e424b3
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-123534
PROSPECTUS
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Range Energy I, Inc.
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Gulfstar Energy, Inc. |
Range HoldCo, Inc.
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Range Energy Finance Corporation |
Range Production Company
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RB Operating Company |
Range Energy Ventures Corporation
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PMOG Holdings, Inc.
as Guarantors |
Offer to Exchange up to
$150,000,000 of
63/8% Senior
Subordinated Notes due 2015
Issued by Range Resources Corporation on March 9,
2005
for
$150,000,000 of
63/8% Senior
Subordinated Notes due 2015
the offer and exchange of which have been registered under
the Securities Act of 1933
Terms of the Exchange Offer
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We are offering to exchange up to $150,000,000 of our
outstanding
63/8% Senior
Subordinated Notes due 2015 which were issued by us on
March 9, 2005, and which we refer to herein as the
old notes, for new notes with substantially
identical terms, the offer and sale of which have been
registered under the Securities Act of 1933. |
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We will exchange all outstanding old notes that you validly
tender and do not validly withdraw before the exchange offer
expires for an equal principal amount of new notes. |
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There is no public market for the old notes or the new notes. |
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We are incurring all expenses associated with this registration. |
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The exchange offer expires at 5:00 p.m., New York City
time, on May 19, 2005, unless extended. We do not currently
intend to extend the exchange offer. |
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Tenders of old notes may be withdrawn at any time prior to the
expiration of the exchange offer in accordance with the
procedures set forth herein. |
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We believe that the exchange of new notes for old notes should
not be an exchange or otherwise a taxable event to a holder for
United States federal income tax purposes. |
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We will not receive any proceeds from the exchange offer. |
Terms of the New
63/8% Senior
Subordinated Notes due 2015 Offered in the Exchange Offer
Maturity
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The new notes will mature on March 15, 2015. |
Interest
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Interest on the new notes is payable on March 15 and September
15 of each year, beginning September 15, 2005. |
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Interest will accrue from March 9, 2005. |
Redemption
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Prior to March 15, 2008, we may redeem up to 35% of the
original aggregate principal amount of the new notes at a
redemption price of 106.375% of the principal amount, plus
accrued and unpaid interest, with the proceeds of certain equity
offerings. |
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On or after March 15, 2010, we may redeem some or all of
the new notes pursuant to the redemption prices specified under
the caption Description of the New Notes
Optional Redemption. |
Change of Control
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Subject to certain conditions, if we experience a change of
control, we may be required to repurchase some or all of the new
notes at a purchase price of 101% of the principal amount, plus
accrued and unpaid interest. |
Ranking
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The new notes and the guarantees are our and our guarantor
subsidiaries general, unsecured obligations and are
subordinated to our and our subsidiaries senior debt and
will be subordinated to future senior debt that we and our
subsidiaries are permitted to incur under our senior credit
facilities and the indenture governing the new notes. |
See Risk Factors on page 9 for a discussion
of factors you should consider before participating in the
exchange offer.
These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities
commission nor has the Securities and Exchange Commission or any
state securities commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a
criminal offense.
Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such new
notes. The letter of transmittal accompanying this prospectus
states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities
Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with
resales of new notes received in exchange for old notes where
such old notes were acquired by the broker-dealer as a result of
market-making activities or other trading activities. We and the
guarantors have agreed that, starting on the expiration date of
this exchange offer and ending on the close of business
180 days after the expiration date, we and the guarantors
will make this prospectus available to any broker-dealer for use
in connection with any such resale. See Plan of
Distribution.
The date of this prospectus is April 15, 2005
TABLE OF CONTENTS
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This prospectus incorporates important business and financial
information about Range Resources Corporation that is not
included in or delivered with this prospectus. Such information
is available without charge upon written or oral request made to
the office of the Corporate Secretary, Range Resources
Corporation, 777 Main Street, Suite 800, Fort Worth,
Texas 76102 (Tel. 817.870.2601). To obtain timely delivery of
any requested information, you must make any request no later
than May 13, 2005.
i
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference in
this prospectus contain or incorporate by reference certain
statements (other than statements of historical fact) that
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These
statements include statements relating to our plans, strategies,
objectives, expectations, intentions and adequacy of resources
and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.
When used in this prospectus, the words budget,
budgeted, assumes, should,
goal, anticipates, expects,
believes, seeks, plans,
estimates, intends, projects
or targets and similar expressions that convey the
uncertainty of future events or outcomes are intended to
identify forward-looking statements. Where any forward-looking
statement includes a statement of the assumptions or bases
underlying such forward-looking statement, we caution that while
we believe these assumptions or bases to be reasonable and to be
made in good faith, assumed facts or bases almost always vary
from actual results and the difference between assumed facts or
bases and the actual results could be material, depending on the
circumstances.
Our actual results may differ materially from the results
predicted or from any other forward-looking statements made by,
or on behalf of, us and reported results should not be
considered as an indication of future performance. The potential
risks and uncertainties include, among other things:
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production variance from expectations, |
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volatility of oil and natural gas prices; |
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hedging results; |
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the need to develop and replace reserves; |
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the substantial capital expenditures required to fund operations; |
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exploration risks; |
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environmental risks; |
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uncertainties about estimates of reserves; |
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competition; |
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litigation; |
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our sources of liquidity; |
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access to capital; |
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government regulation; |
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political risks; |
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our ability to implement our business strategy; |
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costs and results of drilling new projects; |
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mechanical and other inherent risks associated with oil and
natural gas production; |
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weather; |
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complexity of our financial statements; |
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availability of drilling equipment; and |
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changes in interest rates. |
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, events, levels of activity, performance or
achievements. We do not assume responsibility for the accuracy
and completeness of the forward-looking statements. We do not
intend to update any of the forward-looking statements after the
date of this prospectus to conform them to actual results.
ii
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus and the documents incorporated by reference.
Because it is a summary, it does not contain all of the
information that you should consider before deciding to exchange
your old notes for new notes. You should read the entire
prospectus and the documents incorporated by reference
carefully, including the section entitled Risk
Factors and the financial statements and related notes to
those financial statements incorporated by reference in this
prospectus.
Unless otherwise noted herein, as used in this prospectus,
we, our, ours,
us and the Company refer to Range
Resources Corporation and its subsidiaries, except where the
context otherwise requires or as otherwise indicated.
Our Company
We are an independent oil and natural gas company engaged in the
acquisition, development and exploration of oil and natural gas
properties, in the Southwest, Appalachia and Gulf Coast,
including the Gulf of Mexico, regions of the United States. We
seek to increase our reserves and production through a balanced
combination of development drilling, exploitation projects,
exploration and acquisitions.
We have a geographically diverse asset base focused on three
core areas. The Southwest divisions properties are located
in the Permian Basin of West Texas, the East Texas Basin, the
Anadarko Basin of western Oklahoma and the Texas Panhandle. Our
Gulf Coast division operates properties onshore in Texas,
Louisiana and Mississippi and holds a non-operating interest in
approximately 40 offshore properties in the shallow waters of
the Gulf of Mexico. In 1999 we formed Great Lakes Energy
Partners L.L.C. (Great Lakes), a joint venture 50%
owned by us and 50% owned by FirstEnergy Corp.
(FirstEnergy). On June 23, 2004 we consummated
the acquisition of the 50% of Great Lakes that we did not
previously own pursuant to a Purchase and Sale Agreement by and
between the Company and FirstEnergy, thereby expanding our
production in the Appalachian Basin. At closing, we paid cash
consideration of $200 million, assumed $70 million of
Great Lakes bank debt and retired $28 million of oil and
gas commodity hedges for a total purchase price of
$298 million. We funded the acquisition with the proceeds
of $149 million from an underwritten public offering of our
common stock, the sale of $100 million of our
73/8% senior
subordinated notes due 2013 and bank borrowings pursuant to the
Second Amended and Restated Credit Agreement (the Senior
Credit Facility). As a result of the acquisition
transaction, the borrowing base under the Senior Credit Facility
was increased from $240 million to $500 million. On
December 10, 2004 we acquired additional Appalachian oil
and gas properties with the purchase of PMOG Holdings, Inc., a
private company (Pine Mountain). The purchase price
was $222 million. We funded the acquisition with the
proceeds of $108 million from an underwritten public
offering of 5.75 million shares of our common stock and
bank borrowings pursuant to our Senior Credit Facility. In
connection with the acquisition of Pine Mountain, our lenders
increased the Senior Credit Facility borrowing base from
$500 million to $575 million.
Our principal executive offices are located at 777 Main Street,
Suite 800, Fort Worth, Texas 76102. Our telephone
number is 817.870.2601.
Recent Developments
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Private placement of
63/8
Senior Subordinated Notes |
On March 9, 2005, we completed the private offering of
$150 million of
63/8% senior
subordinated notes due 2015. The proceeds from the offering were
used to pay down our Senior Credit Facility to a balance of
$277.4 million.
1
The Exchange Offer
On March 9, 2005, we completed a private offering of the
old notes. We entered into a registration rights agreement with
the initial purchasers in the private offering of the old notes
in which we agreed, among other things, to deliver this
prospectus to you and to use our reasonable best efforts to
consummate the exchange offer within 210 days following the
date of the original issuance of the old notes. The following is
a summary of the exchange offer.
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Exchange Offer |
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We are offering to exchange new notes for old notes. |
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Expiration date |
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The exchange offer will expire at 5:00 p.m. New York City
time, on May 19, 2005, unless we decide to extend it. We do
not currently intend to extend the exchange offer. The exchange
offer must remain open for not less than thirty days (or longer
if required by applicable law) after the date notice of the
exchange offer is mailed to holders of the old notes. |
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Condition to the exchange offer |
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The registration rights agreement does not require us to accept
old notes for exchange if the exchange offer or the making of
any exchange by a holder of the old notes would violate any
applicable law or interpretation of the staff of the Securities
and Exchange Commission. The tender of a minimum aggregate
principal amount of old notes is not a condition to the exchange
offer. |
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Procedures for tendering old notes |
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To participate in the exchange offer, you must follow the
automated tender offer program, or ATOP, procedures established
by The Depository Trust Company, or DTC, for tendering notes
held in book-entry form. The ATOP procedures require that the
exchange agent receive, prior to the expiration date of the
exchange offer, a computer-generated message known as an
agents message that is transmitted through
ATOP and that DTC confirm that: |
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DTC has received instructions to exchange your old
notes; and |
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you agree to be bound by the terms of the letter of
transmittal. |
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For more information on tendering your old notes, please refer
to the sections in this prospectus entitled Exchange
Offer Terms of the Exchange Offer,
Procedures for Tendering and
Book-Entry Transfer. |
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Guaranteed delivery procedures |
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None. |
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Withdrawal of tenders |
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You may withdraw your tender of old notes at any time prior to
the expiration date. To withdraw, you must submit a notice of
withdrawal to the exchange agent using ATOP procedures before
5:00 p.m., New York City time, on the expiration date of
the exchange offer. |
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Acceptance of old notes and delivery of new notes |
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If you fulfill all conditions required for proper acceptance of
old notes, we will accept any and all old notes that you
properly tender in the exchange offer on or before
5:00 p.m., New York City time, on the expiration date. We
will return any old notes that we do not accept for exchange to
you without expense as promptly as practicable after the
expiration date. We will also deliver the new notes as promptly
as practicable after the expiration date. Please refer to |
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the section in this prospectus entitled Exchange
Offer Terms of the Exchange Offer. |
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Resale |
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We believe that the new notes issued pursuant to the exchange
offer may be offered for resale, resold and otherwise
transferred by you (unless you are an affiliate of
ours within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act so long as you are
acquiring the new notes in the ordinary course of your business
and you have not engaged in, do not intend to engage in, and
have no arrangement or understanding with any person to
participate in, a distribution of the new notes. |
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Each participating broker-dealer that receives new notes for its
own account under the exchange offer for old notes that were
acquired by the broker-dealer as a result of market-making or
other trading activity must acknowledge that it will deliver a
prospectus in connection with any resale of the new notes. See
Plan of Distribution. |
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Any holder of old notes who: |
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is our affiliate |
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does not acquire new notes in the ordinary course of
its business; or |
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exchanges old notes in the exchange offer with the
intention to participate, or for the purpose of participating,
in a distribution of new notes, |
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must, in the absence of an exemption, comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with the resale of the new notes. |
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Fees and Expenses |
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We will bear all expenses related to the exchange offer. Please
refer to the section in this prospectus entitled Exchange
Offer Fees and Expenses. |
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Use of proceeds |
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The issuance of the new notes will not provide us with any new
proceeds. We are making this exchange offer solely to satisfy
our obligations under our registration rights agreement. |
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Consequences of failure to exchange old notes |
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If you do not exchange your old notes in this exchange offer,
you will no longer be able to require us to register the old
notes under the Securities Act except in the limited
circumstances provided under our registration rights agreement.
In addition, you will not be able to resell, offer to resell or
otherwise transfer the old notes unless we have registered the
old notes under the Securities Act, or unless you resell, offer
to resell or otherwise transfer them under an exemption from the
registration requirements of, or in a transaction not subject
to, the Securities Act. |
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Tax consideration |
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We believe that the exchange of new notes for old notes should
not be an exchange or otherwise a taxable event to a holder for
United States federal income tax purposes. Please read
United States Federal Income Tax Considerations. |
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Exchange agent |
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We have appointed J.P. Morgan Trust Company, National
Association as exchange agent for the exchange offer. You should
direct questions, requests for assistance and requests for
additional copies of this prospectus (including the letter of
transmittal) to the exchange agent at the following address:
J.P. Morgan Trust Company, National Association, 600 Travis
Street, Suite 1150, Houston, Texas 77002. Eligible
institutions may make requests by facsimile at 713.216.2431. |
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Terms of the New Notes
The new notes will be identical to the old notes except that
the offer and exchange of the new notes is registered under the
Securities Act and the new notes will not have restrictions on
transfer, registration rights or provisions for additional
interest. The new notes will evidence the same debt as the old
notes, and the same indenture will govern the new note and the
old notes. When we use the term notes, we mean the
new notes together with the old notes.
The following summary contains basic information about the
new notes and is not intended to be complete. It does not
contain all the information that is important to you. For a more
complete understanding of the new notes, please refer to the
section of this document entitled Description of the New
Notes.
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Issuer |
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Range Resources Corporation. |
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Notes offered |
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$150 million aggregate principal amount of
63/8% Senior
Subordinated Notes due 2015. |
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Maturity date |
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March 15, 2015. |
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Interest payment dates |
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March 15 and September 15 of each year, commencing on
September 15, 2005. |
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Mandatory redemption |
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None. |
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Optional redemption |
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Except as otherwise described below, the new notes will not be
redeemable at our option prior to March 15, 2010.
Thereafter, the new notes will be subject to redemption at our
option, in whole or in part, at the redemption prices set forth
under the heading Description of the New Notes
Optional Redemption, plus accrued and unpaid interest
thereon to the applicable redemption date. In addition, prior to
March 15, 2008, we may, at our option, on any one or more
occasions, redeem up to 35% of the original aggregate principal
amount of the notes at a redemption price equal to 106.375% of
the principal amount thereof, plus accrued and unpaid interest,
if any, to the redemption date, with all or a portion of the net
proceeds of public sales of equity interests of the Company;
provided that at least 65% of the original aggregate principal
amount of the notes remains outstanding immediately after the
occurrence of such redemption. See Description of the New
Notes Optional Redemption. |
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Change of control |
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Upon a Change of Control, you as a holder of the
notes will have the right to require us to make an offer to
repurchase all or a portion of the notes at a purchase price of
101% of their aggregate principal amount, plus accrued and
unpaid interest, if any, to the date of repurchase. Our Senior
Credit Facility prohibits us from repurchasing any notes
pursuant to a change of control offer prior to the repayment in
full of the senior debt under our credit agreement. Therefore,
if a change of control were to occur, there can be no assurance
that we or the subsidiary guarantors will have the financial
resources or be permitted under the terms of our or their
indebtedness to repurchase the notes. If any event of
default occurs, the trustee or holders of at least 25% in
principal amount of the notes then outstanding may declare the
principal of and the accrued and unpaid interest on such notes
to be due and payable immediately. However, such repayment would
be subject to the subordination provisions in our Indenture. See
Description |
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of the New Notes Subordination and
Repurchase at the Option of
Holders Change of Control, and
Events of Default and Remedies. |
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Ranking |
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The new notes will be general, unsecured obligations, will be
subordinated in right of payment to our senior debt, which
includes borrowings under our Senior Credit Facility and any
other permitted indebtedness which does not expressly provide
that it is on a parity with or subordinated in right of payment
to the new notes. The new notes and the old notes will
constitute a single class of securities under the Indenture. See
Capitalization and Description of the New
Notes Subordination. |
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Subsidiary guarantees |
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Our payment obligations under the new notes will be jointly,
severally and unconditionally guaranteed on a senior
subordinated basis by each of our restricted subsidiaries and
any future restricted subsidiaries. The guarantees will be
subordinated to senior debt of the subsidiary guarantors to the
same extent and in the same manner as the new notes are
subordinated to senior debt. See Description of the New
Notes Guarantees. |
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Certain covenants |
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The new notes will be issued pursuant to the same Indenture as
the old notes. This Indenture contains certain covenants that
will, among other things, limit the ability of us and our
restricted subsidiaries to incur additional indebtedness and
issue disqualified stock, pay dividends, make distributions,
make investments, make certain other restricted payments, enter
into certain transactions with affiliates, dispose of certain
assets, incur liens securing indebtedness of any kind (other
than permitted liens) and engage in mergers and consolidations.
See Description of the New Notes Certain
Covenants. |
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Transfer restrictions; absence of a public market for the new
notes |
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The new notes generally will be freely transferable, but will
also be new securities for which there is no existing market. We
cannot assure you as to the development or liquidity of any
market for trading. We do not intend to apply for a listing of
the new notes on any securities exchange or any automated dealer
quotation system. |
6
Risk Factors
You should carefully consider all of the information in this
prospectus. In particular, you should evaluate the specific risk
factors set forth under Risk Factors, beginning on
page 9, for a discussion of risks involved with an
investment in the new notes.
Ratio of Earnings to Fixed Charges
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Year Ended December 31, | |
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2000 | |
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2001 | |
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Ratio of earnings to fixed charges
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1.9 |
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1.5 |
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1.9 |
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3.2 |
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3.8 |
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For purposes of calculating the ratio of earnings to fixed
charges:
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fixed charges represent interest expense,
amortization of debt costs and the portion of rental expense
representing the interest factor, and |
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earnings represent the aggregate of income from continuing
operations and fixed charges. |
7
RISK FACTORS
You should carefully consider and evaluate all the
information included or incorporated by reference in this
prospectus, including the risks described below, before you
decide to participate in the exchange offer. Our business,
financial condition and results of operations could be
materially adversely affected by any of these risks. The trading
price of the notes could decline, and you may lose all or part
of your investment. The risks described below are not the only
ones facing our company. Additional risks not presently known to
us or that we currently deem immaterial individually or in the
aggregate may also impair our business operations.
This prospectus and the documents incorporated by reference
also contain forward-looking statements that involve risks and
uncertainties, some of which are described in the documents
incorporated by reference in this prospectus. Our actual results
could differ materially from those anticipated in these
forward-looking statements as a result of various factors,
including the risks and uncertainties faced by us described
below or incorporated by reference in this prospectus.
Risks related to our business
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Volatility of oil and natural gas prices significantly
affects our cash flow and capital resources and could hamper our
ability to produce oil and gas economically |
Oil and natural gas prices are volatile, and an extended decline
in prices would adversely affect our profitability and financial
condition.
The oil and natural gas industry typically is cyclical, and
prices for oil and natural gas can be highly volatile.
Historically, the industry has experienced severe downturns
characterized by oversupply and/or weak demand. For example, in
1998 and early 1999, oil and natural gas prices declined, which
contributed to the substantial losses we reported in those
years. By early 2001, oil and natural gas prices reached levels
above historical norms. Prices declined in the second half of
2001 but have risen steadily since mid-2002. Recent oil and
natural gas prices are at historic highs with oil prices
recently reaching $56 per barrel and natural gas prices
reaching $10 per mcf in some markets. These record oil and
natural gas prices have contributed to our positive earnings
over the last 18-24 months. However, long-term supply and
demand for oil and natural gas is uncertain and subject to a
myriad of factors including technology, geopolitics, weather
patterns and economics.
Many factors affect oil and natural gas prices including general
economic conditions, consumer preferences, discretionary
spending levels, interest rates and the availability of capital
to the industry. Decreases in oil and natural gas prices from
current levels could adversely affect our revenues, net income,
cash flow and proved reserves. Significant and prolonged price
decreases could have a material adverse effect on our operations
and limit our ability to fund capital expenditures. Without the
ability to fund capital expenditures, we may be unable to
replace production.
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Hedging transactions may limit our potential gains and
involve other risks |
To manage our exposure to price risk, we enter into hedging
arrangements from time to time with respect to a portion of our
future production. The goal of these hedges is to lock in prices
so as to limit volatility and increase the predictability of
cash flow. These transactions limit our potential gains if oil
and natural gas prices rise above the price established by the
hedge. For example, at December 31, 2004, we were party to
hedging arrangements covering 19.7 Bcf and 0.6 million
barrels of oil and 0.2 million barrels of NGLs. We also had
collars covering 37.8 Bcf of gas and 2.8 million
barrels of oil. The hedges fair value was a pre-tax loss
of $71.9 million. If oil and natural gas prices continue to
rise, we could be subject to margin calls.
In addition, hedging transactions may expose us to the risk of
financial loss in certain circumstances, including instances in
which:
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our production is less than expected; |
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the counterparties to our futures contracts fail to perform
under the contracts; or |
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a sudden, unexpected event materially impacts oil or natural gas
prices or the relationship between the hedged price index and
the oil and gas sales price. |
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Information concerning our reserves and future net reserve
estimates is uncertain |
There are numerous uncertainties inherent in estimating
quantities of proved oil and natural gas reserves and their
values, including many factors beyond our control. Estimates of
proved undeveloped reserves, which comprise a significant
portion of our reserves, are by their nature uncertain. Although
we believe these estimates are reasonable, actual production,
revenues and costs to develop expenditures will likely vary from
estimates, and these variances could be material.
