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As filed with the Securities and Exchange Commission on April 2, 1997
Registration No. 333-23955
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3/A
AMENDMENT NO. 1
REGISTRATION STATEMENT
Under The Securities Act Of 1933
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LOMAK PETROLEUM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 500 Throckmorton Street 34-1312571
(STATE OR OTHER JURISDICTION OF Ft. Worth Texas 76102 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (817) 870-2601 IDENTIFICATION NO.)
(ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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John H. Pinkerton, President
Lomak Petroleum, Inc.
500 Throckmorton Street Fort Worth, Texas 76102
(817) 870-2601
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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With a copy to:
J. Mark Metts
Vinson & Elkins L.L.P.
1001 Fannin, Suite 2300
Houston, Texas 77002-6760
(713) 758-2222
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Approximate date of commencement of proposed sale to the public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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 being 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 /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AMOUNT TO BE PROPOSED PROPOSED AMOUNT OF
REGISTERED MAXIMUM MAXIMUM REGISTRATION FEE
OFFERING PRICE AGGREGATE
PER UNIT(1) OFFERING PRICE(1)
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6% Convertible Subordinated Debentures Due 2007..... $55,000,000 $- $ 55,000,000 $ 16,667
Common Stock, $.01 par value(2)..................... 4,287,249 $19.125 $ 81,993,637 $ 24,847
Total........................................... $ 41,514
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(1) Estimated solely for the purpose of computing the registration fee. This
amount was calculated pursuant to Rule 457 under the Securities Act of
1933, as amended, based on a price of $19.125 (average of the high and low
price of the Common Stock of Lomak Petroleum, Inc, on the New York Stock
Exchange on March 121 1997).
(2) Includes 2,857,143 shares of the Common Stock issuable upon conversion of
the 6% Convertible Subordinated Notes Due 2007, 1,410,106 shares of Common
Stock owned by Cometra Energy L.P. and 20,000 shares of the Common Stock
issuable upon the exercise of warrants outstanding at and exercise price
of $12.88 per share.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 2, 1997
PROSPECTUS
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LOMAK PETROLEUM, INC.
$55,000,000 OF 6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2007
AND
4,287,249 SHARES OF COMMON STOCK
This Prospectus relates to the offer and sale by the Selling
Securityholders (as defined below) of the following securities of Lomak
Petroleum, Inc., a Delaware corporation (the "Company"): (i) $55,000,000 of 6%
Convertible Subordinated Debentures due 2007 (the "6% Debentures") and (ii)
4,287,249 shares (the "Common Shares") of Common Stock, $.01 par value per share
(the "Common Stock").
The foregoing securities consist of the 6% Debentures, the 2,857,143 shares
of the Common Stock issuable upon the conversion of the 6% Debentures, the
1,410,106 shares of Common Stock owned by Cometra Energy L.P. and 20,000 shares
of the Common Stock issuable upon the exercise of outstanding warrants to
purchase Common Stock at a price of $12.88 per share (the "Warrants")
(collectively the "Selling Securityholder Securities"), which may be sold from
time to time for the accounts of certain stockholders and debentureholders of
the Company (the "Selling Securityholders"). See "Selling Securityholders".
The Securities may be sold through agents, underwriters or dealers
designated from time to time. If any underwriters are involved in the sale of
the Securities by the Company in respect of which this Prospectus is being
delivered, the names of such agents or underwriters and any applicable discounts
or commissions with respect to such Securities will also be set forth in a
Prospectus Supplement, to the extent required. See "Plan of Distribution."
The Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "LOM". The closing price of the Common Stock on March 21, 1997, was
$19.125.
The Securities offered by this Prospectus may be sold from time to time by
the Selling Securityholders, or by their transferees. The distribution of these
securities may be effected in one or more transactions that may take place on
the NYSE, including ordinary brokers' transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Securityholders.
The Selling Securityholders and intermediaries through whom such securities
are sold may be deemed "underwriters" within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation. The Company has agreed to indemnify certain of the
Selling Securityholders against certain liabilities, including liabilities under
the Securities Act.
The Company will not receive any of the proceeds from the sale of shares of
the Securities by the Selling Securityholders. See "Use of Proceeds."
All expenses of the registration of securities covered by this Prospectus,
estimated to be $75,000, are to be borne by the Company, except that the Selling
Securityholders will pay any applicable underwriters' commissions and expenses,
brokerage fees or transfer taxes, as well as the fees and disbursements of their
counsel.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A DESCRIPTION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN
THE SECURITIES HEREBY OFFERED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is April __, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following
regional offices: 7 World Trade Center, Suite 1300, New York, New York 10048;
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies can be obtained by mail at prescribed rates. Requests for
copies should be directed to the Commission's Public Reference Section,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a Website (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. In addition, reports, proxy statements and
other information concerning the Company can be inspected and copied at the
offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New
York, New York 10005, on which the Common Stock is listed.
This Prospectus constitutes a part of a Registration Statement filed by
the Company with the Commission under the Securities Act. This prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and related exhibits for
further information with respect to the Company and the Securities offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents and information heretofore filed with the
Commission by the Company are hereby incorporated by reference into this
Prospectus:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
2. The Company's Current Report on Form 8-K dated February 26,
1997, as amended on Form 8-K/A on March 14, 1997.
3. The Company's Current Report on Form 8-K, dated April 19,
1996, as amended on Form 8-K/A, dated May 31, 1996
4. The description of the Common Stock contained in the
Registration Statement on Form 8-A declared effective by the
Commission on October 8, 1996.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offerings made hereby 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 statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. The Company will provide without charge
to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any document described above (other than exhibits). Requests for such
copies should be directed to Lomak Petroleum, Inc., 500 Throckmorton Street,
Fort Worth, Texas 76102, Attn: Corporate Secretary, Telephone No. (817)
870-2601.
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THE COMPANY
Lomak is an independent energy company engaged in oil and gas
development, exploration and acquisition primarily in three core areas: the
Midcontinent, Appalachia and the Gulf Coast. Over the past five years, the
Company has significantly increased its reserves and production through
acquisitions and, to a growing extent, development and exploration of its
properties. On a pro forma basis as of December 31, 1996, the Company had proved
reserves of 644 Bcfe with a Present Value of $974 million. On an Mcfe basis, the
reserves were 63% developed and 77% natural gas, with a reserve life index
excess of 13 years. Properties operated by the Company accounted for 94% of
its pro forma Present Value. The Company also owns over 2,000 miles of gas
gathering systems and a gas processing plant in proximity to its principal gas
properties. On a pro forma basis in 1996, the Company had revenues of $172
million and EBITDA of $105 million.
The Company recently acquired oil and gas properties located in West
Texas, South Texas and the Gulf of Mexico (the "Cometra Properties") from
American Cometra, Inc. ("Cometra") for a purchase price of $385 million (the
"Cometra Acquisition"), consisting of $355 million in cash and 1,410,106 shares
of Common Stock. The Company financed the cash portion of the purchase price
with $221 million of borrowings under its bank credit facility and the issuance
to Cometra of a $134 million non-interest bearing promissory note due March 31,
1997, which is secured by a bank letter of credit. As a result of the Cometra
Acquisition, the Company has significantly expanded its inventory of both
development and exploration projects, increased its proved reserves at December
31, 1996 by 68% to 644 Bcfe and increased the Company's Present Value at
December 31, 1996 by 98% to $974 million.
From 1991 through 1996, the Company made 63 acquisitions for an
aggregate purchase price of approximately $635 million and has spent $39 million
on development and exploration activities. These activities have added
approximately 719 Bcfe of reserves at an average cost of $0.76 per Mcfe. As a
result, the Company has achieved substantial growth since 1991.
The Company maintains its corporate headquarters at 500 Throckmorton
Street, Fort Worth, Texas 76102 and its telephone number is (817) 870-2601.
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, together with the other information contained in this
Prospectus, the following risk factors:
VOLATILITY OF OIL AND GAS PRICES
The Company's financial condition, operating results and future growth
and the carrying value of its oil and gas properties are substantially dependent
on prevailing prices of, and demand for, oil and gas. The Company's ability to
maintain or increase its borrowing capacity and to obtain additional capital on
attractive terms is also substantially dependent upon oil and gas prices.
Historically the markets for oil and gas have been volatile and are likely to
continue to be volatile in the future. Prices for oil and gas are subject to
large fluctuations in response to relatively minor changes in the supply of and
demand for oil and gas, market uncertainty and a variety of additional factors
beyond the control of the Company. These factors include weather conditions in
the United States and elsewhere, the economic conditions in the United States
and elsewhere, the actions of the Organization of Petroleum Exporting Countries
("OPEC"), governmental regulation, political stability in the Middle East and
elsewhere, the supply and demand of oil and gas, the price of foreign imports
and the availability and prices of alternate fuel sources. Any substantial and
extended decline in the price of oil or gas would have an adverse effect on the
Company's carrying value of its proved reserves, borrowing capacity, the
Company's ability to obtain additional capital, and its financial condition,
revenues, profitability and cash flows from operations.
Volatile oil and gas prices make it difficult to estimate the value of
producing properties for acquisition and often cause disruption in the market
for oil and gas producing properties, as buyers and sellers have difficulty
agreeing on such value. Price volatility also makes it difficult to budget for
and project the return on acquisitions and development and exploitation
projects.
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UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET REVENUES
This Prospectus contains estimates of the Company's oil and gas
reserves and the future net revenues from those reserves which have been
prepared by the Company and certain independent petroleum consultants. Reserve
engineering is a subjective process of estimating the recovery from underground
accumulations of oil and gas that cannot be measured in an exact manner, and the
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment. Estimates of
economically recoverable oil and gas reserves and of future net cash flows
necessarily depend upon a number of variable factors and assumptions, such as
historical production from the area compared with production from other
producing areas, the assumed effects of regulations by governmental agencies and
assumptions concerning future oil and gas prices, future operating costs,
severance and excise taxes, development costs and workover and remedial costs,
all of which may in fact vary considerably from actual results. Because all
reserve estimates are to some degree speculative, the quantities of oil and gas
that are ultimately recovered, production and operation costs, the amount and
timing of future development expenditures and future oil and gas sales prices
may all vary from those assumed in these estimates and such variances may be
material. In addition, different reserve engineers may make different estimates
of reserve quantities and cash flows based upon the same available data.
The present value of estimated future net cash flows referred to in
this Prospectus should not be construed as the current market value of the
estimated proved oil and gas reserves attributable to the Company's properties.
In accordance with applicable requirements of the Commission, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate, whereas actual future prices
and costs may be materially higher or lower. The calculation of the Present
Value of the Company's oil and gas reserves were based on prices on December 31,
1996. Average product prices at December 31, 1996 were $23.58 per barrel of oil
and $3.54 per Mcf of gas and pro forma average product prices at December 31,
1996 were $23.23 per barrel of oil and $3.99 per Mcf of gas, which prices were
substantially higher than historical prices used by the Company to calculate
Present Value in recent years. The closing price on the New York Mercantile
Exchange ("NYMEX") for the prompt month contract delivered at Henry Hub on
December 31, 1996 and February 28, 1997 was $2.76 and $1.83, respectively. The
closing price on NYMEX for the prompt month contract delivered for Light Crude
Oil on December 31, 1996 and February 28, 1997 was $25.92 and $20.30,
respectively. In addition, the calculation of the present value of the future
net revenues using a 10% discount as required by the Commission is not
necessarily the most appropriate discount factor based on interest rates in
effect from time to time and risks associated with the Company's reserves or the
oil and gas industry in general. Furthermore, the Company's reserves may be
subject to downward or upward revision based upon actual production, results of
future development, supply and demand for oil and gas, prevailing oil and gas
prices and other factors.
FINDING AND ACQUIRING ADDITIONAL RESERVES
The Company's future success depends upon its ability to find or
acquire additional oil and gas reserves that are economically recoverable.
Except to the extent the Company conducts successful exploration or development
activities or acquires properties containing proved reserves, the proved
reserves of the Company will generally decline as they are produced. There can
be no assurance that the Company's planned development projects and acquisition
activities will result in significant additional reserves or that the Company
will have success drilling productive wells at economic returns. If prevailing
oil and gas prices were to increase significantly, the Company's finding costs
to add new reserves could increase. The drilling of oil and gas wells involves a
high degree of risk, especially the risk of dry holes or of wells that are not
sufficiently productive to provide an economic return on the capital expended to
drill the wells. The cost of drilling, completing and operating wells is
uncertain, and drilling or production may be curtailed or delayed as a result of
many factors.
The Company's business is capital intensive. To maintain its base of
proved oil and gas reserves, a significant amount of cash flow from operations
must be reinvested in property acquisitions, development or exploration
activities. To the extent cash flow from operations is reduced and external
sources of capital become limited or unavailable, the Company's ability to make
the necessary capital investments to maintain or expand its asset base would be
impaired. Without such investment, the Company's oil and gas reserves would
decline.
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DEVELOPMENT AND EXPLORATION RISKS
The Company intends to increase its development and exploration
activities. Exploration drilling, and to a lesser extent development drilling,
involve a high degree of risk that no commercial production will be obtained or
that the production will be insufficient to recover drilling and completion
costs. The cost of drilling, completing and operating wells is uncertain. The
Company's drilling operations may be curtailed, delayed or canceled as a result
of numerous factors, including title problems, weather conditions, compliance
with governmental requirements and shortages or delays in the delivery of
equipment. Furthermore, completion of a well does not assure a profit on the
investment or a recovery of drilling, completion and operating costs.
ACQUISITION RISKS
The Company intends to continue acquiring oil and gas properties. It
generally is not feasible to review in detail every individual property involved
in an acquisition. Ordinarily, review efforts are focused on the higher-valued
properties. However, even a detailed review of all properties and records may
not reveal existing or potential problems nor will it permit the Company to
become sufficiently familiar with the properties to assess fully their
deficiencies and capabilities. Inspections are not always performed on every
well, and environmental problems, such as groundwater contamination, are not
necessarily observable even when an inspection is undertaken.
The Cometra Acquisition substantially increased the Company's reserves,
cash flow and production. The Company's ability to achieve any advantages from
the Cometra Acquisition will depend in large part on successfully integrating
the Cometra Properties into the operations of the Company. No assurances can be
made that the Company will be able to achieve such integration successfully.
