sv3asr
As filed
with the Securities and Exchange Commission on February 3,
2011
Registration Statement
No. 333-
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Louisiana
Delaware
Delaware
Delaware
Delaware
(State of incorporation)
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DENBURY RESOURCES INC.
DENBURY AIR, LLC
DENBURY GATHERING & MARKETING, INC.
DENBURY GREEN PIPELINE-TEXAS, LLC
DENBURY GULF COAST PIPELINES, LLC
DENBURY HOLDINGS, INC.
DENBURY MARINE, L.L.C.
DENBURY ONSHORE, LLC
DENBURY OPERATING COMPANY
DENBURY PIPELINE HOLDINGS, LLC
GREENCORE PIPELINE COMPANY LLC
(Exact name of Registrant)
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20-0467835
75-2807621
75-3056150
26-2072301
27-4160892
27-2051216
72-1311038
20-0467798
75-2807620
27-4160190
27-0619605
(I.R.S. EmployerIdentification No.)
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1311
(Primary Standard Industrial
Classification Code Number)
Mark C. Allen, Senior Vice
President and Chief Financial Officer
Denbury Resources Inc.
5320 Legacy Drive
Plano, Texas 75024
(972) 673-2000
(Name, address and telephone
number of Registrants executive offices and agent for
service)
Copies to:
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Donald W. Brodsky
Judy G. Gechman
Baker & Hostetler LLP
1000 Louisiana Street
Suite 2000
Houston, Texas 77002
(713) 751-1600
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Gary L. Sellers
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
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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. o
If any of the securities being registered on this Form are being
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. þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of earlier effective registration
statement for the same
offering. o
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. o
If this Form is a registration statement pursuant to General
Instruction I.D. or a post-effective amendment thereto that
shall become effective upon filing with the Commission pursuant
to Rule 462(e) under the Securities Act, check the
following
box. þ
If this Form is a post-effective amendment to a registration
statement filed pursuant to General Instruction I.D. filed
to register additional securities or additional classes of
securities pursuant to Rule 413(b) under the Securities
Act, check the following
box. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller
reporting company)
CALCULATION OF REGISTRATION
FEE
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Proposed Maximum
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Amount of
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Title of Each Class of Securities
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Offering
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Registration
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to be Registered
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Price
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Fee (1)
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Senior Subordinated Notes due 2021
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$350,000,000
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$40,635
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Subsidiary Guarantees
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(2)
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(2)
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Total
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$350,000,000
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$40,635
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(1)
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Calculated in accordance with
Rule 457(o) of the Securities Act of 1933.
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(2)
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No separate consideration will be
received for the Subsidiary Guarantees.
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The information in
this prospectus is not complete and may be changed. This
prospectus is not an offer to sell these securities and we are
not soliciting offers to buy these securities in any state where
the offer or sale is not permitted.
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Subject
to Completion,
Preliminary Prospectus dated
February 3, 2011
$350,000,000
Denbury Resources
Inc.
% Senior
Subordinated Notes due 2021
We are offering $350,000,000 aggregate principal amount
of % Senior Subordinated Notes
due 2021 (the notes). The notes will bear interest
at % per year and will mature
on , 2021. Interest will be payable
on
and
of each year, beginning
on ,
2011.
We may redeem the notes in whole or in part on and
after ,
2016 at the redemption prices described herein. In addition,
prior
to ,
2016 we may redeem the notes in whole or in part at a price
equal to 100% of the principal amount thereof plus a make
whole premium and accrued and unpaid interest. We may also
redeem up to 35% of the notes
before ,
2014, with the proceeds of certain equity offerings. If we sell
all or substantially all of our assets or experience specific
kinds of changes in control, we must offer to repurchase the
notes. There is no sinking fund for the notes.
The notes are being offered to partially fund the repurchase of
$225 million of our
71/2% Senior
Subordinated Notes due 2013 and $300 million of our
71/2% Senior
Subordinated Notes due 2015.
The notes are our senior subordinated obligations. The notes
will be unsecured and will rank equally with all of our existing
and future unsecured senior subordinated debt, will be
subordinated to all of our existing and future senior debt and
will rank senior to all of our future subordinated debt. Our
obligations under the notes will be guaranteed on a senior
subordinated basis by most of our current and certain of our
future domestic subsidiaries.
Investing in the notes involves substantial risk. See
Risk Factors beginning on page 12.
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Per Note
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Total
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Public offering price (1)
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%
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$
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Underwriting discount
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%
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$
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Proceeds, before expenses, to us
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%
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$
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(1) |
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Plus accrued interest
from ,
2011, if any. |
The notes will not be listed on any securities exchange.
Currently there is no public market for the notes.
Delivery of the notes, in book-entry form, will be made on or
about ,
2011 through The Depository Trust Company.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities, or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Joint Book-Running Managers
Co-Managers
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BNP PARIBAS
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Scotia Capital
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Credit Agricole CIB
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Lloyds Bank Corporate Markets
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BBVA Securities
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Capital One Southcoast
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CIBC
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Comerica Securities
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ING
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KeyBanc Capital Markets
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Mitsubishi UFJ Securities
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SMBC Nikko
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Suntrust Robinson Humphrey
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US Bancorp
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February , 2011
ABOUT
THIS PROSPECTUS
This prospectus relates to the offer and sale by us of the
notes. You should rely on the information contained or
incorporated by reference into this prospectus. We have not, and
the underwriters have not, authorized any person to provide you
with different or inconsistent information. If anyone provides
you with different or inconsistent information, you should not
rely on it. We and the underwriters are not making an offer to
sell the notes in any jurisdiction where the offer or sale is
not permitted. You should assume that the information contained
in this prospectus and the documents incorporated by reference
are accurate only as of their respective dates. Our business,
results of operations, financial condition and prospects may
have changed since those dates.
TABLE OF
CONTENTS
Our principal executive office is located at 5320 Legacy Drive,
Plano, Texas 75024 and our telephone number is
(972) 673-2000.
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CAUTIONARY
STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
This document and the documents incorporated by reference herein
include forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended (which is referred to as the Securities Act in this
prospectus), Section 21E of the Securities Exchange Act of
1934, as amended (which is referred to as the Exchange Act in
this prospectus), and the Private Securities Litigation Reform
Act of 1995, regarding the financial position, business
strategy, production and reserve growth, possible or assumed
future results of operations, and other plans and objectives for
the future operations of Denbury and general economic
conditions. See Risk Factors.
The events and circumstances referred to in forward-looking
statements are subject to numerous risks and uncertainties.
Although we believe that in making such statements our
expectations are based on reasonable assumptions, the events and
circumstances referred to may be influenced by factors that
could cause actual outcomes and results to be materially
different from those projected.
Except for our obligations to disclose material information
under United States federal securities laws, Denbury does not
undertake any obligation to release publicly any revision to any
forward-looking statement, to report events or circumstances
after the date of this document or to report the occurrence of
unanticipated events.
Statements that are predictive in nature, that depend upon or
refer to future events or conditions, or that include words such
as will, would, should,
plans, likely, expects,
anticipates, intends,
believes, estimates, thinks,
may and similar expressions, are forward-looking
statements. The following important factors, in addition to
those discussed under Risk factors and elsewhere in
this document, could affect the future results of the energy
industry in general, and Denbury in particular, and could cause
those results to differ materially from those expressed in or
implied by such forward-looking statements:
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uncertainties inherent in the development and production of and
exploration for oil and natural gas and in estimating reserves;
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the need to make unexpected future capital expenditures
(including the amount and nature thereof);
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the impact of oil and natural gas price fluctuations;
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the effects of our indebtedness and increases in interest rates
thereon, which could restrict our ability to operate, make us
vulnerable to general adverse economic and industry conditions,
place us at a competitive disadvantage compared to our
competitors that have less debt, and have other adverse
consequences;
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the effects of competition;
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the success of our risk management activities;
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the availability of
CO2;
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the availability of acquisition or combination opportunities (or
lack thereof);
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the impact of current and future laws and governmental
regulations;
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environmental liabilities that are not covered by an effective
indemnification agreement or insurance; and
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general economic, market or business conditions.
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All written and oral forward-looking statements attributable to
Denbury or persons acting on behalf of Denbury are expressly
qualified in their entirety by such factors. For additional
information with respect to these factors, see Where You
Can Find More Information.
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WHERE YOU
CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange
Act, which requires us to file annual, quarterly and special
reports, proxy statements and other information with the SEC.
You may read and copy any document that we file at the Public
Reference Room of the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the operation of its public reference
room. You may view our reports electronically at the SECs
Internet site at www.sec.gov, or at our own website at
www.denbury.com. Our website and the information contained on
our website are not part of this Registration Statement, and you
should rely only on the information contained in this
Registration Statement and the documents incorporated by
reference herein when making a decision about whether to invest
in the notes.
This prospectus constitutes part of a Registration Statement on
Form S-3
filed with the SEC under the Securities Act. It omits some of
the information contained in the Registration Statement, and
reference is made to the Registration Statement for further
information with respect to us and the securities we are
offering. Any statement contained in this prospectus concerning
the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC is not
necessarily complete, and in each instance reference is made to
the filed document.
The SEC allows us to incorporate by reference the
information we file with it, which means that we can disclose
important information to you by referring you to that
information. Any information referred to in this way is
considered part of this prospectus from the date we file the
document containing it. Any reports filed by us with the SEC
after the date of this prospectus and before the date that the
offering of the securities by means of this prospectus is
terminated will automatically update and, when applicable,
supersede any information contained in this prospectus or
incorporated by reference in this prospectus. We incorporate by
reference (excluding any information furnished pursuant to
Item 2.02 or 7.01 of any report on
Form 8-K)
the documents listed below and any future filings made by us
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until we sell all the securities
covered by this prospectus:
Incorporated
Documents
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Annual Report on
Form 10-K
for the year ended December 31, 2009;
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Quarterly Reports on
Form 10-Q
for the quarters ended March 31, 2010, June 30, 2010
and September 30, 2010; and
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Current Reports on
Form 8-K
filed with the SEC on January 6, 2010, February 1,
2010, as amended on February 2, 2010, February 2,
2010, February 2, 2010, February 4, 2010,
February 8, 2010, February 8, 2010, February 9,
2010, February 12, 2010, March 3, 2010, March 4,
2010, March 5, 2010, March 12, 2010, as amended on
May 20, 2010, March 29, 2010, April 6, 2010,
April 15, 2010, May 19, 2010, May 20, 2010,
May 20, 2010, May 25, 2010, October 12, 2010,
December 7, 2010, December 22, 2010, February 3,
2011 and February 3, 2011.
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You may request a copy of these filings at no cost by writing or
telephoning Laurie Burkes, Investor Relations at Denbury
Resources Inc., 5320 Legacy Drive, Plano, Texas 75024, phone:
(972) 673-2000.
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SUMMARY
In this prospectus, when we use the term Denbury,
the Company, we, us or
our, we mean Denbury Resources Inc. and its
subsidiaries on a consolidated basis, unless otherwise indicated
or the context requires otherwise. References to oil and natural
gas prices used in this prospectus mean the NYMEX WTI oil price
and the Henry Hub natural gas cash price per MMBtu, unless
otherwise indicated. Oil and natural gas terms used in this
prospectus are defined in the Glossary section.
Denbury
Denbury is a Delaware corporation engaged in the acquisition,
development, operation and exploration of oil and natural gas
properties in the Rocky Mountain and Gulf Coast regions of the
United States. We are the largest oil and natural gas
producer in both Mississippi and Montana, and we own the largest
reserves of carbon dioxide
(CO2)
used for tertiary oil recovery east of the Mississippi River.
Our goal is to increase the value of acquired properties through
a combination of exploitation, drilling and proven engineering
extraction processes, with our most significant emphasis
relating to tertiary recovery operations.
Since we acquired our first
CO2
tertiary flood in Mississippi in 1999, we have gradually
increased our emphasis on these types of operations. Our
tertiary operations have grown to the point that, as of
December 31, 2010, approximately 41% of our proved reserves
were proved tertiary oil reserves. As of December 31, 2010,
we had total tertiary-related proved oil reserves of
approximately 164.4 MMBbls. Our production from tertiary
operations has increased from approximately 1,350 Bbls/d in
1999, the then existing production at Little Creek Field at the
time of acquisition, to a preliminary estimated average of
approximately 31,139 Bbls/d during the fourth quarter of
2010. We expect this production to continue to increase for
several years as we expand our tertiary operations to additional
fields that we own. With our acquisition of Encore Acquisition
Company (Encore) on March 9, 2010 (the
Encore Merger) we acquired an initial
CO2
source, together with two oil fields that have significant
potential for recovery of crude oil through
CO2
enhanced oil recovery (EOR), thus establishing a new
core area in the Rocky Mountain region for Denburys
application of its expertise in
CO2
EOR. We believe that there are many additional oil fields in our
two core operating areas that can be acquired and flooded with
CO2,
providing potential growth opportunities beyond our existing
inventory of oil fields.
In the Encore Merger, Denbury acquired approximately
275,000 net acres in the Bakken play in North Dakota and
Montana, one of the most attractive unconventional oil plays in
North America. Since our acquisition of Encore, we have
increased the number of drilling rigs we have working in the
Bakken from two rigs to five rigs. We estimate that our Bakken
production in the fourth quarter of 2010 is approximately 5,193
BOE/d, and our proved oil and natural gas reserves there at
December 31, 2010 are 46.7 MMBOE.
Our estimated total proved reserves at December 31, 2010
were 338.3 MMBbls of oil and 357.9 Bcf of natural gas,
based on the average first day of the month prices for each
month during 2010, which for NYMEX oil was a price of
$79.43 per barrel adjusted to prices received by field, and
for natural gas was a Henry Hub cash price of $4.40 per
MMBtu, also adjusted to prices received by field. On a BOE
basis, our proved reserves were 397.9 MMBOE at
December 31, 2010, of which approximately 85% was oil and
approximately 60% was proved developed.
Strategy
Denburys strategy is focused on the following fundamental
principles:
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remain focused in specific regions where Denbury either has, or
believes it can create, a competitive advantage as a result of
its ownership or use of
CO2
reserves, oil fields and
CO2
infrastructure;
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acquire properties where management believes additional value
can be created through tertiary recovery operations and a
combination of other exploitation, development, exploration and
marketing techniques;
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acquire properties that give Denbury a majority working interest
and operational control or where management believes Denbury can
ultimately obtain them;
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maximize the value of Company properties by increasing
production and reserves while controlling costs; and
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maintain a highly competitive team of experienced and
incentivized personnel.
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Recent
Developments
Tender
Offers
Simultaneously with this offering, we are offering to purchase
for cash any and all of our outstanding
(i) $225 million aggregate principal amount of
71/2% Senior
Subordinated Notes due 2013 of the Company and Denbury Onshore,
LLC (the 2013 Notes) and (ii) $300 million
aggregate principal amount of
71/2% Senior
Subordinated Notes due 2015 of the Company (the 2015
Notes). These tender offers are being made in conjunction
with solicitations of consents to amend the indentures with
respect to the 2013 Notes and 2015 Notes to eliminate most of
the restrictive covenants and certain events of default
contained in such indentures.
Fourth
Quarter Production
Based on preliminary data, our estimated average daily
production rate for our tertiary oil production during the
fourth quarter of 2010 is approximately 31,139 Bbls/d. Our
preliminarily estimated fourth quarter total production is
approximately 76,435 BOE/d. In the course of finalizing our
financial statements for the year ended December 31, 2010,
our final average daily production rate and fourth quarter
production may vary from the estimates presented herein.
Sale
of Interests in Encore Energy Partners
On December 31, 2010, we sold all of our common units of
Encore Energy Partners LP (ENP), and all of our
membership interests in Encore Energy Partners GP LLC, the
general partner of ENP, to an affiliate of Vanguard Natural
Resources, LLC (Vanguard) for consideration
consisting of $300.0 million cash and 3,137,255 Vanguard
common units valued at approximately $93.0 million based on
the December 31, 2010 closing price of Vanguard units of
$29.65. In addition, Vanguard assumed all of ENPs
long-term bank debt of $234.0 million. The ENP common units
we sold to Vanguard comprise approximately 46% of the
outstanding common units of ENP. ENPs third quarter 2010
production was 8,630 MBOE/d. Although ENPs 2010
results of operations from March 9, 2010 (the date we
acquired our ownership interest in ENP) through
December 31, 2010 will be included in our 2010 results of
operations, because we sold all of our ownership interests in
ENP on December 31, 2010, ENPs proved reserves are
not included in our year-end 2010 proved reserves.
Completion
of Green Pipeline and Initial
CO2
Injections
In mid-December 2010, we completed the last phase of the Green
Pipeline to Hastings Field near Houston, Texas and subsequently
commenced
CO2
injections in this field on December 16th. In June 2010, we
completed the first phase of the Green Pipeline to the Oyster
Bayou Field in Southeast Texas and on June 29, 2010, we
commenced
CO2
injections there. In December 2010 and January 2011, we received
the facilities construction permit for Hastings and Oyster
Bayou. We expect to begin facilities construction there in the
first quarter of 2011.
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Sale
of Haynesville Assets
On December 1, 2010, we sold our interest in our
Haynesville and East Texas assets to a privately-owned company
for $217.5 million (before closing adjustments). These
assets are primarily natural gas assets that we acquired in the
Encore Merger. Haynesvilles third quarter 2010 production
was 3,685 MBOE/d.
Acquisition
of Riley Ridge
In October 2010 we acquired an approximate 42.5% interest in the
Riley Ridge Federal Unit (Riley Ridge), located in
Southwest Wyoming, and approximately 33% of the
CO2
rights in approximately 28,000 additional acres adjoining the
Riley Ridge Unit, for an aggregate purchase price of
$115.0 million (before closing adjustments). Riley Ridge
has proved and probable natural gas, helium and
CO2
reserves. Production of natural gas and helium is expected to
begin in late 2011 or early 2012 upon completion of a gas
separation plant. This acquisition provides us with a source of
CO2
in the Rocky Mountains that could be used for tertiary oil
production. Any potential tertiary oil production using the
CO2
from Riley Ridge is contingent on the development of a pipeline
framework and significant capital expenditures.
3
THE
OFFERING
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Issuer |
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Denbury Resources Inc. |
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Notes Offered |
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$350,000,000 aggregate principal amount
of % Senior Subordinated Notes
due 2021. |
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Maturity |
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The notes will mature
on ,
2021. |
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Interest |
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Interest on the notes will accrue
from ,
2011 at a rate of % per annum,
payable semi-annually in arrears
on
and
of each year,
commencing ,
2011. |
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Optional Redemption |
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Except as set forth below, we cannot redeem the notes
before ,
2016. On and
after ,
2016, we can redeem some or all of the notes in cash at the
redemption prices described in this prospectus, plus accrued and
unpaid interest to the date of redemption. |
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At any time prior
to ,
2016, we may redeem the notes in whole or in part at a price
equal to 100% of the principal amount of the notes to be
redeemed plus a make whole premium and accrued and
unpaid interest to the date of redemption. In addition, at any
time and from time to time, on and
before ,
2014, we may redeem up to 35% of the notes with the proceeds of
certain equity offerings, in each case at the redemption prices
set forth in this prospectus, plus accrued and unpaid interest
to the date of redemption. |
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Change of Control |
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If a change of control occurs, subject to certain conditions, we
must give holders of the notes an opportunity to sell the notes
to us at a purchase price of 101% of the principal amount of the
notes, plus accrued and unpaid interest to the date of the
purchase. See Description of the NotesChange of
Control. |
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Guarantees |
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The payment of the principal, premium and interest on the notes
will be fully and unconditionally guaranteed on a senior
subordinated basis by most of our current and certain of our
future domestic subsidiaries. The subsidiary guarantees are
subordinated to all existing and future senior indebtedness of
our guarantor subsidiaries, including their guarantees of our
obligations under our senior secured credit facilities. See
Description of the NotesGuarantees. |
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Ranking |
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The notes are our senior subordinated unsecured obligations. The
notes and the guarantees rank: |
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junior to all of our and the
guarantors existing and future senior indebtedness,
including our senior secured credit facilities;
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equally with any of our and the
guarantors existing and future senior subordinated
indebtedness; and
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senior to any of our and the
guarantors future subordinated indebtedness.
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The notes will be pari passu with our existing
$2,176.4 million in aggregate principal amount of senior
subordinated notes (which includes $525 million principal
amount of senior subordinated notes for which we have commenced
tender offers as described above for our 2013 Notes and our 2015
Notes) (the Existing Notes), and subordinate to our
bank indebtedness, capital lease obligations for pipelines and
other capital lease obligations, which totaled
$617.4 million on an as-adjusted basis as of
September 30, 2010. See Description of the
NotesRanking. See also Capitalization
for an as-adjusted presentation of the obligations of the
company. |
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The notes will be structurally subordinated to all of the
liabilities and obligations of our subsidiaries that do not
guarantee the notes. Currently, our non-guarantor subsidiaries
have no material operations or income and no material assets. |
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Covenants |
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We will issue the notes under an indenture with Wells Fargo
Bank, National Association, as trustee. The indenture governing
the notes will contain covenants that will limit our ability and
certain of our subsidiaries ability to: |
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incur additional debt;
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pay dividends on our capital stock
or redeem, repurchase or retire our capital stock or
subordinated debt;
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make investments;
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create liens on our assets;
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create restrictions on the ability
of our restricted subsidiaries to pay dividends or make other
payments to us;
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engage in transactions with our
affiliates;
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transfer or sell assets; and
|
|
|
|
consolidate, merge or transfer all
or substantially all of our assets and the assets of our
subsidiaries.
