CRZO
Pulled from the 10K
quicken.elogic.com
In January 1998, the Company consummated the sale of 300,000 shares of
Preferred Stock and Warrants to purchase 1,000,000 shares of Common Stock to
affiliates of Enron Corp. The net proceeds received by the Company from this
transaction were approximately $28.8 million and were used primarily for oil and
natural gas exploration and development activities in Texas and Louisiana and to
repay related indebtedness. The Preferred Stock provides for annual cumulative
dividends of $9.00 per share, payable quarterly in cash or, at the option of the
Company until January 15, 2002, in additional shares of Preferred Stock. The
Company expects to continue PIK dividends due in 1999. Dividend payments for the
12 months ended December 31, 1998 were made by the issuance of an additional
27,286.69 shares of Preferred Stock. As of January 15, 1999 there were 32,728.69
shares of Preferred Stock outstanding.
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The Preferred Stock is required to be redeemed by the Company (i) on
January 8, 2005, or (ii) after a request for redemption from the holders of at
least 30,000 shares of the Preferred Stock (or, if fewer than such number of
shares of Preferred Stock are outstanding, all of the outstanding shares of
Preferred Stock) and the occurrence of the following events: (a) the Company has
failed at any point in time to declare and pay any two dividends in the amount
then due and payable on or before the date the second of such dividends is due
and such dividends remain unpaid at such time, (b) the Company breaches certain
other covenants concerning the payment of dividends or other distributions on or
redemption or acquisition of shares of its capital stock ranking at parity with
or junior to the Preferred Stock, (c) for two consecutive fiscal quarterly
periods the quarterly Cash Flow (as defined below) of the Company is less than
the amount of the dividends accrued in respect to the Preferred Stock, (d) the
Company fails to pay certain amounts due on indebtedness for borrowed money or
there has otherwise been an acceleration of such indebtedness for borrowed
money, (e) there is a violation of the Shareholders' Agreement that is not
waived or (f) the Company sells, leases, exchanges or otherwise disposes of all
or substantially all of its property and assets which transaction does not
provide for the redemption of the Series A Preferred Stock. "Cash Flow" means
net income prior to preferred dividends and accretion (i) plus (to the extent
included in net income prior to preferred dividends and accretion) depreciation,
depletion and amortization and other non-cash charges and losses on the sale of
property (ii) minus non-cash income items and required principal payments on
indebtedness for borrowed money with a maturity from the original date of
incurrence of such indebtedness of six months or greater (excluding voluntary
prepayments and refinancing, but including prepayments (other than in connection
with refinancing) which would otherwise be due under such indebtedness within a
60-day period following the date of such prepayment). The Preferred Stock also
may be redeemed at the option of the Company at any time in whole or in part.
All redemptions are at a price per share, together with dividends accumulated
and unpaid to the date of redemption, decreasing over time from an initial rate
of $104.50 per share to $100.00 per share. If the Company fails to meet its
redemption obligations, the holders of the Preferred Stock will generally have
the right, voting separately as a class, to elect additional directors, which in
most cases will constitute a majority of the board.
The Company currently expects that its Cash Flow (as defined above) for the
three months ended March 31, 1999 will be less than the amount of the dividends
accrued with respect to the Preferred Stock for such period. There can be no
assurance as to whether the Company's Cash Flow for the three months ended June
30, 1999 will exceed the amount of the dividends to be accrued with respect to
the Preferred Stock.
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