EFFECTS OF LEVERAGE
On a pro forma basis giving effect to the Cometra Acquisition and the
related financings, at December 31, 1996, the Company's outstanding indebtedness
would have been $412 million and the Company's ratio of total debt to total
capitalization would have been 66%. In 1994, 1995, 1996 and on a pro forma basis
for 1996, the Company's ratio of earnings to fixed charges was 2.0x, 2.1x, 3.6x
and 1.9x, respectively. The principal payment obligations of the Company's pro
forma debt for 1997, 1998 and 1999 amount to $26,000, $413,000 and $12,000
respectively. The Company's level of indebtedness will have several important
effects on its future operations, including (i) a substantial portion of the
Company's cash flow from operations must be dedicated to the payment of interest
on its indebtedness and will not be available for other purposes, (ii) covenants
contained in the Company's debt obligations will require the Company to meet
certain financial tests, and other restrictions will limit its ability to borrow
additional funds or to dispose of assets and may affect the Company's
flexibility in planning for, and reacting to, changes in its businesses,
including possible acquisition activities and (iii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired. The Company's ability to meet its debt service obligations and to
reduce its total indebtedness will be dependent upon the Company's future
performance, which will be subject to oil and gas prices, the Company's level of
production, general economic conditions and to financial, business and other
factors affecting the operations of the Company, many of which are beyond its
control. There can be no assurance that the Company's future performance will
not be adversely affected by some or all of these factors. In addition, the
Credit Agreement and the Indenture for the Notes contain restrictions on the
Company's ability to pay dividends on capital stock. Under the most restrictive
of these provisions, the Company could have paid $5,000,000 of dividends as of
December 31, 1996. See "Forward-Looking Information."
CAPITAL AVAILABILITY
The Company's strategy of acquiring and developing oil and gas
properties is dependent upon its ability to obtain financing for such
acquisitions and development projects. The Company expects to utilize the Credit
Agreement among the Company and several banks (the "Banks") to borrow a portion
of the funds required for any given transaction or project. If funds under the
Credit Agreement are not available to fund acquisition and development projects,
the Company would seek to obtain such financing from the sale of equity
securities or other debt financing. There can be no assurance that any such
other financing would be available on terms acceptable to the Company. Should
sufficient capital not be available, the Company may not be able to continue to
implement its strategy.
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The Credit Agreement limits the amounts the Company may borrow to
amounts, determined by the Banks, in their sole discretion, based upon a variety
of factors including the discounted present value of the Company's estimated
future net cash flow from oil and gas production (the "Borrowing Base"). At
March 17, 1997, the Borrowing Base was $300 million, of which the Company had
borrowings of $329 million outstanding (including $134 million of then
outstanding letters of credit to secure the promissory note issued to Cometra as
part of the purchase price in the Cometra Acquisition). If oil or gas prices
decline below their current levels, the availability of funds and the ability to
pay outstanding amounts under the Credit Agreement could be materially adversely
affected. The Indenture for the Company's 8.75% Senior Subordinated Notes Due
2007 (the "Senior Subordinated Notes") also contains restrictions on the
Company's ability to incur additional indebtedness, and other contractual
arrangements to which the Company may become subject to in the future could
contain similar restrictions.
OPERATING HAZARDS AND UNINSURED RISKS; PRODUCTION CURTAILMENTS
The oil and gas business involves a variety of operating risks,
including, but not limited to, unexpected formations or pressures,
uncontrollable flows of oil, gas, brine or well fluids into the environment
(including groundwater contamination), blowouts, cratering, fires, explosions,
pipeline ruptures or spills, pollution and other risks, any of which could
result in personal injuries, loss of life, damage to properties, environmental
pollution, suspension of operations and substantial losses. Although the Company
carries insurance which it believes is reasonable, it is not fully insured
against all risks. The Company does not carry business interruption insurance.
Losses and liabilities arising from uninsured or under-insured events could have
a material adverse effect on the financial condition and results of operations
of the Company.
From time to time, due primarily to contract terms, pipeline
interruptions or weather conditions, the producing wells in which the Company
owns an interest have been subject to production curtailments. The curtailments
vary from a few days to several months. In most cases the Company is provided
only limited notice as to when production will be curtailed and the duration of
such curtailments. The Company is currently not curtailed on any of its
production.
Certain of the Cometra Properties are offshore operations in the Gulf
of Mexico which are subject to a variety of operating risks peculiar to the
marine environment, such as hurricanes or other adverse weather conditions, more
extensive governmental regulation, including regulations that may, in certain
circumstances, impose strict liability for pollution damage, and to interruption
or termination of operations by governmental authorities based on environmental
or other considerations.
HEDGING RISKS
From time to time, the Company hedges a portion of its physical oil and
natural gas production by entering short positions through fixed price swaps or
options. The Company does not generally trade directly utilizing NYMEX futures.
The Company currently has one oil fixed price swap relating to 80,000 Bbls in
each of January, February and March 1997 and 60,000 Bbls in April 1997. The
settlement is determined by the difference between the Company's fixed price and
the average of the daily prompt NYMEX WTI contract during each corresponding
month. The Company had one fixed price natural gas swap during January 1997
relating to 155,000 MmBtu. As of March 17, 1997, there are no other hedge
positions.
The Company's Vice-President--Gas Management has the responsibility for
implementing approved hedge strategies. The hedge program provides for oversight
and reporting requirements, hedge goals and how strategies will be developed.
The above described hedges represent approximately 12% of the Company's
combined oil and gas production through April 1997, and there are none
thereafter. The production that is hedged represents 51% of the Company's oil
production and 1% of the Company's gas production through April 1997. None of
the production sold pursuant to fixed price gas sales contracts is hedged.
These hedges have in the past involved fixed price arrangements and
other price arrangements at a variety of prices, floors and caps. The Company
may in the future enter into oil and natural gas futures contracts, options and
swaps. The Company's hedging activities, while intended to reduce the Company's
sensitivity to changes in market prices of oil and gas, are subject to a number
of risks including instances in which (i) production is less than expected, (ii)
there is a widening of price differentials between delivery points required by
fixed price delivery contracts to the extent they differ from those of the
Company's production or (iii) the Company's customers or the counterparties to
its futures contracts fail to purchase or deliver the contracted quantities of
oil or natural gas. Additionally, the fixed price sales and hedging contracts
limit the benefits the
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Company will realize if actual prices rise above the contract prices. In
the future, the Company may increase the percentage of its production covered by
hedging arrangements.
GAS CONTRACT RISK
A significant portion of the Company's production is subject to fixed
price contracts. On a pro forma basis, approximately 47% of average gas
production for December 1996 was sold subject to fixed price sales contracts
(including a contract relating to the Cometra Properties described below and
excluding the hedging activities described above). These fixed price contracts
are at prices ranging from $2.15 to $3.70 per Mcf. The fixed price contracts
with terms of less than one year, between one and five years and greater than
five years constitute approximately 31%, 65% and 4%, respectively, of the volume
sold under fixed price contracts. The fixed price sales contracts limit the
benefits the Company will realize if actual prices rise above the contract
prices.
As part of the Cometra Acquisition, the Company acquired a gas sales
contract covering 20,000 acres currently producing approximately 20,000 Mcf/d.
The price paid pursuant to the contract was $3.70 per Mcf at December 31, 1996
(65% higher than average 1996 natural gas prices received by the Company) and
escalates at $0.05 per Mcf per annum. The contract is with a large gas utility
and expires in June 2000. This contract represents 15% of the Company's pro
forma December 1996 production on an Mcfe basis.
The gas contract contains language that requires the purchaser to
purchase all of the gas legally produced on the designated acreage. The contract
also contains language that may be read to provide that the purchaser is not
required to purchase more than 80% of the Company's delivery capacity (up to a
delivery capacity of 20,000 Mcf/d). However, since the commencement of the
contract in 1990 through the date hereof, the purchaser has purchased all of the
gas produced on the designated acreage.
The Company believes that these fixed price contracts are enforceable
and it has not received any notice or other indication from any of the
counterparties that they intend to cease performing any of their obligations
under these contracts. However, there can be no assurance that one or more of
these counterparties will not attempt to totally or partially mitigate their
obligations under these contracts. If any of the purchasers under the contracts
should be successful in doing so, then the Company could be required to market
its production on less attractive terms, which could have a material adverse
effect on the Company's financial condition, results of operations and cash
flow.
GAS GATHERING, PROCESSING AND MARKETING
The Company's gas gathering, processing and marketing operations depend
in large part on the ability of the Company to contract with third party
producers to produce their gas, to obtain sufficient volumes of committed
natural gas reserves, to maintain throughput in the Company's processing plant
at optimal levels, to replace production from declining wells, to assess and
respond to changing market conditions in negotiating gas purchase and sale
agreements and to obtain satisfactory margins between the purchase price of its
natural gas supply and the sales price for such residual gas volumes and the
natural gas liquids processed. In addition, the Company's operations are subject
to changes in regulations relating to gathering and marketing of oil and gas.
The inability of the Company to attract new sources of third party natural gas
or to promptly respond to changing market conditions or regulations in
connection with its gathering, processing and marketing operations could
materially adversely affect the Company's financial condition and results of
operations.
LAWS AND REGULATIONS
The Company's operations are affected by extensive regulation pursuant
to various federal, state and local laws and regulations relating to the
exploration for and development, production, gathering, marketing,
transportation and storage of oil and gas. These regulations, among other
things, control the rate of oil and gas production, and control the amount of
oil that may be imported. The Company's operations are subject to numerous laws
and regulations governing plugging and abandonment, the discharge of materials
into the environment or otherwise relating to environmental protection. These
laws and regulations require the acquisition of a permit before drilling
commences, restrict the types, quantities and concentration of various
substances that can be released into the environment in connection with drilling
and production activities, limit or prohibit drilling activities on certain
lands lying within wilderness, wetlands and other protected areas, and impose
substantial liabilities
7
9
for pollution which might result from the Company's operations. The Company
may also be subject to substantial clean-up costs for any toxic or hazardous
substance that may exist under any of its properties. Moreover, the recent trend
toward stricter standards in environmental legislation and regulation is likely
to continue. For instance, legislation has been proposed in Congress from time
to time that would reclassify certain crude oil and natural gas exploration and
production wastes as "hazardous wastes" which would make the reclassified wastes
subject to much more stringent handling, disposal and clean-up requirements. If
such legislation were to be enacted, it could have a significant impact on the
operating costs of the Company, as well as the oil and gas industry in general.
Initiatives to further regulate the disposal of crude oil and natural gas wastes
are also pending in certain states, and these various initiatives could have a
similar impact on the Company. The Company could incur substantial costs to
comply with environmental laws and regulations.
COMPETITION
The Company encounters substantial competition in acquiring properties,
marketing oil and gas, securing equipment and personnel and operating its
properties. The competitors in acquisitions, development, exploration and
production include major oil companies, numerous independent oil and gas
companies, individual proprietors and others. Many of these competitors have
financial and other resources which substantially exceed those of the Company
and have been engaged in the energy business for a much longer time than the
Company. Therefore, competitors may be able to pay more for desirable leases and
to evaluate, bid for and purchase a greater number of properties or prospects
than the financial or personnel resources of the Company will permit.
DEPENDENCE ON KEY PERSONNEL
The Company depends, and will continue to depend in the foreseeable
future, on the services of its officers and key employees with extensive
experience and expertise in evaluating and analyzing producing oil and gas
properties and drilling prospects, maximizing production from oil and gas
properties and marketing oil and gas production, including John H. Pinkerton,
the Company's President and Chief Executive Officer. However, the Company does
not have employment contracts with any of its officers or key employees. The
ability of the Company to retain its officers and key employees is important to
the continued success and growth of the Company. The loss of key personnel could
have a material adverse effect on the Company. The Company does not maintain key
man life insurance on any of its officers or key employees.
CERTAIN BUSINESS INTERESTS OF CHAIRMAN
Thomas J. Edelman, Chairman of the Company, is also the Chairman,
President and Chief Executive Officer of Patina Oil & Gas Company ("Patina"), a
publicly traded oil and gas company. The Company currently has no existing
business relationships with Patina, and Patina does not own any of the Company's
securities. However, as a result of Mr. Edelman's position in Patina, conflicts
of interests may arise between them. The Company has board policies that require
Mr. Edelman to give notification of any potential conflicts that may arise
between the Company and Patina. There can be no assurance, however, that the
Company will not compete with Patina for the same acquisition or encounter other
conflicts of interest.
SUBORDINATION OF 6% DEBENTURES
The 6% Debentures will be subordinated in right of payment to all
existing and future Senior Debt of the Company, including borrowings under the
Credit Agreement and the Senior Subordinated Notes. In the event of bankruptcy,
liquidation or reorganization of the Company, the assets of the Company will be
available to pay obligations on the Notes only after all Senior Debt has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Notes outstanding. The aggregate principal amount of
Senior Debt of the Company, as of December 31, 1996, would have been $229
million on a pro forma basis. Additional Senior Debt may be incurred by the
Company from time to time, subject to certain restrictions. In addition to being
subordinated to all existing and future Senior Debt of the Company, the 6%
Debentures will not be secured by any of the Company's assets, unlike the
borrowings under the Credit Agreement. See "Description of the
Notes--Subordination."
8
10
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the 6% Debentures) is subject
to review under relevant federal and state fraudulent conveyance statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of other
creditors of the Company. To the extent that a court were to find that (x) the
6% Debentures were incurred with the intent to hinder, delay or defraud any
present or future creditor or that the Company contemplated insolvency with a
design to favor one or more creditors to the exclusion in whole or in part of
others or (y) the Company did not receive fair consideration or reasonably
equivalent value for issuing the 6% Debentures and, at the time thereof, the
Company (i) was insolvent or rendered insolvent by reason of the issuance of the
6% Debentures or the Guarantee, (ii) was engaged or about to engage in a
business or transaction for which its remaining assets constituted unreasonably
small capital or (iii) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, a court could avoid or
subordinate the 6% Debentures in favor of other creditors.
On the basis of historical financial information and recent operating
history and other information currently available to it, the Company believes
that the 6% Debentures were incurred for proper purposes and in good faith and
that, after giving effect to Indebtedness incurred in connection with the
issuance of the 6% Debentures, the Company is solvent, will have sufficient
capital for carrying on its business and will be able to pay its debts as such
debts become absolute and mature. There can be no assurance, however, that a
court passing on such questions would reach the same conclusions and, if not, a
court could, among other things, void all or a portion of the Company's
obligations to holders of 6% Debentures and/or subordinate the Company's
obligations under the 6% Debentures to a greater extent than would otherwise be
the case.