|
|
|
|
These covenants are subject to important exceptions and
qualifications, which are described under the caption
Description of the NotesCertain Covenants. |
|
Use of Proceeds |
|
We estimate that the net proceeds from the offering, after
deducting underwriters discounts and commissions and
before |
5
|
|
|
|
|
deducting other estimated offering expenses payable by us, will
be approximately $343.9 million. The net proceeds from this
offering will be used to partially fund tender offers for our
2013 Notes and our 2015 Notes and related expenses. We expect,
but are not obligated, to redeem, in accordance with the
applicable indenture, any and all outstanding 2013 Notes and
2015 Notes that are not tendered in the tender offers using any
remaining proceeds from this offering and cash on hand. See
Use of Proceeds. |
|
Risk Factors |
|
Investing in the notes involves substantial risk. See Risk
Factors beginning on page 11 of this prospectus for a
discussion of certain factors that you should consider carefully
before investing in the notes. |
|
Conflicts of Interest |
|
Simultaneously with this offering, we are making tender offers
for $225 million aggregate principal amount of our 2013
Notes and $300 million aggregate principal amount of our
2015 Notes. We will use the net proceeds from the offering of
the notes, together with cash on hand, to repurchase all of the
notes tendered in the tender offers. Wells Fargo Securities,
LLC, an underwriter in this offering, or its affiliates will
receive more than 5% of the net proceeds of this offering in
connection with the tender offers. See Use of
Proceeds. Accordingly, this offering is being made in
compliance with the requirements of the Financial Industry
Regulatory Authority Rule 5121. In accordance with this
rule, Merrill Lynch, Pierce, Fenner & Smith
Incorporated has assumed the responsibilities of acting as a
qualified independent underwriter. In its role as a qualified
independent underwriter, Merrill Lynch, Pierce,
Fenner & Smith Incorporated has participated in due
diligence and the preparation of this prospectus and the
Registration Statement of which this prospectus is a part.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
will not receive any additional fees for serving as a qualified
independent underwriter in connection with this offering. Wells
Fargo Securities, LLC will not confirm sales of the debt
securities to any account over which it exercises discretionary
authority without the prior written approval of the customer. |
6
SELECTED
HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth Denburys selected
consolidated historical financial information that has been
derived from (1) Denburys consolidated financial
statements as of December 31, 2009, 2008 and 2007, and for
the years then ended and (2) Denburys consolidated
financial statements as of September 30, 2010 and 2009 and
for the nine month periods then ended. You should read this
financial information in conjunction with Denburys
consolidated financial statements and notes thereto in
Denburys 2009 Annual Report on
Form 10-K
and Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2010, which are
incorporated by reference in this document.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
Consolidated statements of operations data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil, natural gas and related product sales (a)
|
|
|
$1,279,699
|
|
|
|
$600,942
|
|
|
|
$866,709
|
|
|
|
$1,347,010
|
|
|
|
$952,788
|
|
CO2
sales and transportation fees
|
|
|
13,840
|
|
|
|
9,708
|
|
|
|
13,422
|
|
|
|
13,858
|
|
|
|
13,630
|
|
Gain on sale of interests in Genesis (b)
|
|
|
101,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and other
|
|
|
7,658
|
|
|
|
7,750
|
|
|
|
9,019
|
|
|
|
10,188
|
|
|
|
5,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,402,734
|
|
|
|
618,400
|
|
|
|
889,150
|
|
|
|
1,371,056
|
|
|
|
971,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses (a)
|
|
|
355,731
|
|
|
|
241,908
|
|
|
|
326,132
|
|
|
|
307,550
|
|
|
|
230,932
|
|
Production taxes and marketing expenses (a)
|
|
|
92,959
|
|
|
|
30,437
|
|
|
|
42,484
|
|
|
|
63,752
|
|
|
|
49,091
|
|
CO2
discovery and operating expenses
|
|
|
5,537
|
|
|
|
3,442
|
|
|
|
4,649
|
|
|
|
4,216
|
|
|
|
4,214
|
|
General and administrative (c)
|
|
|
101,016
|
|
|
|
79,828
|
|
|
|
116,095
|
|
|
|
60,374
|
|
|
|
48,972
|
|
Interest, net of amounts capitalized (d)
|
|
|
123,230
|
|
|
|
36,960
|
|
|
|
47,430
|
|
|
|
32,596
|
|
|
|
30,830
|
|
Depletion, depreciation and amortization
|
|
|
322,683
|
|
|
|
177,145
|
|
|
|
238,323
|
|
|
|
221,792
|
|
|
|
195,900
|
|
Derivatives expense (income)
|
|
|
(138,045
|
)
|
|
|
177,061
|
|
|
|
236,226
|
|
|
|
(200,053
|
)
|
|
|
18,597
|
|
Transaction costs and other related to the Encore Merger (e)
|
|
|
79,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abandoned acquisition cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,601
|
|
|
|
|
|
Write-down of oil and natural gas properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
942,364
|
|
|
|
746,781
|
|
|
|
1,011,339
|
|
|
|
746,828
|
|
|
|
578,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
460,370
|
|
|
|
(128,381
|
)
|
|
|
(122,189
|
)
|
|
|
624,228
|
|
|
|
393,414
|
|
Income tax provision (benefit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income taxes
|
|
|
11,314
|
|
|
|
18,140
|
|
|
|
4,611
|
|
|
|
40,812
|
|
|
|
30,074
|
|
Deferred income taxes
|
|
|
167,289
|
|
|
|
(67,869
|
)
|
|
|
(51,644
|
)
|
|
|
195,020
|
|
|
|
110,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss)
|
|
|
281,767
|
|
|
|
(78,652
|
)
|
|
|
(75,156
|
)
|
|
|
388,396
|
|
|
|
253,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: net income attributable to noncontrolling interest
|
|
|
(20,408
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income (loss) attributable to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denbury stockholders
|
|
|
$261,359
|
|
|
|
$(78,652
|
)
|
|
|
$(75,156
|
)
|
|
|
$388,396
|
|
|
|
$253,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statements of cash flows data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas capital expenditures
|
|
|
$500,062
|
|
|
|
$289,815
|
|
|
|
$343,351
|
|
|
|
$587,968
|
|
|
|
$621,187
|
|
Acquisitions of oil and natural gas properties
|
|
|
24,390
|
|
|
|
197,534
|
|
|
|
452,795
|
|
|
|
31,367
|
|
|
|
49,077
|
|
Cash paid in Encore Merger, net of cash acquired
|
|
|
813,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CO2
capital expenditures, including pipelines
|
|
|
237,772
|
|
|
|
523,411
|
|
|
|
630,202
|
|
|
|
462,889
|
|
|
|
171,182
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
592,775
|
|
|
|
406,434
|
|
|
|
530,599
|
|
|
|
774,519
|
|
|
|
570,214
|
|
Investing activities
|
|
|
(520,153
|
)
|
|
|
(736,390
|
)
|
|
|
(969,714
|
)
|
|
|
(994,659
|
)
|
|
|
(762,513
|
)
|
Financing activities
|
|
|
(6,868
|
)
|
|
|
334,576
|
|
|
|
442,637
|
|
|
|
177,102
|
|
|
|
198,533
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
|
As of September 30,
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(in thousands)
|
|
|
Consolidated balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas properties, net (f)
|
|
$
|
6,184,916
|
|
|
$
|
2,047,798
|
|
|
$
|
2,230,911
|
|
|
$
|
2,140,208
|
|
|
$
|
1,967,541
|
|
Total assets
|
|
|
9,843,203
|
|
|
|
3,903,260
|
|
|
|
4,269,978
|
|
|
|
3,589,674
|
|
|
|
2,771,077
|
|
Total long-term debt
|
|
|
2,778,247
|
|
|
|
1,196,061
|
|
|
|
1,301,068
|
|
|
|
852,767
|
|
|
|
680,330
|
|
Stockholders equity
|
|
|
4,863,918
|
|
|
|
1,790,659
|
|
|
|
1,972,237
|
|
|
|
1,840,068
|
|
|
|
1,404,378
|
|
|
|
|
(a) |
|
On March 9, 2010, Denbury acquired Encore. As part of our
strategic initiatives in merging with Encore, certain Encore oil
and gas properties which were not deemed suitable for future
tertiary production or strategic to us for expanded development
were sold during 2010, including: oil and natural gas properties
and related assets located primarily in the Permian Basin in
West Texas and southeastern New Mexico, and in the Mid-continent
area, which includes the Anadarko Basin in Oklahoma, Texas, and
Kansas (collectively the Southern Assets) in May
2010; Haynesville and East Texas assets in December 2010; and
Denburys investment in ENP during December 2010. |
|
|
|
The following table summarizes oil, natural gas and related
product sale revenues, lease operating expense and production
taxes and marketing expense included in Denburys
Consolidated Statement of Operations for the nine months ended
September 30, 2010 directly related to the acquisition of
properties in the Encore Merger and the sale of certain of those
properties described above: |
|
|
|
|
|
|
|
|
|
|
|
Retained Encore
|
|
|
Encore Properties
|
|
|
|
Properties
|
|
|
Sold During 2010
|
|
|
|
(in thousands)
|
|
|
Oil, natural gas and related product sales
|
|
$
|
272,034
|
|
|
$
|
173,954
|
|
Lease operating expenses
|
|
|
49,220
|
|
|
|
35,878
|
|
Production taxes and marketing expenses
|
|
|
42,557
|
|
|
|
12,687
|
|
|
|
|
|
|
|
|
|
|
Field operating income
|
|
$
|
180,257
|
|
|
$
|
125,389
|
|
|
|
|
(b) |
|
In February 2010, Denbury sold its interest in the general
partner of Genesis Energy, L.P. (Genesis) and in
March 2010, Denbury sold all of its common units of Genesis in a
secondary public offering. As a result, Denbury no longer holds
any interests in Genesis. |
|
(c) |
|
General and administrative expenses have increased in 2010 and
2009 as compared to prior periods. General and administrative
expenses were higher during the nine months ended
September 30, 2010 primarily due to the additional expense
associated with owning Encore. General and administrative
expenses were higher in 2009 than in prior years primarily due
to higher employee costs, non-recurring expense related to a
compensation arrangement with certain members of Genesis Energy,
L.P. management and a compensation charge related to the
June 30, 2009 retirement of Denburys then-CEO and
President and his retention in a non-officer role as Chief
Strategist. |
|
(d) |
|
Denburys capitalized interest was $56.1 million and
$48.7 million for the nine months ended September 30,
2010 and 2009, respectively, and $68.6 million,
$29.2 million and $20.4 million for the years ended
December 31, 2009, 2008 and 2007, respectively. |
|
(e) |
|
Transaction costs and other related to the Encore Merger
primarily include third party fees and severance-related costs
associated with our purchase of Encore. |
|
(f) |
|
Excludes net book value of
CO2
related property and equipment. |
8
SUMMARY
HISTORICAL OIL, NATURAL GAS AND
CO2
RESERVES,
PRODUCTION INFORMATION AND OTHER DATA
The following tables set forth certain historical information
with respect to Denburys estimated oil and natural gas
reserves, production and other data as of the dates indicated.
Estimates of Denburys net proved oil and natural gas
reserves as of December 31, 2010, 2009 and 2008 were
prepared by DeGolyer and MacNaughton, an independent petroleum
engineering firm located in Dallas, Texas.
Estimates of reserves as of year-end 2010 and 2009 were prepared
using an average price equal to the unweighted arithmetic
average of hydrocarbon prices on the first day of each month
within the
12-month
period ended December 31, 2010 and 2009, in accordance with
revised guidelines of the SEC first applicable to reserves
estimates at year-end 2009. Estimates of reserves as of year-end
2008 were prepared using constant prices and costs in accordance
with the guidelines of the SEC based on hydrocarbon prices
received on a
field-by-field
basis as of December 31. Reserve estimates do not include
any value for probable or possible reserves that may exist, nor
do they include any value for undeveloped acreage. The reserve
estimates represent our net revenue interest in our properties.
The following information should be read in conjunction with the
information contained in Denburys 2009 consolidated
financial statements and notes related thereto included in its
2009 Annual Report on
Form 10-K
and incorporated herein by reference.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Summary oil and natural gas reserves data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated net proved reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbls)
|
|
|
338,276
|
|
|
|
192,879
|
|
|
|
179,126
|
|
Natural gas (MMcf)
|
|
|
357,893
|
|
|
|
87,975
|
|
|
|
427,955
|
|
Oil equivalent (MBOE)
|
|
|
397,925
|
|
|
|
207,542
|
|
|
|
250,452
|
|
Percentage of total MBOE:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved producing
|
|
|
51%
|
|
|
|
51%
|
|
|
|
47%
|
|
Proved non-producing
|
|
|
9%
|
|
|
|
11%
|
|
|
|
11%
|
|
Proved undeveloped
|
|
|
40%
|
|
|
|
38%
|
|
|
|
42%
|
|
Representative oil and natural gas prices (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
OilNYMEX
|
|
|
$79.43
|
|
|
|
$61.18
|
|
|
|
$44.60
|
|
Natural gasHenry Hub
|
|
|
4.40
|
|
|
|
3.87
|
|
|
|
5.71
|
|
Present values (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounted estimated future net cash flow before income taxes
(PV-10
Value) (b)
|
|
|
$7,292,557
|
|
|
|
$3,075,459
|
|
|
|
$1,926,855
|
|
Standardized measure of discounted future net cash flow after
income taxes (c)
|
|
|
(d)
|
|
|
|
2,457,385
|
|
|
|
1,415,498
|
|
Estimated proved carbon dioxide reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
Gulf Coast region (Mmcf) (e)
|
|
|
7,085,131
|
|
|
|
6,302,836
|
|
|
|
5,612,167
|
|
Rocky Mountain region (Mmcf) (f)
|
|
|
920,266
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
September 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Summary operating data (g):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production (average daily):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (Bbls)
|
|
|
58,234
|
|
|
|
36,819
|
|
|
|
36,951
|
|
|
|
31,436
|
|
|
|
27,925
|
|
Natural gas (Mcf)
|
|
|
81,065
|
|
|
|
75,523
|
|
|
|
68,086
|
|
|
|
89,442
|
|
|
|
97,141
|
|
BOE (6:1)
|
|
|
71,745
|
|
|
|
49,406
|
|
|
|
48,299
|
|
|
|
46,343
|
|
|
|
44,115
|
|
Unit sales price (excluding impact of derivative
settlements):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (per Bbl)
|
|
|
$73.98
|
|
|
|
$52.68
|
|
|
|
$57.75
|
|
|
|
$92.73
|
|
|
|
$69.80
|
|
Natural gas (per Mcf)
|
|
|
4.68
|
|
|
|
3.46
|
|
|
|
3.54
|
|
|
|
8.56
|
|
|
|
6.81
|
|
Unit sales price (including impact of derivative
settlements):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (per Bbl)
|
|
|
$68.88
|
|
|
|
$67.25
|
|
|
|
$68.63
|
|
|
|
$90.04
|
|
|
|
$68.84
|
|
Natural gas (per Mcf)
|
|
|
6.22
|
|
|
|
3.46
|
|
|
|
3.54
|
|
|
|
7.74
|
|
|
|
7.66
|
|
Costs per BOE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expenses
|
|
|
$18.16
|
|
|
|
$17.94
|
|
|
|
$18.50
|
|
|
|
$18.13
|
|
|
|
$14.34
|
|
Production taxes and marketing expenses
|
|
|
4.75
|
|
|
|
2.26
|
|
|
|
2.41
|
|
|
|
3.76
|
|
|
|
3.05
|
|
Depletion, depreciation and amortization
|
|
|
16.48
|
|
|
|
13.13
|
|
|
|
13.52
|
|
|
|
13.08
|
|
|
|
12.17
|
|
General and administrative (h)
|
|
|
5.16
|
|
|
|
5.92
|
|
|
|
6.59
|
|
|
|
3.56
|
|
|
|
3.04
|
|
Transaction costs and other related to the Encore Merger (i)
|
|
|
4.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abandoned acquisition cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.80
|
|
|
|
|
|
Writedown of oil and natural gas properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.32
|
|
|
|
|
|
|
|
|
(a) |
|
The reference prices for 2010 and 2009 were based on the average
first day of the month prices for each month during 2010 and
2009. The reference prices for 2008 were based on year end
prices. For all periods presented, these representative prices
were adjusted for differentials by field to arrive at the
applicable net price Denbury receives. |
|
(b) |
|
PV-10 Value
is a non-GAAP measure and is different from the Standardized
Measure in that
PV-10 Value
is a pre-tax number and the Standardized Measure is an after-tax
number. The information used to calculate
PV-10 Value
is derived directly from data determined in accordance with the
FASB Extractive IndustriesOil and Gas topic.
Denbury believes that
PV-10 Value
is a useful supplemental disclosure to the Standardized Measure
because the Standardized Measure can be impacted by a
companys unique tax situation, and it is not practical to
calculate the Standardized Measure on a
property-by-property
basis. Because of this,
PV-10 Value
is a widely used measure within the industry and is commonly
used by securities analysts, banks and credit rating agencies to
evaluate the estimated future net cash flows from proved
reserves on a comparative basis across companies or specific
properties.
PV-10 Value
is commonly used by Denbury and others in the industry to
evaluate properties that are bought and sold and to assess the
potential return on investment in these oil and gas properties.
PV-10 Value
is not a measure of financial or operating performance under
GAAP, nor should it be considered in isolation or as a
substitute for the Standardized Measure. The
PV-10 Value
and the Standardized Measure do not purport to represent the
fair value of oil and natural gas reserves. |
|
(c) |
|
Determined in accordance with the guidelines of the FASB
Extractive IndustriesOil and Gas topic. |
|
(d) |
|
Information not yet available for year ended December 31,
2010. |
10
|
|
|
(e) |
|
Proved
CO2
reserves in the Gulf Coast region consist of reserves from our
reservoirs at Jackson Dome, are presented on a gross working
interest basis and include reserves dedicated to volumetric
production payments of 100.2 Bcf, 127.1 Bcf, and
153.8 Bcf, at December 31, 2010, 2009 and 2008,
respectively. |
|
(f) |
|
Proved
CO2
reserves in the Rocky Mountain region consist of our reserves at
Riley Ridge and are net to our interest. |
|
(g) |
|
On March 9, 2010, Denbury acquired Encore. As part of our
strategic initiatives in merging with Encore, certain Encore oil
and natural gas properties which were not deemed suitable for
future tertiary production or strategic to us for expanded
development were sold during 2010, including the Southern Assets
sold in May 2010, and Haynesville and East Texas assets and
Denburys investment in ENP sold in December 2010. The
following table summarizes average production quantities, which
were included in Denburys operating results for the nine
month period ending September 30, 2010 attributable to
those Encore properties that Denbury has retained, including the
Cedar Creek Anticline, Bakken and Other Rockies, and
attributable to those Encore properties that Denbury sold during
2010, including the Southern Assets, Haynesville and ENP: |
|
|
|
|
|
|
|
|
|
|
|
Nine months ending
|
|
|
September 30, 2010
|
|
|
Retained Encore
|
|
Encore Properties
|
|
|
Properties
|
|
Sold During 2010
|
|
Production (average daily) per BOE
|
|
|
17,538
|
|
|
|
16,359
|
|
|
|
|
(h) |
|
General and administrative expenses have increased in 2010 and
2009 as compared to prior periods. General and administrative
expenses were higher during the nine months ended
September 30, 2010 primarily due to the additional expense
associated with owning Encore. General and administrative
expenses were higher in 2009 primarily due to higher employee
costs, expense related to a compensation arrangement with
certain members of Genesis Energy, L.P. management, and a
compensation charge related to the retirement of Denburys
then-CEO and President on June 30, 2009. |
|
(i) |
|
Transaction costs and other related to the Encore Merger
primarily include third party fees and severance-related costs
associated with our purchase of Encore. |
11
RISK
FACTORS
Investing in the notes involves risks. Before purchasing any
notes we offer, you should carefully consider the risk factors
that are incorporated by reference herein from Item 1.A.,
captioned Risk Factors, of our Annual Report on
Form 10-K
for the year ended December 31, 2009 and the
Form 10-K
of Encore for the year ended December 31, 2009. There are
additional risk factors related to our indebtedness and notes,
as described below.
Our
level of indebtedness may adversely affect operations and limit
our growth.
As of September 30, 2010, after giving effect to this
offering and the use of the proceeds therefrom, assuming that
all of the 2013 Notes and the 2015 Notes are tendered and
accepted for purchase promptly following the deadline for
consents to amend their indentures, we would have had
$2.6 billion of long-term debt. This level of indebtedness
could result in our having difficulty accessing capital markets
or raising capital on favorable terms and our financial results
could be negatively affected by our inability to raise capital
or because of the cost of such capital.
Our substantial debt could have important consequences for us.
For example, it could:
|
|
|
|
|
increase our vulnerability to general adverse economic and
industry conditions;
|
|
|
|
limit our ability to fund future working capital and capital
expenditures, to engage in future acquisitions or development
activities, or to otherwise realize the value of our assets and
opportunities fully because of the need to dedicate a
substantial portion of our cash flow from operations to payments
on our debt or to comply with any restrictive terms of our debt;
|
|
|
|
limit our flexibility in planning for, or reacting to, changes
in the industry in which we operate; or
|
|
|
|
place us at a competitive disadvantage as compared to our
competitors that have less debt.
|
Realization of any of these factors could adversely affect our
financial condition. In addition, although we have hedges in
place for 2011 and the first and second quarters of 2012, these
hedges have varying floors and ceilings and will only partially
protect the companys cash flow. A decline in commodity
prices may require that we reduce our planned capital
expenditures, which may have a corresponding negative effect on
our anticipated production growth.
If we are unable to generate sufficient cash flow or otherwise
obtain funds necessary to make required payments on our
indebtedness or if we otherwise fail to comply with the various
covenants in such indebtedness, including covenants in our
senior secured credit facility, we would be in default. This
default would permit the holders of such indebtedness to
accelerate the maturity of such indebtedness and could cause
defaults under other indebtedness, including the notes, or
result in our bankruptcy. Such defaults, or any bankruptcy
resulting therefrom, could result in a default on the notes and
could delay or preclude payment of principal of, or interest on,
the notes. Our ability to meet our obligations will depend upon
our future performance, which will be subject to prevailing
economic conditions, commodity prices, and to financial,
business and other factors, including factors beyond our control.
We and all of our restricted subsidiaries must comply with
various restrictive covenants contained in our revolving credit
facility, the indentures related to our senior subordinated
notes and any of our future debt
12
arrangements. These covenants will, among other things, limit
our ability and the ability of all of our restricted
subsidiaries to:
|
|
|
|
|
incur additional debt or liens;
|
|
|
|
pay dividends;
|
|
|
|
make payments in respect of or redeem or acquire any debt or
equity issued by us;
|
|
|
|
sell assets;
|
|
|
|
make loans or investments; and
|
|
|
|
acquire or be acquired by other companies.
|
Your
right to receive payments on the notes is junior to our existing
senior indebtedness and the existing senior indebtedness of our
subsidiary guarantors.
The indebtedness evidenced by the notes and the guarantees are
our and our subsidiary guarantors senior subordinated
obligations. The payment of the principal of, premium on, if
any, and interest on the notes and the payment of the subsidiary
guarantees are each subordinate in right of payment, as set
forth in the indenture, to the prior payment in full of all
senior indebtedness of Denbury or the senior indebtedness of our
subsidiary guarantors, as the case may be, including the
obligations of Denbury under, and the obligations of our
subsidiary guarantors with respect to, our senior secured credit
facility. Any future subsidiary guarantee will be similarly
subordinated to senior indebtedness of such subsidiary guarantor.
As of September 30, 2010, our senior debt included
$120.0 million borrowed under our credit facility,
$240.0 million borrowed under ENPs credit facility,
$249.9 million of pipeline capital lease obligations and
approximately $7.5 million of other capital lease
obligations. As of December 31, 2010, we had no obligation
under ENPs credit facility due to the sale of our interest
in ENP to Vanguard. See Capitalization. As of
September 30, 2010, we had approximately $1.5 billion
additional borrowing capacity under our credit facility. Any
additional bank borrowings would also be senior indebtedness
when incurred. Although the indenture contains limitations on
the amount of additional indebtedness that we may incur, under
certain circumstances the amount of such indebtedness could be
substantial and, in any case, such indebtedness may be senior
indebtedness. See Description of the NotesCertain
CovenantsLimitations on Indebtedness.
Because the notes are unsecured and because of the subordination
provisions of the notes, in the event of the bankruptcy,
liquidation or dissolution of any subsidiary guarantor, our
assets and the assets of the subsidiary guarantors would be
available to pay obligations under the notes only after all
payments had been made on our and the subsidiary
guarantors senior indebtedness, including under our senior
secured credit facility. We cannot assure you that sufficient
assets would remain after we make all these payments to make any
payments on the notes, including payments of interest when due.
Also, because of these subordination provisions, you may recover
less ratably than our other creditors in a bankruptcy,
liquidation or dissolution. In addition, all payments on the
notes and the guarantees will be prohibited in the event of a
payment default on senior indebtedness, including borrowings
under our senior secured credit facility, and may be prohibited
for up to 180 days in the event of non-payment defaults on
certain of our senior indebtedness, including our senior secured
credit facility. See Description of the
NotesRanking.
The
notes will be structurally subordinated to all obligations of
our existing and future subsidiaries that are not and do not
become guarantors of the notes.
The notes will be guaranteed by each of our current and future
domestic restricted subsidiaries that represents at least 10% of
the book assets of, or 10% of the adjusted consolidated net
tangible assets of, the
13
Company and its restricted subsidiaries, taken as a whole, and
that has an aggregate of $15 million or more of
indebtedness or preferred stock outstanding at any time. See
Description of the NotesFuture Subsidiary
Guarantors.
Our subsidiaries that do not guarantee the notes, including all
of our non-domestic subsidiaries, will have no obligation,
contingent or otherwise, to pay amounts due under the notes or
to make any funds available to pay those amounts, whether by
dividend, distribution, loan or other payment. The notes will be
structurally subordinated to all indebtedness and other
obligations of any non-guarantor subsidiary such that in the
event of insolvency, liquidation, reorganization, dissolution or
other winding up of any subsidiary that is not a guarantor, all
of that subsidiarys creditors (including trade creditors)
would be entitled to payment in full out of that
subsidiarys assets before we would be entitled to any
payment. Currently, our non-guarantor subsidiaries have no
material operations or income and no material assets.
In addition, the indenture governing the notes will, subject to
some limitations, permit these subsidiaries to incur additional
indebtedness and will not contain any limitation on the amount
of other liabilities, such as trade payables, that may be
incurred by these subsidiaries.
In addition, our subsidiaries that provide, or will provide,
guarantees of the notes will be automatically released from
those guarantees upon the occurrence of certain events,
including the following:
|
|
|
|
|
the designation of that subsidiary guarantor as an unrestricted
subsidiary;
|
|
|
|
the sale or other disposition, including the sale of
substantially all the assets, of that subsidiary guarantor.
|
If any subsidiary guarantee is released, no holder of the notes
will have a claim as a creditor against that subsidiary, and the
indebtedness and other liabilities, including trade payables and
preferred stock, if any, whether secured or unsecured, of that
subsidiary will be effectively senior to the claim of any
holders of the notes. See Description of
NotesGuarantees.
The
notes are not secured by our assets or those of our subsidiary
guarantors.
The notes are our general unsecured obligations and are
effectively subordinated in right of payment to all of our
secured indebtedness. If we become insolvent or are liquidated,
our assets which serve as collateral under our secured
indebtedness would be made available to satisfy our obligations
under any secured debt before any payments are made on the
notes. Our obligations under our senior secured credit facility
are secured by substantially all of our producing oil and gas
properties.
If we
undergo a change of control, we may not have the ability to
raise the funds necessary to finance the change of control offer
required by the indenture governing the notes, which would
violate the terms of the notes.
Upon the occurrence of a change of control, holders of the notes
will have the right to require us to purchase all or any part of
such holders notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if
any, to the date of purchase. The events that constitute a
change of control under the indenture would constitute a default
under our senior secured credit facility, which prohibits the
purchase of the notes by us in the event of certain change of
control events, unless, and until, such time as our indebtedness
under the senior secured credit facility is repaid in full.
There can be no assurance that either we or our subsidiary
guarantors would have sufficient financial resources available
to satisfy all of our or their obligations under the senior
secured credit facility and these notes in the event of a change
in control. Our failure to purchase the notes as required under
the indenture would result in a default under the indenture, the
indentures governing our Existing Notes and under the senior
secured credit facility, each of which could have
14
material adverse consequences for us and the holders of the
notes. See Description of the NotesChange of
Control.
In addition, recent case law suggests that, in the event that
incumbent directors are replaced as a result of a contested
election, issuers may nevertheless avoid triggering a change of
control under a clause similar to clause (2) of the
definition of Change of Control under the caption
Description of the NotesChange of Control, if
the outgoing directors were to approve the new directors for the
purpose of such change of control clause.
A subsidiary guarantee could be voided if it constitutes a
fraudulent transfer under U.S. bankruptcy or similar state
law, which would prevent the holders of the notes from relying
on that subsidiary to satisfy claims.
Under U.S. bankruptcy law and comparable provisions of
state fraudulent transfer laws, a guarantee can be voided, or
claims under the guarantee may be subordinated to all other
debts of that guarantor if, among other things, the guarantor,
at the time it incurred the indebtedness evidenced by its
guarantee or, in some states, when payments become due under the
guarantee, received less than reasonably equivalent value or
fair consideration for the incurrence of the guarantee and:
|
|
|
|
|
was insolvent or rendered insolvent by reason of such incurrence;
|
|
|
|
was engaged in a business or transaction for which the
guarantors remaining assets constituted unreasonably small
capital; or
|
|
|
|
intended to incur, or believed that it would incur, debts beyond
its ability to pay those debts as they mature.
|
A guarantee may also be voided, without regard to the above
factors, if a court found that the guarantor entered into the
guarantee with the actual intent to hinder, delay or defraud its
creditors.
A court would likely find that a guarantor did not receive
reasonably equivalent value or fair consideration for its
guarantee if the guarantor did not substantially benefit
directly or indirectly from the issuance of the notes. If a
court were to void a guarantee, you would no longer have a claim
against the guarantor. Sufficient funds to repay the notes may
not be available from other sources, including the remaining
guarantors, if any. In addition, the court might direct you to
repay any amounts that you had already received from the
subsidiary guarantor.
The measures of insolvency for purposes of fraudulent transfer
laws vary depending upon the governing law. Generally, a
guarantor would be considered insolvent if:
|
|
|
|
|
the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all its assets;
|
|
|
|
the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
became absolute and mature; or
|
|
|
|
it could not pay its debts as they became due.
|
Each subsidiary guarantee contains a provision intended to limit
the guarantors liability to the maximum amount that it
could incur without causing the incurrence of obligations under
its subsidiary guarantee to be a fraudulent transfer. This
provision may not be effective to protect the subsidiary
guarantees from being voided under fraudulent transfer law.
15
Original
issue discount
The notes may be issued at a discount from their stated
principal amount for U.S. federal income tax purposes.
Consequently, original issue discount may be included in the
gross income of a U.S. holder of the notes for
U.S. federal income tax purposes in advance of the receipt
of cash payments on such notes. For more information, see
Material U.S. Federal Income Tax Considerations.
If a
bankruptcy petition were filed by or against us, holders of the
notes may receive a lesser amount for their claim than they
would have been entitled to receive under the indenture
governing the notes.
