0000930661-01-501782.txt : 20011008
0000930661-01-501782.hdr.sgml : 20011008
ACCESSION NUMBER: 0000930661-01-501782
CONFORMED SUBMISSION TYPE: S-4
PUBLIC DOCUMENT COUNT: 13
FILED AS OF DATE: 20010919
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PURE RESOURCES HOLDINGS LLC
CENTRAL INDEX KEY: 0001159350
STANDARD INDUSTRIAL CLASSIFICATION: []
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-07
FILM NUMBER: 1740491
BUSINESS ADDRESS:
STREET 1: 3773 HOWARD HUGHES PARKWAY
STREET 2: SUITE 300 NORTH
CITY: LAS VEGAS
STATE: NV
ZIP: 89109
BUSINESS PHONE: 7028662222
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PURE RESOURCES HOLDINGS INC
CENTRAL INDEX KEY: 0001159349
STANDARD INDUSTRIAL CLASSIFICATION: []
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-15
FILM NUMBER: 1740499
BUSINESS ADDRESS:
STREET 1: 3773 HOWARD HUGHES PARKWAY
STREET 2: SUITE 300 NORTH
CITY: LAS VEGAS
STATE: NV
ZIP: 89109
BUSINESS PHONE: 7028662222
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PURE RESOURCES INC
CENTRAL INDEX KEY: 0001109860
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
IRS NUMBER: 742952918
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642
FILM NUMBER: 1740484
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HEC LA PLATA LLC
CENTRAL INDEX KEY: 0001159261
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-01
FILM NUMBER: 1740485
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: LA PLATA ASSOCIATES LLC
CENTRAL INDEX KEY: 0001159259
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-02
FILM NUMBER: 1740486
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HEP PARTNERS LP
CENTRAL INDEX KEY: 0001159257
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-03
FILM NUMBER: 1740487
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HEP PURE ACQUISITION LLC
CENTRAL INDEX KEY: 0001159255
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-04
FILM NUMBER: 1740488
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HEC PETROLEUM INC
CENTRAL INDEX KEY: 0001159253
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-05
FILM NUMBER: 1740489
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: HEP PURE LP
CENTRAL INDEX KEY: 0001159252
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-06
FILM NUMBER: 1740490
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PURE GP LLC
CENTRAL INDEX KEY: 0001159250
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-08
FILM NUMBER: 1740492
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PK IV LP
CENTRAL INDEX KEY: 0001159248
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-09
FILM NUMBER: 1740493
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PK III LP
CENTRAL INDEX KEY: 0001159245
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-10
FILM NUMBER: 1740494
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PK II LP
CENTRAL INDEX KEY: 0001159240
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-11
FILM NUMBER: 1740495
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PK I LP
CENTRAL INDEX KEY: 0001159239
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-12
FILM NUMBER: 1740496
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PURE RESOURCES I INC
CENTRAL INDEX KEY: 0001159236
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-13
FILM NUMBER: 1740497
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PURE RESOURCES LP
CENTRAL INDEX KEY: 0001159233
STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382]
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-14
FILM NUMBER: 1740498
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 915-498-8600
MAIL ADDRESS:
STREET 1: 500 WEST ILLIONIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: TITAN EXPLORATION INC
CENTRAL INDEX KEY: 0001024645
STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311]
IRS NUMBER: 752671582
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-69642-16
FILM NUMBER: 1740500
BUSINESS ADDRESS:
STREET 1: 500 WEST ILLINOIS
CITY: MIDLAND
STATE: TX
ZIP: 79701
BUSINESS PHONE: 9154988600
MAIL ADDRESS:
STREET 1: 500 W TEXAS AVE
STREET 2: SUITE 200
CITY: MIDLAND
STATE: TX
ZIP: 79701
S-4
1
ds4.txt
FORM S-4
As filed with the Securities and Exchange Commission on September 19, 2001
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
________________________
Pure Resources, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1311 74-2952918
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification No.)
For Co-Registrants, see "Table of Co-Registrants" on following page.
