-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, o0ad/a7iQlSq5EoF3rksx9BVg74jJbAmLZt897AHZslMh6dg6n3Xmi1EQAwUm5Ly cKBheVV55x4ErECJtOqC+g== 0000950134-94-000495.txt : 19940506 0000950134-94-000495.hdr.sgml : 19940506 ACCESSION NUMBER: 0000950134-94-000495 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19940505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SNYDER OIL CORP CENTRAL INDEX KEY: 0000860713 STANDARD INDUSTRIAL CLASSIFICATION: 1311 IRS NUMBER: 752306158 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-52807 FILM NUMBER: 94526114 BUSINESS ADDRESS: STREET 1: 777 MAIN ST STE 2500 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173384043 MAIL ADDRESS: STREET 1: 777 MAIN STREET SUITE 2500 CITY: FORT WORTH STATE: TX ZIP: 76102 S-3/A 1 AMENDMENT NO. 3 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1994 REGISTRATION NO. 33-52807 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------------- SNYDER OIL CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 75-2306158 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number)
777 MAIN STREET FORT WORTH, TEXAS 76102 (817) 338-4043 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) --------------------- PETER E. LORENZEN SNYDER OIL CORPORATION 777 MAIN STREET FORT WORTH, TEXAS 76102 (817) 882-5905 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: THOMAS W. BRIGGS KERRY C. L. NORTH KELLY, HART & HALLMAN, P.C. BAKER & BOTTS, L.L.P. 201 MAIN STREET 2001 ROSS AVENUE FORT WORTH, TEXAS 76102 DALLAS, TEXAS 75201 (817) 332-2500 (214) 953-6500
--------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: / / If any of the securities registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: / / --------------------- CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------ PROPOSED PROPOSED MAXIMUM MAXIMUM OFFERING AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) FEE(2) - ------------------------------------------------------------------------------------------------------ % Convertible Subordinated Notes Due 2001............................... $115,000,000(3) 100% $115,000,000 $39,656(5) - ------------------------------------------------------------------------------------------------------ Common Stock (par value $.01 per share)................................. (4) -- -- -- - ------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee. (2) Pursuant to Rule 457, the registration fee has been calculated solely on the basis of the proposed maximum aggregate offering price of the % Convertible Subordinated Notes Due 2001 (the "Notes"). (3) Includes $15,000,000 principal amount of Notes subject to the Underwriters' over-allotment option. (4) Such indeterminate number of shares as may be issuable on conversion of the Notes, including such additional shares as may be issuable as a result of adjustments to the conversion rate. (5) Previously paid. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED MAY 5, 1994 (SOCO LOGO) $100,000,000 Snyder Oil Corporation
% Convertible Subordinated Notes Due 2001 Interest Payable March 31 and September 30 Due March 31, 2001 ------------------ The Notes are convertible into Common Stock of Snyder Oil Corporation (the "Company") at any time on or prior to maturity, unless previously redeemed, at a conversion price of $ per share, subject to adjustment in certain events. On May 4, 1994, the last reported sale price for the Common Stock on the New York Stock Exchange (Symbol: SNY) was $19 7/8 per share. The Notes are redeemable, in whole or in part, at the option of the Company at any time on or after March 31, 1997, at the redemption prices set forth herein plus accrued interest to the date of redemption. Upon a Change of Control (as defined) which constitutes a Repurchase Event (as defined), each holder of Notes will have the right, subject to certain conditions and restrictions, to require the Company to repurchase outstanding Notes owned by such holder at their principal amount plus accrued interest. The Notes are subordinated to all Senior Indebtedness (as defined) of the Company. The Notes have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD- EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Price to Discounts and Proceeds to Public(1) Commissions Company(1)(2) --------------- ---------------- ---------------- Per Note........................................... Total(3)...........................................
- --------------- (1) Plus accrued interest, if any, from May , 1994. (2) Before deduction of expenses payable by the Company estimated at $500,000. (3) The Company has granted the Underwriters an option, exercisable for 30 days from the date of this Prospectus, to purchase up to an additional $15,000,000 principal amount of Notes in order to cover over-allotments of Notes. If the option is exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ , and $ , respectively. ------------------ The Notes are offered by the several Underwriters when, as and if issued by the Company, delivered to and accepted by the Underwriters and subject to their right to reject orders in whole or in part. It is expected that delivery of the Notes, in temporary or definitive fully registered form, will be made on or about May , 1994. If temporary Notes are delivered, definitive Notes will be available for exchange as soon as practicable after such date. CS First Boston PaineWebber Incorporated Petrie Parkman & Co. Smith Barney Shearson Inc. The date of this Prospectus is May , 1994. 3 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES OFFERED HEREBY AND THE COMPANY'S COMMON STOCK AND PREFERRED STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. (MAP OF THE UNITED STATES SHOWING THE LOCATIONS OF THE COMPANY'S MAJOR GAS FACILITIES, CORPORATE OFFICES, FIELD OFFICES AND MAJOR PRODUCING PROPERTIES) Unless otherwise indicated in this Prospectus, as used herein, the term "Btu" means British Thermal Unit, the term "MMBtu" means million Btus, the term "Mcf " means thousand cubic feet, the term "MMcf " means million cubic feet, the term "Bcf " means billion cubic feet, the term "Bbl" means barrel, the term "MBbl" means thousand barrels, the term "MMBbl" means million barrels, the term "BOE" means barrel of oil equivalent, the term "MBOE" means thousand barrels of oil equivalent and the term "MMBOE" means million barrels of oil equivalent. Gas is converted into a barrel of oil equivalent based on six Mcf of gas to one Bbl of oil, except as otherwise described herein. A "gross acre" or "gross well" is an acre or well in which an interest is owned. "Net acres" or "net wells" are obtained by multiplying gross acres or wells by the Company's working interest in the applicable properties. 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere or incorporated by reference in this Prospectus. All information giving effect to this Offering assumes that the Underwriters' over-allotment option is not exercised unless otherwise noted. THE COMPANY Snyder Oil Corporation (the "Company") is engaged in the development and acquisition of oil and gas properties primarily in the Rocky Mountain region of the United States. The Company also gathers, transports, processes and markets natural gas generally in proximity to its principal producing properties. Over the five year period from 1988 to 1993, revenues increased from $14.7 million to $229.9 million, net income increased from $5.1 million to $25.7 million and net cash provided by operations increased from $8.1 million to $68.3 million. At December 31, 1993, the Company's net proved reserves totaled 103.6 MMBOE, having a pretax present value at constant prices of $390.4 million. Approximately 69% of its proved reserves are natural gas. Approximately 90% of the present value of the Company's proved reserves is concentrated in five major producing areas located in Colorado, Wyoming and Texas. In total, the Company's properties are located in 15 states and the Gulf of Mexico and include 5,122 gross (2,187 net) producing wells and nine gas transportation and processing facilities. The Company operates more than 2,100 wells which account for over 90% of its developed reserves. In addition to its domestic operations, the Company is also participating in several international exploration and development projects through its wholly owned subsidiary, SOCO International, Inc., and through its 36% owned affiliate, Command Petroleum Holdings NL. At December 31, 1993, the Company held undeveloped acreage totaling 539,000 gross acres (326,000 net) domestically and 4.3 million gross acres (3.3 million net) internationally. The Company has pursued a balanced strategy of development drilling and acquisitions, focusing on operating efficiency and enhanced profitability through the concentration of assets in selected geographic areas or "hubs." Currently, the primary emphasis of the Company's growth strategy is development drilling in the Rockies, mainly the Wattenberg Field in the Denver-Julesburg Basin ("DJ Basin") of Colorado where the Company drilled 323 wells in 1993. In implementing this strategy in the Wattenberg Field over the past three years, the Company has achieved the following: (i) drilled approximately 667 wells, 660 of which are currently producing; (ii) increased production more than five times, from an average of 2.6 MBOE per day in 1991 to an average of 13.3 MBOE per day in 1993; (iii) increased proved reserves nearly 50% from 37.9 MMBOE at yearend 1991 to 55.2 MMBOE at yearend 1993; and (iv) generally reduced drilling and completion costs by approximately 30% through a combination of aggressive cost cutting, economies of scale and technological improvements. Through a major joint venture with Union Pacific Resources Company, as well as acquisitions and leasing, the Company has accumulated a substantial inventory of potential drilling locations, including 1,102 locations that were classified as proved undeveloped at December 31, 1993. In 1993, the Company embarked on a program to apply the experience gained in the Wattenberg Field to two other large scale gas developments in the Rockies. In the Washakie Basin of southern Wyoming (the "East Washakie Project"), the Company currently operates 128 wells and holds a significant inventory of potential drilling locations, including 98 locations that were classified as proved undeveloped at December 31, 1993. The Company has also initiated the development of a third hub in the Rockies through three purchase transactions, as well as farmouts and leasing. As a result, the Company currently holds a significant inventory of potential drilling locations in the Piceance and Uinta Basins of Colorado and Utah (collectively, the "Western Slope Project"), including 101 locations that were classified as proved undeveloped at December 31, 1993. During 1994, the Company intends to continue development in the DJ Basin and to increase activity in the East Washakie and Western Slope Projects. The Company expects to spend $175 to $200 million for development drilling and expansion of gas facilities in 1994, including the drilling of over 650 wells, 500 of which are planned for the Wattenberg Field and up to 90 for the East Washakie and Western Slope Projects. As part of this program, the Company will emphasize the improvement of well economics through the use of technological improvements and cost saving drilling techniques, as well as the capture of downstream margins via the Company's gas facilities. In addition to development drilling in the Rockies, the Company intends to pursue acquisitions to strengthen its existing asset base and secure a foothold in new geographic areas and to continue progress in bringing its international projects to fruition. 3 5 THE OFFERING Securities Offered......... $100,000,000 aggregate principal amount of % Convertible Subordinated Notes Due 2001 (the "Notes"). Interest Payment Dates..... March 31 and September 30, commencing September 30, 1994. Conversion................. Convertible at the option of the holder into shares of Common Stock at any time prior to maturity, unless previously redeemed, at a conversion price of $ per share, subject to adjustment under certain conditions. Redemption at Option of Company.................. Redeemable at the option of the Company, in whole or in part, at any time on or after March 31, 1997, initially at % of the principal amount and at prices declining to 100% at maturity, in each case together with accrued interest to the date of redemption. Repurchase at Option of Holders.................. Upon a Change of Control (as defined) which constitutes a Repurchase Event (as defined), each holder of Notes will have the right, subject to certain conditions and restrictions, to require the Company to repurchase outstanding Notes owned by such holder at 100% of the principal amount of such Notes, plus accrued and unpaid interest to the date of repurchase. Before repurchasing the Notes, the Company is required, with respect to any Senior Indebtedness (as defined) that would prohibit the repurchase of Notes in the event of a Change of Control, either to repay all such Senior Indebtedness in full or obtain the requisite consents under such Senior Indebtedness to permit the repurchase of the Notes. The Company's existing bank credit facility contains covenants that may prohibit the Company from repurchasing the Notes upon the occurrence of a Change of Control. Furthermore, the Company's ability to repurchase the Notes may be limited by its financial resources at the time a Change of Control occurs. Ranking.................... Subordinated to all existing and future Senior Indebtedness of the Company. The indenture (the "Indenture") with respect to the Notes will not restrict the incurrence of Senior Indebtedness or other indebtedness by the Company or any subsidiary of the Company. The Notes are effectively subordinated to all existing and future liabilities of the Company's subsidiaries to the extent of the assets of such subsidiaries. Immediately following the sale of the Notes offered hereby and application of the net proceeds therefrom, the Company estimates that the sum of its Senior Indebtedness and the indebtedness of its subsidiaries will total approximately $46 million. By reason of the subordination of the Notes, in the event of insolvency of the Company, the holders of Senior Indebtedness and of indebtedness of the Company's subsidiaries may recover more, ratably, than the holders of the Notes. Sinking Fund............... None. Use of Proceeds............ To repay a portion of the borrowings outstanding under the Company's bank credit facility. The Company intends to use the resulting borrowing capacity under its credit facility to fund development drilling, expansion of its gas facilities and potential acquisitions. Listing.................... The Notes have been approved for listing on the New York Stock Exchange (the "NYSE"), subject to official notice of issuance. NYSE Common Stock Symbol................... SNY 4 6 SUMMARY FINANCIAL AND OPERATING INFORMATION The following table presents summary financial and operating information for each of the three years ended December 31, 1993. The following information should be read in conjunction with the consolidated financial statements incorporated by reference herein.
YEAR ENDED DECEMBER 31, --------------------------------- 1991 1992 1993 ------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) FINANCIAL DATA Revenues.......................................... $92,501 $120,172 $229,885 Income before accounting change and extraordinary item........................................... 8,811 16,875 27,608 Net income........................................ 8,811 20,638 25,664 Net income available to common.................... 8,358 15,838 16,564 Weighted average shares outstanding............... 22,839 22,722 23,096 Ratio of earnings to fixed charges(a)............. 2.4x 4.5x 7.6x(b) Ratio of EBITDA to fixed charges(c)............... 5.4x 10.9x 17.2x(b) Net cash provided by operations................... $37,738 $ 47,911 $ 68,293 Capital expenditures.............................. 48,385 130,375(d) 166,726 Per share data Income before accounting change and extraordinary item........................... $ .37 $ .53 $ .80 Net income..................................... .37 .70 .72 Dividends...................................... .20 .25(e) .22 OPERATING DATA Average daily production Oil (Bbl)...................................... 4,074 4,851 9,455 Gas (Mcf)...................................... 50,363 63,088 96,107 BOE(f)......................................... 13,525 16,365 25,472 Average sales price Oil (per Bbl).................................. $ 20.62 $ 18.87 $ 15.41 Gas (per Mcf)(f)............................... 1.68 1.74 1.94 BOE(f)......................................... 13.24 12.92 13.41 Average operating expense per BOE(g).............. 5.04 4.68 4.83
DECEMBER 31, 1993 ---------------------------- ACTUAL AS ADJUSTED(H) --------- -------------- (IN THOUSANDS) BALANCE SHEET DATA Working capital............................................. $ 1,291 $ 1,291 Oil and gas properties and facilities, net.................. 388,361 388,361 Total assets................................................ 479,536 479,536 Senior debt................................................. 114,952 18,052 Convertible subordinated notes.............................. -- 100,000 Stockholders' equity........................................ 297,241 297,241
- ------------- (a) For the purpose of calculating the ratio of earnings to fixed charges, "earnings" consist of income before taxes, accounting change, extraordinary item and "fixed charges." "Fixed charges" include interest on indebtedness and the portion of rental expense, excluding rent on capitalized leases, estimated to be representative of the interest factor in rental expense. (b) The ratio of earnings to fixed charges and the ratio of EBITDA to fixed charges, pro forma for the issuance of $100 million principal amount of Notes offered hereby, would be 4.6x and 10.4x, respectively. (c) EBITDA is income before (i) accounting change and extraordinary item, (ii) taxes, (iii) depletion, depreciation and amortization and (iv) interest. (d) Includes $56.1 million incurred in connection with properties acquired in December 1992, $49.8 million of which was paid in February 1993. (e) Due to revised payment timing, five payments were made at the $.05 quarterly rate in 1992. (f) Gas production is converted to oil equivalents at the rate of 6 Mcf per barrel except for Thomasville production which, through 1992, was converted based on its price equivalency to the Company's other gas. Average gas prices exclude Thomasville production. (g) Includes production and severance taxes. (h) Adjusted to give effect to the application of the estimated net proceeds of this Offering. See "Use of Proceeds." 5 7 SUMMARY RESERVE DATA The following table sets forth information on estimated proved oil and gas reserves, future net cash flow before taxes from such reserves and the pretax present value of such cash flow, using unescalated prices and costs and a 10% per annum discount rate ("Pretax PW10% Value"). The prices used in the yearend reserve estimates averaged $11.49 per barrel of oil and $2.11 per Mcf of gas over the life of the reserves.
DECEMBER 31, 1993 -------------------------------------- DEVELOPED UNDEVELOPED TOTAL --------- ----------- -------- (IN THOUSANDS) Estimated proved reserves: Crude oil and liquids (Bbl)..................... 18,032 13,898 31,930 Natural gas (Mcf)............................... 268,349 161,740 430,089 BOE(a).......................................... 62,757 40,855 103,612 Future net cash flow from estimated production.... $ 474,480 $ 213,792 $688,272 Pretax PW10% Value(b)............................. $ 297,638 $ 92,771 $390,409 -------------
(a) Natural gas reserves are converted to oil equivalents at the rate of 6 Mcf per Bbl. (b) The after-tax present value of proved reserves totalled $340.5 million at December 31, 1993. The revenues generated by the Company are highly dependent upon the prices of crude oil and gas. The volatility of energy prices makes it particularly difficult to estimate future prices of oil and gas. Price fluctuations change reserve values by altering the quantities of reserves that are recoverable on an economic basis as well as the future net revenues attributable to the reserves. Any significant decline in prices of oil or gas could have a material adverse effect on the Company's financial condition and results of operations. 6 8 RECENT DEVELOPMENTS For the three months ended March 31, 1994, the Company's revenues increased 38% to $61.8 million from $44.9 million for the three months ended March 31, 1993. This increase is attributable to a 26% increase in production volumes and increases in gas processing and transportation revenues, which were partially offset by a 16% drop in the price realized per equivalent barrel of production. Income before taxes and extraordinary item rose 33% to $8.6 million from $6.5 million in the 1993 period. Net income remained at $6 million despite a $2.6 million deferred tax provision in the 1994 period. For the three months ended March 31, 1993, income taxes were reduced from the statutory rate by $2.1 million as a result of the Company's adoption of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," as of January 1, 1992. Net income per share before extraordinary item fell to $.14 from $.23 in the prior year period due to the $2.6 million deferred tax provision and $1.5 million of additional preferred stock dividends relating to the April 1993 offering of convertible preferred stock. Production in the first quarter reached an average of 30,405 BOE per day. The production increase was primarily due to continued development drilling in the Wattenberg Field. The Company's average wellhead price for oil in the quarter fell to $12.02 per barrel from $16.62 for the 1993 period. The net wellhead price for gas decreased 3% to $1.98 per Mcf from $2.05 per Mcf in the 1993 period.
THREE MONTHS ENDED MARCH 31, --------------------- 1993 1994 ------- ------- (IN THOUSANDS, EXCEPT PER SHARE DATA) FINANCIAL DATA Revenues............................................................. $44,873 $61,815 Income before taxes and extraordinary item........................... 6,457 8,595 Income before extraordinary item..................................... 6,367 6,003 Net income........................................................... 5,983 6,003 Net income available to common....................................... 4,783 3,264 Weighted average shares outstanding.................................. 22,895 23,307 Per share data Income before extraordinary item.................................. $ .23 $ .14 Net income........................................................ .21 .14 OPERATING DATA Average daily production Oil (Bbl)......................................................... 9,178 11,656 Gas (Mcf)......................................................... 90,033 112,467 BOE............................................................... 24,189 30,405 Average sales price Oil (per Bbl)..................................................... $ 16.62 $ 12.02 Gas (per Mcf)..................................................... 2.05 1.98 BOE............................................................... 14.25 11.93 Average operating expense per BOE.................................... 5.22 4.37
7 9 USE OF PROCEEDS The net proceeds from the sale of the Notes are estimated to be approximately $ million ($ million if the Underwriters' over-allotment option is exercised in full). The Company intends to use the net proceeds to repay a portion of the borrowings outstanding under its bank credit facility. The Company intends to use the resulting borrowing capacity under its credit facility to fund development drilling, expansion of its gas facilities and potential acquisitions. The Company estimates that it will expend $175 to $200 million for development drilling and expansion of gas facilities during 1994, assuming no material changes in oil and gas prices. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." On May 4, 1994 approximately $137.9 million was outstanding under the Company's revolving bank credit facility. The rate of interest on this debt fluctuates based on various rates, as selected by the Company. The weighted average interest rate on bank borrowings at such date was 5.29%. The facility expires on December 31, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." CAPITALIZATION The following table sets forth the Company's capitalization at December 31, 1993, and as adjusted to give effect to the issuance of the Notes offered hereby and the application of the estimated net proceeds therefrom.
DECEMBER 31, 1993 -------------------------- ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Current portion of debt............................................. $ 15 $ 15 -------- ----------- -------- ----------- Long-term debt(a) Senior debt....................................................... $114,952 $ 18,052 % Convertible Subordinated Notes Due 2001...................... -- 100,000 -------- ----------- Total long-term debt...................................... 114,952 118,052 Stockholders' equity Preferred Stock, $.01 par value; 10 million shares authorized: $4.00 Convertible Exchangeable Preferred Stock; 1,186,005 shares issued and outstanding ($50.00 liquidation preference per share).................................................... 12 12 $6.00 Convertible Exchangeable Preferred Stock; 1,035,000 shares issued and outstanding ($100.00 liquidation preference per share).................................................... 10 10 Common Stock, $.01 par value; 75 million shares authorized and 23,259,658 shares issued and outstanding (b)................... 233 233 Capital in excess of par value.................................... 250,574 250,574 Retained earnings................................................. 46,954 46,954 Foreign currency translation...................................... (542) (542) -------- ----------- Total stockholders' equity................................ 297,241 297,241 -------- ----------- Total capitalization...................................... $412,193 $ 415,293 -------- ----------- -------- -----------
- ------------- (a) See Note 3 to the consolidated financial statements incorporated by reference herein for a description of long-term debt. (b) Excludes an aggregate of 15,199,568 shares of Common Stock reserved for issuance as of April 1, 1994 upon conversion or exercise of outstanding securities, consisting of (i) 11,463,558 shares reserved for issuance upon conversion of preferred stock, (ii) 1,736,010 shares reserved for issuance upon exercise of management stock options and (iii) 2,000,000 shares reserved for issuance upon exercise of warrants held by Union Pacific Resources Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 8 10 PRICE RANGE OF COMMON STOCK AND DIVIDENDS The Common Stock is listed on the NYSE under the symbol "SNY." The following table sets forth, for the periods indicated, the high and low sales prices for the Common Stock for NYSE composite transactions, as reported by The Wall Street Journal, and the cash dividends declared per share of Common Stock.
HIGH LOW DIVIDENDS ---- ---- --------- 1992 First Quarter........................................... $ 6 7/8 $ 5 7/8 $ .05 Second Quarter.......................................... 7 3/8 6 1/8 .10(a) Third Quarter........................................... 10 1/2 6 3/8 .05 Fourth Quarter.......................................... 10 1/8 8 5/8 .05 1993 First Quarter........................................... 16 1/8 10 .05 Second Quarter.......................................... 20 1/4 15 .05 Third Quarter........................................... 23 16 5/8 .06 Fourth Quarter.......................................... 23 14 3/4 .06 1994 First Quarter........................................... 21 3/8 17 1/2 .06 Second Quarter (through May 4).......................... 20 1/8 17 1/2 -- ------------- (a) Due to revised payment timing, two payments were made at the $.05 quarterly rate in the second quarter of 1992.
On May 4, 1994, the last reported sale price of the Common Stock on the NYSE was $19 7/8 per share. As of December 31, 1993, there were approximately 3,500 holders of record of the Common Stock and 23.3 million shares outstanding. Shares of Common Stock receive dividends if, as and when declared by the Board of Directors. The amount of future dividends will depend on debt service requirements, dividend requirements on preferred stock, capital expenditures and other factors. The Company's debt agreements contain restrictions on its ability to declare and pay dividends on the Common Stock in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 9 11 SELECTED HISTORICAL FINANCIAL INFORMATION The following table presents selected financial information for each of the five years ended December 31, 1993. The following information should be read in conjunction with the consolidated financial statements incorporated by reference herein.
AS OF OR FOR THE YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 1989 1990 1991 1992 1993 ------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATIONS Revenues Oil and gas sales............................... $12,479 $ 49,803 $ 65,344 $ 77,363 $124,641 Gas processing and transportation............... 10,885 29,442 21,459 38,611 94,839 Other........................................... 3,179 2,928 5,698 4,198 10,405 ------- -------- -------- -------- -------- 26,543 82,173 92,501 120,172 229,885 ------- -------- -------- -------- -------- Expenses Direct operating................................ 4,930 18,088 24,882 28,057 44,901 Cost of gas and transportation.................. 9,168 24,103 14,202 30,469 84,840 General and administrative...................... 1,047 5,649 7,259 6,704 6,780 Interest and other.............................. 761 7,125 9,327 5,693 7,271 Depreciation, depletion and amortization........ 3,316 17,351 25,392 31,944 51,184 Income before taxes, accounting change and extraordinary item.............................. 7,321 9,857 11,439 17,305 34,909 Provision for income taxes Current......................................... 400 977 230 430 -- Deferred........................................ 2,089 1,365 2,398 -- 7,301 ------- -------- -------- -------- -------- 2,489 2,342 2,628 430 7,301 ------- -------- -------- -------- -------- Income before accounting change and extraordinary item............................................ 4,832 7,515 8,811 16,875 27,608 Cumulative effect of change in accounting for income taxes.................................... -- -- -- 3,763 -- Extraordinary item -- use of net operating loss carryforward.................................... 2,089 -- -- -- -- Extraordinary item -- early extinguishment of debt, net of taxes.............................. -- -- -- -- (1,944) ------- -------- -------- -------- -------- Net income........................................ 6,921 7,515 8,811 20,638 25,664 Dividends on preferred stock...................... -- -- 453 4,800 9,100 ------- -------- -------- -------- -------- Net income available to common.................... $ 6,921 $ 7,515 $ 8,358 $ 15,838 $ 16,564 ------- -------- -------- -------- -------- ------- -------- -------- -------- -------- Weighted average shares outstanding............... 11,135 20,620 22,839 22,722 23,096 Per share data Income before accounting change and extraordinary item............................ $ .43 $ .36 $ .37 $ .53 $ .80 Net income...................................... .62 .36 .37 .70 .72 Dividends....................................... .11 .16 .20 .25(a) .22 Ratio of earnings to fixed charges(b)............. 10.6x 2.6x 2.4x 4.5x 7.6x(c) Ratio of EBITDA to fixed charges(d)............... 15.0x 5.3x 5.4x 10.9x 17.2x(c) CASH FLOW Net cash provided by operations................... $11,129 $ 22,512 $ 37,738 $ 47,911 $ 68,293 Capital expenditures.............................. 14,216 171,767(e) 48,385 130,375(f) 166,726 BALANCE SHEET Working capital................................... $ 3,499 $ 12,087 $ 17,259 $ 7,619 $ 1,291 Oil and gas properties and facilities, net........ 29,904 179,902 196,206 287,094 388,361 Total assets...................................... 56,669 227,198 252,241 346,737 479,536 Senior debt....................................... 2,325 56,172 17,108 96,568 114,952 Subordinated notes, net........................... 2,477 25,000 25,000 18,750 -- Stockholders' equity.............................. 31,149 115,187 174,696 184,393 297,241
- --------------- (a) Due to revised payment timing, five payments were made at the $.05 quarterly rate in 1992. (b) For the purpose of calculating the ratio of earnings to fixed charges, "earnings" consist of income before taxes, accounting change, extraordinary item and "fixed charges." "Fixed charges" include interest on indebtedness and the portion of rental expense, excluding rent on capitalized leases, estimated to be representative of the interest factor in rental expense. (c) The ratio of earnings to fixed charges and the ratio of EBITDA to fixed charges, pro forma for the issuance of $100 million principal amount of Notes offered hereby, would be 4.6x and 10.4x, respectively. (d) EBITDA is income before (i) accounting change and extraordinary item, (ii) taxes, (iii) depletion, depreciation and amortization and (iv) interest. (e) Includes $130.7 million related to the acquisition of a publicly traded limited partnership managed by the Company. (f) Includes $49.8 million paid in February 1993 for properties acquired in December 1992. 10 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS(A) Comparison of 1993 results to 1992. Total revenues rose 91% in 1993 to $229.9 million. Net income before taxes and extraordinary items more than doubled to reach $34.9 million in 1993. The increase was led by a rapid rise in production and assisted by an increase in gas processing and transportation margins. Before the effect of a favorable $3.8 million income tax accounting change in 1992 and a $1.9 million 1993 extraordinary charge on early retirement of debt, earnings per common share were $.80 in 1993 compared to $.53 in 1992, a 51% increase. The gross margin from production operations for 1993 increased 62% to $79.7 million, which was primarily related to a 65% growth in oil and gas production. The price received per equivalent barrel decreased by 3% to $13.41. Total operating expenses including production taxes increased 60% during 1993 although operating cost per BOE decreased to $4.83 from $4.99 in 1992. Expense reductions gained from wells added in the DJ Basin, where operating costs averaged $2.76 per BOE, were partially offset by the late 1992 acquisition of Wyoming wells from a major oil company where 1993 operating costs averaged $7.45 per BOE. For the year ended December 31, 1993, average daily production was 25,472 BOE, a 65% increase from 1992. Average daily production in the fourth quarter of 1993 climbed to 10,314 Bbls and 105.6 MMcf (27,917 BOE). The production increases resulted primarily from acquisitions and continuing development drilling in the DJ Basin. Domestically, $51.0 million in properties were acquired in 1993, primarily in and around existing hubs in Colorado and Wyoming. The acquisitions included a significant number of development locations and should continue to add to production in 1994. In 1993, 311 wells were placed on production in the DJ Basin, with 51 wells in various stages of drilling and completion at yearend. Because the majority of the wells were added in the latter part of the year, production will not be fully impacted until 1994. Additionally, significant downtime was experienced in the fourth quarter at the major processing plant in the DJ Basin, which increased line pressures and hampered production. To a lesser extent, this situation continued into early 1994. The gross margin from gas processing, transportation and marketing activities for 1993 increased 23% to $10.0 million from $8.1 million in 1992. The increase was primarily attributable to a $3.0 million (49%) rise in transportation and processing margins as a result of additional DJ Basin production and the recent expansion of the related facilities. Gas marketing margins for 1993 decreased by $1.1 million due to reduced margins on the Company's Oklahoma cogeneration supply contract, which declined as a result of an imposed limitation of the contract sales price and rising gas purchase costs. In 1993 the net contract margin was a loss of $267,000, which was $1.8 million less than 1992. At present gas price levels, the Company foresees continued negative or breakeven margins for the cogeneration contract through July 1994. At that time, a change in the pricing formula should result in improved margins. The cogeneration margin reduction was partially offset by a $667,000 (126%) rise in other gas marketing margins in 1993 resulting from increased third party marketing. Other income was $10.4 million during 1993, compared to $4.2 million in 1992. The $6.2 million increase resulted from a $3.5 million gas contract settlement received in April 1993, collection of a $1.7 million litigation judgment and greater gains on the sales of securities. General and administrative expenses, net of reimbursements, for 1993 represented 3% of revenues compared to 5.6% in 1992 as expenses were held essentially flat while revenues grew 91%. Interest and other expenses increased 28% primarily as a result of a rise in outstanding debt balances. Senior debt was substantially reduced in April 1993 with proceeds from a preferred offering, but increased through yearend as - --------------- (a) Prior to 1993, production from the Thomasville Field, which was sold at prices that were significantly above market, was converted to equivalent barrels based on its price relative to the Company's other gas production. Beginning in 1993, Thomasville production was converted to oil equivalents at the rate of 6 Mcf per barrel. In order to provide comparability between periods, equivalent barrel information, other than depletion rates, for 1992 and 1991 has been restated in this section to reflect Thomasville production at the conversion rate of 6 Mcf per barrel. All equivalent barrel information presented elsewhere in this Prospectus reflects the historical method of conversion of Thomasville production used by the Company in the applicable year. 11 13 a result of development expenditures, acquisitions, the investment in Command Petroleum Holdings NL and the retirement of $25.0 million in subordinated debt. Depletion, depreciation and amortization during 1993 increased 60% from the prior year. The increase was the direct result of the 65% rise in equivalent production between years. The producing depletion rate per BOE for 1993 was reduced to $4.75 from $4.79 in 1992. The rate was reduced by an ongoing drilling cost reduction program, partially offset by an increase from the discontinuation of converting Thomasville production to equivalent quantities based on relative gas prices. The Company adopted FASB Statement No. 109, "Accounting for Income Taxes," effective January 1, 1992. Net income for 1992 was increased by $3.8 million for the cumulative effect of the change in method of accounting for income taxes. In 1992 the income tax provision was reduced from the statutory rate of 34% by $5.5 million due to the elimination of deferred taxes as a result of tax basis in excess of financial basis. In 1993 the income tax provision was reduced from the newly enacted rate of 35% to an effective rate of approximately 20% as a result of full realization of the excess basis benefit. The Company anticipates deferred taxes will be provided in 1994 and beyond based on the full statutory rate and accordingly will increase substantially. Comparison of 1992 results to 1991. Revenues rose 30% in 1992 to $120.2 million, compared to $92.5 million in 1991. Net income for 1992 was $20.6 million, a 134% increase from the $8.8 million in 1991. The increases resulted from greater oil and gas production volumes, lower interest expense, reduced general and administrative expenses and a $3.8 million reversal of the cumulative effect of prior year deferred taxes with the adoption of a change in the method of accounting for income taxes. Average daily production for 1992 rose 24% to 15,408 BOE due mostly to development drilling in the DJ Basin of Colorado as 189 wells were placed on production there. As a result, the gross margin from production increased 22% to $49.3 million in 1992. The price per BOE decreased 4% during 1992. The gross margin from gas processing, transportation and marketing activities for 1992 increased 12% to $8.1 million from $7.3 million in 1991. The growth was primarily the result of increased marketing of third party gas in New Mexico, Colorado and Wyoming. Gas processing and transportation margins increased moderately as volumes were increased late in the year by expansions of pipeline and plant facilities to take advantage of increasing DJ Basin production. Other income for 1992 decreased 26% to $4.2 million from a reduction in gains on sales of securities and lower interest on notes receivable. Direct operating expenses including production taxes increased only 13% during 1992 as the operating cost per BOE decreased to $4.99 from $5.47 in 1991, due to increased DJ Basin production where operating costs have been significantly lower than average. General and administrative expenses, net of reimbursements, for 1992 represented less than 6% of revenues compared to 8% in 1991, as revenues rose 30%. Interest and other expenses dropped 39% in 1992 due to lower average outstanding senior debt after the application of proceeds from a preferred stock offering in late 1991. DEVELOPMENT, ACQUISITION AND EXPLORATION During 1993 the Company expended $93.1 million for oil and gas property development and exploration, $51.0 million for acquisitions and $22.6 million for gas facility expansion and other assets, for a total of $166.7 million in property and equipment expenditures. Additionally, the Company made an $18.2 million investment in an Australian based exploration and production company. The Company has concentrated a significant portion of its development activities in the DJ Basin. Capital expenditures for DJ Basin development totalled $75.4 million during 1993. A total of 311 newly drilled wells were placed on production there in 1993 and 51 were in progress at yearend. Additionally, 42 recompletions were performed in 1993, with seven in process at yearend. In December 1993, 16 drilling rigs were in operation in the DJ Basin. The Company anticipates putting 500 or more wells per year on production in the DJ Basin for the next few years. With additional leasing activity and through drilling cost reductions that add proved undeveloped locations as they become economic, the Company has increased the inventory of available drillsites. In December 1993, the Company entered into a letter of intent with Union Pacific Resources Company ("UPRC") whereby the Company will gain the right to drill wells on UPRC's previously uncommitted acreage throughout the Wattenberg area. This transaction significantly increased the Company's undeveloped Wattenberg inventory. UPRC will retain a royalty and the right to participate as a 50% working 12 14 interest owner in each well, and received warrants to purchase two million shares of Company stock. Of the warrants, one million expire three years from the date of grant, and are exercisable at $25 per share, while the other one million expire in four years and are exercisable at $27 per share. On February 8, 1995, the exercise prices may be reduced to 120% of the average closing price of the Company stock for the preceding 20 consecutive trading days, but not below $21.60 per share. The expiration date of the warrants will be extended one year if the average closing price over such 20 day trading period is less than $16.50 per share. The Company expended $14.8 million for other development and recompletion projects and $2.9 million for exploration during 1993. In Nebraska, 29 wells were added to production in 1993 as an extension of a drilling program initiated in 1992. An additional 20 wells are planned in Nebraska for 1994. In southern Wyoming, 11 wells in the East Washakie Basin development program were successfully drilled and completed during the last half of 1993 with three in process at yearend. In this program, significant cost-cutting measures were applied based on the experience gained in the DJ Basin. In central Wyoming on the properties acquired from a major oil company in late 1992, efforts have been focused on increasing operating efficiency with limited development drilling and workover activity. In 1993, three successful wells were drilled in the fourth quarter and selected development and recompletion activity is scheduled for 1994. In the Piceance Basin of western Colorado, a three well test program was started in December of 1993 on acreage acquired there during the year, with one well undergoing completion, the second in progress and a third scheduled for early 1994. Current plans include a minimum of 25 wells in the basin during 1994. In South Texas, a combined operated and non-operated program was initiated, with nine wells completed in 1993 and one well abandoned. A total of 25 additional horizontal locations have been identified and drilling should continue with as many as 15 wells planned in 1994. In its domestic exploration efforts, the Company initiated a seismic program in Louisiana and began drilling early in the fourth quarter. Advanced seismic techniques are being used to identify further prospects in Louisiana and expectations are to drill up to 20 wells in 1994. A total of $51.0 million in domestic acquisitions were completed in 1993. In May 1993, the Company purchased an interest in 121 producing wells and over 70 drilling locations in the DJ Basin area for $3.3 million. In July, an incremental 25% interest in the Company's Barrel Springs and Duck Lake Fields in Wyoming was purchased for $6.1 million. The properties are 90% gas and include 44 producing wells and 46 undeveloped locations. In August, the Company acquired interests in 225 producing wells and 272 proved undeveloped locations in the DJ Basin for $19.7 million. The proved reserves are 70% gas with more than two- thirds requiring future development to produce. Late in the year, two acquisitions were completed in the Piceance and Uinta Basins of Western Colorado for a total of $12.5 million. The majority of the value was in undeveloped locations as only 128 wells were currently producing. Numerous other producing and undeveloped acquisitions totalling $9.4 million were completed, mostly in or close to the Company's principal operating areas. The Company's gas gathering and processing facilities have been undergoing significant transformation since late 1992. In 1993, the Company expended $20.1 million to develop further its gas related assets. The Company spent $9.4 million toward the second phase of its DJ Basin gathering expansion to construct a high pressure line to deliver gas directly to the major gas processing plant in the area and expand its gathering network for the increased drilling activity. An additional $2.6 million was expended to expand the Roggen Plant for the production increases. A total of $5.6 million in additional transportation and gathering facilities were constructed in the DJ Basin including a nine mile 16" interconnect line completed in October to relieve high line pressures, a 20" western gathering extension and numerous other extensions and connections. A gathering system that delivers third party gas to the Roggen Plant was purchased for $703,000. The Company expended $1.4 million to complete construction of a system to gather gas from its Nebraska drilling project. These projects are intended to take advantage of the significant increase in drilling activity in these areas. In May 1993, the Company acquired 42.8% (currently 35.7%) of the outstanding shares of Command Petroleum Holdings NL ("Command"), a Sydney based Australian exploration and production company listed on the Australian Stock Exchange, for $18.2 million. Command holds interests in more than 20 exploration permits and licenses and a 28.7% interest in a Netherlands exploration and production company whose assets are located primarily in the North Sea. Permtex, the Company's Russian joint venture, received central government approval in August and the Company executed a finance and insurance protocol with the 13 15 Overseas Private Investment Corporation ("OPIC"), a United States government agency. Current plans call for 25 of the existing 45 shut-in wells to be placed on production in 1994, and that 400 development wells will be drilled over the next ten years. Extensive seismic work began in the fourth quarter of 1993 for 400 kilometers of data in