If a bankruptcy petition were filed by or against us under the
United States Bankruptcy Code after the issuance of the notes,
the claim by any holder of the notes for the principal amount of
the notes may be limited to an amount equal to the sum of:
|
|
|
|
|
the original issue price for the notes; and
|
|
|
|
that portion of original issue discount that does not constitute
unmatured interest for purposes of the United States
Bankruptcy Code.
|
Any original issue discount that was not amortized as of the
date of the bankruptcy filing would constitute unmatured
interest. Accordingly, holders of the notes under these
circumstances may receive a lesser amount than they would be
entitled to under the terms of the indenture governing the
notes, even if sufficient funds are available.
You
cannot be sure that there will be an active trading market for
the notes.
We do not intend to list the notes on any national securities
exchange. The underwriters intend to make a market for the
notes, but they are not obligated to do so and may cease their
market-making activities at any time. In addition, the liquidity
of the trading market in the notes, and the market price quoted
for the notes, may be adversely affected by changes in the
overall market for high yield securities and by changes in our
financial performance or prospects or in the financial
performance or prospects of companies in our industry generally.
As a result, we cannot assure you that an active trading market
will develop or be maintained for the notes offered hereby. If
an active market does not develop or is not maintained, the
market price and liquidity of the notes may be adversely
affected.
16
RATIO OF
EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed
charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
Year Ended December 31,
|
|
|
September 30, 2010
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Ratio of earnings to fixed charges
|
|
3.2x
|
|
(1)
|
|
9.9x
|
|
7.7x
|
|
9.5x
|
|
12.7x
|
|
|
|
(1) |
|
Earnings were inadequate to cover fixed charges for the year
ended December 31, 2009 by $183.4 million. |
For purposes of computing the ratio of earnings to fixed
charges, earnings are defined as:
|
|
|
|
|
income from continuing operations before income taxes and equity
method earnings of affiliates; plus
|
|
|
|
fixed charges, distributed income of equity investees and
amortization of capitalized interest; less capitalized
interest.
|
Fixed charges are defined as the sum of the following:
|
|
|
|
|
interest expense (including amounts capitalized);
|
|
|
|
amortization of debt discount and issuance cost (expensed and
capitalized); and
|
|
|
|
that portion of rental expense which we believe to be
representative of an interest factor.
|
17
USE OF
PROCEEDS
The net proceeds from the sale of the notes offered hereby,
after deducting underwriters discounts and commissions and
before deducting other offering expenses payable by us, are
estimated to be approximately $343.9 million.
Simultaneously with this offering, we are making tender offers
for $225 million aggregate principal amount of our 2013
Notes and $300 million aggregate principal amount of our
2015 Notes. The tender offers are contingent on the closing of
this offering. We will use the net proceeds from the offering of
the notes, together with cash on hand, to repurchase all of the
notes tendered in the tender offers. If this notes offering is
completed, to the extent less than 100% of either of the
outstanding 2013 Notes or outstanding 2015 Notes is tendered, we
expect, but are not obligated, to redeem the 2013 Notes and the
2015 Notes. Beginning April 1, 2011, the 2013 Notes will be
redeemable at 100% of principal amount. The 2015 Notes are
currently redeemable at 103.75% of principal amount. The 2013
Notes accrue interest at a rate of 7.5% per year and mature
April 1, 2013. The 2015 Notes accrue interest at a rate of
7.5% per year and mature December 15, 2015.
18
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 2010 on an actual basis
and on an as-adjusted basis to give effect to this
offering and the application of the net proceeds of this
offering. The as-adjusted presentation assumes that
promptly following the deadline for consents to amend the
applicable indentures, we will purchase all $225 million of
the 2013 Notes and all $300 million of the 2015 Notes
pursuant to the tender offers, which cannot be assured. A
portion of the Companys cash on hand (approximately
$460.0 million as of January 31, 2011) will be used,
together with the net proceeds of this offering, to fund the
tender offers even though the Companys cash and cash
equivalents as of September 30, 2010 would have been
insufficient for this purpose. This table should be read in
conjunction with our
Form 10-K
for the year ended December 31, 2009 and our
Form 10-Q
for the quarter ended September 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2010
|
|
|
|
Unaudited
|
|
|
|
|
|
|
Actual
|
|
|
As-Adjusted
|
|
|
|
(dollars in thousands)
|
|
|
Cash and cash equivalents (a)
|
|
$
|
86,345
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (b):
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
|
$5,040
|
|
|
|
$5,040
|
|
Credit facility (c)
|
|
|
120,000
|
|
|
|
120,000
|
|
ENP credit agreement (d)
|
|
|
240,000
|
|
|
|
240,000
|
|
71/2% Senior
Subordinated Notes due 2013 (e)
|
|
|
225,000
|
|
|
|
|
|
6.25% Senior Subordinated Notes due 2014
|
|
|
1,072
|
|
|
|
1,072
|
|
6% Senior Subordinated Notes due 2015
|
|
|
485
|
|
|
|
485
|
|
71/2% Senior
Subordinated Notes due 2015 (f)
|
|
|
300,000
|
|
|
|
|
|
9.75% Senior Subordinated Notes due 2016 (g)
|
|
|
426,350
|
|
|
|
426,350
|
|
9.5% Senior Subordinated Notes due 2016 (h)
|
|
|
224,920
|
|
|
|
224,920
|
|
7.25% Senior Subordinated Notes due 2017
|
|
|
2,250
|
|
|
|
2,250
|
|
81/4% Senior
Subordinated Notes due 2020
|
|
|
996,273
|
|
|
|
996,273
|
|
% Senior Subordinated Notes due 2021 offered hereby
|
|
|
|
|
|
|
350,000
|
|
Pipeline financings
|
|
|
244,788
|
|
|
|
244,788
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
2,786,178
|
|
|
|
2,611,178
|
|
Equity
|
|
|
4,863,918
|
|
|
|
4,863,918
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
7,650,096
|
|
|
$
|
7,475,096
|
|
|
|
|
(a) |
|
As of January 31, 2011, our cash and cash equivalents
totaled approximately $460.0 million. The gross proceeds
from this offering of $350.0 million, together with
$196.0 million of these cash and cash equivalents, will be
used to fund the tender offers, associated premiums and
transaction costs associated with this offering, which total
approximately $546.0 million (excluding accrued interest). |
|
(b) |
|
Excludes current portion of capital lease obligations and
pipeline financings totaling $7.6 million. |
|
(c) |
|
As of January 31, 2011, we had $130.0 million of
borrowings under our $1.6 billion bank credit facility. |
|
(d) |
|
As of December 31, 2010, Denbury had no obligation under
the ENP credit agreement due to the sale of Denburys
interest in ENP. |
|
(e) |
|
Excludes unamortized discount of $0.5 million. |
|
(f) |
|
Excludes unamortized premium of $0.4 million. |
|
(g) |
|
Excludes unamortized discount of $23.2 million. |
|
(h) |
|
Excludes unamortized premium of $15.3 million. |
19
DESCRIPTION
OF THE NOTES
Certain terms used in this description are defined under the
subheading Certain Definitions. As used in
this section, the terms Company, we,
us and our refer only to Denbury
Resources Inc., the issuer of the senior subordinated notes, and
not to any of its subsidiaries.
General
The Company will issue $350 million
of % Senior Subordinated Notes
due 2021 (the Notes) under an indenture dated on or
about ,
2011 (the Indenture), among the Company, its
subsidiary guarantors and Wells Fargo Bank, National
Association, as Trustee.
The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (the Trust Indenture
Act). The following description is only a summary of the
material provisions of the Indenture and the escrow agreement.
We urge you to read the Indenture because it, not this
description, defines your rights as holders of the Notes. You
may request copies of the Indenture at our address set forth
under the heading Where You Can Find More
Information.
Principal of and interest on the Notes will be payable, and the
Notes may be exchanged or transferred, at our office or agency
in the Borough of Manhattan, The City of New York (which
initially shall be the corporate trust office of the Trustee),
except that, at our option, payment of interest may be made by
check mailed to the address of the Holders as such address
appears in the note register.
The Notes will be issued only in fully registered form, without
coupons, in denominations of $2,000 and any integral multiple of
$1,000 in excess thereof. No service charge shall be made for
any registration of transfer or exchange of Notes, but we may
require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection
therewith.
The Company will issue Notes with an initial aggregate principal
amount of $350 million. Subject to the covenants described
below under Certain Covenants and applicable law,
the Company may issue
additional % Senior
Subordinated Notes due 2021 under the Indenture in an unlimited
principal amount (the Additional Notes). The Notes
of a series and any Additional Notes subsequently issued under
the Indenture would be treated as a single class for all
purposes under the Indenture, in each case including, without
limitation, waivers, amendments, redemptions and offers to
purchase. Unless the context otherwise requires, for all
purposes of the Indenture and this Description of the
Notes, references to the Notes include any Additional
Notes actually issued.
Terms of
the Notes
The $350 million aggregate principal amount of Notes
offered hereby will be unsecured senior subordinated obligations
of the Company. The Notes will mature
on ,
2021 and bear interest at the rate per annum shown on the cover
page hereof from the date of original issuance, or from the most
recent date to which interest has been paid or provided for,
payable semiannually to Holders (as defined in the Indenture) of
record at the close of business (whether or not a Business Day)
on
the
or
immediately preceding the interest payment date
on
and of
each year,
beginning ,
2011. Interest on overdue principal and (to the extent permitted
by law) on overdue installments of interest will accrue at 1%
per annum in excess of such rate. Interest on the Notes will be
computed on the basis of a
360-day year
of twelve
30-day
months.
20
Optional
Redemption
Except as set forth in the following two paragraphs, the Notes
will not be redeemable at the option of the Company prior
to ,
2016. Thereafter, the Notes will be redeemable, at our option,
in whole or in part, at any time or from time to time, upon not
less than 30 nor more than 60 days prior notice
mailed by first-class mail to each Holders registered
address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid
interest to the redemption date (subject to the rights of
Holders of record on the relevant record date to receive
interest due on the relevant interest payment date), if redeemed
during the
12-month
period commencing
on ,
of the years set forth below:
|
|
|
|
|
Period
|
|
Redemption Price
|
|
|
2016
|
|
|
|
%
|
2017
|
|
|
|
%
|
2018
|
|
|
|
%
|
2019 and thereafter
|
|
|
100.00
|
%
|
Prior
to ,
2014, we may at our option on one or more occasions redeem the
Notes (which includes Additional Notes, if any) in an aggregate
principal amount not to exceed 35% of the aggregate principal
amount of the Notes (which includes Additional Notes, if any)
originally issued at a redemption price (expressed as a
percentage of principal amount)
of %, plus accrued and unpaid
interest to the redemption date, with the net cash proceeds from
one or more Stock Offerings; provided that at least 65%
of such aggregate principal amount of Notes (which includes
Additional Notes, if any) remains outstanding immediately after
the occurrence of each such redemption (excluding Notes held,
directly or indirectly, by the Company or its Affiliates) and
each such redemption occurs within 60 days after the date
of consummation of the related Stock Offering.
In addition, at any time prior
to ,
2016, upon not less than 30 nor more than 60 days
prior notice mailed by first-class mail to each Holders
registered address, the Company may redeem the Notes, in whole
or in part, at a redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium, plus accrued and
unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
Selection
In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee on a pro rata basis,
by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate, although no
Note of $2,000 in original principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only,
the notice of redemption relating to such Note shall state the
portion of the principal amount thereof to be redeemed. A new
Note in principal amount equal to the unredeemed portion thereof
will be issued in the name of the Holder thereof upon
cancellation of the original Note.
Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
Guarantees
The Subsidiary Guarantors, jointly and severally, as primary
obligors and not merely as sureties, will irrevocably, fully and
unconditionally guarantee (each, a Subsidiary
Guarantee) on a senior subordinated basis the performance
and the punctual payment when due, whether at Stated Maturity,
by acceleration or otherwise, of all the obligations of the
Company under the Indenture and the Notes (all such obligations
guaranteed by the Subsidiary Guarantors being herein called the
Guaranteed Obligations). The Company
21
derives a substantial portion of its operating income and cash
flow from its subsidiaries, including the Subsidiary Guarantors,
the common stock of which may be pledged to secure the
Companys indebtedness outstanding under the Credit
Facility. Each Subsidiary Guarantor will agree to pay, in
addition to the amount stated above, any and all expenses
(including reasonable counsel fees and expenses) incurred by the
Trustee and the Holders in enforcing any rights under the
Subsidiary Guarantee with respect to the Subsidiary Guarantor.
Each Subsidiary Guarantee will be limited to an amount not to
exceed the maximum amount that can be guaranteed by the
applicable Subsidiary Guarantor without rendering the Subsidiary
Guarantee, as it relates to such Subsidiary Guarantor, voidable
under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of
creditors generally. If a Subsidiary Guarantee were to be
rendered voidable, it could be subordinated by a court to all
other indebtedness (including guarantees and other contingent
liabilities) of the applicable Subsidiary Guarantor, and
depending on the amount of such indebtedness, a Subsidiary
Guarantors liability on its Subsidiary Guarantee could be
reduced to zero. See Risk FactorsA Subsidiary
Guarantee Could Be Voided If It Constitutes a Fraudulent
Transfer Under U.S. Bankruptcy or Similar State Law, Which
Would Prevent the Holders of the Notes From Relying on That
Subsidiary to Satisfy Claims.
Each Subsidiary Guarantor that makes a payment under its
Subsidiary Guarantee will be entitled to a contribution from
each other Subsidiary Guarantor in an amount equal to such other
Subsidiary Guarantors pro rata portion of such payment
based on the respective net assets of all the Subsidiary
Guarantors at the time of such payment determined in accordance
with GAAP.
Each Subsidiary Guarantee is a continuing guarantee and shall:
|
|
|
|
(1)
|
subject to certain limited exceptions, remain in full force and
effect until payment in full of all the Guaranteed Obligations;
|
|
|
(2)
|
be binding upon the Subsidiary Guarantor; and
|
|
|
(3)
|
inure to the benefit of and be enforceable by the Trustee, the
Holders and their successors, transferees and assigns.
|
Pursuant to the Indenture, a Subsidiary Guarantor may
consolidate with, merge with or into, or transfer all or
substantially all its assets to any other Person to the extent
described below under Certain CovenantsMerger
and Consolidation; provided, however, that
if such Person is not the Company, the Subsidiary
Guarantors obligations under the Indenture and its
Subsidiary Guarantee must be expressly assumed by such other
Person. However, upon the sale or other disposition (including
by way of consolidation or merger) of a Subsidiary Guarantor or
the sale or disposition of all or substantially all the assets
of a Subsidiary Guarantor (in each case other than to the
Company or an Affiliate of the Company), such Subsidiary
Guarantor will be released and relieved from all its obligations
under its Subsidiary Guarantee. See Certain
CovenantsMerger and Consolidation.
Ranking
Senior
Indebtedness Versus Notes
The indebtedness evidenced by the Notes and the Subsidiary
Guarantees will be unsecured, general obligations of the Company
and the relevant Subsidiary Guarantor, as the case may be,
subordinated in right of payment, as set forth in the Indenture,
to the prior payment of all Senior Indebtedness of the Company
or the relevant Subsidiary Guarantor, as the case may be,
whether outstanding on the Issue Date or thereafter incurred,
including the obligations of the Company under, and such
Subsidiary Guarantors guarantee, if any, of the
Companys obligations with respect to, the Credit Facility.
22
On an as-adjusted basis, as of September 30, 2010, the
Senior Indebtedness of the Company and each Subsidiary Guarantor
would have been approximately $617.4 million, including
$120.0 million representing either a primary obligation
for, or guarantee of, secured debt under the Credit Agreement,
$240.0 million representing borrowings under ENPs
credit facility, approximately $249.9 million of pipeline
capital lease obligations and $7.5 million of other capital
lease obligations. As of December 31, 2010, Denbury has no
obligation under ENPs credit facility due to the sale of
our interest in ENP to Vanguard. The Indenture limits the amount
of Senior Indebtedness we may Incur. Availability under the
Credit Facility is subject to a borrowing base, which is
redetermined semi-annually on or prior to May 1 and
November 1, and upon requested special redeterminations.
The Credit Facility currently provides for a borrowing base of
$1.6 billion, which was reaffirmed on November 1,
2010. Any subsequent borrowings under the Credit Facility will
increase the Senior Indebtedness of the Company.
Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company and the Subsidiary
Guarantors may incur, under certain circumstances the amount of
such Indebtedness could be substantial and, in any case, such
Indebtedness may be Senior Indebtedness.
See Certain
CovenantsLimitation on Indebtedness.
Other
Senior Subordinated Indebtedness Versus Notes
Only Indebtedness of the Company or a Subsidiary Guarantor that
is Senior Indebtedness will rank senior to the Notes and the
relevant Subsidiary Guarantee in accordance with the Indenture.
The Notes and each Subsidiary Guarantee will in all respects
rank pari passu with all other Senior Subordinated Indebtedness
of the Company and the relevant Subsidiary Guarantor,
respectively, including the obligations of the Company and such
Subsidiary Guarantor with respect to the Companys
71/2% Senior
Subordinated Notes due 2013 (the 2013 Notes),
71/2% Senior
Subordinated Notes due 2015 (the 2015 Notes),
9.75% Senior Subordinated Notes due 2016, 6.25% Senior
Subordinated Notes due 2014, 6.0% Senior Subordinated Notes
due 2015, 9.5% Senior Subordinated Notes due 2016,
7.25% Senior Subordinated Notes due 2017 and
81/4% Senior
Subordinated Notes due 2020 (collectively, the Existing
Notes). The Company is making a tender offer to repurchase
the 2013 Notes and the 2015 Notes, and expects, but is not
obligated, to redeem any 2013 Notes and 2015 Notes not tendered
in the tender offer. See Use of Proceeds.
The Company and each Subsidiary Guarantor will agree in the
Indenture that they will not Incur, directly or indirectly, any
Indebtedness that is subordinate or junior in ranking in right
of payment to its Senior Indebtedness unless such Indebtedness
is Senior Subordinated Indebtedness or is expressly subordinated
in right of payment to Senior Subordinated Indebtedness. The
Indenture does not treat (i) unsecured Indebtedness as
subordinated or junior to Secured Indebtedness merely because it
is unsecured or (ii) Senior Indebtedness as subordinated or
junior to any other Senior Indebtedness merely because it has a
junior priority with respect to the same collateral.
Liabilities
of Non-Guarantor Subsidiaries Versus Notes
Substantial portions of the operations of the Company are
currently conducted through its Subsidiaries. Our Unrestricted
Subsidiaries and certain of our Restricted Subsidiaries are not,
and certain future Subsidiaries of the Company may not be,
required to guarantee the Notes. Specifically, only our current
and future domestic Restricted Subsidiaries that represent at
least 10% of the book assets of, or 10% of the ACNTA of, the
Company and its Restricted Subsidiaries, taken as a whole, and
that have an aggregate of $15.0 million or more of
Indebtedness or Preferred Stock outstanding at any time, will be
required to guarantee the notes. See Certain
CovenantsFuture Subsidiary Guarantors. Currently,
our non-guarantor subsidiaries have no material operations or
income and no material assets. Claims of creditors of any
non-guarantor Subsidiaries, including trade creditors, secured
creditors and creditors holding guarantees issued by such
non-guarantor Subsidiaries, and claims of preferred stockholders
(if any) of such non-guarantor Subsidiaries generally would have
priority with respect to the assets and earnings of such
non-guarantor Subsidiaries over the claims of creditors of the
Company, including holders of the Notes, even though such
obligations would
23
not constitute Senior Indebtedness of the Company. The Notes,
therefore, would be effectively subordinated to creditors
(including trade creditors) and preferred stockholders (if any)
of such non-guarantor Subsidiaries of the Company. Although the
Indenture limits the incurrence of Indebtedness and the issuance
of preferred stock of certain of the Companys
Subsidiaries, such limitation is subject to a number of
significant qualifications. Moreover, the Indenture does not
impose any limitation on the incurrence by such Subsidiaries of
liabilities that are not considered Indebtedness under the
Indenture. See Certain CovenantsLimitation on
Indebtedness.
Payment
of Notes
The Company may not pay principal of, premium (if any) or
interest on, the Notes or make any deposit pursuant to the
provisions described under Defeasance below and may
not repurchase, redeem or otherwise retire any Notes
(collectively, pay the Notes) if:
|
|
|
|
(1)
|
any Designated Senior Indebtedness of the Company is not paid
when due; or
|
|
|
(2)
|
any other default on Designated Senior Indebtedness of the
Company occurs and the maturity of such Designated Senior
Indebtedness is accelerated in accordance with its terms;
|
unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Designated
Senior Indebtedness has been paid in full. However, the Company
may pay the Notes without regard to the foregoing if the Company
and the Trustee receive written notice approving such payment
from the Representative of the applicable Designated Senior
Indebtedness with respect to which either of the events set
forth in clause (1) or (2) of the immediately
preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in
clause (1) or (2) of the second immediately preceding
sentence) with respect to any Designated Senior Indebtedness of
the Company pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not
pay the Notes for a period (a Payment Blockage
Period) commencing upon the receipt by the Trustee (with a
copy to the Company) of written notice (a Blockage
Notice) of such default from the Representative of the
holders of such Designated Senior Indebtedness specifying an
election to effect a Payment Blockage Period and ending
179 days thereafter (or earlier if such Payment Blockage
Period is terminated:
|
|
|
|
(1)
|
by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice;
|
|
|
(2)
|
because the default giving rise to such Blockage Notice is no
longer continuing; or
|
|
|
(3)
|
because such Designated Senior Indebtedness has been repaid in
full in cash).
|
Notwithstanding the provisions described in the immediately
preceding sentence, unless the holders of such Designated Senior
Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness,
the Company must resume payments on the Notes after the end of
such Payment Blockage Period. The Notes shall not be subject to
more than one Payment Blockage Period in any period of 360
consecutive days irrespective of the number of defaults with
respect to Designated Senior Indebtedness of the Company during
such period.
Upon any payment or distribution of the assets of the Company
upon a total or partial liquidation or dissolution or
reorganization or similar proceeding relating to the Company or
its property:
|
|
|
|
(1)
|
the holders of Senior Indebtedness of the Company will be
entitled to receive payment in full in cash of such Senior
Indebtedness before the Noteholders are entitled to receive any
payment in respect of the Notes;
|
24
|
|
|
|
(2)
|
until such Senior Indebtedness is paid in full in cash, any
payment or distribution to which Noteholders would be entitled
from the Company but for the subordination provisions of the
Indenture will be made to holders of such Senior Indebtedness of
the Company as their interests may appear; and
|
|
|
(3)
|
if a distribution is made to Noteholders that, due to the
subordination provisions, should not have been made to them,
such Noteholders are required to hold it in trust for the
holders of Senior Indebtedness of the Company and pay it over to
them as their interests may appear.
|
If payment of the Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the
holders of Designated Senior Indebtedness of the Company or the
Representative of such holders of the acceleration.
The obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee are unsecured senior subordinated
obligations. As such, the rights of Noteholders to receive
payment by a Subsidiary Guarantor pursuant to its Subsidiary
Guarantee will be subordinated in right of payment to the rights
of holders of Senior Indebtedness of such Subsidiary Guarantor.
The terms of the subordination provisions described above with
respect to the Companys obligations under the Notes apply
equally to each Subsidiary Guarantor and the obligations of each
such Subsidiary Guarantor under its respective Subsidiary
Guarantee.
By reason of the subordination provisions contained in the
Indenture, in the event of insolvency, creditors of the Company
or a Subsidiary Guarantor who are holders of Senior Indebtedness
of the Company or such Subsidiary Guarantor, as the case may be,
may recover more, ratably, than the Noteholders, and creditors
of the Company or a Subsidiary Guarantor who are not holders of
Senior Indebtedness of the Company or such Subsidiary Guarantor
may recover less, ratably, than holders of Senior Indebtedness
of the Company or such Subsidiary Guarantor, as the case may be,
and may recover more, ratably, than the Noteholders.
Notwithstanding the foregoing, payment from the money or the
proceeds of U.S. Government Obligations held in any
defeasance trust described under Defeasance
below will not be contractually subordinated in right of payment
to any Senior Indebtedness of the Company or subject to the
restrictions described herein.
Book-Entry,
Delivery and Form
The Notes will be represented by one or more global notes in
registered, global form without interest coupons (collectively,
the Global Notes). The Global Notes initially will
be deposited upon issuance with the Trustee as custodian for DTC
in New York, New York, and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or
indirect participant as described below.
Except as set forth below, the Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the
Global Notes may not be exchanged for Notes in certificated form
except in the limited circumstances described below. See
Exchange of Global Notes for Certificated
Notes. In addition, transfers of beneficial interests in
the Global Notes will be subject to the applicable rules and
procedures of DTC and its direct or indirect participants, which
may change from time to time.
The Notes may be presented for registration of transfer and
exchange at the offices of the registrar.
25
Depository
Procedures
The following description of the operations and procedures of
DTC is provided solely as a matter of convenience. These
operations and procedures are solely within the control of the
respective settlement systems and are subject to changes by
them. We take no responsibility for these operations and
procedures and urge investors to contact the system or their
participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company
organized under the laws of the State of New York, a
banking organization within the meaning of the New
York Banking Law, a member of the Federal Reserve System, a
clearing corporation within the meaning of the
Uniform Commercial Code and a clearing agency
registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC was created to hold securities for its
participating organizations (collectively, the
participants) and to facilitate the clearance and
settlement of transactions in those securities between
participants through electronic book-entry changes in accounts
of its participants. The participants include securities brokers
and dealers, banks, trust companies, clearing corporations and
certain other organizations. Access to DTCs system is also
available to other entities such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly
(collectively, the indirect participants). Persons
who are not participants may beneficially own securities held by
or on behalf of DTC only through the participants or the
indirect participants. The ownership interests in, and transfers
of ownership interests in, each security held by or on behalf of
DTC are recorded on the records of the participants and indirect
participants.
DTC has also advised us that, pursuant to procedures established
by it:
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(1)
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upon deposit of the Global Notes, DTC will credit the accounts
of participants designated by the underwriters with portions of
the principal amount of the Global Notes; and
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(2)
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ownership of these interests in the Global Notes will be shown
on, and the transfer of ownership of these interests will be
effected only through, records maintained by DTC (with respect
to the participants) or by the participants and the indirect
participants (with respect to other owners of beneficial
interests in the Global Notes).
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Investors in the Global Notes who are participants in DTCs
system may hold their interests therein directly through DTC.
Investors in the Global Notes who are not participants may hold
their interests therein indirectly through organizations which
are participants in such system. All interests in a Global Note
may be subject to the procedures and requirements of DTC. The
laws of some states require that certain persons take physical
delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a
Global Note to such persons will be limited to that extent.