The accuracy of any reserve estimate is a function of the
quality of available data, engineering and geological
interpretation and judgment, assumptions used regarding
quantities of oil and natural gas in place, recovery rates and
future prices for oil and natural gas. Actual prices,
production, development expenditures, operating expenses and
quantities of recoverable oil and natural gas reserves will vary
from those assumed in our estimates, and such variances may be
material. Any variance in the assumptions could materially
affect the estimated quantity and value of the reserves.
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If oil and natural gas prices decrease or exploration
efforts are unsuccessful, we may be required to take additional
write-downs of our oil and natural gas properties |
In the past, we have been required to write down the carrying
value of our oil and natural gas properties, and there is a risk
that we will be required to take additional write-downs in the
future. This could occur when oil and natural gas prices are low
or if we have downward adjustments to our estimated proved
reserves, increases in our estimates of operating or development
costs or deterioration in our exploration results.
Accounting rules require that the carrying value of oil and
natural gas properties be periodically reviewed for possible
impairment. Impairment is recognized when the book
value of a proven property is greater than the expected
undiscounted future cash flows from that property and on acreage
when conditions indicate the carrying value is not recoverable.
We may be required to write down the carrying value of a
property based on oil and natural gas prices at the time of the
impairment review, as well as a continuing evaluation of
development results, production data, economics and other
factors. While an impairment charge which reflects our long-term
ability to recover on a prior investment does not impact cash or
cash flow from operating activities, it reduces our earnings and
increases our leverage ratios.
For example, based primarily on the poor performance of certain
properties acquired in 1997 and 1998 and significantly lower oil
and natural gas prices, we recorded impairments of
$215.0 million in 1998 and $29.9 million in 1999. At
year-end 2001, we recorded an impairment of $31.1 million
due to year-end prices. At year-end 2004, we recorded an
impairment of $3.6 million on an offshore property due to
hurricane damage and related production declines.
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Our business is subject to operating hazards and
environmental regulations that could result in substantial
losses or liabilities |
Oil and natural gas operations are subject to many risks,
including well blowouts, craterings and explosions,
uncontrollable flows of oil, natural gas or well fluids, fires,
formations with abnormal pressures, pipelines ruptures or
spills, pollution, releases of toxic natural gas and other
environmental hazards and risks. If any of these hazards occur,
we could sustain substantial losses as a result of:
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injury or loss of life; |
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severe damage to or destruction of property, natural resources
and equipment; |
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pollution or other environmental damage; |
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clean-up responsibilities; |
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regulatory investigations and penalties; and/or |
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suspension of operations. |
Our current and former operations are subject to numerous and
increasingly strict federal, state and local laws, regulations
and enforcement policies relating to the environment. We may
incur significant costs and liabilities in complying with
existing or future environmental laws, regulations and
enforcement policies and may incur costs arising out of property
damage or injuries to employees and other persons. These costs
may result from our current and former operations and even may
be caused by previous owners of property we own or lease. Any
past, present or future failure by us to completely comply with
environmental laws, regulations and enforcement policies could
cause us to incur substantial fines, sanctions or liabilities
from cleanup costs or other damages. Incurrence of those costs
or damages could reduce or eliminate funds available for
exploration, development or acquisitions or cause us to incur
losses.
We maintain insurance against some, but not all, of these
potential risks and losses. We may elect not to obtain insurance
if we believe that the cost of available insurance is excessive
relative to the risks presented. In addition, pollution and
environmental risks generally are not fully insurable. If a
significant accident or other event occurs that is not fully
covered by insurance, it could have a material adverse affect on
our financial condition and results of operations.
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We are subject to financing and interest rate exposure
risks |
Our business and operating results can be harmed by factors such
as the availability, terms of and cost of capital, increases in
interest rates or a reduction in credit rating. These changes
could cause our cost of doing business to increase, limit our
ability to pursue acquisition opportunities and place us at a
competitive disadvantage. For example, at December 31,
2004, approximately 40% of our debt is at fixed interest rates
with the remaining 60% subject to variable interest rates.
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Some of our current and potential competitors have greater
resources than we have and we may not be able to successfully
compete in acquiring, exploring and developing new
properties |
We face competition in every aspect of our business, including,
but not limited to, acquiring reserves and leases, obtaining
goods, services and employees needed to operate and manage our
business and marketing oil and natural gas. Competitors include
multinational oil companies, independent production companies
and individual producers and operators. Many of our competitors
have greater financial and other resources than we do.
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The oil and natural gas industry is subject to extensive
regulation |
The oil and natural gas industry is subject to various types of
regulations in the United States by local, state and federal
agencies. Legislation affecting the industry is under constant
review for amendment or expansion, frequently increasing our
regulatory burden. Numerous departments and agencies, both state
and federal, are authorized by statute to issue rules and
regulations binding on participants in the oil and natural gas
industry. Compliance with such rules and regulations often
increases our cost of doing business and, in turn, decreases our
profitability.
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Acquisitions are subject to the risks and uncertainties of
evaluating reserves and potential liabilities and may be
disruptive and difficult to integrate into our business |
We could be subject to significant liabilities related to our
acquisitions. It generally is not feasible to review in detail
every individual property included in an acquisition.
Ordinarily, a review is focused on higher valued properties.
However, even a detailed review of all properties and records
may not reveal existing or potential problems, nor will it
permit us to become sufficiently familiar with the properties to
assess fully their deficiencies and capabilities. We do not
always inspect every well we acquire, and environmental
problems, such as groundwater contamination, are not necessarily
observable even when an inspection is performed.
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For example, in 1997 we consummated a large acquisition which
proved extremely disappointing. Production from the acquired
properties fell more rapidly than anticipated and further
development results were far below the results we had originally
projected. The poor production performance of these properties
resulted in material downward reserve revisions. We cannot
assure you that our recent and/or future acquisition activity
will not result in similar disappointing results.
In addition, there is intense competition for acquisition
opportunities in our industry. Competition for acquisitions may
increase the cost of, or cause us to refrain from, completing
acquisitions. Our strategy of completing acquisitions is
dependent upon, among other things, our ability to obtain debt
and equity financing and, in some cases, regulatory approvals.
Our ability to pursue our acquisition strategy may be hindered
if we are not able to obtain financing on terms acceptable to us
or regulatory approvals.
Acquisitions often pose integration risks and difficulties. In
connection with recent and future acquisitions, the process of
integrating acquired operations into our existing operations may
result in unforeseen operating difficulties and may require
significant management attention and financial resources that
would otherwise be available for the ongoing development or
expansion of existing operations. Possible future acquisitions
could result in our incurring additional debt, contingent
liabilities, expenses, and diversion of resources all of which
could have a material adverse effect on our financial condition
and operating results.
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Our success depends on key members of our management and
our ability to attract and retain experienced technical and
other professional personnel |
Our success is highly dependent on our senior management
personnel, none of which are currently subject to an employment
contract. The loss of one or more of these individuals could
have a material adverse effect on our business. Furthermore,
competition for experienced technical and other professional
personnel is intense. If we cannot retain our current personnel
or attract additional experienced personnel, our ability to
compete could be adversely affected.
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Our future success depends on our ability to replace
reserves that we produce |
Because the rate of production from oil and natural gas
properties generally declines as reserves are depleted, our
future success depends upon our ability to economically find or
acquire and produce additional oil and natural gas reserves.
Except to the extent that we acquire additional properties
containing proved reserves, conduct successful exploration and
development activities or, through engineering studies, identify
additional behind-pipe zones or secondary recovery reserves, our
proved reserves will decline materially as reserves are
produced. Future oil and natural gas production is, therefore,
highly dependent upon our level of success in acquiring or
finding additional reserves that are economically recoverable.
We cannot assure you that we will be able to find and develop or
acquire additional reserves at an acceptable cost.
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A portion of our business is subject to special risks
related to offshore operations generally and in the Gulf of
Mexico specifically |
Offshore operations are subject to a variety of operating risks
specific to the marine environment, such as capsizing,
collisions and damage or loss from hurricanes or other adverse
weather conditions. These conditions can cause substantial
damage to facilities and interrupt production. As a result, we
could incur substantial liabilities that could reduce or
eliminate the funds available for exploration, development or
leasehold acquisitions, or result in loss of equipment and
properties.
Production of reserves from reservoirs in the Gulf of Mexico
generally declines more rapidly than from reservoirs in many
other producing regions of the world. This results in recovery
of a relatively higher percentage of reserves from properties in
the Gulf of Mexico during the initial few years of production.
As a result, reserve replacement needs from new prospects are
greater and require us to incur significant capital expenditure
to replace production.
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New technologies may cause our current exploration and
drilling methods to become obsolete |
The oil and natural gas industry is subject to rapid and
significant advancements in technology, including the
introduction of new products and services using new
technologies. As competitors use or develop new technologies, we
may be placed at a competitive disadvantage, and competitive
pressures may force us to implement new technologies at a
substantial cost. In addition, competitors may have greater
financial, technical and personnel resources that allow them to
enjoy technological advantages and may in the future allow them
to implement new technologies before we can. One or more of the
technologies that we currently use or that we may implement in
the future may become obsolete. We cannot be certain that we
will be able to implement technologies on a timely basis or at a
cost that is acceptable to us. If we are not able to maintain
technological advancements consistent with industry standards,
our operations and financial condition may be adversely affected.
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Our business depends on oil and natural gas transportation
facilities, some of which are owned by others |
The marketability of our oil and natural gas production depends
in part on the availability, proximity and capacity of pipeline
systems owned by third parties. The unavailability of or lack of
available capacity on these systems and facilities could result
in the shut-in of producing wells or the delay or discontinuance
of development plans for properties. Although we have some
contractual control over the transportation of our product,
material changes in these business relationships could
materially affect our operations. Federal and state regulation
of oil and natural gas production and transportation, tax and
energy policies, changes in supply and demand, pipeline
pressures, damage to or destruction of pipelines and general
economic conditions could adversely affect our ability to
produce, gather and transport oil and natural gas.
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Our financial statements are complex |
Due to accounting rules, our financial statements continue to be
complex, particularly with reference to hedging, asset
retirement obligations, stock options and the accounting for our
deferred compensation plan. We expect such complexity to
continue and possibly increase.
Risks related to the Exchange Offer and the New Notes
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If you do not properly tender your old notes, you will
continue to hold unregistered old notes and your ability to
transfer old notes will be adversely affected |
We will only issue new notes in exchange for old notes that you
timely and properly tender. Therefore, you should allow
sufficient time to ensure timely delivery of the old notes and
carefully follow the instructions on how to tender your old
notes. Neither we nor the exchange agent are required to tell
you of any defects or irregularities with respect to your tender
of the old notes.
If you do not exchange your old notes for new notes pursuant to
the exchange offer, the old notes you hold will continue to be
subject to the existing transfer restrictions. In general, you
may not offer or sell the old notes except under an exemption
from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. We do not plan to register old
notes under the Securities Act. Further, if you continue to hold
any old notes after the exchange offer is consummated, you may
not be able to sell the old notes because there will be fewer
old notes outstanding.
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Our significant indebtedness could limit our ability to
successfully operate our business and prevent us from fulfilling
our obligations under the new notes |
We are leveraged and our exploration and development program
will require substantial capital resources, estimated to range
from $250 to $300 million per year over the next three
years. The operation of our existing operations will also
require ongoing capital expenditures. In addition, if we decide
to pursue additional acquisitions, our capital expenditures will
increase both to complete such acquisitions and to explore and
develop any newly acquired properties.
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The degree to which we are leveraged could have other important
consequences, including the following:
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we may be required to dedicate a substantial portion of our cash
flows from operations to the payment of our indebtedness,
reducing the funds available for our operations; |
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a portion of our borrowings are at variable rates of interest,
making us vulnerable to increases in interest rates; |
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we may be more highly leveraged than some of our competitors,
which could place us at a competitive disadvantage; |
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our degree of leverage may make us more vulnerable to a downturn
in our business or the economy generally; |
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the terms of our existing credit arrangements and the indentures
governing the notes contain numerous financial and other
restrictive covenants which, if we fail to comply therewith, and
an event of default occurs as a result of that failure, could
have a material adverse effect on us; |
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our debt level could limit our flexibility in planning for, or
reacting to, changes in our business and the industry in which
we operate; and |
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we may have difficulties borrowing money in the future. |
Any one or more of the foregoing could adversely affect our
ability to use our cash flow from operations, or obtain
additional financing, to continue our existing operations,
including exploring and developing existing properties as
presently anticipated, to consummate acquisitions, or to explore
and develop newly acquired properties.
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Despite our current levels of indebtedness we still may be
able to incur substantially more debt. This could further
increase the risks described above |
We may be able to incur substantial additional indebtedness in
the future. The terms of the Indenture do not prohibit us from
issuing additional
63/8% Senior
Subordinated Notes or other indebtedness and the terms of the
indenture governing the
73/8% Senior
Subordinated Notes do not prohibit us from issuing additional
73/8% Senior
Subordinated Notes or other indebtedness. As of
December 31, 2004, our Senior Credit Facility permitted
borrowings of $575 million, all of which would be senior to
the notes. If new debt is added to our current debt levels, the
related risks that we now face could intensify. See
Capitalization.
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Any failure to meet our debt obligations could harm our
business, financial condition and |
results of operations
If our cash flow and capital resources are insufficient to fund
our debt obligations, we may be forced to sell assets, seek
additional equity or debt or restructure our debt. In addition,
any failure to make scheduled payments of interest and principal
on our outstanding indebtedness would likely result in a
reduction of our credit rating, which could harm our ability to
incur additional indebtedness on acceptable terms. Our cash flow
and capital resources may be insufficient for payment of
interest on and principal of our debt in the future, including
payments on the new notes, and any such alternative measures may
be unsuccessful or may not permit us to meet scheduled debt
service obligations, which could cause us to default on our
obligations and impair our liquidity.
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Your right to receive payments on the new notes is
subordinated to the rights of our senior indebtedness and
effectively subordinated to the rights of existing and future
creditors of any subsidiaries that are not guarantors on the new
notes |
Holders of our senior indebtedness will have claims that are
prior to your claims as holders of the new notes. In the event
of any distribution of our assets in any foreclosure,
dissolution, winding-up, liquidation, reorganization, or other,
bankruptcy proceeding, holders of senior indebtedness will have
prior claim to all of our assets. Holders of the new notes will
participate ratably with all holders of our senior subordinated
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indebtedness that is deemed to be of the same class as the new
notes, based upon the respective amounts owed to each holder or
creditor, in our remaining assets. In any of the foregoing
events, we cannot assure you that there will be sufficient
assets to pay amounts due on the new notes. As a result, holders
of the new notes may receive less, ratably, than holders of
senior indebtedness.
As of December 31, 2004, we had total of approximately
$423.9 million outstanding on our Senior Credit Facility.
We may incur an unlimited amount of indebtedness in the future
under the terms of the Indenture.
In addition, we conduct substantially all of our operations
through our subsidiaries and some of our subsidiaries do not
guarantee the new notes. In addition, we may be able to
designate one or more subsidiaries in the future as unrestricted
subsidiaries. As a result, holders of the new notes will be
effectively subordinated to the indebtedness and other
liabilities of any such subsidiaries, including trade creditors.
Therefore, in the event of the insolvency or liquidation of an
unrestricted subsidiary, following payment by such subsidiary of
its liabilities, such subsidiary may not have sufficient
remaining assets to make payments to us as a shareholder or
otherwise. In the event of a default by any such subsidiary
under any credit arrangement or other indebtedness, its
creditors could accelerate such debt, prior to such subsidiary
distributing amounts to us that we could have used to make
payments on the new notes.
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We may not be able to repurchase the notes |
Under the terms of the Indenture, you may require us to
repurchase all or a portion of your new notes on certain dates
or in the event of a change in control. We may not have enough
funds to pay the repurchase price on a purchase date (in which
case, we could be required to issue common stock to pay the
repurchase price). Our existing and any future credit agreements
or other debt agreements to which we become a party may provide
that our obligation to purchase or redeem the new notes would be
an event of default under such agreement. As a result, we may be
restricted or prohibited from repurchasing or redeeming the new
notes. If we are prohibited from repurchasing or redeeming the
new notes, we could seek the consent of our then-existing
lenders to repurchase or redeem the new notes or we could
attempt to refinance the borrowings that contain such
prohibition. If we are unable to obtain a consent or refinance
the debt, we could not repurchase or redeem the new notes. Our
failure to redeem tendered notes would constitute a default
under the Indenture and might constitute a default under the
terms of other indebtedness that we incur.
The term change in control is limited to certain
specified transactions and may not include other events that
might adversely affect our financial condition. Our obligation
to repurchase the new notes upon a change in control would not
necessarily afford holders of the new notes protection in the
event of a highly leveraged transaction, reorganization, merger
or similar transaction involving us.
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The notes may receive a lower rating than
anticipated |
If one or more rating agencies assigns the new notes a rating
lower than the rating expected by investors, or reduces their
rating in the future, the market price of the new notes would be
adversely affected.
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You may find it difficult to sell your new notes |
You may find it difficult to sell your new notes because an
active trading market for the new notes may not develop.
There is no existing trading market for the new notes. We do not
know the extent to which investor interest will lead to the
development of a trading market or how liquid that market might
be. As a result, the market price of the new notes could be
adversely affected.
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Federal and state fraudulent transfer laws may permit a
court to void the new notes and the guarantees and, if that
occurs, you may not receive any payments on the new notes |
The issuance of the new notes and the guarantees may be subject
to review under federal and state fraudulent transfer and
conveyance statutes. While the relevant laws may vary from state
to state, under such laws the payment of consideration will be a
fraudulent conveyance if (1) we paid the consideration with
the
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intent of hindering, delaying or defrauding creditors or
(2) we or any of our subsidiary guarantors, as applicable,
received less than reasonably equivalent value or fair
consideration in return for issuing either the new notes or a
guarantee and, in the case of (2) only, one of the
following is also true:
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we or any of our subsidiary guarantors were or was insolvent or
rendered insolvent by reason of the incurrence of the
indebtedness evidenced by the new notes; or |
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payment of the consideration left us or any of our subsidiary
guarantors with an unreasonably small amount of capital to carry
on the business; or |
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we or any of our subsidiary guarantors intended to, or believed
that we or it would, incur debts beyond our or its ability to
pay as they mature. |
If a court were to find that the issuance of the new notes or a
guarantee was a fraudulent conveyance, the court could void the
payment obligations under the new notes or such guarantee or
subordinate the new notes or such guarantee to presently
existing and future indebtedness of ours or such guarantor, or
require the holders of the new notes to repay any amounts
received with respect to the new notes or such guarantee. In the
event of a finding that a fraudulent conveyance occurred, you
may not receive any repayment on the new notes. Further, the
voidance of the new notes could result in an event of default
with respect to our other debt and that of our subsidiaries that
could result in acceleration of such debt.
Generally, an entity would be considered insolvent if at the
time it incurred indebtedness:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all its assets; or |
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the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on
its existing debts and liabilities, including contingent
liabilities, as they become absolute and mature; or |
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it could not pay its debts as they become due. |
We cannot be certain as to the standards a court would use to
determine whether or not we or the subsidiary guarantors were
solvent at the relevant time, or regardless of the standard that
a court uses, that the issuance of the new notes and the
guarantees would not be subordinated to our or any
guarantors other debt.
If the guarantees were legally challenged, any guarantee could
also be subject to the claim that, since the guarantee was
incurred for our benefit, and only indirectly for the benefit of
the guarantor, the obligations of the applicable guarantor were
incurred for less than fair consideration. A court could thus
void the obligations under the guarantees, subordinate them to
the applicable guarantors other debt or take other action
detrimental to the holders of the new notes.
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The market price of the new notes may fluctuate
significantly, which may result in losses for investors |
The market price of the new notes could be volatile. We
expect the market price of the new notes to be subject to
fluctuations as a result of a variety of factors, including
factors beyond our control. These include:
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changes in oil and natural gas prices; |
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variations in quarterly drilling, recompletions, acquisitions
and operating results; |
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changes in financial estimates by securities analysts; |
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changes in market valuations of comparable companies; |
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additions or departures of key personnel; and |
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future incurrence of more debt. |
We may fail to meet expectations of the market or of securities
analysts at some time in the future, and the market price of the
new notes could decline as a result.
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EXCHANGE OFFER
We sold the old notes on March 9, 2005 pursuant to a
purchase agreement dated March 2, 2005, by and among us and
the initial purchasers named therein. The old notes were
subsequently offered by the initial purchasers to qualified
institutional buyers pursuant to Rule 144A under the
Securities Act and outside the United States to persons other
than U.S. persons in reliance on Regulation S under
the Securities Act.
Purpose and Effect of the Exchange Offer
In connection with the issuance of the old notes, we entered
into a registration rights agreement under which we agreed to:
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within 90 days after the issue date of the old notes, file
a registration statement with the Securities and Exchange
Commission with respect to a registered offer to exchange the
old notes for new notes of ours having terms substantially
identical in all material respects to the old notes except with
respect to transfer restrictions; |
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use our reasonable best efforts to cause the registration
statement to be declared effective under the Securities Act
within 180 days after the issue date of the old notes; |
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use our reasonable best efforts to consummate the exchange offer
within 210 days after the issue date of the old notes; |
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keep the exchange offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of
the exchange offer is mailed to the holders of the old
notes; and |
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to file a shelf registration for the resale of the old notes if
we cannot consummate the exchange offer within the time period
listed above and certain other circumstances described in this
prospectus. |
For each old note tendered to us pursuant to the exchange offer,
we will issue to the holder of the old note a new note having a
principal amount equal to that of the surrendered old note.
Interest on each new note will accrue from the last date upon
which we paid interest on the old note, unless no interest has
been paid on the old note, in which case, interest shall be paid
from the original issuance date of the old note.