Jack Hightower
500 West Illinois 500 West Illinois
Midland, Texas 79701 Midland, Texas 79701
(915) 498-8600 (915) 498-8600
(Address, including zip code, and telephone number, including (Name, address, including zip code, and telephone
area code, of registrant's principal executive offices) number, including area code, of agent for service)
________________________
Copies to:
Joe Dannenmaier
Jane E. Rast
Wesley P. Williams
Thompson & Knight L.L.P.
1700 Pacific Avenue, Suite 3300
Dallas, Texas 75201
________________________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the registration statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
________________________
CALCULATION OF REGISTRATION FEE
=========================================================================================================================
Proposed Proposed
maximum maximum Amount of
Title of each class of securities Amount to be offering price aggregate registration
to be registered registered per share offering price (1) fee (2)
-------------------------------------------------------------------------------------------------------------------------
7 1/8% Senior Notes due 2011 $350,000,000 100% $350,000,000 $87,500
-------------------------------------------------------------------------------------------------------------------------
Guarantees of 7 1/8% Senior
Notes due 2011............ -- -- $190,816,335(2) (3)
=========================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to rule 457(f) of the rules and regulations under the Securities
Act of 1933, as amended.
(2) Calculated pursuant to Rule 457(f) of the rules and regulations under the
Securities Act of 1933, as amended.
(3) Pursuant to Rule 457(n) of the rules and regulations under the Securities
Act of 1933, no separate fee for the guarantees is payable.
________________________
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
TABLE OF CO-REGISTRANTS
Each of the following subsidiaries of Pure Resources, Inc., and each other
subsidiary that is or becomes a guarantor of certain of the securities
registered hereby, is hereby deemed to be a Registrant.
===================================================================================================================
Jurisdiction of Primary Standard
Exact Name as Specified in Their Incorporation or Industrial I.R.S. Employer
Charters (1) Organization Classification Number Identification Number
-------------------------------------------------------------------------------------------------------------------
Titan Exploration, Inc. Delaware 1311 75-2671582
-------------------------------------------------------------------------------------------------------------------
Pure Resources Holdings, Inc. Nevada 1311 86-0891254
-------------------------------------------------------------------------------------------------------------------
Pure Resources, L.P. Texas 1311 75-2715696
-------------------------------------------------------------------------------------------------------------------
Pure Resources I, Inc. Delaware 1311 75-2591874
-------------------------------------------------------------------------------------------------------------------
PK I, L.P. Delaware 1311 75-2916760
-------------------------------------------------------------------------------------------------------------------
PK II, L.P. Delaware 1311 75-2916761
-------------------------------------------------------------------------------------------------------------------
PK III, L.P. Delaware 1311 75-2916762
-------------------------------------------------------------------------------------------------------------------
PK IV, L.P. Delaware 1311 75-2916763
-------------------------------------------------------------------------------------------------------------------
Pure GP, LLC Delaware 1311 75-2942174
-------------------------------------------------------------------------------------------------------------------
Pure Resources Holdings, LLC Nevada 1311 88-0498888
-------------------------------------------------------------------------------------------------------------------
HEP Pure, LP Delaware 1311 75-2953743
-------------------------------------------------------------------------------------------------------------------
HEC Petroleum, Inc. Delaware 1311 84-0872297
-------------------------------------------------------------------------------------------------------------------
HEP Pure Acquisition, LLC Delaware 1311 75-2942732
-------------------------------------------------------------------------------------------------------------------
HEP Partners, L.P. Delaware 1311 84-0987088
-------------------------------------------------------------------------------------------------------------------
La Plata Associates, LLC Colorado 1311 84-1347831
-------------------------------------------------------------------------------------------------------------------
HEC La Plata, LLC Colorado 1311 84-1462406
===================================================================================================================
(1) The address and telephone number of the principal executive offices, and
the information regarding agent for service, are the same as those of Pure
Resources, Inc., except that for Pure Resources Holdings, Inc. and Pure
Resources Holdings, LLC, (A) the principal executive office is Nevada
Corporate Management, Inc., 3773 Howard Hughes Parkway, Suite 300 North,
Las Vegas, Nevada 89109, telephone number (702) 866-2222 and (B) the agent
for service at such address is Richard Klumpp.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may+
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any jurisdiction where the offer or sale is not permitted. +
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 19, 2001
PRELIMINARY PROSPECTUS
[PURE RESOURCES, INC. LOGO]
Pure Resources, Inc.