Because DTC can act only on behalf of participants, which in
turn act on behalf of indirect participants, the ability of a
person having beneficial interests in a Global Note to pledge
such interests to persons that do not participate in the DTC
system, or otherwise take actions in respect of such interests,
may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of an interest in the
Global Notes will not have notes registered in their names, will
not receive physical delivery of Notes in certificated form and
will not be considered the registered owners or
holders thereof under the Indenture for any
purpose.
Payments in respect of the principal of, and interest and
premium, if any, on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the
registered holder under the Indenture. Under the terms of the
Indenture, we and the Trustee will treat the Persons in whose
names the Notes, including the Global Notes, are registered as
the owners of the Notes for the purpose of receiving
26
payments and for all other purposes. Consequently, neither we,
the Trustee nor any agent of us or the Trustee has or will have
any responsibility or liability for:
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(1)
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any aspect of DTCs records or any participants or
indirect participants records relating to or payments made
on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any of DTCs
records or any participants or indirect participants
records relating to the beneficial ownership interests in the
Global Notes; or
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(2)
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any other matter relating to the actions and practices of DTC or
any of its participants or indirect participants.
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DTC has advised us that its current practice, upon receipt of
any payment in respect of securities such as the Notes
(including principal and interest), is to credit the accounts of
the relevant participants with the payment on the payment date
unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant participant is credited with an
amount proportionate to its beneficial ownership of an interest
in the principal amount of the relevant security as shown on the
records of DTC. Payments by the participants and the indirect
participants to the beneficial owners of Notes will be governed
by standing instructions and customary practices and will be the
responsibility of the participants or the indirect participants
and will not be the responsibility of DTC, the Trustee or us.
Neither we nor the Trustee will be liable for any delay by DTC
or any of its participants in identifying the beneficial owners
of the Notes, and we and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its
nominee for all purposes.
Transfers between participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds.
DTC has advised us that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more
participants to whose account DTC has credited the interests in
the Global Notes and only in respect of such portion of the
aggregate principal amount of the Notes as to which such
participant or participants has or have given such direction.
However, if there is an event of default under the Notes, DTC
reserves the right to exchange the Global Notes for Legend Notes
in certificated form, and to distribute such Notes to its
participants.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Notes among
participants, it is under no obligation to perform such
procedures, and such procedures may be discontinued or changed
at any time. Neither we, the Trustee nor any agent of us or the
Trustee will have any responsibility for the performance by DTC
or its participants or indirect participants of their respective
obligations under the rules and procedures governing their
operations.
Exchange
of Global Notes For Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form (Certificated Notes) if:
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(1)
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DTC (A) notifies us that it is unwilling or unable to
continue as depositary for the Global Notes or (B) has
ceased to be a clearing agency registered under the Exchange Act
and, in each case, a successor depositary is not appointed;
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(2)
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we, at our option, notify the Trustee in writing that we elect
to cause the issuance of the Certificated Notes; or
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(3)
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there has occurred and is continuing a default with respect to
the Notes.
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27
In addition, beneficial interests in a Global Note may be
exchanged for Certificated Notes upon prior written notice given
to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in
exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
Exchange
of Certificated Notes For Global Notes
Certificated Notes may not be exchanged for beneficial interests
in any Global Note unless the transferor first delivers to the
Trustee a written certificate (in the form provided in the
Indenture) to the effect that such transfer will comply with the
appropriate transfer restrictions applicable to such Notes.
Same-Day
Settlement and Payment
We will make payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, and
interest, if any) by wire transfer of immediately available
funds to the accounts specified by the Global Note holder. We
will make all payments of principal, interest and premium, if
any, with respect to Certificated Notes by wire transfer of
immediately available funds to the accounts specified by the
holders of the Certificated Notes or, if no such account is
specified, by mailing a check to each such holders
registered address. The Notes represented by the Global Notes
are expected to be eligible to trade in DTCs
Same-Day
Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by
DTC to be settled in immediately available funds. We expect that
secondary trading in any Certificated Notes will also be settled
in immediately available funds.
Change of
Control
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(a)
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Upon the occurrence of any of the following events (each a
Change of Control), each Holder shall have the right
to require that the Company repurchase such Holders Notes
at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest on the relevant
interest payment date), in accordance with the terms
contemplated in paragraph (b) below:
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(1)
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any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than a
Permitted Holder, is or becomes the beneficial owner (as defined
in
Rules 13d-3
and 13d-5
under the Exchange Act, except that for purposes of this
clause (1) such person shall be deemed to have
beneficial ownership of all shares that such person
has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the
Voting Stock of the Company (for the purposes of this clause
(1), such person shall be deemed to beneficially own any Voting
Stock of a specified corporation held by a parent corporation,
if such person is the beneficial owner (as defined in this
clause (1)), directly or indirectly, of more than 40% of the
voting power of the Voting Stock of such parent corporation);
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(2)
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during any period of two consecutive years from and after the
Issue Date, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with
any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company
was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the
beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office;
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28
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(3)
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the shareholders of the Company shall have approved any plan of
liquidation or dissolution of the Company; or
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(4)
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the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company,
or the sale, lease, conveyance or transfer of all or
substantially all the assets of the Company and its Restricted
Subsidiaries, taken as a whole, to another Person (other than a
Person that is controlled (as defined in the definition of
Affiliate) by the Permitted Holders), and, in the
case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting
power of the Voting Stock of the Company are changed into or
exchanged for cash, securities or property, unless pursuant to
such transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such
transaction, at least a majority of the aggregate voting power
of the Voting Stock of the surviving corporation.
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In the event that at the time of such Change of Control the
terms of the Indebtedness under the Credit Agreement restrict or
prohibit the repurchase of Notes pursuant to this covenant, then
prior to the mailing of the notice to Holders provided for in
paragraph (b) below, but in any event within 30 days
following any Change of Control, the Company shall:
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(1)
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repay in full the Indebtedness under the Credit Agreement; or
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(2)
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obtain the requisite consent under the agreements governing the
Indebtedness under the Credit Agreement to permit the repurchase
of the Notes as provided for in paragraph (b) below.
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(b)
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Within 30 days following a Change of Control, the Company
shall mail a notice to each Holder with a copy to the Trustee
stating: (1) that a Change of Control has occurred and that
such Holder has the right to require the Company to purchase
such Holders Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right
of Holders of record on the relevant record date to receive
interest on the relevant interest payment date); (2) the
circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma
historical income, cash flow and capitalization, in each case
after giving effect to such Change of Control); (3) the
purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed);
and (4) the instructions determined by the Company,
consistent with this covenant, that a Holder must follow in
order to have its Notes purchased.
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(c)
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The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the
repurchase of Notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations
conflict with the provisions of this covenant, the Company shall
comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this
covenant by virtue thereof.
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The Change of Control purchase feature of the Notes may in
certain circumstances make more difficult or discourage a sale
or takeover of the Company and, thus, the removal of incumbent
management. The Change of Control purchase feature is a result
of negotiations between the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated. Management has no present
intention to engage in a transaction involving a Change of
Control, although it is possible that the Company would decide
to do so in the future. Subject to the limitations discussed
below, the Company could, in the future, enter into certain
transactions,
29
including acquisitions, refinancing or other recapitalizations,
that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness
outstanding at such time or otherwise affect the Companys
capital structure or credit ratings. Restrictions on the ability
of the Company to Incur additional Indebtedness are contained in
the covenants described under Certain
CovenantsLimitation on Indebtedness and
Certain CovenantsLimitation on Liens.
Such restrictions can only be waived with the consent of the
holders of a majority in principal amount of the Notes then
outstanding. Except for the limitations contained in such
covenants, however, the Indenture will not contain any covenants
or provisions that may afford holders of the Notes protection in
the event of a highly leveraged transaction.
The Credit Agreement prohibits the Company from purchasing any
Notes and also provides that the occurrence of certain change of
control events with respect to the Company would constitute a
default thereunder. In the event a Change of Control occurs at a
time when the Company is prohibited from purchasing Notes, the
Company could seek the consent of its lenders to the purchase of
Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent
or repay such borrowings, the Company will remain prohibited
from purchasing Notes. In such case, the Companys failure
to purchase tendered Notes would constitute an Event of Default
under the Indenture which would, in turn, constitute a default
under the Credit Agreement. In such circumstances, the
subordination provisions in the Indenture would likely restrict
payment to the Holders of Notes.
Future indebtedness of the Company may contain prohibitions on
the occurrence of certain events that would constitute a Change
of Control or require such indebtedness to be repurchased upon a
Change of Control. Moreover, the exercise by the Holders of
their right to require the Company to repurchase the Notes could
cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Companys ability
to pay cash to the holders of Notes following the occurrence of
a Change of Control may be limited by the Companys then
existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any
required repurchases.
The provisions under the Indenture relating to the
Companys obligation to make an offer to repurchase the
Notes as a result of a Change of Control may be waived or
modified with the written consent of the holders of a majority
in outstanding principal amount of the Notes.
The Company will not be required to make an offer to purchase
the Notes as a result of a Change of Control if a third party:
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(1)
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makes such offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture
relating to the Companys obligations to make such an
offer; and
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(2)
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purchases all Notes validly tendered and not withdrawn under
such an offer.
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Certain
Covenants
The Indenture contains covenants including, among others, the
following:
Limitation
on Indebtedness
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(a)
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The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company or a
Restricted Subsidiary may Incur Indebtedness if, on the date of
such Incurrence and after giving effect thereto, the
Consolidated Coverage Ratio equals or exceeds 2.25 to 1.0.
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30
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(b)
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Notwithstanding the limitation described in the foregoing
paragraph (a), the Company and any Restricted Subsidiary may
Incur the following Indebtedness:
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(1)
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Indebtedness Incurred pursuant to any Credit Facility, so long
as the aggregate amount of all Indebtedness outstanding under
all Credit Facilities does not, at any one time, exceed the
aggregate amount of borrowing availability as of such date under
all Credit Facilities that determine availability on the basis
of a borrowing base or other asset-based calculation;
provided, however, that in no event shall such
amount exceed the greater of (x) $500.0 million and
(y) 75% of ACNTA as of the date of such Incurrence;
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(2)
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Indebtedness owed to and held by the Company or any Restricted
Subsidiary; provided, however, that any subsequent
issuance or transfer of any Capital Stock which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any subsequent transfer of such Indebtedness (other than to
the Company or another Restricted Subsidiary) shall be deemed,
in each case, to constitute the Incurrence of such Indebtedness
by the issuer thereof;
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(3)
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The Notes (other than any Additional Notes);
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(4)
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Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or (3) of
this covenant);
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(5)
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Indebtedness of (A) a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness
Incurred in connection with, or to provide all or any portion of
the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which
such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company) and (B) the Company or a
Restricted Subsidiary Incurred for the purpose of financing all
or any part of the cost of acquiring oil and gas properties,
another Person (other than a Person that was, immediately prior
to such acquisition, a Subsidiary of the Company) engaged in the
Oil and Gas Business or all or substantially all the assets of
such a Person; provided, however, that, in the
case of each of clause (A) and clause (B) above, on
the date of such Incurrence and after giving effect thereto, the
Consolidated Coverage Ratio equals or exceeds 2.0 to 1.0;
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(6)
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Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3), (4),
or (5) above, this clause (6) or clause (7)
below; provided, however, that to the extent such
Refinancing Indebtedness directly or indirectly Refinances
Indebtedness or Preferred Stock of a Restricted Subsidiary
described in clause (5), such Refinancing Indebtedness shall be
Incurred only by such Restricted Subsidiary or the Company;
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(7)
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Non-recourse Purchase Money Indebtedness;
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(8)
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Indebtedness with respect to Production Payments;
provided, however, that any such Indebtedness
shall be Limited Recourse Production Payments; provided
further, however, that the Net Present Value of the
reserves related to such Production Payments shall not exceed
30% of ACNTA at the time of Incurrence;
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(9)
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Indebtedness consisting of the Subsidiary Guarantees and any
Guarantee by a Subsidiary Guarantor of Indebtedness Incurred by
the Company pursuant to clauses (1) and (3);
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31
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(10)
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Indebtedness consisting of Interest Rate Agreements directly
related to Indebtedness permitted to be Incurred by the Company
and its Restricted Subsidiaries pursuant to the Indenture;
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(11)
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Indebtedness under Oil and Gas Hedging Contracts and Currency
Agreements entered into in the ordinary course of business for
the purpose of limiting risks that arise in the ordinary course
of business of the Company and its Restricted Subsidiaries;
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(12)
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Indebtedness in respect of bid, performance or surety
obligations issued by or for the account of the Company or any
Restricted Subsidiary in the ordinary course of business,
including Guarantees and letters of credit functioning as or
supporting such bid, performance or surety obligations (in each
case other than for an obligation for money borrowed);
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(13)
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Indebtedness of the Company or a Restricted Subsidiary Incurred
to finance capital expenditures and Refinancing Indebtedness
Incurred in respect thereof in an aggregate amount which, when
taken together with the amount of all other Indebtedness
Incurred pursuant to this clause (13) since the Issue Date
and then outstanding, does not exceed $20.0 million;
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(14)
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Permitted Marketing Obligations;
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(15)
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In-kind obligations relating to oil and gas balancing positions
arising in the ordinary course of business; and
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(16)
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Indebtedness in an aggregate amount which, together with the
amount of all other Indebtedness of the Company and its
Restricted Subsidiaries outstanding on the date of such
Incurrence (other than Indebtedness permitted by
clauses (1) through (15) above or paragraph (a)) does
not exceed $100.0 million.
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(c)
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Notwithstanding the foregoing, the Company shall not, and shall
not permit any Subsidiary Guarantor to, Incur any Indebtedness
pursuant to the foregoing paragraph (b) if the proceeds
thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be
subordinated to the Notes or the relevant Subsidiary Guarantor,
as the case may be, to at least the same extent as such
Subordinated Obligations.
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(d)
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For purposes of determining compliance with the foregoing
covenant:
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(1)
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in the event that an item of Indebtedness meets the criteria of
more than one of the types of Indebtedness described above, the
Company, in its sole discretion, will classify such item of
Indebtedness at the time of Incurrence and only be required to
include the amount and type of such Indebtedness in one of the
above clauses; provided that any Indebtedness outstanding
under the Credit Agreement on the Issue Date will be treated as
Incurred on the Issue Date under clause (1) of paragraph
(b) above; and
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(2)
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an item of Indebtedness may be divided and classified in more
than one of the types of Indebtedness described above.
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Incurrence
of Layered Indebtedness
Notwithstanding paragraphs (a) and (b) of the covenant
described above under Limitation on
Indebtedness, the Company shall not, and the Company shall
not permit any Subsidiary Guarantor to, Incur any Indebtedness
if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior
32
Indebtedness of the Company or such Subsidiary Guarantor, as
applicable, unless such Indebtedness is Senior Subordinated
Indebtedness or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness of such Person.
Limitation
on Restricted Payments
(a) The Company shall not, and shall not permit any
Restricted Subsidiary, directly or indirectly, to make a
Restricted Payment if at the time the Company or such Restricted
Subsidiary makes such Restricted Payment:
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(1)
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a Default shall have occurred and be continuing (or would result
therefrom);
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(2)
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the Company is not able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant
described under Limitation on
Indebtedness; or
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(3)
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the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of
(without duplication):
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(A)
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50% of the aggregate Consolidated Net Income of the Company
accrued on a cumulative basis commencing on December 31,
2002 and ending on the last day of the fiscal quarter ending on
or immediately preceding the date of such proposed Restricted
Payment (or, if such aggregate Consolidated Net Income shall be
a deficit, minus 100% of such deficit);
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(B)
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the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified
Stock) subsequent to December 31, 2005 (other than an
issuance or sale to a Subsidiary of the Company and other than
an issuance or sale to an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for
the benefit of their employees);
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(C)
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the aggregate Net Cash Proceeds received by the Company from the
issue or sale subsequent to December 31, 2005 of its
Capital Stock (other than Disqualified Stock) to an employee
stock ownership plan; provided, however, that if
such employee stock ownership plan incurs any Indebtedness with
respect thereto, such aggregate amount shall be limited to an
amount equal to any increase in the Consolidated Net Worth of
the Company resulting from principal repayments made by such
employee stock ownership plan with respect to such Indebtedness;
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(D)
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the amount by which Indebtedness of the Company is reduced on
the Companys balance sheet upon the conversion or exchange
(other than by a Subsidiary of the Company) subsequent to
December 31, 2005, of any Indebtedness of the Company
convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash,
or the fair value of any other property, distributed by the
Company upon such conversion or exchange); and
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(E)
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an amount equal to the sum of (i) the net reduction in
Investments made subsequent to December 31, 2005 by the
Company or any Restricted Subsidiary in any Person resulting
from dividends, repayments of loans or advances or other
transfers of assets, in each case to the Company or any
Restricted Subsidiary from such Person, and (ii) the
portion (proportionate to the Companys equity interest in
such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted
Subsidiary is designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall
not exceed, in the case of any such Person or Unrestricted
Subsidiary, the amount of Investments
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33
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previously made (and treated as a Restricted Payment) by the
Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
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At December 31, 2010, the Company would have been able to
make approximately $950.0 million of Restricted Payments
under the foregoing calculation specified in this paragraph
(a)(3).
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(b)
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The provisions of the foregoing paragraph (a) shall not
prohibit:
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(1)
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dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however,
that at the time of payment of such dividend, no other Default
shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividend
shall be included in the calculation of the amount of Restricted
Payments;
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(2)
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any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary of the Company or
an employee stock ownership plan or to a trust established by
the Company or any of its Subsidiaries for the benefit of their
employees); provided, however, that (A) such
purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments and (B) the Net Cash
Proceeds from such sale shall be excluded from the calculation
of amounts under clause (3)(B) of paragraph (a) above (but
only to the extent that such Net Cash Proceeds were used to
purchase or redeem such Capital Stock as provided in this clause
(2));
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(3)
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any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations
of the Company made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Subordinated Obligations
of the Company; provided, however, that such
purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
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(4)
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the repurchase of shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from
employees, former employees, directors or former directors of
the Company or any of its Subsidiaries (or permitted transferees
of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved
by the Board of Directors under which such individuals purchase
or sell or are granted the option to purchase or sell, shares of
such common stock; provided, however, that the
aggregate amount of such repurchases shall not exceed
$2.0 million in any calendar year; provided further,
however, that such repurchases shall be excluded in the
calculation of the amount of Restricted Payments;
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(5)
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loans made to officers, directors or employees of the Company or
any Restricted Subsidiary approved by the Board of Directors (or
a duly authorized officer), the net cash proceeds of which are
used solely (A) to purchase common stock of the Company in
connection with a restricted stock or employee stock purchase
plan, or to exercise stock options received pursuant to an
employee or director stock option plan or other incentive plan,
in a principal amount not to exceed the exercise price of such
stock options or (B) to refinance loans, together with
accrued interest thereon, made pursuant to item (A) of this
clause (5); provided, however, that such loans
shall be excluded in the calculation of the amount of Restricted
Payments; or
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(6)
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other Restricted Payments in an aggregate amount not to exceed
$40.0 million; provided, however, that such
Restricted Payments shall be excluded in the calculation of the
amount of Restricted Payments.
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34
Limitation
on Restrictions on Distributions From Restricted
Subsidiaries
The Company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary (A) to pay
dividends or make any other distributions on its Capital Stock
or pay any Indebtedness owed to the Company or a Restricted
Subsidiary, (B) to make any loans or advances to the
Company or a Restricted Subsidiary or (C) to transfer any
of its property or assets to the Company or a Restricted
Subsidiary, except:
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(1)
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any encumbrance or restriction in the Credit Agreement on the
Issue Date or pursuant to any other agreement in effect on the
Issue Date;
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(2)
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any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date
on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to
provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became
a Restricted Subsidiary or was acquired by the Company) and
outstanding on such date;
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(3)
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any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (1) or (2) of this
covenant or this clause (3) or contained in any amendment
to an agreement referred to in clause (1) or (2) of
this covenant or this clause (3); provided,
however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any such
refinancing agreement or amendment are no less favorable to the
Noteholders than encumbrances and restrictions with respect to
such Restricted Subsidiary contained in such agreements;
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(4)
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any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests
to the extent such provisions restrict the transfer of the lease
or the property leased thereunder;
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(5)
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in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary to the extent such restrictions restrict
the transfer of the property subject to such security agreements
or mortgages; and
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(6)
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any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or
assets of such Restricted Subsidiary pending the closing of such
sale or disposition.
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Limitation
on Sales of Assets and Subsidiary Stock
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(a)
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The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, consummate any Asset
Disposition unless:
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(1)
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the Company or such Restricted Subsidiary receives consideration
at least equal to the fair market value (such fair market value
to be determined in advance in good faith by an Officer or an
officer of such Restricted Subsidiary with responsibility for
such transaction, or if the Asset Disposition exceeds
$50.0 million, by the Board of Directors, which
determination shall be conclusive evidence of compliance with
this provision), of the equity and assets subject to such Asset
Disposition;
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35
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(2)
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at least 75% of the consideration received by the Company or
such Restricted Subsidiary is in the form of cash or cash
equivalents, Additional Assets or any combination thereof
(collectively, the Cash
Consideration); and
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(3)
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an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be):
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(A)
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first, to the extent the Company elects (or is required
by the terms of any Indebtedness), to prepay, repay, redeem or
purchase Senior Indebtedness of the Company or any Subsidiary
Guarantor or Indebtedness (other than any Disqualified Stock) of
a Wholly Owned Subsidiary that is not a Subsidiary Guarantor (in
each case other than Indebtedness owed to the Company or an
Affiliate of the Company) within 540 days from the later of
the date of such Asset Disposition or the receipt of such Net
Available Cash, provided such prepayment, repayment, redemption
or purchase permanently retires, or reduces the related loan
commitment (if any) for, such Indebtedness in an amount equal to
the principal amount so prepaid, repaid, redeemed or purchased;
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(B)
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second, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A),
to the extent the Company elects, to acquire Additional Assets
or to make capital expenditures in the Oil and Gas Business
within 540 days from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; and
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(C)
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third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses (A) and
(B), to make an offer to the holders of the Notes (and to
holders of other Senior Subordinated Indebtedness of the Company
designated by the Company) to purchase Notes (and such other
Senior Subordinated Indebtedness of the Company) pursuant to and
subject to the conditions contained in the Indenture, which
purchase permanently reduces the outstanding amount of such
Notes (and such other Senior Subordinated Indebtedness) in an
amount equal to the principal amount purchased.
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Pending application of Net Available Cash pursuant to this
covenant, such Net Available Cash shall be invested in Temporary
Cash Investments or applied to temporarily reduce revolving
credit Indebtedness.
Notwithstanding the foregoing provisions of this covenant, the
Company and the Restricted Subsidiaries will not be required to
apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from
all Asset Dispositions, which is not applied in accordance with
this covenant, exceeds $40.0 million during any calendar
year.
For the purposes of this covenant, the following are deemed to
be cash or cash equivalents:
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(1)
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any liabilities, as shown on the Companys or such
Restricted Subsidiarys most recent balance sheet, of the
Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated
to the Notes or any Subsidiary Guaranty) that are assumed by the
transferee of any such Asset Disposition pursuant to (1) a
customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability or (2) an
assignment agreement that includes, in lieu of such a release,
the agreement of the transferee or its parent company to
indemnify and hold harmless the Company or such Restricted
Subsidiary from and against any loss, liability or cost in
respect of such assumed liability;
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36
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(2)
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any non-Cash Consideration received by the Company or any
Restricted Subsidiary from the transferee that is converted,
monetized, sold or exchanged by the Company or such Restricted
Subsidiary into cash or cash equivalents within 120 days of
receipt.
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Notwithstanding the foregoing, the 75% limitation referred to in
paragraph (a) (2) above shall be deemed satisfied with
respect to any Asset Disposition in which the cash or cash
equivalents portion of the consideration received therefrom,
determined in accordance with the foregoing provision on an
after-tax basis, is equal to or greater than what the after-tax
proceeds would have been had such Asset Disposition complied
with the aforementioned 75% limitation.
The requirement of clause (a) (3) (B) above shall be deemed
to be satisfied if an agreement (including a lease, whether a
capital lease or an operating lease) committing to make the
acquisitions or expenditures referred to therein is entered into
by the Company or its Restricted Subsidiary within the time
period specified in such clause and such Net Available Cash is
subsequently applied in accordance with such agreement within
six months following such agreement.
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(b)
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In the event of an Asset Disposition that requires the purchase
of Notes (and other Senior Subordinated Indebtedness of the
Company) pursuant to clause (a) (3) (C) of this covenant,
the Company shall make such offer to purchase Notes (an
Offer) on or before the 541st day after
the later of the date of such Asset Disposition or the receipt
of such Net Available Cash, and shall purchase Notes tendered
pursuant to an offer by the Company for the Notes (and such
other Senior Subordinated Indebtedness of the Company) at a
purchase price of 100% of their principal amount (or, in the
event such other Senior Subordinated Indebtedness of the Company
was issued with original issue discount greater than 2.5%, 100%
of the accreted value thereof) without premium, plus accrued but
unpaid interest (or, in respect of such other Senior
Subordinated Indebtedness of the Company, such lesser price, if
any, as may be provided for by the terms of such Senior
Subordinated Indebtedness of the Company) in accordance with the
procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate
purchase price of the securities tendered exceeds the Net
Available Cash allotted to their purchase, the Company will
select the securities to be purchased on a pro rata basis but in
round denominations, which in the case of the Notes will be
denominations of $2,000 principal amount or $1,000 integral
multiples thereof. The Company shall not be required to make
such an offer to purchase Notes (and other Senior Subordinated
Indebtedness of the Company) pursuant to this covenant if the
Net Available Cash not applied or invested as provided in clause
(a) (3) (A) or (B) of this covenant is less than
$20.0 million (which lesser amount shall be carried forward
for purposes of determining whether such an offer is required
with respect to the Net Available Cash from any subsequent Asset
Disposition). Upon completion of such an offer to purchase, Net
Available Cash will be deemed to be reduced by the aggregate
amount of such offer.
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(c)
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The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any
other securities laws or regulations in connection with the
repurchase of Notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this
covenant by virtue of its compliance with such securities laws
or regulations.
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Limitation
on Affiliate Transactions
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(a)
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The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any
property, employee
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37
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compensation arrangements or the rendering of any service) with
any Affiliate of the Company (an Affiliate
Transaction) unless the terms thereof:
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(1)
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are no less favorable to the Company or such Restricted
Subsidiary than those that could be obtained at the time of such
transaction in arms-length dealings with a Person who is
not such an Affiliate;
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(2)
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if such Affiliate Transaction involves an amount in excess of
$15.0 million, are set forth in writing and have been
approved by the Board of Directors, including a majority of the
members of the Board of Directors having no personal stake in
such Affiliate Transaction; and
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(3)
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if such Affiliate Transaction involves an amount in excess of
$25.0 million, have been determined by a nationally
recognized investment banking firm or other qualified
independent appraiser to be fair, from a financial standpoint,
to the Company and its Restricted Subsidiaries.