Tunisia and 500 kilometers in Mongolia. The Company from time to time acquires securities of publicly traded and private oil and gas companies. In addition to its investment in Command, the Company owns, among other investments, more than 5% of the common stock of Lomak Petroleum, Inc. and, as the result of purchases beginning in the third quarter of 1993, American Exploration Company. The Company is currently evaluating a range of possible alternatives with respect to its investment in American Exploration Company, including the possibility of actions to enhance the value of its common stock. FINANCIAL CONDITION AND CAPITAL RESOURCES At December 31, 1993, the Company had total assets of $480 million and working capital of $1.3 million. Total capitalization was $412 million, of which 28% was represented by senior debt and the remainder by stockholders' equity. During 1993, the Company fully retired its $25 million of 13.5% subordinated notes and the related cumulative participating interests. During 1993, cash provided by operations was $68.3 million, an increase of 43% over 1992. As of December 31, 1993, commitments for capital expenditures totalled $7.5 million, primarily for DJ Basin drilling. The Company anticipates that it will expend $175 to $200 million for development drilling and expansion of gas facilities in 1994. The level of these and other future expenditures is largely discretionary, and the amount of funds devoted to any particular activity may increase or decrease significantly, depending on available opportunities and market conditions. The Company plans to finance its ongoing development, acquisition and exploration expenditures using internally generated cash flow, proceeds from property dispositions and existing credit facilities. In addition, joint ventures or future public and private offerings of securities may be utilized. In 1992, an institutional investor agreed to contribute $7 million to a partnership formed to monetize Section 29 tax credits to be realized from the Company's properties, mainly in the DJ Basin. The initial $3 million was contributed in October 1992, and at first payout in June 1993 the second contribution of $1.5 million was received. An additional $1.5 million was received in October 1993. This transaction should increase the Company's cash flow and net income through 1994. A revenue increase of more than $.40 per Mcf is realized on production generated from qualified Section 29 properties in this partnership. The Company recognized $3.8 million of this revenue during 1993. Discussions are in progress to expand the scope of this transaction so that the benefits would be continued through at least 1996. In April 1993, the Company sold 4.1 million depositary shares (each representing a one quarter interest in one share of $100 liquidation value stock) of convertible preferred stock through an underwritten offering for $103.5 million. A portion of the net proceeds of $99.3 million was used to retire the entire outstanding balance under the revolving credit facility at that time. The preferred stock pays a 6% dividend and is convertible into common stock at $21.00 per share. At the Company's option, the preferred stock is exchangeable into 6% convertible debentures on any dividend payment date on or after March 31, 1994. The preferred stock is redeemable at the option of the Company on or after March 31, 1996. Effective July 1, 1993, the Company renegotiated its bank credit facility with a syndicate of banks for whom NationsBank of Texas, N.A. acts as agent and increased it from $150 million to $300 million. The new facility is divided into a $50 million short-term portion and a $250 million long-term portion that expires on December 31, 1997. However, management's policy is to request renewal of the facility annually. Credit availability is adjusted semiannually to reflect changes in reserves and asset values. At December 31, 1993, the elected borrowing base was $150 million. The majority of the borrowings currently bear interest at LIBOR plus 1.25% with the remainder at prime. The Company also has the option to select the CD rate plus 1.375%. The Company's bank credit facility contains certain restrictive covenants (including restrictions on mergers and asset sales, the payment of dividends, the incurrence of additional indebtedness and the creation of liens) and requires that the Company meet certain financial ratios and tests. Among other things, such facility generally limits the amount of dividends and other restricted payments (including payments of principal on the Notes prior to their stated maturity) by the Company to an amount equal to the sum of (i) $10,000,000, 14 16 (ii) the net cash proceeds to the Company from all equity offerings completed after March 31, 1993 and (iii) 50% of the Company's consolidated cash flow after March 31, 1993. Based on such limitations, $86.5 million would have been available for the payment of dividends and other restricted payments as of December 31, 1993. The Company does not currently plan to make, and is not committed to make, any advances or contributions to unrestricted subsidiaries that would materially affect its ability to pay dividends under this limitation. The Company maintains a program to divest marginal properties and assets that do not fit its long range plans. For 1992 and 1993, proceeds from these sales were $3.0 million and $5.5 million, respectively. Included in the 1993 proceeds were $4.0 million of cash receipts previously accrued for late 1992 sales. The Company intends to continue to evaluate and dispose of nonstrategic assets. The Company believes that its capital resources are more than adequate to meet the requirements of its business. However, future cash flows are subject to a number of variables including the level of production and oil and gas prices, and there can be no assurance that operations and other capital resources will provide cash in sufficient amounts to satisfy debt service requirements and to maintain planned levels of capital expenditures or that increased capital expenditures will not be undertaken. INFLATION AND CHANGES IN PRICES While certain of its costs are affected by the general level of inflation, factors unique to the petroleum industry result in independent price fluctuations. Over the past five years, significant fluctuations have occurred in oil and gas prices. Although it is particularly difficult to estimate future prices of oil and gas, price fluctuations have had, and will continue to have, a material effect on the Company. BUSINESS AND PROPERTIES GENERAL Snyder Oil Corporation is engaged in the development and acquisition of oil and gas properties primarily in the Rocky Mountain region of the United States. The Company also gathers, transports, processes and markets natural gas generally in proximity to its principal producing properties. Over the five year period from 1988 to 1993, revenues increased from $14.7 million to $229.9 million, net income increased from $5.0 million to $25.7 million and net cash provided by operations increased from $8.1 million to $68.3 million. At December 31, 1993, the Company's net proved reserves totaled 103.6 MMBOE, having a pretax present value at constant prices of $390.4 million. Approximately 69% of its proved reserves are natural gas. The Company is headquartered at 777 Main Street, Fort Worth, Texas 76102 (telephone 817-338-4043). The Company also maintains administrative offices in Denver and New York and has eight field offices in Colorado, Wyoming, Texas, New Mexico and Nebraska. DEVELOPMENT GENERAL. Since 1990, development drilling has become the primary focus of the Company's growth strategy. The Company believes that its existing properties have extensive development drilling and enhancement potential, primarily in the DJ Basin of Colorado, the Washakie Basin in southern Wyoming, the Piceance and Uinta Basins in western Colorado and Utah and in the Giddings Field in southern Texas. The Company designs its major drilling programs to reduce risk, create synergies with its gas management operations and exploit the potential for continuous cost improvement. In 1994, the Company expects to drill over 650 wells, including approximately 500 wells in the Wattenberg Field, where the size of its operations enables it to continue to refine the application of new drilling, completion and operating techniques, and to apply the experience gained there to establish other large scale development projects in the Rockies. In its large scale development projects, the Company also attempts to acquire and maintain a sizeable inventory of potential drilling locations, many of which may not be economic at current cost and price levels, but which the Company believes may ultimately prove attractive to develop if reservoir assumptions are validated and well economics improve over the life of the project through cost reductions or price increases. 15 17 No assurances can be given that such conditions will be satisfied and, accordingly, that such locations will be drilled. Assuming no material changes in product prices and capital availability, the Company estimates that it will expend from $150 to $200 million per year for development drilling and gas facilities over the next three to five years. Such expenditures totalled $64.8 million in 1992 and $112.8 million in 1993, primarily in the Wattenberg Field. DJ BASIN WATTENBERG FIELD. The Wattenberg Field is the Company's largest base of operations, representing over 55% of total proved reserves. Between 1991 and 1993, the Company drilled a total of 667 wells in Wattenberg, of which 323 were drilled during 1993. At yearend, the Company had interests in more than 1,400 producing wells, of which the Company operated over 1,100. Through a major joint venture with UPRC, complementary acquisitions and an extensive leasing program, the Company has accumulated up to 6,000 potential drilling locations in the Wattenberg Field. The Company expects that over half of these sites will ultimately prove attractive to develop. The Company expects to drill approximately 500 wells per year in the Wattenberg Field for at least the next several years. At yearend 1993, the net proved reserves attributed to the Wattenberg properties were 16.9 million barrels of oil and 229.9 Bcf of gas. The reserves were attributable to 1,437 producing wells, 51 wells in progress, 1,102 proved undeveloped locations and approximately 387 proved behind pipe zones. The Company expects proved reserves to be assigned to other locations as drilling progresses. The Company acquired its first properties in Wattenberg during 1986. In 1990, it substantially increased its acreage position by acquiring rights to the Codell and Niobrara formations underlying 32,985 net acres from Amoco Production Company ("Amoco") for $14.4 million. Several farm-ins from Amoco in 1992, financed primarily through a transfer of Section 29 tax credits, resulted in earning additional Codell/Niobrara rights as well as rights to the Sussex, J-Sand and Dakota formations in a number of locations. During 1993, a series of purchases added nearly 9 MMBOE at a net cost of under $3.50 per barrel as well as several pipeline and processing facilities that complement existing facilities. See "-- Acquisition Program." In early 1994, the Company finalized an agreement with UPRC under which the Company has the right for up to six years to drill wells on locations of its choosing on UPRC's previously uncommitted undeveloped acreage throughout the Wattenberg area. This transaction substantially increased the Company's Wattenberg undeveloped acreage inventory. Many of the locations have the potential for improved economics through completion in one or more of the Shannon, Sussex, J-Sand or Dakota formations, as well as the Codell and Niobrara. During the venture's initial three-year term, the Company is required to drill a minimum of 120, 120 and 60 wells per year. After the initial period, the Company can, at its option, extend the venture annually for up to three additional years by drilling at least 150 wells per year. There is no limit on the maximum number of wells that can be drilled, and wells in excess of the required minimum in any year will reduce the number of wells required in the following year by up to 50%. If the Company drills less than the minimum number of wells, it is required to pay UPRC $20,000 per well for the shortfall. On each well that is drilled on UPRC's mineral acreage under the venture, UPRC retains a 15% mineral owner royalty and has the option either to receive an additional 10% royalty interest after pay-out or to participate in the well as a 50% working interest owner. On leasehold acreage, UPRC does not have the right to participate in the well but will retain a royalty interest that will result in a total royalty burden of 25%. As compensation for committing its acreage position to the Company, UPRC was granted warrants to purchase two million shares of the Company's Common Stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Development, Acquisition and Exploration." Drilling. The Company began drilling operations in Wattenberg in early 1991. From 1991 to December 1993, the Company expended $151.1 million to drill 667 wells, of which 323 were drilled in 1993. At yearend, 609 of these wells were producing, 51 were in various stages of drilling and completion and seven were dry holes. 16 18 The size of the Wattenberg drilling program has resulted in numerous advantages. The Company acts as operator on all its development sites in the Wattenberg Field and much of the acreage is held by production. As a result, the Company has significant operational control over the timing of the development program. The actual drilling locations and schedule are selected to minimize costs associated with rig moves, surface facilities, location preparation and gathering system and pipeline connections and to evaluate and quantify incremental reserve potential across the acreage position. The Company's success in continuing to reduce its costs of drilling and operations, as well as applying new technology, will be important to the full development of its undeveloped acreage in Wattenberg. The Company has selected procedures for drilling and completing wells that it believes maximize recoverable reserves and economics. The Company has also been able to reduce its costs of drilling, completing and operating wells significantly by negotiating favorable prices with suppliers of drilling and completion services because of the size of its drilling program. These cost reductions often allow the Company to earn an attractive rate of return even on lower reserve wells. The reductions have been achieved by several methods. One of the most significant is the formation of alliances with selected vendors who work with Company personnel to improve coordination and reduce both parties' costs. The resultant reductions are credited wholly or in large part to the Company while vendors' margins are maintained or increased. In addition to cost reduction, the Company seeks to employ new technology or to creatively apply existing technology to reduce costs or to produce reserves that would otherwise remain unrecovered. One example is the drilling of four or more wells from a single drilling pad in residential areas, under reservoirs and on inaccessible acreage. The Codell formation, which is the primary objective of the drilling, is a blanket siltstone formation that exists under much of the Wattenberg acreage at depths of 6,700 to 7,500 feet. Codell reserves have a high degree of predictability due to uniform deposition and gradual transition from high to low gas/oil ratio areas. The Company generally dually completes the Niobrara chalk formation, which lies immediately above the Codell, to enhance drilling economics. The Codell/Niobrara wells produce most prolifically in the first six to twelve months, after which production declines to a fraction of initial rates. More than half of a typical well's reserves are recovered in the first three years of production. As a result, each well contributes significantly more production in its first year than in subsequent years. However, the declining production of individual wells is expected to be offset by continuing development drilling. During 1992 and 1993, the Company expanded its drilling targets to include both deeper and shallower formations. The J sand lies approximately 400 feet below the Codell. It is a low permeability sandstone generally found to be productive throughout the DJ Basin with performance varying proportionately with porosity and thickness. The Dakota formation lies approximately 150 feet below the J sand. It is a low permeability sand occasionally naturally fractured with less predictable commercial accumulations and varied performance results. The Sussex formation is at average depths of 4,500 feet. The Sussex sands were deposited as bars and exhibit variable reservoir quality with a moderate degree of predictability. Because the Codell, Niobrara and J formations are continuous reservoirs over a large portion of the DJ Basin, the Company believes that drilling in the Wattenberg Field is relatively low risk. In addition, the Company has compiled a comprehensive geologic and production database for approximately 12,000 wells within a 4,350 square mile area between Denver and the Wyoming border and has had considerable success in predicting variations in thickness, porosity, gas/oil ratios and productivity. Of the 667 wells drilled between 1991 and 1993, only seven have been dry holes. Dry holes in the Codell/Niobrara formations cost an average of only $65,000 per well. The average net cost of a completed well in these formations approximated $193,000 during 1993 with only 30 days usually elapsing between spud date and initial production. CHEYENNE. During 1993, 29 wells were placed on stream in a shallow gas producing area on the northeast flank of the DJ Basin. This project, known as the Cheyenne Project, began with the acquisition of five shut-in gas wells in 1990 when the Company determined that it could capitalize on new open access rules of the Federal Energy Regulatory Commission ("FERC") by constructing a gathering system to transport gas to a nearby interstate pipeline. After acquiring almost 50,000 acres of leases in the area and selling an approximate 27.5% interest to other parties on a promoted basis, the Company has drilled 54 successful wells and six dry 17 19 holes in the area and constructed a gathering system having a capacity of 10 MMcf per day to transport the gas to the interstate pipeline. The Company currently operates 61 wells in this area that produce from the Niobrara formation and plans to drill approximately 20 additional wells during 1994. EAST WASHAKIE During 1993, the Company initiated a major project to apply the cost-cutting and improved drilling and completion techniques learned in the Wattenberg Field to develop fluvial Mesaverde sands in the eastern Washakie Basin. An eleven well pilot project was completed in 1993 to test drilling and completion techniques and confirm cost estimates. A second drilling program is currently being initiated. After final evaluation of the drilling, the Company may initiate a large scale drilling program in this area upon completion of a required environmental impact statement. The environmental impact statement was filed in October 1993, and clearance is currently expected in the second half of 1994. Depending on the timing of environmental clearance and continued evaluation of drilling results, the Company expects to drill up to 60 wells in East Washakie during 1994. Since the mid-1980's, the Company's properties in the Barrel Springs Unit and the Blue Gap Field of southern Wyoming, together with its gas gathering and transportation facilities there, have been one of its most significant assets. See "-- Properties" and "-- Gas Management." The Company currently operates 128 wells in this area and holds up to 1,200 potential drilling locations, 98 of which were classified as proved undeveloped at yearend 1993. The Company believes that more than half of the potential locations may ultimately prove attractive to develop. The Company currently holds interests in 95,000 gross (76,000 net) undeveloped acres in the Washakie Basin. This includes 36,000 gross (32,000 net) undeveloped acres added during 1993. WESTERN SLOPE During 1993, the Company initiated the Western Slope Project by establishing a sizable position in the Piceance Basin on the western slope of Colorado and in the Uinta Basin in northeastern Utah. The Company formed the 53,000 acre Hunter Mesa Unit in the southeast corner of the Piceance Basin. Through purchases and farmouts, the Company obtained a majority interest and acts as unit operator. Immediately adjacent to the Hunter Mesa Unit, a 100% working interest was purchased in the 26,000 acre Divide Creek Unit for $6.2 million. The acquisition of this Unit, which has six wells producing from the Mesaverde and Cameo Coal formations, added 17.6 Bcf of proved gas reserves as well as an established operating base. Near yearend, the Company also purchased interests in 122 producing wells, 29 non-producing wells and 69 proved undeveloped locations. In total, this purchase included 55,000 net acres in various fields in the Piceance and Uinta Basins. Through these purchases, farmouts and a leasing program, the Company currently holds acreage with up to 1,000 potential drilling locations, of which the Company believes 40% could ultimately prove to be attractive to develop. Of these locations, 101 were classified as proved undeveloped at yearend 1993. The development of the Mesaverde sands in the Piceance Basin began with the spudding of the initial test well near the end of 1993. The development will continue with a 10 well test program during 1994 to confirm cost estimates and improved recovery techniques. If successful, the Company may drill up to 30 wells in 1994 and approximately 100 wells per year thereafter. The Company's ability to continue to develop the Piceance Basin is in part dependent on arranging gathering and transportation at a reasonable cost. The company is exploring options for gathering and transporting future gas production, including the possibility of constructing Company owned facilities. OTHER DEVELOPMENT At the end of 1992, the Company acquired interests in four large producing fields in central Wyoming from a major oil company at a cost of $56.1 million. Two of the fields, the Hamilton Dome and Riverton Dome Fields, are operated by the Company. During 1993, the Company evaluated opportunities in the fields and instituted programs to enhance production in the latter part of the year. In the Hamilton Dome Field, 18 20 improvement of the water injection system and completion of two new wells increased daily production 8% above the levels projected at the time of the acquisition. A third well should be completed in the second quarter of 1994. In the Riverton Dome Field, workovers and recompletions increased daily production over 10% above the levels projected at the time of the acquisition. Additional workovers and development drilling are scheduled for both fields during 1994. The Company is attempting to work with the major oil companies that operate the other two fields purchased, both of which are producing slightly below acquisition projections. The Company operates the Adair waterflood property in Gaines County, Texas, which it purchased in September 1991. Initial development of the Adair Unit in 1992 cost approximately $1.7 million net to the Company. Based on production response from the initial phase of development, the Company spent an additional $.4 million in 1993 to conduct a pilot program which reduced well spacing on a portion of the Unit. This program increased the unit production from 150 barrels per day to 260 barrels per day. The Company plans to spend an additional $1.1 million to implement an infill development program throughout the Unit. In the Giddings Field in Southeast Texas, the Company has undertaken a horizontal drilling program to further exploit existing properties in the area. During 1993, the Company spent $2.2 million to re-enter or drill 10 wells, of which nine were completed and one abandoned. The Company is encouraged by the results to date and plans to increase its expenditures in the field during 1994. At yearend, 25 locations were classified as having proved undeveloped reserves. ACQUISITION PROGRAM The Company believes that acquisitions continue to be an attractive method of increasing its reserve base and cash flow. In its acquisition efforts, the Company plans to focus on purchasing properties that strengthen its strategic position and complement its large-scale gas development projects in the Rockies, as well as provide opportunities to establish meaningful positions in new areas. From 1983 through 1993 the Company, on behalf of itself, its affiliates and other investors, purchased oil and gas properties and related assets with an aggregate cost of nearly $650 million. The Company actively seeks to acquire incremental interests in existing properties, acreage with development potential, gas gathering, transportation and processing facilities and related assets, particularly in proximity to existing properties. Purchases of incremental interests or adjacent properties are generally small in size but in aggregate represent a sizeable opportunity that is relatively easy to pursue. Due to its rate of return requirements and the high cost of pursuing potential acquisitions, the Company generally prefers negotiated transactions to auctions. Complex transactions involving legal, financial or operational difficulties have frequently permitted purchase of assets at favorable prices. Past acquisitions of corporations laid the groundwork for the Wattenberg hub, and may in the future provide opportunities to expand in other areas. Acquisitions of incremental interests are being given particular emphasis to take advantage of systems and operational knowledge already in place. The Company has extensive experience in completing numerous types of acquisitions using varied financing sources in addition to internal cash flow. During 1993 domestic acquisitions having a total cost of $51.0 million were completed, primarily to strengthen Wattenberg and establish two new hubs that the Company believes have the potential to develop into large scale gas development projects. In Wattenberg a series of purchases added nearly 9 million BOE of proved reserves at a net cost of under $3.50 per barrel as well as several pipeline and processing facilities that complement the Company's existing gathering systems. In the largest of these acquisitions, the Company paid $19.7 million and, after an exchange of interests with a third party, acquired an approximate 80% working interest in 153 producing wells and 284 undeveloped locations having total proved reserves estimated to exceed 7 million BOE. A portion of the value of the transaction lay in the large volume of undedicated gas located in close proximity to the Company's gas lines. In the Washakie Basin, the Company expended over $7.8 million to acquire a 25% incremental interest in its Barrel Springs properties and interests in 44 producing wells and 7 undeveloped locations, as well as a gathering system that expands the existing gathering infrastructure in the area. These acquisitions added approximately 3.6 million BOE of proved reserves and, together with an active leasing program, formed the 19 21 basis for the East Washakie Project, the Company's second operating hub in the Rockies. See "-- Development -- East Washakie." Through three purchase transactions, as well as farmouts and leasing, the Company established a substantial position in the Piceance and Uinta Basins during 1993, laying the foundation of the Western Slope Project, a third gas development hub in the Rockies. A $6.2 million purchase gave the Company a 100% working interest in the 26,000 acre Divide Creek Unit in the southeast Piceance Basin. The Company also formed the adjacent 53,000 acre Hunter Mesa Unit and through purchases and farmouts obtained a majority working interest position and became unit operator. Near yearend the Company also acquired interests in 122 producing wells, 29 non-producing wells and 69 proved undeveloped locations in various fields in the Uinta and Piceance Basins. See "-- Development -- Western Slope." The following table summarizes acquisition activity since 1983:
PURCHASE PRICE --------------------------------- YEAR MAJOR ASSETS ACQUIRED COMPANY AFFILIATES TOTAL ---- --------------------------------------------- ------- ---------- ------ (MILLIONS) 1983 Louisiana gas pipeline $ 3.5 $ -- $ 3.5 1984 Various producing properties 27.8 -- 27.8 1985 Utah, Texas and Oklahoma properties 56.1 -- 56.1 1986 Colorado and Wyoming properties 61.8 15.4 77.2 1987 Mississippi and Colorado properties, Roggen gas plant, Wyoming gas facilities 71.0 -- 71.0 1988 Various producing properties 33.8 18.5 52.3 1989 Various producing properties 12.3 56.9 69.2 1990 Wattenberg properties, incremental interests 161.2 (a) -- 161.2 1991 Waterflood properties, incremental interests 9.9 -- 9.9 1992 Wyoming properties, incremental interests 63.6 -- 63.6 1993 Colorado and Wyoming properties, incremental interests, acreage 51.0 -- 51.0 ------- ---------- ------ Total $552.0 $ 90.8 $642.8 ------- ---------- ------ ------- ---------- ------
- --------------- (a) Includes the acquisition of a publicly traded limited partnership managed by the Company. GAS MANAGEMENT General. The Company expanded its gas gathering and processing capacity during 1993 with the construction of additional gathering facilities and expansion of the Roggen plant in Wattenberg, as well as the acquisition of additional gas facilities in Wattenberg and in Wyoming. By yearend, operated processing capacity had increased to more than 80 MMcf per day and gathering system capacity was increased to more than 200 MMcf per day, while marketed net volumes reached 100 MMcf per day. The gas management unit complements the Company's development and acquisition activities by providing additional cash flow and enhancing returns. The segment is also increasingly profitable in its own right. During 1993, gross margin increased by approximately 23% to $10 million. See "-- Customers and Marketing." Colorado Facilities. The largest concentration of gas facilities is in the Wattenberg area. These facilities include two major gathering systems, the Enterprise system and Energy Pipeline, the Roggen processing plant, and a number of minor facilities. By yearend 1993, the Roggen plant capacity had reached 60 MMcf per day. During the fourth quarter of 1993, average throughput had reached 54 MMcf per day. The plant is expected to process gas from currently undeveloped locations, new third party sources and permanently released locations on acreage acquired from Amoco, plus additional gas from current suppliers. Gas developed through the UPRC joint venture is not dedicated to a processing plant and will significantly increase future volumes of gas available to be processed in the Company's facilities. 20 22 The gas produced from the majority of the new Wattenberg wells drilled on acreage acquired from Amoco is dedicated for the life of the lease to Amoco's Wattenberg gas processing plant. If Amoco were unable to process Company production at its plant for any reason, including a shut-down of the plant, it would have a short-term adverse impact on the Company. The Company has expanded its processing facilities in Wattenberg in order to process Company and third party gas that is not dedicated to Amoco. The Company intends to continue to expand its facilities during 1994 to handle additional gas developed through continued drilling activity. These facilities will also enable the Company to partially mitigate the effects of significant downtime at the Amoco plant. At the Roggen plant, gas is processed to recover gas liquids, primarily propane and a butane/gasoline mix, from gas supplied by the Company and third parties. The liquids are then sold separately from the residue gas. The liquids are marketed to local and regional distributors and the residue gas is sold to utilities, independent marketers and end users through an intrastate system and the Colorado Interstate Gas ("CIG") pipeline. A liquids line permits the direct sale of Roggen's liquids products through an Amoco line to the major interchange at Conway, Kansas. In addition, Phillips Petroleum began reactivation of an old interconnect, which should be operational by the end of the second quarter of 1994, which will connect the Roggen plant to the Phillips Powder River liquids pipeline. The Company's Wattenberg gathering systems include over 600 miles of pipeline that collect, compress and deliver gas from over 1,400 wells to the Roggen plant. During 1993, the Company substantially increased the capacity of its gathering systems through the expansion of existing facilities and the acquisition of new facilities. The Company also completed the second phase of the Enterprise system during 1993. Enterprise collects a portion of the Company's gas produced from acreage acquired from Amoco and delivers it to the Amoco Wattenberg plant. Enterprise includes 26 miles of 20" diameter trunk and 29 miles of associated lateral gathering lines connecting 20 of the Company's existing central delivery points. As a result of the completion of the second phase, the Enterprise system has the capacity to deliver 75 MMcf per day to the Amoco Wattenberg plant. During 1993, the Company also expanded its gathering system by constructing a nine mile 16" pipeline loop on the western portion of its Energy Pipeline system, which came on line in October 1993. This expansion provides pressure relief and additional capacity for further development in the area. In addition, the Company acquired a pipeline that expands its gathering capacity to the north of the Roggen plant, which may be converted to a residue line allowing for the delivery of residue gas from the tailgate of the Roggen plant to the Williams Natural Gas System. The Company has negotiated a transportation arrangement with CIG that, in conjunction with the gathering fees to be charged on the Enterprise system, allows the delivery of gas to the Amoco Wattenberg plant at a favorable rate. In addition to reducing the Company's exposure to future escalation in gathering costs applicable to the Company's production, Enterprise provides an enhanced degree of operational control. Because the Enterprise system interconnects with the Company's other Colorado facilities, the Roggen plant and other plants in the area can serve as a backup for processing a portion of the Company's gas in the event of any curtailment at the Amoco Wattenberg plant. While shut downs of Amoco's plant reduce the Company's production, diversion of gas to the Roggen plant and, to a lesser degree, two other plants in the area, enabled the Company to produce significant volumes that would have otherwise been curtailed. Given the continued expansion of the Company's drilling program in 1994 and beyond and the potential for third party connections, the Company is continuing to explore opportunities to expand its Wattenberg gas facilities. Subsequent to yearend, the decision was made to double the Company's processing capacity through the construction of a new plant on the west side of the field. The new plant is scheduled to be operational in late 1994. Wyoming Facilities. The Company operates two pipeline systems in Wyoming that enhance its ability to market gas produced from its properties in the Washakie Basin. Wyoming Gathering and Production Company ("WYGAP") gathers gas produced from 53 operated wells in the Barrel Springs Unit. The system has a capacity of 26 MMcf per day. Throughput averaged 10 MMcf and 14 MMcf per day during 1992 and 1993, respectively. WYGAP delivers gas to Western Transmission Corporation ("Westrans"), a Company- 21 23 owned interstate pipeline system which operates under FERC jurisdiction. At the beginning of 1993, the Company assumed operations of CIG's Carbon County Blue Gap gathering system pursuant to a lease. The Company has exercised an option to acquire the system subject to regulatory approval. The Company also purchased Blue Gap gathering facilities formerly owned by Williams Field Services. Both systems extend the Company's transportation capabilities to the south. The Westrans system consists of a 26-mile main pipeline, a smaller 9.2-mile line and related gathering facilities. The system gathers and transports gas under open access transportation service agreements on an interruptible basis. The main line extends from the Washakie Basin area of Carbon County, Wyoming to connections with Williams' and CIG's interstate pipelines in Sweetwater County, Wyoming. Gas transported on Westrans also has access to California markets through the Kern River Pipeline which was completed in February 1992 via interconnects with CIG and Williams. Westrans is located near several other interstate pipelines, providing the potential for additional interconnects that offer alternative transportation routes to end markets. In addition to the gas from WYGAP, which accounts for over 90% of its volumes, Westrans transports volumes from other operated wells and third parties. The capacity of Westrans is 65 MMcf per day. Throughput volumes generally vary from 13 to 20 MMcf per day. Daily throughput averaged 15 MMcf during 1992 and 1993. If the planned acceleration of drilling in East Washakie occurs, volumes of gas on the Company's gas pipeline in the area may be substantially increased. As the East Washakie Project progresses, the Company expects to further expand its gathering network in the area. Other Facilities. The Company expanded its gathering system in southern Nebraska during 1993 to gather gas produced from newly developed Cheyenne County properties for delivery to various markets accessible through an interstate pipeline. The Cheyenne system includes 9.5 miles of 4" to 6" trunkline and 6 miles of 3" lateral gathering lines. During the fourth quarter of 1993, throughput averaged 3 MMcf per day of gas from 60 producing wells. Included in the December 1992 acquisition of Wyoming properties was a gas processing plant in Fremont County, Wyoming. The plant has a 20 MMcf per day capacity with current throughput of 6.5 MMcf per day from the 28 producing wells in the Riverton Dome Field. In conjunction with the growing level of acquisition and development activity in the Western Slope Project, the Company is actively exploring alternatives to gather and transport future gas production, including the possible construction of a Company-owned gathering and transportation line. Traditionally, the lack of sufficient pipeline capacity has been a major deterrent to development in the Piceance Basin. INTERNATIONAL ACTIVITIES The Company's strategy internationally is to develop projects that have the potential for a major impact in the future. The Company attempts to structure the projects to limit its financial exposure and mitigate political risk by minimizing financial commitments in the early phases of a project and seeking industry partners and investors to fund the majority of the equity capital. A wholly owned subsidiary of the Company, SOCO International, Inc., is the holding company for all the Company's international operations. During 1993, the Company purchased from Edward T. Story, President of SOCO International, the 10% of SOCO International held by him and canceled Mr. Story's option to purchase an additional 20% of the company. In connection with the purchase, the Company granted Mr. Story an option to purchase 10% of the currently outstanding shares of SOCO International, which is financed primarily by Company loans, through April 1998 for $600,000. The option price is subject to adjustment in certain circumstances. Russian Joint Venture. In early 1993, the Company formed Permtex, a joint drilling venture with Permneft, a Russian oil and gas company, to develop four major proven oil fields located in the Volga-Urals Basin of the Perm Region of Russia, approximately 800 miles east of Moscow. During 1993, Permtex was registered by the Russian authorities, representing governmental approval of the terms of the joint venture and authorization for Permtex to commence business. In early 1994, the Company executed a finance and insurance protocol with OPIC, an agency of the United States government that provides financing and political risk insurance for American investment in developing countries, related to the financing of Permtex. Permtex holds exploration and development rights to over 300,000 acres in the Volga-Urals Basin. The contract area contains four major fields and four minor fields as well as a number of prospects. The Company 22 24 estimates that the four major fields could ultimately produce 115 million barrels of oil. The major fields have been delineated through 45 previously drilled wells, none of which had been placed on production as of yearend 1993. It is anticipated that 25 of the existing wells will be placed on production, of which four should go on stream in the first half of 1994, and that 400 additional development wells will be drilled over the next five to ten years. The joint venture will primarily utilize Russian personnel and equipment and Western technology under joint Russian/American management. As of March 1, 1994, the Company holds a 28.1% interest in Permtex, after giving effect to the purchases by each of Command, the Company's Australian affiliate, and Holland Sea Search NV ("HSSH"), a Dutch affiliate of Command, of 6.25% interests in Permtex. Recently, a major Japanese trading company has also committed to purchase a 10 to 20% interest in Permtex, which would reduce the Company's interest to 20.6% if the full amount is purchased. Command Petroleum Holdings NL. In May 1993, the Company purchased 42.8% of the outstanding shares of Command for approximately $18.2 million. At the time of the purchase, Thomas J. Edelman, President of the Company, Edward T. Story, President of SOCO International, and two other designees were elected to Command's eight-person board of directors. Command is an exploration and production company based in Sydney, Australia and listed on the Australian Stock Exchange. Following a private placement of equity securities in early 1994, Command had working capital of $35 million and no debt. Its current market capitalization approximates US$150 million. Command currently holds interests in more than 20 exploration permits and production licenses primarily in the Southwestern Pacific Rim including Australia and Papua New Guinea. Until recently, Command held a 28.7% interest in HSSH, a publicly traded Dutch exploration and production company whose primary asset is an interest in the North Sea's Markham gas field. After yearend 1993, Command increased its position in HSSH to nearly 48%. Recently, Command purchased a 6.25% interest in Permtex, acquired an interest in an offshore Tunisian permit operated by Marathon Oil Company and acquired an 11.4% interest in the East Shabwa Contract Area in Yemen. Command funded the expenditures with a portion of a $16.4 million privately placed equity offering which reduced the Company's ownership to 35.7%. If as expected, all of Command's warrants expiring in November 1994 are exercised, the Company's ownership would be decreased to 29.6%. The Company believes that Command's exploration expertise, experienced technical staff and inventory of prospects complement the Company's acquisition and development expertise and position the Company to play a larger role in overseas development of oil and gas reserves. In addition, Command and HSSH provide access to international capital markets which could provide additional sources of financing for international projects. Mongolia. The Company further expanded its international efforts by entering into a production sharing agreement with Mongol Petroleum Company, the national oil company of Mongolia. The Company believes this agreement is the first such contract ever awarded by Mongolia. The agreement covers 11,400 square kilometers, or approximately 2.8 million gross acres, in the Tamstag Basin of northeastern Mongolia. In addition, the Company received a right of first refusal from Mongol Petroleum for the adjacent block which covers 11,130 square kilometers. As a consequence, the Company controls over 5 million acres in this basin which, although previously unexplored and remote from existing markets, is highly prospective. These concessions offset the Hailar Basin of China, a portion of which is included in the China National Petroleum Corporation's round of invitations for bidding in 1994. During 1993, the Company initiated seismic work to broadly define the subsurface and this work is expected to continue into 1995. Tunisia. During 1993 the Company completed its 400 kilometer seismic acquisition program in the Fejaj Permit area of central Tunisia. The permit area encompasses approximately 1.2 million gross acres and is predominately onshore, with a small portion extending into the Gulf of Gabes. After the Company integrates the newly acquired seismic work with over 1,400 kilometers of reprocessed data and extensive geological field information, the Company will seek industry partners for a 1995 exploratory well. 23 25 PRODUCTION, REVENUE AND PRICE HISTORY The following table sets forth information regarding net production of crude oil and liquids and natural gas, revenues and expenses attributable to such production and to natural gas transportation, processing and marketing and certain price and cost information for the five years ended December 31, 1993.
DECEMBER 31, ----------------------------------------------------- 1989 1990 1991 1992 1993 ------- ------- ------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PRICE AND PER BARREL EXPENSES) PRODUCTION Oil (MBbl)............................... 277 1,049 1,487 1,776 3,451 Gas (MMcf)............................... 4,027 12,769 18,382 23,090 35,080 MBOE(a).................................. 948 3,497 4,937 5,989 9,297 REVENUES Oil production........................... $ 5,069 $24,806 $30,667 $ 33,512 $ 53,174 Gas production(b)........................ 7,410 24,997 34,677 43,851 71,467 ------- ------- ------- -------- -------- Subtotal......................... 12,479 49,803 65,344 77,363 124,641 ------- ------- ------- -------- -------- Transportation, processing and marketing............................. 10,885 29,442 21,459 38,611 94,839 Interest and other....................... 3,179 2,928 5,698 4,198 10,405 ------- ------- ------- -------- -------- Total............................ $26,543 $82,173 $92,501 $120,172 $229,885 ------- ------- ------- -------- -------- ------- ------- ------- -------- -------- OPERATING EXPENSES Production............................... $ 4,930 $18,088 $24,882 $ 28,057 $ 44,901 Transportation, processing and marketing............................. 9,168 24,103 14,202 30,469 84,840 ------- ------- ------- -------- -------- $14,098 $42,191 $39,084 $ 58,526 $129,741 ------- ------- ------- -------- -------- ------- ------- ------- -------- -------- GROSS MARGIN............................... $12,445 $39,982 $53,417 $ 61,646 $100,144 ------- ------- ------- -------- -------- ------- ------- ------- -------- -------- PRODUCTION DATA Average sales price(c) Oil (Bbl)............................. $ 18.30 $ 23.65 $ 20.62 $ 18.87 $ 15.41 Gas (Mcf)(a)(b)....................... 1.65 1.69 1.68 1.74 1.94 BOE(a)................................ 12.97 14.18 13.24 12.92 13.41 Average operating expense/BOE............ $ 5.20 $ 5.17 $ 5.04 $ 4.68 $ 4.83
- --------------- (a) Gas production is converted to oil equivalents at the rate of 6 Mcf per barrel except for Thomasville production which through 1992 was converted based on its price equivalency to the Company's other gas. Average gas prices exclude Thomasville production. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (b) Sales of natural gas liquids are included in gas revenues. Gas revenues for the year ended December 31, 1989 and 1990 include nonrecurring receipts of $183,000 and $219,000, respectively, in settlement of contract claims, which have been excluded from average sales price computations. (c) The Company estimates that its composite net wellhead prices at December 31, 1993 were approximately $2.11 per Mcf of gas and $11.49 per barrel of oil. 24 26 DRILLING RESULTS The following table sets forth information with respect to wells drilled during the past three years. The information should not be considered indicative of future performance, nor should it be assumed that there is necessarily any correlation between the number of productive wells drilled, quantities of reserves found or economic value. Productive wells are those that produce commercial quantities of hydrocarbons whether or not they produce a reasonable rate of return.