ABSENCE OF A PUBLIC MARKET FOR 6% DEBENTURES
There is no existing market for the 6% Debentures and, although the
Underwriters have advised the Company that they currently intend to make a
market in the 6% Debentures, the Underwriters are not obligated to do so and may
discontinue such market making at any time. The Company does not intend to apply
for listing of the 6% Debentures on a securities exchange or to seek approval
for quotation through an automated quotation system. Accordingly, there can be
no assurance that an active market will develop for the 6% Debentures or, if
developed, that such market will be sustained or as to the liquidity of any
market. The initial offering price of the 6% Debentures may bear no relationship
to the market price of the 6% Debentures. Factors such as quarterly or cyclical
variations in the Company's financial results, variations in interest rates,
future announcements concerning the Company or its competitors, government
regulation, general economic and other conditions and developments affecting the
oil and gas industry could cause the market price of the 6% Debentures to
fluctuate substantially.
RISKS RELATING TO A CHANGE OF CONTROL
Upon a Change of Control (as defined herein), holders of the 6%
Debentures will have the right to require the Company to repurchase all or any
part of such holders' 6% Debentures at a price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
repurchase. The events that constitute a Change of Control hereunder would
constitute a default under the Credit Agreement, which prohibits the purchase of
the 6% Debentures by the Company in the event of certain Change of Control
events unless and until such time as the Company's indebtedness under the Credit
Agreement is repaid in full. There can be no assurance that the Company and the
Subsidiary Guarantors would have sufficient financial resources available to
satisfy all of its or their obligations under the Credit Agreement and the 6%
Debentures in the event of a Change of Control. The Company's failure to
purchase the 6% Debentures would result in a default under the Indenture and
under the Credit Agreement, each of which could have adverse consequences for
the Company and the holders of the 6% Debentures. See "Description of Capital
Stock and Indebtedness" and "Description of the 6% Convertible Subordinated
Debentures ." The definition of "Change of Control" in the Indenture includes a
sale, lease, conveyance or other disposition of "all or substantially all" of
the assets of the Company and its Subsidiaries taken as a whole to a person or
group of persons. There is little case law interpreting the phrase "all or
substantially all" in the context of an indenture. Because there is no precise
established definition of this phrase, the ability of a holder of the 6%
Debentures to require the Company to repurchase such 6% Debentures as a result
of a sale, lease, conveyance or transfer of all or substantially all of the
Company's assets to a person or group of persons may be uncertain.
9
11
FORWARD-LOOKING INFORMATION
Information included in this Prospectus, including information
incorporated by reference herein, contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act, including projections, estimates and expectations. Those statements by
their nature are subject to certain risks, uncertainties and assumptions and
will be influenced by various factors. Should one or more of these statements or
their underlying assumptions prove to be incorrect, actual results could vary
materially. Although the Company believes that such projections, estimates and
expectations are based on reasonable assumptions, it can give no assurance that
such projections, estimates and expectations will be achieved. Important factors
that could cause actual results to differ materially from those in the
forward-looking statements herein include political and economic developments in
the United States and foreign countries, federal and state regulatory
developments, the timing and extent of changes in commodity prices, the extent
of success in acquiring oil and gas properties and in discovering, developing
and producing reserves and conditions of the capital markets and equity markets
during the periods covered by the forward-looking statements. See "Risk Factors"
for further information with respect to certain of such factors. In addition,
certain of such projections and expectations are based on historical results,
which may not be indicative of future performance. See "Unaudited Pro Forma
Consolidated Financial Statements."
RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
Pro Forma
1992 1993 1994 1995 1996 1996
----------- ---------- ----------- ----------- ---------- ------------
Ratio of earnings to fixed charges 1.9x 2.2x 2.0x 2.1x 3.6x 1.9x
Ratio of earnings to fixed
charges and preferred
dividends 1.5x 1.7x 1,7x 1.9x 2.7x 1.8x
- ---------------
For purposes of determining the ratio of earnings to fixed charges, earnings are
defined as income before income taxes plus fixed charges. Fixed charges consist
of interest expense on all indebtedness.
USE OF PROCEEDS
The Company will not receive any proceeds upon the sale by the Selling
Securityholders of the Selling Securityholder Securities.
10
12
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1996, and the pro forma capitalization of the Company at December
31, 1996, giving effect to the Cometra Acquisition and the related financings
and certain other acquisitions and financings consummated in 1996, as described
in the notes to the Unaudited Pro Forma Consolidated Financial Statements,
incorporated by reference in this prospectus as if such transactions occurred on
December 31, 1996. This table should be read in conjunction with the
Consolidated Financial Statements and Unaudited Pro Forma Consolidated Financial
Statements and Notes thereto incorporated into this Prospectus.
December 31, 1996
------------------------------------
Actual Pro Forma
------------------ ------------------
(unaudited)
(Dollars in thousands)
Current portion of debt $ 26 $ 26
================== ==================
Long-term debt:
Revolving credit facility............................... $ 61,355 $231,305
8.75% Senior Subordinated Notes......................... -- 125,000
6% Convertible Subordinated Debentures (1).............. 55,000 55,000
Other long-term debt.................................... 425 425
------------------ ------------------
Total long-term debt............................. $116,780 $411,730
================== ==================
Stockholders' equity:
Preferred Stock, $1 par value, 4,000,000 shares
authorized: $2.03 Convertible Preferred Stock,
1,150,000 shares outstanding ($28,750,000
liquidation preference)(2)....................... 1,150 1,150
Common Stock, $.01 par value, 35,000,000 shares
authorized: 14,750,537 issued and outstanding;
20,160,643 shares issued and outstanding
pro forma (3).................................... 148 202
Capital in excess of par value.......................... 110,248 204,294
Retained earnings....................................... 5,291 5,291
Unrealized gain on marketable securities................ 692 692
------------------ ------------------
Total stockholders' equity....................... 117,529 211,629
------------------ ------------------
Total capitalization........................ $234,309 $623,359
================== ==================
- -------------------
(1) The 6% Convertible Subordinated Debentures were issued on December 27, 1996. See "Description of Capital Stock
and Indebtedness."
(2) The $2.03 Convertible Preferred Stock, may, at the election of the Company, be exchanged for an aggregate of
$28,750,000 principal amount of 8.125% Convertible Subordinated Notes due December 31, 2005. See "Description of
Capital Stock and Indebtedness."
(3) The pro forma column includes the 1,410,106 shares issued to Cometra as partial consideration for the Cometra
Properties.
11
13
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock was listed on the NYSE on October 11, 1996 under the
symbol "LOM". Prior to listing on the NYSE, the Common Stock was listed on the
Nasdaq National Market under the symbol "LOMK". On March 17, 1997, 20,272,242
shares were held by approximately 4,300 stockholders of record.
The following table sets forth the high and low sales prices as
reported on the NYSE Composite Transaction tape or the Nasdaq National Market,
as applicable, on a quarterly basis for the periods indicated.
Common
Stock
High Low Dividends
----------- ----------- -----------
1997
----
First Quarter (through March 17) $23.625 $16.000 (a)
1996
----
Fourth Quarter....................... $17.375 $13.125 $ .02
Third Quarter........................ 14.875 12.750 .02
Second Quarter....................... 15.500 11.625 .01
First Quarter........................ 12.125 9.560 .01
1995
----
Fourth Quarter....................... $7.500 $5.500 $ .01
Third Quarter........................ 9.250 7.250 -
Second Quarter....................... 8.188 7.250 -
First Quarter........................ 7.375 5.500 -
(a) Since the fourth quarter of 1995, dividends have been declared at the
beginning of the last month of each calendar quarter and have been paid at
the end of such calendar quarter..
Dividends on the Common Stock were initiated in December 1995 and have
been paid each successive quarter. The $2.03 Convertible Preferred Stock
receives cumulative quarterly dividends at the annual rate of $2.03 per share.
If there is any arrearage in dividends on the $2.03 Convertible Preferred Stock,
the Company may not pay dividends on the Common Stock. The Company has never
been in arrears in the payment of dividends on the $2.03 Convertible Preferred
Stock. See "Description of Capital Stock and Indebtedness."
The payment of dividends is subject to declaration by the Board of
Directors and may depend on earnings, capital expenditures and market factors
existing from time to time. The Amended Credit Facility and the Indenture for
the 6% Convertible Subordinated Debenture Due 2007 and 8.75% Senior Subordinated
Notes due 2007 contain restrictions on the Company's ability to pay dividends on
capital stock. Under the most restrictive of these provisions, the Company could
have paid $5,000,000 of dividends as of December 31, 1996.
12
14
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma consolidated financial statements
give effect to: (i) the purchase by the Company of certain oil and gas
properties from Bannon Energy Incorporated (the "Bannon Acquisition") in April
1996 for $37 million, (ii) the Cometra Acquisition, (iii) the private placements
of 600,000 shares of Common Stock and $55 million of 6% Convertible Subordinated
Debentures (collectively referred to as the "Private Placements"), (iv) the
Offerings, (v) the application of the estimated net proceeds from the Private
Placements and the Offerings and (vi) the conversion of the Company's 7 1/2%
Convertible Exchangeable Preferred Stock into Common Stock. The unaudited pro
forma consolidated statement of income for the year ended December 31, 1996 was
prepared as if the Bannon Acquisition, the Cometra Acquisition, the Private
Placements and the Offerings (collectively, the "Transactions") had occurred on
January 1, 1996. The accompanying unaudited pro forma consolidated balance sheet
of the Company as of December 31, 1996 has been prepared as if the Transactions
had occurred as of that date. The historical information provided under the
heading "Bannon Acquisition" in the statement of income for the year ended
December 31, 1996, includes results for the properties acquired in the Bannon
Acquisition for the period from January 1, 1996 until its purchase on March 31,
1996. The historical information provided in the statement of income of the
Company for the year ended December 31, 1996 includes results for the properties
acquired in the Bannon Acquisition for the period from April 1, 1996 through
December 31, 1996.
This information is not necessarily indicative of future consolidated
results of operations and it should be read in conjunction with the separate
historical statements and related notes of the respective entities appearing
elsewhere in this Registration Statement or incorporated by reference herein.
13
15
LOMAK PETROLEUM, INC. AND SUBSIDIARIES
PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
PRO FORMA
BANNON COMETRA PRO FORMA PRE-OFFERING OFFERING PRO FORMA
LOMAK ACQUISITION ACQUISITION ADJUSTMENTS LOMAK ADJUSTMENTS LOMAK
----- ----------------------- ----------- ----- ----------- -----
REVENUES
Oil and gas sales............. $ 68,054 $ 1,703 $ 60,751 $ $ 130,508 $ $ 130,508
Field services................ 14,223 - - 14,223 14,223
Gas transportation and
marketing................... 5,575 - 7,273 11,478 (a) 24,326 24,326
Interest and other............ 3,386 - - 3,386 3,386
----- ----- ------ ----- -----
91,238 1,703 68,024 172,443 172,443
------ ----- ------ ------- -------
EXPENSES
Direct operating.............. 24,456 562 14,376 39,394 39,394
Field services................ 10,443 - - 10,443 10,443
Gas transportation and
marketing................... 1,674 - - 11,478 (a) 13,152 13,152
Exploration................... 1,460 - - 1,460 1,460
General and administrative.... 3,966 - - 3,966 3,966
Interest...................... 7,487 - - 23,991 (b) 31,478 (521) (e) 30,957
Depletion, depreciation and
amortization................ 22,303 - - 22,086 (c) 44,389 44,389
------ --- ------ ------ ------
71,789 562 14,376 144,282 143,761
------ --- ------ ------- -------
Income before taxes............. 19,449 1,141 53,648 28,161 28,682
INCOME TAXES
Current....................... (729) - - (115) (d) (844) (16) (f) (860)
Deferred...................... (6,105) - - (2,906) (d) (9,011) (167) (f) (9,178)
------ ------ ------ ------ -----
Net income...................... $ 12,615 $ 1,141 $ 53,648 $ 18,306 $ 18,644
======== ======== ========= ========== ==========
Net income applicable to
common shares................ $ 10,161 $ 15,972 $ 16,310
======== ========== ==========
Earnings per common share....... $ 0.69 $ 0.97 $ 0.80
======== ========== ==========
Weighted average shares
outstanding.................. 14,812 1,583 16,395 4,000 20,395
====== ====== ======
See notes to pro forma combined financial statements
14
16
LOMAK PETROLEUM, INC.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
PRO FORMA
PRO FORMA PRE-OFFERING OFFERING PRO FORMA
LOMAK ADJUSTMENTS LOMAK ADJUSTMENTS LOMAK
---------- ----------- -------------- ----------- ----------
ASSETS
Current assets
Cash and equivalents ............. $ 8,625 $ $ 8,625 $ $ 8,625
Accounts receivable .............. 18,121 18,121 18,121
Marketable securities ............ 7,658 7,658 7,658
Inventory and other .............. 799 799 799
------- ------- -------
Total current assets .......... 35,203 35,203 35,203
------- ------- -------
Oil and gas properties ............. 282,519 325,000 (g) 607,519 607,519
Accumulated depletion and
amortization ................... (53,102) (53,102) 53,102)
------- ------- -------
229,417 554,417 554,417
------- ------- -------
Gas transportation and field service 21,139 60,000 (g) 81,139 81,139
assets...........................