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(b)
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The provisions of the foregoing paragraph (a) shall not
prohibit:
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(1)
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any sale of hydrocarbons or other mineral products to an
Affiliate of the Company or the entering into or performance of
Oil and Gas Hedging Contracts, gas gathering, transportation or
processing contracts or oil or natural gas marketing or exchange
contracts with an Affiliate of the Company, in each case, in the
ordinary course of business, so long as the terms of any such
transaction are approved by a majority of the members of the
Board of Directors who are disinterested with respect to such
transaction;
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(2)
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the sale to an Affiliate of the Company of Capital Stock of the
Company that does not constitute Disqualified Stock, and the
sale to an Affiliate of the Company of Indebtedness (including
Disqualified Stock) of the Company in connection with an
offering of such Indebtedness in a market transaction and on
terms substantially identical to those of other purchasers in
such market transaction;
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(3)
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transactions contemplated by any employment agreement or other
compensation plan or arrangement existing on the Issue Date or
thereafter entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business;
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(4)
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the payment of reasonable fees to directors of the Company and
its Restricted Subsidiaries who are not employees of the Company
or any Restricted Subsidiary;
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(5)
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transactions between or among the Company and its Restricted
Subsidiaries;
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(6)
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transactions between the Company or any of its Restricted
Subsidiaries and Persons that are controlled (as defined in the
definition of Affiliate) by the Company (an
Unrestricted Affiliate); provided that no
other Person that controls (as so defined) or is under common
control with the Company holds any Investments in such
Unrestricted Affiliate;
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(7)
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Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption
Limitation on Restricted Payments; and
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(8)
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loans or advances to employees in the ordinary course of
business and approved by the Companys Board of Directors
in an aggregate principal amount not to exceed $2.5 million
outstanding at any one time.
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38
Limitation
on Liens
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into, create,
incur, assume or suffer to exist any Lien on or with respect to
any property of the Company or such Restricted Subsidiary,
whether owned on the Issue Date or acquired after the Issue
Date, or any interest therein or any income or profits
therefrom, unless the Notes or any Subsidiary Guarantee of such
Restricted Subsidiary, as applicable, are secured equally and
ratably with (or prior to) any and all other Indebtedness
secured by such Lien, except that the Company and its Restricted
Subsidiaries may enter into, create, incur, assume or suffer to
exist Permitted Liens and Liens securing Senior Indebtedness.
Merger
and Consolidation
The Company shall not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all the assets of the Company
and its Restricted Subsidiaries, taken as a whole, to, any
Person, unless:
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(1)
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(A) the resulting, surviving or transferee Person (the
Successor Company) shall be a Person organized and
existing under the laws of the United States of America, any
State thereof or the District of Columbia and (B) the
Successor Company (if not the Company) shall expressly assume,
by an indenture supplemental thereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture;
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(2)
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immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the
Successor Company or any Subsidiary as a result of such
transaction as having been Incurred by such Successor Company or
such Subsidiary at the time of such transaction), no Default
shall have occurred and be continuing;
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(3)
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immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to paragraph (a) of the covenant
described under Limitation on Indebtedness;
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(4)
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immediately after giving effect to such transaction, the
Successor Company shall have Adjusted Consolidated Net Tangible
Assets that are not less than the Adjusted Consolidated Net
Tangible Assets prior to such transaction;
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(5)
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in the case of a conveyance, transfer or lease of all or
substantially all the assets of the Company and its Restricted
Subsidiaries, taken as a whole, such assets shall have been so
conveyed, transferred or leased as an entirety or virtually as
an entirety to one Person; and
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(6)
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the Company shall have complied with certain additional
conditions set forth in the Indenture;
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provided, however, that clauses (3) and
(4) shall not be applicable to any such transaction solely
between the Company and any Restricted Subsidiary.
The Successor Company shall be the successor to the Company and
shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under the Indenture, and the
predecessor Company, except in the case of a lease, shall be
released from the obligation to pay the principal of and
interest on the Notes.
39
The Company will not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, all or
substantially all of its assets to any Person unless:
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(1)
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the resulting, surviving or transferee Person (if not such
Subsidiary) shall be a Person organized and existing under the
laws of the jurisdiction under which such Subsidiary was
organized or under the laws of the United States of America, or
any State thereof or the District of Columbia, and such Person
shall expressly assume, by executing a Guarantee Agreement, all
the obligations of such Subsidiary, if any, under its Subsidiary
Guarantee;
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(2)
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immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any Indebtedness
which becomes an obligation of the resulting, surviving or
transferee Person as a result of such transaction as having been
issued by such Person at the time of such transaction), no
Default shall have occurred and be continuing;
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(3)
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in the case of a conveyance, transfer or lease of all or
substantially all the assets of a Subsidiary Guarantor, such
assets shall have been so conveyed, transferred or leased as an
entirety or virtually as an entirety to one Person; and
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(4)
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the Company shall have complied with certain additional
conditions contained in the Indenture.
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The provisions of clauses (1) and (2) above shall not
apply to any one or more transactions which constitute an Asset
Disposition if the Company has complied with the applicable
provisions of the covenant described under
Limitation on Sales of Assets and Subsidiary
Stock above.
SEC
Reports
Notwithstanding that the Company may not at any time be subject
to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the SEC and provide
the Trustee and Noteholders with such annual reports and such
information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to
a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and
provided at the times specified for the filing of such
information, documents and reports under such Sections.
Future
Subsidiary Guarantors
The Company shall cause each Restricted Subsidiary that
represents at least 10% of the book assets of, or 10% of the
ACNTA of, the Company and its Restricted Subsidiaries, taken as
a whole, and that has an aggregate of $15.0 million or more
of Indebtedness and Preferred Stock outstanding at any time to
promptly Guarantee the Notes pursuant to a Subsidiary Guarantee
on the terms and conditions set forth in the Indenture.
Defaults
An Event of Default is defined in the Indenture as:
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(1)
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a default in the payment of interest on the Notes when due,
continued for 30 days;
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(2)
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a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required
purchase, upon declaration of acceleration or otherwise;
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(3)
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the failure by the Company to comply with its obligations under
Certain CovenantsMerger and
Consolidation above;
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40
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(4)
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the failure by the Company to comply for 30 days after
notice with any of its obligations in the covenants described
above under Change of Control (other than a failure
to purchase Notes), Certain Covenants,
Limitation on Indebtedness,
Limitation on Restricted Payments,
Limitation on Restrictions on Distributions From
Restricted Subsidiaries, Limitation on Sales
of Assets and Subsidiary Stock (other than a failure to
purchase Notes), Limitation on Affiliate
Transactions, Limitation on Liens,
Future Subsidiary Guarantors or SEC
Reports;
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(5)
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the failure by the Company to comply for 60 days after
notice with its other agreements contained in such Indenture;
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(6)
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Indebtedness of the Company (other than Limited Recourse
Production Payments and Nonrecourse Purchase Money Indebtedness)
is not paid within any applicable grace period after final
maturity or the maturity of such Indebtedness is accelerated by
the holders thereof because of a default (and such acceleration
is not rescinded or annulled) and the total amount of such
Indebtedness unpaid or accelerated exceeds $20.0 million
(the cross acceleration provision);
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(7)
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certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the bankruptcy
provisions);
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(8)
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any judgment or decree for the payment of money in an uninsured
or unindemnified amount in excess of $20.0 million or its
foreign currency equivalent at the time is rendered against the
Company or a Significant Subsidiary, remains outstanding for a
period of 60 days following such judgment and is not
discharged, waived, bonded or stayed within 10 days after
notice (the judgment default provision); or
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(9)
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any Subsidiary Guarantee ceases or otherwise fails to be in full
force and effect (other than in accordance with the terms
thereof) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guarantee if such default
continues for a period of ten days after notice thereof to the
Company (the guarantee default provision).
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However, a default under clauses (4), (5), (8) and
(9) will not constitute an Event of Default until the
Trustee or the holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the
Company does not cure such default within the time specified
after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or
the holders of at least 25% in principal amount of the
outstanding Notes may declare the principal of and accrued but
unpaid interest on all the Notes to be due and payable. Upon
such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and interest
on all the Notes will ipso facto become and be immediately due
and payable without any declaration or other act on the part of
the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of
the outstanding Notes may rescind any such acceleration with
respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, in case an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise
any of the rights or powers under the Indenture at the request
or direction of any of the holders of the Notes unless such
holders have furnished to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to
enforce the right to receive payment of principal, premium (if
any) or interest when due, no holder of a Note may pursue any
remedy with respect to the Indenture or the Notes unless:
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(1)
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such holder has previously given the Trustee notice that an
Event of Default is continuing;
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41
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(2)
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holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy;
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(3)
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such holders have furnished the Trustee reasonable security or
indemnity against any loss, liability or expense;
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(4)
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the Trustee has not complied with such request within
60 days after the receipt thereof and the offer of security
or indemnity; and
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(5)
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the holders of a majority in principal amount of the outstanding
Notes have not given the Trustee a direction inconsistent with
such request within such
60-day
period.
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Subject to certain restrictions, the holders of a majority in
principal amount of the outstanding Notes are given the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other holder of a Note or that
would involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is
continuing and is known to the Trustee, the Trustee must mail to
each holder of the Notes notice of the Default within
90 days after it occurs. Except in the case of a Default in
the payment of principal of or interest on any Note, the Trustee
may withhold notice if and so long as a committee of its trust
officers determines that withholding notice is not opposed to
the interest of the holders of the Notes. In addition, the
Company is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any Default that
occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action the
Company is taking or proposes to take in respect thereof.
Amendments
and Waivers
Subject to certain exceptions, the Indenture may be amended with
the consent of the holders of a majority in principal amount of
the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange for the Notes) and
any past default or compliance with any provisions may also be
waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding. However, without
the consent of each holder of an outstanding Note affected
thereby, an amendment or waiver may not, among other things:
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(1)
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reduce the amount of Notes whose holders must consent to an
amendment;
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(2)
|
reduce the rate of or extend the time for payment of interest on
any Note;
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(3)
|
reduce the principal of or extend the Stated Maturity of any
Note;
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(4)
|
reduce the premium payable upon the redemption of any Note or
change the time at which any Note may be redeemed as described
under Optional Redemption;
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(5)
|
make any Note payable in money other than that stated in the
Note;
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(6)
|
impair the right of any holder of the Notes to receive payment
of principal of and interest on such holders Notes on or
after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such
holders Notes;
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42
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(7)
|
make any change in the amendment provisions which require each
holders consent or in the waiver provisions;
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(8)
|
make any change to the subordination provisions of the Indenture
that would adversely affect the Noteholders; or
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(9)
|
make any change in any Subsidiary Guarantee that could adversely
affect such holder.
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Without the consent of any holder of the Notes, the Company, the
Subsidiary Guarantors and the Trustee may amend the Indenture to:
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(1)
|
cure any ambiguity, omission, defect or inconsistency;
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(2)
|
provide for the assumption by a successor corporation of the
obligations of the Company or the Subsidiary Guarantors under
the Indenture;
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(3)
|
provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Notes are
described in Section 163 (f)(2)(B) of the Code);
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(4)
|
make any change in the subordination provisions of the Indenture
that would limit or terminate the benefits available to any
holder of Senior Indebtedness of the Company or any Subsidiary
Guarantor thereunder;
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(5)
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add guarantees with respect to the Notes (including any
Subsidiary Guarantee);
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(6)
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secure the Notes;
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(7)
|
add to the covenants of the Company for the benefit of the
holders of the Notes or surrender any right or power conferred
upon the Company or any Subsidiary Guarantor;
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(8)
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make any change that does not adversely affect the rights of any
holder of the Notes; or
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(9)
|
comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture
Act.
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However, no amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of
any holder of Senior Indebtedness of the Company or a Subsidiary
Guarantor then outstanding unless the holders of such Senior
Indebtedness (or their Representative) consent to such change.
The consent of the holders of the Notes is not necessary under
the Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the
substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the
Company is required to mail to holders of the Notes a notice
briefly describing such amendment. However, the failure to give
such notice to all holders of the Notes, or any defect therein,
will not impair or affect the validity of the amendment.
Transfer
The Notes will be issued in registered form and will be
transferable only upon the surrender of the Notes being
transferred for registration of transfer. The Company may
require payment of a sum sufficient to
43
cover any tax, assessment or other governmental charge payable
in connection with certain transfers and exchanges.
Defeasance
The Company at any time may terminate all its obligations under
the Notes and the Indenture (legal defeasance),
except for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in
respect of the Notes. The Company at any time may terminate its
obligations under Change of Control and under the
covenants described under Certain Covenants
(other than the covenant described under Merger and
Consolidation), the operation of the cross acceleration
provision, the bankruptcy provisions with respect to Significant
Subsidiaries, the judgment default provision and the guarantee
default provision described under Defaults
above and the limitations contained in clauses (3) and
(4) under the first and third paragraphs of
Certain CovenantsMerger and
Consolidation above (covenant defeasance).
The Company may exercise its legal defeasance option
notwithstanding its prior exercise of its covenant defeasance
option. If the Company exercises its legal defeasance option,
payment of the Notes may not be accelerated because of an Event
of Default with respect thereto. If the Company exercises its
covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in clause
(4), (6), (7) (with respect only to Significant Subsidiaries) or
(8) under Defaults above or because of
the failure of the Company to comply with clause (3) or
(4) under the first or third paragraph of
Certain CovenantsMerger and
Consolidation above. If the Company exercises its legal
defeasance option or its covenant defeasance option, each
Subsidiary Guarantor will be released from all its obligations
with respect to its Subsidiary Guarantee.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the defeasance trust)
with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the Notes to redemption
or maturity, as the case may be, and must comply with certain
other conditions, including delivery to the Trustee of an
opinion of counsel to the effect that holders of the Notes will
not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amounts and in the
same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such opinion of counsel must be based
on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
Concerning
the Trustee
Wells Fargo Bank, National Association, is the Trustee under the
Indenture and has been appointed by the Company as Registrar and
Paying Agent with regard to the Notes.
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires
any conflicting interest it must either eliminate such conflict
within 90 days, apply to the SEC for permission to continue
or resign.
The Holders of a majority in principal amount of the outstanding
Notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available
to the Trustee, subject to certain exceptions. The Indenture
provides that if an Event of Default occurs (and is not cured),
the Trustee will be required, in the exercise of its power, to
use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers
under the Indenture at the request of any Holder of Notes,
unless such Holder shall
44
have furnished to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and
then only to the extent required by the terms of the Indenture.
Governing
Law
The Indenture will provide that it and the Notes will be
governed by, and construed in accordance with, the laws of the
State of New York.
Certain
Definitions
Additional Assets means:
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(1)
|
any property or assets (other than Indebtedness and Capital
Stock) in the Oil and Gas Business;
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(2)
|
the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock
by the Company or another Restricted Subsidiary; or
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(3)
|
Capital Stock constituting a non-controlling interest in any
Person that at such time is a Restricted Subsidiary;
|
provided, however, that any such Restricted
Subsidiary described in clauses (2) or (3) above is
primarily engaged in the Oil and Gas Business.
Adjusted Consolidated Net Tangible Assets or
ACNTA means (without duplication), as of the date of
determination:
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(1)
|
discounted future net revenue from proved crude oil and natural
gas reserves of the Company and its Restricted Subsidiaries
calculated in accordance with SEC guidelines before any state or
federal income taxes, as estimated in a reserve report prepared
as of the end of the Companys most recently completed
fiscal year, which reserve report is prepared or reviewed by
independent petroleum engineers, as increased by, as of the date
of determination, the discounted future net revenue of
(A) estimated proved crude oil and natural gas reserves of
the Company and its Restricted Subsidiaries attributable to
acquisitions consummated since the date of such year-end reserve
report, and (B) estimated crude oil and natural gas
reserves of the Company and its Restricted Subsidiaries
attributable to extensions, discoveries and other additions and
upward determinations of estimates of proved crude oil and
natural gas reserves (including previously estimated development
costs incurred during the period and the accretion of discount
since the prior year end) due to exploration, development or
exploitation, production or other activities which reserves were
not reflected in such year-end reserve report which would, in
the case of determinations made pursuant to clauses (A) and
(B), in accordance with standard industry practice, result in
such determinations, in each case calculated in accordance with
SEC guidelines (utilizing the prices utilized in such year-end
reserve report), and decreased by, as of the date of
determination, the discounted future net revenue attributable to
(C) estimated proved crude oil and natural gas reserves of
the Company and its Restricted Subsidiaries reflected in such
year-end reserve report produced or disposed of since the date
of such year-end reserve report and (D) reductions in the
estimated crude oil and natural gas reserves of the Company and
its Restricted Subsidiaries reflected in such year-end reserve
report since the date of such year-end reserve report
attributable to downward determinations of estimates of proved
crude oil and natural gas reserves due to exploration,
development or exploitation, production or other activities
conducted or otherwise occurring since the date of such year-
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45
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end reserve report which would, in the case of determinations
made pursuant to clauses (C) and (D), in accordance with
standard industry practice, result in such determinations, in
each case calculated in accordance with SEC guidelines
(utilizing the prices utilized in such year-end reserve report);
provided, however, that, in the case of each of
the determinations made pursuant to clauses (A) through
(D), such increases and decreases shall be as estimated by the
Companys engineers, except that if as a result of such
acquisitions, dispositions, discoveries, extensions or
revisions, there is a Material Change which is an increase, then
such increases and decreases in the discounted future net
revenue shall be confirmed in writing by an independent
petroleum engineer;
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(2)
|
the capitalized costs that are attributable to crude oil and
natural gas properties of the Company and its Restricted
Subsidiaries to which no proved crude oil and natural gas
reserves are attributed, based on the Companys books and
records as of a date no earlier than the date of the
Companys latest annual or quarterly financial statements;
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(3)
|
the Net Working Capital on a date no earlier than the date of
the Companys latest annual or quarterly financial
statements; and
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(4)
|
the greater of (I) the net book value on a date no earlier
than the date of the Companys latest annual or quarterly
financial statements and (II) the appraised value, as
estimated by independent appraisers, of other tangible assets of
the Company and its Restricted Subsidiaries as of a date no
earlier than the date of the Companys latest audited
financial statements (provided that the Company shall not be
required to obtain such an appraisal of such assets if no such
appraisal has been performed); minus
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(b)
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to the extent not otherwise taken into account in the
immediately preceding clause (a), the sum of:
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(1)
|
non-controlling interests;
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(2)
|
any natural gas balancing liabilities of the Company and its
Restricted Subsidiaries reflected in the Companys latest
audited financial statements;
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(3)
|
the discounted future net revenue, calculated in accordance with
SEC guidelines (utilizing the same prices utilized in the
Companys year-end reserve report), attributable to
reserves subject to participation interests, overriding royalty
interests or other interests of third parties, pursuant to
participation, partnership, vendor financing or other agreements
then in effect, or which otherwise are required to be delivered
to third parties;
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(4)
|
the discounted future net revenue, calculated in accordance with
SEC guidelines (utilizing the same prices utilized in the
Companys year-end reserve report), attributable to
reserves that are required to be delivered to third parties to
fully satisfy the obligations of the Company and its Restricted
Subsidiaries with respect to Volumetric Production Payments on
the schedules specified with respect thereto; and
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(5)
|
the discounted future net revenue, calculated in accordance with
SEC guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments that, based on the
estimates of production included in determining the discounted
future net revenue specified in the immediately preceding clause
(a)(1) (utilizing the same prices utilized in the Companys
year-end reserve report), would be necessary to satisfy fully
the obligations of the Company and its Restricted Subsidiaries
with respect to Dollar-Denominated Production Payments on the
schedules specified with respect thereto.
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46
Affiliate of any specified Person means any other
Person, directly or indirectly, controlling or controlled by or
under direct or indirect common control with such specified
Person. For the purposes of this definition, control
when used with respect to any Person means the power to direct
the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms controlling
and controlled have meanings correlative to the foregoing.
For purposes of the provisions described under
Certain CovenantsLimitation on Restricted
Payments, Certain CovenantsLimitation on
Affiliate Transactions and Certain
CovenantsLimitation on Sales of Assets and Subsidiary
Stock only, Affiliate shall also mean any
beneficial owner of Capital Stock representing 10% or more of
the total voting power of the Voting Stock (on a fully diluted
basis) of the Company or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner
pursuant to the first sentence hereof.
Applicable Premium means, with respect to a Note on
any date of redemption, the greater of:
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(1)
|
1.0% of the principal amount of such Note and
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|
(2)
|
the excess, if any, of (a) the present value as of such
date of redemption of (i) the redemption price of such Note
on ,
2016 (each such redemption price being described under
Optional Redemption) plus (ii) all required
interest payments due on such Note
through ,
2016 (excluding accrued but unpaid interest to the date of
redemption), computed using a discount rate equal to the
Treasury Rate as of such date of redemption plus 50 basis
points, over (b) the then-outstanding principal of such
Note.
|
Asset Disposition means any sale, lease, transfer or
other disposition (or series of related sales, leases, transfers
or dispositions) by the Company or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this
definition as a disposition), of:
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(1)
|
any shares of Capital Stock of a Restricted Subsidiary (other
than directors qualifying shares or shares required by
applicable law to be held by a Person other than the Company or
a Restricted Subsidiary);
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(2)
|
all or substantially all the assets of any division or line of
business of the Company or any Restricted Subsidiary; or
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(3)
|
any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or
such Restricted Subsidiary.
|
Notwithstanding the foregoing, none of the following shall be
deemed to be an Asset Disposition:
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(1)
|
a disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary;
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(2)
|
for purposes of the covenant described under Certain
CovenantsLimitation on Sales of Assets and Subsidiary
Stock only, a disposition that constitutes a Restricted
Payment permitted by the covenant described under
Certain CovenantsLimitation on Restricted
Payments, a disposition of all or substantially all the
assets of the Company in compliance with Certain
CovenantsMerger and Consolidation or a disposition
that constitutes a Change of Control pursuant to clause (3)
of the definition thereof;
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(3)
|
the sale or transfer (whether or not in the ordinary course of
business) of crude oil and natural gas properties or direct or
indirect interests in real property; provided,
however, that at the time of such sale or transfer such
properties do not have associated with them any proved reserves;
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47
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(4)
|
the abandonment, farm-out, lease or sublease of developed or
undeveloped crude oil and natural gas properties;
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(5)
|
the trade or exchange by the Company or any Restricted
Subsidiary of any crude oil and natural gas property owned or
held by the Company or such Restricted Subsidiary for any crude
oil and natural gas property owned or held by another Person;
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(6)
|
the sale or transfer of hydrocarbons or other mineral products
or surplus or obsolete equipment; or
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(7)
|
a single transaction or series of related transactions that
involve the disposition of assets with a fair market value of
less than $20.0 million;
|
in each case in the ordinary course of business.
Attributable Debt in respect of a Sale/Leaseback
Transaction means, as at the time of determination, the present
value (discounted at the interest rate implicit in the
Sale/Leaseback Transaction, compounded annually) of the total
obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been
extended).
Average Life means, as of the date of determination,
with respect to any Indebtedness or Preferred Stock, the
quotient obtained by dividing
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(1)
|
the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled
principal payment of such Indebtedness or redemption or similar
payment with respect to such Preferred Stock multiplied by the
amount of such payment by
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(2)
|
the sum of all such payments.
|
Board of Directors means the Board of Directors of
the Company or any committee thereof duly authorized to act on
behalf of such Board.
Business Day means each day which is not a Legal
Holiday (as defined in the applicable Indenture).
Capital Lease Obligation means an obligation that is
required to be classified and accounted for as a capital lease
for financial reporting purposes in accordance with GAAP, and
the amount of Indebtedness represented by such obligation shall
be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
Capital Stock of any Person means any and all
shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests (however
designated) in equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such
equity.
Code means the Internal Revenue Code of 1986, as
amended.
Consolidated Coverage Ratio as of any date of
determination means the ratio of
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(x)
|
the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days
prior to the date of such determination to
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48
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(y)
|
Consolidated Interest Expense for such four fiscal quarters;
provided, however, that:
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(1)
|
if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro
forma basis to such Indebtedness as if such Indebtedness had
been Incurred on the first day of such period and the discharge
of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness
as if such discharge had occurred on the first day of such
period;
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(2)
|
if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of such period or if any Indebtedness is to
be repaid, repurchased, defeased or otherwise discharged on the
date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio, EBITDA and Consolidated Interest
Expense for such period shall be calculated on a pro forma basis
as if such discharge had occurred on the first day of such
period and as if the Company or such Restricted Subsidiary has
not earned the interest income actually earned during such
period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such
Indebtedness;
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(3)
|
if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition
(other than an Asset Disposition involving assets having a fair
market value of less than the greater of two and one-half
percent (2.5%) of Adjusted Consolidated Net Tangible Assets as
of the end of the Companys then most recently completed
fiscal year and $3.0 million), then EBITDA for such period
shall be reduced by an amount equal to EBITDA (if positive)
directly attributable to the assets which are the subject of
such Asset Disposition for such period, or increased by an
amount equal to EBITDA (if negative), directly attributable
thereto for such period and Consolidated Interest Expense for
such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after
such sale);
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(4)
|
if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made
an Investment in any Restricted Subsidiary (or any person which
becomes a Restricted Subsidiary) or an acquisition (including by
way of lease) of assets, including any acquisition of assets
occurring in connection with a transaction requiring a
calculation to be made hereunder, EBITDA and Consolidated
Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred on
the first day of such period; and
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(5)
|
if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with
or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Asset Disposition,
any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (3) or (4) above if
made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto as if
such Asset Disposition, Investment or acquisition occurred on
the first day of such period.
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49
For purposes of this definition, whenever pro forma effect is to
be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or
accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect,
the interest on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any
Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term in excess of
12 months).