Under existing interpretations of the staff of the Securities
and Exchange Commission issued to third parties, the new notes
will be freely transferable by holders other than our affiliates
after the exchange offer without further registration under the
Securities Act if the holder of the new notes represents to us
in the exchange offer that it is acquiring the new notes in the
ordinary course of its business, that it has no arrangement or
understanding with any person to participate in the distribution
of the new notes and that it is not our affiliate, as such terms
are interpreted by the Securities and Exchange Commission;
provided, however, that broker-dealers receiving new
notes in the exchange offer will have a prospectus delivery
requirement with respect to resales of such new notes. The staff
of the Securities and Exchange Commission has taken the position
in interpretations issued to third parties that participating
broker-dealers may fulfill their prospectus delivery
requirements with respect to new notes (other than a resale of
an unsold allotment from the original sale of the old notes)
with the prospectus contained in the registration statement
covering the new notes. Each broker-dealer that receives new
notes for its own account in exchange for old notes, where such
old notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with
any resale of such new notes. See Plan of
Distribution.
Under the registration rights agreement, we are required to
allow participating broker-dealers and other persons, if any,
with similar prospectus delivery requirements to use the
prospectus contained in the registration statement in connection
with the resale of the new notes for 180 days following the
effective date of such registration statement (or such shorter
period during which participating broker-dealers are required by
law to deliver such prospectus).
A holder of old notes (other than certain specified holders) who
wishes to exchange old notes for new notes in the exchange offer
will be required to represent that any new notes to be received
by it will be
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acquired in the ordinary course of its business and that at the
time of the commencement of the exchange offer it has no
arrangement or understanding with any person to participate in
the distribution (within the meaning of the Securities Act) of
the new notes and that it is not our affiliate, as
defined in Rule 405 of the Securities Act, or if it is an
affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the
extent applicable.
In the event that:
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any change of law or in applicable interpretations thereof by
the staff of the Securities and Exchange Commission do not
permit us to effect an exchange offer; |
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for any other reason the exchange offer is not consummated
within 210 days after the issue date of the old notes; |
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any holder of old notes, other than the initial purchasers,
notifies us prior to the 20th business day following the
consummation of the exchange offer it is prohibited by law or
the applicable interpretations of the staff of the Securities
and Exchange Commission from participating in the exchange offer; |
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in the case of any holder of old notes who participates in the
exchange offer, such holder does not receive new notes on the
date of the exchange that may be sold without restriction under
state and federal securities laws (other than due solely to the
status of such holders as an affiliate of ours within the
meaning of the Securities Act); or |
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an initial purchaser so requests with respect to old notes or
new notes privately issued in exchange for old notes that have,
or that are reasonably likely to be determined to have, the
status of unsold allotments in an initial distribution; |
then we will, at our cost, use our reasonable best efforts to
file and use our reasonable best efforts to have declared
effective a shelf registration statement covering resales of the
old notes and any such privately issued new notes on or prior to
the later of 180 calendar days after the issue date of the old
notes or 90 days after the shelf registration statement is
required to be filed with the Securities and Exchange Commission.
We will use our reasonable best efforts to keep the shelf
registration statement effective until two years after the issue
date of the old notes, subject to certain exceptions. We will,
if we file a shelf registration statement, among other things,
provide to each holder for whom such shelf registration
statement was filed copies of the prospectus which is a part of
the shelf registration statement, notify each such holder when
the shelf registration statement has become effective and take
certain other actions as are required to permit unrestricted
resales of the old notes or the new notes, as the case may be. A
holder selling such old notes or new notes pursuant to the shelf
registration statement generally would be required to be named
as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions
of the registration rights agreement which are applicable to
such holder (including certain indemnification obligations).
The registration rights agreement obligates us to pay additional
cash interest on the principal amount of the applicable old
notes and new notes (in addition to the stated interest on the
old notes and the new notes) upon the occurrence of any of the
following events:
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if the registration statement of which this prospectus forms a
part is not declared effective by the Securities and Exchange
Commission on or prior to the 180th day after the issue date of
the old notes (the effectiveness deadline); |
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if the exchange offer is not consummated on or prior to the
earlier of the 30th business day following the effectiveness
deadline or the 210th day following the issue date of the old
notes; |
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if we are obligated to file the shelf registration statement, it
is not declared effective by the later of 180 calendar days
after the issue date of the old notes or 90 days after the
shelf registration statement is required to be filed with the
Securities and Exchange Commission; or |
17
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after the shelf registration statement is declared effective it
ceases to be effective or usable (subject to some exceptions); |
from and including the date on which any registration default
shall occur to, but excluding, the earlier of (1) the date
on which all registration defaults have been cured or
(2) the date on which all the old notes and the new notes
otherwise become freely transferable by holders other than our
affiliates without further registration under the Securities
Act. The additional cash interest will accrue at a rate of
..25% per annum during the 90 day period immediately
following the occurrence of a registration default and shall
increase by an additional .25% per annum with respect to
each subsequent 90 day period, up to a maximum amount of
additional interest of .50% per annum.
Resale of New Notes
Based on no action letters of the staff of the Securities and
Exchange Commission issued to third parties, we believe that new
notes may be offered for resale, resold and otherwise
transferred by you without further compliance with the
registration and prospectus delivery provisions of the
Securities Act if:
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you are not our affiliate within the meaning of
Rule 405 under the Securities Act; |
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the new notes are acquired in the ordinary course of your
business; and |
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you do not intend to participate in the distribution of the new
notes. |
The staff of the Securities and Exchange Commission, however,
has not considered the exchange offer for the new notes in the
context of a no action letter, and the staff of the Securities
and Exchange Commission may not make a similar determination as
in the no action letters issued to these third parties.
If you tender in the exchange offer with the intention of
participating in any manner in a distribution of the new notes:
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you cannot rely on such interpretations by the Securities and
Exchange Commission staff issued to third parties; and |
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you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction. |
Unless an exemption from registration is otherwise available,
any security holder intending to distribute new notes should be
covered by an effective registration statement under the
Securities Act. This registration statement and the prospectus
should contain the selling security holders information
required by Item 507 of Regulation S-K under the
Securities Act. This prospectus may be used for an offer to
resell, resale or other retransfer of new notes only as
specifically described in this prospectus. Only broker-dealers
that acquired the old notes as a result of market-making
activities or other trading activities may participate in the
exchange offer. Each broker-dealer that receives new notes for
its own account in exchange for old notes, where such old notes
were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the
new notes. Please read the section captioned Plan of
Distribution for more details regarding the transfer of
new notes.
Terms of the Exchange Offer
Subject to the terms and conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange
any old notes properly tendered and not withdrawn prior to the
expiration date. We will issue new notes in principal amount
equal to the principal amount of old notes surrendered under the
exchange offer. Old notes may be tendered only for new notes and
only in integral multiples of $1,000.
The exchange offer is not conditioned upon any minimum aggregate
principal amount of old notes being tendered for exchange.
As of the date of this prospectus, $150 million aggregate
principal amount of the old notes is outstanding. This
prospectus and the letter of transmittal are being sent to all
registered holders of old notes. There will be
18
no fixed record date for determining registered holders of old
notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the
provisions of the registration rights agreement, the applicable
requirements of the Securities Act and the Securities Exchange
Act of 1934 and the rules and regulations of the Securities and
Exchange Commission. Old notes that the holders thereof do not
tender for exchange in the exchange offer will remain
outstanding and continue to accrue interest. These old notes
will be entitled to the rights and benefits such holders have
under the Indenture relating to the old notes and the
registration rights agreement.
We will be deemed to have accepted for exchange properly
tendered old notes when we have given oral or written notice of
the acceptance to the exchange agent and complied with the
applicable provisions of the registration rights agreement. The
exchange agent will act as agent for the tendering holders for
the purposes of receiving the new notes from us.
If you tender old notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the
letter of transmittal, transfer taxes with respect to the
exchange of old notes. We will pay all charges and expenses,
other than certain applicable taxes described below, in
connection with the exchange offer. It is important that you
read the section labeled Fees and
Expenses for more details regarding fees and expenses
incurred in the exchange offer.
We will return any old notes that we do not accept for exchange
for any reason without expense to their tendering holder
promptly after the expiration or termination of the exchange
offer.
Each broker-dealer that receives new notes for its own account
in exchange for old notes, where such old notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such new notes.
See Plan of Distribution. Any broker-dealer who
acquired the old notes directly from us and holds old notes that
have, or are reasonably likely to have, the status of unsold
allotments in an initial distribution will not receive new notes
in the Exchange Offer, but rather will receive new notes
privately issued in exchange for such old notes.
Expiration Date
The exchange offer will expire at 5:00 p.m., New York City
time, on May 19, 2005 unless, in our sole discretion, we
extend it.
Extensions, Delays in Acceptance, Termination or Amendment
We expressly reserve the right, at any time or various times, to
extend the period of time during which the exchange offer is
open. We may delay acceptance of any old notes by giving oral or
written notice of such extension to their holders if the
exchange offer is so extended. During any such extensions, all
old notes previously tendered will remain subject to the
exchange offer, and we may accept them for exchange upon the
expiration of the extended exchange offer.
In order to extend the exchange offer, we will notify the
exchange agent orally or in writing of any extension. We will
notify the registered holders of old notes of the extension no
later than 9:00 a.m., New York City time, on the business
day after the previously scheduled expiration date.
If any of the conditions described below under
Conditions to the Exchange Offer have
not been satisfied, we reserve the right, in our sole discretion
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to delay accepting for exchange any old notes, |
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to extend the exchange offer, or |
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to terminate the exchange offer, |
by giving oral or written notice of such delay, extension or
termination to the exchange agent. However, we may not delay
acceptance for exchange of any old notes after the expiration of
the exchange offer. Subject to
19
the terms of the registration rights agreement, we also reserve
the right to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or
amendment will be followed promptly by oral or written notice
thereof to the registered holders of old notes. If we amend the
exchange offer in a manner that we determine to constitute a
material change, we will promptly disclose such amendment by
means of a prospectus supplement. The supplement will be
distributed to the registered holders of the old notes.
Depending upon the significance of the amendment and the manner
of disclosure to the registered holders, we will extend the
exchange offer if the exchange offer would otherwise expire
during such period.
Conditions to the Exchange Offer
We will not be required to accept for exchange, or exchange any
new notes for, any old notes if the exchange offer, or the
making of any exchange by a holder of old notes, would violate
applicable law or any applicable interpretation of the staff of
the Securities and Exchange Commission. Similarly, we may
terminate the exchange offer as provided in this prospectus
before accepting old notes for exchange in the event of such a
potential violation.
In addition, we will not be obligated to accept for exchange the
old notes of any holder that has not made to us the
representations described under Purpose and
Effect of the Exchange Offer, Procedures
for Tendering and Plan of Distribution and
such other representations as may be reasonably necessary under
applicable Securities and Exchange Commission rules, regulations
or staff interpretations to allow us to use an appropriate form
to register the new notes under the Securities Act.
We expressly reserve the right to amend or terminate the
exchange offer, and to reject for exchange any old notes not
previously accepted for exchange, upon the occurrence of any of
the conditions to the exchange offer specified above. We will
give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the old notes as
promptly as practicable.
These conditions are for our sole benefit, and we may assert
them or waive them in whole or in part at any time prior to or
on the expiration of the offer in our sole discretion. If we
fail at any time to exercise any of these rights, this failure
will not mean that we have waived our rights. Each such right
will be deemed an ongoing right that we may assert at any time
prior to or on the expiration of the offer.
In addition, we will not accept for exchange any old notes
tendered, and will not issue new notes in exchange for any such
old notes, if at such time any stop order has been threatened or
is in effect with respect to the registration statement of which
this prospectus constitutes a part or the qualification of the
Indenture relating to the new notes under the
Trust Indenture Act of 1939.
Procedures for Tendering
To participate in the exchange offer, you must properly tender
your old notes to the exchange agent as described below. We will
only issue new notes in exchange for old notes that you timely
and properly tender. Therefore, you should allow sufficient time
to ensure timely delivery of the old notes, and you should
follow carefully the instructions on how to tender your old
notes. It is your responsibility to properly tender your old
notes. We have the right to waive any defects. However, we are
not required to waive defects, and neither we nor the exchange
agent is required to notify you of defects in your tender.
If you have any questions or need help in exchanging your old
notes, please call the exchange agent whose address and phone
number are described in the letter of transmittal.
All of the old notes were issued in book-entry form, and all of
the old notes are currently represented by a global certificate
held by Cede & Co. for the account of DTC. We have
confirmed with DTC that the old notes may be tendered using
ATOP. The exchange agent will establish an account with DTC for
purposes of the exchange offer promptly after the commencement
of the exchange offer, and DTC participants may electronically
transmit their acceptance of the exchange offer by causing DTC
to transfer their old notes to the
20
exchange agent using the ATOP procedures. In connection with the
transfer, DTC will send an agents message to
the exchange agent. The agents message will state that DTC
has received instructions from the participant to tender old
notes and that the participant agrees to be bound by the terms
of the letter of transmittal.
By using the ATOP procedures to exchange old notes, you will not
be required to deliver a letter of transmittal to the exchange
agent. However, you will be bound by its terms just as if you
had signed it.
There is no procedure for guaranteed late delivery of the old
notes.
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Determinations under the exchange offer |
We will determine in our sole discretion all questions as to the
validity, form, eligibility, time of receipt, acceptance of
tendered old notes and withdrawal of tendered old notes. Our
determinations will be final and binding. We reserve the
absolute right to reject any old notes not properly tendered or
any old notes our acceptance of which would, in the opinion of
our counsel, be unlawful. We also reserve the rights to waive
any defects, irregularities or conditions of tender as to
particular old notes. Our interpretation of the terms and
conditions of the exchange offer, including the instructions in
the letter of transmittal, will be final and binding on all
parties. Unless waived, all defects or irregularities in
connection with tenders of old notes must be cured within such
time as we shall determine. Although we intend to notify holders
of defects or irregularities with respect to tenders of old
notes, neither we, the exchange agent nor any other person will
incur any liability for failure to give such notification.
Tenders of old notes will not be deemed made until such defects
or irregularities have been cured or waived. Any old notes
received by the exchange agent that are not properly tendered
and as to which the defects or irregularities have not been
cured or waived will be returned to the tendering holder as soon
as practicable following the expiration date.
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When we will issue new notes |
In all cases, we will issue new notes for old notes that we have
accepted for exchange under the exchange offer only after the
exchange agent timely receives:
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a book-entry confirmation of such old notes into the exchange
agents account at DTC; and |
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a properly transmitted agents message. |
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Return of old notes not accepted or exchanged |
If we do not accept any tendered old notes for exchange or if
old notes are submitted for a greater principal amount than the
holder desires to exchange, the unaccepted or non-exchanged old
notes will be returned without expense to their tendering
holder. Such non-exchanged old notes will be credited to an
account maintained with DTC. These actions will occur promptly
after the expiration or termination of the exchange offer.
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Your representations to us |
By agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
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any new notes that you receive will be acquired in the ordinary
course of your business; |
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you have no arrangement or understanding with any person or
entity to participate in the distribution of the new notes
within the meaning of the Securities Act; |
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if you are not a broker-dealer that you are not engaged in and
do not intend to engage in the distribution of the new notes; |
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if you are a broker-dealer that will receive new notes for your
own account in exchange for old notes, you acquired those notes
as a result of market-making activities or other trading
activities and you will deliver a prospectus, as required by
law, in connection with any resale of such new notes; and |
21
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you are not our affiliate, as defined in
Rule 405 of the Securities Act. |
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may
withdraw your tender at any time prior to the expiration date.
For a withdrawal to be effective you must comply with the
appropriate ATOP procedures. Any notice of withdrawal must
specify the name and number of the account at DTC to be credited
with withdrawn old notes and otherwise comply with the ATOP
procedures.
We will determine all questions as to the validity, form,
eligibility and time of receipt of notice of withdrawal. Our
determination shall be final and binding on all parties. We will
deem any old notes so withdrawn not to have been validly
tendered for exchange for purposes of the exchange offer.
Any old notes that have been tendered for exchange but that are
not exchanged for any reason will be credited to an account
maintained with DTC for the old notes. This crediting will take
place as soon as practicable after withdrawal, rejection of
tender or termination of the exchange offer. You may retender
properly withdrawn old notes by following the procedures
described under Procedures for Tendering
above at any time on or prior to the expiration date.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make
additional solicitation by telegraph, telephone or in person by
our officers and regular employees and those of our affiliates.
We have not retained any dealer-manager in connection with the
exchange offer and will not make any payments to broker-dealers
or others soliciting acceptances of the exchange offer. We will,
however, pay the exchange agent reasonable and customary fees
for its services and reimburse it for its related reasonable
out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with
the exchange offer. They include:
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Securities and Exchange Commission registration fees; |
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fees and expenses of the exchange agent and trustee; |
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accounting and legal fees and printing costs; and |
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related fees and expenses. |
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the
exchange of old notes under the exchange offer. The tendering
holder, however, will be required to pay any transfer taxes,
whether imposed on the registered holder or any other person, if
a transfer tax is imposed for any reason other than the exchange
of old notes under the exchange offer.
Consequences of Failure to Exchange
If you do not exchange new notes for your old notes under the
exchange offer, you will remain subject to the existing
restrictions on transfer of the old notes. In general, you may
not offer or sell the old notes unless they are registered under
the Securities Act or unless the offer or sale is exempt from
the registration under the Securities Act and applicable state
securities laws. Except as required by the registration rights
agreement, we do not intend to register resales of the old notes
under the Securities Act.
Accounting Treatment
We will record the new notes in our accounting records at the
same carrying value as the old notes. This carrying value is the
aggregate principal amount of the old notes, as reflected in our
accounting records on the
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date of exchange. Accordingly, we will not recognize any gain or
loss for accounting purposes in connection with the exchange
offer. The expenses of the exchange offer will be amortized over
the term of the new notes.
Other
Participation in the exchange offer is voluntary, and you should
carefully consider whether to accept. You are urged to consult
your financial and tax advisors in making your own decision on
what action to take.
We may in the future seek to acquire untendered old notes in
open market or privately negotiated transactions, through
subsequent exchange offers or otherwise. We have no present
plans to acquire any old notes that are not tendered in the
exchange offer or to file a registration statement to permit
resales of any untendered old notes.
Each broker-dealer that receives new notes for its own account
in exchange for old notes, where such old notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such new notes.
See Plan of Distribution.
23
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under
the registration rights agreement. We will not receive any cash
proceeds from the issuance of the new notes in the exchange
offer. In consideration for issuing the new notes as
contemplated by this prospectus, we will receive old notes in a
like principal amount. The form and terms of the new notes are
identical in all respects to the form and terms of the old
notes, except the offer and exchange of the new notes have been
registered under the Securities Act and the new notes will not
have restrictions on transfer, registration rights or provisions
for additional cash interest. Old notes surrendered in exchange
for the new notes will be retired and cancelled and will not be
reissued. Accordingly, the issuance of the new notes will not
result in any increase in our outstanding indebtedness.
CAPITALIZATION
The following table sets forth our capitalization as of
December 31, 2004 on an actual basis and as adjusted to
reflect the application of the estimated net proceeds from the
sale of the
63/8% Senior
Subordinated Notes on March 9, 2005. This table should be
read in conjunction with our consolidated financial statements
and related notes incorporated by reference herein.
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December 31, 2004 | |
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Actual | |
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As Adjusted(1) | |
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(Dollars in thousands) | |
Cash and cash equivalents
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$ |
18,382 |
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$ |
18,382 |
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Long-term debt:
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Senior credit facility
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423,900 |
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277,400 |
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73/8% senior
subordinated notes due 2013
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196,656 |
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196,656 |
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63/8% senior
subordinated notes due 2015
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150,000 |
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Total long-term debt
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$ |
620,556 |
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$ |
624,056 |
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Stockholders equity:
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Common stock, $.01 par value; 100,000,000 shares
authorized; 81,219,351 issued and outstanding(2)
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812 |
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812 |
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Capital in excess of par value
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707,869 |
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707,869 |
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Stock held by employee benefit trust, 1,441,751 shares at
cost
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(8,186 |
) |
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(8,186 |
) |
Retained earnings (deficit)
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(89,597 |
) |
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(89,597 |
) |
Deferred compensation
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(1,257 |
) |
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(1,257 |
) |
Other comprehensive income
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(43,301 |
) |
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(43,301 |
) |
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Total stockholders equity
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$ |
566,340 |
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$ |
566,340 |
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Total capitalization
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$ |
1,186,896 |
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$ |
1,190,396 |
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(1) |
Includes an estimated $146.5 million of net proceeds from
the sale of the
63/8% Senior
Subordinated Notes and payment of all transaction expenses. |
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(2) |
Outstanding common stock does not include options to
purchase 4,582,070 shares of common stock outstanding
under our stock option plans as of December 31, 2004. |
24
DESCRIPTION OF THE NEW NOTES
General
The form and terms of the new notes are the same as the form and
terms of the old notes, except that the offer and exchange of
the new notes have been registered under the Securities Act, and
the new notes will not bear legends restricting the transfer
thereof, will not be entitled to registration rights under the
registration rights agreement, and will not contain provisions
relating to additional interest. Range Resources Corporation
will issue the new notes under an Indenture among itself, the
Subsidiary Guarantors and J.P. Morgan Trust Company,
National Association, as trustee. The terms of the new notes
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939.
Certain terms used in this description are defined under the
subheading Certain Definitions. In this
description, the words Range Resources or the
Company refer only to Range Resources Corporation,
and any successor obligor on the notes, and not to any of its
subsidiaries. As used in this section, the term
notes refers to both old notes and new notes.
The old notes and the new notes will constitute a single class
of debt securities under the Indenture. If the exchange offer is
consummated, holders of old notes who do not exchange new notes
for their old notes will vote together with holders of the new
notes for all relevant purposes under the Indenture.
Accordingly, in determining whether the required holders have
given any notice, consent or waiver or taken any other action
permitted under the Indenture, any old notes that remain
outstanding after the exchange offer will be aggregated the new
notes and the holders of the old notes and the new notes will
vote together as a single class. All references in this
prospectus to specified percentages in aggregate principal
amount of the notes that are outstanding means, at any time
after the exchange is consummated, the percentage in aggregate
principal amount of the old notes and the new notes then
outstanding.