Accumulated depreciation ......... (4,997) (4,997) (4,997)
------ ------ ------
16,142 76,142 76,142
------ ------ ------
Other assets ....................... 1,785 1,785 4,050 (h) 5,835
---------- ----------- ----------
$ 282,547 $ 667,547 $ 671,597
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable.................. $ 14,433 $ $ 14,433 $ $ 14,433
Accrued liabilities............... 4,603 4,603 4,603
Accrued payroll and benefit costs. 3,245 3,245 3,245
Current portion of debt........... 26 26 26
------- ------- -------
Total current liabilities....... 22,307 22,307 22,307
------- ------- -------
Revolving credit facility........... 61,355 355,000 (g) 416,355 (120,950) (h) 231,305
(64,100) (i)
8.75% Senior subordinated notes..... - - 125,000 (h) 125,000
6% Convertible subordinated
debentures....................... 55,000 55,000 55,000
Other long-term debt................ 425 425 425
------- ------- -------
116,780 471,780 411,730
------- ------- -------
Deferred income taxes............... 25,931 25,931 25,931
Stockholders' equity
$2.03 Preferred stock, $1 par value 1,150 1,150 1,150
Common stock, $.01 par value...... 148 14 (g) 162 40 (i) 202
Capital in excess of par value.... 110,248 29,986 (g) 140,234 64,060 (i) 204,294
Retained earnings (deficit)....... 5,291 5,291 5,291
Unrealized gain on marketable
securities...................... 692 692 692
----------- ------------ ---------
Total stockholders' equity ..... 117,529 147,529 211,629
------- ------- -------
$ 282,547 $ 667,547 $ 671,597
========== =========== =========
See notes to pro forma combined financial statements
15
17
LOMAK PETROLEUM, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE (1) PRO FORMA ADJUSTMENTS FOR THE TRANSACTIONS -- FOR THE YEAR ENDED
DECEMBER 31, 1996
The accompanying unaudited pro forma consolidated statement of income
for the year ended December 31, 1996 has been prepared as if the Transactions
had occurred on January 1, 1996 and reflects the following adjustments:
(a) To reclassify gas transportation and marketing revenue and
expenses to conform with the accounting presentation followed
by the Company.
(b) To adjust interest expense for the estimated amount that would
have been incurred on the incremental borrowings for the
Bannon Acquisition and the Cometra Acquisition, net of
proceeds received from the Private Placements. A 1/8% per
annum increase in interest rate would decrease the Company's
income before taxes by $392,000.
(c) To record depletion expense for the Bannon Acquisition and the
Cometra Acquisition at a rate of $0.87 per Mcfe, which would
have been the rate in effect for 1996 had such acquisitions
taken place at January 1, 1996. Additionally, to record
depreciation expense on the gas processing plant purchased in
the Cometra Acquisition.
(d) To adjust the provision for income taxes for the change in
taxable income resulting from the Bannon Acquisition, the
Cometra Acquisition and the Private Placements and the effect
on deferred taxes recorded at January 1, 1996 as if such
Transactions had taken place at that time.
(e) To adjust interest expense for the estimated amounts that
would have been repaid with the net proceeds from the
Offerings. Because the net proceeds from the Offerings will be
used to repay debt, a 1/8% per annum increase in interest rate
would increase the Company's income before taxes by $76,000.
(f) To adjust the provision for income taxes for the change in
taxable income resulting from interest adjustments made to
reflect the amounts of borrowings repaid with the net proceeds
from the Offerings and the effect on deferred taxes recorded
at January 1, 1996 as if the Offerings had taken place at that
time.
NOTE (2) PRO FORMA ADJUSTMENTS FOR THE COMETRA ACQUISITION AND THE
OFFERINGS--AS OF DECEMBER 31, 1996
(g) To record the Cometra Acquisition.
(h) To record the Notes Offering, net of offering costs and the
application of proceeds therefrom.
(i) To record the Common Stock Offering, net of offering costs
and the application of proceeds therefrom.
NOTE (3) EXPECTED GENERAL AND ADMINISTRATION EXPENSES
In connection with the Cometra Acquisition, the Company expects that
general and administrative expenses will increase approximately $1.7 million as
a result of offers made to Cometra personnel and that field service revenues
will increase approximately $240,000 for operating agreements acquired in the
Cometra Acquisition. The impact of these increases would be to reduce 1996 pro
forma earnings per share to $0.75.
16
18
SELECTED CONSOLIDATED FINANCIAL DATA
The following tables present selected consolidated financial data
covering the five years ended December 31, 1996. Such data has been derived
from, and should be read in conjunction with, the audited Consolidated Financial
Statements and Notes thereto for each of the five years ended December 31, 1996,
the Unaudited Pro Forma Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included herein.
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Revenues:
Oil and gas sales................. $ 7,703 $ 11,132 $ 24,461 $ 37,417 $ 68,054 $130,508
Field services.................... 5,283 6,966 7,667 10,097 14,223 14,223
Gas transportation and marketing.. 332 559 2,195 3,284 5,575 24,326
Interest and other................ 577 418 471 1,317 3,386 3,386
------ ------ ------ ------ ------ -------
13,895 19,075 34,794 52,115 91,238 172,443
Expenses
Direct operating.................. 3,039 4,438 10,019 14,930 24,456 39,394
Field services.................... 3,951 5,712 5,778 6,469 10,443 10,443
Gas transportation and marketing.. - 13 490 849 1,674 13,152
Exploration....................... 36 86 359 512 1,460 1,460
General and administrative........ 1,915 2,049 2,478 2,736 3,966 3,966
Interest.......................... 952 1,120 2,807 5,584 7,487 30,957
Depletion, depreciation and
amortization...................... 3,124 4,347 10,105 14,863 22,303 44,389
----- ----- ------ ------ ------ ------
13,017 17,765 32,036 45,943 71,789 143,761
------ ------ ------ ------ ------ -------
Income before taxes................. 878 1,310 2,758 6,172 19,449 28,682
Income taxes........................ 192 (81) 139 1,782 6,834 10,038
--- --- --- ----- ----- ------
Net income.......................... $ 686 $ 1,391 $ 2,619 $ 4,390 $ 12,615 $ 18,644
======= ======== ========= ======== ======== ========
Earnings per common share........... $ 0.08 $ 0.18 $ 0.25 $ 0.31 $ 0.69 $ 0.80
======= ======== ========= ======== ======== ========
Cash dividends per common share..... $ 0.00 $ 0.00 $ 0.00 $ 0.01 $ 0.06 N/A
======= ======== ========= ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA (a).......................... $ 4,990 $ 6,863 $ 16,029 $ 27,131 $ 50,699 $105,488
Net cash provided by operations..... 5,168 4,305 11,241 16,561 38,445 N/A
Net cash used in investing.......... (4,210) (43,459) (29,536) (76,113) (69,666) N/A
Net cash provided by financing...... 126 38,912 21,173 57,702 36,799 N/A
Capital expenditures................ 5,920 48,240 70,024 88,530 79,390 N/A
Ratios:
EBITDA to interest expense........ 5.2x 6.1x 5.7x 4.9x 6.8x 3.4x
Earnings to fixed charges(b)...... 1.9x 2.2x 2.0x 2.1x 3.6x 1.9x
Total debt to EBITDA.............. 2.6x 4.5x 3.9x 3.1x 2.3x 3.9x
BALANCE SHEET DATA (END OF PERIOD):
Cash and equivalents................ $ 2,261 $ 2,019 $ 4,897 $ 3,047 $ 8,625 $ 8,625
Total assets........................ 28,328 76,333 141,768 214,788 282,547 671,597
Long-term debt (c).................. 13,127 31,108 62,592 83,088 116,806 411,756
Stockholders' equity................ 9,504 32,263 43,248 99,367 117,529 211,629
(a) EBITDA represents net income plus income taxes, exploration expense,
interest expense and depletion, depreciation, and amortization expense.
EBITDA is not presented as an indicator of the Company's operating
performance, an indicator of cash available for discretionary spending
or as a measure of liquidity. EBITDA may not be comparable to other
similarly titled measures of other companies. The Company's Credit
Agreement requires the maintenance of certain EBITDA ratios.
(b) For the purpose of determining the ratio of earnings to fixed charges,
earnings are defined as income before taxes plus fixed charges. Fixed
charges consist of interest expense.
(c) Long-term debt includes current portion.
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SELLING SECURITYHOLDERS
The following table sets forth certain information with respect to the
Selling Securityholders for whom the Company is registering the Selling
Securityholder Securities for resale to the public. The Company will not receive
any of the proceeds from the sale of the Selling Securityholder Securities.
There are no material relationships between any of the Selling Securityholders
and the Company except as otherwise indicated. Beneficial ownership of the
Selling Securityholder Securities by each Selling Securityholder after the sale
will depend on the number of Selling Securityholder Securities sold by each
Selling Securityholder. The shares offered by the Selling Securityholder are not
being underwritten. No estimate can be given as to the amount of Common Stock
that will be held by the Selling Securityholders upon termination of the
Offering.
No arrangements have been made for the distribution or sale of the Selling
Securityholder Securities. There can be no assurance that Selling
Securityholders will be able to sell some or all of the Selling Securityholder
Securities listed for sale herein. There is no established public trading market
for the Debentures as of the date of this Prospectus.
NUMBER OF
SHARES TO
BE OWNED
AFTER PERCENT OF
NUMBER OF OFFERING PERCENT OF CLASS
SHARES MAXIMUM ASSUMING DEBENTURES CLASS OF OF
BENEFICIALLY NUMBER OF ALL SHARES BENEFICIALLY COMMON DEBENTURES
OWNED PRIOR SHARES TO OFFERED ARE OWNED PRIOR STOCK AFTER PRIOR TO
NAME OF SELLING SECURITYHOLDER TO OFFERING BE OFFERED DISTRIBUTED TO OFFERING OFFERING OFFERING
------------------------------ ----------- ---------------------- ----------- -------- --------
6% CONVERTIBLE SUBORDINATED DEBENTURES:
Allstate Insurance 103,896 103,896 (1) 0 $2,000,000 0.0% 3.6%
AON Corporation 36,364 36,364 (1) 0 700,000 0.0% 1.3%
Bankers Trust 51,948 51,948 (1) 0 1,000,000 0.0% 1.9%
Paul Berkman and Company 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Camden Asset Management 103,896 103,896 (1) 0 2,000,000 0.0% 3.6%
CIBC 25,974 25,974 (1) 0 500,000 0.0% 0.9%
CNA Insurance 129,870 129,870 (1) 0 2,500,000 0.0% 4.5%
Eagle Asset Management 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Fidelity Management 519,481 519,481 (1) 0 10,000,000 0.0% 18.2%
Fiduciary Trust 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Harris Trust 15,584 15,584 (1) 0 300,000 0.0% 0.5%
High Bridge Capital 51,948 51,948 (1) 0 1,000,000 0.0% 1.8%
Kessler Asher Trading 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Laterman 25,974 25,974 (1) 0 500,000 0.0% 0.9%
Lynch & Mayer 259,740 259,740 (1) 0 5,000,000 0.0% 9.1%
New York Life 207,792 207,792 (1) 0 4,000,000 0.0% 7.3%
Oaktree Capital Management 207,792 207,792 (1) 0 4,000,000 0.0% 7.3%
Orion Capital 77,922 77,922 (1) 0 1,500,000 0.0% 2.7%
Palisade Capital 207,792 207,792 (1) 0 4,000,000 0.0% 7.3%
Pecks Management 415,584 415,584 (1) 0 8,000,000 0.0% 14.5%
Putnam Investments 233,766 233,766 (1) 0 4,500,000 0.0% 8.2%
Sage Capital 15,584 15,584 (1) 0 300,000 0.0% 0.6%
William E Simon & Sons 10,390 10,390 (1) 0 200,000 0.0% 0.4%
Society Asset Management 51,948 51,948 (1) 0 1,000,000 0.0% 1.8%
Donald & Company 20,000 20,000 0 0 0.0% 0.0%
Cometra Energy, L.P. 1,410,106 1,410,106 0 0 0.0% 0.0%
- ------------------------------
(1) Issuable upon conversion of the Preferred Stock.
18
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PLAN OF DISTRIBUTION
The Company has not been advised by the Selling Security holders as to any
plan of distribution. Distribution of the Common Stock and the Debentures by the
Selling Securityholders, or by pledgees, donees (including charitable
organizations), transferees or other successors in interest, may be effected
from time to time in one or more transactions (which may involve block
transactions) (i) in the case of Common Stock, on the NYSE in transactions that
may include special offerings, exchangeable distributions, the writing of
options , in each case pursuant to and in accordance with the rules of such
exchange, (ii) in the over-the-counter market, or (iii) in transactions
otherwise than on such exchange or in the over-the-counter market, or in a
combination of any such transactions. Such transactions may be effected by the
Selling Securityholders at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at negotiated prices or at
fixed prices.
The Selling Securityholders may effect such transactions by selling the
Common Stock or the Debentures to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts or commissions
from the purchasers of the Common Stock for whom they may act as agent.
All expenses of the registration of the Securities covered by this
Prospectus, estimated to be $75,000, are to be borne by the Company, except that
the Selling Securityholders will pay any applicable underwriters' commissions
and expenses, brokerage fees or transfer taxes, as well as the fees and
disbursements of their counsel.
The Selling Securityholders may agree to indemnify any broker-dealer or
agent that participates in transactions involving sales of the shares against
certain liabilities, including liabilities arising under the Securities Act.
DESCRIPTION OF 6% CONVERTIBLE SUBORDINATED DEBENTURES
The following is a summary of the terms of the 6% Convertible Subordinated
Debentures due 2007 (the "Debentures"). This summary is not intended to be
complete and is subject to, and qualified in its entirety by reference to, the
Indenture (as defined below), including the definition therein of certain terms.
The Debentures were be issued under an indenture (the "Indenture"), between
the Company and Keycorp Shareholder Services, Inc., as trustee (the "Trustee"),
a copy of which is available upon request from the Company. The following
statements are summaries of certain terms applicable to the Debentures and do
not purport to be complete. The summaries are subject to, and qualified in their
entirety by reference to, the provisions of the Indenture, including the
definitions therein of certain terms. Whenever reference is made to defined
terms of the Indenture and not otherwise defined herein, such defined terms are
incorporated herein by reference.
GENERAL
The Debentures are unsecured general obligations of the Company,
subordinate in right of payment to certain other obligations of the Company as
described under "Subordination of the Debentures," and convertible into Common
Stock as described under "Conversion of the Debentures." The Debentures are
limited to $55 million aggregate principal amount and will mature on February 1,
2007 (the "Maturity Date"). The Debentures will bear interest at the rate per
annum of 6% from the date of original issue or from the most recent Interest
Payment Date (as defined below) to which interest has been paid or duly provided
for, and accrued but unpaid interest will be payable semi-annually in arrears on
February 1 and August 1 of each year commencing February 1, 1997 (each, an
"Interest Payment Date"), or, if any such day is not a business day, on the next
succeeding business day. Interest will be paid to Debentureholders of record
("Holders") at the close of business on January 15 and July 15, respectively,
immediately preceding the relevant Interest Payment Date (each, a "Regular
Record Date"). Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
Principal and premium, if any, and interest are payable, and the Debentures
may be presented for conversion, registration of transfer and exchange, at the
office or agency of the Company maintained for those purposes in New York, New
York (which initially will be the corporate trust office of the Trustee), except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the Holder entitled thereto as it appears on the
Debenture Register on the related record date.