Consolidated Current Liabilities as of the date of
determination means the aggregate amount of liabilities of the
Company and its consolidated Restricted Subsidiaries which would
properly be classified as current liabilities (including taxes
accrued as estimated), on a consolidated balance sheet of the
Company and its Restricted Subsidiaries at such date, after
eliminating:
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(1)
|
all intercompany items between the Company and any Restricted
Subsidiary; and
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(2)
|
all current maturities of long-term Indebtedness, all as
determined in accordance with GAAP consistently applied.
|
Consolidated Interest Expense means, for any period,
the total interest expense of the Company and its Restricted
Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, plus, to the extent not included in
such total interest expense, and to the extent incurred by the
Company or its Restricted Subsidiaries, without duplication:
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(1)
|
interest expense attributable to Capital Lease Obligations and
imputed interest with respect to Attributable Debt;
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(2)
|
capitalized interest;
|
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(3)
|
non-cash interest expense;
|
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(4)
|
commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers acceptance
financing;
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(5)
|
net costs (including amortization of fees and up-front payments)
associated with interest rate caps and other interest rate and
currency options that, at the time entered into, resulted in the
Company and its Restricted Subsidiaries being net payees as to
future payouts under such caps or options, and interest rate and
currency swaps and forwards for which the Company or any of its
Restricted Subsidiaries has paid a premium;
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(6)
|
dividends (excluding dividends paid in shares of Capital Stock
which is not Disqualified Stock) in respect of all Disqualified
Stock held by Persons other than the Company or a Wholly Owned
Subsidiary; and
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(7)
|
interest accruing on any Indebtedness of any other Person to the
extent such Indebtedness is Guaranteed by the Company or any
Restricted Subsidiary or secured by a Lien on assets of the
Company or any Restricted Subsidiary to the extent such
Indebtedness constitutes Indebtedness of the Company or any
Restricted Subsidiary (whether or not such Guarantee or Lien is
called upon); provided, however,
Consolidated Interest Expense shall not include any
(x) amortization of costs relating to original debt
issuances other than the amortization of debt discount related
to the issuance of zero coupon securities or other securities
with an original issue price of not more than 90% of the
principal thereof, (y) Consolidated Interest Expense with
respect to any Indebtedness Incurred pursuant to clause (b)
(8) of the covenant described under Certain
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50
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CovenantsLimitation on Indebtedness and
(z) noncash interest expense Incurred in connection with
interest rate caps and other interest rate and currency options
that, at the time entered into, resulted in the Company and its
Restricted Subsidiaries being either neutral or net payors as to
future payouts under such caps or options.
|
Consolidated Net Income means, for any period, the
net income of the Company and its Subsidiaries determined on a
consolidated basis in accordance with GAAP; provided,
however, that there shall not be included in such
Consolidated Net Income:
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(1)
|
any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:
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(A)
|
subject to the exclusion contained in clause (4) below, the
Companys equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such
Person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the
case of a dividend or other distribution paid to a Restricted
Subsidiary, to the limitations contained in clause (3)
below); and
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(B)
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the Companys equity in a net loss of any such Person for
such period shall be included in determining such Consolidated
Net Income;
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(2)
|
any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any
period prior to the date of such acquisition;
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(3)
|
any net income of any Restricted Subsidiary (other than a
Subsidiary Guarantor) if such Restricted Subsidiary is subject
to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that:
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(A)
|
subject to the exclusion contained in clause (4) below, the
Companys equity in the net income of any such Restricted
Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause); and
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(B)
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the Companys equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income;
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(4)
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any gain or loss realized upon the sale or other disposition of
any assets of the Company or its Subsidiaries (including
pursuant to any
sale-and-leaseback
arrangement) which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon
the sale or other disposition of any Capital Stock of any Person;
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(5)
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extraordinary gains or losses;
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(6)
|
any non-cash compensation expense realized for grants of
performance shares, stock options or stock awards to officers,
directors and employees of the Company or any of its Restricted
Subsidiaries;
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51
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(7)
|
any write-downs of noncurrent assets; provided,
however, that any ceiling limitation write-downs under
SEC guidelines shall be treated as capitalized costs, as if such
write-downs had not occurred; and
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(8)
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the cumulative effect of a change in accounting principles.
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Notwithstanding the foregoing, for the purposes of the covenant
described under Certain CovenantsLimitation on
Restricted Payments only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the
amount of Restricted Payments permitted under such covenant
pursuant to clause (a)(3)(E) thereof.
Consolidated Net Tangible Assets, as of any date of
determination, means the total amount of assets (less
accumulated depreciation and amortization, allowances for
doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a balance sheet
of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, and after giving
effect to purchase accounting and after deducting therefrom
Consolidated Current Liabilities and, to the extent otherwise
included, the amounts of:
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(1)
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non-controlling interests in Restricted Subsidiaries held by
Persons other than the Company or a Restricted Subsidiary;
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(2)
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excess of cost over fair value of assets of businesses acquired,
as determined in good faith by the Board of Directors;
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(3)
|
any revaluation or other
write-up in
book value of assets subsequent to the Issue Date as a result of
a change in the method of valuation in accordance with GAAP
consistently applied;
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(4)
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unamortized debt discount and expenses and other unamortized
deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental
expenses and other intangible items;
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(5)
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treasury stock;
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(6)
|
cash set apart and held in a sinking or other analogous fund
established for the purpose of redemption or other retirement of
Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities; and
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(7)
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Investments in and assets of Unrestricted Subsidiaries.
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Consolidated Net Worth means the total of the
amounts shown on the balance sheet of the Company and its
Subsidiaries, determined on a consolidated basis in accordance
with GAAP, as of the end of the most recent fiscal quarter of
the Company ending at least 45 days prior to the taking of
any action for the purpose of which the determination is being
made, as the sum of:
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(1)
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the par or stated value of all outstanding Capital Stock of the
Company, plus
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(2)
|
paid-in capital or capital surplus relating to such Capital
Stock, plus
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(3)
|
any retained earnings or earned surplus
|
less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
52
Credit Agreement means the Credit Agreement among
the Company as Borrower and JPMorgan Chase Bank, N.A. as
Administrative Agent and certain other financial institutions,
dated March 9, 2010, as amended (or any successor thereto
or replacement thereof), including any related notes,
guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended,
restated, modified, renewed, refunded, replaced, refinanced or
increased in whole or in part from time to time.
Credit Facilities means, with respect to the Company
or any Restricted Subsidiary, one or more debt facilities
(including the Credit Agreement) or commercial paper facilities
with banks or other institutional lenders providing for
revolving credit loans, term loans, production payments,
receivables financing (including through the sale of receivables
to such lenders or to special purpose entities formed to borrow
from such lenders against such receivables) or letters of
credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time
to time.
Currency Agreement means in respect of a Person any
foreign exchange contract, currency swap agreement or other
similar agreement to which such Person is a party or a
beneficiary.
Default means any event which is, or after notice or
passage of time or both would be, an Event of Default.
Designated Senior Indebtedness in respect of a
Person means:
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(1)
|
all the obligations of such Person under any Credit Facilities
(including the Credit Agreement); and
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(2)
|
any other Senior Indebtedness of such Person which, at the date
of determination, has an aggregate principal amount outstanding
of, or under which, at the date of determination, the holders
thereof are committed to lend up to, at least $20.0 million
and is specifically designated by such Person in the instrument
evidencing or governing such Senior Indebtedness as
Designated Senior Indebtedness for purposes of the
Indenture.
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Disqualified Stock means, with respect to any
Person, any Capital Stock that by its terms (or by the terms of
any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event,
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(1)
|
matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
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(2)
|
is convertible or exchangeable for Indebtedness or Disqualified
Stock; or
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(3)
|
is redeemable, in whole or in part, at the option of the holder
thereof;
|
in each case described in the immediately preceding clauses (1),
(2) or (3), on or prior to the Stated Maturity of the
Notes; provided, however, that any Capital Stock
that would not constitute Disqualified Stock but for provisions
thereof giving holders thereof the right to require such Person
to purchase or redeem such Capital Stock upon the occurrence of
an asset sale or change of control
occurring prior to the Stated Maturity of the Notes shall not
constitute Disqualified Stock if:
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(x)
|
the asset sale or change of control
provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the
provisions described under Certain
CovenantsLimitation on Sales of Assets and Subsidiary
Stock and Certain CovenantsChange of
Control; and
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53
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(y)
|
any such requirement only becomes operative after compliance
with such corresponding terms applicable to the Notes, including
the purchase of any Notes tendered pursuant thereto.
|
The amount of any Disqualified Stock that does not have a fixed
redemption, repayment or repurchase price will be calculated in
accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were redeemed, repaid or repurchased on any
date on which the amount of such Disqualified Stock is to be
determined pursuant to the Indenture; provided,
however, that if such Disqualified Stock could not be
required to be redeemed, repaid or repurchased at the time of
such determination, the redemption, repayment or repurchase
price will be the book value of such Disqualified Stock as
reflected in the most recent financial statements of such Person.
Dollar-Denominated Production Payments means
production payment obligations recorded as liabilities in
accordance with GAAP, together with all undertakings and
obligations in connection therewith.
EBITDA for any period means the sum of Consolidated
Net Income, plus Consolidated Interest Expense plus the
following to the extent deducted in calculating such
Consolidated Net Income:
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(1)
|
provision for taxes based on income or profits;
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(2)
|
depletion and depreciation expense;
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(3)
|
amortization expense;
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(4)
|
exploration expense (if applicable to the Company after the
Issue Date);
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(5)
|
unrealized foreign exchange losses; and
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(6)
|
all other non-cash charges, including non-cash charges taken
pursuant to the Derivatives and Hedging topic of the
FASC (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was
paid in a prior period except such amounts as the Company
determines in good faith are nonrecurring);
|
and less, to the extent included in calculating such
Consolidated Net Income and in excess of any costs or expenses
attributable thereto and deducted in calculating such
Consolidated Net Income, the sum of:
|
|
|
|
(1)
|
the amount of deferred revenues that are amortized during such
period and are attributable to reserves that are subject to
Volumetric Production Payments;
|
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|
(2)
|
amounts recorded in accordance with GAAP as repayments of
principal and interest pursuant to Dollar-Denominated Production
Payments;
|
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|
(3)
|
unrealized foreign exchange gains; and
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|
(4)
|
all other non-cash unrealized gains, including non-cash
unrealized gains taken pursuant to the Derivatives and
Hedging topic of the FASC.
|
Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depletion, depreciation,
amortization and exploration and other non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same
proportion) that the net income of such Restricted Subsidiary
was included in calculating Consolidated Net Income and only if
a corresponding amount would be permitted at the date of
determination to be dividended
54
to the Company by such Restricted Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable
to such Restricted Subsidiary or its stockholders.
Encore means Encore Acquisition Company, a Delaware
corporation.
Exchange Act means the Securities Exchange Act of
1934, as amended.
FASC means Financial Accounting Standards
Codification Issued by the Financial Accounting Standards Board.
GAAP means generally accepted accounting principles
in the United States of America as in effect on the Issue Date,
including those set forth in:
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(1)
|
the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants;
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(2)
|
statements and pronouncements of the Financial Accounting
Standards Board;
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|
(3)
|
such other statements by such other entity as approved by a
significant segment of the accounting profession; and
|
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(4)
|
the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to
Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the SEC.
|
Government Securities means securities that are:
|
|
|
|
(1)
|
direct obligations of the United States of America for the
timely payment of which its full faith and credit is
pledged; or
|
|
|
(2)
|
obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America,
|
which, in either case, are not callable or redeemable at the
option of the issuers thereof, and shall also include a
depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act), as custodian with
respect to any such Government Securities or a specific payment
of principal of or interest on any such Government Securities
held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by
law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the
Government Securities or the specific payment of principal of or
interest on the Government Securities evidenced by such
depository receipt.
Guarantee means, without duplication, any
obligation, contingent or otherwise, of any Person directly or
indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such
Person:
|
|
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|
(1)
|
to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness of such Person (whether arising
by virtue of partnership arrangements, or by agreements to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay
or to maintain financial statement conditions or
otherwise); or
|
55
|
|
|
|
(2)
|
entered into for the purpose of assuring in any other manner the
obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole
or in part);
|
provided, however, that the term
Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The
term Guarantee used as a verb has a corresponding
meaning. The term Guarantor shall mean any Person
Guaranteeing any obligation.
Guarantee Agreement means a supplemental indenture,
in a form satisfactory to the Trustee, pursuant to which a
Subsidiary Guarantor or any other Person becomes subject to the
applicable terms and conditions of the Indenture.
Hedging Obligations of any Person means the
obligations of such Person pursuant to any Oil and Gas Hedging
Contract, Interest Rate Agreement or Currency Agreement.
Holder or Noteholder means the Person in
whose name a Note is registered on the Registrars books.
Incur means issue, assume, Guarantee, incur or
otherwise become liable for; provided, however,
that any Indebtedness or Capital Stock of a Person existing at
the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary.
The term Incurrence when used as a noun shall have a
correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall not be
deemed the Incurrence of Indebtedness.
Indebtedness means, with respect to any Person on
any date of determination (without duplication):
|
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|
(1)
|
the principal of and premium (if any) in respect of
(A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person
is responsible or liable;
|
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|
(2)
|
all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions
entered into by such Person;
|
|
|
(3)
|
all obligations of such Person issued or assumed as the deferred
purchase price of property (which purchase price is due more
than six months after the date of taking delivery of title to
such property), including all obligations of such Person for the
deferred purchase price of property under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business);
|
|
|
(4)
|
all obligations of such Person for the reimbursement of any
obligor on any letter of credit, bankers acceptance or
similar credit transaction (other than obligations with respect
to letters of credit securing obligations (other than
obligations described in clauses (1) through
(3) above) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following
receipt by such Person of a demand for reimbursement following
payment on the letter of credit);
|
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|
(5)
|
the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified
Stock (but excluding any accrued dividends);
|
|
|
(6)
|
all obligations of such Person relating to any Production
Payment;
|
56
|
|
|
|
(7)
|
all obligations of the type referred to in clauses (1)
through (6) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor,
guarantor or otherwise, including by means of any Guarantee
(including, with respect to any Production Payment, any
warranties or guarantees of production or payment by such Person
with respect to such Production Payment but excluding other
contractual obligations of such Person with respect to such
Production Payment); and
|
|
|
(8)
|
all obligations of the type referred to in clauses (1)
through (7) of other Persons secured by any Lien on any
property or asset of such first-mentioned Person (whether or not
such obligation is assumed by such first-mentioned Person), the
amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation
so secured.
|
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability,
assuming the contingency giving rise to the obligation were to
have occurred on such date, of any Guarantees outstanding at
such date.
None of the following shall constitute Indebtedness:
|
|
|
|
(1)
|
indebtedness arising from agreements providing for
indemnification or adjustment of purchase price or from
guarantees securing any obligations of the Company or any of its
Subsidiaries pursuant to such agreements, incurred or assumed in
connection with the disposition of any business, assets or
Subsidiary of the Company, other than guarantees or similar
credit support by the Company or any of its Subsidiaries of
Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Subsidiary for the purpose of
financing such acquisition;
|
|
|
(2)
|
any trade payables or other similar liabilities to trade
creditors and other accrued current liabilities incurred in the
ordinary course of business as the deferred purchase price of
property;
|
|
|
(3)
|
any liability for Federal, state, local or other taxes owed or
owing by such Person;
|
|
|
(4)
|
amounts due in the ordinary course of business to other royalty
and working interest owners;
|
|
|
(5)
|
obligations arising from guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers incurred in the
ordinary course of business;
|
|
|
(6)
|
obligations (other than express Guarantees of indebtedness for
borrowed money) in respect of Indebtedness of other Persons
arising in connection with (A) the sale or discount of
accounts receivable, (B) trade acceptances and
(C) endorsements of instruments for deposit in the ordinary
course of business;
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|
(7)
|
obligations in respect of performance bonds provided by the
Company or its Subsidiaries in the ordinary course of business
and refinancing thereof;
|
|
|
(8)
|
obligations arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
drawn against insufficient funds in the ordinary course of
business; provided, however that such obligation
is extinguished within two Business Days of its Incurrence;
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|
(9)
|
obligations in respect of any obligations under workers
compensation laws and similar legislation;
|
|
|
(10)
|
any obligation in respect of any Oil and Gas Hedging
Contract; and
|
|
|
(11)
|
any unrealized losses or charges in respect of Hedging
Obligations (including those resulting from the application of
the Derivatives and Hedging topic of the FASC).
|
57
Interest Rate Agreement means any interest rate swap
agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect the Company or any
Restricted Subsidiary against fluctuations in interest rates.
Investment in any Person means any direct or
indirect advance, loan (other than advances to customers or
joint interest partners or drilling partnerships sponsored by
the Company or any Restricted Subsidiary in the ordinary course
of business that are recorded as accounts receivable on the
balance sheet of the lender) or other extensions of credit
(including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services
for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. Except as otherwise provided
for herein, the amount of an Investment shall be its fair value
at the time the Investment is made and without giving effect to
subsequent changes in value.
For purposes of the definition of Unrestricted
Subsidiary, the definition of Restricted
Payment and the covenant described under
Certain CovenantsLimitation on Restricted
Payments:
|
|
|
|
(1)
|
Investment shall include the portion (proportionate
to the Companys equity interest in such Subsidiary) of the
fair market value of the net assets of any Subsidiary of the
Company at the time that such Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that
upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a
permanent Investment in an Unrestricted Subsidiary
equal to an amount (if positive) equal to (x) the
Companys Investment in such Subsidiary at the
time of such redesignation less (y) the portion
(proportionate to the Companys equity interest in such
Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and
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|
|
(2)
|
any property transferred to or from an Unrestricted Subsidiary
shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board
of Directors.
|
Issue Date means the date on which the Notes are
originally issued.
Lien means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof).
Limited Recourse Production Payments means, with
respect to any Production Payments, Indebtedness, the terms of
which limit the liability of the Company and its Restricted
Subsidiaries solely to the hydrocarbons covered by such
Production Payments; provided, however, that no
default with respect to such Indebtedness would permit any
holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
Material Change means an increase or decrease
(excluding changes that result solely from changes in prices and
changes resulting from the Incurrence of previously estimated
future development costs) of more than 25% during a fiscal
quarter in the discounted future net revenues from proved crude
oil and natural gas reserves of the Company and its Restricted
Subsidiaries, calculated in accordance with clause (a)(1) of the
definition of Adjusted Consolidated Net Tangible Assets;
provided, however, that the following will be
excluded from the calculation of Material Change:
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|
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|
(1)
|
any acquisitions during the fiscal quarter of oil and gas
reserves that have been estimated by independent petroleum
engineers and with respect to which a report or reports of such
engineers exist; and
|
58
|
|
|
|
(2)
|
any disposition of properties existing at the beginning of such
fiscal quarter that have been disposed of in compliance with the
covenant described under Certain
CovenantsLimitation on Sales of Assets and Subsidiary
Stock.
|
Moodys means Moodys Investors
Service, Inc. and its successors.
Net Available Cash from an Asset Disposition means
cash payments received therefrom (including any cash payments
received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and
when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness
or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of:
|
|
|
|
(1)
|
all legal, title and recording tax expenses, commissions and
other fees (including financial and other advisory fees) and
expenses incurred, and all Federal, state, provincial, foreign
and local taxes required to be accrued as a liability under
GAAP, as a consequence of such Asset Disposition;
|
|
|
(2)
|
all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind
with respect to such assets, or which must by its terms, or in
order to obtain a necessary consent to such Asset Disposition,
or by applicable law, be repaid out of the proceeds from such
Asset Disposition;
|
|
|
(3)
|
all distributions and other payments required to be made to
non-controlling interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition; and
|
|
|
(4)
|
the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities
associated with the property or other assets disposed in such
Asset Disposition and retained by the Company or any Restricted
Subsidiary after such Asset Disposition.
|
Net Cash Proceeds, with respect to any issuance or
sale of Capital Stock, means the cash proceeds of such issuance
or sale net of attorneys fees, accountants fees,
underwriters or placement agents fees, discounts or
commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
Net Present Value means, with respect to any proved
hydrocarbon reserves, the discounted future net cash flows
associated with such reserves, determined in accordance with the
rules and regulations (including interpretations thereof) of the
SEC in effect on the Issue Date.
Net Working Capital means:
|
|
|
|
(1)
|
all current assets of the Company and its Restricted
Subsidiaries; minus
|
|
|
(2)
|
all current liabilities of the Company and its Restricted
Subsidiaries, except current liabilities included in
Indebtedness;
|
determined in accordance with GAAP.
Non-recourse Purchase Money Indebtedness means
Indebtedness (other than Capital Lease Obligations) of the
Company or any Subsidiary Guarantor incurred in connection with
the acquisition by the Company or such Subsidiary Guarantor in
the ordinary course of business of fixed assets used in the Oil
and
59
Gas Business (including office buildings and other real property
used by the Company or such Subsidiary Guarantor in conducting
its operations) with respect to which:
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(1)
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the holders of such Indebtedness agree that they will look
solely to the fixed assets so acquired which secure such
Indebtedness, and neither the Company nor any Restricted
Subsidiary (a) is directly or indirectly liable for such
Indebtedness or (b) provides credit support, including any
undertaking, Guarantee, agreement or instrument that would
constitute Indebtedness (other than the grant of a Lien on such
acquired fixed assets); and
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(2)
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no default or event of default with respect to such Indebtedness
would cause, or permit (after notice or passage of time or
otherwise), any holder of any other Indebtedness of the Company
or a Subsidiary Guarantor to declare a default or event of
default on such other Indebtedness or cause the payment,
repurchase, redemption, defeasance or other acquisition or
retirement for value thereof to be accelerated or payable prior
to any scheduled principal payment, scheduled sinking fund
payment or maturity.
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Officer means the Chairman of the Board, the
President, any Vice Chairman of the Board, Vice President, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Assistant Secretary of a
Person.
Oil and Gas Business means the business of the
exploration for, and exploitation, development, acquisition,
production, processing (but not refining), marketing, storage
and transportation of, hydrocarbons, and other related energy
and natural resource businesses (including oil and gas services
businesses related to the foregoing).
Oil and Gas Hedging Contract means any oil and gas
purchase or hedging agreement, and other agreement or
arrangement, in each case, that is designed to provide
protection against oil and gas price fluctuations.
Oil and Gas Liens means:
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(1)
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Liens on any specific property or any interest therein,
construction thereon or improvement thereto to secure all or any
part of the costs incurred for surveying, exploration, drilling,
extraction, development, operation, production, construction,
alteration, repair or improvement of, in, under or on such
property and the plugging and abandonment of wells located
thereon (it being understood that, in the case of oil and gas
producing properties, or any interest therein, costs incurred
for development shall include costs incurred for all
facilities relating to such properties or to projects, ventures
or other arrangements of which such properties form a part or
which relate to such properties or interests);
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(2)
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Liens on an oil or gas producing property to secure obligations
Incurred or guarantees of obligations Incurred in connection
with or necessarily incidental to commitments for the purchase
or sale of, or the transportation or distribution of, the
products derived from such property;
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(3)
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Liens arising under partnership agreements, oil and gas leases,
overriding royalty agreements, net profits agreements,
production payment agreements, royalty trust agreements,
incentive compensation programs on terms that are reasonably
customary in the Oil and Gas Business for geologists,
geophysicists and other providers of technical services to the
Company or a Restricted Subsidiary, master limited partnership
agreements, farm-out agreements, farm-in agreements, division
orders, contracts for the sale, purchase, exchange,
transportation, gathering or processing of oil, gas or other
hydrocarbons, unitizations and pooling designations,
declarations, orders and agreements, development agreements,
operating agreements, production sales contracts, area of mutual
interest agreements, gas balancing or deferred production
agreements, injection,
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repressuring and recycling agreements, salt water or other
disposal agreements, seismic or geophysical permits or
agreements, and other agreements which are customary in the Oil
and Gas Business; provided, however, that in all
instances such Liens are limited to the assets that are the
subject of the relevant agreement, program, order or contract;
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(4)
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Liens arising in connection with Production Payments; and
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(5)
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Liens on pipelines or pipeline facilities that arise by
operation of law.
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Permitted Business Investment means any investment
made in the ordinary course of, and of a nature that is or shall
have become customary in, the Oil and Gas Business including
investments or expenditures for actively exploiting, exploring
for, acquiring, developing, producing, processing, gathering,
marketing or transporting oil and gas through agreements,
transactions, interests or arrangements which permit one to
share risks or costs, comply with regulatory requirements
regarding local ownership or satisfy other objectives
customarily achieved through the conduct of Oil and Gas Business
jointly with third parties, including:
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(1)
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ownership interests in oil and gas properties, processing
facilities, gathering systems, pipelines or ancillary real
property interests; and
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(2)
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Investments in the form of or pursuant to operating agreements,
processing agreements, farm-in agreements, farm-out agreements,
development agreements, area of mutual interest agreements,
unitization agreements, pooling agreements, joint bidding
agreements, service contracts, joint venture agreements,
partnership agreements (whether general or limited),
subscription agreements, stock purchase agreements and other
similar agreements (including for limited liability companies)
with third parties, excluding, however, Investments in
corporations other than Restricted Subsidiaries.
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Permitted Investment means an Investment by the
Company or any Restricted Subsidiary in:
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(1)
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a Restricted Subsidiary or a Person that will, upon the making
of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of
such Restricted Subsidiary is an Oil and Gas Business;
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(2)
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another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; provided, however, that
such Persons primary business is an Oil and Gas Business;
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(3)
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Temporary Cash Investments;
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(4)
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receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade
terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any
such Restricted Subsidiary deems reasonable under the
circumstances;
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(5)
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payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated
as expenses for accounting purposes and that are made in the
ordinary course of business;
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(6)
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loans or advances to employees made in the ordinary course of
business;
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61
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(7)
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stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of
judgments;
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(8)
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any Person to the extent such Investment represents the noncash
portion of the consideration received for an Asset Disposition
as permitted pursuant to the covenant described under
Certain CovenantsLimitation on Sales of Assets
and Subsidiary Stock;
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(9)
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Permitted Business Investments;
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(10)
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Investments intended to promote the Companys strategic
objectives in the Oil and Gas Business in an aggregate amount
not to exceed 5.0% of ACNTA (determined as of the date of the
making of any such Investment) at any one time outstanding
(which Investments shall be deemed to be no longer outstanding
only upon and to the extent of the return of capital
thereof); and
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(11)
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Investments made pursuant to Hedging Obligations of the Company
and the Restricted Subsidiaries.