The following description is a summary of the provisions of the
Indenture that we believe to be material and of interest to you
and does not restate that agreement in its entirety. We
encourage you to read the Indenture because that agreement, and
not this description, will define your rights as a holder of the
new notes. A copy of the Indenture is filed as an exhibit to our
Current Report on Form 8-K filed with the Securities
Exchange Commission on March 15, 2005, and is incorporated
by reference as an exhibit hereto.
Basic Terms of the Notes
The notes
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are unsecured senior subordinated obligations of Range
Resources, subordinated in right of payment to all existing and
future Senior Debt of Range Resources in accordance with the
subordination provisions of the Indenture; |
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are jointly, severally and unconditionally guaranteed on a
senior subordinated basis by each of the Restricted Subsidiaries
of the Company and any future Restricted Subsidiary of the
Company. The obligations of the Subsidiary Guarantors under the
Guarantees will be general unsecured obligations of each of the
Subsidiary Guarantors and will be subordinated in right of
payment to all obligations of the Subsidiary Guarantors in
respect of Senior Debt; |
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are issued as new notes under the Indenture in an original
aggregate principal amount of $150 million; |
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mature on March 15, 2015; |
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bear interest commencing the date of issue at
63/8%,
payable semiannually in arrears on each March 15 and
September 15, commencing September 15, 2005 to holders
of record on the March 1 or September 1 immediately
preceding the interest payment date; and |
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bear interest on overdue principal, and, to the extent lawful,
pay interest on overdue interest, at 1.0% per annum higher
than
63/8%. |
Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
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Additional Notes
Subject to the covenants described below, the Company may issue
additional notes under the Indenture having the same terms in
all respects as the notes except that interest will accrue on
the additional notes from their date of issuance.
Any old notes not exchanged in the exchange offer, any new notes
and any additional notes would be treated as a single class for
all purposes under the Indenture and will vote together as one
class on all matters under the Indenture.
Optional Redemption
Except as otherwise described below, the new notes will not be
redeemable at the Companys option prior to March 15,
2010. Thereafter, the new notes will be subject to redemption at
the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days notice, at the
redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest thereon to the
applicable redemption date, if redeemed during the twelve-month
period beginning on July 15 of the years indicated below:
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|
|
|
|
|
|
% of Principal | |
Year |
|
Amount | |
|
|
| |
2010
|
|
|
103.188 |
% |
2011
|
|
|
102.125 |
% |
2012
|
|
|
101.063 |
% |
2013 and thereafter
|
|
|
100.000 |
% |
Prior to March 15, 2008, the Company may, at its option, on
any one or more occasions, redeem up to 35% of the original
aggregate principal amount of the new notes at a redemption
price equal to 106.375% of the principal amount thereof, plus
accrued and unpaid interest, if any, thereon to the redemption
date, with all or a portion of the net proceeds of public sales
of Equity Interests of the Company; provided that at
least 65% of the original aggregate principal amount of the new
notes remains outstanding immediately after the occurrence of
such redemption; and provided, further, that such
redemption shall occur within 60 days of the date of the
closing of the related sale of such Equity Interests.
No Mandatory Redemption or Sinking Fund
Except as set forth below under Repurchase at
the Option of Holders, the Company is not required to make
mandatory redemption or sinking fund payments with respect to
the new notes.
Guarantees
The Companys payment obligations under the new notes will
be jointly, severally and unconditionally guaranteed (the
Guarantees) by each Restricted Subsidiary of the
Company and any future Restricted Subsidiary of the Company. The
Subsidiary Guarantors shall initially be Range Energy I,
Inc., Range HoldCo, Inc., Range Production Company, Range Energy
Ventures Corporation, Gulfstar Energy, Inc., Range Energy
Finance Corporation, RB Operating Company and PMOG Holdings,
Inc. The Guarantees will be subordinated to Indebtedness of the
Subsidiary Guarantors to the same extent and in the same manner
as the notes are subordinated to the Senior Debt. Each Guarantee
by a Subsidiary Guarantor will be limited in an amount not to
exceed the maximum amount that can be guaranteed by the
applicable Subsidiary Guarantor without rendering such
Guarantee, as it relates to such Subsidiary Guarantor, voidable
under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting rights of
creditors generally.
The Indenture provides that no Subsidiary Guarantor may
consolidate with or merge with or into (whether or not such
Subsidiary Guarantor is the surviving Person), another Person
whether or not affiliated with such Subsidiary Guarantor, unless
(i) subject to the provisions of the following paragraph,
the Person
26
formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) assumes all the
obligations of such Subsidiary Guarantor pursuant to a
supplemental Indenture in form and substance reasonably
satisfactory to the Trustee in respect of the notes, the
Indenture and the Guarantees; (ii) immediately after giving
effect to such transaction, no Default or Event of Default
exists; and (iii) such transaction does not violate any of
the covenants described under the heading
Certain Covenants.
The Indenture provides that in the event of a sale or other
disposition of all or substantially all of the assets of a
Subsidiary Guarantor to a third party or an Unrestricted
Subsidiary in a transaction that does not violate any of the
covenants in the Indenture, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital
stock of a Subsidiary Guarantor, then such Subsidiary Guarantor
(in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital stock
of such Subsidiary Guarantor) or the Person acquiring the
property (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor)
will be released from and relieved of any obligations under its
Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the covenant
described under the caption Repurchase at the
Option of Holders Asset sales.
Any Subsidiary Guarantor that is designated an Unrestricted
Subsidiary in accordance with the terms of the Indenture shall
be released and relieved of its obligations under its Guarantee
and any Unrestricted Subsidiary and any newly formed or newly
acquired Subsidiary that becomes a Restricted Subsidiary will be
required to execute a Guarantee in accordance with the terms of
the Indenture.
The Company is a holding company, owns no operating assets and
has no significant operations independent of its subsidiaries.
The Guarantees are full and unconditional and joint and several,
and any subsidiaries of the Company other than the Subsidiary
Guarantors are either minor subsidiaries or indirect
subsidiaries, or both.
Subordination
The payment of principal of, premium, if any, and interest on
the notes and any other payment obligations of the Company in
respect of the notes (including any obligation to repurchase the
notes) will be subordinated in certain circumstances in right of
payment, as set forth in the Indenture, to the prior payment in
full in cash of all Senior Debt, whether outstanding on the date
of the Indenture or thereafter incurred.
Upon any payment or distribution of property or securities to
creditors of the Company in a liquidation or dissolution of the
Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or
its property, or in an assignment for the benefit of creditors
or any marshalling of the Companys assets and liabilities,
the holders of Senior Debt will be entitled to receive payment
in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt,
whether or not a claim for such interest would be allowed in
such proceeding) before the Holders of notes will be entitled to
receive any payment with respect to the notes, and until all
Obligations with respect to Senior Debt are paid in full, any
distribution to which the Holders of notes would be entitled
shall be made to the holders of Senior Debt (except in each case
that Holders of notes may receive securities that are
subordinated at least to the same extent as the notes are
subordinated to Senior Debt and any securities issued in
exchange for Senior Debt and payments made from the trust
described under Legal Defeasance and Covenant
Defeasance).
The Company may not make any payment (whether by redemption,
purchase, retirement, defeasance or otherwise) upon or in
respect of the notes (except in such subordinated securities or
from the trust described under Legal
Defeasance and Covenant Defeasance) if (i) a default
in the payment of the principal of, premium, if any, or interest
on Designated Senior Debt occurs or (ii) any other default
occurs and is continuing with respect to Designated Senior Debt
that permits, or with the giving of notice or passage of time or
both (unless cured or waived) will permit, holders of the
Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of
such default (a Payment Blockage Notice) from the
Company or the holders of any Designated Senior Debt. Cash
payments on the notes shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or
waived and
27
(b) in case of a nonpayment default, the earliest of the
date on which such nonpayment default is cured or waived, the
date on which the applicable Payment Blockage Notice is
retracted by written notice to the Trustee or 90 days after
the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Debt has
been accelerated or a default of the type described in
clause (ix) under the caption Events of
Default has occurred and is continuing. No new period of
payment blockage may be commenced unless and until 360 days
have elapsed since the date of commencement of the payment
blockage period resulting from the immediately prior Payment
Blockage Notice. No nonpayment default in respect of Designated
Senior Debt that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be,
or be made, the basis for a subsequent Payment Blockage Notice.
The Indenture further requires that the Company promptly notify
holders of Senior Debt if payment of the notes is accelerated
because of an Event of Default.
As a result of the subordination provisions described above, in
the event of a liquidation or insolvency of the Company, Holders
of notes may recover less ratably than creditors of the Company
who are holders of Senior Debt. As of December 31, 2004, we
had $423.9 million of Senior Debt outstanding, excluding
intercompany debt and trade payables. The Indenture will limit,
subject to certain financial tests, the amount of additional
Indebtedness, including Senior Debt, that the Company and its
Subsidiaries can incur. See Certain
Covenants Incurrence of indebtedness and issuance of
disqualified stock.
Repurchase at the Option of Holders
Upon the occurrence of a Change of Control, each Holder of notes
will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of
such Holders notes pursuant to the offer described below
(the Change of Control Offer) at an offer price in
cash equal to 101% of the aggregate principal amount of the
notes plus accrued and unpaid interest, if any, thereon to the
date of purchase (the Change of Control Payment).
Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offer to
repurchase the notes pursuant to the procedures required by the
Indenture and described in such notice. The Change of Control
Payment shall be made on a business day not less than
30 days nor more than 60 days after such notice is
mailed (the Change of Control Payment Date). The
Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of the notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment all the notes or
portions thereof properly tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all the
notes or portions thereof so tendered and (iii) deliver or
cause to be delivered to the Trustee the notes so accepted
together with an Officers Certificate stating the
aggregate principal amount of such notes or portions thereof
being purchased by the Company. The Paying Agent will promptly
mail to each Holder of notes so tendered the Change of Control
Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry)
to each Holder a new note equal in principal amount to any
unpurchased portion of the notes surrendered, if any;
provided that each such new note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control
Payment Date.
Except as described above with respect to a Change of Control,
the Indenture will not contain provisions that permit the
Holders of notes to require that the Company repurchase or
redeem the notes in the event of a takeover, recapitalization or
similar transaction.
The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the
28
requirements set forth in the Indenture applicable to a Change
of Control Offer made by the Company and purchases all notes (or
portions thereof) validly tendered and not withdrawn under such
Change of Control Offer.
The Credit Agreement will prohibit the Company from repurchasing
any notes pursuant to a Change of Control Offer prior to the
repayment in full of the Senior Debt under the Credit Agreement.
Moreover, the occurrence of certain change of control events
identified in the Credit Agreement will constitute a default
under the Credit Agreement. Any future Credit Facilities or
other agreements relating to the Senior Debt to which the
Company becomes a party may contain similar restrictions and
provisions. If a Change of Control were to occur, the Company
may not have sufficient available funds to pay the Change of
Control Payment for all notes that might be delivered by Holders
of notes seeking to accept the Change of Control Offer after
first satisfying its obligations under the Credit Agreement or
other agreements relating to Senior Debt, if accelerated. The
failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Payment when due will
constitute a Default under the Indenture and will otherwise give
the Trustee and the Holders of notes the rights described under
Events of Default and Remedies.
The definition of Change of Control includes a phrase relating
to the sale, lease, transfer, conveyance or other disposition of
all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole. Although there is
a developing body of case law interpreting the phrase
substantially all, there is no precise established
definition of the phrase under applicable law. Accordingly, the
ability of a Holder of notes to require the Company to
repurchase such notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets
of the Company and its Subsidiaries taken as a whole to another
Person or group may be uncertain.
The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, engage in an Asset
Sale unless (i) the Company or the Restricted Subsidiary,
as the case may be, receives consideration at the time of such
Asset Sale at least equal to the fair market value (as
determined in good faith by a resolution of the Board of
Directors set forth in an Officers Certificate delivered
to the Trustee, which determination shall be conclusive evidence
of compliance with this provision) of the assets or Equity
Interests issued or sold or otherwise disposed of and
(ii) at least 85% of the consideration therefor received by
the Company or such Restricted Subsidiary in such Asset Sale,
plus all other Asset Sales since the date of the Indenture, on a
cumulative basis, is in the form of cash or Cash Equivalents;
provided that the amount of 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
guarantee thereof) are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases
the Company or such Restricted Subsidiary from further liability.
Within 360 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply such Net Proceeds, at its
option, (a) to reduce Senior Debt, (b) to acquire a
controlling interest in another Oil and Gas Business,
(c) to make capital expenditures in respect of the
Companys or its Restricted Subsidiaries Oil and Gas
Business, (d) to purchase long-term assets that are used or
useful in such Oil and Gas Business or (e) to repurchase
any notes. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce Senior Debt that is
revolving debt or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied as provided in the first
sentence of this paragraph will (after the expiration of the
periods specified in this paragraph) be deemed to constitute
Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds
$10.0 million, the Company will be required to make an
offer to all Holders of notes and, to the extent required by the
terms thereof, to all holders or lenders of Pari
PassuIndebtedness (an Asset Sale Offer) to
purchase the maximum principal amount of the notes and any such
Pari Passu Indebtedness to which the Asset Sale Offer
applies that may be purchased out of the Excess Proceeds, at an
offer price in cash in an amount equal to, in the case of the
notes, 100% of the principal
29
amount thereof plus accrued and unpaid interest thereon to the
date of purchase, or, in the case of any other Pari Passu
Indebtedness, 100% of the principal amount thereof (or with
respect to discount Pari Passu Indebtedness, the accreted
value thereof) on the date of purchase, in each case in
accordance with the procedures set forth in the Indenture or the
agreements governing the Pari Passu Indebtedness, as
applicable. To the extent that the aggregate principal amount
(or accreted value, as the case may be) of the notes and Pari
Passu Indebtedness tendered pursuant to an Asset Sale Offer
is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. If the
sum of the aggregate principal amount of the notes surrendered
by Holders thereof and the aggregate principal amount or
accreted value, as the case may be, of other Pari Passu
Indebtedness surrendered by holders or lenders thereof
exceeds the amount of Excess Proceeds, the Trustee and the
trustee or other lender representatives for the Pari Passu
Indebtedness shall select the notes and other Pari Passu
Indebtedness to be purchased on a pro rata basis, based on
the aggregate principal amount (or accreted value, as
applicable) thereof surrendered in such Asset Sale Offer. Upon
completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
The Credit Agreement will prohibit the Company from purchasing
any notes from the Net Proceeds of Asset Sales. Any future
credit agreements or other agreements relating to Senior Debt to
which the Company becomes a party may contain similar
restrictions and provisions. In the event an Asset Sale Offer
occurs at a time when the Company is prohibited from purchasing
the notes, the Company could seek the consent of its lenders to
the purchase or could attempt to refinance the Senior Debt that
contain such prohibition. If the Company does not obtain such a
consent or repay such Senior Debt, the Company may remain
prohibited from purchasing the 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 and
possibly a default under other agreements relating to Senior
Debt. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of the
notes.
Certain Covenants
The Indenture contains covenants including, among others, the
following:
The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any
other payment or distribution on account of the Companys
Equity Interests (including, without limitation, any payment to
holders of the Companys Equity Interests in connection
with any merger or consolidation involving the Company) or to
the direct or indirect holders of the Companys Equity
Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than
Disqualified Stock) of the Company); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of
the Company or any direct or indirect parent or other Affiliate
of the Company that is not a Wholly Owned Restricted Subsidiary
of the Company; (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the notes, except
at final maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in
clauses (i) through (iv) above being collectively
referred to as Restricted Payments), unless, at the
time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption
Incurrence of indebtedness and issuance of
disqualified stock; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture
(excluding Restricted Payments
30
permitted by clauses (2), (3), (5) and (6) of the
next succeeding paragraph), is less than the sum of (i) the
dollar amount calculated as of March 9, 2005 under
Section 4.07(c) of that certain Indenture dated
July 21, 2003 among the Company, the Subsidiary Guarantors
and J.P. Morgan Trust Company, National Association as
successor trustee to Bank One, National Association, plus
(ii) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing prior to the date of the
Indenture to the end of the Companys most recently ended
fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100%
of such deficit), plus (iii) 100% of the aggregate net cash
proceeds received by the Company from the issue and sale since
the date of the Indenture of Equity Interests of the Company or
of debt securities of the Company that have been converted into
or exchanged for such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary
of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock),
plus (iv) to the extent that any Restricted Investment that
was made after the date of the Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of
(A) the net proceeds of such sale, liquidation or repayment
and (B) the initial amount of such Restricted Investment.
The foregoing provisions will not prohibit: (1) the payment
of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company in exchange
for, or out of the proceeds of, the substantially concurrent
sale (other than to a Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (3) the
defeasance, redemption or repurchase of Subordinated
Indebtedness with the net cash proceeds from an incurrence of
subordinated Permitted Refinancing Debt or the substantially
concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase,
retirement or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (4) the
repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Subsidiary
of the Company held by any of the Companys (or any of its
Subsidiaries) employees pursuant to any management equity
subscription agreement or stock option agreement in effect as of
the date of the Indenture; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $2 million in any
twelve-month period; and provided further that no Default
or Event of Default shall have occurred and be continuing
immediately after such transaction; (5) repurchases of
Equity Interests deemed to occur upon exercise of stock options
if such Equity Interests represent a portion of the exercise
price of such options; and (6) cash payments made by the
Company for the repurchase, redemption or other acquisition or
retirement of the Companys
73/8% Senior
Subordinated Notes due 2013.
The amount of all Restricted Payments (other than cash) shall be
the fair market value (as determined in good faith by a
resolution of the Board of Directors set forth in an
Officers Certificate delivered to the Trustee, which
determination shall be conclusive evidence of compliance with
this provision) on the date of the Restricted Payment of the
asset(s) proposed to be transferred by the Company or the
applicable Restricted Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than five days after the
date of making any Restricted Payment, the Company shall deliver
to the Trustee an Officers Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon
which the calculations required by the covenant Restricted
Payments were computed.
|
|
|
Designation of unrestricted subsidiaries |
The Board of Directors of the Company may designate any
Restricted Subsidiary to be an Unrestricted Subsidiary if such
designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company
and its Restricted Subsidiaries (except to the extent repaid in
cash) in the Subsidiary so designated will be deemed to be
Restricted Payments at the time of such designation and will
reduce the amount available for Restricted Payments under
clause (c) of the first paragraph of the
31
covenant Restricted payments. All such outstanding
Investments will be deemed to constitute Investments in an
amount equal to the greater of the fair market value or the book
value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
|
|
|
Incurrence of indebtedness and issuance of disqualified
stock |
The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, incur) any
Indebtedness (including Acquired Debt) and that the Company will
not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock if:
(i) the Fixed Charge Coverage Ratio for the Companys
most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.5
to 1, determined on a pro forma basis as set forth in the
definition of Fixed Charge Coverage Ratio; and
(ii) no Default or Event of Default shall have occurred and
be continuing at the time such additional Indebtedness is
incurred or such Disqualified Stock is issued or would occur as
a consequence of the incurrence of the additional Indebtedness
or the issuance of the Disqualified Stock.
Notwithstanding the foregoing, the Indenture will not prohibit
any of the following (collectively, Permitted
Indebtedness): (a) the Indebtedness evidenced by the
notes; (b) the Indebtedness evidenced by the
73/8% Senior
Subordinated Notes; (c) the incurrence by the Company or
any of its Restricted Subsidiaries of Indebtedness pursuant to
Credit Facilities, so long as the aggregate principal amount of
all Indebtedness outstanding under all Credit Facilities does
not, at any one time, exceed the greater of
(i) $600.0 million (or, if there is any permanent
reduction in the aggregate principal amount permitted to be
borrowed under the Credit Agreement, such lesser aggregate
principal amount) and (ii) an amount equal to the sum of
(A) $50.0 million plus (B) 30% of Adjusted
Consolidated Net Tangible Assets determined after the incurrence
of such Indebtedness (including the application of the proceeds
therefrom); (d) the guarantee by any Subsidiary Guarantor
of any Indebtedness that is permitted by the Indenture to be
incurred by the Company; (e) all Indebtedness of the
Company and its Restricted Subsidiaries in existence as of the
date of the Indenture; (f) intercompany Indebtedness
between or among the Company and any of its Wholly Owned
Restricted Subsidiaries; provided, however, that
(i) if the Company is the obligor on such Indebtedness,
such Indebtedness is expressly subordinate to the payment in
full of all Obligations with respect to the notes and (ii)(A)
any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other
than the Company or a Wholly Owned Restricted Subsidiary and
(B) any sale or other transfer of any such Indebtedness to
a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be;
(g) Indebtedness in connection with one or more standby
letters of credit, guarantees, performance bonds or other
reimbursement obligations, in each case, issued in the ordinary
course of business and not in connection with the borrowing of
money or the obtaining of advances or credit (other than
advances or credit on open account, includible in current
liabilities, for goods and services in the ordinary course of
business and on terms and conditions which are customary in the
Oil and Gas Business, and other than the extension of credit
represented by such letter of credit, guarantee or performance
bond itself), not to exceed in the aggregate at any given time
5% of Total Assets; (h) Indebtedness under Interest Rate
Hedging Agreements entered into for the purpose of limiting
interest rate risks, provided that the obligations under
such agreements are related to payment obligations on
Indebtedness otherwise permitted by the terms of this covenant
and that the aggregate notional principal amount of such
agreements does not exceed 105% of the principal amount of the
Indebtedness to which such agreements relate;
(i) Indebtedness under Oil and Gas Hedging Contracts,
provided that such contracts were 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; (j) the incurrence by the
Company of Indebtedness not otherwise permitted to be
32
incurred pursuant to this paragraph, provided that the
aggregate principal amount (or accreted value, as applicable) of
all Indebtedness incurred pursuant to this clause (j),
together with all Permitted Refinancing Debt incurred pursuant
to clause (k) of this paragraph in respect of Indebtedness
previously incurred pursuant to this clause (j), does not
exceed $10.0 million at any one time outstanding;
(k) Permitted Refinancing Debt incurred in exchange for, or
the net proceeds of which are used to refinance, extend, renew,
replace, defease or refund, Indebtedness that was permitted by
the Indenture to be incurred (including Indebtedness previously
incurred pursuant to this clause (k)); (l) accounts
payable or other obligations of the Company or any Restricted
Subsidiary to trade creditors created or assumed by the Company
or such Restricted Subsidiary in the ordinary course of business
in connection with the obtaining of goods or services;
(m) Indebtedness consisting of obligations in respect of
purchase price adjustments, guarantees or indemnities in
connection with the acquisition or disposition of assets; and
(n) production imbalances that do not, at any one time
outstanding, exceed 2% of the Total Assets of the Company.