Offer to Exchange all of Our Outstanding
7 1/8% Senior Notes due 2011 for
7 1/8% Senior Notes due 2011, Which Have Been Registered
Under the Securities Act of 1933
______________
We are offering to exchange all of our outstanding unregistered 7 1/8% senior
notes due 2011 for registered 7 1/8% senior notes due 2011. We refer to the
registered senior notes as the new notes and the unregistered senior notes as
the old notes. We issued the old notes on June 8, 2001. As of the date of this
prospectus, an aggregate principal amount of $350 million of old notes is
outstanding. Please consider the following:
. Our offer to exchange the old notes for the new notes expires at 5:00 p.m.,
New York City time, on ________, 2001, unless we extend the offer.
. You should carefully review the procedures for tendering the old notes
beginning on page 23 of this prospectus. If you do not follow these
procedures, we may not exchange your old notes for new notes.
. We will not receive any proceeds from the exchange offer.
. If you do not tender your old notes, you will continue to hold unregistered
securities and your ability to transfer them could be adversely affected.
. You may withdraw tendered old notes at any time before the expiration of
the exchange offer.
The terms of the new notes will be substantially identical to the old notes,
except for the elimination of some transfer restrictions, registration rights
and liquidated damages provisions relating to the old notes. We will pay
interest on the new notes on June 15 and December 15 of each year, beginning
December 15, 2001, at a rate of 7 1/8% per year. We may redeem some or all of
the new notes at any time, at a price described in this prospectus. Some of our
wholly owned subsidiaries have guaranteed the new notes on a senior unsecured
basis.
There is currently no public market for the new notes. We do not intend to
list the new notes on any securities exchange. Therefore, we do not anticipate
that an active public market for the new notes will develop.
You should read the section entitled "Risk Factors" beginning on page 8 for a
discussion of specific factors that you should consider before participating in
this 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 in exchange for old notes must acknowledge that it will deliver a
prospectus in connection with any resale of such new notes. The letter of
transmittal 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 such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, until
, 200 , we 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 __________________, 2001.
TABLE OF CONTENTS
Page
--------
FORWARD-LOOKING STATEMENTS............................................ ii
SUMMARY............................................................... 1
RISK FACTORS.......................................................... 8
USE OF PROCEEDS....................................................... 16
SELECTED CONSOLIDATED HISTORICAL AND UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA................................................... 17
SELECTED CONSOLIDATED HISTORICAL AND PRO FORMA RESERVE AND
PRODUCTION DATA.................................................. 19
THE EXCHANGE OFFER.................................................... 21
DESCRIPTION OF CERTAIN INDEBTEDNESS................................... 30
DESCRIPTION OF NEW NOTES.............................................. 31
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.............. 41
PLAN OF DISTRIBUTION.................................................. 45
LEGAL MATTERS......................................................... 46
EXPERTS............................................................... 46
ENGINEERS............................................................. 46
WHERE YOU CAN FIND MORE INFORMATION................................... 46
This prospectus incorporates important business and financial information
about Pure that is not included in or delivered with this prospectus. See "Where
You Can Find More Information" for more information regarding these matters.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus include "forward-looking statements" which are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of our
management and on the information currently available to them. Among the
factors that could cause actual results to differ materially from expectations
are:
. inherent uncertainties in interpreting engineering and reserve or
production data;
. operating hazards, delays or cancellations of drilling operations for a
variety of reasons;
. competition;
. fluctuations and volatility in oil and gas prices;
. our ability to successfully integrate the business and operations of
acquired companies and assets;
. government and environmental regulations;
. increases in our cost of borrowing or inability or unavailability of
capital resources to fund capital expenditures, dependence on key
personnel, changes in general economic conditions and/or in the markets in
which we compete or may, from time to time, compete; and
. other factors including but not limited to those set forth below in "Risk
Factors" and those described in the reports we file with the SEC.
