pipeline, L.P. and Fleet
National Bank and certain other lenders. (incorporated by
reference to Exhibit 10.01 to the Quarterly Report on Form 10-Q
for Plains All American Pipeline, L.P. for the quarterly period
ended March 31, 2000).
10.37 -- Credit Agreement [Revolving Credit Facility] dated May 8, 2000,
among Plains Marketing, L.P., All American Pipeline, L.P., Plains
All American Pipeline, L.P. and Fleet National Bank and certain
other lenders (incorporated by reference to Exhibit 10.02 to the
Quarterly Report on Form 10-Q for Plains All American Pipeline,
L.P. for the quarterly period ended March 31, 2000).
5* -- Opinion of Michael R. Patterson, Esq.
12** -- Computation of Ratio of Earnings to Fixed Charges.
23.1* -- Consent of Michael R. Patterson, Esq. (contained in Exhibit 5).
23.2** -- Consent of PricewaterhouseCoopers LLP
II-20
23.3* -- Consent of Netherland, Sewell & Associates, Inc.
23.4* -- Consent of H. J. Gruy and Associates, Inc.
23.5* -- Consent of Ryder Scott Company
24* -- Powers of Attorney (contained on pages II-4 through II-15 of the
initial filing of this Registration Statement).
25* -- Statement of Eligibility of Trustee.
99* -- Form of Letter of Transmittal.
*Previously filed.
**Filed herewith.
5327712.20
II-21