The Indenture provides that the Company will not permit any
Unrestricted Subsidiary to incur any Indebtedness other than
Non-Recourse Debt; provided, however, if any such
Indebtedness ceases to be Non-Recourse Debt, such event shall be
deemed to constitute an incurrence of Indebtedness by the
Company.
The Indenture provides that (i) the Company will not incur,
create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in any respect in right of
payment to the notes and (ii) the Subsidiary Guarantors
will not directly or indirectly incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that
is subordinate or junior in right of payment to any Senior Debt
and senior in any respect in right of payment to the Guarantees,
provided, however, that the foregoing limitations will
not apply to distinctions between categories of Indebtedness
that exist by reason of any Liens arising or created in respect
of some but not all such Indebtedness.
The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, create, incur,
assume or otherwise cause or suffer to exist or become effective
any Lien securing Indebtedness of any kind (other than Permitted
Liens) upon any of its property or assets, now owned or
hereafter acquired, unless all payments under the notes are
secured by such Lien prior to, or on an equal and ratable basis
with, the Indebtedness so secured for so long as such
Indebtedness is secured by such Lien.
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Dividend and other payment restrictions affecting
subsidiaries |
The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability
of any Restricted Subsidiary to (i)(x) pay dividends or make any
other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured
by, its profits, or (y) pay any indebtedness owed by it to
the Company or any of its Restricted Subsidiaries,
(ii) make loans or advances to the Company or any of its
Restricted Subsidiaries or (iii) transfer any of its
properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (a) the Credit Agreement as
in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof or any other
Credit Facility, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements, refinancings or other Credit
Facilities are no more restrictive taken as a whole with respect
to such dividend and other payment restrictions than those
contained in the Credit Agreement as in effect on the date of
the Indenture, (b) the Indenture and the notes,
(c) applicable law, (d) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except, in the case of
Indebtedness, to the extent such Indebtedness was incurred in
connection with or in contemplation of such acquisition), which
encumbrance or restriction is not
33
applicable to any Person, or the properties or assets of any
Person, other than the Person and its Subsidiaries, or the
property or assets of the Person and its Subsidiaries, so
acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the Indenture to
be incurred, (e) by reason of customary non-assignment
provisions in leases and customary provisions in other
agreements that restrict assignment of such agreement or rights
thereunder, entered into in the ordinary course of business and
consistent with past practices, (f) purchase money
obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, or
(g) Permitted Refinancing Debt, provided that the
restrictions contained in the agreements governing such
Permitted Refinancing Debt are no more restrictive than those
contained in the agreements governing the Indebtedness being
refinanced.
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Merger, consolidation or sale of substantially all
assets |
The Indenture provides that the Company may not consolidate or
merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties
or assets, in one or more related transactions, to another
Person, and the Company may not permit any of its Restricted
Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions
would, in the aggregate, result in a sale, assignment, transfer,
lease, conveyance, or other disposition of all or substantially
all of the properties or assets of the Company to another
Person, in either case unless (i) the Company is the
surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (the Surviving
Entity) is a corporation organized or existing under the
laws of the United States, any state thereof or the District of
Columbia; (ii) the Surviving Entity (if the Company is not
the continuing obligor under the Indenture) assumes all the
obligations of the Company under the notes and the Indenture
pursuant to a supplemental Indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately before and
after giving effect to such transaction or series of
transactions no Default or Event of Default exists;
(iv) immediately after giving effect to such transaction or
a series of transactions on a pro forma basis (and treating any
Indebtedness not previously an obligation of the Company and its
Subsidiaries which becomes the obligation of the Company or any
of its Subsidiaries as a result of such transaction or series of
transactions as having been incurred at the time of such
transaction or series of transactions), the Consolidated Net
Worth of the Company and its Subsidiaries or the Surviving
Entity (if the Company is not the continuing obligor under the
Indenture) is equal to or greater than the Consolidated Net
Worth of the Company and its Subsidiaries immediately prior to
such transaction or series of transactions and (v) the
Company or the Surviving Entity (if the Company is not the
continuing obligor under the Indenture) will, at the time of
such transaction or series of transactions and after giving pro
forma effect thereto as if such transaction or series of
transactions had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the test set forth in the
first paragraph of the covenant described above under the
caption Incurrence of indebtedness and
issuance of disqualified stock. Notwithstanding the
restrictions described in the foregoing clauses (iv) and
(v), any Restricted Subsidiary may consolidate with, merge into
or transfer all or part of its properties and assets to the
Company, and any Wholly Owned Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its
properties and assets to another Wholly Owned Restricted
Subsidiary.
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Transactions with affiliates |
The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter
into or make or amend any contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any of
its Affiliates (each of the foregoing, an Affiliate
Transaction), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or the
relevant Subsidiary than those that would have been obtained in
a comparable transaction by the Company or such Subsidiary with
an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate
consideration in excess of
34
$1.0 million but less than or equal to $5.0 million,
an Officers Certificate certifying that such Affiliate
Transaction complies with clause (i) above, (b) with
respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in
excess of $5.0 million but less than or equal to
$10.0 million, a resolution of the Board of Directors set
forth in an Officers Certificate certifying that such
Affiliate Transaction or series of Affiliate Transactions
complies with clause (i) above and that such Affiliate
Transaction or series of Affiliate Transactions has been
approved in good faith by a majority of the members of the Board
of Directors who are disinterested with respect to such
Affiliate Transaction or series of related Affiliate
Transactions, which resolution shall be conclusive evidence of
compliance with this provision, and (c) with respect to any
Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of
$10.0 million, the Company delivers a resolution of the
Board of Directors set forth in an Officers Certificate
certifying that such Affiliate Transaction or series of related
Affiliate Transactions complies with clause (i) above and
that such Affiliate Transaction or series of related Affiliate
Transactions has been approved in good faith by a resolution
adopted by a majority of the members of the Board of Directors
of the Company who are disinterested with respect to such
Affiliate Transaction or series of related Affiliate
Transactions and an opinion as to the fairness to the Company or
such Subsidiary of such Affiliate Transaction or series of
related Affiliate Transactions (which resolution and fairness
opinion shall be conclusive evidence of compliance with this
provision) from a financial point of view issued by an
accounting, appraisal, engineering or investment banking firm of
national standing; (which resolution and fairness opinion shall
be conclusive evidence of compliance with this provision);
provided that the following shall not be deemed Affiliate
Transactions: (1) transactions contemplated by any
employment agreement or other compensation plan or arrangement
entered into by the Company or any of its Subsidiaries in the
ordinary course of business and consistent with the past
practice of the Company or such Subsidiary,
(2) transactions between or among the Company and/or its
Restricted Subsidiaries, (3) Restricted Payments and
Permitted Investments that are permitted by the provisions of
the Indenture described above under the caption
Restricted payments, and
(4) indemnification payments made to officers, directors
and employees of the Company or any Subsidiary pursuant to
charter, bylaw, statutory or contractual provisions.
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Additional subsidiary guarantees |
The Indenture provides that if the Company or any of its
Subsidiaries shall acquire or create another Restricted
Subsidiary after the date of the Indenture, then such newly
acquired or created Restricted Subsidiary will be required to
execute a Guarantee and deliver an opinion of counsel, in
accordance with the terms of the Indenture; provided that, in no
event will any non-U.S. Subsidiary of the Company be
required to execute a Guarantee.
The Company will not, and will not permit any Restricted
Subsidiary to, engage in any material respect in any business
other than the Oil and Gas Business.
Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, to the extent permitted by the
Exchange Act, the Company will file with the Commission and
provide, within 15 days after such filing, the Trustee and
Holders and prospective Holders (upon request) with the annual
reports and the information, documents and other reports which
are specified in Sections 13 and 15(d) of the Exchange Act
(but without exhibits in the case of the Holders and prospective
Holders). In the event that the Company is not permitted to file
such reports, documents and information with the Commission, the
Company will provide substantially similar information to the
Trustee, the Holders and prospective Holders (upon request) as
if the Company were subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act. The Company will
also comply with the other provisions of Section 314(a) of
the Trust Indenture Act.
35
Events of Default and Remedies
The Indenture provides that each of the following constitutes an
Event of Default: (i) a default for 30 days in the
payment when due of interest (including any interest payable as
liquidated damages), if any, on the notes (whether or not
prohibited by the subordination provisions of the Indenture);
(ii) a default in payment when due of the principal of or
premium, if any, on the notes (whether or not prohibited by the
subordination provisions of the Indenture); (iii) the
failure by the Company to comply with its obligations under
Certain Covenants Merger, consolidation or
sale of assets above; (iv) the failure by the Company
for 30 days after notice from the Trustee or the Holders of
at least 25% in principal amount of the notes then outstanding
to comply with the provisions described under the captions
Repurchase at the option of holders and Certain
Covenants other than the provisions described under
Merger, consolidation or sale of assets;
(v) failure by the Company for 60 days after notice
from the Trustee or the Holders of at least 25% in principal
amount of the notes then outstanding to comply with any of its
other agreements in the Indenture or the notes; (vi) except
as permitted by the Indenture, any Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or a
Subsidiary Guarantor, or any Person acting on behalf of such
Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Guarantee; (vii) a default under any mortgage,
indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the
date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on
such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a
Payment Default) or (b) results in the
acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there is then existing a Payment
Default or the maturity of which has been so accelerated,
aggregates $10.0 million or more; provided, that if
any such default is cured or waived or any such acceleration
rescinded, or such Indebtedness is repaid, within a period of
10 days from the continuation of such default beyond the
applicable grace period or the occurrence of such acceleration,
as the case may be, such Event of Default under the Indenture
and any consequential acceleration of the notes shall be
automatically rescinded; (viii) the failure by the Company
or any of its Restricted Subsidiaries to pay final,
non-appealable judgments aggregating in excess of
$10.0 million, which judgments remain unpaid or discharged
for a period of 60 days; and (ix) certain events of
bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries or any group of Subsidiaries that,
taken together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the notes
then outstanding may declare the principal of and accrued but
unpaid interest on such notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency,
with respect to the Company or any Significant Subsidiary or any
group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding notes will become due
and payable without further action or notice. Holders of notes
may not enforce the Indenture or notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the notes then outstanding may direct the
Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of notes notice of any continuing Default
or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the
Holders of all of the notes waive any existing Default or Event
of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of
interest or premium on, or the principal of, the notes.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the
Company is required, within five business days of becoming aware
of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
36
No Liability of Directors, Officers, Employees,
Incorporators, Members and Stockholders
No director, officer, employee, incorporator, member or
stockholder of the Company or any Guarantor, as such, will have
any liability for any obligations of the Company or such
Guarantor under the notes or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or
their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part
of the consideration for issuance of the notes. This waiver may
not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a
waiver is against public policy.
Amendment, supplements and waivers
Except as provided in the next two succeeding paragraphs, the
Indenture, the notes or the Guarantees may be amended or
supplemented with the consent of the Holders of at least a
majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, the
notes), and any existing Default or Event of Default or
compliance with any provision of such Indenture, the notes or
the Guarantees may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding notes
(including consents obtained in connection with a tender offer
or exchange offer for the notes).
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any the notes held by a
non-consenting Holder): (i) reduce the principal amount of
the notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed
maturity of any Note or alter the provisions with respect to the
redemption of the notes (other than provisions relating to the
covenants described above under the caption
Repurchase at the Option of Holders),
(iii) reduce the rate of or change the time for payment of
interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or
interest on the notes (except a rescission of acceleration of
the notes by the Holders of at least a majority in principal
amount of such notes and a waiver of the payment default that
resulted from such acceleration), (v) make any Note payable
in money other than that stated in the notes, (vi) make any
change in the provisions of the Indenture relating to waivers of
past Defaults or the rights of Holders of notes to receive
payments of principal of or premium, if any, or interest on the
notes or (vii) make any change in the foregoing amendment
and waiver provisions. In addition, any amendment to the
provisions described under Repurchase at the
Option of Holders or the provisions of Article 10 of
the Indenture (which relate to subordination) will require the
consent of the Holders of at least
662/3%
in principal amount of the notes then outstanding if such
amendment would adversely affect the rights of Holders of such
notes. However, no amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of
any holder of Senior Debt then outstanding unless the holders of
such Senior Debt (or any group or representative thereof
authorized to give a consent) consents to such change.
Notwithstanding the foregoing, without the consent of any Holder
of the notes the Company and the Trustee may amend or supplement
the Indenture or the notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated notes in addition
to or in place of certificated notes, to provide for the
assumption of the Companys obligations to Holders of the
notes in the case of a merger or consolidation, to make any
change that would provide any additional rights or benefits to
the Holders of the notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, to secure
the notes or to comply with requirements of the Commission in
order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
Legal defeasance and covenant defeasance
The Company may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding notes (Legal Defeasance) except for
(i) the rights of Holders of such outstanding notes to
receive payments in respect of the principal of, premium, if
any, or interest on such notes when such payments are due from
the trust referred to below, (ii) the Companys
obligations with respect to such notes concerning issuing
temporary notes, registration of such notes, mutilated,
destroyed, lost or stolen notes and the maintenance of an office
or agency for payment and money for security payments held in
trust, (iii) the
37
rights, powers, trusts, duties and immunities of the Trustee,
and the Companys obligations in connection therewith and
(iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect
to have the obligations of the Company released with respect to
certain covenants that are described in the Indenture
(Covenant Defeasance) and thereafter any omission to
comply with such obligations shall not constitute a Default or
Event of Default. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described
under Events of default and remedies will no longer
constitute an Event of Default.
In order to exercise either Legal Defeasance or Covenant
Defeasance, (i) the Company must irrevocably deposit with
the Trustee, in trust, for the benefit of the Holders of notes,
cash in U.S. dollars, non-callable Government Securities,
or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any,
and interest on the outstanding notes on the stated maturity or
on the applicable redemption date, as the case may be, and the
Company must specify whether the notes are being defeased to
maturity or to a particular redemption date; (ii) in the
case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States
reasonably acceptable to such Trustee confirming that
(A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or
(B) since the date of the Indenture, there has been a
change in the applicable federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel
shall confirm that, the Holders of the outstanding notes will
not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of
Covenant Defeasance, the Company shall have delivered to the
Trustee an opinion of counsel in the United States reasonably
acceptable to such Trustee confirming that the Holders of the
outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be
applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee
an opinion of counsel to the effect that after the 91st day
following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights
generally; (vii) the Company must deliver to the Trustee an
Officers Certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders of
notes over the other creditors of the Company, or with the
intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers Certificate and an
opinion of counsel, each stating that all conditions precedent
provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
J.P. Morgan Trust Company, National Association is the
Trustee under the Indenture. The Trustee and its affiliates also
perform and may in the future perform certain banking and other
services for us in the ordinary course of their business. The
Trustee will be the paying agent, conversion agent, transfer
agent and bid solicitation agent for the notes.
The Trustee assumes no responsibility for this prospectus and
has not reviewed or undertaken to verify any information
contained in this prospectus.
38
The Indenture, the notes and the Guarantees provide that they
will be governed by the laws of the State of New York.
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full definition of all
such terms, as well as any other capitalized terms used herein
for which no definition is provided.
Acquired Debt means, with respect to any
specified Person, (i) Indebtedness of any other Person
existing at the time such other Person is merged with or into or
became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and
(ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
Adjusted Consolidated Net Tangible Assets
means (without duplication), as of the date of
determination, (i) the sum of (a) discounted future
net revenues from proved oil and gas reserves of the Company and
its Restricted Subsidiaries calculated in accordance with the
Commissions guidelines before any state or federal income
taxes, with no less than 80% of the discounted future net
revenues estimated by one or more nationally recognized firms of
independent petroleum engineers in a reserve report prepared as
of the end of the Companys most recently completed fiscal
year, as increased by, as of the date of determination, the
estimated discounted future net revenues from (1) estimated
proved oil and gas reserves acquired since the date of such
year-end reserve report, and (2) estimated oil and gas
reserves attributable to upward revisions of estimates of proved
oil and gas reserves since the date of such year-end reserve
report due to exploration, development or exploitation
activities, in each case calculated in accordance with the
Commissions guidelines (utilizing the prices utilized in
such year-end reserve report) increased by the accretion of the
discount from the date of the reserve report to the date of
determination, and decreased by, as of the date of
determination, the estimated discounted future net revenues from
(3) estimated proved oil and gas reserves produced or
disposed of since the date of such year-end reserve report and
(4) estimated oil and gas reserves attributable to downward
revisions of estimates of proved oil and gas reserves since the
date of such year-end reserve report due to changes in
geological conditions or other factors which would, in
accordance with standard industry practice, cause such
revisions, in each case calculated in accordance with the
Commissions guidelines (utilizing the prices utilized in
such year-end reserve report); provided that, in the case
of each of the determinations made pursuant to clause (1)
through (4), such increases and decreases shall be as estimated
by the Companys petroleum engineers, unless in the event
that there is a Material Change as a result of such
acquisitions, dispositions or revisions, then the discounted
future net revenues utilized for purposes of this
clause (i)(a) shall be confirmed in writing by one or more
nationally recognized firms of independent petroleum engineers,
(b) the capitalized costs that are attributable to oil and
gas properties of the Company and its Restricted Subsidiaries to
which no proved oil and gas reserves are attributable, 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, (c) the Net Working Capital on a date
no earlier than the date of the Companys latest annual or
quarterly financial statements and (d) the greater of
(1) the net book value on a date no earlier than the date
of the Companys latest annual or quarterly financial
statements or (2) the book value of other tangible assets
(including, without duplication, investments in unconsolidated
Restricted Subsidiaries and mineral rights held under lease or
other contractual arrangement) of the Company and its Restricted
Subsidiaries, as of the date no earlier than the date of the
Companys latest annual or quarterly financial statements,
minus (ii) the sum of (a) minority interests,
(b) any gas balancing liabilities of the Company and its
Restricted Subsidiaries reflected in the Companys latest
audited financial statements, and (c) the discounted future
net revenues, calculated in accordance with the
Commissions guidelines, attributable to reserves subject
to Dollar-Denominated Production Payments which, based on the
estimates of production and price assumptions included in
determining the discounted future net revenues specified in
(i)(a) above, would be necessary to fully satisfy the payment
obligations of the Company and its Restricted Subsidiaries with
respect to Dollar-Denominated Production Payments on the
schedules specified with respect thereto. If
39
the Company changes its method of accounting from the successful
efforts method to the full cost method or a similar method of
accounting, Adjusted Consolidated Net Tangible
Assets will continue to be calculated as if the Company
was still using the successful efforts method of accounting.
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 purposes of this definition, control
(including, with correlative meanings, the terms
controlling, controlled by and
under common control with), as used with respect to
any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
Asset Sale means (i) the sale, lease,
conveyance or other disposition (but excluding the creation of a
Lien) of any assets including, without limitation, by way of a
sale and leaseback (provided that the sale, lease,
conveyance or other disposition of all or substantially all of
the assets of the Company and its Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described
above under the caption Repurchase at the
Option of Holders Change of Control and/or the
provisions described above under the caption
Certain Covenants Merger,
consolidation or sale of assets and not by the provisions
described above under Repurchase at the Option
of Holders Asset sales), and (ii) the
issuance or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Companys
Subsidiaries (including the sale by the Company or a Restricted
Subsidiary of Equity Interests in an Unrestricted Subsidiary),
in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions
(a) that have a fair market value in excess of
$5.0 million or (b) for net proceeds in excess of
$5.0 million. Notwithstanding the foregoing, the following
shall not be deemed to be Asset Sales: (i) a transfer of
assets by the Company to a Wholly Owned Restricted Subsidiary of
the Company or by a Wholly Owned Restricted Subsidiary of the
Company to the Company or to another Wholly Owned Restricted
Subsidiary of the Company, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary of the Company
to the Company or to another Wholly Owned Restricted Subsidiary
of the Company, (iii) the making of a Restricted Payment or
Permitted Investment that is permitted by the covenant described
above under the caption Certain
Covenants Restricted payments, (iv) the
abandonment, farm-out, lease or sublease of undeveloped oil and
gas properties in the ordinary course of business, (v) the
trade or exchange by the Company or any Restricted Subsidiary of
the Company of any oil and gas property owned or held by the
Company or such Restricted Subsidiary for any oil and gas
property owned or held by another Person, which the Board of
Directors of the Company determines in good faith to be of
approximately equivalent value, (vi) the trade or exchange
by the Company or any Subsidiary of the Company of any oil and
gas property owned or held by the Company or such Subsidiary for
Equity Interests in another Person engaged primarily in the Oil
and Gas Business which, together with all other such trades or
exchanges (to the extent excluded from the definition of Asset
Sale pursuant to this clause (vi)) since the date of the
Indenture, does not exceed 5% of Adjusted Consolidated Net
Tangible Assets determined after such trade or exchange and
(vii) the sale or transfer of hydrocarbons or other mineral
products or surplus or obsolete equipment in the ordinary course
of business.
Attributable Debt in respect of a sale and
leaseback transaction means, at the time of determination, the
present value (discounted at the rate of interest implicit in
such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback
transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
Borrowing Base means, as of any date, 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.
Capital Lease Obligation means, at the time
any determination thereof is to be made, the amount of the
liability in respect of a capital lease that would at such time
be required to be capitalized on a balance sheet in accordance
with GAAP.