Statements and calculations concerning oil and gas reserves and their present
value also may be deemed to be forward-looking statements in that they reflect
the determination, based on estimates and assumptions, that oil and gas reserves
may be profitably exploited in the future. When used or referred to in this
document, these forward-looking statements may be preceded by, followed by, or
otherwise include the words "believes," "expects," "anticipates," "intends,"
"plans," "estimates," "projects" or similar expressions, or statements that
events or conditions "will" or "may" occur.
We undertake no obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. In light of
these risks, uncertainties and assumptions, the forward-looking events discussed
in this offering circular might not occur.
ii
SUMMARY
The following summary contains information about Pure and the offering of the
new notes. It does not contain all of the information that may be important to
you in making a decision to exchange your old notes. For a more complete
understanding of Pure and this exchange offer, we urge you to read this entire
prospectus and the documents incorporated by reference into this prospectus,
including the "Risk Factors" section. In this prospectus, when we use the term
"Pure," "we" or "our," we mean Pure Resources, Inc. and its subsidiaries on a
consolidated basis, unless the context requires otherwise.
Pure Resources
We are an independent energy company engaged in the exploitation,
development, exploration and acquisition of oil and gas properties. Our common
stock is traded on the New York Stock Exchange under the symbol "PRS." Our most
significant core areas of operation are the Permian Basin of West Texas and
southeastern New Mexico (69% of total proved reserves at December 31, 2000),
the San Juan Basin of New Mexico and Colorado (21% of total proved reserves),
the onshore Gulf Coast region (8% of total proved reserves) and the Gulf of
Mexico (2% of total proved reserves). We also own over 6 million gross (3.2
million net) acres of fee mineral ownership, primarily across the southern Gulf
Coast region of the United States. As of December 31, 2000, on a pro forma
basis giving effect to our 2000 acquisitions from International Paper Company
and of Hallwood Energy Corporation, we had proved reserves of 247.6 MBOE, with
an SEC 10% present value of $4.2 billion. On a pro forma basis, we had an
average reserve life of approximately 10.8 years and, of our proved reserves,
64% were natural gas, 81% were classified as proved developed and 81% were
operated by us.
Unocal Corporation, through its wholly owned subsidiary Union Oil Company of
California, owns approximately 65.4% of our common stock. In May 2000, Union
Oil and Titan Exploration, Inc. merged the Permian Basin business unit of Union
Oil and Titan into a new company. The resulting company is Pure Resources, Inc.
Titan's executive staff continued in their same capacities with Pure after the
combination. Titan, which was formed in March 1995, had historically been
involved in oil and gas exploration and production in the Permian Basin of West
Texas and southeastern New Mexico, the Brenham Dome area of south central Texas
and the Central Gulf Coast region of Texas. The combination of Pure and Union
Oil's Permian Basin business unit has been treated as a combination of entities
under common control, and the merger of Titan and a subsidiary of Pure has been
treated as an acquisition of Titan by Pure. Consequently, the historical
financial results and operational data of Pure for periods prior to the merger
are those of Union Oil's Permian Basin business unit.
Competitive Strengths
. Low Risk Asset Base. We believe that our asset base has several
characteristics that combine to create a low-risk platform for growth.
Our proved reserves are long-lived, gas oriented (64% gas) reserves that
are predominantly proved developed (80% developed) with multiple pay
zones. We operate a majority of our wells, giving us significant control
over our cost structure and timing of major expenditures. We believe our
efforts to successfully replace reserves at attractive finding costs will
be enhanced by an inventory of drilling locations for which our present
schedule of drilling exceeds four years. In addition, our position as one
of the largest independents in the Permian Basin gives us an excellent
strategic position in the consolidation of one of the most prolific
producing regions in the continental United States.
. Long-Lived Reserves. At December 31, 2000, on a pro forma basis, our
properties had an estimated average reserve life of 10.8 years. As a
result of the long-lived nature of our reserves, management believes that
we are better able to sustain our operations during periods of commodity
price and interest rate volatility than our competition with shorter
reserve lives.