1991 1992 1993 ----- ----- ----- Development wells Productive Gross.................................................. 143.0 241.0 382.0 Net.................................................... 117.2 207.5 316.0 Dry Gross.................................................. 3.0 6.0 10.0 Net.................................................... 2.8 2.7 5.5 Exploratory wells Productive Gross.................................................. 5.0 -- 2.0 Net.................................................... 1.8 -- 2.0 Dry Gross.................................................. 5.0 -- 6.0 Net.................................................... 1.5 -- 3.3
As of December 31, 1993, the Company had 61 gross (50.9 net) development wells in progress. Between yearend and February 28, 1994, the Company spudded 118 wells. At that date 135 gross (116.7 net) wells, including wells in progress at yearend, had been completed, two wells (1.5 net) had been abandoned and 42 gross (36.3 net) development wells were in progress. FIELD OPERATIONS In its capacity as operator, the Company supervises day-to-day field activities, generally employing a combination of its personnel and contract pumpers. The Company maintains eight district field offices and one division office. As operator, the Company charges overhead fees to all working interest owners according to the applicable operating agreements. As of the end of 1991, 1992 and 1993, respectively, the Company operated 1,442, 1,745 and 2,176 wells. The Company received overhead reimbursements for operations and drilling of $10.1 million, $12.9 million and $15.5 million during 1991, 1992 and 1993, respectively (including reimbursements attributable to the Company's interest). The increase in reimbursements is attributable to the increase in operated drilling and producing wells and contractual escalations. Based on the time allocated to operations, these reimbursements in aggregate generally have exceeded the costs of such activities. PROPERTIES The Company's reserves are concentrated in several major producing areas. These include the Wattenberg Field in Colorado, central and southern Wyoming, the Piceance and Uinta Basins in the Western Slope of Colorado and Utah, the Giddings area in South Texas, the Spraberry Trend in West Texas, waterflood units in Texas, and the Appalachian Basin in eastern Ohio and Pennsylvania. At December 31, 1993, the Company had interests in 5,122 gross (2,187 net) producing oil and gas wells located in 15 states and in the Gulf of Mexico. As of December 31, 1993, estimated proved reserves totalled 31.9 million barrels of oil and 430.1 Bcf of gas. In addition to its oil and gas reserves, the Company holds interests in nine gas transportation and processing facilities. See "-- Gas Management." 25 27 Significant Properties. Although the Company's properties are widely dispersed geographically, emphasis has been placed on establishing hubs in certain producing basins. Interests in five producing areas accounted for approximately 90% of Pretax PW10% Value at December 31, 1993. This concentration of assets results in economic efficiencies in the management of assets and permits identification of complementary acquisition candidates. Summary information regarding the five most significant properties is set forth below.
PROVED RESERVE QUANTITIES PRETAX PW10% VALUE ------------------------ ------------------------ CRUDE OIL NATURAL AMOUNT PERCENT AND LIQUIDS GAS -------------- ------- ----------- -------- (IN THOUSANDS) (MBBL) (MMCF) DJ Basin (CO, NE).......................... 16,984 242,155 $245,617 62.9% East Washakie (WYO)........................ 1,334 72,871 41,903 10.7 Central Wyoming (WYO)...................... 7,207 28,913 30,905 7.9 Western Slope (CO & UT).................... 439 41,070 22,113 5.7 Giddings Field (TX)........................ 752 7,987 10,960 2.8 ----------- -------- -------------- ------- Subtotal......................... 26,716 392,996 351,498 90.0 Other...................................... 5,214 37,093 38,911 10.0 ----------- -------- -------------- ------- Total............................ 31,930 430,089 $390,409 100.0% ----------- -------- -------------- ------- ----------- -------- -------------- -------
Proved Reserves. The following table sets forth estimated yearend proved reserves for the three years ended December 31, 1993.
DECEMBER 31, ------------------------------- 1991 1992 1993 ------- ------- ------- Crude oil and liquids (MBbl) Developed........................................... 9,094 21,116 18,032 Undeveloped......................................... 10,584 11,086 13,898 ------- ------- ------- Total....................................... 19,678 32,202 31,930 ------- ------- ------- ------- ------- ------- Natural gas (MMcf) Developed........................................... 136,229 194,621 268,349 Undeveloped......................................... 110,940 93,037 161,740 ------- ------- ------- Total....................................... 247,169 287,658 430,089 ------- ------- ------- ------- ------- ------- Total MBOE (a).............................. 66,641 84,393 103,612 ------- ------- ------- ------- ------- -------
- --------------- (a) Natural gas reserves are converted to oil equivalents at the rate of 6 Mcf per barrel, except Thomasville gas reserves prior to 1993. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The following table sets forth pretax future net revenues from the production of proved reserves and the Pretax PW10% Value of such revenues.
DECEMBER 31, 1993 ----------------------------------------- DEVELOPED UNDEVELOPED(A) TOTAL --------- -------------- -------- (IN THOUSANDS) 1994............................................ $ 81,401 $(24,109) $ 57,292 1995............................................ 59,421 1,220 60,641 1996............................................ 47,148 8,472 55,620 Remainder....................................... 286,510 228,209 514,719 --------- -------------- -------- Total................................. $ 474,480 $213,792 $688,272 --------- -------------- -------- --------- -------------- -------- Pretax PW10% Value.............................. $ 297,638 $ 92,771 $390,409(b) --------- -------------- -------- --------- -------------- --------
- --------------- (a) Net of estimated capital costs, including estimated costs of $68.9 million during 1994. (b) The after tax PW10% value of proved reserves totalled $340.5 million at yearend 1993. 26 28 The quantities and values in the preceding tables are based on prices in effect at December 31, 1993, averaging $11.49 per barrel of oil and $2.11 per Mcf of gas. Price reductions decrease reserve values by lowering the future net revenues attributable to the reserves and will reduce the quantities of reserves that are recoverable on an economic basis. Price increases have the opposite effect. Any significant decline in prices of oil or gas could have a material adverse effect on the Company's financial condition and results of operations. Proved developed reserves are proved reserves that are expected to be recovered from existing wells with existing equipment and operating methods. Proved undeveloped reserves are proved reserves that are expected to be recovered from new wells drilled to known reservoirs on undrilled acreage for which the existence and recoverability of such reserves can be estimated with reasonable certainty, or from existing wells where a relatively major expenditure is required to establish production. Future prices received for production and future production costs may vary, perhaps significantly, from the prices and costs assumed for purposes of these estimates. There can be no assurance that the proved reserves will be developed within the periods indicated or that prices and costs will remain constant. With respect to certain properties that historically have experienced seasonal curtailment, the reserve estimates assume that the seasonal pattern of such curtailment will continue in the future. There can be no assurance that actual production will equal the estimated amounts used in the preparation of reserve projections. The present values shown should not be construed as the current market value of the reserves. The 10% discount factor used to calculate present value, which is specified by the Securities and Exchange Commission ("SEC"), is not necessarily the most appropriate discount rate, and present value, no matter what discount rate is used, is materially affected by assumptions as to timing of future production, which may prove to be inaccurate. For properties operated by the Company, expenses exclude the Company's share of overhead charges. In addition, the calculation of estimated future net revenues does not take into account the effect of various cash outlays, including, among other things, general and administrative costs and interest expense. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures. The data in the above tables represent estimates only. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way, and estimates of other engineers might differ materially from those shown above. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. Results of drilling, testing and production after the date of the estimate may justify revisions. Accordingly, reserve estimates are often materially different from the quantities of oil and gas that are ultimately recovered. Netherland, Sewell & Associates, Inc. ("NSAI"), independent petroleum consultants, prepared estimates of or audited the Company's proved reserves which collectively represent more than 80% of Pretax PW10% Value as of December 31, 1993. Approximately 38% of the yearend Pretax PW10% Value was estimated internally by the Company and 62% was estimated independently by NSAI. No estimates of the Company's reserves comparable to those included herein have been included in reports to any federal agency other than the SEC. Producing Wells. The following table sets forth certain information at December 31, 1993 relating to the producing wells in which the Company owned a working interest. The Company also held royalty interests in 240 producing wells. Wells are classified as oil or gas wells according to their predominant production stream.
AVERAGE PRINCIPAL GROSS NET WORKING PRODUCT STREAM WELLS WELLS INTEREST ----------------------------------------------------- ----- ----- ------- Crude oil and liquids................................ 3,026 1,297 43% Natural gas.......................................... 2,096 890 42% ----- ----- ------- Total...................................... 5,122 2,187 43% ----- ----- ------- ----- ----- -------
27 29 CUSTOMERS AND MARKETING The Company's oil and gas production is principally sold to refiners and others having pipeline facilities near its properties. Where there is no access to gathering systems, crude oil is trucked to storage facilities. In 1992 and 1993, Amoco accounted for approximately 27% and 12% of revenues, respectively, as the result of the contractual dedication, which terminated at the end of 1993, of a portion of the Company's natural gas and natural gas liquids produced from certain of its Wattenberg acreage. Historically, this arrangement provided for average prices in excess of spot due to participation in certain fixed price contracts, many of which are expected to expire over the next two years. The Company exercised its option to release its natural gas and natural gas liquids and began marketing its production beginning January 1, 1994. The Company believes, however, that it can obtain pricing comparable to that which would have been obtainable through Amoco. The marketing of oil and gas by the Company can be affected by a number of factors that are beyond its control and whose future effect cannot be accurately predicted. The Company does not believe, however, that the loss of any of its customers would have a material adverse effect on its operations. In addition to marketing a significant portion of its own gas, in 1992 the Company initiated an effort to supplement its cash flow through the purchase and resale of gas owned by third parties. Gross margins during 1992 and 1993 from third party marketing activities was $.6 million and $1.2 million, respectively, as average third party volumes increased from 58.7 to 89.9 MMcf per day. The Company expects to continue increasing its role in third party gas marketing. In June 1991, the Company entered into a contract to supply gas to a cogeneration facility through August 2004. The contract calls for the Company to supply 10,000 MMBtu per day. This plant, which requires up to 24,500 MMBtu per day of gas, began operations in 1989 and is located at a manufacturing facility in Oklahoma City. The facility has firm fifteen-year sales agreements with a utility company for electricity and with a tire manufacturer for steam. The effect of this contract depends on market prices for gas and its choice of alternative sources of gas (including the spot market) to meet its supply commitments. Gross margin generated from the contract was approximately $1.5 million for both 1991 and 1992. A contractual limitation of the contract sales price and rising gas purchase costs resulted in a net loss of $267,000 on the contract during 1993. At present gas price levels, the Company foresees continued negative or breakeven margins for this contract through July 1994. At that time, a change in the pricing formula should result in improved margins. DESCRIPTION OF NOTES The Notes are to be issued under an Indenture to be dated as of May 1, 1994 between the Company, as issuer, and Texas Commerce Bank National Association, as trustee (the "Trustee"), a copy of which is filed as an exhibit to the Registration Statement of which this Prospectus is a part. The terms of the Indenture are governed by certain provisions contained in the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following summaries of certain provisions of the Indenture do not purport to be complete, and where particular provisions of the Indenture are referred to, such provisions, including the definitions of certain capitalized terms used in this Prospectus, are incorporated by reference as a part of such summaries, which are qualified in their entirety by reference to the provisions of the Indenture. The section ("Section") and article ("Article") references appearing below are to sections and articles of the Indenture. GENERAL The Notes will be unsecured subordinated obligations of the Company, will mature on March 31, 2001 and will be in the aggregate principal amount of $100,000,000 ($115,000,000 aggregate principal amount if the Underwriters' over-allotment option is exercised in full). The Notes will bear interest from the date of issuance at the rate per annum shown on the cover page of this Prospectus. Interest will be payable semi-annually on March 31 and September 30 of each year, commencing September 30, 1994, to the persons in whose names such Notes (or any predecessor Notes) are registered at the close of business on the March 15 or September 15 preceding such Interest Payment Date (Sections 301 and 307). 28 30 Principal of and premium, if any, and interest on the Notes will be payable, and the Notes will be convertible and may be presented for transfer and exchange, at the office or agency maintained by the Company for such purposes, which will initially be the office of the Trustee located at 80 Broad Street, Fourth Floor, New York, New York 10004. However, at the option of the Company, payment of interest on the Notes may be made by check mailed to the address of persons entitled thereto as shown in the register of the Security Registrar. No service charge will be made upon any registration of transfer or exchange of the Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Indenture does not limit the incurrence of additional indebtedness, including Senior Indebtedness, by the Company. CONVERSION RIGHTS The Notes will be convertible, in whole or from time to time in part (in denominations of $1,000 or integral multiples thereof), at the option of the holder thereof, into Common Stock of the Company, initially at the conversion price stated on the cover page hereof, at any time prior to maturity, unless previously redeemed by the Company. In the case of Notes called for redemption, conversion rights will terminate at the close of business on the fifth business day preceding the Redemption Date, except that, with respect to any redemption occurring on March 31, 1997 or within five business days thereafter, conversion rights will terminate at the close of business on the Redemption Date such that all holders of Notes to be redeemed will be entitled to receive the March 31, 1997 interest payment (assuming such holders held the Notes on March 15, 1997). Notwithstanding anything to the contrary in the foregoing, the Notes will not be convertible at any time when payments on the Notes are prohibited under the subordination provisions of the Indenture as described under "-- Subordination of Notes" (Section 1201). If the Company, by dividend or otherwise, declares or makes a distribution on its Common Stock of the type referred to in clause (iv) or (v) below, the holder of each Note, upon the conversion thereof subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the conversion price adjustment in respect of such distribution pursuant to clause (iv) or (v) below, will be entitled to receive for each share of Common Stock into which such Note is converted the portion of the evidences of indebtedness, shares of capital stock, cash and other assets so distributed applicable to one share of Common Stock; provided, however, that the Company may, with respect to all holders so converting, in lieu of distributing any portion of such distribution not consisting of cash or securities of the Company, pay such holder cash in an amount equal to the fair market value thereof, as determined in good faith by the Board of Directors (Section 1201). The conversion price will be subject to adjustment in certain events, including: (i) dividends (and other distributions) payable in Common Stock on any class of capital stock of the Company; (ii) the issuance to all holders of Common Stock of rights, warrants or options entitling them to subscribe for or purchase Common Stock at less than the current market price (as provided in the Indenture); provided, however, that if such rights, warrants or options are only exercisable upon the occurrence of certain triggering events, then the conversion price will not be adjusted until such triggering events occur; (iii) subdivisions and combinations of Common Stock; (iv) distributions to all holders of Common Stock of evidences of indebtedness of the Company, shares of any class of capital stock, cash or other assets (including securities, but excluding those dividends, rights, warrants, options and distributions referred to in clauses (i) and (ii) above and excluding dividends and distributions exclusively paid in cash up to the greater of (x) retained earnings of the Company on the date such distribution or dividend was declared or (y) Net Income (as defined below) of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared, and other than in connection with a tender offer or other negotiated purchase made by the Company or any Subsidiary for all or a portion of the Common Stock); provided, however, that if any rights, warrants or options in respect of which an adjustment is provided for in this clause (iv) are only exercisable upon the occurrence of certain triggering events, then the conversion price will not be adjusted until such triggering events occur; (v) distributions consisting exclusively of cash (specifically including distributions paid in cash up to the greater of (x) retained earnings of the Company on the date such distribution or dividend was declared or (y) 29 31 Net Income of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared, but excluding any cash distributions for which an adjustment has been made pursuant to a preceding clause of this paragraph) to all holders of Common Stock in an aggregate amount that, together with (A) other all-cash distributions made within the preceding 12 months not triggering a conversion price adjustment and (B) all Excess Tender Payments (as defined below) in respect of each tender or exchange offer by the Company or any Subsidiary for Common Stock concluded within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 20% of the Company's deemed market capitalization on the date fixed for the determination of stockholders entitled to receive such distribution (calculated as set forth in the Indenture); (vi) issuances of Common Stock to an Affiliate for a net consideration per share less than the current market price per share (other than issuances of Common Stock under certain management benefit plans); and (vii) payment of an Excess Tender Payment in respect of a tender or exchange offer by the Company or any Subsidiary for Common Stock, if the aggregate amount of such Excess Tender Payment, together with (A) the aggregate amount of any all-cash distributions made within the preceding 12 months not triggering a conversion price adjustment and (B) all Excess Tender Payments in respect of each tender or exchange offer by the Company or any Subsidiary for Common Stock concluded within the preceding 12 months not triggering a conversion price adjustment, exceeds an amount equal to 20% of the Company's deemed market capitalization on the expiration of such tender offer (calculated as set forth in the Indenture) (Section 1204). For purposes of these conversion price adjustments, the term (i) "Excess Tender Payment" means the excess of (A) the aggregate of the cash and value of other consideration paid by the Company with respect to the shares acquired in the tender or exchange transaction over (B) the market value of such acquired shares after the completion of the tender or exchange offer (calculated as set forth in the Indenture) and (ii) "Net Income" of any Person means the net income of such Person net of non-cash charges taken as a result of accounting changes required to be made by the Financial Accounting Standards Board after the date of the Indenture. No adjustments in the conversion price are required for any dividend or distribution referred to above if the holders may participate in the dividend or distribution (on a basis determined in good faith to be fair by the Board of Directors) and receive the same consideration they would have received if they had converted the Notes (Section 1213). No adjustment of the conversion price will be required to be made until cumulative adjustments amount to 1% or more of the conversion price as last adjusted. In addition to the foregoing adjustments, the Company will be permitted to make such reductions in the conversion price as it considers to be advisable in order that any event treated for federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipient (Section 1204). Subject to any applicable right of the holders to receive the Change of Control Purchase Price (as described below), in the case of certain consolidations or mergers to which the Company is a party or the transfer or lease of the Company's properties or assets substantially as an entirety, each holder has the right to convert each Note only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger, transfer or lease by a holder of the number of shares of Common Stock into which such Note might have been converted immediately prior to such consolidation, merger, transfer or lease (assuming such holder of Common Stock is not a Constituent Person and such holder failed to exercise any rights of election and received per share the kind and amount of consideration received per share by a plurality of non-electing shares) (Section 1211). Fractional shares of Common Stock will not be issued upon conversion, but, in lieu thereof, the Company will pay a cash adjustment based upon the market price of a share of Common Stock (Section 1203). Except as provided below, no adjustment will be made upon a conversion of Notes for interest accrued thereon. The Company's delivery to the holder of the fixed number of shares of Common Stock into which the Note is convertible will be deemed to satisfy the Company's obligation to pay the principal amount of the Note and all accrued interest that has not previously been paid. If a Note is surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the close of business on any Interest Payment Date, then notwithstanding such conversion, interest payable in respect of the Note so surrendered will be paid in cash to the person in whose name such Note is registered at the close 30 32 of business on such Regular Record Date, and (except in the case of Notes with a Maturity Date prior to such Interest Payment Date) when so surrendered for conversion, such Note must be accompanied by payment of a amount equal to the interest thereon which the registered holder as of the close of business on such Regular Record Date is to receive (Sections 307 and 1202). SUBORDINATION OF NOTES The payment of the principal of and premium, if any, and interest on the Notes is, to the extent set forth in the Indenture, subordinated in right of payment to the prior payment in full of all Senior Indebtedness, whether now outstanding or incurred in the future (Section 1301). Upon any payment or distribution of assets of the Company to creditors upon any liquidation, dissolution, winding up, assignment for the benefit of creditors or marshalling of assets and liabilities or any bankruptcy, insolvency, receivership, liquidation, reorganization or similar proceedings of the Company, the holders of all Senior Indebtedness will first be entitled to receive payment in full of all amounts due or to become due thereon before the holders of the Notes will be entitled to receive any payment (other than any payment in the form of Permitted Junior Securities) on account of the principal of or premium, if any, or interest on the Notes, including payment of the Redemption Price and the Change of Control Purchase Price of the Notes, and before the Notes may be converted into Common Stock (Section 1302). No payment (other than any payment in the form of Permitted Junior Securities) on account of principal of and premium, if any, or interest on the Notes, including payment of the Redemption Price and the Change of Control Purchase Price on the Notes, may be made, and the Notes may not be converted into Common Stock, if a Payment Event of Default shall have occurred and be continuing. In addition, no payment (other than any payment in the form of Permitted Junior Securities) on account of principal of or premium, if any, or interest on the Notes, including payment of the Redemption Price and the Change of Control Purchase Price on the Notes, may be made, and the Notes may not be converted into Common Stock, if a Non-payment Event of Default shall have occurred and be continuing, for the period (a "Payment Blockage Period") commencing on receipt of notice of such event of default by the Trustee from holders of at least a majority in principal amount of any Designated Senior Indebtedness (or any trustee or other representative therefor) and ending on the earlier of (i) the date such Non-payment Event of Default has been cured or waived or has ceased to exist or any acceleration of such Designated Senior Indebtedness has been rescinded or annulled or such Designated Senior Indebtedness shall have been discharged and (ii) the date 176 days after such receipt of notice. Any number of such notices may be given; provided, however, that, during any 360-day period, the aggregate Payment Blockage Periods shall not exceed 176 days and there shall be a period of at least 184 consecutive days when no Payment Blockage Period is in effect. No default existing or continuing when a Payment Blockage Period begins may be the basis for any subsequent Payment Blockage Period unless such default has been cured for a period of at least 90 consecutive days. In the event that, notwithstanding the restrictions described in the preceding sentences, the Company makes any payment to the Trustee or a holder of Notes prohibited by any such restriction, with such Trustee or holder, as the case may be, knowing of such contravention before receipt thereof, then such payment will be required to be paid over and delivered forthwith to the Company to the extent necessary to pay in full all such Senior Indebtedness (Section 1303). The subordination rights of holders of Senior Indebtedness will not be prejudiced or impaired by any acts or failures to act by the Company or by any such holder (Section 1308). The subordination of the Notes set forth above will not prevent the occurrence of any Event of Default under the Indenture. Furthermore, the subordination of the Notes as set forth above will not impair, as between the Company, the holders of the Notes and creditors of the Company other than holders of Senior Indebtedness, the obligations of the Company to make payments on the Notes in accordance with their terms. In certain circumstances, as set forth in the Indenture, the holders of Notes will be subrogated to certain rights of the holders of Senior Indebtedness upon payment in full of all Senior Indebtedness (Section 1302). By reason of such subordination, in the event of insolvency of the Company, the holders of Senior Indebtedness (as well as other creditors of the Company who are holders of indebtedness that is not subordinated to the Senior Indebtedness) may recover more, ratably, than the holders of the Notes. 31 33 The Notes will also be effectively subordinated to all liabilities, including trade payables and capitalized lease obligations, if any, of the Company's subsidiaries. Any right of the Company to receive the assets of any of its subsidiaries upon their liquidation or reorganization (and the consequent right of the holders of the Notes to participate in those assets) will be subject to the prior payment of claims of that subsidiary's creditors (including trade creditors), except to the extent that the Company is itself a creditor of such subsidiary, in which case the claims of the Company would still be subject to the prior payment of claims secured by security interests in the assets of such subsidiary and any other indebtedness of such subsidiary senior to that held by the Company. Immediately following the sale of the Notes offered hereby and application of the proceeds therefrom, the Company estimates that the sum of its Senior Indebtedness and the indebtedness of its subsidiaries will total approximately $46 million. There are no restrictions in the Indenture on the creation of Senior Indebtedness (or any other indebtedness). The agreements under which Senior Indebtedness may be outstanding in the future could contain provisions which may require repayment of such respective Senior Indebtedness prior to repayment of the Notes upon, among other things, a Change of Control. If the Company is unable to obtain the requisite consents under its Senior Indebtedness to enable it to repurchase the Notes or is unable to repay all Senior Indebtedness, there would be both an Event of Default under the Notes and an event of default under such Senior Indebtedness, as a result of which events the Company would be prohibited by the subordination terms of the Indenture from repurchasing Notes or making other payments in respect thereof. Furthermore, the exercise by the holders of their right to require the Company to repurchase the Notes could cause a default under the Designated Senior Indebtedness of the Company, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. As a result, the repurchase of the Notes could be blocked pursuant to the subordination terms of the Indenture. Finally, the Company's ability to pay cash to the holders of Notes upon a repurchase may be limited by the Company's then existing financial resources. Failure of the Company to pay the Change of Control Purchase Price will create an Event of Default with respect to the Notes, whether or not such repurchase is permitted by the subordination terms of the Indenture. See " -- Repurchase of Notes at the Option of the Holder Upon a Change of Control." "Bank Credit Facility" means the Company's existing bank credit facility and any renewals, amendments, extensions, supplements, modifications, refinancings or replacements thereof (Section 101). "Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Facility if the sum of the amounts outstanding under the Bank Credit Facility and the amounts available for borrowing thereunder is equal to or greater than $25,000,000 and (ii) all other Senior Indebtedness having an outstanding principal amount equal to or greater than $25,000,000 (provided, however, that the agreements, indentures or other instruments evidencing any Senior Indebtedness referred to in this clause (ii) specifically state that such Senior Indebtedness shall be classified as "Designated Senior Indebtedness" for purposes of the Indenture) (Section 101). "Indebtedness" of any Person means, without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every obligation of such Person under conditional sale or other title retention agreements relating to assets or property purchased by such Person or issued or assumed as the deferred purchase price of property, assets or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business that are not overdue by more than 90 days or are being contested by such Person in good faith); (iv) every Capital Lease Obligation of such Person; (v) every obligation of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party; (vi) every obligation of such Person with respect to letters of credit, bankers acceptances or similar facilities issued for the account of such Person; (vii) the maximum fixed redemption or repurchase price of outstanding Redeemable Stock of such Person; (viii) every obligation of such Person with respect to performance, surety or similar bonds; (ix) every obligation of such Person under interest rate, commodity or foreign currency swap, cap, hedge, exchange or similar agreements; (x) every obligation of the type referred to in clauses (i) through (ix) and clause (xi) of another Person the payment of which such Person has Guaranteed or is otherwise responsible for or liable for, directly or 32 34 indirectly, as obligor, Guarantor or otherwise; and (xi) every amendment, modification, renewal and extension of an obligation of the type referred to in clauses (i) through (x) (Section 101). "Non-payment Event of Default" means any event (other than a Payment Event of Default) the occurrence of which entitles any one or more persons to accelerate the maturity of any Designated Senior Indebtedness (Section 101). "Payment Event of Default" means any default in the payment of principal of or premium, if any, or interest on any Designated Senior Indebtedness when due (whether at maturity, upon acceleration or otherwise) (Section 101). "Permitted Junior Securities" means subordinated debt securities of the Company (or any successor obligor with respect to the Senior Indebtedness) provided for by a plan of reorganization or readjustment that are subordinated in right of payment to all Senior Indebtedness that may be outstanding to substantially the same extent as, or to a greater extent than, the Notes are subordinated as provided in the Indenture (Section 101). "Senior Indebtedness" means all obligations of the Company for Indebtedness (other than Indebtedness described in clause (vii) of the definition of Indebtedness), whether now existing or hereafter incurred or assumed; provided that, Senior Indebtedness shall not include (A) any obligation owed to a Subsidiary or an Affiliate or Related Person of the Company, (B) any obligation that by its terms is not superior in right of payment to the Notes, (C) any obligation in respect of the Company's 8% Convertible Subordinated Debentures and 6% Convertible Subordinated Debentures, if and when issued, for which the Company's existing preferred stock is exchangeable (the Notes not being senior in right of payment to such debentures) or (D) any obligation constituting a trade account payable (Section 101). REDEMPTION The Notes will be redeemable, at the Company's option, as a whole or from time to time in part, at any time on or after March 31, 1997, upon not less than 20 nor more than 60 days notice mailed to the registered holders thereof, at the redemption prices (expressed as a percentage of the principal amount thereof) set forth below if redeemed during the 12-month period beginning March 31 of the years indicated:
YEAR REDEMPTION PRICE --------------------------------------------- ---------------- 1997......................................... % 1998......................................... % 1999......................................... % 2000......................................... %
together, in each case, with accrued interest to the Redemption Date (subject to the right of holders of record on the relevant record date to receive interest due on an Interest Payment Date that is on or prior to the Redemption Date) (Sections 203, 1101, and 1107). If less than all the Notes are to be redeemed, the Notes to be redeemed shall be selected by the Trustee in such manner as the Trustee shall deem appropriate and fair (Section 1104). The Company's existing bank credit facility prohibits the Company from redeeming any Notes unless (i) such redemption is permitted under the restricted payment covenant contained in such bank credit facility and (ii) at the time of such redemption and after giving effect thereto, no default shall have occurred under such bank credit facility. REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL In the event of any Change of Control (as defined below) with respect to the Company which constitutes a Repurchase Event (as defined below), each holder of Notes will have the right, at such holder's option, subject to the terms and conditions of the Indenture, to require the Company to repurchase all or any part (provided that the principal amount must be $1,000 or an integral multiple thereof) of the holder's Notes on 33 35 the date (the "Change of Control Purchase Date") that is 60 days after the date the Company's Change of Control Notice (as defined below) is mailed (or such later date as is required by law), at a cash price equal to 100% of the principal amount plus accrued interest to the Change of Control Purchase Date (the "Change of Control Purchase Price"). The Change of Control Purchase Price may be less than the fair market value of the Notes on the Change of Control Purchase Date. Promptly, but in any event within 29 days following any Change of Control, the Company is required, with respect to any Senior Indebtedness that would prohibit the repurchase of Notes by the Company in the event of such Change of Control, either to repay all such Senior Indebtedness in full or obtain the requisite consents under such Senior Indebtedness to permit the repurchase of the Notes as provided below. The Company first is required to comply with the covenants in the preceding sentence before it is required to repurchase Notes pursuant to a Change of Control. The foregoing will in no way limit the occurrence of an Event of Default, including an Event of Default arising from a default under the covenants of the second sentence of this paragraph (Section 1401 and 1402). Within 29 days after a Change of Control which constitutes a Repurchase Event, the Company is obligated to mail to the Trustee and to all holders of Notes at their addresses shown in the register of the Security Registrar (and to beneficial owners as required by applicable law) a notice (the "Change of Control Notice") regarding the Change of Control. The Change of Control Notice will describe: (i) the events causing the Change of Control; (ii) the Change of Control Purchase Price; (iii) the Change of Control Purchase Date; (iv) information regarding the conversion rights of the Notes; and (v) the procedures for withdrawing a Change of Control Purchase Notice. The Change of Control Notice will also state whether or not the Company has satisfied its obligations regarding Senior Indebtedness referred to in the preceding paragraph (Section 1401). To exercise the right to have Notes repurchased following a Change of Control, a holder must deliver a Change of Control Purchase Notice to the Paying Agent at its office maintained for such purpose, prior to the close of business on the Change of Control Purchase Date. The Change of Control Purchase Notice shall state: (i) the certificate numbers of the Notes to be delivered by the holder thereof for purchase by the Company; (ii) the portion of the principal amount of Notes to be repurchased, which portion must be $1,000 or an integral multiple thereof; and (iii) that such Notes are to be repurchased by the Company pursuant to the applicable provision of the Indenture (Section 1401). A holder of record of Notes shall be entitled to deliver a Change of Control Purchase Notice with respect to any or all Notes held by it; provided, however, that such holder may be required to provide evidence satisfactory to the Company that, with respect to each beneficial holder of the Notes to be delivered to the Company, such beneficial holder is exercising the right to require the repurchase of all of the Notes in which it has a beneficial interest. Any Change of Control Purchase Notice may be withdrawn by the holder by a written notice of withdrawal delivered to the Paying Agent prior to the close of business on the Change of Control Purchase Date. The notice of withdrawal shall state the principal amount and the certificate numbers of the Notes as to which the withdrawal notice relates and the principal amount, if any, which remains subject to a Change of Control Purchase Notice (Sections 1401 and 1402). Payment of the Change of Control Purchase Price for Notes for which a Change of Control Purchase Notice has been delivered and not withdrawn is conditioned upon delivery of such Notes (together with necessary endorsements) to the Paying Agent at its office maintained for such purpose, at any time (whether prior to, on, or after the Change of Control Purchase Date) after the delivery of such Change of Control Purchase Notice. Payment of the Change of Control Purchase Price for such Notes will be made promptly following the later of the Change of Control Purchase Date and the time of delivery of such Notes (Sections 1401 and 1402). "Change of Control" shall occur when: (i) all or substantially all of the Company's assets are sold as an entirety to any person or related group of persons; (ii) there shall be consummated any consolidation or merger of the Company (A) in which the Company is not the continuing or surviving corporation (other than a consolidation or merger with a wholly-owned subsidiary of the Company in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into or exchanged for the same consideration) or (B) pursuant to which the Common Stock would be converted into cash, securities or other 34 36 property, in each case other than a consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the Common Stock of the continuing or surviving corporation immediately after such consolidation or merger; or (iii) any person or any persons acting together which would constitute a "group" for purposes of Section 13(d) of the Exchange Act (other than the Company, any Subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic dividend reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any person holding securities of the Company for or pursuant to the terms of any such employee benefit plan), together with any affiliates thereof, shall Beneficially Own, directly or indirectly, at least 50% of the total Voting Stock of the Company (Section 1401). As noted above, one of the events that constitutes a Change of Control is a sale of all or substantially all of the assets of the Company as an entirety to any person or related group of persons. The Indenture will be governed by New York law, and there is no established quantitative definition under New York law of "substantially all" of the assets of a corporation. This uncertainty may make it more difficult for a holder of Notes to determine whether a Change of Control has occurred in the event that the Company were to engage in a transaction in which it sold less than all of its assets. A Change of Control as described above shall constitute a Repurchase Event unless (i) the closing price per share of the Common Stock on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days ending immediately after the later of the Change of Control or the public announcement of the Change of Control (in the case of a Change of Control under clauses (i) or (ii) of the definition of Change of Control) or ending immediately before the Change of Control (in the case of a Change of Control under clause (iii) of the definition of Change of Control) is at least equal to 105% of the conversion price of the Notes in effect immediately preceding the time of such Change of Control, or (ii) all of the consideration (excluding cash payments for fractional shares) in the transaction giving rise to such Change of Control to the holders of Common Stock consists of shares of common stock that are, or immediately upon issuance will be, listed on a national securities exchange or quoted in the Nasdaq National Market, and as a result of such transaction the Notes become convertible solely into such Common Stock and neither Moody's Investors Service, Inc. nor Standard & Poor's, principally as a result of the Change of Control, has downgraded the rating on the Notes by one or more gradations below the rating of the Notes on the original issuance date thereof within 90 days after the date of the public announcement of the Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the rating agencies), or (iii) the consideration in the transaction giving rise to such Change of Control to the holders of Common Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted in the Nasdaq National Market, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the daily closing prices of such securities on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days following consummation of such transaction) is at least 105% of the conversion price of the Notes in effect on the date immediately preceding the closing date of such transaction (Section 1401). A Change of Control that is initiated or supported by the Company, management of the Company or affiliates of such parties and which constitutes a Repurchase Event will entitle holders of the Notes to the same rights to require the Company to repurchase their Notes as any other Change of Control which constitutes a Repurchase Event. The Company, to the extent applicable and if required by law, will comply with the provisions of Rule 13e-4 and any successor or similar provision under the Exchange Act which may then be applicable and will file a Schedule 13E-4 or any successor or similar schedule required thereunder in connection with any offer by the Company to purchase Notes at the option of holders upon a Change of Control (Section 1405). The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a takeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature, however, is not the result of management's knowledge of any specific effort to accumulate shares of Common Stock or to obtain control of the Company by means of a merger, tender offer, 35 37 solicitation or otherwise, or part of any plan by management to adopt a series of anti-takeover provisions. Instead, the Change of Control purchase feature is a result of negotiations between the Company and the Underwriters. Management has no present intention to engage in a transaction involving a Change of Control, although it is possible that the Company would decide to do so in future. Subject to the limitation on mergers discussed below, the Company could, in the future, enter into certain transactions, including certain recapitalizations, sales of assets, or the liquidation of the Company, that would not constitute a Change of Control under the Indenture, but that would increase the amount of Senior Indebtedness (or any other indebtedness) outstanding at such time or substantially reduce or eliminate the Company's assets. There are no restrictions in the Indenture on the creation of additional Senior Indebtedness (or any other indebtedness), and, under certain circumstances, the incurrence of significant amounts of additional indebtedness could have an adverse effect on the Company's ability to service its indebtedness, including the Notes. If a Change of Control were to occur, there can be no assurance that the Company would have sufficient funds to pay the Change of Control Purchase Price for all Notes tendered by the holders thereof. No Note may be purchased pursuant to the Change of Control provisions if there has occurred and is continuing an Event of Default described under " -- Events of Default" (Section 1402). The Company's existing bank credit facility prohibits the Company from repurchasing any Notes unless (i) such repurchase is permitted under the restricted payment covenant contained in such bank credit facility and (ii) at the time of such repurchase and after giving effect thereto, no default shall have occurred under such bank credit facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Financial Condition and Capital Resources." In addition, the agreements under which Senior Indebtedness may be outstanding in the future could contain provisions which may require repayment of such respective Senior Indebtedness prior to repayment of the Notes upon, among other things, a Change of Control. If the Company is unable to obtain the requisite consents under its Senior Indebtedness to enable it to repurchase the Notes or is unable to repay all Senior Indebtedness, there would be both an Event of Default under the Notes and an event of default under such Senior Indebtedness, as a result of which events the Company could be prohibited by the subordination provisions of the Indenture from repurchasing Notes or making other payments in respect thereof. Furthermore, the exercise by the holders of their right to require the Company to repurchase the Notes could cause a default under the Senior Indebtedness of the Company, even if the Change of Control itself does not, due to the financial effect of such repurchase on the Company. As a result, the repurchase of the Notes could be blocked pursuant to the subordination terms of the Indenture. Finally, the Company's ability to pay cash to the holders of Notes upon a repurchase may be limited by the Company's then existing financial resources. Failure of the Company to pay the Change of Control Purchase Price will be a default under the Indenture and could result in an Event of Default with respect to the Notes, whether or not such repurchase is permitted by the subordination provisions. See "-- Events of Default." LIMITATION ON MERGERS The Company may, without the consent of the holders of the Notes, consolidate with or merge into any other entity or convey, transfer or lease its properties and assets substantially as an entirety to any person, provided that: (1) the entity formed by such consolidation or into which the Company is merged or the person that acquires by conveyance or transfer, or which leases the properties and assets of the Company substantially as an entirety, must be a corporation, partnership or trust organized and existing under the laws of the United States, any state thereof or the District of Columbia; (2) the successor entity expressly assumes, by a supplemental indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium, if any, and interest on all Notes and the performance of every covenant of the Indenture on the part of the Company to be performed or observed and provides for conversion rights in accordance with the Indenture; and (3) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing (Section 801). Upon compliance with these provisions by a successor entity, the Company (except in the case of a lease) would be relieved of its obligations under the Indenture and the Notes (Section 802). 