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Permitted Liens means, with respect to any Person:
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(1)
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Liens existing as of the Issue Date;
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(2)
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Liens securing the Notes, any Subsidiary Guarantee and other
obligations arising under the Indenture;
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(3)
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any Lien existing on any property of a Person at the time such
Person is merged or consolidated with or into the Company or a
Restricted Subsidiary or becomes a Restricted Subsidiary (and
not incurred in anticipation of or in connection with such
transaction); provided that such Liens are not extended
to other property of the Company or the Restricted Subsidiaries;
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(4)
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any Lien existing on any property at the time of the acquisition
thereof (and not incurred in anticipation of or in connection
with such transaction); provided that such Liens are not
extended to other property of the Company or the Restricted
Subsidiaries;
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(5)
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any Lien incurred in the ordinary course of business incidental
to the conduct of the business of the Company or the Restricted
Subsidiaries or the ownership of their property (including
(i) easements, rights of way and similar encumbrances,
(ii) rights or title of lessors under leases (other than
Capital Lease Obligations), (iii) rights of collecting
banks having rights of setoff, revocation, refund or chargeback
with respect to money or instruments of the Company or the
Restricted Subsidiaries on deposit with or in the possession of
such banks, (iv) Liens imposed by law, including Liens
under workers compensation or similar legislation and
mechanics, carriers, warehousemens,
materialmens, suppliers and vendors Liens,
(v) Liens incurred to secure performance of obligations
with respect to statutory or regulatory requirements,
performance or
return-of-money
bonds, surety bonds or other obligations of a like nature and
incurred in a manner consistent with industry practice and
(vi) Oil and Gas Liens, in each case which are not incurred
in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price
of property (other than trade accounts payable arising in the
ordinary course of business));
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(6)
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Liens for taxes, assessments and governmental charges not yet
due or the validity of which are being contested in good faith
by appropriate proceedings, promptly instituted and diligently
conducted, and for which adequate reserves have been established
to the extent required by GAAP as in effect at such time;
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62
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(7)
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Liens incurred to secure appeal bonds and judgment and
attachment Liens, in each case in connection with litigation or
legal proceedings that are being contested in good faith by
appropriate proceedings, so long as reserves have been
established to the extent required by GAAP as in effect at such
time and so long as such Liens do not encumber assets by an
aggregate amount (together with the amount of any unstayed
judgments against the Company or any Restricted Subsidiary but
excluding any such Liens to the extent securing insured or
indemnified judgments or orders) in excess of $10.0 million;
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(8)
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Liens securing Hedging Obligations of the Company and its
Restricted Subsidiaries;
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(9)
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Liens securing purchase money Indebtedness or Capital Lease
Obligations; provided that such Liens attach only to the
property acquired with the proceeds of such purchase money
Indebtedness or the property which is the subject of such
Capital Lease Obligations;
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(10)
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Liens securing Non-recourse Purchase Money Indebtedness granted
in connection with the acquisition by the Company or any
Restricted Subsidiary in the ordinary course of business of
fixed assets used in the Oil and Gas Business (including the
office buildings and other real property used by the Company or
such Restricted Subsidiary in conducting its operations);
provided that (i) such Liens attach only to the
fixed assets acquired with the proceeds of such Non-recourse
Purchase Money Indebtedness; and (ii) such Non-recourse
Purchase Money Indebtedness is not in excess of the purchase
price of such fixed assets;
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(11)
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Liens resulting from the deposit of funds or evidences of
Indebtedness in trust for the purpose of decreasing or legally
defeasing Indebtedness of the Company or any Restricted
Subsidiary so long as such deposit of funds is permitted by the
provisions of the Indenture described under Certain
CovenantsLimitation on Restricted Payments;
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(12)
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Liens resulting from a pledge of Capital Stock of a Person that
is not a Restricted Subsidiary to secure obligations of such
Person and any refinancing thereof;
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(13)
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Liens to secure any permitted extension, renewal, refinancing,
refunding or exchange (or successive extensions, renewals,
refinancing, refunding or exchanges), in whole or in part, of or
for any Indebtedness secured by Liens referred to in clauses
(1), (2), (3), (4), (9) and (10) above;
provided, however, that (i) such new Lien
shall be limited to all or part of the same property (including
future improvements thereon and accessions thereto) subject to
the original Lien and (ii) the Indebtedness secured by such
Lien at such time is not increased to any amount greater than
the sum of (A) the outstanding principal amount or, if
greater, the committed amount of the Indebtedness secured by
such original Lien immediately prior to such extension, renewal,
refinancing, refunding or exchange and (B) an amount
necessary to pay any fees and expenses, including premiums,
related to such refinancing, refunding, extension, renewal or
replacement; and
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(14)
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Liens in favor of the Company or a Restricted Subsidiary.
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Notwithstanding anything in this definition to the contrary, the
term Permitted Liens shall not include Liens
resulting from the creation, incurrence, issuance, assumption or
Guarantee of any Production Payments other than:
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(1)
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any such Liens existing as of the Issue Date;
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(2)
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Production Payments in connection with the acquisition of any
property after the Issue Date; provided that any such
Lien created in connection therewith is created, incurred,
issued, assumed
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63
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or Guaranteed in connection with the financing of, and within
60 days after the acquisition of, such property;
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(3)
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Production Payments other than those described in
clauses (1) and (2), to the extent such Production Payments
constitute Asset Dispositions made pursuant to and in compliance
with the provisions of the Indenture described under
Certain CovenantsLimitation on Sales of Assets and
Subsidiary Stock; and
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(4)
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incentive compensation programs for geologists, geophysicists
and other providers of technical services to the Company and any
Restricted Subsidiary;
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provided, however, that, in the case of the
immediately foregoing clauses (1), (2), (3) and (4), any
Lien created in connection with any such Production Payments
shall be limited to the property that is the subject of such
Production Payments.
Permitted Marketing Obligations means Indebtedness
of the Company or any Restricted Subsidiary under letter of
credit or borrowed money obligations, or in lieu of or in
addition to such letters of credit or borrowed money, guarantees
of such Indebtedness or other obligation, of the Company or any
Restricted Subsidiary by any other Restricted Subsidiary, as
applicable, related to the purchase by the Company or any
Restricted Subsidiary of hydrocarbons for which the Company or
such Restricted Subsidiary has contracts to sell;
provided, however, that in the event that such
Indebtedness or obligations are guaranteed by the Company or any
Restricted Subsidiary, then either:
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(1)
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the Person with which the Company or such Restricted Subsidiary
has contracts to sell has an investment grade credit rating from
S&P or Moodys, or in lieu thereof, a Person
guaranteeing the payment of such obligated Person has an
investment grade credit rating from S&P or
Moodys; or
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(2)
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such Person posts, or has posted for it, a letter of credit in
favor of the Company or such Restricted Subsidiary with respect
to all such Persons obligations to the Company or such
Restricted Subsidiary under such contracts.
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Person means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof or any other entity.
Preferred Stock, as applied to the Capital Stock of
any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such
Person.
The term principal of a Note means the principal of
the Note plus the premium, if any, payable on the Note which is
due or overdue or is to become due at the relevant time.
Production Payments means, collectively,
Dollar-Denominated Production Payments and Volumetric Production
Payments.
Refinance means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease
or retire, or to issue other Indebtedness in exchange or
replacement for, such Indebtedness. Refinanced and
Refinancing shall have correlative meanings.
64
Refinancing Indebtedness means Indebtedness that
Refinances any Indebtedness of the Company or any Restricted
Subsidiary existing on the Issue Date or Incurred in compliance
with the Indenture, including Indebtedness that Refinances
Refinancing Indebtedness; provided, however, that:
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(1)
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such Refinancing Indebtedness has a Stated Maturity no earlier
than the Stated Maturity of the Indebtedness being Refinanced;
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(2)
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such Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being
Refinanced;
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(3)
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such Refinancing Indebtedness has an aggregate principal amount
(or if Incurred with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the
aggregate accreted value) then outstanding or committed (plus
fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced; and
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(4)
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if the Indebtedness being Refinanced is Non-recourse Purchase
Money Indebtedness, such Refinancing Indebtedness satisfies
clauses (1) and (2) of the definition of
Non-recourse Purchase Money Indebtedness;
provided further, however, that Refinancing
Indebtedness shall not include
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(x)
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Indebtedness of a Subsidiary that Refinances Indebtedness of the
Company or
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(y)
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Indebtedness of the Company or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
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Representative means any trustee, agent or
representative (if any) for an issue of Senior Indebtedness of
the Company or of a Subsidiary Guarantor.
Restricted Payment with respect to any Person means:
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(1)
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the declaration or payment of any dividends or any other
distributions of any sort in respect of its Capital Stock
(including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than
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(x)
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dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock),
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(y)
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dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and
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(z)
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pro rata dividends or other distributions made by a Subsidiary
that is not a Wholly Owned Subsidiary to minority stockholders
(or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation));
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(2)
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the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company held by any Person or
of any Capital Stock of a Restricted Subsidiary held by any
Affiliate of the Company (other than a Restricted Subsidiary),
including the exercise of any option to exchange any Capital
Stock (other than into Capital Stock of the Company that is not
Disqualified Stock);
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(3)
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the purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment
of any Subordinated Obligations of such Person (other than the
purchase, repurchase or other acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking
fund obligation,
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65
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principal installment or final maturity, in each case due within
one year of the date of acquisition); or
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(4)
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the making of any Investment (other than a Permitted Investment)
in any Person.
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Restricted Subsidiary means any Subsidiary of the
Company that is not an Unrestricted Subsidiary.
S&P means Standard & Poors
Rating Services, a division of The McGraw-Hill Company, Inc.,
and its successors.
Sale/Leaseback Transaction means an arrangement
relating to property owned on the Issue Date or thereafter
acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a
Restricted Subsidiary leases it from such Person; provided
that the fair market value of such property (as reasonably
determined by the Board of Directors acting in good faith) is
$10.0 million or more.
Secured Indebtedness means any Indebtedness of the
Company secured by a Lien.
Senior Indebtedness means with respect to any Person:
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(1)
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Indebtedness of such Person, and all obligations of such Person
under any Credit Facility, whether outstanding on the Issue Date
or thereafter Incurred; and
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(2)
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accrued and unpaid interest (including interest accruing on or
after the filing of any petition in bankruptcy or for
reorganization relating such Person to the extent post-filing
interest is allowed in such proceeding) in respect of
(A) indebtedness of such Person for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person
is responsible or liable;
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unless, with respect to obligations described in the immediately
preceding clause (1) or (2), in the instrument creating or
evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not
superior in right of payment to the Notes or the applicable
Subsidiary Guarantee; provided, however, that
Senior Indebtedness shall not include:
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(1)
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any obligation of such Person to any Subsidiary of such Person;
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(2)
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any liability for Federal, state, local or other taxes owed or
owing by such Person;
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(3)
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any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities);
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(4)
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any Indebtedness of such Person (and any accrued and unpaid
interest in respect thereof) which is subordinate or junior in
any respect to any other Indebtedness or other obligation of
such Person; or
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(5)
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that portion of any Indebtedness which at the time of Incurrence
is Incurred in violation of the Indenture (other than, in the
case of the Company or any Subsidiary Guarantor that Guarantees
any Credit Facility, Indebtedness under any Credit Facility that
is Incurred on the basis of a representation by the Company or
the Subsidiary Guarantor to the applicable lenders that such
Person is permitted to Incur such Indebtedness under such
Indenture).
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66
Senior Subordinated Indebtedness means:
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(1)
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with respect to the Company, the Notes, the Existing Notes and
any other Indebtedness of the Company that specifically provides
that such Indebtedness is to rank pari passu with the Notes in
right of payment and is not subordinated by its terms in right
of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness of the Company; and
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(2)
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with respect to each Subsidiary Guarantor, its Subsidiary
Guarantee of the Notes, the Existing Notes and any other
Indebtedness of such Person that specifically provides that such
Indebtedness rank pari passu with its applicable Subsidiary
Guarantee in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other
obligation of such Person which is not Senior Indebtedness of
such Person.
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Significant Subsidiary means any Restricted
Subsidiary that would be a Significant Subsidiary of
the Company within the meaning of
Rule 1-02
under
Regulation S-X
promulgated by the SEC.
Stated Maturity means, with respect to any security,
the date specified in such security as the fixed date on which
the final payment of principal of such security is due and
payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof
upon the happening of any contingency unless such contingency
has occurred).
Stock Offering means a primary offering, whether
public or private, of shares of common stock of the Company.
Subordinated Obligation means any Indebtedness of
the Company or any Subsidiary Guarantor (whether outstanding on
the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to, in the case of the Company, the
Notes or, in the case of a Subsidiary Guarantor, its Subsidiary
Guarantee pursuant to a written agreement to that effect.
Subsidiary means, in respect of any Person, any
corporation, association, partnership or other business entity
of which more than 50% of the total voting power of shares of
Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by:
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(1)
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such Person;
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(2)
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such Person and one or more Subsidiaries of such Person; or
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(3)
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one or more Subsidiaries of such Person.
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Subsidiary Guarantor means each Subsidiary of the
Company that executes the applicable Indenture as a guarantor
and each other Subsidiary of the Company that thereafter
Guarantees the Notes pursuant to the terms of the Indenture.
Temporary Cash Investments means any of the
following:
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(1)
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any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the
United States of America or any agency thereof;
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(2)
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investments in time deposit accounts, certificates of deposit
and money market deposits maturing within one year of the date
of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any
state thereof or any foreign
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67
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country recognized by the United States, and which bank or trust
company has capital, surplus and undivided profits aggregating
in excess of $200.0 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated
A (or such similar equivalent rating) or higher by
at least one nationally recognized credit rating organization
(as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or
mutual fund distributor whose assets consist of obligations of
the types described in clauses (1), (2), (3), (4) and
(5) hereof;
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(3)
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repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in
clause (1) above entered into with a bank meeting the
qualifications described in clause (2) above;
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(4)
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investments in commercial paper, maturing not more than
180 days after the date of acquisition, issued by a Person
(other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any
foreign country recognized by the United States of America with
a rating at the time as of which any investment therein is made
of
P-2
(or higher) according to Moodys or
A-2
(or higher) according to S&P or R-1 (or higher)
by Dominion Bond Rating Service Limited or Canadian Bond Rating
Service, Inc. (in the case of a Canadian issuer);
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(5)
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investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority
thereof, and rated at least A by S&P or
A by Moodys; and
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(6)
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investments in asset-backed securities maturing within one year
of the date of acquisition thereof with a long-term rating at
the time as of which any investment therein is made of
A3 (or higher) by Dominion Bond Rating Service
Limited or Canadian Bond Rating Service, Inc. (in the case of a
Canadian issuer).
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Treasury Rate means as of any date of redemption of
Notes the yield to maturity at the time of computation of United
States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical
Release H.15 (519) that has become publicly available at
least two Business Days prior to the redemption date (or, if
such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to
the period from the redemption date
to ,
2016; provided, however, that if the period from the
redemption date
to ,
2016 is not equal to the constant maturity of a United States
Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear Interpolation
(calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for
which such yields are given, except that if the period from the
redemption date
to ,
2016 is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant
maturity of one year will be used.
Unrestricted Subsidiary means:
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(1)
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any Subsidiary of the Company that at the time of determination
shall be designated an Unrestricted Subsidiary by the Board of
Directors in the manner provided below; and
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(2)
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any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors may designate any Subsidiary of the
Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated;
provided, however,
68
that either (A) the Subsidiary to be so designated has
total assets of $1,000 or less or (B) if such Subsidiary
has assets greater than $1,000, such designation would be
permitted under the covenant described under Certain
CovenantsLimitation on Restricted Payments. The
Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; provided, however,
that immediately after giving effect to such designation
(x) the Company could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described
under Certain CovenantsLimitation on
Indebtedness and (y) no Default shall have occurred
and be continuing. Any such designation by the Board of
Directors shall be evidenced by the Company to the Trustee by
promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers
Certificate certifying that such designation complied with the
foregoing provisions.
U.S. Government Obligations means direct
obligations (or certificates representing an ownership interest
in such obligations) of the United States of America (including
any agency or instrumentality thereof) for the payment of which
the full faith and credit of the United States of America is
pledged and which are not callable at the issuers option.
Volumetric Production Payments means production
payment obligations recorded as deferred revenue in accordance
with GAAP, together with all undertakings and obligations in
connection therewith.
Voting Stock of a Person means all classes of
Capital Stock or other interests (including partnership
interests) of such Person then outstanding and normally entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof.
Wholly Owned Subsidiary means a Restricted
Subsidiary all the Capital Stock of which (other than
directors qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law
to be held by a Person other than the Company or a Restricted
Subsidiary) is owned by the Company or one or more Wholly Owned
Subsidiaries.
69
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of the material
U.S. federal income tax considerations relating to the
purchase, ownership and disposition of the notes offered hereby
by investors who are U.S. Holders (as defined below) or
Non-U.S. Holders
(as defined below). This discussion is based on currently
existing provisions of the Internal Revenue Code of 1986, as
amended (the Code), existing, temporary and proposed
Treasury regulations promulgated thereunder, and administrative
and judicial interpretations thereof, all as in effect or
proposed on the date hereof and all of which are subject to
change, possibly with retroactive effect, or different
interpretations. This discussion does not address the
U.S. federal income tax consequences to subsequent
purchasers of notes and is limited to investors who
(i) purchase the notes pursuant to this offering at the
public offering price of notes set forth on the cover page of
this prospectus and (ii) hold the notes as capital assets
within the meaning of section 1221 of the Code. Moreover,
this discussion is for general information only and does not
address all of the tax consequences that may be relevant to
particular investors in light of their personal circumstances or
to certain types of investors subject to special tax rules (such
as U.S. Holders having a functional currency other than the
U.S. dollar, persons subject to special rules applicable to
former citizens and residents of the United States, certain
financial institutions, persons subject to the alternative
minimum tax, grantor trusts, real estate investment trusts,
insurance companies, tax-exempt entities, dealers in securities
or currencies, traders in securities that elect to use a
mark-to-market
method of accounting for their securities holdings, persons
holding the notes in connection with a hedging transaction,
straddle, conversion transaction or other integrated
transaction, corporations treated as personal holding companies,
controlled foreign corporations, passive foreign investment
companies or
Non-U.S. Holders
that are owned or controlled by U.S. Holders).
Baker & Hostetler LLP has reviewed the discussion
below and is of the opinion that the discussion, to the extent
it addresses matters of U.S. federal income tax law or
legal conclusions, accurately summarizes the U.S. federal
income tax considerations of the purchase, ownership and
disposition of the notes that are likely to be material to
investors. The opinion is based on various assumptions,
including assumptions regarding the accuracy of factual
representations made by us, and is subject to limitations. Their
opinion is not binding on the Internal Revenue Service or any
court. The Internal Revenue Service may challenge part or all of
their opinion and such a challenge could be successful.
Prospective investors are urged to consult their own tax
advisors as to the particular tax consequences to them of their
participation in the offering and their ownership and
disposition of the notes, including the applicability of any
U.S. federal tax laws or any state, local or foreign tax
laws or any treaty, and any changes (or proposed changes) in
applicable tax laws or interpretations thereof.
Considerations
Relating to U.S. Holders
As used herein, the term U.S. Holder means a
beneficial owner of a note that is, for U.S. federal income
tax purposes:
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an individual citizen or resident of the United States;
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a corporation (or any other entity treated as a corporation for
U.S. federal income tax purposes) created or organized in
or under the laws of the United States, any state thereof or the
District of Columbia;
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an estate whose income is includible in gross income for
U.S. federal income tax purposes, regardless of its
source; or
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a trust whose administration is subject to the primary
supervision of a U.S. court and which has one or more
U.S. persons who have the authority to control all
substantial decisions of the trust, or that has a valid election
in effect under applicable Treasury regulations to be treated as
a U.S. person.
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70
If a partnership holds notes, the tax treatment of a partner
will generally depend upon the status of the partner and upon
the activities of the partnership. We suggest that partners of a
partnership holding notes consult their tax advisors.
Payments
of Qualified Stated Interest
The notes pay interest at a stated rate
of %. The stated interest paid on
the notes will be treated as qualified stated interest (as
discussed below under Original Issue Discount) and a
U.S. Holder will be required to include interest on each
note in his, her or its income as ordinary income in accordance
with such U.S. Holders method of accounting for
U.S. federal income tax purposes.
Original
Issue Discount
If the issue price of a note is less than its stated redemption
price at maturity, then the note will be treated as being issued
with original issue discount (OID) for
U.S. federal income tax purposes in an amount equal to such
difference unless such difference is less than a statutory de
minimis amount (one-fourth of one percent of the stated
redemption price at maturity of the note multiplied by the
number of complete years from issuance to maturity). Generally,
the issue price of a note is the first price at
which a substantial amount of notes is sold to purchasers other
than bond houses, brokers or similar persons or organizations
acting in the capacity of underwriters, placement agents or
wholesalers. The stated redemption price at maturity
of a note is the total of all payments to be made under the note
other than qualified stated interest (generally, stated interest
that is unconditionally payable in cash or property at least
annually at a single fixed rate or at certain floating rates
that properly take into account the length of the interval
between stated interest payments). Since the stated interest
paid on the notes will be treated as qualified stated interest,
the stated redemption price at maturity of a note will generally
be equal to the notes stated principal amount.
Although not expected, the notes issued pursuant to this
offering may be issued with OID. Accordingly, a U.S. Holder
of a note may have to report annually the OID as income as it
accrues, based on a constant yield method (which includes at
least annual compounding) and regardless of the
U.S. Holders regular method of tax accounting. Thus,
the OID income on a note may be taxable before it is received in
cash. The amount of OID allocable to any accrual period other
than the final accrual period is an amount equal to the excess,
if any, of (i) the product of the notes
adjusted issue price at the beginning of such
accrual period and its
yield-to-maturity
(determined on the basis of compounding at the close of each
accrual period and properly adjusted for the length of the
accrual period) over (ii) the aggregate of all stated
interest allocable to the accrual period. OID allocable to a
final accrual period is the difference between the amount
payable at maturity (other than a payment of stated interest)
and the adjusted issue price of the note at the
beginning of the final accrual period. The
yield-to-maturity
of a note is the discount rate that causes the present value of
all payments on the note as of its original issue date to equal
the issue price of such note. The adjusted issue
price of a note at the beginning of any accrual period is
equal to its issue price increased by the accrued OID for each
prior accrual period.
The holders of the notes have the right to require us to
repurchase all or any part of such holders notes upon a
Change of Control. See Description of the
NotesChange of Control. Under the contingent payment
debt rules of the original issue discount regulations, certain
possible payments are not treated as contingencies or are
excepted from consideration for purposes of calculating original
issue discount (for example, in cases which the possible
payments are remote, incidental, or fit certain other
exceptions). We intend to take the position that a repurchase at
the option of a holder if a Change of Control occurs is remote.
Therefore, we do not intend, on the issuance date, to treat the
repurchase option as affecting the computation of the
yield-to-maturity
of the notes.
In addition, we have the right to redeem the notes prior to
their stated maturity. See Description of the
NotesOptional Redemption. Under applicable Treasury
regulations, an unconditional option to redeem a debt instrument
will be assumed to be exercised if such exercise will lower the
yield-to-maturity
of the debt
71
instrument. We do not intend, on the issuance date, to treat any
of our redemption rights as affecting the computation of the
yield-to-maturity
of the notes. The Internal Revenue Service may take a different
position regarding the payment or potential payment of amounts
in excess of qualified stated interest or principal, in which
case the timing, amount and character of income with respect to
the notes may be different, and a U.S. Holder could be
required to treat as ordinary interest income any gain
recognized on the disposition of a note. Prospective holders are
urged to consult their own tax advisors regarding the potential
effect, if any, of these matters on their particular situation.
A U.S. Holder may elect to treat all interest on a note as
OID and calculate the amount includible in gross income under
the constant yield method described above. U.S. Holders
should consult their own tax advisors about this election.
Sale,
Retirement or Disposition
Upon the sale, retirement at maturity or other disposition of a
note, a U.S. Holder generally will recognize taxable gain
or loss equal to the difference between (i) the sum of cash
plus the fair market value of all other property received on
such disposition (except to the extent such cash or property is
attributable to accrued but unpaid interest, which will be
taxable as ordinary income to the extent not previously included
in income) and (ii) such U.S. Holders adjusted
tax basis in the note. A U.S. Holders adjusted tax
basis in a note generally will equal the cost of the note to
such U.S. Holder, increased by any OID previously included
in income with respect to such note. Gain or loss recognized on
the disposition of a note generally will be capital gain or loss
and will be long-term capital gain or loss if, at the time of
such disposition, the U.S. Holders holding period for
the note is more than one year. The current maximum tax rate on
long-term capital gains to non-corporate U.S. Holders is
generally 15% (for taxable years beginning on or prior to
December 31, 2012). The deductibility of capital losses by
a U.S. Holder is subject to limitations.
Medicare
Contributions Tax
For taxable years beginning after December 31, 2012, a 3.8%
tax is imposed on the net investment income (which includes
interest and gross proceeds of a disposition of notes) of
certain individuals, trusts and estates.
Backup
Withholding and Information Reporting
Information reporting requirements generally will apply to
payments of principal and interest (including any OID) made by
us on, or the proceeds of the sale or other disposition prior to
maturity of, the notes. Backup withholding tax, currently at a
rate of 28%, may apply to such payments if the U.S. Holder
fails to:
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furnish his, her or its taxpayer identification number (social
security or employer identification number);
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certify that his, her or its number is correct;
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certify that he, she, or it is not subject to backup
withholding; or
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otherwise comply with the applicable requirements of the backup
withholding rules.
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Certain U.S. Holders are not subject to backup withholding
and information reporting requirements. Any amounts withheld
under the backup withholding rules from a payment to a
U.S. Holder will be allowed as a credit against such
U.S. Holders U.S. federal income tax liability
and may entitle the holder to a refund, provided that the
required information is furnished to the Internal Revenue
Service.
72
Considerations
Relating to
Non-U.S.
Holders
As used herein, the term
Non-U.S. Holder
means a beneficial owner of a note that is an individual,
corporation, trust or estate and is not a U.S. Holder.
Payment
of Interest
In general, payments of interest (which, for purposes of this
discussion, includes any OID) received by a
Non-U.S. Holder
will not be subject to U.S. federal withholding tax,
provided that:
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(i)
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the
Non-U.S. Holder,
as beneficial owner,
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(a)
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does not actually or constructively own 10% or more of the total
combined voting power of all of our classes of our stock
entitled to vote;
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(b)
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is not a controlled foreign corporation that is related to us
actually or constructively through stock ownership; and
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(c)
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is not a bank receiving the interest pursuant to a loan
agreement entered into in its ordinary course of business;
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(ii)
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the interest payments are not effectively connected with the
conduct by the
Non-U.S. Holder
of a U.S. trade or business, and
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(iii)
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the
Non-U.S. Holder,
as beneficial owner, satisfies the certification requirement.