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21
The Debentures are issued in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. At any time from and
after the execution and delivery of the Indenture, the Company may deliver
Debentures to the Trustee for authentication and the Trustee shall, in
accordance with the instructions of the Company, authenticate and deliver such
Debentures as provided in the Indenture. No service charge will be made for any
transfer or exchange of Debentures, but, subject to certain exceptions set forth
in the Indenture, 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 contain any restrictions on the payment of dividends
or on the repurchase of securities by the Company or any financial covenants,
nor does the Indenture require the Company to maintain any sinking fund or other
reserve for the payment of the Debentures.
CONVERSION OF THE DEBENTURES
The Debentures are convertible at any time prior to the Maturity Date
(subject to earlier redemption or repurchase, as described below) into shares of
Common Stock of the Company at the conversion price of $19.25 per share (the
"Conversion Price"), subject to adjustment under certain circumstances as
described below.
The Conversion Price is subject to adjustment as set forth in the Indenture
upon the occurrence of certain events, including: (i) the issuance of Common
Stock as a dividend or other distribution on any class of capital stock of the
Company; (ii) a subdivision or combination of outstanding shares of Common
Stock; (iii) the issuance or distribution of capital stock of the Company or the
issuance or distribution of options, rights, warrants or convertible or
exchangeable securities entitling the holder thereof to subscribe for, purchase,
convert into or exchange for capital stock of the Company at less than the
current market price of such capital stock on the date of issuance or
distribution, but in each case only if such issuance or distribution is made
generally to holders of Common Stock or of a class or series of capital stock
convertible into or exchangeable or exercisable for Common Stock (provided that
the issuance of capital stock upon the exercise of such options, rights or
warrants or the conversion or exchange of convertible or exchangeable securities
will not cause an adjustment in the conversion price if no such adjustment would
have been required at the time such options, rights or warrants or convertible
or exchangeable securities were issued); (iv) the dividend or other distribution
to holders of Common Stock, or of a class or series of capital stock convertible
into or exchangeable or exercisable for Common Stock, generally (other than in
connection with the liquidation or distribution of the Company) of evidences of
indebtedness of the Company or assets (including securities, but excluding
issuances, dividends and distributions referred to above and dividends and
distributions in connection with the liquidation, dissolution or winding up of
the Company; and (v) distributions consisting exclusively of cash to the extent
the amount of such cash combined with all such cash distributions made within
the preceding 12 months with respect to which no adjustment has been made,
exceeds 10% of the Company's market capitalization (being the product of the
then current market price of the Common Stock multiplied by the number of shares
of Common Stock then outstanding) on the record date for such distribution.
Notwithstanding the foregoing, no adjustment in the Conversion Price shall
be made upon (i) the issuance of Common Stock of the Company pursuant to any
compensation or incentive plan for officers, Directors, employees or consultants
of the Company, which plan has been approved by the Compensation Committee of
the Board of Directors (or if there is no such committee then serving, by the
majority vote of the independent Directors) and, if required by law, the
requisite vote of the stockholders of the Company (unless the exercise or
conversion price of the instrument issued pursuant to such plan is subsequently
changed other than solely by operation of the anti-dilution provisions thereof
or by the Compensation Committee, if applicable, the Board of Directors and, if
required by law, the stockholders of the Company as provided in this clause
(i)); (ii) the issuance of Common Stock upon the conversion or exercise of
preferred stock or warrants of the Company outstanding on the date hereof,
unless the conversion or exercise price thereof is changed after the date of the
Indenture (other than solely by operation of the anti-dilution provisions
thereof); (iii) the declaration, setting aside or payment of dividends on any
outstanding preferred stock or any other preferred stock hereafter issued by the
Company; or (iv) after giving effect to any dividend pursuant to the preceding
clause (iii), the declaration, setting aside or payment of dividends out of the
Company's cumulative retained earnings. Also, notwithstanding the provisions of
the preceding paragraph, (a) if the options, rights or warrants or convertible
or exchangeable securities described in clause (iii) of the preceding paragraph
are exercisable only upon the occurrence of certain triggering events, then the
Conversion Price will not be adjusted until such triggering events occur and (b)
if options, rights or warrants or convertible or exchangeable securities expire
unexercised, the Conversion Price will be readjusted to take into account only
the actual number of such options, rights or warrants or convertible or
exchangeable securities which were exercised.
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22
No adjustment will be made to the Conversion Price until cumulative
adjustments to the Conversion Price amount to at least 1% of the Conversion
Price, as last adjusted. Except as stated above, the Conversion Price will not
be adjusted for the issuance of Common Stock or any securities convertible into
or exchangeable for Common Stock or carrying the right to purchase any of the
foregoing, or the payment of dividends on the Common Stock. The Company from
time to time may reduce the Conversion Price if the Board of Directors of the
Company has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive.
In the event of (i) any reclassification or change of the Common Stock or
(ii) a consolidation, merger or combination to which the Company is a party or a
sale or conveyance to another entity of the property and assets of the Company
as an entirety or substantially as an entirety, in each case as a result of
which holders of Common Stock shall be entitled to receive stock, other
securities, other property or assets (including cash) with respect to or in
exchange for such Common Stock, each Holder will have the right thereafter to
convert such Holder's Debentures into the kind and amount of shares of stock,
other securities or other property or assets which the Holder would have owned
or have been entitled to receive immediately upon such consolidation, merger,
combination, sale or conveyance had such Debenture been converted into Common
Stock immediately prior to the effective date of such reclassification, change,
consolidation, merger, combination, sale or conveyance. Certain of the foregoing
events may also constitute or result in a Change of Control requiring the
Company to offer no repurchase the Debentures. See "Repurchase at Option of
Holders Upon Change of Control."
Fractional shares of Common Stock will not be issued upon conversion. A
person otherwise entitled to a fractional share of Common Stock upon conversion
shall receive cash equal to the equivalent fraction of the current market price
of a share of Common Stock on the business day prior to conversion.
A Holder who surrenders a Debenture (or portion thereof) for conversion
between the close of business on a Regular Record Date and the next Interest
Payment Date will receive interest on such Interest Payment Date with respect to
such Debenture (or portion thereof) so converted through such Interest Payment
Date. Subject to such payments in the event of conversion after the close of
business on a Regular Record Date, no payment or adjustment shall be made upon
any conversion on account of any interest accrued but unpaid on the Debentures
surrendered for conversion.
OPTIONAL REDEMPTION BY THE COMPANY
The Debentures are not redeemable at the option of the Company prior to
February 1, 2000. Thereafter, the Debentures will be redeemable, in whole or
from time to time in part, upon not less than 30 days' nor more than 60 days'
prior notice of redemption to each Holder at such Holder's last address as it
appears in the Debenture Register (as defined in the Indenture), at the
Redemption Prices established for the Debentures, together with accrued but
unpaid interest, if any, to the date fixed for redemption. The Redemption Prices
for the Debentures (expressed as a percentage of the principal amount) are as
follows:
For the 12 Months
After February 1, Percentage
----------------------------------
2000 104.0
2001 103.5
2002 103.0
2003 102.5
2004 102.0
2005 101.5
2006 101.0
If less than all the Debentures are to be redeemed, the Trustee will select
the Debentures to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Debentures are
quoted or listed or admitted to trading, or, if the Debentures are not quoted or
listed, on a pro rata basis by lot or by such method that complies with
applicable legal requirements and that the Trustee considers fair and
appropriate. The Trustee may select for redemption portions of the principal
amount of Debentures that have a denomination larger than $1,000. Debentures and
portions thereof will be redeemed in the amount of $1,000 or integral multiples
of $1,000. The Trustee will make the selection from Debentures outstanding and
not previously called for redemption.
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REPURCHASE AT THE OPTION OF HOLDERS UPON CHANGE OF CONTROL
If a Change of Control occurs, the Company shall offer to repurchase each
Holder's Debentures pursuant to an offer (the "Change of Control Offer") at a
purchase price equal to 100% of the principal amount of such Holder's
Debentures, plus accrued but unpaid interest, if any, to the date of purchase.
A "Change of Control" means the occurrence of any of the following events
after the date of the Indenture (i) any person or group (within the meaning of
Section 13(d) or Section 14(d) of the Exchange Act), becomes the direct or
indirect beneficial owner of shares of capital stock of the Company representing
greater than 50% of the combined voting power of all outstanding shares of
capital stock of the Company entitled to vote in the election of directors under
ordinary circumstances; (ii) subject to certain exceptions, the Company
consolidates with or merges into any other entity and the outstanding Common
Stock is changed or exchanged as a result; (iii) sale, transfer or other
disposition of a majority of the assets of the Company or of the collective
assets of the Company and the subsidiaries; (iv) at any time Continuing
Directors cease to constitute a majority of the Board of Directors of the
Company then in office; or (v) on any day the Company makes any distribution of
cash, property or securities (other than regular quarterly dividends, Common
Stock, preferred stock which is substantially equivalent to Common Stock or
rights to acquire Common Stock or preferred stock which is substantially
equivalent to Common Stock) to holders of Common Stock, or the Company or any of
its subsidiaries purchases or otherwise acquires Common Stock, and the sum of
the fair market value of such cash, property or securities distributed or Common
Stock purchased on the date the same is made, plus the fair market value, when
made, of all other cash, property or securities so distributed or Common Stock
so purchased which have occurred during the 12 month period ending on the such
date, in each case expressed as a percentage of the aggregate market price of
all of the shares of Common Stock outstanding at the close of business on the
last day prior to the date of such distribution or purchase, exceeds 50%.
"Continuing Director" means at any date a member of the Company's Board of
Directors (i) who was a member of such Board on the date of the Indenture or
(ii) who was nominated or elected by at least two-thirds of the directors who
were Continuing Directors at the time of such nomination or election or whose
election to the Company's Board of Directors was recommended or endorsed by at
least two-thirds of the directors who were Continuing Directors at the time of
such election. (Under this definition, if the present Board of Directors of the
Company were to approve a new director or directors and then resign, no Change
of Control would occur even though the present Board of Directors would
thereafter cease to be in office). Notwithstanding the foregoing, a Change of
Control under clause (ii) above will not include any transaction or series of
related transactions in which 85% or more of the consideration received by the
Holders of the Debentures (assuming conversion of the Debentures immediately
after such transaction) consists of common stock that is listed on a national
securities exchange or approved for quotation on the Nasdaq National Market.
Within 30 days after any Change of Control, unless the Company has
previously given a notice of optional redemption by the Company of all of the
Debentures, the Company shall give a notice of the Change of Control Offer to
each Holder at such Holder's last address as it appears on the Debenture
Register stating: (i) that a Change of Control has occurred and that the Company
is offering to repurchase all of such Holder's Debentures; (ii) a brief
description of such Change of Control; (iii) the repurchase price (the "Change
of Control Payment"); (iv) the expiration date of the Change of Control Offer,
which shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed; (v) the date such purchase shall be effected, which shall be
no later than 30 days after expiration date of the Change of Control Offer; (vi)
a statement that any Debentures not accepted for payment pursuant to the Change
of Control Offer shall continue to accrue interest; (vii) a statement that
unless the Company defaults in the payment of the Change of Control Payment, all
Debentures accepted for payment pursuant to the Change of Control offer shall
cease to accrue interest after the Change of Control Payment Date; (viii) the
Conversion Price; (ix) the name and address of the paying agent and conversion
agent; (x) a statement that Debentures must be surrendered to the paying agent
to collect the Change of Control Payment; and (xi) any other information
required by applicable law to be included therein.
In the event that the Company is required to make a Change of Control
Offer, the Company will comply with any applicable securities laws and
regulations, including, to the extent applicable, Section 14(e) of and Rule
14e-1 and any other tender offer rules under, the Exchange Act which may then be
applicable in connection with any offer by the Company to purchase Debentures at
the option of the Holders.
The Company, could, in the future, enter into certain transactions,
including certain recapitalizations of the Company, that would not constitute a
Change of Control under the Debentures, but that would increase the amount of
Senior Indebtedness (or any other indebtedness) outstanding at such time. The
incurrence of significant amounts of additional indebtedness could have an
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24
adverse effect on the Company's ability to service its indebtedness, including
the Debentures. If a Change of Control were to occur, there can be no assurance
that the Company would have sufficient funds at the time of such event to pay
the Change of Control Payment of for all Debentures tendered by the Holders.
Certain of the Company's existing and future agreements relating to its
indebtedness could prohibit the purchase by the Company of the Debentures
pursuant to the tender by Holders pursuant to a Change of Control Offer.
Depending on the financial circumstances of the Company, such purchase by the
Company could cause a breach of certain covenants contained in such agreements.
A default by the Company on its obligation to pay the Change of Control Payment
could, pursuant to cross-default provisions, result in acceleration of the
payment of other indebtedness of the Company outstanding at that time. See "-
Subordination."
SUBORDINATION
The payment of principal of and premium, if any, and interest on the
Debentures will be, to the extent set forth in the Indenture, subordinated in
right of payment to the prior payment in full of all Senior Indebtedness (as
defined). Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors or marshalling of assets, whether voluntary, involuntary or in
receivership, bankruptcy, insolvency or similar proceedings, the holders of all
Senior Indebtedness will be first entitled to receive payment in full of all
amounts due or to become due thereon before any payment is made on account of
principal of and premium, if any, and interest on the Debentures or on account
of any other monetary claims under or in respect of the Debentures, and before
any distribution is made to acquire any of the Debentures for any cash,
property, assets or securities. No payments on account of principal of and
premium, if any, and interest on the Debentures shall be made if at the time
thereof: (i) there is a default in the payment of all or any portion of the
obligations under any Senior Indebtedness or (ii) there shall exist a default in
any covenant with respect to the Senior Indebtedness (other than as specified in
clause (i) of this sentence), and, in such event, such default shall not have
been cured or waived or shall not have ceased to exist, the Trustee and the
Company shall have received written notice from any holder of such Senior
Indebtedness stating that no payment shall be made with respect to the
Debentures and such default would permit the maturity of such Senior
Indebtedness to be accelerated, provided that no such default will prevent any
payment on, or in respect of, the Debentures for more than 120 days unless the
maturity of such Senior Indebtedness has been accelerated.