36 38 MODIFICATION AND WAIVER Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding, and holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding may waive compliance by the Company with certain provisions of the Indenture; provided, however, that no such modification, amendment or waiver may, without the consent of the holder of each outstanding Note affected thereby, (i) change the Stated Maturity of the principal of or the due date of any installment of interest on any Note, (ii) reduce the principal amount of, or the rate of interest on, or any premium payable upon redemption of, any Note, (iii) change the currency of payment of principal of, or premium, if any, or interest on, any Note, (iv) impair the right to institute suit for the enforcement of any payment on or with respect to any Note on or after the Stated Maturity, or the Redemption Date in case of the redemption of any Note, (v) adversely affect the right of a holder to convert Notes, (vi) modify the provisions of the Indenture with respect to the subordination of the Notes in a manner adverse to the holders, (vii) reduce the above-stated percentage of outstanding Notes necessary to modify or amend the Indenture, or (viii) reduce the percentage in aggregate principal amount of outstanding Notes necessary for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults (Sections 902 and 1009). The Indenture also contains provisions permitting the Company and the Trustee to effect certain minor modifications of the Indenture not adversely affecting the rights of holders of Notes in any material respect. (Sections 901 and 902). The holders of a majority in aggregate principal amount of the outstanding Notes may waive any past default under the Indenture except, among other things, a default in the payment of principal of or premium, if any, or interest on any Note, including the Redemption Price, or a default with respect to right of holders to convert the Notes (Section 513). EVENTS OF DEFAULT The following will be Events of Default under the Indenture: (i) failure to pay principal of, premium, if any, or Redemption Price when due on any Note, whether or not such payment is prohibited by the subordination provisions of the indenture; (ii) failure to pay any interest on any Note 30 days after payment is due, whether or not such payment is prohibited by the subordination provisions of the Indenture; (iii) failure to perform any other covenant of the Company in the Indenture, and such failure continues for 60 days after written notice by the Trustee or the holders of at least 25% in principal amount of the outstanding Notes as provided in the Indenture; (iv) default under any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Company in excess of an aggregate of $10,000,000 either for borrowed money or representing any Senior Indebtedness (other than indebtedness which is nonrecourse to the Company beyond the property securing such indebtedness) resulting in the acceleration of such indebtedness prior to its express maturity (provided however, that the Event of Default under this clause (iv) shall be automatically deemed remedied and cured if the default under such accelerated indebtedness is remedied or cured by the Company or waived by the holder of such indebtedness); and (v) certain events of bankruptcy, insolvency or reorganization of the Company (Section 501). Notwithstanding the 60-day period and notice requirement referred to in clause (iii) above, with respect to a default under the Change of Control provisions, (1) the 60-day period referred to in clause (iii) above will be deemed to have begun as of the date the Change of Control Notice is required to be sent in the event the Change of Control Notice indicates (or would, if sent, indicate) that the Company has not complied with its obligation to either repay or obtain the requisite consents under any Senior Indebtedness that would prohibit the repurchase of the Notes, and either (a) the holders duly elect to have at least 25% in principal amount of outstanding Notes repurchased or (b) the holders of at least 25% in principal amount of the outstanding Notes or the Trustee thereafter gives the Notice of Default to the Company and, if applicable, the Trustee, and (2) if the breach or default is a result of a default in the payment when due of the Change of Control Purchase Price on the Change of Control Purchase Date, such default shall arise on the Change of Control Purchase Date, provided that either the holders of at least 25% in principal amount of the Notes or the Trustee thereafter gives the Notice of Default to the Company and, if applicable, the Trustee (Section 501). 37 39 Subject to the provisions of the Indenture relating to the duties of the Trustee in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders shall have offered to the Trustee reasonable indemnity (Sections 601 and 603). Subject to such provisions for the indemnification of the Trustee, the holders of a majority in aggregate principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee (Section 512). If an Event of Default shall occur and be continuing, other than an event of bankruptcy, insolvency or reorganization of the Company, either the Trustee or the holders of at least 25% of the principal amount of the outstanding Notes may accelerate the maturity of all Notes upon the earlier of (1) five business days after notice of such acceleration is received by the Company (and the Trustee if given by holders) and (2) a payment default under or acceleration of any Senior Indebtedness or such other earlier time as the final maturity date for such Senior Indebtedness occurs. If an Event of Default shall occur and be continuing which is an event of bankruptcy, insolvency or reorganization of the Company, the maturity of all Notes shall immediately accelerate without any act on the part of the Trustee or any holder. If an Event of Default shall occur and be continuing as a result of an acceleration of indebtedness of the type described in clause (iv) above, a declaration of acceleration under the Indenture shall automatically be annulled if the holders of the accelerated indebtedness described in clause (iv) above have rescinded their declaration of acceleration within 90 days thereof and no other Event of Default has occurred during such 90-day period which has not been cured or waived. After acceleration upon the Event of Default, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of outstanding Notes may, under certain circumstances, rescind and annul such acceleration if, among other things, all Events of Default, other than the non-payment of accelerated principal, have been cured or waived as provided in the Indenture (Section 502). For information as to waiver of defaults, see " -- Modification and Waiver." No holder of any Note will have any right to institute any proceeding with respect to the Indenture or for any remedy thereunder, unless such holder shall have previously given to the Trustee written notice of a continuing Event of Default, the holders of at least 25% in aggregate principal amount of the outstanding Notes shall have made written request, and offered reasonable indemnity, to the Trustee to institute such proceeding as trustee, the Trustee shall not have received from the holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request and the Trustee shall have failed to institute such proceeding within 60 days after such notice (Section 507). However, such limitations do not apply to a suit instituted by a holder of a Note for the enforcement of payment of the principal of or premium, if any, or interest on such Note or the Redemption Price on or after the respective due dates expressed in such Note or of the right to convert such Note in accordance with the Indenture (Section 508). The Company will be required annually to furnish to the Trustee a statement as to any default in its performance of certain of its obligations under the Indenture (Section 1004). DISCHARGE OF INDENTURE; DEFEASANCE The Company may terminate substantially all obligations under the Indenture at any time by delivering all outstanding Notes to the Trustee for cancellation and paying any other sums payable under the Indenture (Article IV). The Indenture also provides that the Company may elect: (a) to defease and be discharged from any and all obligations with respect to the Notes and that the provisions of the Indenture (including the provisions described under " -- Subordination of Notes") will no longer be in effect with respect to the Notes (except for the obligations to register the transfer or exchange of the Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office or agency in respect of Notes and to hold monies for payment in trust) ("Defeasance"); or (b) to be released from its obligations with respect to the Notes under certain restrictive covenants of the Indenture, and that the event of the type described under the clause (iv) under " -- Events of 38 40 Default" will not be deemed to be an Event of Default under the indenture and that the provisions described under " -- Subordination of Notes" will not apply ("Covenant Defeasance"). Such Defeasance or Covenant Defeasance will take effect only upon the deposit with the Trustee (or other qualifying trustee), in trust for such purpose, of money or U.S. Government Obligations that, through the payment of principal and interest in accordance with their terms, will provide money, in an amount sufficient to pay the principal of and premium, if any, and interest on the Notes on the dates such payments are due, which may include one or more Redemption Dates designated by the Company (other than in connection with a Change of Control occurring after such Defeasance or Covenant Defeasance), in accordance with the terms of the Notes (Article XV). Such a trust may be established with respect to the Notes only if, among other things: (i) such Defeasance or Covenant Defeasance will not result (whether immediately or with notice or lapse of time or both) in an Event of Default under the Indenture; (ii) such deposit will not be prohibited by the provisions of any agreement or instrument to which the Company is a party or is bound; (iii) such deposit will not cause the Trustee to have any conflicting interest with respect to other securities of the Company; (iv) the Company has delivered to the Trustee an Opinion of Counsel to the effect that the holders of the Notes will not recognize income, gain or loss for federal income tax purpose as a result of such Defeasance or Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance or Covenant Defeasance had not occurred; and (v) the Company has delivered an Officers' Certificate and an Opinion of Counsel, each to the effect that all conditions precedent relating to such Defeasance or Covenant Defeasance have been satisfied. Such Opinion of Counsel, in the case of Defeasance, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable federal income tax law occurring after the issue date (Article XV). If the Company omits to comply with its remaining obligations under the Indenture after Covenant Defeasance in respect of the Notes issued thereunder and the Notes are declared due and payable because of the occurrence of an Event of Default, the amount of money or U.S. Government Obligations on deposit with the Trustee may be insufficient to pay amounts due on the Notes at the time any acceleration of the maturity thereof resulting from such Event of Default. However, the Company will remain liable in respect of such payments (Article XV). GOVERNING LAW The Indenture and the Notes will be governed by and construed in accordance with the laws of the State of New York. THE TRUSTEE Texas Commerce Bank National Association is the Trustee under the Indenture. In the ordinary course of business the Company maintains other commercial relationships with the Trustee and its affiliates. If the Trustee shall acquire any conflicting interest (as defined in Section 301(b) of the Trust Indenture Act) after a default under the Indenture, the Trustee either shall eliminate such conflicting interest or resign as Trustee. 39 41 DESCRIPTION OF CAPITAL STOCK AUTHORIZED CAPITAL STOCK The Company's authorized capital stock consists of 75,000,000 shares of common stock, par value $.01 per share (the "Common Stock"), of which 23,259,658 were issued and outstanding at December 31, 1993, and 10,000,000 shares of preferred stock, par value $.01 per share (the "Preferred Stock"), of which 2,221,005 were issued and outstanding as of December 31, 1993. COMMON STOCK All shares of Common Stock have equal rights to participate in dividends and, in the event of liquidation, assets available for distribution to stockholders, subject to any preference established with respect to Preferred Stock. Each holder of Common Stock is entitled to one vote for each share held on all matters submitted to a vote of stockholders, and voting rights for the election of directors are noncumulative. Shares of Common Stock carry no conversion, preemptive or subscription rights, and are not subject to redemption. All outstanding shares of Common Stock are, and any shares of Common Stock issued upon conversion of convertible securities will be, validly issued, fully paid and nonassessable. The Company pays dividends on Common Stock when, as and if declared by the Board of Directors. Dividends may be declared in the discretion of the Board of Directors from funds legally available therefor, subject to restrictions under agreements related to Company indebtedness. The transfer agent for the Common Stock is Society National Bank, 3200 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270. PREFERRED STOCK The Preferred Stock is issuable in one or more series or classes, any or all of which may have such voting powers, full or limited, or no voting powers, and such designations, preferences and related, participating, optional or other special rights and qualifications, limitations or restrictions thereof, as are set forth in the Company's Certificate of Incorporation, as amended, or in the resolution or resolutions providing for the issue of such stock adopted by the Board, which is expressly authorized to set such terms for any such issue. In November 1991, the Company issued 1,200,000 shares of $4.00 Exchangeable Convertible Preferred Stock, of which 1,186,005 shares were outstanding on December 31, 1993. Holders of such Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, cash dividends at an annual rate of $4.00 per share, payable quarterly in arrears. Upon liquidation, such holders are entitled to receive a preference of $50.00 per share, plus accrued and unpaid dividends to the payment date. Each share of such Preferred Stock is convertible into 5.51 shares of Common Stock at any time prior to redemption (subject to adjustment), equivalent to a conversion price of $9.07 for each share of Common Stock. The Company has the right to exchange the shares of such Preferred Stock for the Company's 8% Convertible Subordinated Debentures due 2006 on any dividend payment date and, subject to certain restrictions, the right to redeem such Preferred Stock beginning January 1, 1995. In April 1993, the Company issued 1,035,000 shares (represented by 4,140,000 depositary shares) of $6.00 Exchangeable Convertible Preferred Stock, all of which were outstanding on December 31, 1993. Holders of such Preferred Stock are entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, cash dividends at an annual rate of $6.00 per share ($1.50 per depositary share), payable quarterly in arrears. Upon liquidation, such holders are entitled to receive a preference of $100.00 per share ($25.00 per depositary share), plus accrued and unpaid dividends to the payment date. Each share of such Preferred Stock is convertible into 4.762 shares of Common Stock at any time prior to redemption (subject to adjustment), equivalent to a conversion price of $21.00 for each share of Common Stock. The Company has the right to exchange the shares of such Preferred Stock for the Company's 6% Convertible Subordinated Debentures due 2008 on any dividend date payment on or after March 31, 1994 and the right to redeem such Preferred Stock beginning March 31, 1996. 40 42 The existing series of Preferred Stock rank prior to the Common Stock, and on a parity with each other, as to dividends and upon liquidation, dissolution or winding up. FACTORS AFFECTING ACQUISITIONS OF CONTROL The Company's Certificate of Incorporation, as amended, provides that the Board of Directors, in its discretion, may establish one or more class or series of Preferred Stock having such number of shares, designations, relative voting rights, dividend rates, liquidation and other rights, preferences and limitations as may be fixed by the Board of Directors without any further stockholder approval. Such rights, preferences, privileges and limitations could have the effect of impeding or discouraging the acquisition of control of the Company. The Company is a Delaware corporation and is subject to Section 203 of the Delaware General Corporation Law (the "DGCL"). In general, Section 203 prevents an "interested stockholder" (defined generally as a person owning 15% or more of a corporation's outstanding voting stock) from engaging in a "business combination" (as defined) with a Delaware corporation for three years following the date such person became an interested stockholder unless (i) before such person became an interested stockholder, the board of directors of the corporation approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination; (ii) upon consummation of the transaction that resulted in the interested stockholder's becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding stock held by directors who are also officers of the corporation and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or (iii) following the transaction in which such person became an interested stockholder, the business combination is approved by the board of directors of the corporation and authorized at a meeting of stockholders by the affirmative vote of the holders of two-thirds of the outstanding voting stock of the corporation not owned by the interested stockholder. Under Section 203, the restrictions described above also do not apply to certain business combinations proposed by an interested stockholder following the announcement or notification of one of certain extraordinary transactions involving the corporation and a person who had not been an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of the corporation's directors, if such extraordinary transaction is approved or not opposed by a majority of the directors who were directors prior to any person's becoming an interested stockholder during the previous three years or who were recommended for election or elected to succeed such directors by a majority of such directors. DIRECTORS' LIABILITY The Company's Certificate of Incorporation, as amended, also provides for the elimination of directors' liability for monetary damages for a breach of certain fiduciary duties and for the indemnification of directors, officers, employees or agents as permitted by the DGCL. These provisions cannot be amended without the affirmative vote of the holders of at least a majority in interest of the outstanding shares entitled to vote. The Company has entered into indemnification agreements with all directors and executive officers and may, in the future, enter into such agreements with employees and agents. Such indemnification agreements provide generally that such persons will be indemnified, to the extent permitted by applicable law, for expenses (including attorneys' fees), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such persons in connection with any proceeding (including, to the extent permitted by law, any derivative action) to which such persons are, or are threatened to be made, a party by reason of their status in such positions. Such indemnification agreements do not change the basic legal standards for indemnity under applicable law or as set forth in the Certificate of Incorporation. 41 43 UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement (the "Underwriting Agreement") between the Company and CS First Boston Corporation, PaineWebber Incorporated, Petrie Parkman & Co., Inc. and Smith Barney Shearson Inc., as underwriters (the "Underwriters"), the Company has agreed to sell to each of the Underwriters, and each of the Underwriters has severally agreed to purchase, the principal amount of Notes set forth opposite its name below.
PRINCIPAL UNDERWRITER AMOUNT ----------------------------------------------------------------------- ------------ CS First Boston Corporation............................................ $ PaineWebber Incorporated............................................... Petrie Parkman & Co., Inc.............................................. Smith Barney Shearson Inc.............................................. ------------ Total........................................................ $100,000,000 ------------ ------------
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters will be obligated to purchase all of the Notes offered hereby, if any are purchased. The Company has been advised by the Underwriters that they propose to offer the Notes to the public initially at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of % of the principal amount of the Notes; that the Underwriters and such dealers may allow a discount not in excess of % of such principal amount on sales to certain other dealers; and that after the initial public offering, the public offering price, concession and discount may be changed. The Company has granted to the Underwriters an option, expiring at the close of business on the 30th day after the date of this Prospectus, to purchase up to an additional $15,000,000 aggregate principal amount of the Notes at the public offering price less the underwriting discount, all as set forth on the cover page of this Prospectus. The Underwriters may only exercise such option to cover over-allotments, if any, in the sale of the initial $100,000,000 aggregate principal amount of Notes offered hereby. The Company and each of John C. Snyder, Thomas J. Edelman and John A. Fanning, the Chairman, President and Executive Vice President, respectively, of the Company, have agreed that, for a period of 90 days after the date of this Prospectus, they will not, without the prior written consent of CS First Boston Corporation, directly or indirectly, sell, agree to sell, contract to sell, or otherwise dispose of any shares of the Company's Common Stock or Preferred Stock or any other security convertible into or exchangeable for Common Stock, other than, in the case of the Company, upon conversion of convertible securities outstanding on the date hereof or pursuant to employee benefit plans (including, but not limited to, stock option plans). The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments which the Underwriters may be required to make in respect thereof. Each of the Underwriters has provided during the past 12 months and may provide in the future investment banking services to the Company for which they have received or may receive customary fees. The Notes have been approved for listing on the NYSE, subject to official notice of issuance. LEGAL OPINIONS The validity of the Notes and the Common Stock issuable upon conversion of the Notes will be passed upon by Peter E. Lorenzen, Vice President -- General Counsel of the Company. Mr. Lorenzen owns 7,000 shares of Common Stock and holds options to purchase 67,800 shares of Common Stock. Certain legal 42 44 matters in connection with this Offering will be passed upon for the Underwriters by Baker & Botts, L.L.P., Dallas, Texas. EXPERTS The audited financial statements and schedules incorporated in this Prospectus by reference have been audited by Arthur Andersen & Co., independent public accountants, as indicated in their reports with respect thereto, and are incorporated herein by reference in reliance upon the authority of said firm as experts in accounting and auditing. The information appearing in this Prospectus and incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 regarding proved reserves and related future net revenues and the present value thereof is derived, as and to the extent described herein and therein, from reserve reports and reserve report audits prepared by NSAI, independent oil and gas consultants, and, to such extent, are included and incorporated by reference herein in reliance upon the authority of such firm as experts with respect to the matters contained in such reports and audits. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; at Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and at 7 World Trade Center, New York, New York 10048. Copies of such material may also be obtained by mail at prescribed rates from the Public Reference Section of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Common Stock is traded on the NYSE, and such reports, proxy statements and other information may be inspected at the NYSE, 20 Broad Street, New York, New York 10005. The Company has filed with the SEC a Registration Statement on Form S-3 (together with any amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended, with respect to the Notes offered by this Prospectus. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits thereto. For further information with respect to the Company and the Notes, reference is made to the Registration Statement and the exhibits thereto. Copies of the Registration Statement are available from the SEC in the manner provided above. Statements contained in this Prospectus concerning the provisions of documents filed with the Registration Statement as exhibits are necessarily summaries of such documents, and each such statement is qualified in its entirety by reference to the copy of the applicable document filed with the SEC. 43 45 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following document heretofore filed by the Company with the SEC pursuant to Section 13 of the Exchange Act is incorporated herein by reference: The Company's Annual Report on Form 10-K for the year ended December 31, 1993, as amended by Form 10-K/A1 dated April 22, 1994. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Notes shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. ANY PERSON RECEIVING A COPY OF THIS PROSPECTUS MAY OBTAIN WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST, A COPY OF ANY OF THE DOCUMENTS INCORPORATED BY A REFERENCE HEREIN, EXCEPT FOR THE EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS). REQUESTS SHOULD BE ADDRESSED TO SNYDER OIL CORPORATION, 1625 BROADWAY, SUITE 2200, DENVER, COLORADO 80202, ATTENTION: INVESTOR RELATIONS, (303) 592-8638. 44 46 - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. --------------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary...................... 3 Recent Developments..................... 7 Use of Proceeds......................... 8 Capitalization.......................... 8 Price Range of Common Stock and Dividends............................. 9 Selected Historical Financial Information........................... 10 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 11 Business and Properties................. 15 Description of Notes.................... 28 Description of Capital Stock............ 40 Underwriting............................ 42 Legal Opinions.......................... 42 Experts................................. 43 Available Information................... 43 Incorporation of Certain Documents by Reference............................. 44
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SOCO LOGO) Snyder Oil Corporation $100,000,000 % Convertible Subordinated Notes Due 2001 PROSPECTUS CS First Boston PaineWebber Incorporated Petrie Parkman & Co. Smith Barney Shearson Inc. - -------------------------------------------------------------------------------- 47 PART II INFORMATION NOT REQUIRED IN PROSPECTUS All capitalized terms used and not defined in Part II of this Registration Statement shall have the meanings assigned to them in the Prospectus which forms a part of this Registration Statement. ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Except for the Registration Fee and the NASD Filing Fee, the following itemized table sets forth estimates of those expenses payable by the Company in connection with the offer and sale or exchange of the securities offered hereby: Registration Fee........................................................ $ 39,656 NASD Filing Fee......................................................... 12,000 Printing and Engraving Expenses......................................... 195,000 Legal Fees and Expenses................................................. 90,000 Blue Sky Fees and Expenses.............................................. 5,000 Trustee's Fees and Expenses............................................. 20,000 Accountants' Fees and Expenses.......................................... 50,000 Engineers' Fees and Expenses............................................ 4,000 Rating Agency Fees...................................................... 50,000 Miscellaneous Fees and Expenses......................................... 34,344 -------- Total......................................................... $500,000
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Registrant is incorporated in Delaware. Under Section 145 of the DGCL, a Delaware corporation has the power, under specified circumstances, to indemnify its directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses and liabilities incurred in any such action, suit or proceeding so long as they acted in good faith and in a manner that they reasonably believed to be in, or not opposed to, the best interests of such corporation, and with respect to any criminal action, that they had no reasonable cause to believe their conduct was unlawful. With respect to suits by or in the right of such corporation, however, indemnification is generally limited to attorneys' fees and other expenses and is not available if such person is adjudged to be liable to such corporation unless the court determines that indemnification is appropriate. A Delaware corporation also has the power to purchase and maintain insurance for such persons. Article Ninth of the Certificate of Incorporation of the Registrant provides for mandatory indemnification of directors and officers to the fullest extent permitted by Section 145 of the DGCL. Reference is made to the Certificate of Incorporation of the Registrant. Reference is also made to the indemnification provisions of Section 7 of the Underwriting Agreement, the form of which has been filed as Exhibit 1.1 hereto, under which the Underwriters have agreed to indemnify the Registrant, its directors and officers and certain other persons against liabilities, including liabilities under the Securities Act of 1933, with respect to information furnished in writing to the Registrant for use in this Registration Statement. The Registrant has entered into indemnification agreements with each of its officers and directors and may in the future enter into such indemnification agreements with its directors, officers, employees and agents. Such indemnification agreements are intended to provide a contractual right to indemnification, to the extent permitted by law, for costs, expenses (including attorneys' fees and disbursements), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by the person to be indemnified in connection with any proceeding (including, to the extent permitted by law, any derivative action) to which they are, or are threatened to be made, a party by reason of their status or decisions or actions in such positions. Such indemnification agreements do not change the basic legal standards for indemnification set forth in DGCL or II-1 48 the Certificate of Incorporation of the Registrant. Such provisions are intended to be in furtherance, and not in limitation of, the general right to indemnification provided in the certificate of incorporation and Bylaws of the Registrant. Section 102(b)(7) of the DGCL provides that a certificate of incorporation may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision may not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. Article Tenth of the Registrant's Certificate of Incorporation contains such a provision. The above discussion of the Registrant's Certificate of Incorporation and Sections 102(b)(7) and 145 of the DGCL is not intended to be exhaustive and is qualified in its entirety by such Certificate of Incorporation and statutes. ITEM 16. EXHIBITS. 1.1 -- Form of Underwriting Agreement.* 4.1.1 -- Certificate of Incorporation of Registrant -- incorporated by reference from Exhibit 3.1 to the Registrant's Registration Statement on Form S-4 (Registration No. 33-33455). 4.1.2 -- Certificate of Amendment to Certificate of Incorporation of Registrant filed February 9, 1990 -- incorporated by reference from Exhibit 3.1.1 to the Registrant's Registration Statement on Form S-4 (Registration No. 33-33455). 4.1.3 -- Certificate of Amendment to Certificate of Incorporation of Registrant filed May 22, 1991 -- incorporated by reference from Exhibit 3.1.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-43106). 4.1.4 -- Certificate of Amendment to Certificate of Incorporation of Registrant filed May 24, 1993 -- incorporated by reference from Exhibit 3.1.5 to the Registrant's Form 10-Q for the quarter ended June 30, 1993 (File No. 1-10509). 4.1.5 -- Certificate of Designations, Powers, Preferences and Rights of the Registrant's $4.00 Convertible Exchangeable Preferred Stock -- incorporated by reference from Exhibit 3.1.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1-10509). 4.1.6 -- Certificate of Designations of the Registrant's $6.00 Convertible Exchangeable Preferred Stock -- incorporated by reference from Exhibit 3.1.4 to the Registrant's Form 10-Q for the quarter ended June 30, 1993 (File No. 1-10509). 4.2 -- By-Laws of Registrant -- incorporated by reference from Exhibit 3.2 to the Registrant's Registration Statement on Form S-4 (Registration No. 33-33455). 4.3 -- Form of Indenture.* 4.4 -- Form of Note (included in Exhibit 4.3). 4.5 -- Fourth Restated Credit Agreement dated July 1, 1993 among Registrant, the Banks listed therein and NationsBank of Texas, N.A. as the Agent -- incorporated by reference from Exhibit 4.1.4 to the Registrant's Form 10-Q for the quarter ended June 30, 1993 (File No. 1-10509). 4.6 -- First Amendment to Fourth Restated Credit Agreement.* 5.1 -- Opinion of Peter E. Lorenzen, Vice President and General Counsel of the Registrant, as to legality of the securities registered hereby.* 12.1 -- Computation of Ratio of Earnings to Fixed Charges.** 23.1 -- (Intentionally left blank.)
II-2 49 23.2 -- Consent of Arthur Andersen & Co.** 23.3 -- Consent of Netherland, Sewell, & Associates, Inc.** 23.4 -- Consent of Peter E. Lorenzen, Esq., Vice President and General Counsel, to the use of his opinion filed as Exhibit 5.1 (set forth in his opinion filed as Exhibit 5.1). 24.1 -- Powers of attorney (set forth on the signature page hereof). 25.1 -- Statement of Eligibility of Trustee on Form T-1.** 99.1 -- Report of Netherland, Sewell & Associates, Inc. dated February 10, 1994 relating to certain of the Registrant's property interests -- incorporated by reference from Exhibit 28.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-10509). 99.2 -- Report of Netherland, Sewell & Associates, Inc. dated February 11, 1994 relating to their audit of reserve estimates -- incorporated by reference from Exhibit 28.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-10509).
- --------------- * Filed herewith ** Previously filed ITEM 17. UNDERTAKINGS. (a) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each posteffective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) The undersigned Registrant hereby further undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in 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. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling persons of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 50 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form S-3 and has duly caused this Amendment to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fort Worth, State of Texas, on May 4, 1994. SNYDER OIL CORPORATION By /s/ PETER E. LORENZEN Peter E. Lorenzen, 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 and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------- ------------------------------ ---------------- * Director and Chairman May 4, 1994 John C. Snyder (Principal Executive Officer of Registrant) * Director and President May 4, 1994 Thomas J. Edelman (Principal Financial Officer of Registrant) * Director and Executive Vice May 4, 1994 John A. Fanning President * Director May 4, 1994 Roger W. Brittain * Director May 4, 1994 John A. Hill * Director May 4, 1994 B. J. Kellenberger * Director May 4, 1994 John H. Lichtblau * Director May 4, 1994 James E. McCormick * Director May 4, 1994 Alfred M. Micallef * Vice President and Controller May 4, 1994 James H. Shonsey (Principal Accounting Officer) *By /s/ PETER E. LORENZEN Peter E. Lorenzen, Attorney-in-Fact
II-4 51 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE - --------- -------------------------------------------------------------------------- ------------ 1.1 -- Form of Underwriting Agreement.* 4.1.1 -- Certificate of Incorporation of Registrant -- incorporated by reference from Exhibit 3.1 to the Registrant's Registration Statement on Form S-4 (Registration No. 33-33455). 4.1.2 -- Certificate of Amendment to Certificate of Incorporation of Registrant filed February 9, 1990 -- incorporated by reference from Exhibit 3.1.1 to the Registrant's Registration Statement on Form S-4 (Registration No. 33-33455). 4.1.3 -- Certificate of Amendment to Certificate of Incorporation of Registrant filed May 22, 1991 -- incorporated by reference from Exhibit 3.1.2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-43106). 4.1.4 -- Certificate of Amendment to Certificate of Incorporation of Registrant filed May 24, 1993 -- incorporated by reference from Exhibit 3.1.5 to the Registrant's Form 10-Q for the quarter ended June 30, 1993 (File No. 1-10509). 4.1.5 -- Certificate of Designations, Powers, Preferences and Rights of the Registrant's $4.00 Convertible Exchangeable Preferred Stock -- incorporated by reference from Exhibit 3.1.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1-10509). 4.1.6 -- Certificate of Designations of the Registrant's $6.00 Convertible Exchangeable Preferred Stock -- incorporated by reference from Exhibit 3.1.4 to the Registrant's Form 10-Q for the quarter ended June 30, 1993 (File No. 1-10509). 4.2 -- By-Laws of Registrant -- incorporated by reference from Exhibit 3.2 to the Registrant's Registration Statement on Form S-4 (Registration No. 33-33455). 4.3 -- Form of Indenture.* 4.4 -- Form of Note (included in Exhibit 4.3). 4.5 -- Fourth Restated Credit Agreement dated July 1, 1993 among Registrant, the Banks listed therein and NationsBank of Texas, N.A. as the Agent -- incorporated by reference from Exhibit 4.1.4 to the Registrant's Form 10-Q for the quarter ended June 30, 1993 (File No. 1-10509). 4.6 -- First Amendment to Fourth Restated Credit Agreement.* 5.1 -- Opinion of Peter E. Lorenzen, Vice President and General Counsel of the Registrant, as to legality of the securities registered hereby.* 12.1 -- Computation of Ratio of Earnings to Fixed Charges.** 23.1 -- [Intentionally left blank.] 23.2 -- Consent of Arthur Andersen & Co.** 23.3 -- Consent of Netherland, Sewell, & Associates, Inc.** 23.4 -- Consent of Peter E. Lorenzen, Esq., Vice President and General Counsel, to the use of his opinion filed as Exhibit 5.1 (set forth in his opinion filed as Exhibit 5.1). 24.1 -- Powers of attorney (set forth on the signature page hereof). 25.1 -- Statement of Eligibility of Trustee on Form T-1.** 99.1 -- Report of Netherland, Sewell & Associates, Inc. dated February 10, 1994 relating to certain of the Registrant's property interests -- incorporated by reference from Exhibit 28.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-10509). 99.2 -- Report of Netherland, Sewell & Associates, Inc. dated February 11, 1994 relating to their audit of reserve estimates -- incorporated by reference from Exhibit 28.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-10509).