. Financial Discipline and Strong Capital Structure. We believe that the
abilities to take advantage of acquisition opportunities and to obtain
low-cost financing can be decisive advantages in our efforts to enhance
shareholder value. In keeping with this belief, we believe in a
disciplined approach to financial management and in a strong capital
structure that preserves our ability to execute our business plan. Key
elements of our financial discipline include use of hedges to protect our
capital budget, periodic review of our capital budget and exploratory
projects, maintenance of leverage levels that are appropriate over the
entire industry cycle and pursuit of
1
attractive asset monetization alternatives where appropriate.
. Successful Growth Record. We have increased our reserves to 1,486 Bcfe as
of December 31, 2000, on a pro forma basis, as a result of a series of
acquisitions and business combinations and successes in the exploitation,
development and exploration of our properties. Our management has
demonstrated its ability to identify and evaluate potential acquisitions
and growth areas and successfully integrate new properties into our
existing portfolio.
. Substantial Exploitation Opportunities. As of June 30, 2001, we had
identified over 900 gross drilling locations, 300 recompletions and 19
tertiary recovery projects on our acreage. The Permian Basin, containing
approximately 58% of our SEC 10% present value on a pro forma basis, is
characterized by complex geology with numerous known producing horizons
and provides significant opportunities to increase reserves, production
and ultimate recoveries through development, exploratory and horizontal
drilling, recompletions, secondary and tertiary recovery methods and use
of 3-D seismic and other advanced technologies.
. Low Finding and Development Costs. Using our management's experience and
expertise in our core operating areas, we have been able to add reserves
through the exploitation of acquired properties at finding costs
substantially below our per unit acquisition cost. Our average finding
and development cost for proved reserves we have acquired, developed or
found is approximately $3.60 per BOE both for calendar year 2000 and over
the three-year period ending December 31, 2000.
. Experienced Management. We believe that our personnel provides us with a
competitive advantage for exploitation and exploration opportunities in
our core areas and in other complex producing basins in North America.
Members of our management team have an average of over 25 years
experience in the oil and gas industry, including experience in managing
operations significantly larger than those operated by us. This
experience provides us with a significant and diverse knowledge base upon
which to expand our operations.
. Strategic Support from Strong Parent. Pure is considered a strategic
asset by Unocal Corporation, which owns 65.4% of our outstanding common
stock through Union Oil and consolidates Pure's financial and reserve
information into its own financial statements. Unocal-designated
directors, which include members of Unocal's executive management,
constitute the majority of our Board of Directors. Pure represents
Unocal's primary exposure to the consolidation of the onshore exploration
and production sector in the continental United States.
Business Strategy
We seek to increase shareholder value through a strategy based on a returns-
focused management orientation, opportunistic management of assets and
maintenance of the financial flexibility to efficiently execute our plans. Key
elements of our strategy are as follows:
. Exploitation of Reserve Base. We believe that there are significant
development and exploitation opportunities in prolific, multi-pay fields
located in our core operating areas, where we have a substantial
inventory of drilling locations. We engage in horizontal and infill
drilling activities, major workovers, recompletions, secondary and
tertiary recovery operations, and other production enhancement techniques
in order to increase reserves and production. In 2001, subject to market
conditions and drilling and operating results, we expect to spend
approximately $83 million of our capital budget for developmental
drilling activities and $62 million for possible and probable projects.
. Identify Acquisition Opportunities. We seek to acquire oil and gas
properties or enter into business combinations that provide opportunities
for (a) the addition of reserves, production and value through
exploitation and development, (b) high exploration potential and (c) the
control of operations. Our management team, both before and after Titan's
merger with Pure, has completed significant acquisitions, and we believe
that other acquisition opportunities exist in our current focus areas and
in other North American basins. We have maintained the financial
flexibility to pursue additional acquisition opportunities. We
aggressively review a substantial number of possible acquisitions each
year, applying rigorous evaluation standards to each.
2
. Realize Strong Full-Cycle Returns. We manage our assets to achieve strong
full-cycle returns by maximizing realizations through focus on reducing
overhead and operating cost structure and leveraging our significant
inventory of low risk development and exploitation opportunities to add
reserves at low finding and development costs. We seek to control our
operating costs and drilling opportunities by operating a significant
portion of our reserve base (approximately 81% of our reserves on a pro
forma basis).