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The certification requirement is generally satisfied if the
beneficial owner of a note certifies on IRS
Form W-8BEN
(or a suitable substitute or successor form), under penalties of
perjury, that he, she or it is not a U.S. person and
provides his, her or its name and address, and
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such beneficial owner timely files the IRS
Form W-8BEN
(or a suitable substitute or successor form) with the
withholding agent; or
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in the case of notes held on behalf of a beneficial owner by a
securities clearing organization, bank or other financial
institution that holds customers securities in the
ordinary course of its trade or business, the financial
institution files with the withholding agent a statement that it
has received the
Form W-8BEN
(or a suitable substitute or successor form) from the
Non-U.S. Holder
or from another financial institution acting on behalf of that
Non-U.S. Holder,
timely furnishes the withholding agent with a copy thereof and
otherwise complies with the applicable certification
requirements. A withholding agent, as used herein, is generally
the last U.S. payor (or a
non-U.S. payor
who is a qualified intermediary, U.S. branch of a foreign
person, or a withholding foreign partnership) in the chain of
payment prior to payment to a
Non-U.S. Holder
(which itself is not a withholding agent).
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Other alternative procedures exist in order to satisfy the
certification requirement, depending upon the circumstances
applicable to the
Non-U.S. Holder,
including but not limited to situations where the notes are held
by certain intermediaries or partnerships. The certification
requirement is not met if either we or the withholding agent
have actual knowledge or reason to know that the beneficial
owner is a U.S. Holder or that the conditions of any
exemption are not, in fact, satisfied.
Non-U.S. Holders
should consult their own tax advisors regarding the
certification requirements for
Non-U.S. Holders
and the effect, if any, of the certification requirements on
their particular situation.
73
Payments of interest (including any OID) not exempt from
U.S. federal withholding tax as described above will be
subject to such withholding tax at the rate of 30%, unless
(i) subject to reduction under an applicable income tax
treaty or (ii) the interest is effectively connected to a
U.S. trade or business and the holder provides IRS
Form W-8ECI
(or a suitable substitute or successor form) to the withholding
agent and meets any other applicable certification requirements.
In order to claim a reduced or zero withholding rate under an
applicable income tax treaty, the beneficial owner of the note
must, under penalties of perjury, provide the withholding agent
with a properly completed and executed IRS
Form W-8BEN
(or a suitable substitute or successor form) claiming an
exemption from, or reduction in the rate of, withholding under
the benefit of such applicable income tax treaty and meet any
other applicable certification requirements.
Sale,
Retirement or Disposition
A
Non-U.S. Holder
generally will not be subject to United States federal income
tax (and generally no tax will be withheld) with respect to gain
(excluding gain representing accrued interest, in which case the
rules for interest apply) realized on the sale, retirement at
maturity or other disposition of a note unless:
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the
Non-U.S. Holder
is an individual who is present in the United States for a
period or periods aggregating 183 or more days in the taxable
year of the disposition and certain other conditions are
met; or
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such gain is effectively connected with the conduct by the
Non-U.S. Holder
of a trade or business within the United States (and, if
required by an applicable income tax treaty, the note is
attributable to a U.S. permanent establishment of the
Non-U.S. Holder).
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U.S.
Trade or Business
If a
Non-U.S. Holder
holds a note in connection with the conduct of a trade or
business in the United States (and, if required by an
applicable income tax treaty, the note is attributable to a
U.S. permanent establishment of the
Non-U.S. Holder):
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(i)
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any interest (including any OID) on the note, and any gain from
disposing of the note, generally will be subject to income tax
at U.S. federal income tax rates as if the holder were a
U.S. Holder, and
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(ii)
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Non-U.S. Holders
that are corporations may be subject to the branch profits
tax on earnings that are connected with a U.S. trade
or business, including earnings from the note.
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The branch profits tax is 30% of the dividend equivalent
amount, subject to adjustment, but may be reduced or
eliminated by an applicable income tax treaty or otherwise
adjusted.
Backup
Withholding and Information Reporting
The withholding agent must report annually to the Internal
Revenue Service and to each
Non-U.S. Holder
on IRS
Form 1042-S
(or a suitable substitute or successor form) the amount of
interest (including any OID) paid on a note, regardless of
whether withholding was required, and any tax withheld with
respect to interest. Under the provisions of certain
U.S. income tax treaties and other applicable agreements,
copies of these information returns may be available to the tax
authorities of the country in which the
Non-U.S. Holder
resides. Backup withholding generally will not apply to payments
of interest (including any OID) to a
Non-U.S. Holder
if the certification requirements described above under
Considerations Relating to
Non-U.S. HoldersPayment
of Interest are met, provided the payor does not have
actual knowledge or reason to know that the holder is a
U.S. Holder or that the conditions of any other exemption
are not, in fact, satisfied. Moreover, payment of the principal
or the proceeds of a sale, exchange, retirement or other
disposition of a note are generally not subject to information
reporting and backup withholding if the
74
certification requirements described above under
Considerations Relating to
Non-U.S. HoldersPayment
of Interest are met, provided the payor does not have
actual knowledge or reason to know that the holder is a
U.S. Holder or that the conditions of any other exemption
are not, in fact, satisfied.
Non-U.S. Holders
of notes should consult their tax advisors regarding the
application of information reporting and backup withholding in
their particular situations, the availability of an exemption
therefrom, and the procedure for obtaining such an exemption, if
available. Any amounts withheld under the backup withholding
rules from a payment to a
Non-U.S. Holder
will be allowed as a credit against such
Non-U.S. Holders
U.S. federal income tax liability and may entitle the
holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
75
UNDERWRITING
We intend to offer the notes through the underwriters. Subject
to the terms and conditions in the underwriting agreement
between us and the underwriters, we have agreed to sell to each
underwriter, and each underwriter has severally agreed to
purchase from us, the principal amount of notes that appears
opposite its name in the table below:
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Principal
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Underwriter
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Amount
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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$
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J.P. Morgan Securities LLC
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Credit Suisse Securities (USA) LLC
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UBS Securities LLC
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RBC Capital Markets, LLC
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Wells Fargo Securities, LLC
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BNP Paribas Securities Corp.
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Scotia Capital (USA) Inc.
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Credit Agricole Securities (USA) Inc.
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Lloyds TSB Bank plc
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BBVA Securities Inc.
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Capital One Southcoast, Inc.
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CIBC World Markets Corp.
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Comerica Securities, Inc.
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ING Financial Markets LLC
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KeyBanc Capital Markets Inc.
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Mitsubishi UFJ Securities (USA), Inc.
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SMBC Nikko Capital Markets Limited
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SunTrust Robinson Humphrey, Inc.
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U.S. Bancorp Investments, Inc.
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Total
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$
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350,000,000
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The underwriting agreement provides that the underwriters will
purchase all the notes if any of them are purchased.
In the underwriting agreement, we have agreed that we will
indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the underwriters may be
required to make in respect of those liabilities.
The notes do not have an established trading market. We do not
intend to apply for the notes to be listed on any securities
exchange or to arrange for the notes to be quoted on any
quotation system. The underwriters have advised us that they
intend to make a market in the notes. However, they are not
obligated to do so and may discontinue any market making at any
time in their sole discretion. Therefore, we cannot assure you
that a liquid trading market will develop for the notes, that
you will be able to sell your notes at a particular time or that
the prices that you receive when you sell will be favorable.
The underwriters initially propose to offer part of the notes
directly to the public at the offering prices described on the
cover page of this prospectus and part to certain dealers at
prices that represent a concession not in excess
of % of the principal amount of the
notes. The underwriters may allow, and any such dealer may
re-allow, a concession not in excess
of % of the principal amount of the
notes to certain other
76
dealers. After the initial offering of the notes, the
underwriters may from time to time vary the offering prices and
other selling terms.
The expenses of the offering, not including the underwriting
discount, are estimated at $1.1 million and are payable
by us.
In connection with this offering of the notes, the underwriters
may engage in overallotments, stabilizing transactions and
syndicate covering transactions in accordance with
Regulation M under the Securities Exchange Act of 1934.
Overallotment involves sales in excess of the offering size,
which creates a short position for the underwriters. Stabilizing
transactions involve bids to purchase the notes in the open
market for the purpose of pegging, fixing or maintaining the
price of the notes, as applicable. Syndicate covering
transactions involve purchases of the notes in the open market
after the distribution has been completed in order to cover
short positions. Stabilizing transactions and syndicate covering
transactions may cause the price of the notes to be higher than
it would otherwise be in the absence of those transactions. If
the underwriters engage in stabilizing or syndicate covering
transactions, they may discontinue them at any time.
Each of the underwriters
and/or their
respective affiliates performs investment banking, commercial
banking and financial advisory services for us in the normal
course of business. In addition, each of the underwriters is a
lender or agent under our credit facility.
Lloyds TSB Bank plc is not a U.S. registered broker-dealer and,
therefore, to the extent that they intend to effect any sales of
the notes in the United States, they will do so through one or
more U.S. registered broker-dealers as permitted by the
regulations of the Financial Industry Regulatory Authority.
Conflicts
of Interest
Simultaneously with this offering, we are making tender offers
for $225 million aggregate principal amount of our 2013
Notes and $300 million aggregate principal amount of our
2015 Notes. We will use the net proceeds from the offering of
the notes, together with cash on hand, to repurchase all of the
notes tendered in the tender offers. As a result, the
underwriters or their affiliates that hold our 2013 Notes or
2015 Notes would receive their pro rata share of the net
proceeds from this offering that we use to repurchase or redeem
such notes. In addition, Merrill Lynch, Pierce,
Fenner & Smith Incorporated is acting as
dealer-manager in the tender offer. Wells Fargo Securities, LLC,
an underwriter in this offering, or its affiliates will receive
more than 5% of the net proceeds of this offering in connection
with the tender offers. See Use of Proceeds.
Accordingly, this offering is being made in compliance with the
requirements of the Financial Industry Regulatory Authority
Rule 5121. In accordance with this rule, Merrill Lynch,
Pierce, Fenner & Smith Incorporated has assumed the
responsibilities of acting as a qualified independent
underwriter. In its role as a qualified independent underwriter,
Merrill Lynch, Pierce, Fenner & Smith Incorporated has
participated in due diligence and the preparation of this
prospectus and the Registration Statement of which this
prospectus is a part. Merrill Lynch, Pierce, Fenner &
Smith Incorporated will not receive any additional fees for
serving as a qualified independent underwriter in connection
with this offering. Wells Fargo Securities, LLC will not confirm
sales of the debt securities to any account over which it
exercises discretionary authority without the prior written
approval of the customer.
77
LEGAL
MATTERS
Certain legal matters with respect to the notes offered hereby
and related guarantees will be passed upon for us by
Baker & Hostetler LLP, Houston, Texas. The validity of
the notes offered hereby and related guarantees will be passed
upon for the underwriters by Simpson Thacher &
Bartlett, LLP, New York, New York.
EXPERTS
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting (which is included in Managements
Report on Internal Control Over Financial Reporting)
incorporated in this Prospectus by reference to the Denbury
Resources Inc. Annual Report on
Form 10-K
for the year ended December 31, 2009 have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.
Certain information with respect to the oil and gas reserves
associated with Denburys oil and gas properties is derived
from the reports of DeGolyer and MacNaughton, an independent
petroleum engineering firm, and has been included in this
document upon the authority of said firm as experts with respect
to the matters covered by such reports and in giving such
reports.
The consolidated financial statements of Encore Acquisition
Company appearing in Denbury Resources Inc.s Current
Reports on
Form 8-K
dated February 2, 2010 and March 3, 2010 and the
effectiveness of Encore Acquisition Companys internal
control over financial reporting as of December 31, 2009
have been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their reports
thereon, included therein, and incorporated herein by reference.
Such consolidated financial statements and Encore Acquisition
Company managements assessment of the effectiveness of
internal control over financial reporting as of
December 31, 2009 are incorporated herein by reference in
reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
Certain information with respect to the oil and natural gas
reserves associated with Encores oil and natural gas
properties is derived from the reports of Miller and Lents,
Ltd., an independent petroleum engineering firm, and has been
included in this document upon the authority of said firm as
experts with respect to the matters covered by such reports and
in giving such reports.
78
GLOSSARY
The following are abbreviations and definitions of certain terms
commonly used in the oil and gas industry and this document:
Bbl. One stock tank barrel of 42
U.S. gallons liquid volume, used in reference to crude oil
or other liquid hydrocarbons.
Bbls/d. Barrels of oil produced per day.
Bcf. One billion cubic feet of gas or
CO2.
BOE. One barrel of oil equivalent, using the
ratio of one barrel of crude oil, condensate or natural gas
liquids to six Mcf of natural gas.
BOE/d. BOE per day.
CO2. Carbon
dioxide.
Development costs.* Costs incurred to obtain
access to proved reserves and to provide facilities for
extracting, treating, gathering and storing the oil and gas.
Differential. The difference between the net
realized commodity prices received on a per unit basis, as
compared to the actual NYMEX prices posted on a per unit basis.
Field.* An area consisting of a single
reservoir or multiple reservoirs all grouped on or related to
the same individual geological structural feature
and/or
stratigraphic condition.
MBbls. One thousand barrels of crude oil or
other liquid hydrocarbons.
Mcf. One thousand cubic feet of natural gas or
CO2.
MBOE. One thousand BOEs.
MMBbls. One million barrels of crude oil or
other liquid hydrocarbons.
MMBOE. One million BOEs.
MMBtu. One million British thermal units. One
British thermal unit is the amount of 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 of natural gas or
CO2.
NYMEX. New York Mercantile Exchange.
Production costs.* Costs incurred to operate
and maintain wells and related equipment and facilities,
including depreciation and applicable operating costs of support
equipment and facilities and other costs of operating and
maintaining those wells and related equipment and facilities.
Proved developed reserves.* Crude oil, natural
gas and natural gas liquids reserves that can be expected to be
recovered through existing wells with existing equipment and
operating methods.
Proved properties. Properties with proved
reserves.
79
Proved reserves.* The estimated quantities of
crude oil, natural gas, and natural gas liquids that geological
and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions, i.e., prices and costs as of
the date the estimate is made.
PV-10
Value. When used with respect to oil and natural
gas reserves,
PV-10 Value
means the estimated future gross revenue to be generated from
the production of proved reserves, net of estimated future
production, development and abandonment costs and before income
taxes, discounted to a present value using an annual discount
rate of 10%.
PV-10 Values
calculated as of December 31, 2009 were prepared using an
average price equal to the unweighted arithmetic average of
hydrocarbon prices on the first day of each month within a
12-month
period ended December 31, 2009.
PV-10 Values
calculated prior to December 31, 2009 were prepared using
prices and costs in effect at the determination date.
Reservoir. A porous and permeable underground
formation containing a natural accumulation of producible oil
and/or gas
that is confined by impermeable rock or water barriers and is
individual and separate from other reservoirs.
Standardized measure. The present value,
discounted at 10% per year, of estimated future net revenues
from the production of proved reserves, computed by applying
sales prices and deducting the estimated future costs to be
incurred in developing, producing and abandoning the proved
reserves (computed based on current costs and assuming
continuation of existing economic conditions). Future income
taxes are calculated by applying the statutory federal and state
income tax rate to pre-tax future net cash flows, net of the tax
basis of the properties involved and utilization of available
tax carryforwards related to oil and natural gas operations.
Sales prices as of year-end 2009 were prepared using an average
price equal to the unweighted arithmetic average of hydrocarbon
prices on the first day of each month within the
12-month
period ended December 31, 2009 (except for consideration of
price changes to the extent provided by contractual
arrangements). Sales prices as of year-end 2007 and 2008 were
prepared using prices in effect as of the dates of such
estimates and held constant throughout the productive life of
the reserves (except for consideration of price changes to the
extent provided by contractual arrangements).
Tertiary recovery operations. An enhanced
recovery operation that normally occurs after waterflooding, in
which chemicals or natural gases
(CO2)
are used as the injectant.
* This definition is an abbreviated version of the complete
definition as defined by the SEC in
Rule 4-10(a)
of
Regulation S-X.
For the complete definition
see:http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=20c66c74f60c4bb8392bcf9ad6fccea3&rgn=div5&view=text&-node=17:2.0.1.1.8&id-no=17#17:2.0.1.1.8.0.21.43.
80
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
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Item 14.
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Other
Expenses of Issuance and Distribution
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The following table sets forth the costs and expenses payable by
us in connection with the sale of securities being registered
hereby. All amounts are estimates, except the registration fee.
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SEC registration fee
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$
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40,635
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Accounting fees
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275,000
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|
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Legal fees and expenses
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375,000
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Printing and engraving fees and expenses
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100,000
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Miscellaneous
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300,000
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Total
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$
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1,090,635
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Item 15.
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Indemnification
of Officers and Directors
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Section 145 of the Delaware General Corporation Law (the
DGCL), empowers us under specified circumstances to
indemnify our directors, officers, employees and agents in
connection with actions, suits or proceedings brought against
them or threatened by reason of the fact that they were our
directors, officers, employees or agents, so long as they acted
in good faith and in a manner that they reasonably believed to
be in, or not opposed to, the best interests of our Company, and
with respect to any criminal action, that they had no reasonable
cause to believe their conduct was unlawful. With respect to
suits by or in the right of our Company, however,
indemnification is generally limited to attorneys fees and
other expenses and is not available if such person is adjudged
to be liable to us, unless a court determines that
indemnification is appropriate.
Article IX of our Restated Certificate of Incorporation
requires indemnification of directors, officers and other
employees to the fullest extent permitted by Section 145 of
the DGCL. Furthermore, Article IX explicitly provides that:
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we may advance expenses, including reasonable attorneys
fees, to individuals entitled to indemnification;
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we may not take any action to diminish or reduce the rights of
individuals entitled to indemnification after the occurrence of
the events to which the indemnification relates; and
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any person entitled to indemnification by us may bring suit
against us if we do not pay them within 30 days after
receiving a written demand for indemnification and, if
successful, such person may recover their expenses for such
suit, including attorneys fees, from us. In the suit, we
will have the burden of proving any defense that the person is
not eligible for indemnification under the DGCL.
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Additionally, we maintain directors and officers insurance which
includes coverage for liability under the federal securities
laws.
Article X of our Certificate of Incorporation limits the
personal liability of a director to us or our stockholders for
monetary damages for breach of fiduciary duty as a director
provided that a directors liability may not be limited
(i) for any breach of the directors duty of loyalty
to us or our stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under
II-1
Section 174 (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital stock)
of the DGCL or (iv) for any transaction from which the
director derived an improper personal benefit.
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Exhibit
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No.
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Document Description
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**1
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Underwriting Agreement between Denbury Resources Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
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3
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.1
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Restated Certificate of Incorporation of Denbury Resources Inc.
filed with the Delaware Secretary of State on December 29,
2003 (incorporated by reference as Exhibit 3.1 of our
Form 8-K
filed December 29, 2003).
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3
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.2
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Certificate of Amendment of Restated Certificate of
Incorporation of Denbury Resources Inc. filed with the Delaware
Secretary of State on October 20, 2005 (incorporated by
reference as Exhibit 3(a) of our
Form 10-Q
filed November 8, 2005).
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3
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.3
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Certificate of Amendment of Restated Certificate of
Incorporation of Denbury Resources Inc. filed with the Delaware
Secretary of State on November 21, 2007 (incorporated by
reference as Exhibit 3(c) of our
Form 10-K
filed February 29, 2008).
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3
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.4
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Bylaws of Denbury Resources Inc., a Delaware corporation,
adopted December 29, 2003 (incorporated by reference as
Exhibit 3.2 of our
Form 8-K
filed December 29, 2003).
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*4
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.1
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Form of Indenture among Denbury Resources Inc., certain of its
subsidiaries, and Wells Fargo Bank, National Association, as
trustee, covering the debt securities offered hereunder,
including Form of Note attached thereto.
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*5
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.1
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Opinion of Baker & Hostetler LLP as to the validity of
the Debt Securities being registered.
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*8
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.1
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Opinion of Baker & Hostetler LLP, relating to tax
matters.
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*12
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Denbury Resources Inc. Computation of Ratio of Earnings to Fixed
Charges.
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*23
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.1
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Consent of PricewaterhouseCoopers LLP.
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*23
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.2
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Consent of DeGolyer and MacNaughton.
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*23
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.3
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Consent of Baker & Hostetler LLP (included in
Exhibits 5.1 and 8.1).
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*23
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.4
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Consent of Ernst & Young LLP.
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*23
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.5
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Consent of Miller and Lents, Ltd.
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*24
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Power of Attorney (included on signature page).
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*25
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Form T-1
Statement of Eligibility of Trustee for the Debt Securities.
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* |
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Filed herewith |
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** |
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To be filed by amendment or
Form 8-K |
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(a)
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The undersigned registrant hereby undertakes:
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(1)
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To file, during any period in which offers or sales are being
made of securities registered hereby, a post-effective amendment
to this registration statement:
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(i)
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to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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(ii)
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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.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered
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II-2
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would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b)
under the Securities Act of 1933 if, in the aggregate, the
changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the
Calculation of Registration Fee table in the
effective registration statement; and
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(iii)
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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;
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provided, however, that the undertakings set forth in
paragraphs (i), (ii) and (iii) do not apply if the
information required to be included in a post-effective
amendment by those paragraphs is contained in reports filed with
or furnished to the Commission by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in this
registration statement, or is contained in a form of prospectus
filed pursuant to Rule 424(b) that is part of the
registration statement.
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(2)
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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.
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(3)
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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.
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(4)
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That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
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(A)
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Each prospectus filed by a registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the
registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
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(B)
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Each prospectus required to be filed pursuant to
Rule 424(b)(2), (b)(5) or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering
made pursuant to Rule 415(a)(1)(i), (vii) or
(x) for the purpose of providing the information required
by Section 10(a) of the Securities Act of 1933 shall be
deemed to be part of and included in the registration statement
as of the earlier of the date such form of prospectus is first
used after effectiveness or the date of the first contract of
sale of securities in the offering described in the prospectus.
As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such
date shall be deemed to be a new effective date of the
registration statement relating to the securities in the
registration statement to which the prospectus relates, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof. Provided,
however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made
in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time
of contract of sale prior to such effective date, supersede or
modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective
date.
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II-3
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(5)
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That, for the purpose of determining liability of a registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities, the undersigned registrant
undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the
securities to the purchaser, if the securities are offered or
sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
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(i)
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Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed
pursuant to Rule 424;
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(ii)
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Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned registrant or used or referred
to by the undersigned registrant;
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(iii)
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The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
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(iv)
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Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
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(b)
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The undersigned registrant hereby understands that, for purposes
of determining any liability under the Securities Act of 1933,
each filing of the registrants 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 plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration
statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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(c)
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Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act of 1933
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 Securities Act of 1933 and will be governed by the final
adjudication of such issue.
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(d)
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The undersigned registrant hereby undertakes that:
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(1)
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For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
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(2)
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For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered
herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
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II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY RESOURCES INC.
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
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Signatures
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Title
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Date
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/s/ Phil
Rykhoek
Phil
Rykhoek
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Chief Executive Officer
(Principal Executive Officer)
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February 3, 2011
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/s/ Mark
C. Allen
Mark
C. Allen
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Senior Vice President and Chief Financial Officer (Principal
Financial Officer)
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February 3, 2011
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/s/ Alan
Rhoades
Alan
Rhoades
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Vice PresidentAccounting (Principal Accounting Officer)
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February 3, 2011
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/s/ Wieland
Wettstein
Wieland
Wettstein
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Chairman of the Board of Directors
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February 3, 2011
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/s/ Michael
L. Beatty
Michael
L. Beatty
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Director
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February 3, 2011
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Michael
B. Decker
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Director
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|
February 3, 2011
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/s/ Ronald
G. Greene
Ronald
G. Greene
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Director
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February 3, 2011
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II-5
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Signatures
|
|
Title
|
|
Date
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/s/ David
I. Heather
David
I. Heather
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Director
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February 3, 2011
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/s/ Greg
McMichael
Greg
McMichael
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Director
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February 3, 2011
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Gareth
Roberts
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Director
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|
February 3, 2011
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|
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/s/ Randy
Stein
Randy
Stein
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Director
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|
February 3, 2011
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II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY GATHERING & MARKETING, INC.
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
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Signatures
|
|
Title
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Date
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|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Director (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Director
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Director
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Director
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY HOLDINGS, INC.
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Director (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Director
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Director
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Director
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY OPERATING COMPANY
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Director (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Director
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Director
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Director
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY ONSHORE, LLC
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Manager (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Manager
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY MARINE, L.L.C.
|
|
|
|
By:
|
Denbury Operating Company
|
its sole member
Mark C. Allen
Senior Vice President and Chief Financial Officer
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY PIPELINE HOLDINGS, LLC
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Manager (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Manager
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY AIR, LLC
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Manager (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Manager
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY GULF COAST PIPELINES, LLC
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Manager (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Manager
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
GREENCORE PIPELINE COMPANY LLC
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Manager (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Manager
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, 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 Plano, State of Texas, on February 3, 2011.
DENBURY GREEN PIPELINETEXAS, LLC
Mark C. Allen
Senior Vice President and Chief Financial Officer
Each person whose signature appears below hereby constitutes and
appoints Phil Rykhoek and Mark C. Allen, and each of them, as
his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including, without
limitation, post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, and hereby grants to such attorneys-in-fact
and agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary to
be done, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their or his or her
substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
|
|
|
|
|
|
|
Signatures
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Phil
Rykhoek
Phil
Rykhoek
|
|
Chief Executive Officer, Manager (Principal Executive Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Mark
C. Allen
Mark
C. Allen
|
|
Senior Vice President and Chief Financial Officer, Manager
(Principal Financial Officer)
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Ronald
T. Evans
Ronald
T. Evans
|
|
President and Chief Operating Officer, Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Robert
L. Cornelius
Robert
L. Cornelius
|
|
Senior Vice PresidentOperations and Assistant Secretary,
Manager
|
|
February 3, 2011
|
|
|
|
|
|
/s/ Alan
Rhoades
Alan
Rhoades
|
|
Vice PresidentAccounting
(Principal Accounting Officer)
|
|
February 3, 2011
|
II-16
INDEX TO
EXHIBITS
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Document Description
|
|
|
4
|
.1
|
|
Form of Indenture among Denbury Resources Inc., certain of its
subsidiaries, and Wells Fargo Bank, National Association, as
trustee, covering the debt securities offered hereunder,
including Form of Note attached thereto.
|
|
5
|
.1
|
|
Opinion of Baker & Hostetler LLP as to the validity of the
securities being registered hereunder.
|
|
8
|
.1
|
|
Opinion of Baker & Hostetler LLP relating to tax matters.
|
|
12
|
|
|
Denbury Resources Inc. Computation of Ratio of Earnings to Fixed
Charges.
|
|
23
|
.1
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
23
|
.2
|
|
Consent of DeGolyer and MacNaughton.
|
|
23
|
.4
|
|
Consent of Ernst & Young LLP.
|
|
23
|
.5
|
|
Consent of Miller and Lents, Ltd.
|
|
25
|
|
|
Form T-1 Statement of Eligibility of Trustee for the Debt
Securities.
|