- --------------- * Filed herewith ** Previously filed EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 $100,000,000 PRINCIPAL AMOUNT SNYDER OIL CORPORATION ____% CONVERTIBLE SUBORDINATED NOTES DUE 2001 UNDERWRITING AGREEMENT May __, 1994 CS FIRST BOSTON CORPORATION PAINEWEBBER INCORPORATED PETRIE PARKMAN & CO., INC. SMITH BARNEY, SHEARSON INC. c/o CS First Boston Corporation Park Avenue Plaza New York, N.Y. 10055 Dear Sirs: 1. Introductory. Snyder Oil Corporation, a Delaware corporation ("Company"), proposes to issue and sell $100,000,000 aggregate principal amount of its ___% Convertible Subordinated Notes Due 2001 (the "Firm Securities") to be issued under an indenture, dated as of April 1, 1994 ("Indenture"), between the Company and Texas Commerce Bank National Association, as trustee (the "Trustee"). The Company also proposes to issue and sell not more than $15,000,000 aggregate principal amount of such securities (the "Optional Securities"), if and to the extent that the right to purchase such Optional Securities is exercised as herein described. The Firm Securities and the Optional Securities are hereinafter collectively referred to as the "Securities." The Securities are convertible into shares of the Company's common stock, par value $.01 per share ("Common Stock"), at any time prior to the maturity of the Securities, unless the Securities have been previously redeemed or otherwise acquired by the Company, upon the terms and subject to the conditions set forth in the Indenture. The shares of Common Stock issuable upon conversion of the Securities are hereinafter 2 referred to as the "Shares." The Company hereby agrees with the several Underwriters named in Schedule A hereto (the "Underwriters") as follows: 2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the several Underwriters that: (a) The Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the "Act"), and a registration statement (No. 33-52807) on such Form, including a form of prospectus relating to the Securities and the Shares, has been filed with the Securities and Exchange Commission ("Commission") and either (i) has been declared effective under the Act and is not proposed to be amended or (ii) is proposed to be amended by amendment or post-effective amendment. If the Company does not propose to amend such registration statement and if any post-effective amendment to such registration statement has been filed with the Commission prior to the execution and delivery of this Agreement, the most recent such amendment has been declared effective by the Commission. For purposes of this Agreement, "Effective Time" means (i) if the Company has advised you that it does not propose to amend such registration statement, the date and time as of which such registration statement, or the most recent post-effective amendment thereto (if any) filed prior to the execution and delivery of this Agreement, was declared effective by the Commission, or (ii) if the Company has advised you that it proposes to file an amendment or post-effective amendment to such registration statement, the date and time as of which such registration statement, as amended by such amendment or post-effective amendment, as the case may be, is declared effective by the Commission. The term "Effective Date" means the date of the Effective Time. Such registration statement, as amended at the Effective Time, including all material incorporated by reference therein and information (if any) deemed to be a part of such registration statement as of the Effective Time pursuant to Rule 430A(b) under the Act, is hereinafter referred to as the "Registration Statement," and the form of prospectus relating to the Securities and the Shares, as first filed with the Commission pursuant to and in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no such filing is required) as included in the Registration Statement, including all material incorporated by reference in such prospectus, is hereinafter referred to as the "Prospectus." (b) If the Effective Time is prior to the execution and delivery of this Agreement: (i) on the Effective Date, the Registration Statement conformed in all material respects to the requirements of the Act, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations of the -2- 3 Commission ("Rules and Regulations") and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) on the date of this Agreement and at the time of filing of the Prospectus pursuant to Rule 424(b), the Registration Statement conforms, and will conform, in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, and does not include, and will not include, any untrue statement of a material fact and does not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) at the time of filing of the Prospectus pursuant to Rule 424(b), the Prospectus will conform in all material respects to the requirements of the Act and the Rules and Regulations and will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Effective Time is subsequent to the execution and delivery of this Agreement: on the Effective Date, the Registration Statement and the Prospectus will conform in all material respects to the requirements of the Act, the Trust Indenture Act and the Rules and Regulations, the Registration Statement will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The two preceding sentences do not apply to statements in or omissions from the Registration Statement or Prospectus based upon written information furnished to the Company by any Underwriter through you specifically for use therein or contained in the Statement of Eligibility and Qualification on Form T-1 furnished by the Trustee and filed as an exhibit to the Registration Statement. (c) The documents which are incorporated by reference in the Registration Statement and the Prospectus, and any amendments or supplements thereto, when they were filed with the Commission or were or hereafter are last amended, complied in all material respects with the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Rules and Regulations promulgated under the Exchange Act, and when read together with the information in the Prospectus, no such document, when it was filed with the Commission or was or hereafter is last amended, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. -3- 4 (d) All the outstanding shares of Common Stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and are free of any preemptive or similar rights. The Shares have been duly authorized and reserved for issuance upon the conversion of the Securities and, if and when issued upon such conversion in accordance with the provisions of the Indenture, will be validly issued, fully paid, nonassessable and free of any preemptive or other similar rights. The capital stock of the Company conforms to the description thereof contained in the Registration Statement and the Prospectus in all material respects. There are no outstanding options, warrants or other rights to acquire from the Company any capital stock except pursuant to the stock option plans and agreements referred to and otherwise described in the Registration Statement or the Prospectus. (e) The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify will not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries (as hereinafter defined) taken as a whole. (f) All the Company's subsidiaries that are required to be listed in an exhibit to the Registration Statement or to any document incorporated by reference therein are so listed (collectively, the "Subsidiaries"). Each Subsidiary is a corporation or limited partnership duly organized, validly existing and in good standing in the jurisdiction of its organization, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure to so register or qualify will not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole. All the outstanding shares of capital stock of, or other equity interests in, each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any lien, adverse claim, security interest, equity or other encumbrance, except for the lien granted pursuant to the bank credit facility referenced in the Registration Statement. -4- 5 (g) The Company and the Subsidiaries have all requisite corporate power and authority, and have obtained all necessary authorizations, approvals, orders, licenses, franchises, certificates and permits of and from all governmental regulatory officials and bodies ("Permits"), to own, lease and operate their respective properties and conduct their respective businesses as described in the Registration Statement and the Prospectus, except where the failure to obtain such Permits will not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole. Each of the Company and the Subsidiaries has fulfilled and performed all its current material obligations with respect to such Permits and no event has occurred which allows, or after notice or lapse of time, or both, would allow, revocation or termination thereof or result in any other material impairment of the rights of the holder of any such Permit, subject in each case to such qualification as may be set forth in the Registration Statement and the Prospectus and except where the failure to do so will not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole. Except as described in the Registration Statement and the Prospectus and as is customary in the oil and gas industry or in the areas where the properties of the Company or the Subsidiaries are located, such Permits contain no restrictions that are materially burdensome to the Company and the Subsidiaries taken as a whole. The Company and the Subsidiaries own, or possess adequate rights to use, all trademarks, service marks and other rights necessary for the conduct of their business as presently conducted and described in the Registration Statement and the Prospectus, and neither the Company nor any of the Subsidiaries has received any notice of conflict with the asserted rights of others in any such respect that would materially adversely affect their business and neither the Company nor any Subsidiary knows of any basis therefor. The property and business of the Company and the Subsidiaries taken as a whole conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus. (h) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened, against the Company or any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or to which any of their respective properties, is subject that are required to be described in the Registration Statement or the Prospectus but are not described as required, and there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that are not described or filed as required by the Act. -5- 6 (i) Neither the Company nor any of the Subsidiaries is (i) in violation of any term or provision of its certificate or articles of incorporation or bylaws, or other organizational documents, or of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any franchise, license, permit, judgment or any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries or (ii) in default (and no event has occurred that with notice or lapse of time, or both, would constitute a default) in any respect in the due performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, which default would have a material adverse effect on the condition (financial or other) business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole. (j) Neither the execution, delivery or performance of this Agreement or the Indenture by the Company, the issuance, offer, sale or delivery of the Securities, or the issuance of the Shares, nor the consummation by the Company of the transactions contemplated by this Agreement or the Indenture (i) requires any consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency or other governmental body, agency or official (other than (A) the registration of the Securities and the Shares under the Act, (B) qualification of the Indenture under the Trust Indenture Act and (C) compliance with the securities or Blue Sky laws of various jurisdictions, all of which will be, or have been, effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of the Subsidiaries or (ii) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Company or any of the Subsidiaries or any of their respective properties or (iii) results or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of the property or assets of any of them is subject. -6- 7 (k) Arthur Andersen & Co., the accountants for the Company who have certified the financial statements and the related financial statement schedules included in the Company's most recent Annual Report on Form 10-K, which is incorporated by reference in the Prospectus, are independent public accountants with respect to the Company and the Subsidiaries as required by the Act. (l) Netherland, Sewell & Associates, Inc. ("Netherland Sewell"), whose reserve reports and audits are filed as exhibits to the Company's most recent Annual Report on Form 10-K, are independent petroleum engineers with respect to the Company and the Subsidiaries. (m) The consolidated financial statements, together with related schedules and notes, included in or incorporated by reference in the Registration Statement and the Prospectus present fairly the consolidated financial position, results of operations and cash flows of the Company and the Subsidiaries on the basis stated in the Company's most recent Annual Report on Form 10-K at the respective dates or for the respective periods to which they apply. Such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein. The reserve reports and audits of Netherland Sewell present the proved reserves, future net revenues therefrom and discounted present value thereof in compliance with the applicable Rules and Regulations, and all of the information furnished by the Company to Netherland Sewell and used in connection with the preparation of such reports and audits (including, but not limited to, information regarding working interests, net revenue interests and pricing) was true and correct in all material respects as of the applicable effective date of such reports and audits and conformed with the applicable Rules and Regulations. The other financial and statistical information and data set forth in the Registration Statement and the Prospectus are accurately presented and prepared on a basis consistent with such financial statements or reserve reports or audits and the books and records of the Company. (n) The Company has all corporate power and authority necessary to execute and deliver this Agreement and the Indenture to perform its obligations under this Agreement and the Indenture. The execution and delivery of, and the performance by the Company of its obligations under, this Agreement has been duly and validly authorized by the Company, and this Agreement has been duly executed and delivered by the Company and constitutes a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except as rights to indemnity and contribution hereunder may be limited -7- 8 by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, or other laws relating to or affecting creditors' rights generally and by general equitable principles. The Indenture and the Securities, the execution and delivery by the Company of the Indenture and the Securities and the consummation of the transactions contemplated by the Indenture and the Securities have been duly authorized by the Company. If the Securities are issued in accordance with the provisions of the Indenture (when the Indenture has been executed and delivered by the Company and assuming due authorization, execution and delivery by the Trustee), the Securities and the Indenture will be valid and legally binding obligations of the Company enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles. (o) The respective forms of the Indenture and the Securities filed as exhibits to the Registration Statement conform, and, if and when executed by the Company, the Indenture and the Securities so executed will conform, to the respective descriptions thereof contained in the Prospectus in all material respects. (p) Except as disclosed in the Registration Statement and the Prospectus, subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus, neither the Company nor any of the Subsidiaries has incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Company and the Subsidiaries taken as a whole, and there has not been any material change in the capital stock, or material increase in the short-term debt or long-term debt, of the Company or any of the Subsidiaries, or any material adverse change, or any development involving or which may reasonably be expected to involve a prospective material adverse change, in the condition (financial or other), business, net worth or results of operations of the Company and the Subsidiaries taken as a whole. (q) Each of the Company and the Subsidiaries, except with respect to its respective interests in oil and gas leases, has good and marketable title in fee simple to all material real property owned by it, valid and defensible title to all material personal property owned by it and valid and enforceable interests in leases of all material real and personal property leased by it, in each case free and clear of all security interests, mortgages, pledges, liens, encumbrances, charges and defects (collectively, "encumbrances"), except for those encumbrances granted to -8- 9 secure indebtedness specified in the Registration Statement and those that do not materially and adversely affect the value of such property or materially interfere with the intended use of such property by it. Each of the Company and the Subsidiaries has good and defensible title to all of its respective interests in oil and gas leases, free and clear of any encumbrances, except encumbrances granted to secure the indebtedness specified in the Registration Statement, subject only to liens for taxes or charges of mechanics or materialmen not yet due and to encumbrances under gas sales contracts, operating agreements, unitization and pooling agreements and other similar agreements customarily found in connection with comparable drilling and producing operations and to title defects that are, singly and in the aggregate, not material in amount and do not interfere with its use or enjoyment of its oil and gas properties. Each of the Company and the Subsidiaries has conducted such title investigations and has acquired its respective interests in oil and gas leases in such manner as is customary in the oil and gas industry. Each of the Company and the Subsidiaries has complied in all material respects with the terms of the oil and gas leases in which it purports to own an interest, and all of such leases are in full force and effect (except where the failure so to comply or to be in full force and effect would not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and its Subsidiaries taken as a whole). (r) The Company has not distributed and, prior to the latest to occur of (i) the First Closing Date (as defined below), (ii) the Second Closing Date (as defined below) and (iii) the completion of the Company's distribution of the Securities, will not distribute any offering material in connection with the offering and sale of the Securities other than the Registration Statement, the Prospectus or other materials permitted by the Act. (s) The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (t) To the Company's knowledge, neither the Company nor any of the Subsidiaries nor any employee or agent of the Company or any Subsidiary has made any payment of funds of the Company or any Subsidiary or received or retained any funds in violation of any law, rule or regulation, which payment, receipt or retention of funds is of a character required to be disclosed in the Prospectus. (u) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company -9- 10 to file a registration statement under the Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Act. (v) Neither the Company nor any of the Subsidiaries is involved in any labor dispute nor, to the knowledge of the Company, is any such dispute threatened. (w) Each of the Company and the Subsidiaries has filed all federal, state and local tax returns that are required to be filed or has obtained extensions thereof, and has paid all taxes shown on such returns and all assessments received by it to the extent that the same have become due or is contesting such taxes in good faith by appropriate proceedings. (x) Except for the shares of capital stock of each of the Subsidiaries, neither the Company nor any of the Subsidiaries owns any share of stock or any other securities of any corporation or has any equity interest in any firm, partnership, association or other entity material in amount in relation to the net assets of the Company and the Subsidiaries taken as a whole, other than as disclosed in the Prospectus or as reflected in the consolidated financial statements included or incorporated by reference in the Registration Statement and the Prospectus. (y) The Company has complied with all of the provisions of Florida H.B. 1771, codified as Section 517.075 of the Florida statutes, and all regulations promulgated thereunder relating to issuers doing business with the Government of Cuba or with any person or any affiliate located in Cuba. (z) The Company has caused each of John C. Snyder, Thomas J. Edelman and John A. Fanning to enter into an agreement with the Underwriters providing that for a period of 90 days after the effective date of the Registration Statement they will not without the prior written consent of CS First Boston Corporation sell, contract to sell, cause or in any way permit to be sold, or otherwise dispose of any shares of Common Stock or any shares of preferred stock, par value $.01 per share ("Preferred Stock"), of the Company or any depositary shares representing an interest in Preferred Stock (or any securities convertible into or exercisable for any such shares of Common Stock or Preferred Stock or depositary shares), except that each such person may dispose of Common Stock -10- 11 with a value not to exceed in the aggregate $100,000 owned by such person on the date hereof as a gift. 3. Purchase, Sale and Delivery of Securities. On the basis of the representations, warranties and agreements contained herein, but subject to the terms and conditions set forth herein, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company, at a purchase price of 100% of the principal amount thereof, plus accrued interest, if any, from May ___, 1994 to the First Closing Date (as defined below), the respective principal amounts of Firm Securities set forth opposite the name of such Underwriter in Schedule A hereto. The Company will deliver the Firm Securities to you at the office of CS First Boston Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, New York, 10055 or such other place as you and the Company determine, against payment of the purchase price, by certified or official bank check or checks payable in New York Clearing House (next day) funds drawn to the order of the Company, at the above office of CS First Boston Corporation, at 10:00 A.M., New York time, on May ___, 1994, or at such other place and at such other time not later than seven full business days thereafter as you and the Company determine, such time being hereinafter referred to as the "First Closing Date." The certificates evidencing the Firm Securities to be so delivered will be in definitive form, in such denominations and registered in such names as you request, and will be made available for checking and packaging at the above office of CS First Boston Corporation at least 24 hours prior to the First Closing Date. In addition, upon written notice from you given to the Company not more than 30 days subsequent to the date of the initial public offering of the Firm Securities, the Underwriters may purchase all or less than all of the Optional Securities at a purchase price of 100% of the principal amount thereof, plus accrued interest, if any, from May __, 1994 to the Second Closing Date (as defined below). The Company agrees to sell to the Underwriters the principal amount of Optional Securities specified in such notice and the Underwriters agree, severally and not jointly, to purchase such Optional Securities. Such Optional Securities shall be purchased from the Company for the account of each Underwriter in the same proportion as the principal amount of Firm Securities set forth opposite such Underwriter's name in Schedule A hereto bears to the total principal amount of Firm Securities (subject to adjustment by you to round purchases to the nearest $1,000 principal amount) and may be purchased by the Underwriters only for the purpose of covering over-allotments made in connection with the sale of the Firm Securities. No Optional Securities shall be sold or delivered unless -11- 12 the Firm Securities previously have been, or simultaneously are, sold and delivered. The right to purchase the Optional Securities, or any portion thereof, may be surrendered and terminated at any time upon notice by you to the Company. The time for the delivery of and payment for the Optional Securities, being hereinafter referred to as the "Second Closing Date" (which may be the First Closing Date), shall be determined by you but shall not be later than 10 days after written notice of election to purchase the Optional Securities is given. The Company will deliver the Optional Securities to you at the above office of CS First Boston Corporation or such other place as you and the Company determine, against payment of the purchase price therefor by certified or official bank check or checks in New York Clearing House (next day) funds drawn to the order of the Company at the above office of CS First Boston Corporation or such other place you and the Company determine. The certificates evidencing the Optional Securities will be in definitive form, in such denominations and registered in such names as you request, and will be made available for checking and packaging at the above office of CS First Boston Corporation at least 24 hours prior to the Second Closing Date. 4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Prospectus. 5. Certain Agreements of the Company. The Company agrees with the several Underwriters that: (a) If the Effective Time is prior to the execution and delivery of this Agreement, the Company will file the Prospectus with the Commission pursuant to and in accordance with subparagraph (1) (or, if applicable and if consented to by you, subparagraph (3) or (4)) of Rule 424(b) not later than the earlier of (i) the second business day following the execution and delivery of this Agreement or (ii) the fifth business day after the Effective Date. The Company will advise you promptly of any such filing pursuant to Rule 424(b). (b) The Company will advise you promptly of any proposal to amend or supplement the registration statement as filed or the related prospectus or the Registration Statement or the Prospectus and will not effect any such amendment or supplementation to which you shall reasonably object after being so advised or which is not in compliance with the Rules and Regulations. So long as a prospectus relating to the Securities is required to be delivered under the Act, the Company will not file any information, documents or reports pursuant to the Exchange Act without delivering a copy of such information, documents or reports -12- 13 to you prior to or concurrently with such filings. The Company will also advise you promptly of the effectiveness of the Registration Statement (if the Effective Time is subsequent to the execution and delivery of this Agreement) and of any amendment or supplementation of the Registration Statement or the Prospectus and of the institution by the Commission of any stop order proceedings in respect of the Registration Statement and will make every reasonable effort to prevent the issuance of any such stop order and to obtain as soon as possible its lifting, if issued. (c) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will promptly prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. Neither your consent to, nor the Underwriters' delivery of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 6. (d) As soon as practicable, but not later than the Availability Date (as defined below), the Company will make generally available to its security holders an earnings statement covering a period of at least 12 months beginning after the Effective Date which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. For the purpose of the preceding sentence, "Availability Date" means the 45th day after the end of the fourth fiscal quarter following the fiscal quarter that includes the Effective Date, except that, if such fourth fiscal quarter is the last quarter of the Company's fiscal year, "Availability Date" means the 90th day after the end of such fourth fiscal quarter. (e) The Company will furnish to you copies of the Registration Statement (five of which will be signed and will include all exhibits), each related preliminary prospectus, the Prospectus and all amendments and supplements to such documents (including any document filed under the Exchange Act and deemed to be incorporated by reference therein), in each case as soon as available and in such quantities as you reasonably request. (f) The Company will arrange for the registration and qualification of the Securities for sale and the determination of their eligibility for investment -13- 14 under the laws of such jurisdictions as you may reasonably designate and will continue such qualifications in effect so long as required for the distribution. (g) During the period of three years hereafter, the Company will furnish to you, as soon as practicable after the end of each fiscal year, a copy of its annual report to stockholders for such year; and the Company will furnish to you (i) as soon as available, a copy of each report or definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to stockholders, and (ii) from time to time, such other information concerning the Company as you may reasonably request. (h) The Company agrees to pay the following costs and expenses and all other costs and expenses incident to the performance by it of its obligations hereunder: (i) the preparation, printing and filing with the Commission of the Registration Statement (including financial statements and schedules and exhibits thereto) and the Prospectus, and each amendment or supplement to either of them, (ii) the printing and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Registration Statement, the Prospectus, and all amendments or supplements to either of them as may be reasonably requested for use in connection with the offering and sale of the Securities, (iii) the preparation, printing, authentication, issuance and delivery of certificates for the Securities, and, if and when issued, the Shares, including any stamp taxes and any transfer agent's, trustee's or registrar's fees and expenses payable in connection with the original issuance of any of the foregoing, (iv) the printing and delivery of the Indenture, the preliminary and supplemental Blue Sky Memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection with the offering of the Securities, (v) the registration or qualification of the Securities for offer and sale under the securities or Blue Sky laws of the several states as provided in Section 5(f) (including the reasonable fees, expenses and disbursements of Baker & Botts, L.L.P. relating to the preparation, printing or reproduction, and delivery of the preliminary and supplemental Blue Sky Memoranda and such registration and qualification), (vi) the filing fees and the fees and expenses of Baker & Botts, L.L.P. in connection with any filings required to be made with the National Association of Securities Dealers, Inc. in connection with the offering, (vii) the fees and expenses of the Company's accountants and petroleum engineers and the fees and expenses of counsel (including local and special counsel) for the Company, (viii) any fees charged by any rating agency in connection with a rating of the Securities, (ix) the registration of the Securities under the Exchange Act, (x) -14- 15 the fees and expenses of listing the Securities and the Shares on the New York Stock Exchange and (xi) the performance by the Company of its other obligations under this Agreement, including the fees of the Trustee. (i) The Company has not taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of its capital stock or debt securities to facilitate the sale or resale of the Securities. (j) The Company will reserve and keep available at all times, free of any preemptive or other similar rights, a sufficient number of shares of Common Stock to provide for the issuance of such shares upon conversion of the Securities. (k) The Company will use its best efforts to effect and maintain the listing of the Securities and the Shares on the New York Stock Exchange as promptly as possible and to cause the Securities to be registered under the Exchange Act at the Effective Time. (l) For a period of 90 days after the date of the commencement of the public offering of the Securities by you, the Company will not issue, sell, contract to sell, grant any option for the sale of or otherwise dispose of, directly or indirectly, any capital stock, including, but not limited to, any Common Stock or Preferred Stock or any depositary shares representing an interest in Preferred Stock (or any securities convertible into or exercisable for any such shares of Common Stock or Preferred Stock or depositary shares), other than the Securities or the Shares (if any are issued upon conversion of the Securities), without the prior written consent of CS First Boston Corporation, except that the Company may sell or issue, or grant options with respect to, shares of the Common Stock in connection with the Company's stock option plans or other outstanding options or with the conversion of its outstanding convertible instruments. 6. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Securities on the First Closing Date and the Optional Securities on the Second Closing Date will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of the Company's officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: -15- 16 (a) You shall have received a letter, dated the date of delivery thereof (which, if the Effective Time is prior to the execution and delivery of this Agreement, shall be on or prior to the date of this Agreement or, if the Effective Time is subsequent to the execution and delivery of this Agreement, shall be prior to the filing of the amendment or post-effective amendment to the registration statement to be filed shortly prior to the Effective Time), of Arthur Andersen & Co. confirming that they are independent public accountants with respect to the Company within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating in effect that: (i) in their opinion the financial statements and schedules examined by them and incorporated by reference in the Registration Statement comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; (ii) on the basis of a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more than five days prior to the date of this Agreement, there was any change greater than five percent in the consolidated capital stock or the consolidated long-term debt of the Company or any decrease greater than five percent in consolidated working capital or net long-term assets, as compared with amounts shown on the latest balance sheet included in the Prospectus; or (B) for the period from the closing date of the latest income statement included in the Prospectus to the closing date of the latest available income statement read by such accountants, or to the subsequent specified date referred to in clause (A), there were any decreases greater than five percent, as compared with the period of corresponding length ended the date of the latest income statement included in the Prospectus, in consolidated oil and gas sales revenues or increases greater than five percent in consolidated direct operating expenses; -16- 17 except in all cases set forth in clauses (A) and (B) above for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (iii) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Registration Statement (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter. For purposes of this subsection, if the Effective Time is subsequent to the execution and delivery of this Agreement, "Registration Statement" shall mean the registration statement as proposed to be amended by the amendment or post-effective amendment to be filed shortly prior to the Effective Time, and "Prospectus" shall mean the prospectus included in the Registration Statement. All financial statements and schedules included in material incorporated by reference into the Prospectus shall be deemed included in the Registration Statement for purposes of this subsection. (b) If the Effective Time is not prior to the execution and delivery of this Agreement, the Effective Time shall have occurred not later than 10:00 P.M., New York time, on the date of this Agreement or such later date as shall have been consented to by you. If the Effective Time is prior to the execution and delivery of this Agreement, the Prospectus shall have been filed with the Commission in accordance with the Rules and Regulations and Section 5(a) of this Agreement. Prior to such Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company or you, shall be contemplated by the Commission. (c) Subsequent to the execution and delivery of this Agreement, there shall not have occurred (i) any change, or any development involving a prospective change, in or affecting particularly the business or properties of the Company or its subsidiaries which, in the judgment of a majority in interest of the -17- 18 Underwriters, materially impairs the investment quality of the Securities; (ii) any downgrading in the rating of any debt securities or Preferred Stock of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), or any public announcement that any such organization has under surveillance or review its rating of any debt securities or Preferred Stock of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iii) any suspension or limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange, or any suspension of trading of any securities of the Company on any exchange or in the over-the-counter market; (iv) any banking moratorium declared by Federal or New York authorities; or (v) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Underwriters, the effect of any such outbreak, escalation, declaration, calamity or emergency makes it impractical or inadvisable to proceed with completion of the sale of and payment for the Securities. (d) You shall have received an opinion, dated such Closing Date, of Peter E. Lorenzen, General Counsel for the Company, to the effect that: (i) The Company is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure so to register or qualify will not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as whole; (ii) Each of the Subsidiaries is a corporation or limited partnership duly organized and validly existing in good standing under the laws of the jurisdiction of its organization, with full corporate or partnership power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus, and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of -18- 19 its business requires such registration or qualification, except where the failure so to register or qualify will not have a material adverse effect upon the Company and the Subsidiaries taken as a whole; and all of the outstanding shares of capital stock of, or other equity securities in, each of the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, and are owned by the Company directly, or indirectly through one of the other Subsidiaries, free and clear of any perfected security interest, or, to the best knowledge of such counsel, any other security interest, lien, adverse claim, equity or other encumbrance except for the lien granted pursuant to the bank credit facility referenced in the Registration Statement; (iii) The authorized and outstanding capital stock of the Company is as set forth under the caption "Capitalization" in the Prospectus; the authorized capital stock of the Company conforms in all material respects as to legal matters to the description thereof contained in the Prospectus under the caption "Description of Capital Stock;" and the Securities, the Shares and the Indenture conform in all material respects to the respective descriptions thereof contained in the Prospectus under the captions "Description of Notes" and "Description of Capital Stock;" (iv) All the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable; (v) The Securities have been duly authorized and executed by the Company and, when certificates for the Securities are issued and delivered to you against payment therefor in accordance with the terms hereof, will be valid and legally binding obligations of the Company, enforceable in accordance with the provisions thereof (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles), and will entitle the holders thereof to the rights specified therein and in the Indenture; and, to the best knowledge of such counsel, there are no preemptive or similar rights that entitle any person to acquire any Securities upon the issuance thereof by the Company; (vi) The Indenture has been duly authorized, executed and delivered by the Company and is a valid and legally binding obligation of the Company, enforceable in accordance with the provisions thereof (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, -19- 20 moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles); (vii) The Shares have been duly authorized by the Company and reserved for issuance upon conversion of the Securities and, if and when issued upon such conversion, will be validly issued, fully paid and nonassessable; and, to the best knowledge of such counsel, there are no preemptive or similar rights that will entitle any person to acquire any Shares upon the issuance thereof by the Company. (viii) The form of certificate for the Securities contemplated by the Indenture conforms to the requirements of New York law; and the form of certificate for the Shares conforms to the requirements of the Delaware General Corporation Law; (ix) The Registration Statement and all post-effective amendments, if any, have become effective under the Act and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending before or contemplated by the Commission; (x) The Indenture (A) conforms in all material respects to the applicable requirements of the Trust Indenture Act and (B) has been duly qualified under the Trust Indenture Act; (xi) The Company has full corporate power and authority to enter into this Agreement and to perform its obligations (including the sale and delivery of the Securities) hereunder, and this Agreement has been duly authorized, executed and delivered by the Company and is a valid, legal and binding agreement of the Company, enforceable in accordance with its terms, except as rights to indemnification and contribution hereunder may be limited by applicable securities laws and except as the enforceability of the Company's obligations hereunder may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights generally and by general equitable principles; (xii) To the best knowledge of such counsel, neither the Company nor any of the Subsidiaries (A) is in violation of its certificate or articles of incorporation or bylaws, or other organizational documents, (B) is in breach of, or in default (nor has an event occurred that with notice, lapse -20- 21 of time or both would constitute such a default) under, any indenture, mortgage, deed of trust, note, bond, debenture, bank loan or credit agreement, or any other evidence of indebtedness, agreement or instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their property is or may be bound or affected, (C) is in violation of any law, ordinance, administrative or governmental rule or regulation applicable to the Company or any of the Subsidiaries or of any decree of any court or governmental agency or body having jurisdiction over the Company or any of the Subsidiaries or (D) has received any notice of conflict with the asserted rights of others in respect of trademarks, service marks or other rights necessary for the conduct of their business, in each case in which such breach, default, violation or conflict would have a material adverse effect on the business, properties or operations of the Company and the Subsidiaries taken as a whole; (xiii) None of the execution, delivery or performance of this Agreement or the Indenture, the offer, sale or delivery of the Securities, the issuance of the Shares upon conversion of the Securities, compliance by the Company with all provisions hereof or consummation by the Company of the transactions contemplated hereby (A) conflicts or will conflict with or constitutes or will constitute a breach of, or a default (or an event that with notice or lapse of time, or both, would constitute a default) under, the certificate or articles of incorporation or bylaws, or other organizational documents, of the Company or any of the Subsidiaries or, to the best knowledge of such counsel, any agreement, indenture, lease or other instrument to which the Company or any of the Subsidiaries is a party or by which any of them or any of their respective properties is bound, or any of the documents or agreements that are included or incorporated by reference as exhibits to the Registration Statement; (B) will, to the best knowledge of such counsel, result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Subsidiaries; or (C) will result in any violation of any existing law, statute, regulation, ruling (assuming compliance with all applicable state securities and Blue Sky laws) or, to the best knowledge of such counsel, any existing judgment, injunction, order or decree of any court or of any federal, state or other regulatory authority or other governmental body having jurisdiction over the Company, any of the Subsidiaries or any of their respective properties; (xiv) No consent, approval, authorization or other order of, or registration or filing with, any court, regulatory body, administrative agency -21- 22 or other governmental body, agency, or official is required on the part of the Company for the valid issuance and delivery of the Securities to you pursuant to this Agreement or the issuance of the Shares upon conversion of the Securities, other than (A) the registration of the Securities and the Shares, under the Act, (B) qualification of the Indenture under the Trust Indenture Act, and (C) compliance with the securities or Blue Sky laws of various jurisdictions; (xv) Under conflicts of law principles observed by the courts of the State of Texas, the courts of the State of Texas and the federal courts of the United States applying Texas law, if called upon to do so, will give effect to the choice of laws of the State of New York contained in the Securities and the Indenture, including insofar as the same applies to the provisions of the Securities and the Indenture relating to the amount or rate of interest contracted for, charged or received in respect of the Securities. (xvi) The Registration Statement and the Prospectus (except for the financial statements and the notes thereto and the schedules and other financial and statistical data contained therein, as to which such counsel need not express any opinion) comply as to form in all material respects with the requirements of the Act; (xvii) To the best knowledge of such counsel, (A) other than as described in the Registration Statement and the Prospectus there are no legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries, or to which the Company or any of the Subsidiaries or any of their respective properties is subject, that are required to be described in the Registration Statement or Prospectus and (B) there are no agreements, contracts, indentures, leases or other documents or instruments, that are required to be described in the Registration Statement or the Prospectus, or filed as an exhibit to the Registration Statement, that are not described or filed as required; (xviii) To the best knowledge of such counsel, each of the Company and the Subsidiaries holds all necessary governmental authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental regulatory officials and bodies for the conduct of the material businesses in which it is engaged and owns, or possesses adequate rights to use, all material rights necessary for the conduct of such businesses, and to such counsel's knowledge, none of the Company or the Subsidiaries has -22- 23 received any notice of conflict with the asserted rights of others in respect thereto, except where the failure to hold, or the conflict with the asserted rights of others with respect to, such authorizations, approvals, orders, licenses, certificates, franchises or permits, would not have a material adverse effect on the condition (financial or other), business, properties, net worth or results of operations of the Company and the Subsidiaries taken as a whole; (xix) To the best knowledge of such counsel, there are no statutes or regulations relating to the exploration for, development, production and marketing of oil and gas that are required to be described in the Registration Statement or Prospectus that are not described as required; (xx) The statements in the Registration Statement and Prospectus, insofar as they are descriptions of contracts, agreements or other legal documents, are accurate in all material respects and present fairly the information required to be shown; (xxi) Except as described in the Prospectus, such counsel knows of no outstanding option, warrant or other right calling for the issuance of, and such counsel knows of no commitment, plan or arrangement to issue, any share of capital stock of the Company or any security convertible into or exchangeable or exercisable for capital stock of the Company; and except as described in the Prospectus, such counsel does not know of any holder of any securities of the Company or any other person who has the right, contractual or otherwise, to cause the Company to issue to such holder or such person, or permit such holder or such person to underwrite the sale of, any shares of capital stock of the Company upon and as the result of the issuance and sale of the Securities to you hereunder or the right to require registration under the Act of an offering of shares of capital stock of the Company as a result of the filing of the Registration Statement; and (xxii) Although such counsel is not passing upon and does not assume any responsibility for the accuracy or completeness of the statements contained in the Registration Statement and Prospectus (except with respect to paragraphs (iii), (xvi) and (xx) above), such counsel advises you that, on the basis of his participation in conferences with other officers and employees of the Company, representatives of the independent accountants and independent petroleum consultants of the Company and representatives of the Underwriters at which the contents of the Registration Statement and the Prospectus and related matters were discussed (relying as to materiality to a large extent upon -23- 24 other officers and representatives of the Company), no facts have come to his attention that lead him to believe that the Registration Statement or any amendment thereof (other than the financial statements and the notes thereto and the schedules and other financial, statistical and engineering data or information included therein and the exhibits thereto), at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any supplement thereto (other than the financial statements and the notes thereto and the schedules and other financial, statistical and engineering data or information included therein), as of its date, the First Closing Date or Second Closing Date, as the case may be, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. In rendering his opinion as aforesaid, such counsel may rely upon an opinion or opinions, each dated such Closing Date, of other counsel retained by him or the Company as to federal energy regulatory matters or as to laws of any jurisdiction other than the United States, the State of Texas, the State of New York and the corporate laws of the State of Delaware, provided that (1) each such local counsel is acceptable to you, (2) such reliance is expressly authorized by each opinion so relied upon and a copy of each such opinion is delivered to you and is in form and substance satisfactory to you, and (3) such counsel shall state in his opinion that he believes that he and you are justified in relying thereon. (e) You shall have received from Baker & Botts, L.L.P., counsel for the Underwriters, such opinion or opinions, dated such Closing Date, with respect to the incorporation of the Company, the validity of the Securities, the Registration Statement, the Prospectus and other related matters as you may require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (f) You shall have received a certificate on behalf of the Company, dated such Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers, to the best of their knowledge after reasonable investigation, shall state that the representations and warranties of the Company in this Agreement are true and correct, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date, that no stop order suspending the effectiveness of the Registration Statement has been -24- 25 issued and, to the best of such officer's knowledge, no proceedings for that purpose have been instituted or are contemplated by the Commission and that, subsequent to the date of the most recent financial statements in the Prospectus, there has been no material adverse change in the financial position or results of operations of the Company and the Subsidiaries except as set forth in or contemplated by the Prospectus or as described in such certificate. (g) You shall have received a letter, dated such Closing Date, of Arthur Andersen & Co. which meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than five days prior to such Closing Date for the purposes of this subsection. (h) You shall have received a letter addressed to you and dated the date hereof from Netherland Sewell, independent petroleum consultants, substantially in the form heretofore approved by you. (i) The Securities and the Shares shall have been qualified or registered for offering and sale by you or dealers under the securities or Blue Sky laws of such jurisdictions as you shall have requested prior to the date hereof, and no order suspending the sale of the Securities in any such jurisdiction shall have been issued as of or on the Closing Date, and no proceedings for that purpose shall have been instituted or, to your knowledge or to the knowledge of the Company, shall be contemplated. (j) At such Closing Date, the Securities and the Shares shall have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. (k) You shall have received copies of the agreements between the Underwriters and each of John C. Snyder, Thomas J. Edelman and John A. Fanning specified in Section 2(z). The Company will furnish you with such conformed copies of such opinions, certificates, letters and documents as you reasonably request. 7. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise -25- 26 out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Underwriter through you specifically for use therein; and provided, further, that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Underwriter (or any person who controls such Underwriter) from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that any such loss, claim, damage or liability of such Underwriter results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the Prospectus if the Company had previously furnished copies thereof to such Underwriter and such untrue statement or omission or alleged untrue statement or omission made in a preliminary prospectus was corrected in the Prospectus. (b) Each Underwriter will severally and not jointly indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or any related preliminary prospectus, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Underwriter through you specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred. -26- 27 (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation unless (i) the employment of separate counsel has been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party has failed to assume the defense and employ counsel reasonably satisfactory to the indemnified party within a reasonable time after commencement of such action or (iii) the named parties to any such action (including any impleaded parties) include an indemnified and an indemnifying party and the indemnified party has been advised in writing by separate counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action or proceeding on behalf of the indemnified party). In no event shall the indemnifying party be liable for fees and expenses of more than one counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. (d) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. (e) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such -27- 28 indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (e). Notwithstanding the provisions of this subsection (e), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public was offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act or the Exchange Act; and the obligations of the Underwriters under this Section shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each director of the Company, to each officer of the Company who has signed the Registration -28- 29 Statement and to each person, if any, who controls the Company within the meaning of the Act or the Exchange Act. 8. Default of Underwriters. If any Underwriter or Underwriters default in their obligations to purchase Securities hereunder on either the First Closing Date or Second Closing Date and the aggregate principal amount of Securities that such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed 10% of the total principal amount of Securities that the Underwriters are obligated to purchase on such Closing Date, you may make arrangements satisfactory to the Company for the purchase of such Securities by other persons, including any of the Underwriters, but if no such arrangements are made by such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Securities that such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate principal amount of Securities with respect to which such default or defaults occurs exceeds 10% of the total principal amount of Securities that the Underwriters are obligated to purchase on such Closing Date, and arrangements satisfactory to you and the Company for the purchase of such Securities by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Underwriter or the Company, except as provided in Section 9 (provided that if such default occurs with respect to Optional Securities after the First Closing Date, this Agreement will not terminate as to the Firm Securities). As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 9. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company or its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Underwriter, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Securities. If this Agreement is terminated pursuant to Section 8 or if for any reason the purchase of the Securities by the Underwriters is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 5 and the respective obligations of the Company and the Underwriters pursuant to Section 7 shall remain in effect, and if any Securities have been purchased hereunder the representations and warranties in Section 2 and all obligations under Section 5 shall also remain in effect. If the purchase of the Securities by the Underwriters is not -29- 30 consummated for any reason other than solely because of the termination of this Agreement pursuant to Section 8 or the occurrence of any event specified in clause (iii), (iv) or (v) of Section 6(c), the Company will reimburse the Underwriters for all out-of-pocket expenses (including fees and disbursements of counsel) reasonably incurred by them in connection with the offering of the Securities. 10. Notices. All communications hereunder will be in writing and, if sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed to you, c/o CS First Boston Corporation, Park Avenue Plaza, 55 East 52nd Street, New York, N.Y. 10055, Attention: Investment Banking Department -- New Issue Processing Group, or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 777 Main Street, Suite 2500, Fort Worth, Texas 76102, Attention: Peter E. Lorenzen, General Counsel; provided, however, that any notice to an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed and confirmed to such Underwriter. 11. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7, and no other person will have any right or obligation hereunder. 12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 13. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. * * * * * -30- 31 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement among the Company and the several Underwriters in accordance with its terms. Very truly yours, SNYDER OIL CORPORATION By:_______________________ President The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. CS FIRST BOSTON CORPORATION PAINEWEBBER INCORPORATED PETRIE PARKMAN & CO., INC. SMITH BARNEY SHEARSON INC. BY: CS FIRST BOSTON CORPORATION By:_________________________ Vice President -31- 32 SCHEDULE A