. Pursue Exploration Activities. We have identified an extensive inventory
of exploration opportunities and seek to apply our management's and
technical staff's extensive geological, geophysical and drilling
expertise to evaluate and develop these exploration projects. As part of
our exploration strategy, we attempt to reduce the costs and risks of our
exploration activities by, in selected circumstances, applying 3-D
seismic technology and drilling wells with multiple pay objectives in
known producing areas. For selected projects and under certain
circumstances, we sell interests in our exploration prospects to industry
partners which combines the regional and technical expertise of all
participants. Subject to market conditions and drilling and operating
results, we expect to spend approximately $85 million of our 2001 capital
budget on exploration opportunities and seismic and leasing activities.
. Capitalize on Advanced Technology. We seek to complement our management's
geological and drilling expertise by capitalizing on the use of advanced
technology to identify, explore and exploit projects. We believe that the
complex geology of certain areas in which we currently operate, such as
the Permian Basin, is characterized by numerous known producing zones and
provides opportunities to apply advanced technology to increase reserves,
production and ultimate recoveries. Using 3-D seismic, horizontal
drilling, secondary and tertiary recovery methods and other sophisticated
technologies, we seek to enhance our drilling success, production rates,
the size of our average discovery and our total economic returns.
______________________________
Pure is incorporated under the laws of Delaware. Our executive offices are
located at 500 West Illinois, Midland, Texas 79701, and our telephone number is
(915) 498-8600.
3
The Exchange Offer
Following is a summary of the principal terms of our exchange offer. A more
detailed description is contained in this prospectus under the heading "The
Exchange Offer" beginning on page 21.
The exchange offer........................ We are offering to exchange $1,000 principal amount of our 7 1/8% Senior
Notes due 2011, which have been registered under the Securities Act, for
each $1,000 principal amount of our outstanding unregistered 7 1/8% Senior
Notes due 2011. As of the date of this prospectus, $350 million in
aggregate principal amount of the old notes are outstanding.
We have registered the new notes under the Securities Act and they are
substantially identical to the old notes, except for the elimination of
some transfer restrictions, registration rights and liquidated damages
provisions relating to the old notes.
Resale of the new notes................... We believe that the new notes issued to you pursuant to the exchange offer
may be offered for sale, resold and otherwise transferred by you, without
compliance with the registration and prospectus delivery provisions of the
Securities Act, if you:
. are acquiring the new notes in the ordinary course of your business;
. are not engaging in, and do not intend to engage in, a distribution of
the new notes;
. do not have an arrangement or understanding with any person to
participate in a distribution of the new notes;
. are not an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act; and
. are not a broker-dealer that acquired the old notes directly from us.
If any of these conditions is not satisfied and you transfer any new notes
without delivering a proper prospectus or without qualifying for an
exemption from registration, you may incur liability under the Securities
Act. In addition, if you are a broker-dealer seeking to receive new notes
for your own account in exchange for old notes that you acquired as a
result of market-making or other trading activities, you must acknowledge
that you will deliver this prospectus in connection with any offer to
resell, or any resale or other transfer of the new notes that you receive
in the exchange offer. See "Plan of Distribution."
Expiration date........................... The exchange offer will expire at 5:00 p.m., New York City time, on
______ ___, 2001, unless we extend the exchange offer.
Withdrawal rights......................... You may withdraw the tender of your old notes at any time prior to the
expiration date of the exchange offer. We will return to you any of your
old notes that we do not accept for exchange for any reason without
expense to you promptly after the exchange offer expires or terminates.
4
Accrued interest on the new notes and
the old notes.......................... Interest on the new notes will accrue from the last interest payment date
on which interest was paid on the old notes or, if no interest was paid on
the old notes, from the date of issuance of the old notes, which was June
8, 2001. Holders whose old notes are accepted for exchange will be deemed
to have waived the right to receive any interest on the old notes.
Conditions to the exchange offer.......... The exchange offer is subject to customary conditions that may be waived
by us; however, the exchange offer is not conditioned upon any minimum
aggregate principal amount of old notes being tendered for exchange. We
currently anticipate that each of the conditions will be satisfied and
that we will not need to waive any conditions. We reserve the right to
terminate or amend the exchange offer at any time before the expiration
date. For additional information, see "The Exchange Offer -- Conditions."