The Holders will be subrogated to the rights of the holders of the Senior
Indebtedness to the extent of payments made on Senior Indebtedness upon any
distribution of assets in any such proceedings out of the distributive share of
the Debentures.
"Senior Indebtedness" is defined to mean the principal of (and premium, if
any), and interest on (a) existing indebtedness of the Company (including
indebtedness of others guaranteed by the Company) other than the Debentures,
which is (i) for money borrowed or (ii) evidenced by a note, debenture or
similar instrument given in connection with the acquisition of any businesses,
properties or assets of any kind, (b) obligations of the Company as lessee under
leases required to be capitalized on the balance sheet of the lessee under
generally accepted accounting principles and leases of property or assets made
as part of any sale and leaseback transaction to which the Company is a party,
(c) amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligation and (d) all future indebtedness of the Company for
money borrowed or evidenced by a note, debenture or similar instrument, other
than indebtedness which by its terms is convertible into shares of Common Stock
or other equity securities of the Company, and amendments, renewals, extensions,
modifications and refundings thereof, if the instrument creating such future
indebtedness provides by its terms that such indebtedness is senior in right of
payment to the Debentures; provided, however, that all future indebtedness for
money borrowed or evidenced by a note or similar instrument which by its terms
is convertible into shares of Common Stock or other equity securities of the
Company (including, without limitation, if issued pursuant to the terms of the
Company's $2.03 Convertible Preferred Stock, the Company's 8.125% Convertible
Subordinated Notes due 2005), and amendments, renewals, extensions,
modifications and refundings thereof, will rank pari passu with the Debentures,
unless the instruments creating such future indebtedness provide by their terms
that such indebtedness is junior in right of payment to the Debentures. Senior
Indebtedness includes any compensation owed to hourly employees in the ordinary
course of the Company's business but does not include other indebtedness or
amounts owed (except to banks and other financial institutions) for compensation
to non-hourly employees, for goods or materials purchased, or services utilized,
in the ordinary course of business of the Company or of any other person from
whom such indebtedness or amount was assumed.
The Debentures are unsecured obligations of the Company, and, accordingly,
will rank pari passu with all unsecured trade debt and unsecured obligations of
the Company that arise by operation of law or are imposed by any judicial or
governmental authority. The Debentures are obligations exclusively of the
Company, and accordingly, will be effectively subordinated to all
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25
indebtedness and other liabilities and commitments (including trade
payables and lease obligations) of its Subsidiaries (as defined in the
Indenture). The right of the Company, and, therefore, the right of creditors of
the Company (including Holders) to receive assets of any such Subsidiary upon
the liquidation or reorganization of such Subsidiary or otherwise, as a
practical matter, will be effectively subordinated to the claims of such
Subsidiary's creditors, except to the extent the Company is itself recognized as
a creditor of such Subsidiary or such other creditors have agreed to subordinate
their claims to the payment of the Debentures, in which case the claims of the
Company would still be subordinate to any secured claim on the assets of such
Subsidiary and any indebtedness of such Subsidiary senior to that held by the
Company.
At March 17, 1997, $195 million of Senior Indebtedness (excluding the $134
million letter of credit outstanding with American Cometra) was outstanding,
including indebtedness under the Credit Agreement and $125 million principal
amount of 8.75% Senior Subordinated Notes due 2007 (the "Senior Subordinated
Notes"). The Senior Subordinated Notes are due on January 15, 2007 which is
prior to the maturity date of the Debentures. In addition the Company's
obligations under the Credit Agreement and the Senior Subordinated Debentures
are guaranteed by the Company's Subsidiaries. The Company will from time to time
incur additional indebtedness constituting Senior Indebtedness.
LIMITATION ON DIVIDEND RESTRICTIONS AFFECTING SUBSIDIARIES
Without the consent of the Holders of a majority in aggregate principal
amount of the Debentures then outstanding the Company may not, and may not
permit any of its Subsidiaries to, create or otherwise cause or suffer to exist
or become effective any encumbrance or restriction of any kind on the ability of
any Subsidiary to (a) pay to the Company dividends or make to the Company any
other distribution of its capital stock, (b) pay any debt owed to the Company or
any other Subsidiary, (c) make loans or advances to the Company or any other
Subsidiary or (d) transfer any of its property or assets to the Company or any
other Subsidiary, other than such encumbrances or restrictions existing or
created under or by reason of (i) applicable laws, (ii) the Indenture, (iii)
covenants or restrictions contained in any instrument governing debt of the
Company or any of the Subsidiaries existing on the date of the Indenture, or
covenants or restrictions in any loan documents relating to Senior Indebtedness
incurred after the date hereof, provided that in the absence of a default under
any such loan documents, no such restriction shall prevent a Subsidiary from
paying dividends or otherwise distributing funds to the Company in amounts
sufficient to enable the Company to make interest and principal payments on the
Debentures as and when due, (including pursuant to any Change of Control Offer),
(iv) customary provisions restricting subletting, assignment and transfer of any
lease governing a leasehold interest of the Company or any of the Subsidiaries
or in any license or other agreement entered into in the ordinary course of
business, (v) any agreement governing debt of a person acquired by the Company
or any of the Subsidiaries in existence at the time of such acquisition (but not
created in contemplation thereof), which encumbrances or restrictions are not
applicable to any person, or the property or assets of any person, other than
the person, or the property or assets of the person, so acquired or (vi) any
restriction with respect to a Subsidiary imposed pursuant to an agreement
entered into in accordance with the terms of the Indenture for the sale or
disposition of capital stock or property or assets of such Subsidiary, pending
the closing of such sale or disposition.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not, without the consent of the Holders of a majority in
aggregate principal amount of the Debentures then outstanding, consolidate with
or merge into any other entity or convey, transfer, sell or lease its assets
substantially as an entirety to any entity, unless: (i) either (a) the Company
is the continuing corporation or (b) the entity formed by such consolidation or
into which the Company is merged or the entity to which such assets are sold,
leased, transferred, conveyed or disposed is organized under the laws of the
United States or any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all obligations of the Company under the
Debentures and the Indenture, (ii) immediately before and immediately after
giving effect to such merger, consolidation, conveyance, transfer, sale, lease
or disposition no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, under the Indenture occurred and
is continuing, (iii) immediately after giving effect to such merger,
consolidation, conveyance, transfer, sale, lease or disposition, the Debentures
and the Indenture, as supplemented, will be a valid and enforceable obligation
of the Company or such successor and (iv) the Company has delivered to the
Trustee an Officer's certificate and an opinion of counsel, each stating that
such merger, consolidation, conveyance, transfer, sale, lease or disposition and
such supplemental indenture comply with the applicable provisions of the
Indenture and that all conditions precedent to such transaction provided in the
Indenture have been satisfied.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of or premium, if any, on any Debenture when due and payable,
whether at maturity, upon redemption, upon a Change of Control Offer or
otherwise, whether or not such payment is prohibited by the subordination
provisions of the Indenture; (b) failure to pay any interest on any Debenture
when due, which failure continues for 30 days, whether or not such payment is
prohibited by the subordination provisions of the Indenture; (c) failure to
perform the other covenants of the Company in the Indenture, which failure
continues for 60 days after written notice as provided in the Indenture; (d)
failure to pay when due principal of and or acceleration of, any indebtedness
for money borrowed by the Company or any of its Subsidiaries in excess of $5
million, individually or in the aggregate, if such indebtedness is not
discharged, or such acceleration is not annulled, within 10 days after written
notice as provided in the Indenture; and (e) certain events of bankruptcy,
insolvency or reorganization of the Company or any Significant Subsidiary (as
defined in the Indenture). Subject to the provisions of the Indenture relating
to the duties of the Trustee in case of the occurrence of an Event of Default,
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. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Debentures 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.
If an Event of Default occurs and is continuing, either the Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
Debentures by notice to the Company and Trustee may declare the unpaid
principal, premium if any, and interest on all outstanding Debentures due and
payable; provided, however, that if an Event of Default under clause (e) above
shall occur, all unpaid principal, premium, if any, and interest on all
outstanding Debentures will automatically become due and payable without any
declaration or other act on the part of the Trustee or any Holders. After such
acceleration, but before a judgment or decree based on acceleration, the Holders
of a majority in aggregate principal amount of the then outstanding Debentures
may, under certain circumstances, rescind and annul such acceleration if all
Events of Default, other than the nonpayment of accelerated principal, have been
cured or waived as provided in the Indenture. For information as to waiver of
defaults, see "Modifications, Amendments and Waivers."
No Holder of any Debenture will have any right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder unless (i) such Holder shall have previously
given to the Trustee written notice of a continuing Event of Default, (ii)
Holders of at least 25% in aggregate principal amount of the then outstanding
Debentures shall have made written request and offered satisfactory indemnity to
the Trustee to institute such proceeding as Trustee, (iii) the Trustee shall
have failed to institute such proceeding within 60 days after the receipt of
such request of and offer of indemnity and (iv) during such 60-day period, no
direction inconsistent with such request shall have been given to the Trustee by
the Holders of a majority in aggregate principal amount of the then outstanding
Debentures.
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MODIFICATIONS, AMENDMENTS AND WAIVERS
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 then outstanding Debentures held by persons
other than affiliates of the Company; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
outstanding Debenture affected thereby, (i) change the stated maturity of, or
any installment of interest on or waive a default in the payment of principal,
premium, if any, or interest on, any Debenture, (ii) reduce the principal amount
of any Debenture or reduce the rate or extend the time of payment of interest on
any Debenture, (iii) increase the Conversion Price (other than in connection
with a reverse stock split as provided in the Indenture), (iv) change the place
or currency of payment of principal of, or premium or repurchase price, if any,
or interest on, any Debenture, (v) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debenture, (vi) adversely
affect the right to exchange or convert Debentures, (vii) reduce the percentage
of the aggregate principal amount of outstanding Debentures, the consent of the
Holders of which is necessary to modify or amend the Indenture, (viii) reduce
the percentage of the aggregate principal amount of outstanding Debentures, the
consent of the Holders of which is necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults, (ix)
modify the provisions of the Indenture with respect to the subordination of the
Debentures in a manner adverse to the Holders, (x) except as permitted by the
Indenture, consent to the assignment or transfer by the Company of any of its
rights and obligations thereunder or (xi) modify the provisions of the Indenture
with respect to the right to require the Company to repurchase Debentures in a
manner adverse to the Holders.
The Holders of a majority in aggregate principal amount of the then
outstanding Debentures held by persons other than affiliates of the Company may,
on behalf of all Holders, waive any past default under the Indenture or Event of
Default, except a default in the payment of principal, premium of, if any, or
interest on any of the Debentures or in respect of a provision which under the
Indenture cannot be amended without the consent of the Holder of each
outstanding Debenture.
Amendments and supplements of the Indenture may be made by the Company and
the Trustee without the consent of any Holder, in part, to: (i) cure any
ambiguity, defect or inconsistency (which does not adversely affect the rights
of any Holder); (ii) comply with the restriction on mergers, consolidations, and
asset sales or with the provisions relating to conversion upon such events;
(iii) add to the covenants of the Company further covenants, restrictions,
conditions or provisions for the protection of the Holders; (iv) make any change
that does not adversely affect the rights of any Holder under the Indenture; or
(v) comply with requirements of the Commission in order to effect or maintain
qualification of the Indenture under the Trust Indenture Act.
DISCHARGE OF INDENTURE
The Indenture provides that the Company may defease and be discharged from
its obligations in respect of the Debentures while the Debentures remain
outstanding (except for certain obligations to convert the Debentures into
Common Stock, register the transfer, substitution or exchange of Debentures, to
replace stolen, lost or mutilated Debentures and to maintain an office or agency
and the rights, obligations and immunities of the Trustee), if all outstanding
Debentures will become due and payable at their scheduled maturity within one
year and the Company has irrevocably deposited, or caused to be deposited, with
the Trustee (or another trustee satisfying the requirements of the Indenture),
in trust for such purpose, (a) money in an amount, (b) U.S. Government
Obligations (as defined) which through the payment of principal, premium, if
any, and interest in accordance with their terms (without reinvestment of such
interest or principal) 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
the principal of, premium, if any, and interest on the outstanding Debentures at
maturity or upon redemption, together with all other amounts payable by the
Company under the Indenture. Such defeasance will become effective 91 days after
such deposit only if, among other things, (x) no Default or Event of Default
with respect to the Debentures has occurred and is continuing on the date of
such deposit or will occur as a result of such deposit or at any time during the
period ending on the 91st day after the date of such deposit, (y) such
defeasance does 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 and (z) the Company has delivered to the Trustee (A) either a
private Internal Revenue Service ruling or an opinion of counsel that Holders
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 amount, in the same manner, and at the same times, as
would have been the case if such deposit, defeasance and discharge had not
occurred, (B) an opinion of counsel to the effect that the deposit shall not
result in the Company, the Trustee or the trust
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being deemed to be an "investment company" under the Investment Company Act
of 1940, as amended, and (C) an Officers' Certificate and a opinion of counsel,
each stating that all conditions precedent relating to a discharge have been
complied with.
GOVERNING LAW
The Indenture and the Debentures will be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
such State's conflict of law principles.
CONCERNING THE TRUSTEE
Keycorp Shareholders Services, Inc., the Trustee under the Indenture, has
been appointed by the Company as the paying agent, conversion agent, registrar
and custodian with respect to the Debentures. Keycorp Shareholder Services, Inc.
also serves as the transfer agent for the Common stock and the $2.03 Convertible
Preferred Stock. The Company and its subsidiaries may maintain deposit accounts
and conduct other banking transactions with the Trustee or its affiliates in the
ordinary course of business, and the Trustee and its affiliates may from time to
time in the future provide the Company and its subsidiaries with banking and
financial services in the ordinary course of their business.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Debentures will initially be issued in the
form of one or more registered Debentures in global form, without coupons (the
"Global Debentures"). Each Global Debenture will be deposited on the date of the
closing of the sale of the Debentures (the "Closing Date") with, or on behalf
of, The Depository Trust Company (the "Depositary") and registered in the name
of Cede & Co., as nominee of the Depositary. Interests in Global Debentures will
be available for purchase only by "qualified institutional buyers," as defined
in Rule 144A under the Securities Act ("QIBs").