PRINCIPAL UNDERWRITER AMOUNT ----------- ------------ CS First Boston Corporation . . . . . . . . . . . . . . . . . . PaineWebber Incorporated . . . . . . . . . . . . . . . . . . . Petrie Parkman & Co., Inc. . . . . . . . . . . . . . . . . . . Smith Barney Shearson Inc. . . . . . . . . . . . . . . . . . . ------------ Total . . . . . . . . . . . . . . . . . . . . . . . . $100,000,000 ============
A-1 EX-4.3 3 FORM OF INDENTURE 1 Draft of May 4, 1994 ================================================================================ SNYDER OIL CORPORATION, ISSUER AND TEXAS COMMERCE BANK NATIONAL ASSOCIATION, TRUSTEE __________ INDENTURE DATED AS OF APRIL 1, 1994 __________ $100,000,000* ____% CONVERTIBLE SUBORDINATED NOTES DUE 2001 ================================================================================ * Subject to increase to up to $115,000,000 as provided herein. 2 TABLE OF CONTENTS
PAGE ARTICLE I -- DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . 13 SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . 13 SECTION 104. Acts of Holders; Record Date . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . 15 SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . 16 SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . 16 SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 110. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 114. Incorporators, Stockholders, Officers and Directors of the Company Exempt from Individual Liability . . . . . . . . . . . . . . 18 ARTICLE II -- FORMS OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 204. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . 23 SECTION 205. Form of Election to Convert . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 206. Form of Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 207. Form of Option of Holder to Elect to Require Purchase . . . . . . . . . . 26 ARTICLE III -- THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 301. Title and Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . . . . 27 SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 305. Registration, Registration of Transfer and Exchange . . . . . . . . . . . 29 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . . . . 30 SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . 31
-i- 3 SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE IV -- SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . 33 SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE V -- REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 502. Acceleration of Maturity Date; Rescission and Annulment . . . . . . . . . 37 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . 38 SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . 39 SECTION 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . 39 SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . 39 SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert . . . . . . . . . . . . . . . . . . . 41 SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . 41 SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 41 SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 513. Waiver of Past Default . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . 42 ARTICLE VI -- THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . 43 SECTION 602. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . 44 SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . 45 SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . 46
-ii- 4 SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . 46 SECTION 610. Resignation and Removal, Appointment of Successor . . . . . . . . . . . . 46 SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . 48 SECTION 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . 48 SECTION 613. Preferential Collection of Claims Against Company . . . . . . . . . . . . 48 SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . 49 ARTICLE VII -- HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . . . . . . . 50 SECTION 702. Preservation of Information; Communications to Holders . . . . . . . . . 51 SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 ARTICLE VIII -- CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . . . . . . . 52 SECTION 801. Company May Consolidate, Etc., Only on Certain Terms . . . . . . . . . . 52 SECTION 802. Successor Substituted for Company . . . . . . . . . . . . . . . . . . . . 53 ARTICLE IX -- SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . . . 53 SECTION 902. Supplemental Indentures with Consent of Holders . . . . . . . . . . . . . 54 SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . . . . 55 SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 55 SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . 55 SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . . . . . . 55 ARTICLE X -- COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 1001. Payment of Principal, Premium and Interest . . . . . . . . . . . . . . . 56 SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . 56 SECTION 1003. Money for Security Payments to Be Held in Trust . . . . . . . . . . . . . 56 SECTION 1004. Statements of Officers of Company as to Default; Notice of Default . . . 58 SECTION 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
-iii- 5 SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . 59 SECTION 1008. Further Instruments and Acts . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 1009. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . 59 ARTICLE XI -- REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 1101. Right Of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 1102. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 1103. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . 60 SECTION 1104. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . 60 SECTION 1105. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 1106. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 1107. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . 61 SECTION 1108. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE XII -- CONVERSION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 SECTION 1201. Conversion Privilege and Conversion Price . . . . . . . . . . . . . . . . 62 SECTION 1202. Exercise of Conversion Privilege . . . . . . . . . . . . . . . . . . . . 63 SECTION 1203. Fractions of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 SECTION 1204. Adjustment of Conversion Price . . . . . . . . . . . . . . . . . . . . . 65 SECTION 1205. Notice of Adjustments of Conversion Price . . . . . . . . . . . . . . . . 72 SECTION 1206. Notice of Certain Corporate Action . . . . . . . . . . . . . . . . . . . 72 SECTION 1207. Company to Reserve Common Stock . . . . . . . . . . . . . . . . . . . . . 74 SECTION 1208. Taxes on Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 1209. Covenant as to Common Stock . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 1210. Cancellation of Converted Securities . . . . . . . . . . . . . . . . . . 74 SECTION 1211. Provisions in Case of Consolidations, Merger or Sale of Assets; Special Distributions . . . . . . . . . . . . . . . . . . . . 74 SECTION 1212. Trustee Adjustment Disclaimer . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 1213. When No Adjustment Required . . . . . . . . . . . . . . . . . . . . . . . 76 ARTICLE XIII -- SUBORDINATION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 SECTION 1301. Securities Subordinate to Senior Indebtedness . . . . . . . . . . . . . . 76 SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc . . . . . . . . . . . . . 76 SECTION 1303. No Payment When Designated Senior Indebtedness in Default . . . . . . . . 77 SECTION 1304. Payment Permitted if No Default . . . . . . . . . . . . . . . . . . . . . 78 SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness . . . . . . . . . 78 SECTION 1306. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . . . 79
-iv- 6 SECTION 1307. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . 79 SECTION 1308. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . 80 SECTION 1309. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . 81 SECTION 1311. Trustee Not Fiduciary for Holders of Senior Indebtedness . . . . . . . 81 SECTION 1312. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights . . . . . . . . . . . . . . . . . . . . 81 SECTION 1313. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . . . 82 ARTICLE XIV -- RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 SECTION 1401. Repurchase of Securities at Option of the Holder upon Change of Control . 82 SECTION 1402. Effect of Change of Control Purchase Notice . . . . . . . . . . . . . . . 86 SECTION 1403. Deposit of Change of Control Purchase Price . . . . . . . . . . . . . . . 87 SECTION 1404. Securities Purchased in Part . . . . . . . . . . . . . . . . . . . . . . 87 SECTION 1405. Covenant to Comply with Securities Laws Upon Purchase of Securities . . . 87 ARTICLE XV -- DEFEASANCE AND COVENANT DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 SECTION 1501. Company's Option to Effect Defeasance or Covenant Defeasance . . . . . . 88 SECTION 1502. Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . 88 SECTION 1503. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 SECTION 1504. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . 89 SECTION 1505. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions . . . . . . . . . . . 91 SECTION 1506. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
-v- 7 CROSS-REFERENCE TABLE
TRUST INDENTURE ACT SECTION INDENTURE SECTION ----------- ----------------- Section 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609 (a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608, 610 Section 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 Section 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701, 702 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702 Section 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703 Section 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704 (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1004 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 (c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Section 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514 Section 316(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 Section 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003 Section 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
N.A. means not applicable. NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -vi- 8 INDENTURE, dated as of April 1, 1994, between Snyder Oil Corporation, a corporation duly organized and existing under the laws of the State of Delaware (herein called the "Company"), having its principal offices at 777 Main Street, Fort Worth, Texas 76102, and Texas Commerce Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY: The Company has duly authorized the creation of an issue of its ______% Convertible Subordinated Notes Due 2001 (hereinafter referred to as the "Securities"), and to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (b) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (c) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles; 9 (d) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision of this Indenture; and (e) the words "Article" and "Section" refer to an Article and Section, respectively, of this Indenture. "Act" has the meaning specified in Section 104. "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, the term "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise (and the terms "controlling" and "controlled" have meanings correlative to the foregoing). "Agent" means NationsBank of Texas, N.A., when acting in its capacity as agent under the Bank Credit Facility and any other Person acting as agent, trustee or other fiduciary under the Bank Credit Facility, when acting in such capacity. "Authenticating Agent" means any Person appointed pursuant to Section 614 to authenticate Securities on behalf of the Trustee. "Bank Credit Facility" means the Fourth Restated Credit Agreement dated July 1, 1993 among the Company, the lenders named therein and the Agent, as heretofore amended and as the same may be further amended, restated, supplemented or otherwise modified from time to time, and any Refinancings thereof that may be effected, whether or not with the same lenders or the same Agent and whether or not the principal amount outstanding thereunder shall be thereby increased. "Bankruptcy Law" has the meaning specified in Section 501. "Beneficial Owner" means, with respect to any shares of Capital Stock, every Person who, for purposes of Rule 13d-3 under the Exchange Act as in effect on the date of this Indenture, is the beneficial owner of such shares of Capital Stock (and the terms "Beneficially Owned" and "Beneficially Owns" have meanings correlative to the foregoing). "Board of Directors" means the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the -2- 10 Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means, when used with respect to any Place of Payment or other location, each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in that Place of Payment or other location, as the case may be, are authorized or obligated by law or executive order to close. "Capital Lease Obligation" means an obligation of the Company or any Subsidiary to pay rent or other amounts under a lease of (or another arrangement conveying the right to use) real or personal property thereof that is required to be classified and accounted for as a capital lease or a liability on the face of a balance sheet thereof in accordance with generally accepted accounting principles. For purposes of this Indenture, the amount of such obligation shall be the capitalized amount thereof and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease (or other arrangement) prior to the first date upon which such lease (or other arrangement) may be terminated by the lessee (or obligor) without payment of a penalty. "Capital Securities" of any Person means all Capital Stock of such Person, all options, warrants and other rights to subscribe for or acquire Capital Stock of such Person and all Convertible Securities of such Person. "Capital Stock" of any Person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock or other equity of such Person. "Change of Control" has the meaning specified in Section 1401(a). "Change of Control Notice" has the meaning specified in Section 1401(b). "Change of Control Purchase Date" has the meaning specified in Section 1401(a). "Change of Control Purchase Notice" has the meaning specified in Section 1401(c). "Change of Control Purchase Price" has the meaning specified in Section 1401(a). "Closing Price" per share of Common Stock on any Trading Day means, if the Common Stock is admitted to trading on the New York Stock Exchange, the last reported sales price regular way or, in case no such reported sale takes place on such -3- 11 Trading Day, the average of the reported closing bid and asked prices regular way, in either case on such Exchange or, if the Common Stock is not admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange, on the Nasdaq National Market or, if the Common Stock is not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm that is selected from time to time by the Company for that purpose and is reasonably acceptable to the Trustee. "Commission" means the Securities and Exchange Commission, as from time to time constituted and created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, the body performing such duties at such time. "Common Stock" of any Person means each class of the Capital Stock of such Person that is not Preferred Stock of such Person. However, subject to the provisions of Section 1211, shares issuable on conversion of Securities shall include only shares of the class designated as Common Stock of the Company at the date of this Indenture or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company and which are not subject to redemption by the Company; provided, however, that if at any time there shall be more than one such resulting class, the shares then so issuable of each such class shall be substantially in the proportion which the total number of shares then so issuable of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the Person named as the "Company" in the first paragraph of this Indenture until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. "Convertible Securities" of any Person means any and all securities not constituting Capital Stock of such Person that are convertible into or exchangeable for Capital Stock of such Person. -4- 12 "Corporate Trust Office" means the principal office of the Trustee in the City of Dallas, Texas, at which at any particular time its corporate trust business shall be administered, which, as of the date of this Indenture, is located at 1201 Elm Street, 30th Floor, Dallas, Texas, Attention: Corporate Trust Department. "corporation" means a corporation, association, company, joint-stock company or business trust. "Covenant Defeasance" has the meaning specified in Section 1503. "Defaulted Interest" has the meaning specified in Section 307. "Defeasance" has the meaning specified in Section 1502. "Definitive Security" means a Security other than a temporary Security. "Depositary" means the Person designated as Depositary by the Company in Section 301 until a successor Depositary shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Depositary" shall mean or include each Person who is then a Depositary hereunder. "Designated Senior Indebtedness" means (i) all Senior Indebtedness under the Bank Credit Facility if the sum of the aggregate principal amount outstanding under the Bank Credit Facility and the aggregate amount available for borrowing thereunder is equal to or greater than $25,000,000 and (ii) all other Senior Indebtedness having an outstanding principal amount equal to or greater than $25,000,000; provided, however, that the agreements, indentures or other instruments evidencing any Senior Indebtedness referred to in clause (ii) above specifically state that such Senior Indebtedness shall be classified as "Designated Senior Indebtedness" for purposes of this Indenture. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any statutory successor thereto. "Exchange Debentures" means the Company's 8% Convertible Subordinated Debentures due 2006 and its 6% Convertible Subordinated Debentures due 2008 issuable in exchange for the Preferred Stock of the Company that is outstanding on the date of this Indenture. "Guaranty" by any Person means any Obligation, contingent or otherwise, of such Person guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including, but not -5- 13 limited to, every Obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness (and the terms "Guaranteed," "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that the Guaranty by any Person shall not include endorsements by such Person for collection or deposit, in either case in the ordinary course of business. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indebtedness" of any Person means, without duplication, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every obligation of such Person under conditional sale or other title retention agreements relating to assets or property purchased by such Person or issued or assumed as the deferred purchase price of property, assets or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business that are not overdue by more than 90 days or are being contested by such Person in good faith); (iv) every Capital Lease Obligation of such Person; (v) every obligation of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party; (vi) every obligation of such Person with respect to letters of credit, bankers acceptances or similar facilities issued for the account of such Person; (vii) the maximum fixed redemption or repurchase price of outstanding Redeemable Stock of such Person; (viii) every obligation of such Person with respect to performance, surety or similar bonds; (ix) every obligation of such Person under interest rate swap, cap, hedge, exchange or similar agreements, under foreign currency swap, hedge, exchange or similar agreements or under commodity swap, hedge, exchange or similar agreements; (x) every obligation of the type referred to in clauses (i) through (ix) and clause (xi) of another Person the payment of which such Person has Guaranteed or is otherwise responsible for or liable for, directly or indirectly, as obligor, Guarantor or otherwise; and (xi) every amendment, modification, renewal and extension of an obligation of the type referred to in clauses (i) through (x). "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the -6- 14 Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively. "Interest Payment Date" means the stated due date of an installment of interest on the Securities. "Junior Subordinated Payment" means any payment or distribution which may be payable or deliverable in respect of the Securities by reason of the payment of any Indebtedness of the Company that is subordinate in right of payment to the payment of the Securities. "Maturity Date" means, when used with respect to any Security, the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption on a Redemption Date or otherwise. "Moody's" means Moody's Investors Service. "Net Income" of any Person means the net income of such Person net of non-cash charges taken as a result of accounting changes required to be made by the Financial Accounting Standards Board after the date this Indenture. "Non-Payment Event of Default" means any event, circumstance, condition or state of facts (other than a Payment Event of Default) the occurrence or existence of which permits one or more holders of Designated Senior Indebtedness (or a trustee or other representative of the holders thereof) to declare such Designated Senior Indebtedness immediately due and payable prior to the date on which such indebtedness would otherwise become due and payable. "Obligation" of any Person means any obligation of such Person to pay principal of or premium, if any, or interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company, whether or not a claim for such post-petition interest is allowed in such proceeding) on any Indebtedness or any penalties, reimbursement or indemnification amounts, fees, expenses or other amounts in respect thereof. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of legal counsel, who may be an employee of or counsel for the Company, and which shall be in form and substance reasonably acceptable to the Trustee. -7- 15 "Outstanding" means, when used with respect to Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities as to which money for the payment or redemption which in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, however, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been replaced or paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee evidence satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of any such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of any such other obligor. "Paying Agent" means any Person authorized by the Company to pay the principal of and premium, if any, and interest on any Securities on behalf of the Company. "Payment Blockage Period" has the meaning specified in Section 1303. -8- 16 "Payment Event of Default" means any default in the payment of principal of or premium, if any, or interest on or fees with respect to any Designated Senior Indebtedness beyond any applicable grace period with respect thereto. "Permitted Junior Securities" means subordinated debt securities of the Company (or any successor obligor with respect to the Senior Indebtedness) provided for by a plan of reorganization or readjustment that are subordinated in right of payment to all Senior Indebtedness that may be outstanding to substantially the same extent as, or to a greater extent than, the Securities are subordinated as provided in this Indenture. "Person" means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment" means, when used with respect to the Securities, the place or places where (subject to the provisions of Section 1002), the principal of and premium, if any, and interest on the Securities are payable as specified and as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security. For purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Preferred Stock" of any Person means every share of each class (however designated) of the Capital Stock of such Person that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, to any other share of such or any other class of the Capital Stock of such Person. "Proceeding" means (subject to the last paragraph of Section 1302) (i) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, (ii) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company. "Rating Agencies" means (a) S&P, (b) Moody's or (c) if S&P or Moody's, or both, shall not make a rating of the Securities publicly available, such nationally recognized securities rating agency or agencies, as the case may be, as are -9- 17 selected by the Company, which shall be substituted for S&P or Moody's, or both, as the case may be. "Rating Category" means (a) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (b) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (c) with respect to any other Rating Agency, the equivalent of any such category of S&P or Moody's used by such Rating Agency. In determining whether the rating of the Securities has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for Moody's; or the equivalent gradations for any other Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Decline" means that, principally as a result of a Change of Control and on, or within 90 days after, the date of the public announcement of such Change of Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by any Rating Agency), any Rating Agency has lowered the rating of the Securities below what such rating was as of the date the Securities were originally issued by one or more gradation (including gradations within or between Rating Categories). "Redeemable Stock" of a Person means every Capital Security of such Person that by its terms or otherwise is or may be (whether at the option of the holder or otherwise) required to be redeemed or otherwise purchased by such Person at any time prior to the Stated Maturity of the Securities. "Redemption Date" means, when used with respect to any Security to be redeemed, the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price" means, when used with respect to any Security to be redeemed, the price at which such security may be redeemed pursuant to this Indenture, including, if applicable, any accrued interest on such Security due upon such redemption pursuant to the terms of this Indenture. "Refinance" means, with respect to any specified Indebtedness, to incur additional Indebtedness and use the proceeds thereof to redeem, repurchase, retire for value, refinance or refund such specified Indebtedness (and the terms "Refinancing" and "Refinanced" shall have meanings correlative to the foregoing). "Regular Record Date" for the interest payable on the Securities on any Interest Payment Date means the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. -10- 18 "Related Person" of any Person (the "Referent Person") means, at any time, (a) if the Referent Person is the Company or any Subsidiary, every Person (other than the Company and any Wholly Owned Subsidiary) that at such time (i) is, or is controlled by, an Affiliate of the Company or (ii) is, or is controlled by, a Person that Beneficially Owns 5% or more of the outstanding Common Stock of the Company or any Subsidiary or 5% or more of the outstanding Voting Stock of the Company or any Subsidiary; and (b) in all other cases, every Person that at such time (i) is, or is controlled by, an Affiliate of the Referent Person or (ii) is, or is controlled by, a Person that Beneficially Owns 5% or more of the outstanding Common Stock of the Referent Person or any subsidiary thereof or 5% or more of the outstanding Voting Stock of the Referent Person or any subsidiary thereof. For purposes of this definition, the term "controlled" shall have the meaning specified in the definition of "Affiliate." "Repurchase Event" has the meaning specified in Section 1401(a). "S & P" means Standard & Poors Ratings Group, a division of McGraw-Hill. "Sale and Leaseback Transaction" means any arrangement with any bank, insurance company or other lender or investor (other than the Company or a Subsidiary), or to which such lender or investor is a party, providing for the leasing by the Company or any Subsidiary of any property or asset that has been or is to be sold or transferred by the Company or any Subsidiary to such lender or investor or to any Person (other than the Company or a Subsidiary) to whom funds have been or are to be advanced by such lender or investor on the security of such property or asset. "Securities" has the meaning specified in the first recital of this Indenture and, more particularly, means any Securities authenticated and delivered under this Indenture. "Securities Payment" means any payment or distribution of any kind or character, whether by way of set-off or otherwise and whether in cash, property or securities (including any Junior Subordinated Payment) on account of principal of or premium, if any, or interest on the Securities or on account of any purchase, repurchase, redemption or other acquisition of Securities by the Company. "Security Register" has the meaning specified in Section 305. "Security Registrar" has the meaning specified in Section 305. "Senior Indebtedness" means (i) all Obligations of the Company under the Bank Credit Facility; and (ii) all Obligations of the Company for Indebtedness (other than Indebtedness described in clause (vii) of the definition of Indebtedness), whether now existing or hereafter incurred or assumed; provided, however, that the -11- 19 Obligations referred to in clause (ii) shall not include (a) any Obligation owed to a Subsidiary or an Affiliate or Related Person of the Company, (b) any Obligation that by the terms of the instrument creating or evidencing the same is not superior in right of payment to the Securities, (c) any Obligation in respect of the Exchange Debentures, if and when issued in exchange for the Preferred Stock of the Company outstanding on the date of this Indenture, or (d) any Obligation constituting a trade account payable. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307(a). "Stated Maturity" means, when used with respect to any Security, the date specified in such Security as the fixed date on which the principal of such Security is due and payable. "subsidiary" of any Person means a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person, one or more subsidiaries of such Person or such Person and one or more subsidiaries of such Person. "Subsidiary" of the Company means a corporation more than 50% of the outstanding Voting Stock of which is owned, directly or indirectly, by the Company, one or more Subsidiaries or the Company and one or more Subsidiaries. "Trading Day" means each day on which the securities exchange or automated interdealer quotation system, which is used to determine the Closing Price is open for trading or quotation. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have assumed all of the duties and obligations of this Indenture pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this Indenture was executed, except as provided in Section 905; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, to the extent required by any such amendment, the term "Trust Indenture Act" means the Trust Indenture Act of 1939, as so amended. "U.S. Government Obligations" has the meaning specified in Section 1504. "Vice President" means, when used with respect to the Company or the Trustee, any vice president, whether designated by a number or a word or words added before or after the title "vice president." -12- 20 "Voting Stock" of any Person means every share of any class (however designated) of the Capital Stock of such Person that ordinarily has voting power for the election of directors (or similar governing body) of such Person, whether at all times or only as long as no share of any senior class of Capital Stock has such voting power, whether by reason of the occurrence of any contingency or otherwise. "Wholly Owned Subsidiary" of the Company means a Subsidiary all of the outstanding Capital Stock of which (other than directors' qualifying shares) is owned, directly or indirectly, by the Company, one or more Wholly Owned Subsidiaries or the Company and one or more Wholly Owned Subsidiaries. SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act. Each such certificate or opinion shall be in the form of an Officers' Certificate, if to be given by an officer of the Company, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements of the Trust Indenture Act and any other requirements set forth in this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (except for certificates provided for in Section 1004) shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only -13- 21 one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon an opinion of counsel, unless such officer knows, or in the exercise of reasonable care should know, that the opinion with respect to the matters upon which his certificate or opinion is based are erroneous. Any opinion of counsel may be based, insofar as it relates to factual matters, upon a certificate of, or representations by, an officer or officers of the Company, stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or representations with respect to such matters are erroneous. SECTION 104. Acts of Holders; Record Date. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Any such instrument or instruments (and the action embodied therein and evidenced thereby) are hereinafter sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgements of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. -14- 22 (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Without limiting the foregoing, a Holder entitled hereunder to give or take any action hereunder with regard to any particular Security (or his duly appointed agents) may do so with regard to all or any part of the principal amount of such Security. (e) The Company may, in the circumstances permitted by the Trust Indenture Act, set any day as the record date for the purpose of determining the Holders of Outstanding Securities entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other Act provided or permitted by this Indenture to be given or taken by Holders of Securities. With regard to any record date set pursuant to this paragraph, the Holders of Outstanding Securities on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Persons remain Holders after such record date. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust Office, or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to the Company, addressed to it at the address of its principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any) and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any -15- 23 notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 107. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience of reference only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its respective successors and assigns. SECTION 110. Severability. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Senior Indebtedness of the Company and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD -16- 24 REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION, AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA. THE COMPANY HEREBY CONSENTS TO AND ACCEPTS, GENERALLY AND UNCONDITIONALLY, FOR ITSELF AND FOR ITS PROPERTIES, THE NON-EXCLUSIVE JURISDICTION OF THE STATE OR FEDERAL COURTS OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK IN ANY DISPUTE ARISING UNDER OR IN CONNECTION WITH THIS INDENTURE, THE SECURITIES OR ANY OTHER DOCUMENT OR INSTRUMENT RELATED HERETO OR THERETO AND HEREBY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION, SUIT OR PROCEEDING IN ANY SUCH COURT, INCLUDING, BUT NOT LIMITED TO, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS. THE COMPANY FURTHER IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED BY ANY SUCH COURT IN CONNECTION WITH THIS INDENTURE, THE SECURITIES OR ANY OTHER DOCUMENTS OR INSTRUMENTS RELATED HERETO OR THERETO FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS AVAILABLE. THE COMPANY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM (OR ANY SUCCESSOR THERETO OR REPLACEMENT THEREFOR REASONABLY SATISFACTORY TO THE TRUSTEE THAT IS DESIGNATED BY THE COMPANY FROM TIME TO TIME BY MEANS OF AN OFFICERS' CERTIFICATE DELIVERED TO THE TRUSTEE SETTING FORTH THE NAME AND ADDRESS OF SUCH SUCCESSOR OR REPLACEMENT) AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY ACTION, SUIT OR PROCEEDING BROUGHT IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE COMPANY TO BE VALID AND EFFECTIVE IN EVERY RESPECT. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY SUCH COURT BY THE MAILING OF COPIES THEREOF BY FIRST-CLASS MAIL, POSTAGE PREPAID, TO THE COMPANY AT THE LOCATION SPECIFIED AS ITS ADDRESS FOR NOTICE IN OR PURSUANT TO THIS INDENTURE. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF ANY PERSON TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. SECTION 113. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Maturity Date or Stated Maturity of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of interest on or principal of or premium, if any, on or conversion of the Securities need not he made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Maturity Date, Redemption Date or Stated Maturity or on such last day for conversion; provided, however, that no interest shall accrue for the period from and -17- 25 after such Interest Payment Date, Redemption Date, Maturity Date or Stated Maturity, as the case may be, if such payment is made or duly provided for on the next succeeding Business Day. SECTION 114. Incorporators, Stockholders, Officers and Directors of the Company Exempt from Individual Liability. No recourse under or upon any obligation, covenant or agreement of this Indenture or any indenture supplemental hereto or of any Security, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor Person, either directly or through the Company or any successor Person, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, it being expressly understood that this Indenture and the obligations issued hereunder are solely corporate obligations, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, stockholders, officers or directors, as such, of the Company or of any successor Person, or any of them, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom; and that any and all such personal liability of every name and nature, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, stockholder, officer or director, as such, because of the creation of the indebtedness hereby authorized, or under or by reason of the obligations, covenants or agreements contained in this Indenture or in any of the Securities or implied therefrom, is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of such Securities. ARTICLE II FORMS OF SECURITIES SECTION 201. Forms Generally. The Securities and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution thereof. The Definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on -18- 26 which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution thereof. SECTION 202. Form of Face of Security. SNYDER OIL CORPORATION _____% CONVERTIBLE SUBORDINATED NOTE DUE 2001 Number ______________________ $_________________________________ CUSIP ____________________________ SNYDER OIL CORPORATION, a Delaware corporation (herein called the "Company," which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to_________ ________________________________________________________________________________ _____________________________, or registered assigns, the principal sum of _____________ Dollars on March 31, 2001, and to pay interest thereon from __________ ____, 1994 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 31 and September 30 of each year, commencing September 30, 1994, until the principal hereof is paid or duly provided for, at the rate per annum of _____% from the date of issuance of this Security until maturity or earlier redemption. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time and in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of and premium, if any, and interest on, and the Change of Control Purchase Price, if any, and Redemption Price with respect to, this Security will be made at the office or agency of the Company maintained in the Borough of Manhattan, the City of New York and at any other office or agency maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. The Indenture provides that no Holder of any Security shall have the right to enforce any remedy under the Indenture except in the case of the refusal or neglect of the Trustee to act after receipt of notice of default and the request by the Holders of 25% in aggregate principal amount of the Securities then outstanding and the offer to the Trustee of such reasonable security or indemnity as it may require; provided, however, that the foregoing limitations do not prevent the Holder of any such Security from enforcing the right to receive payment of principal of and premium, if any, and interest on such -19- 27 Security on or after the respective due dates therefor or to demand conversion of its Securities or require the purchase of its Securities by the Company upon the occurrence of a Change in Control in accordance with the Indenture. Reference is hereby made to the further provisions of this Security set forth herein, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to below by manual signature, this Security shall not be entitled to any benefit under the Indenture and shall not be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. Dated: SNYDER OIL CORPORATION By:_____________________________ Attest: ___________________________________________ Secretary SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of Securities of the Company designated as its _____% Convertible Subordinated Notes Due 2001 (hereinafter referred to as the "Securities"), limited in aggregate principal amount to $100,000,000 (plus up to $15,000,000 to cover over-allotments) issued and to be issued under an Indenture, dated as of April 1, 1994 (herein called the "Indenture"), between the Company and Texas Commerce Bank National Association, as Trustee (hereinafter referred to as the "Trustee," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Indebtedness and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled, at his option, at any time on or before the close of business on March 31, 2001, or in case this Security or a portion hereof is called for redemption, then in respect of this Security or such portion hereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the fifth Business Day preceding the Redemption Date (except that, with respect to any redemption occurring on March 31, 1997 or within five business days thereafter, the conversion right shall terminate at the close of business on the Redemption Date such that all of the holders of Securities to be redeemed will be entitled to receive the March 31, 1997 interest payment, assuming such holders held such Securities on the Regular Record Date next preceeding March 31, 1997), to convert this Security (or any portion of the principal amount hereof equal to $1,000 or an integral multiple thereof) into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Company at a conversion price equal to $_____ -20- 28 aggregate principal amount of Securities for each share of Common Stock (or at the current adjusted conversion price, if an adjustment has been made as provided in the Indenture) by surrender of this Security, duly endorsed or assigned to the Company or in blank, to the Company at the office or agency maintained by the Company in the Borough of Manhattan, the City of New York or at any other office or agency maintained by the Company for such purpose, accompanied by written notice to the Company stating that the Holder hereof elects to convert this Security, or if less than the entire principal amount hereof is to be converted, the portion hereof to be converted, and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (unless this Security or the portion thereof being converted has a Maturity Date prior to such Interest Payment Date), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date, on the principal amount of this Security then being converted. Subject to the aforesaid requirement for payment by the Holder and, in the case of a conversion after the Regular Record Date next preceding any Interest Payment Date and on or before such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security) of record at such Regular Record Date to receive an installment of interest (with certain exceptions provided in the Indenture), no payment or adjustment is to be made on conversion for interest accrued hereon or for dividends on the Common Stock issued on conversion. The Company's delivery to the Holder of the fixed number of shares of Common Stock of the Company (and any cash in lieu of a fractional share of such Common Stock) into which the Security is convertible shall be deemed to satisfy the Company's obligation to pay the principal amount of the Security and all accrued interest that has not previously been paid. The Common Stock of the Company so delivered shall be treated as issued first in payment of accrued interest and then in payment of principal. Thus, accrued interest shall be treated as paid rather than cancelled, extinguished or forfeited. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest the Company shall pay a cash adjustment as provided in the Indenture. The conversion price is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that in case of certain consolidations or mergers to which the Company is a party or the transfer or lease of its properties and assets substantially as an entirety, the Indenture shall be amended, without the consent of any Holders of Securities, so that this Security, if then outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger, transfer or lease by a holder of the number of shares of Common Stock into which this Security might have been converted immediately prior to such consolidation, merger or transfer (assuming such holder of Common Stock failed to exercise any rights of election and received per share the kind and amount of consideration received per share by a plurality of nonelecting shares). The Securities are subject to redemption upon not less than 20 nor more than 60 days' notice by mail, at any time on or after March 31, 1997, as a whole or from time to time in part, at the election of the Company, at the Redemption Prices (expressed as percentages of the principal amount) set forth below, if redeemed during the 12-month period beginning March 31 of the years indicated:
REDEMPTION YEAR PRICE ---- ------------- 1997 . . . . . . . . . . . . . . . . . . . . . . . . 1998 . . . . . . . . . . . . . . . . . . . . . . . . 1999 . . . . . . . . . . . . . . . . . . . . . . . . 2000 . . . . . . . . . . . . . . . . . . . . . . . .
-21- 29 together in the case of any such redemption with accrued interest to the Redemption Date, but interest installments whose stated due date is on or prior to such Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, of record at the close of business on the relevant Regular Record Dates referred to on the face hereof, all as provided in the Indenture. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. In the event there shall occur any Change of Control constituting a Repurchase Event with respect to the Company, each Holder of Securities shall have the right, at such Holder's option but subject to the limitations, conditions and subordination provisions set forth in the Indenture, to require the Company to purchase on the Change of Control Purchase Date all or any part of such Holder's Securities at a Change of Control Purchase Price equal to 100% of the principal amount thereof, together with accrued interest to the Change of Control Purchase Date, all as provided in the Indenture. If an Event of Default shall occur and be continuing, the principal of all the Securities may become due and payable in the manner and with the effect provided in the Indenture. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency maintained by the Company in the Borough of Manhattan, the City of New York or at any other office or agency maintained by the Company for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar, duly executed by the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain -22- 30 limitations therein set forth, Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by a Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not any amount due in respect of this Security be overdue, and none of the Company, the Trustee or any such agent shall be affected by notice to the contrary. No recourse for the payment of the principal of, premium, if any, or interest on this Security, or for any claim based hereon or otherwise in respect hereof, and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any indenture supplemental thereto or in any Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor Person, either directly or through the Company, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the issue hereof, expressly waived and released. The Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York as applied to contracts made and performed within the State of New York, without regard to any principles of conflicts of laws that may require the application of the laws of any other jurisdiction, and the applicable Federal laws of the United States of America. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. SECTION 204. Form of Trustee's Certificate of Authentication. CERTIFICATE OF AUTHENTICATION This is one of the Securities referred to in the within-mentioned Indenture. Dated: TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee By_______________________________________ Authorized Signatory -23- 31 SECTION 205. Form of Election to Convert. CONVERSION NOTICE The undersigned owner of this Security does hereby irrevocably exercise its option to convert this Security, or the portion hereof (which is $1,000 or an integral multiple thereof) below designated, into shares of Common Stock of Snyder Oil Corporation in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for any fractional shares and any Securities representing any unconverted principal amount hereof, be issued and delivered to the registered Holder hereof unless a different name has been indicated below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any amount required to be paid by the undersigned on account of interest accompanies this Security. Portion of Security to be converted ($1,000 or an integral multiple thereof): $_________________________________ Date:_____________________________ Signature*:_____________________________ (Sign exactly as your name appears on the Security in every particular, without alteration or enlargement or any change whatsoever) If shares of Common Stock are to be issued and registered otherwise than to the registered Holder named above, please print or type name and address, including zip code, and social security or other taxpayer identification number. ________________________________________ ________________________________________ ________________________________________ Signature Guarantee: _______________________________ Member or member's organization of the New York Stock Exchange or commercial bank or trust company having an office in the United States *Your signature must be guaranteed by a commercial bank or trust company or by a member or members' organization of the New York Stock Exchange. -24- 32 SECTION 206. Form of Assignment. ASSIGNMENT The undersigned owner of this Security does hereby sell, assign and transfer this Security unto: ______________________________________ ______________________________________ (Insert assignee's Social Security or other taxpayer identification number) ______________________________________ ______________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoints ______________________________________ ______________________________________ as agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Date:_____________________________ Signature*:_____________________________ (Sign exactly as your name appears on the Security in every particular, without alteration or enlargement or any change whatsoever) Signature Guarantee: __________________________________ Member or members' organization of the New York Stock Exchange or commercial bank or trust company having an office in the United States *Your signature must be guaranteed by a commercial bank or trust company or by a member or members' organization of the New York Stock Exchange. -25- 33 SECTION 207. Form of Option of Holder to Elect to Require Purchase. ELECTION TO REQUIRE PURCHASE If you wish to elect to have this Security purchased by the Company pursuant to Section 1402 of the Indenture, check the box: ( ) If you wish to elect to have only part of this Security purchased by the Company pursuant to Section 1402 of the Indenture, state the amount ($1,000 or an integral multiple thereof): $________________________ Date:_________________________________ Signature*:____________________________ (Sign exactly as your name appears on the Security in every particular, without alteration or enlargement or any change whatsoever) Signature Guarantee: ___________________________________________ Member or members' organization of the New York Stock Exchange or commercial bank or trust company having an office in the United States *Your signature must be guaranteed by a commercial bank or trust company or by a member or members' organization of the New York Stock Exchange. ARTICLE III THE SECURITIES SECTION 301. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $100,000,000 (and such additional principal amount of Securities, if any, as shall be determined pursuant to the next succeeding paragraph), except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 304, 305, 306, 906, 1108, 1202 or 1404. Upon receipt by the Trustee of an Officers' Certificate stating that the Underwriters (as defined below) have elected to purchase from the Company a specified aggregate principal amount of additional Securities (which are referred to in said Underwriting Agreement as the "Optional Securities") not to exceed a total of $15,000,000 for all such elections in accordance with this paragraph pursuant to the Underwriting Agreement, dated May ____, 1994, between the Company and CS First -26- 34 Boston Corporation, PaineWebber Incorporated, Petrie Parkman & Co., Inc. and Smith Barney Shearson Inc. (the "Underwriters"), the Trustee shall authenticate and make available for delivery such specified aggregate principal amount of such additional Securities to or upon a Company Order, and such specified aggregate principal amount of such additional Securities shall be considered part of the original aggregate principal amount of the Securities. The Securities shall be known and designated as the "_____% Convertible Subordinated Notes Due 2001" of the Company. Their Stated Maturity shall be March 31, 2001, and they shall bear interest at the rate per annum of ___% from the date of issuance thereof until maturity or earlier redemption, payable semiannually on March 31 and September 30 of each year, commencing September 30, 1994. The principal of and premium, if any, and interest on the Securities shall be payable at the office or agency maintained by the Company in the Borough of Manhattan, the City of New York and at any other office or agency maintained by the Company for such purpose; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. The Securities shall be redeemable as provided in Article XI. The Securities shall be convertible as provided in Article XII. The Securities shall be subordinated in right of payment to Senior Indebtedness, to the extent provided in Article XIII. The Securities shall be subject to repurchase by the Company, at the option of the Holders, to the extent provided in Article XIV. SECTION 302. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. SECTION 303. Execution, Authentication, Delivery and Dating. (a) The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind -27- 35 the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of Definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and make available for delivery, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the Definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause Definitive Securities to be prepared without unreasonable delay. After the preparation of Definitive Securities, the temporary Securities shall be exchangeable for Definitive Securities upon surrender of the temporary Securities, at any office or agency of the Company designated pursuant to Section 1002, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a like principal amount of Definitive Securities of authorized denominations. -28- 36 Until so exchanged the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as Definitive Securities. SECTION 305. Registration, Registration of Transfer and Exchange. (a) The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 1002 being hereinafter sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and the registration of transfers of Securities entitled to be registered or transferred as herein provided. The Trustee is hereby appointed the initial registrar (hereinafter referred to as the "Security Registrar") for the purpose of registering Securities and transfers of Securities as herein provided. The Company may at any time replace such Security Registrar, change such office or agency or act as its own Security Registrar. The Company will give prompt written notice to the Trustee of any change of the Security Registrar or of the location of such office or agency. Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 1002 for such purpose, the Company shall execute, and the Trustee shall authenticate and make available for delivery, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and make available for delivery, the Securities which the Holder making the exchange is entitled to receive. (b) All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same benefits under this Indenture, as the securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing, with the signatures -29- 37 guaranteed by a commercial bank or trust company having an office in the United States or by a member or members' organization of the New York Stock Exchange. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906, 1108, 1202 or 1404 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of or exchange any Security, during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 1104 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemable portion of any Security being redeemed in part. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and make available for delivery in exchange therefor a new Security, of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the destruction, loss or theft of any Security and (b) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and make available for delivery, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental -30- 38 charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (hereinafter referred to as "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date, notwithstanding the fact that such Holder was a Holder on such Regular Record Date, and such Defaulted Interest may be paid by the Company, at its election, as provided in clause (a) or (b) below: (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as provided in this clause (a). Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest, which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of notice from the Company in writing of the proposed payment. The Trustee shall promptly notify the Company of such -31- 39 Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (b). (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may then be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause (b), such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section and Section 305, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. In the case of any Security which is converted after any Regular Record Date and on or prior to the next succeeding Interest Payment Date (other than any Security whose Maturity Date is prior to such Interest Payment Date), interest whose stated due date is on such Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest (whether or not punctually paid or duly provided for) shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on such Regular Record Date. Except as otherwise expressly provided in the immediately preceding sentence, in the case of any Security which is converted, interest whose stated due date is after the date of conversion of such Security shall not be payable. SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Sections 305 and 307) interest on such Security and for all other purposes whatsoever, whether or not any payment due in respect of such Security be overdue, and none of the Company, the Trustee or any agent of the Company or the Trustee shall be affected by notice to the contrary. -32- 40 SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture. All cancelled Securities held by the Trustee shall be disposed of as directed by a Company Order. SECTION 310. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year consisting of twelve 30-day months. SECTION 311. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such "CUSIP" numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such "CUSIP" numbers. ARTICLE IV SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (A) Securities which have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (B) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the -33- 41 Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Stated Maturity within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of clause (A), (B) or (C) above, has (subject to Section 402) irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness in respect of Securities not theretofore delivered to the Trustee for cancellation for principal of and premium, if any, and interest on such Securities to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company in Sections 305, 306, 607, 608, 702, 1001, 1002 and 1003 and in Article XII shall survive until the Securities are no longer outstanding. SECTION 402. Application of Trust Money. Subject to the provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment to the Persons entitled thereto, either directly or through any Paying Agent (including the Company acting as its own Paying Agent), as the Trustee may determine, of the principal of and premium, if any, and interest on the Securities for whose payment such money has been deposited with -34- 42 the Trustee. The Trustee shall hold all money deposited with it pursuant to Section 401 for the benefit of the Holders of such Securities, and the Trustee shall be under no liability for interest thereon. All money deposited with the Trustee pursuant to Section 401 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon Company Request. ARTICLE V REMEDIES SECTION 501. Events of Default. The term "Event of Default," wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XIII or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order or any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of the principal of or premium, if any, on, or the Redemption Price of, any Security when the same becomes due and payable at its Maturity Date, whether or not such payment is prohibited by Article XIII; or (b) default in the payment of any interest upon any Security when it becomes due and payable, and continuance of such default for a period of 30 days, whether or not such payment is prohibited by Article XIII; or (c) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or (d) a default under any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Company in excess of $10,000,000 either for borrowed money or representing any Senior Indebtedness (other than indebtedness which is nonrecourse to the Company beyond the property securing such indebtedness), resulting in the acceleration of such indebtedness prior to its express maturity; provided, however, that if such default under such -35- 43 mortgage, indenture or instrument shall be remedied or cured by the Company or waived by the holders of such indebtedness, then the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any of the Holders of the Securities; and provided, further, that the Trustee (subject to Sections 601 and 602) shall not have any rights, duties, liabilities or responsibilities with respect to such default unless and until the Trustee shall have received written notice thereof at the Corporate Trust Office from the Company, the trustee under any such mortgage, indenture or instrument, the holder or holders of any such indebtedness or the agent of any such holder or holders or the Holder or Holders of any Outstanding Securities; or (e) a decree or order by a court having jurisdiction in the premises shall have been entered adjudging the Company as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization of the Company under any Bankruptcy Law, and such decree or order shall have continued undischarged and unstayed for a period of 60 days; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of the Company or of its property, or for the winding up or liquidation of its affairs, shall have been entered, and such decree or order shall have remained in force undischarged and unstayed for a period of 60 days; or (f) the Company shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under any Bankruptcy Law, or shall consent to the filing of any such petition, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency of it or of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due. Notwithstanding the 60-day period and notice requirement contained in Section 501(c) above, with respect to a default under Article XIV: (i) the 60-day period referred to in Section 501(c) shall be deemed to have begun as of the date the Change of Control Notice is required to be sent in the event the Change of Control Notice indicates (or would, if sent, indicate) that the Company has not timely complied with the covenant in the second sentence of Section 1401(a), and either (a) the Holders duly elect to have at least 25% in principal amount of Outstanding Securities repurchased in accordance with the requirements of Article XIV, or (b) the Holders of at least 25% in principal amount of the Outstanding Securities or the Trustee thereafter gives the Notice of Default to the Company, and if applicable, the Trustee, referred to in Section 501(c); and (ii) if the breach or default is a result of a default in the payment when due -36- 44 of the Change of Control Purchase Price on the Change of Control Purchase Date, such default shall arise on the Change of Control Purchase Date, provided that either (a) the Holders duly elect to have at least 25% in principal amount of Outstanding Securities repurchased in accordance with the requirements of Article XIV, or (b) the Holders of at least 25% in principal amount of the outstanding Securities or the Trustee thereafter gives the Notice of Default to the Company, and if applicable, the Trustee, referred to in Section 501(c). "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. SECTION 502. Acceleration of Maturity Date; Rescission and Annulment. If an Event of Default (other than an Event of Default specified in Section 501(e) or 501(f)) 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 Outstanding Securities may declare the principal of all the Securities to be due and payable, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon the earlier of (a) the fifth Business Day after receipt by the Company (and the Trustee if given by Holders) of any such written notice and (b) a default in the payment of principal, or an acceleration of Indebtedness under any Senior Indebtedness or upon any earlier time as such principal under any Senior Indebtedness shall become immediately due and payable, such principal shall become immediately due and payable. If an Event of Default specified in Section 501(e) or 501(f) occurs, all unpaid principal and accrued interest on the Securities then outstanding shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. In the event of a declaration of acceleration under this Indenture because an Event of Default set forth in Section 501(d) has occurred and is continuing, such declaration of acceleration under this Indenture shall be automatically annulled if the holders of the accelerated indebtedness described in Section 501(d) have rescinded their declaration of acceleration in respect of such indebtedness within 90 days thereof and no other Event of Default has occurred during such 90-day period which has not been cured or waived. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article V provided, the Holders of a majority in principal amount of the Outstanding Securities, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if the Company has paid or deposited with the Trustee a sum sufficient to pay: (a) all overdue interest on all Securities, -37- 45 (b) the principal of and premium, if any, on any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, (c) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate borne by the Securities, and (d) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and (e) all Events of Default, other than the non-payment of the principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (a) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of or premium, if any, on any Security at the Maturity Date thereof, including the payment of the Redemption Price on any Redemption Date, the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest, and, to the extent that payment of such interest shall be lawful, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate borne by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust in addition to the remedies specified in Section 502, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner -38- 46 provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. If an Event of Default occurs and is continuing, the Trustee, in addition to the remedies specified in Section 502, may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of any judicial proceeding relative to the Company or any other obligor upon the Securities, their property or their creditors, the Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment, or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Subject to Article XIII, any money collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the -39- 47 distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; SECOND: To the payment of the amounts then due and unpaid for principal of and premium, if any, and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium, if any, and interest, respectively; and THIRD: The balance, if any, to the Company. SECTION 507. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of not less than 25% in principal amount of the outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Defaults in its own name as Trustee hereunder; (c) such Holder or Holders have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee for 60 days after its receipt of such written notice, request and offer of indemnity has failed to institute any such proceeding; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60- day period by the Holders of a majority in principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any -40- 48 right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert. Notwithstanding any other provision in this Indenture but subject to the provisions of Article XIII, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of and premium, if any, and (subject to Sections 305 and 307) interest on such Security on the respective Stated Maturities of such payments as expressed in such Security (and in the case of redemption, the Redemption Price on the applicable Redemption Date) and to convert such Security in accordance with Article XII and to require the purchase of such Security upon the occurrence of a Change in Control in accordance with Article IV and to institute suit for the enforcement of any such payment and right to convert and require purchase, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. -41- 49 SECTION 512. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided, however, that (a) such direction shall not be in conflict with any rule of law or with this Indenture, and (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Default. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default (a) in the payment of the principal of or premium, if any or interest on any Security as specified in clauses (a) and (b) of Section 501, (b) in respect of a covenant or provision hereof which under Article IX cannot he modified or amended without the consent of the Holder of each Outstanding Security affected or (c) in respect of the right of a Holder of any Security to convert such Security in accordance with Article XII. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such undertaking or to make such an assessment in any suit instituted by the Company or in connection with any suit for the enforcement of the right to convert any Security in accordance with the terms hereof. SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, -42- 50 any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. The duties and responsibilities of the Trustee shall be as provided by the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate security or indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 602. Notice of Default. If a default occurs hereunder with respect to Securities, the Trustee shall give the Holders of the Securities notice of such default as and to the extent provided by the Trust Indenture Act; provided, however, that in the case of any default of the character specified in Section 501(c), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default. SECTION 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by a Company Request or -43- 51 Company Order, and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction which shall be reasonably satisfactory to the Trustee; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; provided, however, that the Trustee shall not thereby be deemed to be required to act or be held to any higher duty of care than existed prior to such inquiry; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility or liability whatsoever for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. -44- 52 SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 608 and 613, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 607. Compensation and Reimbursement. The Company agrees: (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree upon in writing for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with the Trustee's performance of this Indenture (including the reasonable compensation and the expenses and disbursements of its non-employee agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or willful misconduct; and (c) to indemnify each of the Trustee or any predecessor Trustee for, and to hold it harmless against, any and all loss, damage, claims, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except those attributable to its negligence or willful misconduct. This obligation shall survive the maturity of the Securities. The Trustee shall have a claim prior to the Securities as to all property and funds properly held by it hereunder for any amount owing it or any predecessor Trustee pursuant to this Section 607, except with respect to funds held in trust for the benefit of the Holders of particular Securities. -45- 53 When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 501(e) or Section 501(f), the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable Federal or state bankruptcy, insolvency or other similar law. The provisions of this Section shall survive the termination of this Indenture. SECTION 608. Disqualification; Conflicting Interests. If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extant and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall (a) be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, (b) authorized under such laws to exercise corporate trust powers, (c) have a combined capital and surplus of at least $50,000,000 (or, in the case of the initial Trustee hereunder, have a combined capital and surplus meeting the requirements of the Trust Indenture Act and be a wholly owned subsidiary of a Person that would otherwise meet the eligibility requirements of this Section), and (iv) be subject to supervision or examination by Federal or state authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. The Trustee shall comply with Trust Indenture Act Section 310(b). SECTION 610. Resignation and Removal, Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 611. (b) The Trustee may resign at any time by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning -46- 54 Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (i) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (ii) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, or (iii) the Trustee shall become incapable of acting or shall be judged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all other similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. -47- 55 (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges pursuant to Section 607, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money hold by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article VI, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 613. Preferential Collection of Claims Against Company. If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). -48- 56 SECTION 614. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents acceptable to the Company which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer, partial conversion or partial redemption or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate agency or corporate trust business of such Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee, the Company or such Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first- class mail, postage prepaid, to all Holders of Securities, as their names and addresses appear in the Security Register. -49- 57 Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Company agrees to pay each Authenticating Agent, as appointed from time to time, such reasonable fees as may be agreed to in writing with the Company, for services rendered under this Section 614. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificates of authentication, an alternate certificate of authentication in the following form: This is one of the Securities described in the within mentioned Indenture. Dated: TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee By:___________________________________________ As Authenticating Agent By:___________________________________________ Authorized Signatory ARTICLE VII HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) semi-annually, not more than 10 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of -50- 58 similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar or Paying Agent. SECTION 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar or Paying Agent. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of any of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). SECTION 703. Reports by Trustee. The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and the Company. SECTION 704. Reports by Company. The Company shall: -51- 59 (a) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 102 of this Indenture; and (c) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (a) and (b) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. ARTICLE VIII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless: (a) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust organized and validly -52- 60 existing under the laws of the United States of America, any State thereof or the District of Columbia and shall have expressly assumed, by an indenture supplemental hereto, executed and delivered by the successor Person to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of and premium, if any, and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed by it and shall have provided for conversion rights in accordance with Article XII; (b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing; and (c) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent provided for herein relating to such transaction have been complied with. SECTION 802. Successor Substituted for Company. Upon any consolidation of the Company with, or merger of the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE IX SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities in accordance with Article VIII; or -53- 61 (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (c) to secure the Securities; or (d) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 1211; or (e) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities; or (f) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture; provided, however, that such action pursuant to this clause (f) shall not adversely affect the interests of the Holders in any material respect. SECTION 902. Supplemental Indentures with Consent of Holders. Subject to Section 508, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture. Notwithstanding the foregoing, no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby: (a) change the Stated Maturity of the principal of, or the stated due date of any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or change the coin or currency in which any Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or adversely affect the right of a Holder to convert any Security as provided in Article XII, or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, or (b) reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any -54- 62 waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section or Section 513 or Section 1009, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. After a supplemental indenture under this Section becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the supplemental indenture. Any failure of the Company to mail such notice, or defect therein, shall not, however, in any way impair or affect the validity of such supplemental indenture. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel of the Company stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental -55- 63 indenture may be prepared and executed by the Company, and authenticated and made available for delivery by the Trustee in exchange for Outstanding Securities. ARTICLE X COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees that it will duly and punctually pay the principal of and premium, if any, and interest on the Securities and the Redemption Price and Change of Control Purchase Price as and when due, in accordance with the terms of the Securities and this Indenture. The Company shall pay interest on overdue amounts at the rate set forth in the Securities, and it shall pay interest on overdue interest at the same rate compounded semiannually (to the extent that the payment of such interest shall be lawful), which interest on overdue interest shall accrue from the date such amounts became overdue. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in the Borough of Manhattan, the City of New York an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside the Borough of Manhattan, the City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Security Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent, it will, on or before each -56- 64 due date of the principal of and premium, if any, or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will, on or prior to each due date of the principal of and premium, if any, or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium, if any, or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of and premium, if any, and interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal and premium, if any, or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company in trust for the payment of the principal of and premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such -57- 65 trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper customarily published on each Business Day and of general circulation in the Borough of Manhattan, the City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 1004. Statements of Officers of Company as to Default; Notice of Default. (a) The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a certificate, signed by the principal executive officer, principal financial officer or principal accounting officer, stating whether or not to the best knowledge of the signers thereof the Company is in default (without regard to periods of grace or requirements of notice) in the performance and observance of any of the terms, provisions and conditions hereof, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. (b) The Company shall file with the Trustee written notice of the occurrence of any default or Event of Default within five Business Days of its becoming aware of any such default or Event of Default. SECTION 1005. Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, material rights (charter and statutory) and material franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if its Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company; and provided further that a transaction that complies with Article VIII shall not be deemed a breach of this Section 1005. SECTION 1006. Maintenance of Properties. The Company will cause all material properties used or useful in the conduct of its business or the business of any Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company, may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from -58- 66 discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Subsidiary and could not reasonably be expected to have a material adverse effect on the business and operations of the Company. SECTION 1007. Payment of Taxes and Other Claims. The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon the Company or any Subsidiary or upon the income, profits or property of the Company or any Subsidiary and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company or any Subsidiary, unless the failure to pay or discharge any such tax, assessment, charge or claim would not have a material adverse effect on the business and operations of the Company and its Subsidiaries taken as a whole; provided, however, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with generally accepted accounting principles have been made. SECTION 1008. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and perform such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. SECTION 1009. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in this Article X (other than Sections 1001 through 1004, inclusive), if before the time for such compliance the Holders of at least a majority (or such greater amount as may be specified in any such term, provision or condition) in principal amount of the outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition, except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. ARTICLE XI REDEMPTION OF SECURITIES SECTION 1101. Right Of Redemption. The Securities may be redeemed at the election of the Company, as a whole or from time to time in part, at any time on -59- 67 or after March 31, 1997, at the Redemption Prices specified in the form of Security hereinbefore set forth, together with accrued interest to the Redemption Date. SECTION 1102. Applicability of Article. Redemption of Securities at the election of the Company, as permitted by any provision of the Securities or this Indenture, shall be made in accordance with such provision and this Article XI. SECTION 1103. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities, the Company shall, at least 35 days prior to the Redemption Date fixed by the Company (unless a shorter period shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Securities to be redeemed. SECTION 1104. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, by such method as the Trustee shall deem appropriate and fair and which may provide for the selection for redemption of portions (equal to $1,000 or any integral multiple thereof) of the principal amount of Securities. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection. The Trustee shall promptly notify the Company and each Security Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1105. Notice of Redemption. Notice of redemption shall be mailed not less than 20 nor more than 60 days prior to the Redemption Date to each Holder of Securities to be redeemed at his address appearing in the Security Register. All notices of redemption shall state: -60- 68 (a) the Redemption Date, (b) the Redemption Price, (c) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, (d) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after that date, (e) the conversion price, and any adjustments thereto, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the place or places where such Securities may be surrendered for conversion, (f) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (g) the CUSIP number of the Securities to be redeemed. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1106. Deposit of Redemption Price. At least one Business Day prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, the Company shall segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Redemption Price of, and (unless the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date other than any Securities called for redemption on that date which have been converted prior to the date of such deposit. If any Security called for redemption is converted, any money deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in the last paragraph of Section 307) be paid to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. SECTION 1107. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on -61- 69 the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that installments of interest whose stated due date is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 1108. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at an office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Security, without service charge, a new Security or Securities of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE XII CONVERSION OF SECURITIES SECTION 1201. Conversion Privilege and Conversion Price. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted into fully paid and nonassessable shares of the Common Stock of the Company, at the conversion price, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall expire at the close of business on March 31, 2001. In case a Security or portion thereof is called for redemption, unless the Company defaults in making the payment due upon redemption, such conversion right in respect of the Security or portion so called shall expire at the close of business on the fifth Business Day preceding the Redemption Date (except that, with respect to any redemption occurring on March 31, 1997 or within five business days thereafter, the conversion right shall terminate at the close of business on the Redemption Date such that all of the holders of Securities to -62- 70 be redeemed will be entitled to receive the March 31, 1997 interest payment, assuming such holders held such Securities on the Regular Record Date next preceeding March 31, 1997). The price at which shares of Common Stock shall be delivered upon conversion (hereinafter referred to as the "conversion price") shall be initially $_____ per share of Common Stock. The conversion price shall be adjusted in certain instances as provided in Section 1204. In case the Company shall, by dividend or otherwise, declare or make a distribution on its Common Stock referred to in paragraph (d) or (e) of Section 1204, the Holder of each Security, upon the conversion thereof pursuant to this Article subsequent to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution and prior to the effectiveness of the conversion price adjustment in respect of such distribution pursuant to paragraph (d) or (e) of Section 1204, shall be entitled to receive for each share of Common Stock into which such Security is converted, the portion of the evidences of indebtedness, shares of capital stock, cash or assets so distributed applicable to one share of Common Stock; provided, however, that, at the election of the Company (whose election shall be evidenced by a Board Resolution filed with the Trustee) with respect to all Holders so converting, the Company may, in lieu of delivering to such Holder any portion of such distribution not consisting of cash or securities of the Company, pay such Holder an amount equal to the fair market value thereof (as determined in good faith by the Board of Directors, whose determination shall be evidenced by a Board Resolution filed with the Trustee). If any conversion of a Security entitled to the benefits described in the immediately preceding sentence occurs prior to the payment date for a distribution to holders of Common Stock which the Holder of the Security so converted is entitled to receive in accordance with the immediately preceding sentence, the Company may elect (such election to be evidenced by a Board Resolution filed with the Trustee) to distribute to such Holder a due bill for the evidences of indebtedness, shares of capital stock, cash or assets to which such Holder is so entitled, provided that such due bill (i) meets any applicable requirements of the principal national securities exchange or other market on which the Common Stock is then traded and (ii) requires payment or delivery of such evidences of indebtedness, shares of capital stock, cash or assets no later than the date of payment or delivery thereof to holders of Common Stock receiving such distribution. SECTION 1202. Exercise of Conversion Privilege. In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security, duly endorsed or assigned to the Company or in blank, at any office or agency maintained by the Company pursuant to Section 1002, accompanied by written notice to the Company substantially in the form set forth in Section 205 at such office or agency that the Holder elects to convert such Security or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. -63- 71 Securities surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except for Securities whose Maturity Date is prior to such Interest Payment Date) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of Securities being surrendered for conversion. Except as provided in the preceding sentence and subject to the last paragraph of Section 307, no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion. Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Securities as Holders shall cease, and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and shall deliver at such office or agency a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 1203. In the case of any Security which is converted in part only, as promptly as practicable on or after the conversion date the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder thereof, at the expense of the Company, a new Security or Securities, of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Security. The Company's delivery to the Holder of the fixed number of shares of the Common Stock of the Company (and any cash in lieu of any fractional share of Common Stock) into which the Security is convertible shall be deemed to satisfy the Company's obligation to pay the principal amount of the Security and all accrued interest and original issue discount that has not previously been paid. The Common Stock of the Company so delivered shall be treated as issued first in payment of accrued interest and original issue discount and then in payment of principal. Thus, accrued interest and original issue discount shall be treated paid rather than cancelled, extinguished or forfeited. SECTION 1203. Fractions of Shares. No fractional shares of Common Stock shall be issued upon conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the -64- 72 aggregate principal amount of the Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment (rounded to the nearest cent) in respect of such fraction in an amount equal to the same fraction of the Closing Price per share of the Common Stock on the day of conversion (or, if such day is not a Trading Day, on the Trading Day immediately preceding such day). SECTION 1204. Adjustment of Conversion Price. (a) In case the Company shall pay or make a dividend or other distribution on its Common Stock exclusively in Common Stock or shall pay or make a dividend or other distribution on any other class of capital stock of the Company which dividend or distribution includes Common Stock, the conversion price in effect at the opening of business on the day following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (b) Subject to the last sentence of paragraph (h) of this Section, in case the Company shall pay or make a dividend or other distribution on its Common Stock consisting exclusively of, or shall otherwise issue to all holders of its Common Stock, rights, warrants or options entitling the holders thereof to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (i) of this Section) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, warrants or options, the conversion price in effect at the opening of business on the day following the date fixed for such determination shall be reduced by multiplying such conversion price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common -65- 73 Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such reduction to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of this paragraph (b), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company. (c) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the conversion price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become affective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (d) Subject to the last sentence of this paragraph (d) and to the last sentence of paragraph (h) of this Section, in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class of capital stock, cash or other assets (including Securities, but excluding (w) any rights, options or warrants referred to in paragraph (b) of this Section, (x) any dividend or distribution paid exclusively in cash up to the greater of (i) retained earnings of the Company on the date such distribution or dividend was declared and (ii) Net Income of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared, (y) any dividend or distribution referred to in paragraph (a) of this Section and (z) other than in connection with a tender offer or other negotiated purchase made by the Company or any Subsidiary for all or any portion of the Company's Common Stock), the conversion price shall be reduced so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the effectiveness of the conversion price reduction contemplated by this paragraph (d) by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (i) of this Section) of the Common Stock on the date fixed for such effectiveness less the fair market value (as determined in good -66- 74 faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution filed with the Trustee), on the date of such effectiveness, of the portion of the evidences of indebtedness, shares of capital stock, cash and other assets so distributed applicable to one share of Common Stock (collectively, the "Market Value of the Distribution") and the denominator shall be such current market price per share of the Common Stock, such reduction to become effective immediately prior to the opening of business on the day following the later of (i) the date fixed for the payment of such distribution and (ii) the date 20 days after notice relating to such distribution is required to be given pursuant to Section 1206(a) (such later date of (i) and (ii) being referred to as the "Reference Date"). If the Board of Directors determines the fair market value of any distribution for purposes of this paragraph (d) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the current market price per share pursuant to paragraph (i) of this Section. For purposes of this paragraph (d), any dividend or distribution that includes shares of Common Stock, rights, options or warrants to subscribe for or purchase shares of Common Stock or other securities convertible into or exchangeable for shares of Common Stock shall be deemed instead to be (A) a dividend or distribution of the evidences of indebtedness, cash, assets or shares of capital stock other than such shares of Common Stock, such rights, options or warrants or such other convertible or exchangeable securities (making any conversion price reduction required by and in accordance with this paragraph (d)) immediately followed by (B) in the case of such shares of Common Stock or such right, options or warrants, a dividend or distribution thereof making any further conversion price reduction required by paragraph (a) or (b) of this Section, except (1) the Reference Date of such dividend or distribution as defined in this paragraph (d) shall be substituted as "the date fixed for the determination of stockholders entitled to receive such dividend or other distribution" and "the date fixed for such determination" within the meaning of paragraphs (a) and (b) of this Section and (2) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of paragraph (a) of this Section) or (c) in the case of such other convertible or exchangeable securities, a dividend or distribution of such number of shares of Common Stock as would then be issuable upon the conversion or exchange thereof, whether or not the conversion or exchange of such securities is subject to any conditions (making any further conversion price reduction required by paragraph (a) of this Section, except (i) the Reference Date of such dividend or distribution as defined in this paragraph (a) shall be substituted as "the date fixed for the determination of stockholders entitled to receive such dividend or other distribution" and "the date fixed for such determination", and (ii) the shares deemed to constitute such dividend or distribution shall not be deemed "outstanding at the close of -67- 75 business on the date fixed for such determination," each within the meaning of paragraph (a) of this Section). In the event that, with respect to any distribution to which this paragraph (d) of Section 1204 would otherwise apply, the Market Value of the Distribution is greater than the current market price per share, then the adjustment provided by this paragraph (d) of Section 1204 shall not be made and in lieu thereof the provisions of Section 1211 shall apply to such distribution. (e) In case the Company shall, by dividend or otherwise, at any time distribute to all holders of its Common Stock cash (specifically including any distributions of cash up to the greater of (x) retained earnings of the Company on the date such distribution or dividend was declared and (y) Net Income of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared but excluding any cash that is distributed as part of a distribution requiring a purchase price adjustment pursuant to paragraph (d) of this Section) in an aggregate amount that, together with (i) the aggregate amount of any other distributions to all holders of its Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution and in respect of which no conversion price adjustment pursuant to paragraph (d) of this Section or this paragraph (e) has been made and (ii) the portion of the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be evidenced by a Board Resolution) of consideration payable in respect of any tender offer or other negotiated purchase by the Company or a Subsidiary for all or any portion of the Company's Common Stock concluded within the 12 months preceding the date of payment of such distribution and in respect of which no conversion price adjustment pursuant to paragraph (g) of this Section has been made that is in excess of an amount equal to the product of (x) the number of shares of Common Stock with respect to which the aggregate tender offer or negotiated purchase consideration is payable times (y) the average of the daily Closing Prices per share of Common Stock on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days next succeeding the date of payment of the negotiated purchase consideration or expiration of the tender offer, as the case may be, exceeds 20% of the product of the current market price per share (determined as provided in paragraph (i) of this Section) of the Common Stock on the date fixed for stockholders entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (excluding shares held in the Treasury of the Company), the conversion price shall be reduced so that the same shall equal the price determined by multiplying such conversion price in effect immediately prior to the conversion price reduction contemplated by this paragraph (e) by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (i) of this Section) of the Common Stock on the date of such distribution less the amount of cash so distributed applicable -68- 76 to one share of Common Stock and the denominator shall be such current market price per share (determined as provided in paragraph (i) of this Section) of the Common Stock on the date of such distribution, such reduction to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution. (f) In case the Company shall issue to an Affiliate shares of its Common Stock at a net price per share less than the current market price per share (determined as provided in paragraph (i) of this Section) on the date the Company fixes the offering price of such additional shares, the conversion price shall be reduced immediately thereafter so that it shall equal the price determined by multiplying such conversion price in effect immediately prior thereto by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at the current market price and the denominator shall be the number of shares of Common Stock that would be outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. For the purposes of this paragraph (f), the number of shares of Common Stock at any time outstanding shall not include shares held in the Treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. This paragraph (f) shall not apply to Common Stock issued to any Affiliate under bona fide benefit plans in which only directors, officers and employees of the Company and its Subsidiaries are eligible to participate adopted by the Board of Directors and approved by the holders of Common Stock when required by law. (g) In case a tender offer or other negotiated purchase (the "Current Purchase") made by the Company or any Subsidiary for all or any portion of the Company's Common Stock shall be consummated, if the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be evidenced by a Board Resolution) of consideration payable in respect of such tender offer or other negotiated purchase is in excess of an amount equal to the product of (i) the number of shares of Common Stock with respect to which the aggregate tender offer or negotiated purchase consideration is payable, (ii) the average of the daily Closing Prices per share of Common Stock on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days next succeeding the date of payment of the negotiated purchase consideration or expiration of the tender offer, as the case may be (the "Reference Price"), and the amount of such excess, together with (A) the portion of the aggregate of the cash, plus the fair market value (as determined by the Board of Directors, whose determination shall be evidenced by in a Board Resolution) of -69- 77 consideration payable in respect of any tender offer or other negotiated purchase (the "Prior Purchase") by the Company or a Subsidiary for all or any portion of the Company's Common Stock concluded within the 12 months preceding the expiration of a tender offer or the consummation of any negotiated purchase, as the case may be, that is the subject of the Current Purchase (the "Current Purchase Expiration Time") and in respect of which no conversion price adjustment pursuant to this paragraph (g) has been made, that is in excess of an amount equal to the product of (1) the number of shares of Common Stock with respect to which the aggregate consideration for the Prior Purchase was payable and (2) the average of the daily Closing Prices per share of Common Stock on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days next succeeding the date of payment of the negotiated purchase consideration or expiration of the tender offer, as the case may be, with respect to the negotiated purchase or tender offer that was the subject of the Prior Purchase, and (iii) the aggregate amount of any distributions to all holders of the Company's Common Stock made exclusively in cash (specifically including distributions of cash out of retained earnings of the Company or Net Income of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared) within the 12 months preceding the expiration of the tender offer and as to which no adjustment pursuant to paragraph (d) or paragraph (e) of this Section has been made, exceeds 20% of the product of the Reference Price times the number of shares of Common Stock outstanding (including any tendered shares but excluding any shares held in the Treasury of the Company) on the Current Purchase Expiration Time, the conversion price shall be reduced so that the same shall equal the price determined by multiplying such conversion price in effect immediately prior to the Current Purchase Expiration Time by a fraction of which the numerator shall be (A) the product of the Reference Price times the number of shares of Common Stock outstanding (including any tendered shares but excluding any shares held in the Treasury of the Company) on the Current Purchase Expiration Time minus (B) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer or other negotiated purchase) of all shares validly tendered and not withdrawn or purchased in any negotiated purchase as of the Current Purchase Expiration Time (the shares deemed so accepted or purchased, up to any such maximum, being referred to as the "Purchased Shares") and the denominator shall be the product of (1) such Reference Price times (2) such number of outstanding shares (excluding any shares held in the Treasury of the Company) on the Current Purchase Expiration Time less the number of Purchased Shares, such reduction to become effective immediately prior to the opening of business on the day following the Current Purchase Expiration Time. -70- 78 (h) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 1211 applies) shall be deemed to involve (i) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be "the Reference Date" within the meaning of paragraph (d) of this Section), and (ii) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be "the day upon which such subdivision becomes effective," or "the day upon which such combination becomes effective", as the case may be, and "the day upon which such subdivision or combination becomes effective" within the meaning of paragraph (c) of this Section). Rights, warrants or options issued or distributed by the Company to all holders of its Common Stock entitling the holders thereof to subscribe for or purchase shares of Common Stock or preferred stock, which rights, warrants or options (A) are deemed to be transferred with such shares of Common Stock, (B) are not exercisable and (C) are also issued or distributed in respect of future issuances of Common Stock, in each case in clauses (A) through (C) until the occurrence of a specified event or events ("Trigger Events"), shall for purposes of this Section 1204 not be deemed issued or distributed until the occurrence of the earliest Trigger Event. (i) For the purpose of any computation under paragraph (b), (d), (e), (f) or (g) of this Section, the "current market price" per share of Common Stock on any date shall be deemed to be the average of the daily Closing Prices for the 5 consecutive Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than, the date in question. (j) The Company may, but shall not be required to, make such reductions in the conversion price, in addition to those required by paragraphs (a), (b), (c), (d), (e), (f) and (g) of this Section, as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (k) No adjustment in the conversion price shall be required unless such adjustment would require an increase or decrease of at least 1% in the conversion price; provided, however, that any adjustments which by reason of this paragraph (k) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article XIII shall be made to the nearest cent or to the nearest one-hundredth of a share of Common Stock, as the case may be. -71- 79 (l) Anything herein to the contrary notwithstanding, in the event the Company shall declare any dividend or distribution requiring an adjustment in the conversion price hereunder and shall, thereafter and before the payment of such dividend or distribution to stockholders, legally abandon its plan to pay such dividend or distribution, the conversion price then in effect hereunder, if changed to reflect such dividend or distribution, shall upon the legal abandonment of such plan be changed to the conversion price which would have been in effect at the time of such abandonment (after giving effect to all other adjustments not so legally abandoned pursuant to the provisions of this Article XII) had such dividend or distribution never been declared. (m) Notwithstanding any other provision of this Section 1204, no adjustment to the conversion price shall reduce the conversion price below the then par value per share of the Common Stock, and any such purported adjustment shall instead reduce the conversion price to such par value. The Company hereby covenants not to take any action (i) to increase the par value per share of the Common Stock or (ii) that would or does result in any adjustment in the conversion price that, if made without giving effect to the previous sentence, would cause the conversion price to be less than the then par value per share of the Common Stock of the Company. (n) Anything herein to the contrary notwithstanding, no single event shall require or result in an adjustment in the conversion price pursuant to more than one of the foregoing paragraphs of this Section 1204. SECTION 1205. Notice of Adjustments of Conversion Price. Whenever the conversion price is adjusted by the Company as herein provided: (a) the Company shall compute the adjusted conversion price in accordance with Section 1204 and shall prepare a certificate signed by the Treasurer or any Assistant Treasurer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall forthwith be filed (with a copy to the Trustee) at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 1002; and (b) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall forthwith be required, and as soon as practicable after it is required, such notice shall be mailed by the Company to all Holders at their last addresses as they shall appear in the Security Register. -72- 80 SECTION 1206. Notice of Certain Corporate Action. In case: (a) the Company shall declare a dividend (or any other distribution) on its Common Stock payable (i) otherwise than exclusively in cash out of retained earnings of the Company or Net Income of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared or (ii) exclusively in cash out of retained earnings of the Company or Net Income of the Company during the four full fiscal quarters preceding the date such distribution or dividend was declared in an amount that would require a conversion price adjustment pursuant to paragraph (e) of Section 1204; or (b) the Company shall authorize the granting to all holders of its Common Stock of rights, warrants or options to subscribe for or purchase any shares of capital stock of any class or of any other rights (excluding employee stock options or other rights under employee benefit plans); or (c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or of the sale, transfer or lease of all or substantially all of the assets of the Company; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) the Company or any Subsidiary of the Company shall commence a tender offer for all or a portion of the Company's outstanding shares of Common Stock (or shall amend any such tender offer), then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Securities pursuant to Section 1002, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 20 days (or 10 days in any case specified in clause (a), (b) or (e) above) prior to the applicable record, effective or expiration date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights, warrants or options, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, -73- 81 liquidation or winding up, or (z) the date on which such tender offer commenced, the date on which such tender offer is scheduled to expire unless extended, the consideration offered and the other material terms thereof (or the material terms of any amendment thereto). SECTION 1207. Company to Reserve Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of shares of Common Stock then issuable upon the conversion of all outstanding Securities. SECTION 1208. Taxes on Conversions. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. SECTION 1209. Covenant as to Common Stock. The Company covenants that all shares of Common Stock which may be issued upon conversion of Securities will upon issue be fully paid and nonassessable, free of preemptive or any similar rights, and, except as provided in Section 1208, the Company will pay all taxes, liens and charges with respect to the issue thereof. The Company will endeavor promptly to comply with all Federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Securities, if any, and will list or cause to have quoted such shares of Common Stock on each national securities exchange or in the over-the-counter market or such other market on which the Common Stock is then listed or quoted. SECTION 1210. Cancellation of Converted Securities. All Securities delivered for conversion shall be delivered to the Trustee to be cancelled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 309. SECTION 1211. Provisions in Case of Consolidations, Merger or Sale of Assets; Special Distributions. Subject to any applicable right of the Holders to have their Securities purchased pursuant to the provisions of Section 1401, in case of any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or any transfer or lease of the Company's -74- 82 properties or assets substantially as an entirety, the Person formed by such consolidation or resulting from such merger or which acquires such properties or assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right thereafter, during the period such Security shall be convertible as specified in Section 1201, to convert such Security only into the kind and amount of securities, cash and other property receivable, if any, upon such consolidation, merger, sale, transfer or lease by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, sale, transfer or lease, assuming such holder of Common Stock of the Company (a) is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale, transfer or lease was made, as the case may be (a "Constituent Person"), or an Affiliate of a Constituent Person and (b) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, sale, transfer or lease by other than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised ("non-electing share"), then for the purpose of this Section the kind and amount of securities, cash and other property receivable upon such consolidation, merger, sale, transfer or lease by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section shall similarly apply to successive consolidations, mergers, sales, transfers or leases. If the Company makes a distribution to all holders of its Common Stock that, but for the provisions of the last sentence of paragraph (d) of Section 1204, would otherwise result in an adjustment in the conversion price pursuant to the provisions of Section 1204, then, from and after the record date for determining the holders of Common Stock entitled to receive the distribution, a Holder of a Security that converts such Security in accordance with the provisions of this Indenture shall upon conversion be entitled to receive, in addition to the shares of Common Stock into which the Security is convertible, the kind and amount of evidences of indebtedness, shares of capital stock, cash or assets comprising the distribution that such Holder would have received if such Holder had converted the Security immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution. SECTION 1212. Trustee Adjustment Disclaimer. The Trustee has no duty to determine when an adjustment under this Article XII should be made, how it should be made or what it should be. The Trustee has no duty to determine whether a -75- 83 supplemental indenture under Section 1211 need be entered into or whether any provisions of any supplemental indenture are correct. The Trustee shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon conversion of Securities. SECTION 1213. When No Adjustment Required. (a) Except as expressly set forth in Section 1204, no adjustment in the conversion price shall be made because the Company issues, in exchange for cash, property or services, shares of Common Stock, or any securities convertible into or exchangeable for shares of Common Stock, or securities (including warrants, rights and options) carrying the right to subscribe for or purchase shares of Common Stock or such convertible or exchangeable securities. (b) Notwithstanding anything herein to the contrary, no adjustment in the conversion price shall be made pursuant to Section 1204 in respect of any dividend or distribution if the Holders may participate therein (on a basis to be determined in good faith by the Board of Directors) and receive the same consideration they would have received if they had converted the Securities immediately prior to the record date with respect to such dividend or distribution (a "Non-Adjustment Distribution"). All Non-Adjustment Distributions shall be ignored for purposes of any computation under paragraph (e) or (g) of Section 1204. ARTICLE XIII SUBORDINATION OF SECURITIES SECTION 1301. Securities Subordinate to Senior Indebtedness. The Company covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Articles IV and XV), the Indebtedness represented by the Securities and the payment of the principal of and premium, if any, and interest on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness. SECTION 1302. Payment Over of Proceeds Upon Dissolution, Etc. In the event of any Proceeding, the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, before the Holders of the Securities are entitled to receive any Securities Payment (other -76- 84 than a Securities Payment in the form of Permitted Junior Securities), and to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any Securities Payment (other than any Securities Payment in the form of Permitted Junior Securities), which may be payable or deliverable in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any Securities Payment (other than any Securities Payment in the form of Permitted Junior Securities), before all Senior Indebtedness is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, and if the Trustee or such Holder, as the case may be, shall, at or prior to the time of such Securities Payment have actual knowledge of such fact, then and in each such event, such Securities Payment shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article VIII shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article VIII. SECTION 1303. No Payment When Designated Senior Indebtedness in Default. In the event that any Payment Event of Default shall have occurred and be continuing, no Securities Payment (other than a Securities Payment in the form of Permitted Junior Securities) shall be made unless and until such Payment Event of Default shall have been cured or waived or shall have ceased to exist or all amounts then due and payable in respect of Designated Senior Indebtedness shall have been paid in full, or provision shall have been made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Designated Senior Indebtedness. In the event that any Non-Payment Event of Default shall have occurred with respect to any Designated Senior Indebtedness and be continuing, then, upon the receipt by the Trustee and the Company of written notice of such Non-Payment Event of Default from the trustee or representative for, or holders of, at least a majority in principal amount of such Designated Senior Indebtedness, no Securities Payment (other -77- 85 than a Securities Payment in the form of Permitted Junior Securities) shall be made during the period (the "Payment Blockage Period") commencing on the date of receipt of such written notice and ending on the earlier of (a) the date on which such Non- Payment Event of Default shall have been cured or waived or shall have ceased to exist or any acceleration of the Designated Senior Indebtedness to which such Non-Payment Event of Default relates shall have been rescinded or annulled or such Designated Senior Indebtedness shall have been discharged and (b) the 176th day after the date of such receipt of such written notice. During any 360-day period the aggregate of all Payment Blockage Periods shall not exceed 176 days and there shall be a period of at least 184 consecutive days in each 360-day period when no Payment Blockage Period is in effect. For all purposes of this paragraph, no Non- Payment Event of Default that existed or was continuing on the date of commencement of any Payment Blockage Period shall be, or be made, the basis for the commencement of a subsequent Payment Blockage Period by a trustee or representative for, or holders of, Designated Senior Indebtedness unless such Payment Event of Default or Non-Payment Event of Default shall have been cured for a period of not less than 90 consecutive days. In the event that, notwithstanding the foregoing, the Company shall make any Securities Payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such Securities Payment, have been made known to the Trustee or, such Holder, as the case may be, then and in such event such Securities Payment shall be paid over and delivered forthwith to the Company. The provisions of this Section shall not apply to any Securities Payment with respect to which Section 1302 would be applicable. SECTION 1304. Payment Permitted if No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time except during the pendency of any Proceeding referred to in Section 1302 or under the conditions described in Section 1303, from making Securities Payments or (b) the application by the Trustee of any money deposited with it hereunder to Securities Payments or the retention of such Securities Payment by the Holders, if, at the time of such application by the Trustee, it did not have actual knowledge that such Securities Payment would have been prohibited by the provisions of this Article. SECTION 1305. Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all amounts due and to become due on or in respect of Senior Indebtedness, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article to the rights of the holders of such Senior Indebtedness to receive -78- 86 payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of and premium, if any, and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. SECTION 1306. Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities, the obligation of the Company, which is absolute and unconditional (and which, subject to the rights under this Article of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company), to pay to the Holders of the Securities the principal of and premium, if any, and interest on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 1307. Trustee to Effectuate Subordination. Each Holder of a Security by his acceptance thereof authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate, as between the Holders of the Securities and the holders of Senior Indebtedness, the subordination provided in this Article and appoints the Trustee his attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding up or liquidation or reorganization under any applicable bankruptcy law of the Company (whether in bankruptcy, insolvency or receivership proceedings or otherwise), the timely filing of a claim for the unpaid balance of such Holder's Securities in the form required in such proceedings and the causing of such claim to be approved. If the Trustee does not file a claim or proof of debt in the form required in such proceedings prior to 10 days before the expiration of the time to file such claims of proofs, then the holders of Senior Indebtedness, jointly, or their representative shall have the right to file an appropriate claim for and on behalf of the Holders. Nothing contained herein shall be construed to authorize the Trustee or the holders of Senior Indebtedness to authorize -79- 87 or consent to or to accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder or to authorize the Trustee or the holders of Senior Indebtedness to vote in respect of the claim of any Holder in any such proceeding. SECTION 1308. No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (c) release any Person liable in any manner for the collection of Senior Indebtedness and settle or compromise Senior Indebtedness (which, to the extent so settled and compromised, shall be deemed to have been paid in full for all purposes hereof); (d) apply any amounts received to any liability of the Company owing to holders of Senior Indebtedness; and (e) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 1309. Notice to Trustee. The Company shall give prompt written notice to the Trustee of any default or event of default with respect to any Senior Indebtedness or of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Indebtedness or from any trustee therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 601, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section at least five Business Days prior to the date upon which by the terms -80- 88 hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of and premium, if any, or interest on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within five Business Days prior to such date. Subject to the provisions of Section 601, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Indebtedness (or a trustee therefor) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 1310. Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 601, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which any Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. SECTION 1311. Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness. SECTION 1312. Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. -81- 89 Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 607. SECTION 1313. Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 1312 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent. ARTICLE XIV RIGHT TO REQUIRE REPURCHASE SECTION 1401. Repurchase of Securities at Option of the Holder upon Change of Control. (a) If at any time there shall have occurred a Change of Control (as defined below) with respect to the Company which constitutes a Repurchase Event (as defined below), each Holder shall have the right, at such Holder's option, subject to the terms and conditions of this Indenture, to require the Company to repurchase all or a portion of such Holder's Securities (in denominations of $1,000 or integral multiples thereof), at a purchase price equal to 100% of the principal amount of such Securities, together with accrued interest to the Change of Control Purchase Date (the "Change of Control Purchase Price"), on the date (the "Change of Control Purchase Date") that is 60 days after the date on which the Company's Change of Control Notice (as defined below) is mailed (or such later date as is required by law), subject to substantial satisfaction by or on behalf of the Holder of the requirements set forth in Section 1401(c). Promptly, but in any event within 29 days following any such Change of Control constituting a Repurchase Event, the Company hereby covenants, with respect to any Senior Indebtedness that would prohibit the repurchase of Securities by the Company in the event of such Change of Control, to either (i) repay all such Senior Indebtedness in full; or (ii) obtain the requisite consents under any agreement or instrument pursuant to which such Senior Indebtedness is issued to permit the repurchase of the Securities as provided below. The Company shall first comply with the covenants in the preceding sentence before it shall be required to repurchase Securities pursuant to this Article XIV. The foregoing shall in no way limit the occurrence of an Event of Default, including an Event of Default arising from a default under the covenants of the second sentence of this Section 1401(a), and the right to -82- 90 declare all the principal of the Securities to be immediately due and payable in accordance with the provisions of this Indenture. A "Change of Control" shall occur when: (i) all or substantially all of the Company's assets are sold as an entirety to any person or related group of persons; (ii) there shall be consummated any consolidation or merger of the Company (A) in which the Company is not the continuing or surviving corporation (other than a consolidation or merger with a wholly owned subsidiary of the Company in which all shares of Common Stock outstanding immediately prior to the effectiveness thereof are changed into or exchanged for the same consideration) or (B) pursuant to which the Common Stock would be converted into cash, securities or other property, in each case, other than a consolidation or merger of the Company in which the holders of the Common Stock immediately prior to the consolidation or merger have, directly or indirectly, at least a majority of the Common Stock of the continuing or surviving corporation immediately after such consolidation or merger; or (iii) any person or any persons acting together which would constitute a "group" for purposes of Section 13(d) of the Exchange Act (other than the Company, any Subsidiary, any employee stock purchase plan, stock option plan or other stock incentive plan or program, retirement plan or automatic dividend reinvestment plan or any substantially similar plan of the Company or any Subsidiary or any person holding securities of the Company for or pursuant to the terms of any such employee benefit plan), together with any affiliates thereof, shall Beneficially Own, directly or indirectly, at least 50% of the total Voting Stock of the Company. Notwithstanding the foregoing provisions of this Section 1401(a), a Change of Control shall not be deemed to have occurred by virtue of the purchase by one or more underwriters of Capital Stock of the Company pursuant to a firm commitment underwriting in connection with a public offering of such Capital Stock; provided, however, that upon the expiration of 20 Business Days following the acquisition by such underwriters of Capital Stock of the Company pursuant to such a firm commitment underwriting, such underwriters shall not Beneficially Own, directly or indirectly, at least 50% of the total Voting Stock of the Company. A Change of Control as described above shall constitute a "Repurchase Event" unless (i) the closing price per share of the Common Stock on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days ending immediately after the later of the Change of Control or the public announcement of the Change of Control (in the case of a Change of Control under clauses (i) or (ii) of the definition of Change of Control) or ending immediately before the Change of Control (in the case of a Change of Control under clause (iii) of the definition of Change of Control) is -83- 91 at least equal to 105% of the conversion price of the Securities in effect immediately preceding the time of such Change of Control, or (ii) all of the consideration (excluding cash payments for fractional shares) in the transaction giving rise to such Change of Control to the holders of Common Stock consists of shares of Common Stock that are, or immediately upon issuance will be, listed on a national securities exchange or quoted in the Nasdaq National Market, and as a result of such transaction the Securities become convertible solely into such Common Stock and there has not been a Rating Decline, or (iii) the consideration in the transaction giving rise to such Change of Control to the holders of Common Stock consists of cash, securities that are, or immediately upon issuance will be, listed on a national securities exchange or quoted in the Nasdaq National Market, or a combination of cash and such securities, and the aggregate fair market value of such consideration (which, in the case of such securities, shall be equal to the average of the daily Closing Prices of such securities on the five consecutive Trading Days selected by the Company out of the 10 consecutive Trading Days following consummation of such transaction) is at least 105% of the conversion price of the Securities in effect on the date immediately preceding the closing date of such transaction. (b) Within 29 days after the occurrence of a Change of Control which constitutes a Repurchase Event, the Company covenants that it shall mail a written notice (the "Change of Control Notice") of Change of Control by first- class mail to the Trustee and to each Holder (and to beneficial owners as required by applicable law) and shall cause a copy of such notice to be published in a daily newspaper of national circulation. The notice shall state: (i) the events causing a Change of Control (setting forth a brief description of such event) and the date of such Change of Control; (ii) the date by which the Change of Control Purchase Notice pursuant to this Section 1401 must be given; (iii) the Change of Control Purchase Date; (iv) the Change of Control Purchase Price; (v) the name and address of the Paying Agent and the conversion agent; (vi) the conversion price and any adjustments thereto and the place or places where Securities may be surrendered for conversion; -84- 92 (vii) that Securities as to which a Change of Control Purchase Notice has been given may be converted into Common Stock only if the Change of Control Purchase Notice has been withdrawn in accordance with the terms of this Indenture; (viii) the procedures the Holder must follow to exercise rights under this Section 1401 and a brief description of such rights; and (ix) the procedures for withdrawing a Change of Control Purchase Notice. The Change of Control Notice shall also state whether or not the Company has satisfied its obligations with respect to any Senior Indebtedness that would prohibit the repurchase of Securities by the Company in the event of a Change of Control pursuant to Section 1401(a). If the Company is unable to satisfy such obligations, the Change of Control Notice shall also state that the Company is or will be in default under Section 501(c) of the Indenture, that receipt by the Company of one or more Change of Control Purchase Notices by Holders of at least 25% of the outstanding Securities will constitute a Notice of Default thereunder, and that the failure of the Company to cure such default within 60 days (or the then applicable time period) will be an Event of Default allowing the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities to declare the principal of all the Securities to be due and payable immediately. (c) A Holder may exercise its rights specified in Section 1401(a) upon delivery of a written notice of purchase (a "Change of Control Purchase Notice") to the Paying Agent at any time prior to the close of business on the Change of Control Purchase Date, stating: (i) the certificate number or numbers of the Security or Securities which the Holder will deliver to be purchased; (ii) the portion of the principal amount of the Security or Securities which the Holder will deliver to be repurchased, which portion must be $1,000 or an integral multiple thereof; and (iii) that such Security or Securities shall be repurchased pursuant to the terms and conditions specified in this Article XIV. The delivery of such Security or Securities to the Paying Agent prior to, on or after the Change of Control Purchase Date (together with all necessary endorsements) at the offices of the Paying Agent shall be a condition -85- 93 to the receipt by the Holder of the Change of Control Purchase Price therefor, and the Change of Control Purchase Price shall be paid pursuant to this Section 1401 only if the Security or Securities so delivered to the Paying Agent shall conform in all respects to the description thereof set forth in the related Change of Control Purchase Notice. The Company shall repurchase from the Holder thereof, pursuant to this Section 1401, a portion of a Security if such portion is $1,000 or an integral multiple of $1,000. Notwithstanding anything herein to the contrary, any Holder delivering to the Paying Agent the Change of Control Purchase Notice contemplated by this Section 1401(c) shall have the right to withdraw such Change of Control Purchase Notice at any time prior to the close of business on the Change of Control Purchase Date by delivery of a written notice of withdrawal to the Paying Agent in accordance with Section 1402. SECTION 1402. Effect of Change of Control Purchase Notice. Upon receipt by the Company of the Change of Control Purchase Notice specified in Section 1401, the Holder of the Security in respect of which such notice was given shall (unless such notice is withdrawn as specified in the following paragraph) thereafter be entitled to receive solely the Change of Control Purchase Price with respect to such Security. Such price shall be paid to such Holder (provided the conditions in Section 1401 have been satisfied) promptly following the later of (x) the Change of Control Purchase Date with respect to such Security and (y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner required by Section 1401(c). Securities in respect of which a Change of Control Purchase Notice has been given by the Holder thereof may not be converted into shares of Common Stock on or after the date of the delivery of such Change of Control Purchase Notice unless such notice has first been validly withdrawn as specified in the following paragraph. A Change of Control Purchase Notice may be withdrawn by means of a written notice of withdrawal delivered to the office of the Paying Agent at any time prior to the close of business on the Change of Control Purchase Date specifying: (i) the certificate number or numbers of the Security or Securities in respect of which such notice of withdrawal is being submitted; (ii) the portion of the principal amount of the Security or Securities with respect to which such notice of withdrawal is being submitted, which portion must be $1,000 or an integral multiple thereof, and -86- 94 (iii) the portion of the principal amount, if any, of such Security or Securities which remains subject to the original Change of Control Purchase Notice and which has been or will be delivered for purchase by the Company, which portion must be $1,000 or an integral multiple thereof. In addition to the requirement that the Company must first comply with the covenants set forth in Section 1401, there shall be no repurchase of any Securities pursuant to Section 1401 if there has occurred (prior to, on or after the giving, by the Holders of such Securities, of the required Change of Control Purchase Notice) and is continuing an Event of Default. The foregoing shall in no way limit the occurrence of an Event of Default, including an Event of Default arising from a default under the covenants in this Article XIV and the right to declare the principal of the Securities to be immediately due and payable in accordance with the provisions of this Indenture. SECTION 1403. Deposit of Change of Control Purchase Price. At least one Business Day prior to the Change of Control Purchase Date, the Company shall deposit with the Trustee or with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is acting as the Paying Agent, shall segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the aggregate Change of Control Purchase Price of all the Securities or portions thereof which are to be purchased as of the Change of Control Purchase Date. SECTION 1404. Securities Purchased in Part. Any Security which is to be purchased only in part shall be surrendered at the office of the Paying Agent (with, if the Company or the Trustee so requires, due endorsement by, or written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing) and the Company shall execute and the Trustee shall authenticate and make available for delivery to the Holder of such Security, without service charge, a new Security or Securities, of any authorized denomination requested by such Holder in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Security so surrendered which is not purchased. SECTION 1405. Covenant to Comply with Securities Laws Upon Purchase of Securities. In connection with any purchase of Securities under Section 1401 hereof, the Company shall, to the extent then applicable and required by law: (a) comply with Rule 13e-4 (which term, as used herein, includes any successor provision thereto) under the Exchange Act; (b) file the related Schedule 13E-4 (or any successor or similar schedule, form or report) under the Exchange Act; and (c) otherwise comply with all Federal and state securities laws so as to permit the rights and obligations under Section 1401 to be exercised in the time and in the manner specified in Section 1401. -87- 95 ARTICLE XV DEFEASANCE AND COVENANT DEFEASANCE SECTION 1501. Company's Option to Effect Defeasance or Covenant Defeasance. The Company may at its option by Board Resolution, at any time, elect to have the provisions of either Section 1502 or Section 1503 apply to the Outstanding Securities upon compliance with the conditions set forth below in this Article XV. SECTION 1502. Defeasance and Discharge. Upon the Company's election to have this Section 1502 apply to the Outstanding Securities, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities (including the provisions of Article XIII hereof) on the date the conditions set forth below are satisfied (hereinafter referred to as a "Defeasance"). For this purpose, such Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Outstanding Securities to receive, solely from the trust fund described in Section 1504 and as more fully set forth in such Section, payments in respect of the principal of and premium, if any, and interest on such Securities when such payments are due, (b) the Company's obligations with respect to such Securities under Sections 305, 306, 607, 608, 702, 1002 and 1003, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder, (d) the Company's obligations under Article XII and (e) this Article XV. Subject to compliance with this Article XV, the Company may exercise its option under this Section 1502 notwithstanding the prior exercise of its option under Section 1503. SECTION 1503. Covenant Defeasance. Upon the Company's election to have this Section 1503 apply to the Outstanding Securities, the Company (a) shall be released from its obligations under Section 1007, Section 1008, and the provisions of Article XIII hereof, and (b) the occurrence of an event specified in Section 501(d) shall not constitute an Event of Default, and such Sections and Article shall no longer apply with respect to or for the benefit of the Company, the Securities, the Holders of Securities and the holders of Senior Indebtedness on and after the date the conditions set forth below are satisfied (hereinafter referred to as a "Covenant Defeasance"). For this purpose, such Covenant Defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Sections or Article, whether directly or indirectly by reason of any reference elsewhere herein to any such Sections or Article or by reason of any -88- 96 reference in any such Sections or Article to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby. SECTION 1504. Conditions to Defeasance or Covenant Defeasance. The following shall be the conditions to the application of either Section 1502 or Section 1503 to the Outstanding Securities: (a) The Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article XV applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (i) money in an amount, or (ii) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee or other qualifying trustee to pay and discharge, the principal of and premium, if any, on and each installment of interest on the Securities on the Stated Maturity of such principal or the stated due date of such installment of interest in accordance with the terms of this Indenture and of such Securities. For this purpose, "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such U.S. Government obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. (b) In the case of an election under Section 1502, the Company shall have delivered to the Trustee an Opinion of Counsel stating that -89- 97 (x) the Company has received from, or there has been published by, the Internal Revenue service a ruling or (y) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Outstanding Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, Defeasance and discharge and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Defeasance had not occurred. (c) In the case of an election under Section 1503, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit and Covenant Defeasance had not occurred. (d) In the case of an election under Section 1502 or 1503, the Company shall have delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of such deposit. (e) At the time of such Defeasance or Covenant Defeasance: (i) no default in the payment of all or a portion of principal of or premium, if any, or interest on any Senior Indebtedness shall have occurred and be continuing, and no event of default with respect to any Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable and (ii) (A) no other event of default with respect to any Senior Indebtedness shall have occurred and be continuing permitting the holders of such Senior Indebtedness (or a trustee on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, (B) no judicial proceeding shall be pending with respect to any such event of default and (C) the Company and the Trustee shall not have received a notice with respect to any such event of default from any holder of Senior Indebtedness (or their representative or representatives), or, in the case of either clause (A) or clause (B) above, each such default or event of default shall have been cured or waived or shall have ceased to exist. (f) No Event of Default or event which with notice or lapse of time, or both, would become an Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as Sections 501(e) and (f) are -90- 98 concerned, at any time during the period ending on the 90th day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (g) Such Defeasance or Covenant Defeasance shall not cause the Trustee to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to any securities of the Company. (h) Such Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any other agreement or instrument to which the Company is a party or by which it is bound. (i) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Defeasance under Section 1502 or the Covenant Defeasance under Section 1503 (as the case may be) have been complied with. (j) Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit to constitute, unless it is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended. The subordination provisions of Article XIII shall no longer apply to the Securities upon such Defeasance or Covenant Defeasance. SECTION 1505. Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee collectively, for purposes of this Section 1505, the "Trustee") pursuant to Section 1504 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of the Securities, of all sums due and to become due thereon, in respect of principal of and premium, if any, and interest on the Securities, but such money need not be segregated from other funds except to the extent required by law. Money so held in trust, to the extent allocated for the payment of Securities, shall not be subject to the provisions of Article XIII. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1504 or the principal and interest received in respect -91- 99 thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. Anything in this Article XV to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1504 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount hereof which would then be required to be deposited to effect an equivalent Defeasance or Covenant Defeasance. The provisions for subordination of the Securities set forth in Article XIII are hereby expressly made subject to the provisions for Defeasance or Covenant Defeasance in this Article XV and, anything herein to the contrary notwithstanding, upon the effectiveness of such Defeasance or Covenant Defeasance, such Securities shall thereupon cease to be so subordinated. SECTION 1506. Reinstatement. If the Trustee or Paying Agent is unable to apply any money in accordance with Section 1502 or 1503 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article XV until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 1502 or 1503; provided, however, that if the Company makes any payment of principal of or premium, if any, or interest on any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or Paying Agent. -92- 100 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. SNYDER OIL CORPORATION By:_____________________________________ Name:___________________________________ Title:__________________________________ TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee By:_____________________________________ Authorized Signatory -93- EX-4.6 4 FIRST AMENDMENT TO FOURTH RESTATED CREDIT AGMT. 1 FIRST AMENDMENT TO FOURTH RESTATED CREDIT AGREEMENT This First Amendment to Fourth Restated Credit Agreement (this "Amendment") is entered into as of the 28th day of April, 1994 by and among Snyder Oil Corporation ("Borrower"), NationsBank of Texas, N.A. as Agent ("Agent"), and NationsBank of Texas, N.A., Wells Fargo Bank, N.A. and Bank One, Texas, N.A., each a national banking association (NationsBank of Texas, N.A., Wells Fargo Bank, N.A. and Bank One, Texas, N.A. are collectively referred to herein as the "Banks"). Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to such terms in the Fourth Restated Credit Agreement dated as of July 1, 1993 by and among Borrower, Agent and the Banks (the "Credit Agreement"). W I T N E S S E T H: WHEREAS, Borrower, Agent and the Banks entered into the Credit Agreement pursuant to which the Banks agreed to make Loans to Borrower on the terms and conditions set forth therein; and WHEREAS, Borrower, Agent and the Banks desire to amend the Credit Agreement in certain respects; NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Amendments to Definitions. The definitions of "Bank Redemption Notice," "Borrowing Base Report," "Conversion Price," "Redemption Notice," and "Restricted Payment" contained in Section 1.1 of the Credit Agreement shall be amended to read in full as follows: "Bank Redemption Notice" means any notice required to be given by Borrower to the Banks pursuant to the definitions of "Qualified Redemption of First Issue," "Qualified Redemption of Second Issue" and "Qualified Redemption of Third Convertible Debentures." "Borrowing Base Report" means the report required to be delivered to the Banks pursuant to Section 4.1 and 4.3 which shall (a) set forth the aggregate amount of all obligations of Borrower to the holders of the Subordinated Notes, the Convertible Debentures and the Preferred Stock coming due within the twelve (12) month period following the next succeeding Determination Date, including, without limitation, (i) dividends anticipated to be paid during such period whether or not declared, and (ii) the full amount of any redemption, sinking fund or mandatory prepayment obligation anticipated to come due during such period with respect to the Subordinated Notes, the Convertible Debentures or the Preferred Stock (whether or not a Bank Redemption Notice or Redemption Notice has been delivered), and (b) include a copy of the Reserve Report and the Related Asset Report upon which the Total Borrowing Base is to be determined. "Conversion Price" means (a) in the case of the First Preferred Stock, the "conversion price" in effect at the time in question as such term is defined in the First Preferred Stock Designation or, if the First Preferred Stock has been exchanged for the First Convertible Debentures, as such term is defined in the First Page 1 2 Indenture, (b) in the case of the Second Preferred Stock, the "conversion price" in effect at the time in question as such term is defined in the Second Preferred Stock Designation or, if the Second Preferred Stock has been exchanged for the Second Convertible Debentures, as such term is defined in the Second Indenture and (c) in the case of the Third Convertible Debentures, the "conversion price" in effect at the time in question as such term is defined in the Third Indenture. "Convertible Debentures" means the First Convertible Debentures, the Second Convertible Debentures and the Third Convertible Debentures, collectively. "Redemption Notice" means a notice by Borrower (or the First Indenture Trustee, the Second Indenture Trustee or the Third Indenture Trustee) to the holders of First Preferred Stock, Second Preferred Stock, First Convertible Debentures, Second Convertible Debentures or Third Convertible Debentures, as applicable, pursuant to which Borrower (or the First Indenture Trustee, the Second Indenture Trustee or the Third Indenture Trustee) calls any such securities for redemption. "Restricted Payment" means (a) any Distribution by Borrower or any Distribution by DJ Partners, L.P., (b) any capital contribution, loan or advance by Borrower or any Restricted Subsidiary to any Unrestricted Subsidiary of Borrower or to DJ Partners, L.P., (c) the issuance of a Guarantee by Borrower or any Restricted Subsidiary with respect to any Debt or other obligation of any Unrestricted Subsidiary, (d) the retirement, redemption or prepayment prior to the scheduled maturity by Borrower or a Restricted Subsidiary of Borrower of any Debt of Borrower or such Restricted Subsidiary which is subordinate to the Obligations, including without limitation, the Subordinate Notes and the Convertible Debentures (and, in the case of the Third Convertible Debentures, any payment of the Change of Control Purchase Price [as defined in the Third Indenture]), and (e) any Investment by Borrower which is a Permitted Investment pursuant to subsection (e) of the definition of Permitted Investment. Notwithstanding the foregoing, "Restricted Payments" shall not include (y) advances made under the Intercompany Loan or (z) contributions by Borrower and SWAT to DJ Partners, L.P. of (i) oil and gas properties owned by Borrower and DJ Partners, L.P. on September 30, 1992 located in Weld County, Colorado (as to the Codell and Niobrara formation only) and Cheyenne County, Nebraska (as to the Niobrara formation only) and (ii) the oil and gas properties owned by Borrower described on Schedule 2 hereto; provided, that, in the case of (z) (i) and (ii) preceding, such properties shall be mortgaged to Agent for the benefit of Banks as required by Section 5.1 hereof prior to the date such properties are contributed to DJ Partners, L.P. for purposes of this definition, at the time Borrower or any Restricted Subsidiary issues any Guarantee of any Debt or other obligation of any Unrestricted Subsidiary, Borrower or such Restricted Subsidiary will be deemed to have made a Restricted Payment in an amount equal to the maximum potential liability of Borrower or such Restricted Subsidiary under such Guarantee. 2. Additional Definitions. The Credit Agreement shall be amended to include new definitions of "Delmar," "Delmar Acquisition," "Delmar Plan," "Qualified Redemption of Third Convertible Debentures," "Third Convertible Debentures," "Third Indenture," "Third Indenture Trustee" and "Third Registration Statement," which shall read in their Page 2 3 respective entirety as follows: "Delmar" means Delmar Operating, Inc., a Delaware corporation which may become a Subsidiary of Borrower as a result of the Delmar Acquisition. "Delmar Acquisition" means the acquisition by Borrower of more than fifty percent (50%) of the outstanding capital stock (on a fully diluted basis) of Delmar Petroleum, Inc. a Delaware corporation, which holds one hundred percent (100%) of the issued and outstanding capital stock of Delmar. "Delmar Plan" means the Delmar Operating, Inc. Pension Plan, a Plan maintained by Delmar. "Qualified Redemption of Third Convertible Debentures" means a redemption by Borrower of the Third Convertible Debentures pursuant to Article XI of the Third Indenture which meets each of the following qualifications: (a) Borrower shall have given the Banks a Bank Redemption Notice not less than twenty (20) days nor more than sixty (60) days prior to the delivery of a Redemption Notice to the holders of the Third Convertible Debentures; (b) Borrower shall not (and shall not permit the Third Indenture Trustee to) deliver the Redemption Notice more than thirty (30) days prior to the date fixed for redemption; (c) such redemption shall not be effective prior to March 31, 1997; and (d) the Closing Price of Borrower's Common Stock on each trading day in the period commencing thirty (30) days prior to the date of delivery of the Redemption Notice through the fifth (5th) Domestic Business Day prior to the date fixed for redemption shall be at least one hundred twenty percent (120%) of the Conversion Price. "Third Convertible Debentures" means Borrower's ___% Convertible Subordinated Notes Due 2001 which may be issued pursuant to the Third Registration Statement. "Third Indenture" means an Indenture to be entered into by and between Borrower and the Third Indenture Trustee setting forth the terms of the Third Convertible Debentures, which shall be in form and substance acceptable to Required Banks. "Third Indenture Trustee" means Texas Commerce Bank National Association and any successor trustee appointed pursuant to the Third Indenture. "Third Registration Statement" means the Registration Statement on Form S-3 (No. 33-52807) under the Securities Act registering the offering and sale of the Third Convertible Debentures in accordance with the Securities Act filed by Borrower with the Securities and Exchange Commission, together with all changes and completions to such Registration Statement filed with the Securities and Exchange Commission after the date hereof, but before the effective date of such Registration Statement. 3. Amendment to Representation Regarding ERISA. Section 7.7 of the Credit Agreement shall be amended to read in full as follows: SECTION 7.7 ERISA. With the exception of the Delmar Plan (to the extent Borrower completes the Delmar Acquisition), neither the Borrower nor any of its Subsidiaries is a party Page 3 4 to or bound by, or at any time prior to the date hereof, has been a party to or bound by, any Plan. 4. Addition of Representations Regarding Third Convertible Debentures. The Credit Agreement shall be amended to include a new Section 7.18 which shall read in full as follows: SECTION 7.18. Issuance of Third Convertible Debentures. Upon the issuance and sale of the Third Convertible Debentures upon the terms and conditions set forth in the Third Indenture, the Third Convertible Debentures will have been duly authorized by all necessary corporate action on the part of Borrower, will require no action by or in respect of or filing with, any government authority, agency or official and will not contravene, or constitute a default under any provision of applicable law or regulation or of the certificates of incorporation, or partnership agreement, bylaws or other organizational documents of Borrower or any of its Subsidiaries or of any Material Agreement, judgment, injunction, order, decree or other instrument binding upon any such Person or the creation of any Lien on the assets of any such Person other than the Liens securing the Notes, and (b) the Third Registration Statement when it becomes effective will conform in all material respects to the requirements of the Securities Act and the Exchange Act. Neither the Third Registration Statement nor the final prospectus constituting a part thereof (including any documents incorporated therein by reference) will include any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The issuance of the Third Convertible Debentures will be conducted in accordance with all provisions of the Securities Act and the Exchange Act and applicable state securities laws. 5. Amendment to Reporting Covenant. Section 8.1(j) of the Credit Agreement shall be amended to read in full as follows: (j) immediately upon receipt of the same, a copy of the any notice received by Borrower of the occurrence of any Event of Default under and as defined in the Securities Purchase Agreement, the First Indenture, the Second Indenture or the Third Indenture or any event which with notice, lapse of time or both, would, unless cured or waived, become such an Event of Default; 6. Amendment to Debt Covenant. Section 9.1 of the Credit Agreement shall be amended to read in full as follows: SECTION 9.1. Total Additional Debt of the Borrower, Restricted Subsidiaries and DJ Partners, L.P. Neither the Borrower, any Restricted Subsidiary nor DJ Partners, L.P. will incur any Debt other than (a) Debt secured by Permitted Encumbrances described in subpart (1) of the definition of Permitted Encumbrances, (b) Nonrecourse Debt, (c) Third Party Letters of Credit permitted by Section 2.1 hereof, (d) the Loans, (e) the Intercompany Loan, (f) margin accounts with brokers and dealers relating to Margin Stock and other securities, and (g) Guarantees of Debt and other liabilities of other Restricted Subsidiaries and of Borrower provided that such Debt and other liabilities are permitted Page 4 5 pursuant to this Agreement; provided, that the Debt permitted pursuant to Section 9.1(a) and (b) shall not exceed $15,000,000 in the aggregate; provided further that the Third Party Letter of Credit Exposure under Cash Secured Third Party Letters of Credit shall not exceed at any time five percent (5%) of the Borrowing Base in effect at such time; and provided further, that the maximum aggregate outstanding balance of Borrower's and its Subsidiaries' margin accounts shall not exceed one percent (1%) of Borrower's Consolidated Tangible Net Worth at any time. In addition to the foregoing, Borrower may issue the First Convertible Debentures in exchange for the First Preferred Stock, Borrower may issue the Second Convertible Debentures in exchange for the Second Preferred Stock, and Borrower may issue the Third Convertible Debentures; provided, that Borrower shall give each Bank ninety (90) days advance notice of Borrower's intention to complete any exchange of Convertible Debentures for Preferred Stock, and if Majority Banks require that Borrower and the Restricted Subsidiaries grant Liens on their oil and gas properties and Related Assets pursuant to Section 5.1(b), Borrower will not complete such exchange until all requisite Mortgages have been executed and delivered by Borrower and the Restricted Subsidiaries and Agent has notified Borrower that all such Mortgages have been filed of record and that all other steps necessary to perfect (and confirm perfection) of the Liens created by such Mortgages have been taken. 7. Amendment to Restricted Payments Covenants. Section 9.2 of the Credit Agreement shall be amended to read in full as follows: SECTION 9.2. Restricted Payments. Neither the Borrower, any Restricted Subsidiary nor DJ Partners, L.P. will declare or make any Restricted Payment; provided, that, so long as no Default or Event of Default, Borrowing Base Deficiency or noncompliance with Section 10.4 exists (without giving effect to the cure periods provided by Section 4.4 or 10.4), and provided further that no Default or Event of Default would result from such Restricted Payment, Borrower, Restricted Subsidiaries and DJ Partners, L.P. may (a) make Restricted Payments in an aggregate amount (measured cumulatively from March 31, 1993) not to exceed the sum of the following (i) $10,000,000, plus (ii) the net cash proceeds to Borrower from all equity offerings completed by Borrower after March 31, 1993, plus (iii) all cash Distributions actually received by Borrower or any Restricted Subsidiary from Unrestricted Subsidiaries after March 31, 1993, plus (iv) fifty percent (50%) of Borrower's Consolidated Cash Flow earned after March 31, 1993, (b) declare and make a Qualified Redemption of the First Issue, (c) declare and make a Qualified Redemption of the Second Issue, (d) declare and make a Qualified Redemption of the Third Convertible Debentures, (e) issue the First Convertible Debentures in exchange for the Preferred Stock, and (f) at any time on or after March 31, 1994, issue the Second Convertible Debentures in exchange for the Second Preferred Stock. 8. Amendment to Plan Covenant. Section 9.10 of the Credit Agreement shall be amended to read in full as follows: SECTION 9.10 Plans. With the exception of the Delmar Plan (to the extent Borrower completes the Delmar Acquisition), neither the Borrower nor any of its Subsidiaries shall Page 5 6 create, adopt or become bound by any Plan. To the extent Borrower completes the Delmar Acquisition, Borrower shall (a) immediately notify the Banks of the occurrence of any Reportable Event (as defined in Section 4043 of ERISA) with respect to the Delmar Plan, (b) cause the Delmar Plan to at all times meet the minimum funding requirements contained in Section 412 of the Code, (c) cause Delmar to take all steps required to maintain the qualification of the Delmar Plan under Section 401(a) of the Code and the tax exempt status of the related trust under Section 501(a) of the Code, (d) not permit Delmar to materially increase the benefits provided under the Delmar Plan, and (e) not permit Delmar to terminate the Delmar Plan if such termination would result in liability to Borrower or any of its Subsidiaries (including Delmar) of $1,000,000 or more. 9. Amendment to Schedule of Subsidiaries. Schedule 1 to the Credit Agreement is hereby amended to delete Lido Atlantic Trading Company, Inc., Oil Field Systems Corporation and American Onshore Petroleum Company, Inc. due to the merger of such Subsidiaries out of existence. 10. Revocation of Exchange Letters. Reference is hereby made to (a) that certain letter dated September 17, 1993, from Peter E. Lorenzen, Vice President and General Counsel of Borrower addressed to the Banks (the "Exchange Notice Letter"), pursuant to which the Banks were notified of Borrower's intention to issue the First Convertible Debentures in exchange for the First Convertible Stock (the "Exchange"), and (b) the letter agreement (the "Collateral Waiver Letter") dated as of October 6, 1993, by and between Borrower and Banks regarding the Banks limited waiver of the right contained in Section 5.1(b) of the Credit Agreement to require the grant of certain Liens in connection with the Exchange. Borrower has notified Banks that it did not complete the Exchange and that it does not currently intend to complete the Exchange. As such, Borrower hereby rescinds the Exchange Notice and Banks and Borrower hereby mutually rescind the Collateral Waiver Letter, in each case to the same extent as if such letters had never been executed or delivered. As a result of the foregoing, in the event Borrower elects to complete an exchange of the First Preferred Stock for the First Convertible Debentures in the future, it will be necessary for Borrower to again comply with the requirements of Section 9.1 and 5.1(b) of the Credit Agreement. 11. Conditions to Effectiveness. This Amendment shall not be deemed effective until the following shall have been received or occurred: a. Evidence of Corporate Authority; Legal Opinion. Borrower shall have delivered to the Banks (a) resolutions of Borrower's (and to the extent requested, each Restricted Subsidiary's) Board of Directors authorizing execution and delivery of this Amendment certified as being true and correct by Borrower's (or the applicable Restricted Subsidiaries') corporate secretary, and (b) an opinion of Peter E. Lorenzen, Esq., in form and substance acceptable to the Banks, opining with respect to the matters set forth in Paragraph 12 hereof and such other materials as Agent shall reasonably request. b. Approval of Third Convertible Debentures Offering Documents. The Third Indenture and any other related documents, Page 6 7 instruments and agreements shall be in form and substance acceptable to the Required Banks. c. Consent of Guarantors. Borrower shall have caused each Restricted Subsidiary to execute and deliver to the Banks an Acknowledgement of Guaranty substantially in the form of Exhibit A attached hereto. 12. Certificate of Effectiveness. Upon satisfaction of each of the conditions set forth in Paragraph 11 hereof, Borrower and each Bank shall execute a Certificate of Effectiveness (herein so called) substantially in the form of Exhibit B attached hereto and incorporated herein. Upon the execution and delivery of the Certificate of Effectiveness, the Credit Agreement shall be automatically amended on the terms set forth herein without the necessity of any other action on the part of Borrower, Agent or the Banks. Until the execution and delivery of the Certificate of Effectiveness, the Credit Agreement shall remain in full force and effect in accordance with its terms. The date the Certificate of Effectiveness is delivered is referred to herein as the "Effective Date." 13. Legal Expenses. Borrower hereby agrees to pay on demand all reasonable fees and expenses of counsel to Agent incurred by Agent in connection with the preparation, negotiation and execution of this Amendment and all related documents. 14. Certification of Representations and Warranties. Borrower hereby certifies to each Bank that each representation and warranty of it and the Restricted Subsidiaries contained in the Credit Agreement and the other Loan Papers (after giving effect to this Amendment) is true and correct on the date hereof and will be true and correct on the Effective Date; provided, however, that the representation and warranty contained in Section 7.5 of the Credit Agreement shall apply to the most recent financial statements delivered to the Banks pursuant to Section 8.1 thereof. 15. Binding Effect. Borrower hereby represents and warrants to the Banks as follows: a. The execution, delivery and performance by Borrower of this Amendment is within the Borrower's corporate powers, has been duly authorized by all necessary action, requires no action by or in respect of, or filing with, any governmental body, agency or official and do not violate or constitute a default under any provision of applicable law or regulation or of any agreement, judgment, injunction, order, decree or other instrument binding upon Borrower, any Restricted Subsidiary or DJ Partners, L.P. or result in the creation or imposition of any Lien upon any of the assets of Borrower, any Restricted Subsidiary or DJ Partners, L.P.; and b. This Amendment constitutes a valid and binding obligation of the Borrower enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general application. 16. No Defenses. Borrower hereby represents and warrants to the Page 7 8 Banks that there are no defenses to payment, counterclaims or rights of set-off with respect to the Loans existing on the date hereof. 17. Reaffirmation of Loan Papers; Extension of Liens. Any and all of the terms and provisions of the Credit Agreement and the Loan Papers shall, except as amended and modified hereby, remain in full force and effect. Borrower hereby extends the Liens securing the Obligations until the Obligations have been paid in full, and agrees that the amendments and modifications herein contained shall in no manner affect or impair the Obligations or the Liens securing payment and performance thereof. 18. Parties in Interest. All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 19. Counterparts. This Amendment may be executed in counterparts, and all parties need not execute the same counterpart. However, no party shall be bound by this Amendment until all parties have executed a counterpart. 20. COMPLETE AGREEMENT. THIS AMENDMENT, THE CREDIT AGREEMENT AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF BORROWER, THE AGENT AND THE BANKS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG BORROWER, THE AGENT AND BORROWER. 20. Headings. The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers on the date and year first above written. BORROWER SNYDER OIL CORPORATION, a Delaware corporation By: /s/ PETER E. LORENZEN Peter E. Lorenzen Vice President AGENT NATIONSBANK OF TEXAS, N.A. By: /s/ E. MURPHY MARKHAM, IV E. Murphy Markham, IV Senior Vice President Page 8 9 BANKS NATIONSBANK OF TEXAS, N.A. By: /s/ E. MURPHY MARKHAM, IV E. Murphy Markham, IV Senior Vice President WELLS FARGO BANK, N.A. By: /s/ KIRK SCOGGINS Kirk Scoggins Vice President BANK ONE, TEXAS, N.A. By: /s/ BRAD BARTEK Brad Bartek Vice President Page 9 EX-5.1 5 OPINION OF PETER E. LORENZEN 1 (LOGO) SNYDER OIL CORPORATION 777 Main Street, Suite 2500 Fort Worth, Texas 76102 817 / 338-4043 May 3, 1994 Snyder Oil Corporation 777 Main Street, Suite 2500 Fort Worth, Texas 76102 Re: Registration Statement on Form S-3 Registration No. 33-52807 Dear Sirs: As Vice President and General Counsel of Snyder Oil Corporation, a Delaware corporation (the "Company"), I have acted as counsel to the Company in connection with the preparation and filing of the Company's Registration Statement on Form S-3 (Registration No. 33-52807) (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), relating to the offering by the Company of (i) up to an aggregate $115,000,000 face amount of Convertible Subordinated Notes Due 2001 (the "Notes") and (ii) an indeterminate number of shares of common stock of the Company, par value $.01 per share (the "Common Stock"), into which the Notes are convertible. Capitalized terms used and not defined herein have the meaning set forth in the prospectus (the "Prospectus") that is included as part of the Registration Statement. For purposes of this opinion, I have assumed that the final terms of the offering of the Notes will be duly authorized by the committee of the Company's Board of Directors established for such purpose, and that the Indenture will be executed and delivered and the Notes will be executed, authenticated and delivered, in the forms heretofor filed as exhibits to the Registration Statement, with such changes as are necessary to reflect the final terms of the Notes. In connection with the opinions expressed below, I have examined such documents, corporate records and other writings as I have deemed necessary to enable me to express the opinions set forth herein. In such examination I have assumed the genuineness of all original documents and the conformity to original documents of all copies submitted to me. Based upon the foregoing, it is my opinion that: 1. Upon the due execution and delivery of the Indenture and the due execution, authentication and delivery of the Notes in accordance with the terms and in the manner described in the Registration Statement, the Notes will be validly issued and will constitute binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws 2 affecting creditors' rights generally and by general equitable principles limiting the availability of specific enforcement. 2. The shares of Common Stock initially issuable on conversion of the Notes have been duly authorized and reserved for issuance upon such conversion and, when issued upon such conversion in accordance with the terms of the Indenture and the Notes, will be validly issued, fully paid and nonassessable. This opinion is limited to the substantive laws of the States of Texas and New York, the General Corporation Law of the State of Delaware and the applicable federal laws of the United States. I express no opinion as to any matter other than as expressly set forth above, and no opinion or any other matter may be inferred herefrom. This opinion is given as of the date hereof, and I undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth herein. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the use of my name under the caption "Legal Opinions" in the Prospectus. In giving such consent, I do not admit that I come within the category of persons whose consent is required by Section 7 of the Act. Very truly yours, Peter E. Lorenzen Vice President and General Counsel -----END PRIVACY-ENHANCED MESSAGE-----