Procedures for tendering the old notes.... If you are a holder of old notes who wishes to accept the exchange offer:
. complete, sign and date the accompanying letter of transmittal, or a facsimile of
the letter of transmittal, and mail or otherwise deliver the letter of
transmittal, together with your old notes, to the exchange agent at the address
set forth under "The Exchange Offer -- Exchange Agent;" or
. arrange for The Depository Trust Company to transmit certain required
information, including an agent's message forming part of a book-entry transfer
in which you agree to be bound by the terms of the letter of transmittal, to the
exchange agent in connection with a book-entry transfer.
By tendering you old notes in either manner, you will be representing,
among other things, that:
. the new notes you receive pursuant to the exchange offer are being acquired in
the ordinary course of your business;
. you are not currently participating in, do not intend to participate in, and have
no arrangement or understanding with any person to participate in, the
distribution of the new notes issued to you in the exchange offer;
. you are not an "affiliate" of ours, or if you are an affiliate, you will comply
with the registration and prospectus delivery requirements of the Securities Act;
and
. you are not a broker-dealer tendering old notes acquired directly from us.
5
Special procedures for beneficial
owners.................................. If your old notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender
your old notes, you should contact the registered holder promptly and
instruct the registered holder to tender your old notes on your behalf.
If you wish to tender on your own behalf, you must, prior to completing
and executing the letter of transmittal and delivering your old notes,
either make appropriate arrangements to register ownership of the old
notes in your name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take
considerable time and may not be able to be completed prior to the
expiration date.
Guaranteed delivery procedures............ If you wish to tender your old notes and cannot cause the old notes, the
letter of transmittal or any other required documents to be transmitted
to, and received by, the exchange agent prior to the expiration of the
exchange offer, you may tender your old notes according to the guaranteed
delivery procedures described in this prospectus under the heading "The
Exchange Offer -- Guaranteed Delivery Procedures.
Acceptance of the old notes and delivery
of the new notes......................... Subject to the satisfaction or waiver of the conditions to the exchange
offer, we will accept for exchange any and all old notes that are properly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. The new notes will be delivered promptly following the
expiration date. For additional information, see "The Exchange Offer --
Terms of the Exchange Offer."
Federal income tax consequences........... The exchange of old notes for new notes in the exchange offer should not
be a taxable event for U.S. federal income tax purposes. See "Material
United States Income Tax Consequences."
Use of proceeds........................... We will not receive any proceeds from the issuance of the new notes. We
will pay for all expenses incident to the exchange offer.
Consequences of failing to exchange
your old notes......................... The exchange offer satisfies our obligations and your rights under the
registration rights agreement. Except in limited circumstances, after the
exchange offer is completed, you will not be entitled to any registration
rights with respect to your old notes unless:
. you comply with the registration and prospectus delivery requirements
of the Securities Act of 1933; or
. you qualify for an exemption from the Securities Act of 1933
registration requirements.
Exchange agent............................ First Union National Bank is serving as the exchange agent.
6
The New Notes
The form and terms of the respective new notes will be identical in all
material respects to the form and terms of the old notes, except that the new
notes will not bear legends restricting their transfer and will not have any of
the registration and related liquidated damages rights of the old notes under
the registration rights agreement, which rights will terminate upon consummation
of the exchange offer. The new notes will evidence the same indebtedness as the
old notes which they replace and will be issued under, and be entitled to the
benefits of, the indenture dated as of June 8, 2001. For a more complete
description of the terms of the new notes, see "Description of New Notes."
Issuer.................................... Pure Resources, Inc.
Notes offered............................. $350,000,000 aggregate principal amount of 7 1/8% Senior Notes due 2011.
Maturity date............................. June 15, 2011.
Interest payment fates.................... Every June 15 and December 15 beginning December 15, 2001. Interest on
the new notes will accrue from the last interest payment date on which
interest was paid on the old notes or, if no interest was paid on the old
notes, from the date of issuance of the old notes, which was June 8, 2001.
Ranking................................... The new notes will rank:
. equally with our existing and future senior indebtedness;
. junior to any of our future secured indebtedness; and
. senior to any of our future subordinated indebtedness.