Debentures that are (i) originally issued to or transferred to
institutional "accredited investors," as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, who are not QIBs or to any other persons who are
not QIBs or (ii) issued as described below under "Certified Securities," will be
issued in registered form without coupons (the "Certified Securities"). Upon the
transfer to a QIB of Certified Securities, such Certificated Securities will,
unless the Global Debenture has previously been exchanged for Certificated
Securities, be exchanged for an interest in the Global Debentures representing
the principal amount of Debentures being transferred. For a description of the
restrictions on the transfer of Certificated Securities, see "Notice to
Investors."
The Depositary has advised the Company that it is (i) a limited-purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depositary was
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance in accounts of its
Participants. The Depositary's Participants include securities brokers and
dealers, banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as bank's, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. QIBs may elect to hold
Debentures purchased by them through the Depositary. QIBs who are not
Participants may beneficially own securities held by or on behalf of the
Depositary only through Participants or Indirect Participants. Persons that are
not QIBs may not hold Debentures through the Depositary.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Debenture, the Depositary will credit
the accounts of Participants designated by the Initial Purchasers with an
interest in the Global Debenture and (ii) ownership of the Debentures will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by the Depositary (with respect to the interests of
Participants), the Participants and the Indirect Participants. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own and that security interests in negotiable instruments
can only be perfected by delivery of certificates representing the instruments.
Consequently, the ability to transfer Debentures or to pledge the Debentures as
collateral will be limited to such extent. For certain other restrictions on the
transferability of the Debentures, see "Notice to Investors."
So long as the Depositary or its nominee is the registered owner of a
Global Debenture, the Depositary or such nominee, as the case may be, will be
considered the sole owner or Holder of the Debentures represented by the Global
Debenture for all purposes under the Indenture. Except as provided below, owners
of beneficial interests in a Global Debenture will not be entitled
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to have Debentures represented by such Global Debenture registered in their
names, will not receive or be entitled to receive physical delivery of the
Certificated Securities, and will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
As a result, the ability of a person having a beneficial interest in Debentures
represented by a Global Debenture to pledge such interest to persons or entities
that do not participate in the Depositary's system, or to otherwise take actions
with respect to such interest, may be affected by the lack of a physical
certificate evidencing such interest.
Accordingly, each QIB owing a beneficial interest in a Global Debenture
must rely on the procedures of the Depositary and, if such QIB is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such QIB owns its interest, to exercise any rights of a Holder
under the Indenture or such Global Debenture. The Company understands that under
existing industry practice, in the event the Company requests any action of
Holders of Debentures or a QIB that is an owner of a beneficial interest in a
Global Debenture desires to take any action that the Depositary, as the Holder
of such Global Debenture, is entitled to take, the Depositary would authorize
the Participants to take such action and the Participants would authorize QIBs
owning through such Participants to take such action or would otherwise act upon
the instructions of such QIBs. Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of Debentures by the Depositary, or for maintaining,
supervising or reviewing any records of the Depositary relating to such
Debentures.
Payments with respect to the principal of, premium, if any, and interest on
any Debentures represented by a Global Debenture registered in the name of the
Depositary or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depositary or its nominee in its capacity
as the registered Holder of the Global Debenture representing such Debentures
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the persons in whose names the Debentures, including the
Global Debentures, are registered as the owners thereof for the purpose of
receiving such payments and for any and all other purposes whatsoever.
Consequently, neither the Company nor the Trustee has or will have
responsibility or liability for the payment of such amounts to beneficial owners
of Debentures (including principal, premium, if any, and interest), or to
immediately credit the accounts of the relevant Participants with such payment,
in amounts proportionate to their respective holdings in principal amount of
beneficial interest in the Global Debenture as shown on the records of the
Depositary Payments by the Participants and the Indirect Participants to the
beneficial owners of Debentures will be governed by standing instructions and
customary practice and will be the responsibility of the Participants or the
Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Debentures in definitive form under the Indenture, then, upon surrender by the
Depositary of its Global Debenture, Certificated Securities will be issued to
each person that the Depositary identifies as the beneficial owner of the
Debentures represented by the Global Debenture. In addition, subject to certain
conditions, any person having a beneficial interest in a Global Debenture may,
upon request to the Trustee, exchange such beneficial interest for Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of such person or persons (or the nominee of
any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary or any Participant or Indirect Participant in identifying the
beneficial owners of the related Debentures and each person may conclusively
rely on, and shall be protected in relying on instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the Debentures to be issued).
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable. The
Company will have no responsibility for the performance by DTC or its
Participants of their respective obligations as described hereunder or under the
rules and procedures governing their respective operations.
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SAME-DAY FUNDS SETTLEMENT AND PAYMENT
The Indenture will require that payments in respect of the Debentures
represented by the Global Debenture (including principal, premium, if any,
interest and liquidated damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the registered Holder of the Global
Debenture. With respect to Certificated Securities, the Company will make all
payments of principal, premium, if any, interest and liquidated damages, if any,
by wire transfer of immediately available funds to the accounts specified by
Holders thereof or, if no such account is specified, by mailing a check to each
such Holder's registered address. Secondary trading in long-term notes and
debentures of corporate issuers is generally settled in clearing-house or
next-day funds. In contrast, the Debentures represented by the Global Debenture
are expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Debentures will therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Securities will also be settled in
immediately available funds.
DESCRIPTION OF CAPITAL STOCK AND INDEBTEDNESS
The authorized capital stock of the Company consists of (i) 4,000,000
shares of serial preferred stock, $1.00 par value and (ii) 35,000,000 shares of
Common Stock, $.01 par value. As of March 17, 1997, the Company had outstanding
20,272,242 shares of Common Stock and 1,150,000 shares of $2.03 Convertible
Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to receive dividends if, when and
as declared by the Board of Directors of the Company out of funds legally
available therefor (however, the Indenture for the Senior Subordinated Notes and
the Credit Agreement contain certain restrictions on the payment of cash
dividends. If there is any arrearage in the payment of dividends on any
preferred stock, the Company may not pay dividends upon, repurchase or redeem
shares of its Common Stock. All shares of Common Stock have equal voting rights
on the basis of one vote per share on all matters to be voted upon by
stockholders. Cumulative voting for the election of directors is not permitted.
Shares of Common Stock have no preemptive, conversion, sinking fund or
redemption provisions and are not liable for further call or assessment. Each
share of Common Stock is entitled to share on a pro rata basis in any assets
available for distribution to the holders of the Common Stock upon liquidation
of the Company after satisfaction of any liquidation preference on any series of
the Company's preferred stock. All outstanding shares of Common Stock have been,
and all shares offered in the Common Stock Offering are when issued, validly
issued, fully paid and nonassessable.
OPTIONS
The Company's stock option plan, which is administered by the
Compensation Committee, provides for the granting of options to purchase shares
of Common Stock to key employees and certain other persons who are not employees
for advice or other assistance or services to the Company. The plan permits the
granting of options to acquire up to 2,000,000 shares of Common Stock subject to
a limitation of 10% of the outstanding Common Stock on a fully diluted basis. At
March 13, 1997, a total of 1,216,032 options had been granted under the plan of
which options to purchase 503,632 shares were exercisable at that date. The
options outstanding at March 13, 1997 were granted at an exercise price of $3.38
to $13.88 per share. The exercise price of all such options was equal to the
fair market value of the Common Stock on the date of grant. All were options
granted for a term of five years, with 30% of the options becoming exercisable
after one year, an additional 30% becoming exercisable after two years and the
remaining options becoming exercisable after three years.
WARRANTS
Warrants to acquire 20,000 shares of Common Stock at a price of $12.88
per share were outstanding at March 17, 1997. These warrants expire in May 1999.
The warrants were issued in a private placement not registered under the
Securities Act, and the resale of the shares of Common Stock underlying such
warrants are covered by the Prospectus.
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PREFERRED STOCK
The Board of Directors of the Company, without action by stockholders,
is authorized to issue shares of serial preferred stock in one or more series
and, within certain limitations, to determine the voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and the liquidation, conversion, redemption and other rights of each such
series. The Board of Directors could issue a series with rights more favorable
with respect to dividends, liquidation and voting than those held by the holders
of its Common Stock. At March 17, 1997, 1,150,000 shares of Preferred Stock were
outstanding, designated as $2.03 Convertible Preferred Stock.
The $2.03 Convertible Preferred Stock bears an annual dividend rate of
$2.03 payable quarterly. If dividends have not been paid on the $2.03
Convertible Preferred Stock, the Company cannot redeem or pay dividends on
shares of stock ranking junior to the $2.03 Convertible Preferred Stock. No new
serial preferred stock can be created with rights superior to those of the $2.03
Convertible Preferred Stock, as to dividends and liquidation rights, without the
approval of the holders of a majority of the $2.03 Convertible Preferred Stock.
In addition, the holders of the $2.03 Convertible Preferred Stock are entitled
to one vote for each share owned. Additionally, if dividends remain unpaid for
six full quarterly periods, or if any future class of preferred stockholders is
entitled to elect members of the Board of Directors based on actual missed and
unpaid dividends, the number of members of the Board of Directors are increased
to such number as may be necessary to entitle the holders of the $2.03
Convertible Preferred Stock and such other future preferred stockholders, voting
as a single class, to elect one-third of the members of the Board of Directors.
The $2.03 Convertible Preferred Stock has liquidation rights of $25 per share.
The Company may exchange the $2.03 Convertible Preferred Stock for an aggregate
of $28,750,000 principal amount of its 8.125% Convertible Subordinated Notes due
December 31, 2005. Each share of $2.03 Convertible Preferred Stock is
convertible into Common Stock at a conversion price of $9.50 per share, subject
to adjustment under certain circumstances. The conversion price are reduced for
a limited period (but to not less than $5.21) if a change in control or
fundamental change in the Company occurs at a time that the market price of the
Common Stock is less than the conversion price. The Company may redeem the $2.03
Convertible Preferred Stock at any time after November 1, 1998, at redemption
prices declining from $26.50 to $25.00 per share, plus cumulative unpaid
dividends.
CREDIT AGREEMENT
In connection with the financing of the Cometra Acquisition, the
Company and its subsidiaries expanded the existing credit facility with the bank
lenders. The Credit Agreement permits the Company to obtain revolving credit
loans and to issue letters of credit for the account of the Company from time to
time in an aggregate amount not to exceed $300 million (of which not more than
$150 million may be represented by letters of credit). The Borrowing Base is
subject to semi-annual determination and certain other redeterminations based
upon a variety of factors, including the discounted present value of estimated
future net cash flow from oil and gas production. At the Company's option, loans
may be prepaid, and revolving credit commitments may be reduced, in whole or in
part at any time in certain minimum amounts. The Credit Agreement matures in
February 2002.
The obligations of the Company under the Credit Agreement are
unconditionally and irrevocably guaranteed by each of the Company's direct and
indirect domestic subsidiaries (collectively, the "Bank Guarantors"). In
addition, the Credit Agreement is secured by first priority security interests
in (i) existing mortgaged oil and gas properties of the Company and the Cometra
Properties, (ii) all accounts receivable, inventory and intangibles of the
Company and the Bank Guarantors, and (iii) all of the capital stock of the
Company's direct or indirect subsidiaries. Substantially all of the assets of
the Company are pledged as collateral if, on May 15, 1997, the Borrowing Base
and amounts outstanding under the Credit Agreement have not been reduced to $300
million. Such security interests are released upon the (i) reduction of the
amounts outstanding under the Credit Agreement to $300 million (or the then
determined Borrowing Base) and (ii) issuance of $65 million of Common Stock
and/or the sale of Company assets in excess of the Borrowing Base value
attributable to such assets as agreed by the lenders (the "Trigger Event"). On
March 14, 1997, the Trigger Event occurred and the Company's Credit Agreement
became unsecured with a Borrowing Base up to $300 million.
At the Company's option, the applicable interest rate per annum is
either the Eurodollar loan rate plus a margin ranging from 0.625% to 1.125% or
the Alternate Base Rate (as defined) plus a margin ranging from 0% to 0.25%. The
Alternate Base Rate is the higher of (a) the administrative agent bank's prime
rate and (b) the federal funds effective rate plus 0.5%. Until the
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occurrence of the Trigger Event, the interest rate margins are increased by
50 basis points prior to March 31, 1997 and 100 basis points thereafter.
The Credit Agreement includes various covenants that require, among
other things, that the Company (i) maintain a minimum consolidated tangible net
worth of at least $100 million plus 90% of the net proceeds from the Common
Stock Offering and 50% of the net proceeds from any subsequent equity offering;
(ii) maintain a ratio of EBITDA to consolidated interest expense on total debt
for each period of four consecutive fiscal quarters of at least 2.5 to 1.0; and
(iii) not make restricted payments (defined as dividends, distributions or
guarantees to third parties or the retirement, repurchase or prepayment prior to
the scheduled maturity of its subordinated debt) in an aggregate amount in any
one fiscal year in excess of $5 million plus 50% of the net proceeds from equity
offerings subsequent to the Common Stock Offering and 50% of the Company's
consolidated net income earned after January 1, 1997. In addition, the Credit
Agreement restricts the ability of the Company to dispose of assets, incur
additional indebtedness, repay other indebtedness or amend other debt
instruments, create liens on assets, make investments or acquisitions, engage in
mergers or consolidations, make capital expenditures or engage in certain
transactions with affiliates.
LEGAL MATTERS
Certain legal matters related to the Securities and the Selling
Securityholder Securities are being passed upon for the Company by Vinson &
Elkins L.L.P., 2300 First City Tower, Houston, Texas 77002-6760.
EXPERTS
The Consolidated Financial Statements of the Company, as of December
31, 1995 and 1996 and for the three years then ended, included and incorporated
by reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto incorporated by reference in this Prospectus in reliance upon the
authority of said firm as experts in giving said reports.
The statements of revenues and direct operating expenses of the
American Cometra Interests (referred to herein as the Cometra Properties) for
the years ended December 31, 1994, 1995 and 1996, incorporated by reference in
this Registration Statement have been audited by Coopers & Lybrand L.L.P.,
independent accountants, and are incorporated by reference herein in reliance
upon the authority of that firm as experts in accounting and auditing.
The financial statements of the Bannon Interests as of December 31,
1995 and for the year then ended, have been incorporated by reference herein and
in the Registration Statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
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GLOSSARY
The terms defined in this glossary are used throughout this Prospectus.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used herein in
reference to crude oil or other liquid hydrocarbons.
Bcf. One billion cubic feet.