40
Capital Stock means (i) in the case of a
corporation, corporate stock, (ii) in the case of an
association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated)
of corporate stock, (iii) in the case of a partnership,
partnership interests (whether general or limited), (iv) in
the case of a limited liability company or similar entity, any
membership or similar interests therein and (v) any other
interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
Cash Equivalents means (i) United States
dollars, (ii) securities issued or directly and fully
guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more
than six months from the date of acquisition,
(iii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of
acquisition, bankers acceptances with maturities not
exceeding six months and overnight bank deposits, in each case
with any lender party to the Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of
$500 million and a Thompson Bank Watch Rating of
B or better, (iv) repurchase obligations with a
term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the
qualifications specified in clause (iii) above,
(v) commercial paper having a rating of at least P1 from
Moodys Investors Service, Inc. (or its successor) and a
rating of at least A1 from Standard & Poors
Ratings Group (or its successor) and (vi) investments in
money market or other mutual funds substantially all of whose
assets comprise securities of the types described in
clauses (ii) through (v) above.
Change of Control means the occurrence of any
of the following: (i) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any person or group
of related persons (a Group) (as such
terms are used in Section 13(d)(3) of the Exchange Act),
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any purchase, sale,
acquisition, disposition, merger or consolidation) the result of
which is that any person (as defined above) or Group
becomes the beneficial owner (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the
Exchange Act) of more than 40% of the aggregate voting power of
all classes of Capital Stock of the Company having the right to
elect directors under ordinary circumstances or (iv) the
first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
Commission means the Securities and Exchange
Commission.
Consolidated Cash Flow means, with respect to
any Person for any period, the Consolidated Net Income of such
Person and its Restricted Subsidiaries for such period plus
(i) an amount equal to any extraordinary loss, plus any net
loss realized in connection with an Asset Sale (together with
any related provision for taxes), to the extent such losses were
included in computing such Consolidated Net Income, plus
(ii) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Restricted Subsidiaries
for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred
payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letters of credit or
bankers acceptance financings, and net payments (if any)
pursuant to Interest Rate Hedging Agreements), to the extent
that any such expense was included in computing such
Consolidated Net Income, plus (iv) depreciation, depletion
and amortization expenses (including amortization of goodwill
and other intangibles) for such Person and its Restricted
Subsidiaries for such period to the extent that such
depreciation, depletion and amortization expenses were included
in computing such Consolidated Net Income, plus
(v) exploration expenses for such Person and its Restricted
Subsidiaries for such period to the extent such exploration
expenses were included in computing such Consolidated Net
Income, plus (vi) other non-cash charges (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) of such Person and its Restricted
41
Subsidiaries for such period to the extent that such other
non-cash charges were included in computing such Consolidated
Net Income, in each case, on a consolidated basis and determined
in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the
depreciation, depletion and amortization and other non-cash
charges and expenses of, a Restricted Subsidiary of the referent
Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Restricted Subsidiary
was included in calculating the Consolidated Net Income of such
Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to the referent
Person by such Restricted Subsidiary without prior governmental
approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
Consolidated Net Income means, with respect
to any Person for any period, the aggregate of the Net Income of
such Person and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is
accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly
Owned Restricted Subsidiary thereof, (ii) the Net Income of
any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded,
(iv) the cumulative effect of a change in accounting
principles shall be excluded, (v) any impairments or
write-downs of oil and natural gas assets, shall be excluded,
provided, however, that ceiling limitation write-downs in
accordance with GAAP shall be treated as capitalized costs, as
if such write-downs had not occurred, (vi) extraordinary
non-cash losses shall be excluded, (vii) any non-cash
compensation expenses 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
shall be excluded and (viii) any unrealized non-cash gains
or losses or charges in respect of hedge or non-hedge
derivatives (including those resulting from the application of
SFAS 133) shall be excluded.
Consolidated Net Worth means the total of the
amounts shown on the balance sheet of the Company and its
consolidated Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the
taking of any action for the purpose of which the determination
is being made and for which internal financial statements are
available (but in no event ending more than 135 days prior
to the taking of such action), as (i) the par or stated
value of all outstanding Capital Stock of the Company, plus
(ii) paid-in capital or capital surplus relating to such
Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
Continuing Directors means, as of any date of
determination, any member of the Board of Directors of the
Company who (i) was a member of such Board of Directors on
the date of original issuance of the notes or (ii) was
nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who
were members of such Board at the time of such nomination.
Credit Agreement means that certain Second
Amended and Restated Credit Agreement, dated as of June 23,
2004, as amended on December 6, 2004, and as further
amended on March 2, 2005, by and among Range, Great Lakes
Energy Partners L.L.C. and JPMorgan Chase Bank, N.A. (successor
by merger to Bank One, N.A., (Illinois), a national banking
association), The Frost National Bank, The Bank of Nova Scotia,
Union Bank of California, N.A., Wachovia Bank, National
Association, Key Bank, Harris Nesbitt Financing, Inc., Southwest
Bank of Texas, N.A., Hibernia National Bank, Comerica Bank,
Natexis Banques Populaires, Fortis Capital Corp., Fleet National
Bank, Compass Bank, Calyon New York Branch and Bank of Scotland
(hereinafter collectively referred to as Lenders,
and individually, Lender) and JPMorgan Chase Bank
N.A. (formerly Bank One, NA), as Administrative Agent, Fleet
National Bank, as Co-Documentation Agent,
42
Fortis Capital Corp., as Co-Documentation Agent, Calyon, New
York Branch, as Co-Syndication Agent, Harris Nesbitt Financing,
Inc., as Co-Syndication Agent, J.P. Morgan Securities Inc.
(formerly Banc One Capital Markets, Inc.), as Sole Lead Arranger
and Sole Bookrunner providing for up to $600 million of
Indebtedness, 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 or refinanced, in whole or
in part, from time to time, whether or not with the same lenders
or agents.
Credit Facilities means, with respect to the
Company, one or more debt facilities (including, without
limitation, 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. Indebtedness under Credit Facilities outstanding on the
date on which the notes are first issued and authenticated under
the Indenture (after giving effect to the use of proceeds
thereof) shall be deemed to have been incurred on such date in
reliance on the exception provided by clause (b) of the
definition of Permitted Indebtedness.
Default means any event that is or with the
passage of time or the giving of notice or both would be an
Event of Default.
Designated Senior Debt means (i) the
Credit Agreement and (ii) any other Senior Debt permitted
under the Indenture the principal amount of which is
$25 million or more and that has been designated by the
Company as Designated Senior Debt.
Disqualified Stock means any Capital Stock to
the extent 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, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise,
or redeemable at the option of the holder thereof, in whole or
in part, on or prior to the date that is 91 days after the
date on which the notes mature.
Dollar-Denominated Production Payments means
production payment obligations recorded as liabilities in
accordance with GAAP, together with all undertakings and
obligations in connection therewith.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
Fixed Charge Coverage Ratio means with
respect to any Person for any period, the ratio of the
Consolidated Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period. In the event that
the Company or any of its Restricted Subsidiaries incurs,
assumes, guarantees or redeems any Indebtedness (other than
revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date
on which the calculation of the Fixed Charge Coverage Ratio is
made (the Calculation Date), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, guarantee or redemption of
Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable
four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions
that have been made by the referent Person or any of its
Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions,
during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date
(including, without limitation, any acquisition to occur on the
Calculation Date) shall be deemed to have occurred on the first
day of the four-quarter reference period and Consolidated Cash
Flow for such reference period shall be calculated without
giving effect to clause (iii) of the proviso set forth in
the definition of Consolidated Net Income, (ii) the net
proceeds of Indebtedness incurred or Disqualified Stock issued
by the referent Person pursuant to the first paragraph of the
covenant described under the caption Certain
Covenants Incurrence of indebtedness and issuance of
disqualified stock during the four-quarter reference
period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have been received by
the referent Person or any of its Restricted Subsidiaries on the
first day of
43
the four-quarter reference period and applied to its intended
use on such date, (iii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, and
(iv) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, shall be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be
obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
Fixed Charges means, with respect to any
Person for any period, the sum, without duplication, of
(i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of original
issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers acceptance
financings, and net payments (if any) pursuant to Interest Rate
Hedging Agreements), (ii) the consolidated interest expense
of such Person and its Restricted Subsidiaries that was
capitalized during such period, (iii) any interest expense
on Indebtedness of another Person that is guaranteed by such
Person or any of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or any of its Restricted
Subsidiaries (whether or not such guarantee or Lien is called
upon) and (iv) the product of (a) all cash dividend
payments (and non-cash dividend payments in the case of a Person
that is a Restricted Subsidiary) on any series of preferred
stock of such Person or any of its Restricted Subsidiaries,
times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP.
GAAP means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in
effect on the date of the Indenture.
Guarantee means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner
(including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part
of any Indebtedness.
Indebtedness means, with respect to any
Person, without duplication, (a) any indebtedness of such
Person, whether or not contingent, (i) in respect of
borrowed money, (ii) evidenced by bonds, notes, debentures
or similar instruments, (iii) evidenced by letters of
credit (or reimbursement agreements in respect thereof) or
bankers acceptances, (iv) representing Capital Lease
Obligations, (v) representing the balance deferred and
unpaid of the purchase price of any property, except any such
balance that constitutes an accrued expense or trade payable,
(vi) representing any obligations in respect of Interest
Rate Hedging Agreements or Oil and Gas Hedging Contracts, and
(vii) in respect of any Production Payment, (b) all
indebtedness of others secured by a Lien on any asset of such
Person (whether or not such indebtedness is assumed by such
Person), (c) obligations of such Person in respect of
production imbalances, (d) Attributable Debt of such
Person, and (e) to the extent not otherwise included in the
foregoing, the guarantee by such Person of any indebtedness of
any other Person, provided that the indebtedness
described in clauses (a)(i), (ii), (iv) and
(v) shall be included in this definition of Indebtedness
only if, and to the extent that, the indebtedness described in
such clauses would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP.
Interest Rate Hedging Agreements means, with
respect to any Person, the obligations of such Person under
(i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and
(ii) other agreements or arrangements designed to protect
such Person against fluctuations in interest rates.
Investments means, with respect to any
Person, all investments by such Person in other Persons
(including Affiliates) in the forms of direct or indirect loans
(including guarantees of Indebtedness or other obligations, but
excluding trade credit and other ordinary course advances
customarily made in the oil and gas
44
industry), advances or capital contributions (excluding
commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are
or would be classified as investments on a balance sheet
prepared in accordance with GAAP; provided that the
following shall not constitute Investments: (i) an
acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity
securities of the Company, (ii) Interest Rate Hedging
Agreements entered into in accordance with the limitations set
forth in clause (g) of the second paragraph of the covenant
described under the caption Certain
Covenants Incurrence of indebtedness and issuance of
disqualified stock, (iii) Oil and Gas Hedging
Agreements entered into in accordance with the limitations set
forth in clause (h) of the second paragraph of the covenant
described under the caption Certain
Covenants Incurrence of indebtedness and issuance of
disqualified stock and (iv) endorsements of
negotiable instruments and documents in the ordinary course of
business.
Lien means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction
other than a precautionary financing statement with respect to a
lease not intended as a security agreement).
Material Change means an increase or decrease
(excluding changes that result solely from changes in prices) of
more than 20% during a fiscal quarter in the estimated
discounted future net cash flows from proved oil and gas
reserves of the Company and its Restricted Subsidiaries,
calculated in accordance with clause (i)(a) of the
definition of Adjusted Consolidated Net Tangible Assets;
provided, however, that the following will be excluded
from the calculation of Material Change: (i) any
acquisitions during the quarter of oil and gas reserves that
have been estimated by one or more nationally recognized firms
of independent petroleum engineers and on which a report or
reports exist and (ii) any disposition of properties
existing at the beginning of such quarter that have been
disposed of as provided in the Asset Sales covenant.
Net Income means, with respect to any Person,
the net income (loss) of such Person, determined in accordance
with GAAP and before any reduction in respect of preferred stock
dividends, excluding, however, (i) any gain (but not loss),
together with any related provision for taxes on such gain (but
not loss), realized in connection with (a) any Asset Sale
(including, without limitation, dispositions pursuant to sale
and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries
or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (ii) any extraordinary
or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain
(but not loss).
Net Proceeds means the aggregate cash
proceeds received by the Company or any of its Restricted
Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition
of any non-cash consideration received in any Asset Sale, but
excluding cash amounts placed in escrow, until such amounts are
released to the Company), net of the direct costs relating to
such Asset Sale (including, without limitation, legal,
accounting and investment banking fees and expenses, and sales
commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking
into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the
repayment of Indebtedness (other than Indebtedness under any
Credit Facility) secured by a Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP and any reserve established
for future liabilities.
Net Working Capital means (i) all
current assets of the Company and its Restricted Subsidiaries,
minus (ii) all current liabilities of the Company and its
Restricted Subsidiaries, except current liabilities included in
Indebtedness, in each case as set forth in financial statements
of the Company prepared in accordance with GAAP (excluding any
adjustments made pursuant to FASB 133).
45
Non-Recourse Debt means Indebtedness
(i) as to which neither the Company nor any of its
Restricted Subsidiaries (a) provides any guarantee or
credit support of any kind (including any undertaking,
guarantee, indemnity, agreement or instrument that would
constitute Indebtedness), or (b) is directly or indirectly
liable (as a guarantor or otherwise); and (ii) no default
with respect to which (including any rights that the holders
thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity; and
(iii) the explicit terms of which provide that there is no
recourse against any of the assets of the Company or its
Restricted Subsidiaries.
Obligations means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
Oil and Gas Business means (i) the
acquisition, exploration, development, operation and disposition
of interests in oil, gas and other hydrocarbon properties,
(ii) the gathering, marketing, treating, processing,
storage, distribution, selling and transporting of any
production from such interests or properties, (iii) any
business relating to exploration for or development, production,
treatment, processing, storage, transportation or marketing of
oil, gas and other minerals and products produced in association
therewith and (iv) any activity that is ancillary to or
necessary or appropriate for the activities described in
clauses (i) through (iii) of this definition.
Oil and Gas Hedging Contracts 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.
Pari Passu Indebtedness means Indebtedness
that ranks pari passu in right of payment to the notes.
Permitted Indebtedness has the meaning given
in the covenant described under the caption
Certain Covenants Incurrence of
indebtedness and issuance of disqualified stock.
Permitted Investments means (a) any
Investment in the Company or in a Wholly Owned Restricted
Subsidiary of the Company; (b) any Investment in Cash
Equivalents or securities issued or directly and fully
guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more
than one year from the date of acquisition; (c) any
Investment by the Company or any Restricted Subsidiary of the
Company in a Person if, as a result of such Investment and any
related transactions that at the time of such Investment are
contractually mandated to occur, (i) such Person becomes a
Wholly Owned Restricted Subsidiary of the Company or
(ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys all or substantially all
of its assets to, or is liquidated into, the Company or a Wholly
Owned Restricted Subsidiary of the Company; (d) any
Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and
in compliance with the covenant described above under the
caption Repurchase at the Option of
Holders Asset sales; (e) other
Investments in any Person or Persons having an aggregate fair
market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when
taken together with all other Investments made pursuant to this
clause (e) that are at the time outstanding, not to exceed
$10.0 million; (f) any Investment acquired by the
Company in exchange for Equity Interests in the Company (other
than Disqualified Stock); (g) shares of Capital Stock
received in connection with any good faith settlement of a
bankruptcy proceeding involving a trade creditor; (h) entry
into operating agreements, joint ventures, partnership
agreements, working interests, royalty interests, mineral
leases, processing agreements, farm-out agreements, contracts
for the sale, transportation or exchange of oil and natural gas,
unitization agreements, pooling arrangements, area of mutual
interest agreements, production sharing agreements or other
similar or customary agreements, transactions, properties,
interests or arrangements, and Investments and expenditures in
connection therewith or pursuant thereto, in each case made or
entered into the ordinary course of the Oil and Gas Business,
excluding, however, Investments in corporations other than any
Investment received pursuant to the Asset Sale provision; and
(i) the acquisition of any Equity Interests pursuant to a
transaction of the type described in clause (vi) of the
exclusions from the definition of Asset Sale.
46
Permitted Liens means (i) Liens securing
Indebtedness of a Subsidiary or Liens securing Senior Debt that
is outstanding on the date of issuance of the notes and Liens
securing Senior Debt that are permitted by the terms of the
Indenture to be incurred; (ii) Liens in favor of the
Company; (iii) Liens on property existing at the time of
acquisition thereof by the Company or any Subsidiary of the
Company and Liens on property or assets of a Subsidiary existing
at the time it became a Subsidiary, provided that such
Liens were in existence prior to the contemplation of the
acquisition and do not extend to any assets other than the
acquired property; (iv) Liens incurred or deposits made in
the ordinary course of business in connection with workers
compensation, unemployment insurance or other kinds of social
security, or to secure the payment or performance of tenders,
statutory or regulatory obligations, surety or appeal bonds,
performance bonds or other obligations of a like nature incurred
in the ordinary course of business (including lessee or operator
obligations under statutes, governmental regulations or
instruments related to the ownership, exploration and production
of oil, gas and minerals on state or federal lands or waters);
(v) Liens existing on the date of the Indenture;
(vi) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
(vii) statutory liens of landlords, mechanics, suppliers,
vendors, warehousemen, carriers or other like Liens arising in
the ordinary course of business; (viii) judgment Liens not
giving rise to an Event of Default so long as any appropriate
legal proceeding that may have been duly initiated for the
review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated
shall not have expired; (ix) Liens on, or related to,
properties or assets to secure all or part of the costs incurred
in the ordinary course of the Oil and Gas Business for the
exploration, drilling, development, or operation thereof;
(x) Liens in pipeline or pipeline facilities that arise
under operation of law; (xi) Liens arising under operating
agreements, joint venture agreements, partnership agreements,
oil and gas leases, farm-out agreements, division orders,
contracts for the sale, transportation or exchange of oil or
natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements and other
agreements that are customary in the Oil and Gas Business;
(xii) Liens reserved in oil and gas mineral leases for
bonus or rental payments and for compliance with the terms of
such leases; (xiii) Liens securing the notes; and
(xiv) Liens not otherwise permitted by clauses (i)
through (xiii) that are incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at
any one time outstanding.
Permitted Refinancing Debt means any
Indebtedness of the Company or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness (other than Indebtedness incurred
under a Credit Facility) of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal
amount of such Permitted Refinancing Indebtedness does not
exceed the principal amount of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Indebtedness has a final
maturity date on or later than the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
(iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the notes on terms
at least as favorable taken as a whole to the Holders of notes
as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is
incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
Production Payments means Dollar-Denominated
Production Payments and Volumetric Production Payments,
collectively.
Restricted Investment means an Investment
other than a Permitted Investment.
Restricted Subsidiary means any direct or
indirect Subsidiary of the Company that is not an Unrestricted
Subsidiary.
47
Senior Debt means (i) Indebtedness of
the Company or any Subsidiary of the Company under or in respect
of any Credit Facility, whether for principal, interest
(including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law,
whether or not the claim for such interest is allowed as a claim
in such proceeding), reimbursement obligations, fees,
commissions, expenses, indemnities or other amounts, and
(ii) any other Indebtedness permitted under the terms of
the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the notes.
Notwithstanding anything to the contrary in the foregoing
sentence, Senior Debt will not include (w) any liability
for federal, state, local or other taxes owed or owing by the
Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or
(z) any Indebtedness that is incurred in violation of the
Indenture (other than Indebtedness under (i) any Credit
Agreement or (ii) any other Credit Facility that is
incurred on the basis of a representation by the Company to the
applicable lenders that it is permitted to incur such
Indebtedness under the Indenture).
Significant Subsidiary any Subsidiary of the
Company that would be a significant subsidiary as
defined in Article I, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Exchange Act,
as such Regulation is in effect on the date hereof.
Subsidiary means, with respect to any Person,
(i) any corporation, association or other business entity
of which more than 50% of the total voting power of shares of
Capital Stock, 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 such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are such Person or of one or more Subsidiaries of such
Person (or any combination thereof).
Subsidiary Guarantors means each Restricted
Subsidiary of the Company existing on the date of the Indenture
(such Subsidiaries being Range Energy I, Inc., Range
HoldCo, Inc., Range Production Company, Range Energy Ventures
Corporation, Gulfstar Energy, Inc., Range Energy Finance
Corporation, RB Operating Company and PMOG Holdings, Inc.), any
other future Restricted Subsidiary of the Company that executes
a Guarantee in accordance with the provisions of the Indenture
and, in each case, their respective successors and assigns,
provided that, in no event shall any future acquired foreign
Subsidiary be a Subsidiary Guarantor under the Indenture.
Total Assets means, with respect to any
Person, the total consolidated assets of such Person and its
Restricted Subsidiaries, as shown on the most recent balance
sheet of such Person.
Unrestricted Subsidiary means (i) any
Subsidiary of the Company which at the time of determination
shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company, as provided below) and
(ii) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors of the Company may designate any Subsidiary
of the Company (including any newly acquired or newly formed
Subsidiary or a Person becoming a Subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted
Subsidiary only if (a) such Subsidiary does not own any
Capital Stock of, or own or hold any Lien on any property of,
any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated or otherwise an Unrestricted
Subsidiary; (b) all the Indebtedness of such Subsidiary
shall, at the date of designation, and will at all times
thereafter, consist of Non-Recourse Debt; (c) the Company
certifies that such designation complies with the
Limitation on restricted payments covenant;
(d) such Subsidiary, either alone or in the aggregate with
all other Unrestricted Subsidiaries, does not operate, directly
or indirectly, all or substantially all of the business of the
Company and its Subsidiaries; (e) such Subsidiary does not,
directly or indirectly, own any Indebtedness of or Equity
Interest in, and has no investments in, the Company or any
Restricted Subsidiary; (f) such Subsidiary is a Person with
respect to which neither the Company nor any of its Restricted
Subsidiaries has any direct or indirect obligation (1) to
subscribe for additional Equity Interests or (2) to
maintain or preserve such Persons financial condition or
to cause such Person to achieve any specified levels of
operating results; and (g) on the date such Subsidiary is
designated an Unrestricted Subsidiary, such Subsidiary is not a
party to any agreement, contract, arrangement or understanding
with the
48
Company or any Restricted Subsidiary with terms substantially
less favorable to the Company than those that might have been
obtained from Persons who are not Affiliates of the Company. Any
such designation by the Board of Directors of the Company shall
be evidenced to the Trustee by filing with the Trustee a
resolution of the Board of Directors of the Company giving
effect to such designation and an Officers Certificate
certifying that such designation complied with the foregoing
conditions. If, at any time, any Unrestricted Subsidiary would
fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred as of such date.
