JPMorgan - KASE

guarantees any Indebtedness of an Obligor) shall be a Guarantor. In that case, the Issuer will be
required to file a supplement to this Offering Memorandum with the Luxembourg Stock
Exchange. See “Description of the Notes — Guarantees”. The Notes are effectively subordinated
in respect of payment to claims of creditors (other than the Company or a Guarantor) of the
Company’s Subsidiaries other than the Guarantors. Claims of creditors (other than the Company
or a Guarantor) of such Subsidiaries, including trade creditors, tort claimants, secured creditors,
taxing authorities and creditors holding guarantees, will generally have priority as to the assets
of such Subsidiaries over the claims and equity of the Issuer, the Company or any Guarantor, and,
thereby indirectly, the holders of the Indebtedness of the Issuer, the Company or such
Guarantors, including the Notes and the Guarantees. In addition, the Company and its Restricted
Subsidiaries are permitted to make Investments in certain other entities not constituting
Subsidiaries engaged or proposed to be engaged in the Oil and Gas Business. Such entities will
not generally be governed by the covenants set forth in the Indenture. The operations of the
Company are conducted through its Subsidiaries (principally HKM and HOP) and such other
entities and, therefore, the Issuer is dependent upon the cash flow from those entities to meet its
obligations.
Principal, Maturity and Interest
The Notes will initially have an aggregate principal amount of $125 million and will mature on
February 12, 2010. On the maturity date, the Issuer will repay 100% of the outstanding
aggregate principal amount of the Notes. Interest on the Notes will accrue at the rate of 9.625%
per annum and will be payable semi-annually in arrears on February 12 and August 12,
commencing on August 12, 2003, to Holders of record on the immediately preceding January 28
and July 28. Interest on the Notes will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. Principal of,
premium and interest, if any, on the Notes will be payable at the office or agency of the Issuer
maintained for such purpose within the City and State of New York and at the specified office of
the paying agent in the United Kingdom and Luxembourg or, at the option of the Issuer,
payment of principal, premium or interest, if any, may be made by check mailed to the Holders
of the Notes at their respective addresses set forth in the register of Holders of Notes; provided
that all payments with respect to Global Notes the Holders of whom have given wire transfer
instructions to the Issuer and its paying agent prior to the applicable record date for such
payment will be required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the Issuer, the Issuer’s
office or agency will be the office of the Trustee maintained for such purpose. The Issuer will
maintain a paying agent in Luxembourg, so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require. Notice of any change in
the Registrar or the Paying Agent or their specified offices or the appointment of any further
Paying Agent will promptly be given to the Holders of the Notes in accordance with the
provisions contained in “Description of the Notes — Notices”. The Notes will be issued in
denominations of $10,000 and integral multiples of $1,000 in excess thereof.
Guarantees
The obligations of the Issuer under the Notes will be jointly and severally guaranteed by the
Guarantors. As of the Closing Date, the Initial Guarantors will be the only Guarantors. The
Indenture will require the Company to cause any Person that becomes a Material Restricted
Subsidiary of the Company after the Closing Date (other than Valsera) to execute and deliver to
the Trustee a supplemental indenture pursuant to which such Subsidiary will become a
Guarantor. Each Guarantee will be a continuing guarantee and shall (i) remain in full force and
effect until payment in full of all the obligations under the Indenture and the Notes, (ii) be
binding upon such Guarantor and (iii) inure to the benefit of and be enforceable by the Holders
and their successors, transferees and assigns.
The Indenture contains provisions the intent of which is to provide that the obligations of each
Guarantor (and any other Subsidiary of the Company that becomes a Guarantor after the date of
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