Bcfe. One billion cubic feet of natural gas equivalents, based on a ratio of 6
Mcf for each barrel of oil, which reflects the relative energy content.
Development well. A well drilled within the proved area of an oil or natural gas
reservoir to the depth of a stratigraphic horizon known to be productive.
Dry hole. A well found to be incapable of producing either oil or natural gas in
sufficient quantities to justify completion as an oil or gas well.
Exploratory well. A well drilled to find and produce oil or gas in an unproved
area, to find a new reservoir in a field previously found to be productive of
oil or gas in another reservoir, or to extend a known reservoir.
Gross acres or gross wells. The total acres or wells, as the case may be, in
which a working interest is owned.
Infill well. A well drilled between known producing wells to better exploit the
reservoir.
Mbbl. One thousand barrels of crude oil or other liquid hydrocarbons.
Mcf. One thousand cubic feet.
Mcfe. One thousand cubic feet of natural gas equivalents, based on a ratio of
6 Mcf for each barrel of oil, which reflects the relative energy content.
Mmbbl. One million barrels of crude oil or other liquid hydrocarbons.
MmBtu. One million British thermal units. One British thermal unit is the heat
required to raise the temperature of a one-pound mass of water from 58.5 to 59.5
degrees Fahrenheit.
Mmcf. One million cubic feet.
Mmcfe. One million cubic feet of natural gas equivalents.
Net acres or net wells. The sum of the fractional working interests owned in
gross acres or gross wells.
Net oil and gas sales. Oil and natural gas sales less oil and natural gas
production expenses.
Present Value. The pre-tax present value, discounted at 10%, of future net cash
flows from estimated proved reserves, calculated holding prices and costs
constant at amounts in effect on the date of the report (unless such prices or
costs are subject to change pursuant to contractual provisions) and otherwise in
accordance with the Commission's rules for inclusion of oil and gas reserve
information in financial statements filed with the Commission.
Productive well. A well that is producing oil or gas or that is capable of
production.
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Proved developed non-producing reserves. Reserves that consist of (i) proved
reserves from wells which have been completed and tested but are not producing
due to lack of market or minor completion problems which are expected to be
corrected and (ii) provided reserves currently behind the pipe in existing wells
and which are expected to be productive due to both the well log characteristics
and analogous production in the immediate vicinity of the wells.
Proved developed producing reserves. Proved reserves that can be expected to be
recovered from currently producing zones under the continuation of present
operating methods.
Proved developed reserves. Proved reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.
Proved reserves. The estimated quantities of crude oil, natural gas and natural
gas liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing
economic and operating conditions.
Proved undeveloped reserves. Proved reserves that are expected to be recovered
from new wells on undrilled acreage, or from existing wells where a relatively
major expenditure is required for recompletion.
Recompletion. The completion for production of an existing wellbore in another
formation from that in which the well has previously been completed.
Royalty interest. An interest in an oil and gas property entitling the owner to
a share of oil and natural gas production free of costs of production.
Standardized Measure. The present value, discounted at 10%, of future net cash
flows from estimated proved reserves after income taxes calculated holding
prices and costs constant at amounts in effect on the date of the report (unless
such prices or costs are subject to change pursuant to contractual provisions)
and otherwise in accordance with the Commission's rules for inclusion of oil and
gas reserve information in financial statements filed with the Commission.
Working interest. The operating interest that gives the owner the right to
drill, produce and conduct operating activities on the property and a share of
production, subject to all royalties, overriding royalties and other burdens and
to all costs of exploration, development and operations and all risks in
connection therewith.
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No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any securities offered hereby by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making such
offer or solicitation is not qualified to do so or to anyone to whom it is
unlawful to make such offer or solicitation.
------------------
TABLE OF CONTENTS
Page
----
Available Information............................... 2
Incorporation of Certain Information by Reference... 2
The Company.......................................... 3
Risk Factors........................................ 3
Forward-Looking Information......................... 10
Ratio of Earnings to Fixed Charges.................. 10
Use of Proceeds..................................... 10
Capitalization...................................... 11
Price Range of Common Stock and Dividend Policy..... 12
Unaudited Pro Forma Consolidated
Financial Statements................................ 13
Selected Consolidated Financial Data................ 17
Selling Securityholders ............................ 18
Plan of Distribution................................ 19
Description of 6% Convertible
Subordinated Debentures............................. 19
Description of Capital Stock and Indebtedness....... 29
Legal Matters....................................... 31
Experts............................................. 31
Glossary............................................ 32
============================================================
LOMAK PETROLEUM, INC.
---------------------
PROSPECTUS
---------------------
March , 1997
---
================================================================================
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PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee..................................... $ 41,514
Legal Fees and Expenses*................................. 5,000
Accounting Fees*......................................... 7,500
Printing and Engraving*.................................. 15,000
Miscellaneous*........................................... 5,986
--------------
Total.............................................. $ 75,000
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation. Section 145 of the Delaware General
Corporation Law generally provides that a corporation is empowered to indemnify
any person who is made a party to a proceeding or threatened proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or was, at the request of the corporation, serving in any of
such capacities in another corporation or other enterprise. This statute
describes in detail the right of the corporation to indemnify any such person.
Article SEVENTH, section (5) the Company Certificate of Incorporation provides:
Any former, present or future director, officer or employee of the Company
or the legal representative of any such director, officer, or employee shall be
indemnified by The Company
(a) against reasonable costs, disbursements and counsel fees paid or
incurred where such person has been successful on the merits or otherwise in any
pending, threatened or completed civil, criminal, administrative or arbitrative
action, suit or proceeding, and any appeal therein and any inquiry or
investigation which could lead to such action, suit or proceeding, or in defense
of any claim, issue or matter therein, by reason of such person being or having
been such director, officer or employee, and
(b) with respect to any such action, suit, proceeding, inquiry or
investigation for which indemnification is not made under (a) above, against
reasonable costs, disbursements (which shall include amounts paid in
satisfaction of settlements, judgments, fines and penalties, exclusive, however,
of any amount paid or payable to the Company) and counsel fees if such person
also had no reasonable cause to believe the conduct was unlawful, with the
determination as to whether the applicable standard of conduct was met to be
made by a majority of the members of the Board of Directors (sitting as a
committee of the Board) who were not parties to such inquiry, investigation,
action, suit or proceeding or by any one or more disinterested counsel to whom
the question may be referred to the Board of Directors; provided, however, in
connection with any proceeding by or in the right of the Company, no
indemnification shall be provided as to any person adjudged by any court to be
liable for negligence or misconduct except as and to the extent determined by
such court.
II-1
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The termination of any such inquiry, investigation, action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not of itself create a presumption that such
person did not meet the standards of conduct set forth in subsection (b) above.
Reasonable costs, disbursements and counsel fees incurred by such person in
connection with any inquiry, investigation action, suit or proceeding may be
paid by the Company in advance of the final disposition of such matter if
authorized by a majority of the Board of Directors (sitting as a committee of
the Board) not parties to such matter upon receipt by The Company of an
undertaking by or on behalf of such person to repay such amount unless it is
ultimately determined that such person is entitled to be indemnified as set
forth herein.
The Board of Directors may, at any regular or special meeting of the Board,
by resolution, accord similar indemnification (prospective or retroactive) to
any director, trustee, officer or employee of any other company who is serving
as such at the request of the Company because of the Company's interest in such
other company and any officer, director or employee of any constituent
corporation absorbed by the Company in a consolidation or merger, or the legal
representative of any such director, trustee, officer or employee.
The indemnification herein provided shall not exclude any other rights to
which such person may be entitled as a matter of law or which may be lawfully
granted.
Article XII of the Company's Bylaws, incorporating the above provisions,
provides for an indemnification agreement to be entered into by directors' and
designated officers of the Company. All directors of the Company have executed
an indemnification agreement the form of which was approved by stockholders at
the Company's 1994 annual stockholders meeting.
Article XII of the Company's Bylaws also allows the Company to purchase
liability insurance for Officers and Directors. As of the date hereof there is
no such insurance in place.
Article XIII of the Company's Bylaws, with certain specified exceptions,
limits the personal liability of the Directors to Lomak or its stockholders for
monetary damages for breach of fiduciary duty to the fullest extent permitted by
Delaware law, including any changes in Delaware law adopted in the future.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant,
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. See Item 17,
"Undertakings."
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ITEM 16. EXHIBITS.
Exhibit No. Description
- ----------- -----------
1.1** Purchase Agreement dated December 20, 1996 among Lomak
Petroleum, Inc., Forum Capital Markets L.P., McDonald & Company
Securities, Inc. and Morgan Keegan & Company, Inc.
4.1(a)** Form of Indenture between Lomak Petroleum, Inc. and Keycorp.
Shareholder Service, Inc. relating to the 8.125% Subordinated
Convertible Notes due 2005.
4.1(b)** Registration Rights Agreement dated October 31, 1995 among
Lomak Petroleum, Inc., Forum Capital Markets L.P. and Hanifen,
Imhoff Inc.
5.1* Opinion of Vinson & Elkins, L.L.P.
24.1(a)* Consent of Vinson & Elkins, L.L.P. (included in Exhibit 5.1
hereto).
24.1(b)** Consent of Arthur Andersen LLP.
24.1(c)** Consent of Coopers & Lybrand LLP.
24.1(d)** Consent of KPMG Peat Marwick LLP.
- ----------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8, or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in 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.
II-3
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"The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent for given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information."
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Forth Worth, State of Texas on April 2, 1997.
LOMAK PETROLEUM, INC.
BY:/S/ JOHN H. PINKERTON
-------------------------------------
John H. Pinkerton
President and
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Thomas J. Edelman Chairman and Director April 2, 1997
- ------------------------------------------
Thomas J. Edelman
/s/ John H. Pinkerton President, Chief Executive Officer and April 2, 1997
- ------------------------------------------ Director (Principal Executive Officer)
John H. Pinkerton
/s/ C. Rand Michaels Vice Chairman and Director April 2, 1997
- ------------------------------------------
C. Rand Michaels
/s/ Robert E. Aikman Director April 2, 1997
- --------------------------------------------
Robert E. Aikman
/s/ Allen Finkelson Director April 2, 1997
- --------------------------------------------
Allen Finkelson
/s/ Anthony V. Dub Director April 2, 1997
- --------------------------------------------
Anthony V. Dub
/s/ Ben A. Guill Director April 2, 1997
- ------------------------------------------
Ben A. Guill
/s/ Thomas W. Stoelk Vice President - Finance and Chief Financial April 2, 1997
- ------------------------------------------ Officer (Principal Financial Officer)
Thomas W. Stoelk
/s/ John R. Frank Controller and Chief Accounting Officer April 2, 1997
- ------------------------------------------ (Principal Accounting Officer)
John R. Frank
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1.1** Purchase Agreement dated December 20, 1996 among Lomak
Petroleum, Inc., Forum Capital Markets L.P., McDonald
& Company Securities, Inc. and Morgan Keegan & Company,
Inc.
4.1(a)** Form of Indenture between Lomak Petroleum, Inc. and
Keycorp. Shareholder Service, Inc. relating
to the 8.125% Subordinated Convertible Notes due 2005.
4.1(b)** Registration Rights Agreement dated October 31, 1995
among Lomak Petroleum, Inc., Forum Capital Markets L.P.
and Hanifen, Imhoff Inc.
5.1* Opinion of Vinson & Elkins, L.L.P.
24.1(a)* Consent of Vinson & Elkins, L.L.P. (included in
Exhibit 5.1 hereto).
24.1(b)** Consent of Arthur Andersen LLP.
24.1(c)** Consent of Coopers & Lybrand LLP.
24.1(d)** Consent of KPMG Peat Marwick LLP.
* Filed herewith.
** Previously filed.
II-6
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[VINSON & ELKINS LETTERHEAD]
EXHIBIT 5.1
(713) 758-2222 (713) 758-2346
April 2, 1997
Lomak Petroleum, Inc.
500 Throckmorton Street
Fort Worth, Texas 76102
Ladies and Gentleman:
We have acted as counsel to Lomak Petroleum, Inc., a Delaware corporation
(the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-3, Registration Statement No. 333-23955 (the
"Registration Statement"), relating to the proposed offer and sale by certain
securityholders of the Company of up to an aggregate of 4,287,249 shares of the
Company's common stock par value $.01 per share (the "Shares"), and $55,000,000
aggregate principal amount of 6% Convertible Subordinated Debentures due 2007
(the "Debentures"). Of the shares of Common Stock registered by the Registration
Statement, (a) 1,410,106 shares are already outstanding (the "Outstanding
Shares"), (b) 2,857,143 shares are issuable upon conversion of the Debentures
(the "Debenture Shares") and (c) 20,000 shares are issuable upon exercise of
currently outstanding warrants (the "Warrant Shares"). In our capacity as
counsel of the Company, we are passing on certain legal matters in connection
with the registration of the sale of the Shares and the Debentures. At your
request, this opinion is being furnished to you for filing as an exhibit to the
Registration Statement.
In connection with rendering this opinion, we have examined such
certificates, instruments and documents and reviewed such questions of law as we
have considered necessary or appropriate for the purpose of this opinion. In
addition, we have relied as to factual matters on certificate of certain public
officials and officers of the Company.
Based upon the foregoing examination and review, we are of the opinion
that:
(i) The Outstanding Shares are duly and validly authorized and
legally issued, fully paid and nonassessable;
(ii) The Debenture Shares will, upon conversion of the Debentures
in accordance with the terms thereof, be duly and validly
authorized and legally issued, fully paid and nonassessable;
(iii) The Warrant Shares will, upon exercise of the applicable
warrants in accordance with the terms thereof, be duly and
validly authorized and legally issued, fully paid and
nonassessable;
2
Lomak Petroleum, Inc.
Page 2
April 2, 1997
(iv) The Debentures have been duly authorized for issuance, and
constitute legally issued and binding obligations of the
Company enforceable in accordance with their terms and
entitled to the benefits of the Indenture, except to the
extent that such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws affecting creditors' rights
generally and by general equitable principles (whether
considered in a proceeding in equity or at law).
The foregoing opinion is limited to the laws of the United States of
America and to the General Corporation Law of the State of Delaware. For
purposes of this opinion, we assume that the Shares will be issued in compliance
with all applicable state securities or Blue Sky laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, however, we do not hereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 and the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
VINSON & ELKINS L.L.P.