The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be Restricted Subsidiary;
provided, that (i) immediately after giving effect
to such designation, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence
thereof and the Company could incur at least $1.00 of additional
Indebtedness (excluding Permitted Indebtedness) pursuant to the
first paragraph of the Incurrence of indebtedness and
issuance of disqualified stock covenant on a pro forma
basis taking into account such designation and (ii) such
Subsidiary executes a Guarantee pursuant to the terms of the
Indenture.
Volumetric Production Payments means
production payment obligations recorded as deferred revenue in
accordance with GAAP, together with all undertakings and
obligations in connection therewith.
Weighted Average Life to Maturity means, when
applied to any Indebtedness at any date, the number of years
obtained by dividing (i) the sum of the products obtained
by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to
the nearest-twelfth) that will elapse between such date and the
making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
Wholly Owned Restricted Subsidiary of any
Person means a Restricted Subsidiary of such Person all of the
outstanding Capital Stock or other ownership interests of which
(other than directors qualifying shares) shall at the time
be owned, directly or indirectly, by such Person or by one or
more Wholly Owned Restricted Subsidiaries of such Person.
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Form, Denomination and Registration of the Notes |
The new notes will be issued in registered form, without
interest coupons, in denominations of $1,000 and integral
multiples thereof, in the form of both global notes and
certificated notes, as further provided below.
The trustee is not required (i) to issue, register the
transfer of or exchange any note for a period of 15 days
before a selection of notes to be redeemed or repurchased,
(ii) to register the transfer of or exchange any note so
selected for redemption or repurchase in whole or in part,
except, in the case of a partial redemption or repurchase, that
portion of any note not being redeemed or repurchased, or
(iii) if a redemption or a repurchase is to occur after a
regular record date but on or before the corresponding interest
payment date, to register the transfer or exchange of any note
on or after the regular record date and before the date of
redemption or repurchase. See Global
Notes and Certificated Notes for a
description of additional transfer restrictions applicable to
the notes.
No service charge will be imposed in connection with any
transfer or exchange of any note, but the Company may in general
require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith.
Global notes representing the new notes will be deposited with a
custodian for DTC, and registered in the name of a nominee of
DTC. Beneficial interests in the global notes will be shown on
records maintained by DTC and its direct and indirect
participants. So long as DTC or its nominee is the registered
owner or holder of a global note, DTC or such nominee will be
considered the sole owner or holder of the notes represented by
such global note for all purposes under the Indenture and the
notes. No owner of a beneficial interest in a
49
global note will be able to transfer such interest except in
accordance with DTCs applicable procedures and the
applicable procedures of its direct and indirect participants.
The Company will apply to DTC for acceptance of the global notes
in its book-entry settlement system. Investors may hold their
beneficial interests in the global notes directly through DTC if
they are participants in DTC, or indirectly through
organizations which are participants in DTC.
Payments of principal and interest under each global note will
be made to DTCs nominee as the registered owner of such
global note. The Company expects that the nominee, upon receipt
of any such payment, will immediately credit DTC
participants accounts with payments proportional to their
respective beneficial interests in the principal amount of the
relevant global note as shown on the records of DTC. The Company
also expects that payments by DTC participants to owners of
beneficial interests will be governed by standing instructions
and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the
responsibility of such participants, and none of the Company,
the Trustee, the custodian or any paying agent or registrar will
have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
interests in any global note or for maintaining or reviewing any
records relating to such beneficial interests.
If DTC notifies the Company that it is unwilling or unable to
continue as depositary for a global note and a successor
depositary is not appointed by the Company within 90 days
of such notice, or an Event of Default has occurred and the
trustee has received a request from DTC, the trustee will
exchange each beneficial interest in that global note for one or
more certificated notes registered in the name of the owner of
such beneficial interest, as identified by DTC. Neither the
Company nor the trustee will be liable for any delay by DTC or
any participant or indirect participant in DTC in identifying
the beneficial owners of the related notes and each of those
person may conclusively rely on, and will be protected in
relying on, instructions from DTC for all purposes, including
with respect to the registration and delivery, and the
respective principal amounts, of the notes to be issued.
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Same Day Settlement and Payment |
The Indenture requires that payments in respect of the notes
represented by the global notes be made by wire transfer of
immediately available funds to the accounts specified by holders
of the global notes. With respect to notes in certificated form,
the Company will make all payments by wire transfer of
immediately available funds to the accounts specified by the
holders thereof or, if no such account is specified, by mailing
a check to each holders registered address.
The new notes represented by the global notes are expected 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. The Company expects that secondary trading in
any certificated notes will also be settled in immediately
available funds.
50
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material federal
income tax considerations relevant to the exchange of new notes
for old notes but does not purport to be a complete analysis of
all potential tax effects. This discussion is based upon the
provisions of the Internal Revenue Code of 1986, as amended,
applicable Treasury Regulations promulgated and proposed
thereunder, judicial authority and administrative
interpretations, as of the date hereof, all of which are subject
to change, possibly with retroactive effect or are subject to
different interpretations. This discussion does not address the
tax considerations arising under the laws of any foreign, state,
local, or other jurisdiction.
We believe that the exchange of new notes for old notes should
not be an exchange or otherwise a taxable event to a holder for
United States federal income tax purposes. Accordingly, a holder
should have the same adjusted issue price, adjusted basis and
holding period in the new notes as it had in the old notes
immediately before the exchange.
51
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Securities and
Exchange Commission in no action letters issued to third
parties, we believe that you may transfer new notes issued in
the exchange offer in exchange for the old notes if:
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you acquire the new notes in the ordinary course of your
business; and |
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you are not engaged in, and do not intend to engage in, and have
no arrangement or understanding with any person to participate
in, a distribution of the new notes. |
Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such new
notes. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes
where such old notes were acquired as a result of market-making
activities or other trading activities. We and the subsidiary
guarantors have agreed that, starting on the expiration date of
the exchange offer and ending on the close of business
180 days after the date of such expiration date, we will
make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale.
If you wish to exchange new notes for your old notes in the
exchange offer, you will be required to make representations to
us as described in Exchange Offer Purpose and
Effect of the Exchange Offer and
Procedures for Tendering Your
representations to us in this prospectus and in the letter
of transmittal. In addition, if you are a broker-dealer who
receives new notes for your own account in exchange for old
notes that were acquired by you as a result of market-making
activities or other trading activities, you will be required to
acknowledge that you will deliver a prospectus in connection
with any resale by you of the new notes.
We will not receive any proceeds from any resale of new notes by
broker-dealers. New notes received by broker-dealers for their
own account pursuant to the exchange offer may be sold from time
to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in
the form of commission or concessions from any such
broker-dealer and/or the purchasers of any such new notes. Any
broker-dealer that resells new notes that were received by it
for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such new
notes may be deemed to be an underwriter within the
meaning of the Securities Act, and any profit on any such resale
of new notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act.
For a period of 180 days after the expiration date of the
exchange offer, we and the subsidiary guarantors will promptly
send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests
such documents in the letter of transmittal. We have agreed to
pay all expenses incident to the exchange offer (including the
expenses of one counsel for the holders of the old notes) other
than commission or concession of any brokers or dealers and will
indemnify the holders of the old notes (including any
broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
52
SECURITY OWNERSHIP
The following table reflects the beneficial ownership of the
Companys common stock based upon the 81,448,623 common
shares outstanding as of February 28, 2005 by (i) each
person known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of the common stock,
(ii) each director and each of the five Named Executive
Officers (as defined under Executive
Compensation Summary Compensation Table) and
(iii) all directors and executive officers as a group. The
business address of each individual listed below is:
c/o Range Resources Corporation, 777 Main Street,
Suite 800, Fort Worth, Texas 76102. Unless otherwise
indicated, to the Companys knowledge, each stockholder has
sole voting and dispositive power with respect to the securities
beneficially owned by that stockholder.
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Common Stock | |
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Number of Shares | |
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Percent | |
Name of Beneficial Owner |
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Beneficially Owned | |
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of Class | |
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Robert E. Aikman
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176,416 |
(1) |
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* |
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Charles L. Blackburn
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42,927 |
(2) |
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* |
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Anthony V. Dub
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200,000 |
(3) |
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* |
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V. Richard Eales
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104,000 |
(4) |
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* |
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Allen Finkelson
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157,812 |
(5) |
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* |
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Jonathan S. Linker
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59,000 |
(6) |
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* |
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John H. Pinkerton
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981,659 |
(7) |
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1.2 |
% |
Jeffrey L. Ventura
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105,427 |
(8) |
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* |
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Roger S. Manny
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52,494 |
(9) |
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* |
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Chad L. Stephens
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267,923 |
(10) |
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* |
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Rodney L. Waller
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413,792 |
(11) |
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* |
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All directors and executive officers as a group (13 individuals)
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2,784,489 |
(12) |
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3.4 |
% |
FMR Corp.
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82 Devonshire Street |
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Boston, Massachusetts 02109 |
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7,426,250 |
(13) |
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9.1 |
% |
Wells Fargo & Company
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420 Montgomery Street |
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San Francisco, California 94104 |
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7,169,575 |
(14) |
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8.8 |
% |
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(1) |
Includes 46,000 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days, 14,500 shares owned by
Mr. Aikmans family trust, and 14,366 shares
owned by Mr. Aikmans spouse to which Mr. Aikman
disclaims beneficial ownership. |
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(2) |
Include 24,000 shares which may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 18,927 shares held in
the Companys deferred compensation plan. |
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(3) |
Includes 46,000 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 4,000 shares held in
the Companys deferred compensation plan. |
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(4) |
Includes 38,000 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 3,500 shares held in
the Companys deferred compensation plan. |
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(5) |
Includes 46,000 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 46,812 shares held in
the Companys deferred compensation plan. |
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(6) |
Includes 24,000 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 10,000 shares held in
the Companys deferred compensation plan. |
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(7) |
Includes 482,750 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days, 121,199 shares held in an
IRA account, 272,133 shares held in the Companys
deferred compensation and 401(k) plans, 4,772 shares owned
by Mr. Pinkertons minor |
53
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children and 3,499 shares owned by
Mr. Pinkertons spouse, to which Mr. Pinkerton
disclaims beneficial ownership. |
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(8) |
Includes 58,200 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 47,227 shares held in
the Companys deferred compensation and 401(k) plans of
which 20,000 shares are subject to vesting requirements
until July 2006. |
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(9) |
Includes 34,200 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 18,294 shares held in
the Companys deferred compensation and 401(k) plans of
which 10,000 shares are subject to vesting requirements
until October 2006. |
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(10) |
Includes 115,940 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days; 80,376 shares held in the
Companys deferred compensation and 401(k) plans,
18,000 shares owned by a family trust, 3,879 shares
owned by Mr. Stephens minor children and
15,000 shares owned by Mr. Stephens spouse, to
which Mr. Stephens disclaims beneficial ownership. |
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(11) |
Includes 208,031 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days; 42,500 shares in an IRA
account and 136,978 shares held in the Companys
deferred compensation and 401(k) plans. |
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(12) |
Includes 1,219,091 shares that may be purchased under
currently exercisable stock options or options that are
exercisable within 60 days and 716,944 shares held in
the Companys deferred compensation and 401(k) plans. |
|
(13) |
Based on Schedule 13G/ A filed with the Securities and
Exchange Commission on January 10, 2005. Fidelity
Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and an investment advisor registered
under Section 203 of the Investment Advisers Act of 1940,
is the beneficial owner of 6,419,450 shares as a result of
acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of
1940. Fidelity Management Trust Company, a wholly owned
subsidiary of FMR Corp. and a bank as defined in
Section 3(a)(6) of the Securities Exchange Act of 1934, is
the beneficial owner of 1,006,800 shares as a result of its
serving as investment manager of certain institutional accounts.
Edward C. Johnson 3d, FMR Corp., through its control of
Fidelity, and the funds each has sole power to dispose of the
7,426,250 shares owned by the Funds and the institutional
accounts. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman
of FMR Corp., has the sole power to vote or direct the voting of
the shares owned directly by the Fidelity Funds, which power
resides with the Funds Boards of Trustees.
Mr. Johnson 3d is Chairman of FMR Corp. and Abigail P.
Johnson is a Director of FMR Corp. Accordingly, through their
ownership of voting common stock and the execution of the
stockholders voting agreement, members of the Johnson
family may be deemed, under the Investment Company Act of 1940,
to form a controlling group with respect to FMR Corp. |
|
(14) |
Based on Schedule 13G filed with the Securities and
Exchange Commission on February 22, 2005. Wells
Fargo & Company, a Parent Holding Company in accordance
with 240.13d-1(b)(1)(ii)(G) of the Securities Exchange Act of
1934, reported on behalf of Wells Capital Management
Incorporated (6,844,926 shares) and Wells Fargo Funds
Management, LLC (5,490,687 shares), both Registered
Investment Advisors in accordance with
Regulation 13d-1(b)(1)(ii)(E), an aggregate beneficial
ownership of 7,169,575 shares. Wells Fargo &
Company reported sole voting power of 7,150,236 shares and
sole dispositive power of 6,844,926 shares. Wells Capital
Management Incorporated reported sole voting power of
1,659,543 shares and sole dispositive power of
6,844,926 shares. Wells Fargo Funds Management, LLC
reported sole voting power of 5,490,687 shares and sole
dispositive power of zero shares. |
54
EXECUTIVE COMPENSATION
The following table summarizes the total compensation awarded
to, earned or paid by the Company to the Chief Executive Officer
of the Company and the four most highly compensated executive
officers who were serving as executive officers at the end of
the Companys last completed fiscal year for services
rendered in all capacities during the years ended
December 31, 2004, 2003 and 2002. In this Registration
Statement, these individuals are referred to as Named
Executive Officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation | |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
Annual Compensation | |
|
Restricted | |
|
Securities | |
|
All Other | |
|
|
|
|
| |
|
Stock | |
|
Underlying | |
|
Compensation | |
Name and Principal Position |
|
Year | |
|
Salary ($) | |
|
Bonus ($) | |
|
Awards ($) | |
|
Options (#) | |
|
($)(a) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
|
2004 |
|
|
$ |
386,827 |
|
|
$ |
450,000 |
(d) |
|
$ |
106,220 |
(e) |
|
|
180,000 |
|
|
$ |
56,092 |
|
|
President & CEO |
|
|
2003 |
|
|
|
358,462 |
|
|
|
400,000 |
(f) |
|
|
106,200 |
(g) |
|
|
175,000 |
|
|
|
54,286 |
|
|
|
|
|
2002 |
|
|
|
363,462 |
|
|
|
271,000 |
(h) |
|
|
|
|
|
|
175,000 |
|
|
|
135,860 |
|
Jeffrey L. Ventura(b)
|
|
|
2004 |
|
|
|
239,231 |
|
|
|
240,000 |
(d) |
|
|
71,190 |
(e) |
|
|
94,000 |
|
|
|
42,899 |
|
|
Executive Vice President |
|
|
2003 |
|
|
|
108,462 |
|
|
|
120,000 |
(f) |
|
|
200,800 |
(g)(i) |
|
|
100,000 |
|
|
|
19,080 |
|
|
COO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roger S. Manny(c)
|
|
|
2004 |
|
|
|
184,231 |
|
|
|
150,000 |
(d) |
|
|
36,160 |
(e) |
|
|
54,000 |
|
|
|
34,969 |
|
|
Senior Vice President & |
|
|
2003 |
|
|
|
43,615 |
|
|
|
30,000 |
(f) |
|
|
70,000 |
(j) |
|
|
60,000 |
|
|
|
4,362 |
|
|
CFO |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rodney L. Waller
|
|
|
2004 |
|
|
|
182,554 |
|
|
|
150,000 |
(d) |
|
|
36,160 |
(e) |
|
|
52,200 |
|
|
|
34,259 |
|
|
Senior Vice President |
|
|
2003 |
|
|
|
176,664 |
|
|
|
125,000 |
(f) |
|
|
35,400 |
(g) |
|
|
50,700 |
|
|
|
44,299 |
|
|
|
|
|
2002 |
|
|
|
174,808 |
|
|
|
88,000 |
(h) |
|
|
|
|
|
|
50,700 |
|
|
|
49,200 |
|
Chad L. Stephens
|
|
|
2004 |
|
|
|
174,308 |
|
|
|
140,000 |
(d) |
|
|
36,160 |
(e) |
|
|
51,100 |
|
|
|
32,816 |
|
|
Senior Vice President |
|
|
2003 |
|
|
|
169,731 |
|
|
|
100,000 |
(f) |
|
|
35,400 |
(g) |
|
|
49,600 |
|
|
|
40,184 |
|
|
Corporate Development |
|
|
2002 |
|
|
|
164,962 |
|
|
|
60,000 |
(h) |
|
|
|
|
|
|
49,600 |
|
|
|
38,467 |
|
|
|
(a) |
Represents the Companys contribution to the 401(k) and
deferred compensation plans in the form of common stock valued
at 100% of the common stocks closing price as reported by
the New York Stock Exchange (NYSE) on the date of
the contributions along with the value, if any, attributable to
participation in the stock purchase plan. |
|
|
|
(b) |
|
Mr. Ventura joined the Company in July 2003. |
|
(c) |
|
Mr. Manny joined the Company in October 2003. |
|
(d) |
|
Officer bonuses for 2004 were paid 75% in cash and 25% placed in
each officers deferred compensation account either in
restricted common stock or cash at each officers election.
The 25% deferred portion of the bonus will vest January 2,
2006. If elected by the officer, restricted stock was valued at
$23.28 per share, 100% of the common stocks closing
price as reported by the NYSE at the time the bonuses were
approved by the Compensation Committee. The following table sets
forth the total amount of cash and stock paid to each Named
Executive Officer as a bonus for 2004. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in | |
|
Paid in | |
|
Number of | |
|
|
Cash | |
|
Stock | |
|
Shares | |
|
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
$ |
337,500 |
|
|
$ |
112,500 |
|
|
|
4,832 |
|
Jeffrey L. Ventura
|
|
|
180,000 |
|
|
|
60,000 |
|
|
|
2,577 |
|
Roger S. Manny
|
|
|
112,500 |
|
|
|
37,500 |
|
|
|
1,610 |
|
Rodney L. Waller
|
|
|
131,250 |
|
|
|
18,750 |
|
|
|
805 |
|
Chad L. Stephens
|
|
|
105,000 |
|
|
|
35,000 |
|
|
|
1,503 |
|
|
|
(e) |
The Compensation Committee awarded restricted stock grants to
officers on May 19, 2004. Such shares were valued at
$11.30 per share, 100% of the common stocks closing
price as reported by the NYSE on the date of grant. Such
restricted shares were placed in each officers deferred
compensation account |
55
|
|
|
subject to vesting over a three-year period at 30% on the first
anniversary of the date of grant, 30% on the second anniversary
of the date of grant and 40% on the third anniversary of the
date of grant. The following restricted stock awards were
granted to the Named Executive Officers in 2004 John
H. Pinkerton, 9,400 shares; Jeffrey L. Ventura,
6,300 shares; Roger S. Manny, 3,200 shares; Rodney L.
Waller, 3,200 shares and Chad L. Stephens,
3,200 shares. |
|
|
|
(f) |
|
Officer bonuses for 2003 were paid 75% in cash and 25% placed in
each officers deferred compensation account either in
restricted common stock or cash at each officers election.
The 25% deferred portion of the bonus was subject to delayed
vesting until January 2, 2005. If elected by the officer,
restricted stock was valued at $10.48 per share, 100% of
the common stocks closing price as reported by the NYSE at
the time the bonuses were approved by the Compensation
Committee. The following table sets forth the total amount of
cash and stock paid to each Named Executive Officer as a bonus
for 2003. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in | |
|
Paid in | |
|
Number of | |
|
|
Cash | |
|
Stock | |
|
Shares | |
|
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
$ |
300,000 |
|
|
$ |
100,000 |
|
|
|
9,541 |
|
Jeffrey L. Ventura
|
|
|
90,000 |
|
|
|
30,000 |
|
|
|
2,862 |
|
Roger S. Manny
|
|
|
22,500 |
|
|
|
7,500 |
|
|
|
715 |
|
Rodney L. Waller
|
|
|
93,750 |
|
|
|
31,250 |
|
|
|
2,981 |
|
Chad L. Stephens
|
|
|
75,000 |
|
|
|
25,000 |
|
|
|
2,385 |
|
|
|
(g) |
The Compensation Committee awarded restricted stock grants to
officers on September 24, 2003. Such shares were valued at
$7.08 per share, 100% of the common stocks closing
price as reported by the NYSE on the date of the grant. Such
restricted shares were placed in each officers deferred
compensation account subject to vesting over a three-year period
at 30% on the first anniversary of the date of grant, 30% on the
second anniversary of the date of grant and 40% on the third
anniversary of the date of grant. The following restricted stock
awards were granted to the Named Executives John H.
Pinkerton, 15,000 shares; Jeffrey L. Ventura,
10,000 shares; Rodney L. Waller, 5,000 shares and Chad
L. Stephens, 5,000 shares. |
|
|
|
(h) |
|
Officer bonuses for 2002 were paid 75% in cash and 25% in
restricted common stock of the Company placed in each
officers deferred compensation account. The 25% deferred
portion of the bonus was subject to delayed vesting until
January 2, 2004. The restricted stock was valued at
$5.83 per share, 100% of the common stocks closing
price as reported by the NYSE at the time the bonuses were
approved by the Compensation Committee. The following table sets
forth the total amount of cash and stock paid to each Named
Executive Officer as a bonus for 2002. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in | |
|
Paid in | |
|
Number of | |
|
|
Cash | |
|
Stock | |
|
Shares | |
|
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
$ |
203,250 |
|
|
$ |
67,750 |
|
|
|
11,621 |
|
Rodney L. Waller
|
|
|
62,250 |
|
|
|
20,750 |
|
|
|
3,559 |
|
Chad L. Stephens
|
|
|
45,000 |
|
|
|
15,000 |
|
|
|
2,573 |
|
|
|
(i) |
Mr. Ventura was awarded 20,000 restricted common shares
upon his employment in July 2003. Such shares were placed in his
deferred compensation plan account and vest annually over a
three-year period at
1/3
on the first anniversary of the date of grant,
1/3 on
the second anniversary of the date of grant and
1/3 on
the third anniversary of the date of grant. Such shares were
valued at $6.50 per share, 100% of the common stocks
closing price as reported by the NYSE on the date of the grant. |
|
|
|
(j) |
|
Mr. Manny was awarded 10,000 restricted common shares upon
his employment in October 2003. Such shares were placed in his
deferred compensation plan account and vest annually over a
three-year period at
1/3
on the first anniversary of the date of grant,
1/3 on
the second anniversary of the date of grant and
1/3 on
the third anniversary of the date of grant. Such shares were
valued at $7.00 per share, 100% of the then fair market
value of the common stock. |
56
The following table reflects the aggregate restricted stock
award holdings as of December 31, 2004 of the Named
Executive Officers which were unvested. Such restricted shares
exclude any shares elected by individuals as partial payment of
bonuses which are disclosed in the notes to the Summary
Compensation Table shown above. The value of the stock as of
December 31, 2004, is based upon the closing price as
reported by NYSE of $20.46.
Restricted Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
|
Amount | |
|
|
|
|
Restricted | |
|
Average | |
|
Value at | |
|
Value at | |
|
Vested as of | |
|
|
|
|
Shares | |
|
Grant | |
|
Date of | |
|
December 31, | |
|
December 31, | |
|
|
|
|
Granted | |
|
Price | |
|
Grant | |
|
2004 | |
|
2004 | |
|
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
2004 |
|
|
9,400 |
|
|
$ |
11.30 |
|
|
$ |
106,220 |
|
|
$ |
192,324 |
|
|
$ |
|
|
|
|
2003 |
|
|
15,000 |
|
|
|
7.08 |
|
|
|
106,200 |
|
|
|
306,900 |
|
|
|
92,070 |
|
Jeffrey L. Ventura
|
|
2004 |
|
|
6,300 |
|
|
|
11.30 |
|
|
|
71,190 |
|
|
|
128,898 |
|
|
|
|
|
|
|
2003 |
|
|
30,000 |
|
|
|
6.69 |
|
|
|
200,800 |
|
|
|
613,800 |
|
|
|
196,416 |
|
Roger S. Manny
|
|
2004 |
|
|
3,200 |
|
|
|
11.30 |
|
|
|
36,160 |
|
|
|
65,472 |
|
|
|
|
|
|
|
2003 |
|
|
10,000 |
|
|
|
7.00 |
|
|
|
70,000 |
|
|
|
204,600 |
|
|
|
67,518 |
|
Rodney L. Waller
|
|
2004 |
|
|
3,200 |
|
|
|
11.30 |
|
|
|
36,160 |
|
|
|
65,472 |
|
|
|
|
|
|
|
2003 |
|
|
5,000 |
|
|
|
7.08 |
|
|
|
35,400 |
|
|
|
102,300 |
|
|
|
30,690 |
|
Chad L. Stephens
|
|
2004 |
|
|
3,200 |
|
|
|
11.30 |
|
|
|
36,160 |
|
|
|
65,472 |
|
|
|
|
|
|
|
2003 |
|
|
5,000 |
|
|
|
7.08 |
|
|
|
35,400 |
|
|
|
102,300 |
|
|
|
30,690 |
|
Dividends are paid on the restricted stock granted to the Named
Executive Officers. Specific vesting information as to each
award is contained in the notes to the Summary Compensation
Table shown above.
Stock Option Grants and Exercises
The following table reflects the stock options granted to the
Named Executive Officers for the year ended December 31,
2004. The stock options are granted at the market price of the
common stock as reported on the NYSE on the date of grant with a
term of five years and vest 30% on the first anniversary of the
date of grant, 30% on the second anniversary of the date of
grant and 40% on the third anniversary of the date of grant. No
stock appreciation rights have been granted.
Stock Options Granted in 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants | |
|
|
|
|
| |
|
Potential Realizable Value | |
|
|
Number of | |
|
Percent of | |
|
|
|
at Assumed Annual Rates | |
|
|
Securities | |
|
Total Options | |
|
|
|
of Stock Price Appreciation | |
|
|
Underlying | |
|
Granted to | |
|
|
|
for Option Term(a) | |
|
|
Options | |
|
Employees in | |
|
Exercise | |
|
Expiration | |
|
| |
Name |
|
Granted (#) | |
|
Fiscal Year | |
|
Price | |
|
Date | |
|
5% | |
|
10% | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
|
180,000 |
|
|
|
10.7 |
% |
|
$ |
10.48 |
|
|
|
2/11/09 |
|
|
$ |
521,178 |
|
|
$ |
1,151,666 |
|
Jeffrey L. Ventura
|
|
|
94,000 |
|
|
|
5.6 |
% |
|
|
10.48 |
|
|
|
2/11/09 |
|
|
|
272,171 |
|
|
|
601,426 |
|
Roger S. Manny
|
|
|
54,000 |
|
|
|
3.2 |
% |
|
|
10.48 |
|
|
|
2/11/09 |
|
|
|
156,353 |
|
|
|
345,500 |
|
Rodney L. Waller
|
|
|
52,200 |
|
|
|
3.1 |
% |
|
|
10.48 |
|
|
|
2/11/09 |
|
|
|
151,141 |
|
|
|
333,983 |
|
Chad L. Stephens
|
|
|
51,100 |
|
|
|
3.0 |
% |
|
|
10.48 |
|
|
|
2/11/09 |
|
|
|
147,957 |
|
|
|
326,945 |
|
|
|
(a) |
The Securities and Exchange Commission prescribes the annual
rates of stock price appreciation used in showing the potential
realizable value of stock option grants. Actual realized value
of the options may be significantly greater or less than that
assumed. |
The following table reflects the stock options exercised during
2004 and the stock options held by the Named Executive Officers
as of December 31, 2004. The value of
in-the-money options represents the
57
spread between the exercise price of the stock options and the
common stocks closing price as reported by the NYSE on
December 31, 2004 of $20.46.
Option Exercises in 2004 and Year-End Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities | |
|
|
|
|
|
|
|
|
Underlying Unexercised | |
|
Value of Unexercised | |
|
|
|
|
|
|
Options | |
|
In-the-Money Options | |
|
|
Shares | |
|
|
|
at Year-End 2004 | |
|
at Year-End 2004 | |
|
|
Acquired on | |
|
Value | |
|
(Exercisable (E)/ | |
|
(Exercisable (E)/ | |
Name |
|
Exercise (#) | |
|
Realized ($) | |
|
Unexercisable (U))(#) | |
|
Unexercisable (U))($) | |
|
|
| |
|
| |
|
| |
|
| |
John H. Pinkerton
|
|
|
|
|
|
$ |
|
|
|
|
317,500 |
(E) |
|
$ |
5,129,137 |
(E) |
|
|
|
|
|
|
|
|
|
|
|
405,000 |
(U) |
|
$ |
5,131,550 |
(U) |
Jeffrey L. Ventura
|
|
|
|
|
|
$ |
|
|
|
|
30,000 |
(E) |
|
$ |
418,800 |
(E) |
|
|
|
|
|
|
|
|
|
|
|
164,000 |
(U) |
|
$ |
1,915,320 |
(U) |
Roger S. Manny
|
|
|
|
|
|
$ |
|
|
|
|
18,000 |
(E) |
|
$ |
242,280 |
(E) |
|
|
|
|
|
|
|
|
|
|
|
96,000 |
(U) |
|
$ |
1,104,240 |
(U) |
Rodney L. Waller
|
|
|
|
|
|
$ |
|
|
|
|
154,630 |
(E) |
|
$ |
2,400,115 |
(E) |
|
|
|
|
|
|
|
|
|
|
|
118,970 |
(U) |
|
$ |
1,518,136 |
(U) |
Chad L. Stephens
|
|
|
30,000 |
|
|
$ |
430,551 |
|
|
|
63,640 |
(E) |
|
$ |
939,632 |
(E) |
|
|
|
|
|
|
|
|
|
|
|
116,660 |
(U) |
|
$ |
1,489,306 |
(U) |
DIRECTOR COMPENSATION
Upon Mr. Blackburns election in April 2003 as the
non-executive Chairman of the Board, the Board approved a
retainer of $100,000 per annum for Mr. Blackburn. Such
retainer is paid quarterly, one-half in cash and one-half in
fully-vested restricted common stock of the Company issued at
the then market value and placed in a deferred compensation
account for Mr. Blackburn. No increase in
Mr. Blackburns retainer was made in 2004.
In September 2003, upon the recommendation of the Compensation
Committee following its review of market data and other
considerations, the Board approved an increase in director
compensation. The Board maintained the annual grant of 8,000
stock options and retainer of $25,000 per annum for non-employee
directors but initiated a meeting fee of $1,000 for each Board
or Committee meeting that a director attends, including
telephonic meetings.
The meeting fees were initiated to recognize the increased time
and number of meetings required for Board service with increased
responsibilities under each committees charters,
especially the Audit and Compensation Committees. The Board also
approved the recommendation of the Compensation Committee to
grant each director annually restricted shares of the
Companys common stock in lieu of participation in the
Companys stock purchase plan. In May 2004, upon the
recommendation of the Compensation Committee, the Board approved
the grant of 4,000 shares of restricted common stock to each
director.
58
The following table provides information on our compensation and
reimbursement practices during 2004 for non-employee directors,
as well as the range of compensation paid to non-employee
directors who served during 2004. Mr. Pinkerton did not
receive any separate compensation for his Board participation.
Non-Employee Director
Compensation For 2004
|
|
|
|
|
|
|
|
|
|
|
Rate Per | |
|
Total Fees | |
|
|
Director | |
|
Paid | |
|
|
| |
|
| |
Non-Executive Chairman annual retainer
|
|
$ |
100,000 |
|
|
$ |
100,000 |
|
Non-employee directors annual retainer each
|
|
$ |
25,000 |
|
|
$ |
125,000 |
|
Board or Committee fee for each meeting
|
|
$ |
1,000 |
|
|
$ |
119,000 |
|
Annual stock options each(a)
|
|
|
8,000 |
|
|
|
48,000 |
|
Annual restricted common shares each(b)
|
|
|
4,000 |
|
|
|
24,000 |
|
|
|
|
(a) |
|
Granted upon election as a director and automatically each year
upon reelection at the annual meeting. 48,000 stock options were
granted in 2004 at an exercise price of $11.30 which was equal
to the fair market value of the common stock on the date of
grant. Such options are fully vested upon grant and have a term
of five years. |
|
(b) |
|
Granted on May 19, 2004 for the 2004-2005 fiscal term of
directors at $11.30 per share, the fair market value of such
shares on the date of grant. |
The range of total cash compensation earned by continuing
non-employee directors for 2004 was $44,000 to $118,000.
Directors are reimbursed for expenses attendant to Board
membership and travel.
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
There are no employment agreements currently in effect between
the Company and any Named Executive Officer. The Company has
agreed to pay the Named Executive Officers the following
salaries effective February 28, 2005: John H.
Pinkerton $430,000; Jeffrey L. Ventura
$300,000; Roger S. Manny $225,000; Rodney L.
Waller $210,000 and Chad L. Stephens
$190,000.
Effective March, 2005, the Board adopted the Range Resources
Corporation Executive Change in Control Severance Benefit Plan
(the Management Plan) pursuant to which officers and
certain key employees (the Management Group) may be
entitled to receive certain payments and benefits if there is a
change in control and a member of the Management Group is
terminated other than for cause or resigns for good reason. All
other employees (the Employee Group) may be entitled
to receive more limited payments under the Range Resources
Corporation Employee Change in Control Severance Benefit Plan
(the Employee Plan) upon an involuntary termination
of employment by the Company for other than cause. Upon a Change
in Control (as defined in the plans), all nonvested equity-based
compensation awards automatically vest under both plans. If any
person in the Management Group is (i) terminated, other
than for Cause (as defined in the plans), (A) within twelve
full calendar months following a Change in Control,
(B) prior to a Change in Control in anticipation of the
change in control, (C) during the period beginning on the
date stockholder approval is obtained for a Business Combination
(as defined in the plans) which constitutes a Change in Control
and ending as of the last day of the twelfth full calendar month
following the consummation of the Business Combination, or
(D) during the period beginning with the earlier of the
public announcement or commencement of a tender or exchange
offer constituting a Change in Control and ending on the last
day of the twelfth full calendar month following the
consummation of such transaction, unless such transaction is a
Business Combination, in which case the period will end in the
twelfth full calendar month following stockholder approval of
the Business Combination (each such period of at least twelve
months, the Protection Period), or
(ii) terminates employment within the Protection Period due
to a material diminution of the position or responsibility of
the employee, or reduction in the employees compensation
or benefits, or a substantial change in the location of the
principal place of the employees employment, the employee
will receive a lump sum payment (the Management
Payment) equal to (i) the employees
59
Benefit Multiple multiplied by (ii) the sum of
(a) the average of the bonuses paid or awarded to the
employee for the three prior fiscal years plus (b) the
employees base salary. The Benefit Multiple for the Named
Executive Officers is: Mr. Pinkerton three;
Mr. Ventura three; Mr. Manny
two and one-half; Mr. Waller two; and
Mr. Stephens two.
The Benefit Multiple for all other members of the Management
Group is two for officers and one for key employees specifically
named in the Plan. In addition, upon such a termination, persons
in the Management Group will receive, for a period of years
equal to their Benefit Multiple, continued participation in any
medical, dental, life and disability insurance and any other
insurance arrangement for the continued benefit of the employee
(and, if applicable, the employees spouse and minor
children) in which such persons were participating immediately
prior to the earlier of the termination of employment or the
date of the event constituting good reason. If any person in the
Employee Group is terminated by the Company, other than for
cause, within twelve months after a change in control, the
employee will receive a lump sum payment (the Employee
Payment) equal to (i) six months of their total
annual base salary, plus (ii) one-half of the average of
their past two annual bonuses. The amount of the Employee
Payment is reduced if an employee has been with the Company for
less than three years. An employee would receive one-third of
the payment if he was employed by the Company for less than two
years, and two-thirds of the payment if he was employed by the
Company for between two and three years.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors, during the
last fiscal year ended December 31, 2004, consisted of
Robert E. Aikman, Mr. Blackburn and Allen Finkelson. During
the last fiscal year, there were no compensation committee
interlocks or insider participation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires executive officers, directors and persons who
beneficially own more than ten percent of the Companys
stock to file initial reports of ownership and reports of
changes of ownership with the Securities and Exchange
Commission. Copies of such reports are required to be furnished
to the Company.
Based solely on a review of such forms furnished to the Company
and certain written representations from the executive officers
and directors, the Company believes that all Section 16(a)
filing requirements applicable to its executive officers,
directors and greater than 10% beneficial owners were complied
with on a timely basis during 2004.
LEGAL MATTERS
The validity of the new notes offered in this exchange offer
will be passed upon for us by Vinson & Elkins LLP,
Dallas, Texas.
EXPERTS
The consolidated financial statements of Range Resources
Corporation appearing in Range Resources Corporations
Annual Report (Form 10-K) as of December 31, 2004, and
2003, and for each of the years in the two year period ended
December 31, 2004, and Range Resources Corporation
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2004
included therein (which did not include an evaluation of the
internal control over financial reporting of PMOG Holdings,
Inc.), have been audited by Ernst & Young LLP,
independent registered public accounting firm, as set forth in
its reports thereon, which as to the report on internal control
over financial reporting contains an explanatory paragraph
describing the above referenced exclusion of PMOG Holdings, Inc.
from the scope of managements assessment and such
firms audit of internal control over financial reporting,
included therein, and incorporated herein by reference. Such
financial statements and managements assessment have been
60
incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Great Lakes Energy
Partners, L.L.C. at December 31, 2003 and 2002, and for
each of the two years in the period ended December 31,
2003, incorporated by reference in this Registration Statement
have been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their report
thereon incorporated by reference herein, and are incorporated
by reference in reliance upon such report given on the authority
of such firm as experts in accounting and auditing.
The consolidated statements of operations, stockholders
equity, comprehensive income (loss) and cash flows of Range
Resources Corporation for the year ended December 31, 2002,
have been audited by KPMG LLP, an independent registered public
accounting firm, as set forth in their report thereon included
in the Companys Annual Report on Form 10-K filed on
March 2, 2005 and incorporated herein by reference. Such
financial statements have been incorporated herein by reference
in reliance upon such reports given on the authority of such
firm as experts in accounting and auditing.
The consolidated balance sheet of PMOG Holdings, Inc. and
subsidiaries as of December 31, 2003 and the related
consolidated statements of operations, shareholders equity
and comprehensive income and cash flows for the period from
January 1, 2003 to August 12, 2003 (predecessor
period), and from August 13, 2003 to December 31, 2003
(successor period) appearing in Range Resources
Corporations current report on Form 8-K/ A filed on
January 27, 2005 were audited by KPMG LLP, an independent
registered public accounting firm, as set forth on their report
thereon included therein and incorporated herein by reference.
The report of KPMG LLP contains an explanatory paragraph as to a
business combination on August 13, 2003 and as to the
adoption of Statement of Financial Accounting Standard
No. 143. Such financial statements have been incorporated
herein by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
RESERVE ENGINEERS
Certain information incorporated by reference in this prospectus
regarding estimated quantities of oil and natural gas reserves
owned by us, the future net revenues from those reserves and
their present value is based on estimates of the reserves and
present values prepared by or derived from estimates prepared by
DeGolyer and MacNaughton, Wright & Company, Inc. and
H.J. Gruy and Associates, Inc. The reserve information is
incorporated by reference herein in reliance upon the authority
of said firms as experts with respect to such reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, with
respect to the new notes offered hereby. As permitted by the
rules and regulations of the Securities and Exchange Commission,
this prospectus does not contain all of the information set
forth in the registration statement. For further information
with respect to us and the new notes offered hereby, reference
is made to the registration statement, including the exhibits
and schedules filed therewith. Statements contained in this
prospectus concerning the provisions of any contract, agreement
or other document referred to herein or therein are not
necessarily complete, but contain a summary of the material
terms of such contracts, agreements or other documents. With
respect to each contract, agreement or other document filed as
an exhibit to the registration statement, reference is made to
the exhibit for the complete contents of the exhibit, and each
statement concerning its provisions is qualified in its entirety
by such reference. We file annual, quarterly and current
reports, proxy statements and other information with the
Securities and Exchange Commission. The registration statement
and our other filings with the Securities and Exchange
Commission may be read and copied at the SECs Public
Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such materials may also
be obtained by mail at prescribed rates from the Public
Reference Room of the Securities and Exchange Commission at that
address. You may obtain information on the operation of the
Public Reference Room by calling the Securities and Exchange
61
Commission at 1-800-SEC-0330. Copies of such materials may also
be obtained from the web site that the Securities and Exchange
Commission maintains at www.sec.gov.
We maintain an internet web site at www.rangeresources.com. The
information on this site does not form a part of this
prospectus. Our common stock is listed and traded on the New
York Stock Exchange under the trading symbol RRC.
Pursuant to the Indenture under which the new notes will be
issued, we have agreed that, whether or not we are required to
do so by the rules and regulations of the Securities and
Exchange Commission, for so long as any of the new notes remain
outstanding, we will furnish to the holders of the new notes
copies of the annual reports and any other information,
documents and other reports which we would be required to file
with the Securities and Exchange Commission if we were subject
to Section 13 or 15(d) of the Securities Exchange Act of
1934. In addition, whether or not required by the rules and
regulations of the Securities and Exchange Commission, we will
also agree to file a copy of all such information and reports
with the Securities and Exchange Commission for public
availability (unless the Securities and Exchange Commission will
not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. Any
request of this nature should be directed to our Corporate
Secretary, 777 Main Street, Suite 800, Ft. Worth,
Texas 76102 (telephone 817.870.2601).
INCORPORATION BY REFERENCE
In this prospectus, we have incorporated by reference certain
information we have filed, or will file, with the Securities and
Exchange Commission. The information incorporated by reference
is an important part of this prospectus, and information that we
file later with the Securities and Exchange Commission will
automatically update and supersede this information. Any
statement contained in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified
or superseded, for purposes of this prospectus, to the extent
that a statement contained in or omitted from this prospectus,
or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
We incorporate by reference the documents listed below and any
further filings made with the Securities and Exchange Commission
under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act until we terminate this exchange offer:
|
|
|
|
|
Annual report on Form 10-K for the year ended
December 31, 2004; |
|
|
|
Current Reports on Form 8-K filed January 3, 2005,
January 12, 2005, January 21, 2005, January 27,
2005, February 22, 2005, March 2, 2005, March 2,
2005, March 4, 2005, March 8, 2005, March 15,
2005 and March 22, 2005; and |
|
|
|
Current Reports on Form 8-K/ A filed on August 17,
2004 and January 27, 2005. |
All documents filed by us under Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 after the date of
the initial registration statement and prior to the
effectiveness of the registration statement and subsequent to
the date of this prospectus and prior to the termination of this
exchange offer, shall be deemed to be incorporated by reference
into this prospectus from the respective dates of filing such
documents.
We will provide without charge to any person to whom this
prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the documents incorporated by
reference (other than exhibits to such documents unless the
exhibits are specifically incorporated by reference in the
documents). Requests should be directed to Range Resources
Corporation, Attention: Rodney L. Waller, Senior Vice President,
777 Main Street, Suite 800, Fort Worth, Texas 76102
(telephone number 817.870.2601).
62
Range Resources Corporation
Offer to Exchange up to
$150,000,000
63/8% Senior
Subordinated Notes due 2015
issued by Range Resources Corporation on March 9,
2005
For
$150,000,000
63/8% Senior
Subordinated Notes due 2015
the offer and exchange of which have been registered under
the Securities Act of 1933
April 15, 2005