Guarantees................................ Our obligations under the new notes will be unconditionally guaranteed by
certain of our subsidiaries so that the new notes will not be structurally
subordinated to our obligations under our senior credit facilities or any
other of our funded indebtedness that is guaranteed, from time to time, by
such subsidiaries. A subsidiary guarantee of the new notes may be
released if, but only so long as, none of our other funded indebtedness is
guaranteed by such subsidiary.
Optional redemption....................... We may redeem the new notes at any time at the redemption prices described
in this prospectus, plus accrued and unpaid interest to the date of
redemption.
Use of proceeds........................... We will not receive any cash proceeds from the exchange offer. For a
description of the use of proceeds from the offering of the old notes, see
"Use of Proceeds."
Absence of a public market for the new
notes.................................... The new notes are new securities. There has been no public market for the
old notes, and we do not anticipate that an active market for the new
notes will develop. The new notes will not be listed on any securities
exchange or included in any automated quotation system. As a result, we
cannot assure you that any active or liquid market will develop for the
new notes. See "Plan of Distribution."
7
RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this prospectus, you should carefully consider the following risk
factors before deciding whether to participate in the exchange offer.
Risks Related to the Exchange Offer and the New Notes
You may be adversely affected if you do not exchange your old notes.
If you do not exchange your old notes for new notes pursuant to the exchange
offer, you will continue to be subject to the transfer restrictions on your old
notes. Except in limited circumstances, you will have no further registrations
rights. The transfer restrictions on your old notes arise because we issued the
old notes pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act of 1933 and applicable state
securities laws. In general, you may only offer or sell the old notes if they
are registered under the Securities Act of 1933 and applicable state securities
laws, or offered and sold pursuant to an exemption from those requirements. We
do not intend to register the old notes under the Securities Act of 1933. In
addition, if you exchange your old notes in the exchange offer for the purpose
of participating in a distribution of the new notes, you may be deemed to have
received restricted securities. In those circumstances, you will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933 in connection with any resale transaction. To the extent
old notes are tendered and accepted in the exchange offer, the trading market,
if any, for the old notes would be adversely affected. See "The Exchange Offer -
- Consequences of Failing to Exchange Old Notes."
You must tender the old notes in accordance with proper procedures in order to
ensure the exchange will occur.
We will only exchange old notes for new notes if you follow the proper
procedures, as detailed in this prospectus. We will issue the new notes in
exchange for the old notes if the exchange agent receives the old notes or a
book-entry confirmation, a properly completed and executed transmittal letter,
or an agent's message, and all other required documentation in a timely manner.
If you want to tender your old notes in exchange for new notes, you should allow
sufficient time to ensure timely delivery. Neither we nor the exchange agent is
under any duty to give you notification of defects or irregularities with
respect to tenders of old notes for exchange. In addition, if you are an
affiliate of ours or you tender the old notes in the exchange offer in order to
participate in a distribution of the new notes, you will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933 in connection with any resale transaction. For additional information,
please refer to the sections entitled "The Exchange Offer" and "Plan of
Distribution."
We may not be able to generate a sufficient amount of cash flow to meet our
debt service obligations.
Our ability to make payments on and to refinance our indebtedness, including
the new notes, and to fund planned capital expenditures will depend on our
ability to generate cash in the future. This, to a certain extent, is subject
to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control.
We cannot assure you that we will generate sufficient cash flow from
operations or that future borrowings will be available to us in an amount
sufficient to enable us to pay our indebtedness, including the new notes, or to
fund our other liquidity needs. We may need to refinance all or a portion of
our indebtedness, including the new notes, on or before maturity. We cannot
assure you that we will be able to refinance any of our indebtedness, including
the new notes, on commercially reasonable terms or at all.
Following this exchange offer, we could incur a substantial amount of debt,
which could materially adversely affect our financial condition, results of
operations and business prospects and prevent us from fulfilling our obligations
under the new notes.
We had $535.1 million of indebtedness outstanding at June 30, 2001. However,
we will be permitted under our senior credit facilities and the indenture
governing the new notes to incur additional debt, subject to certain
limitations. If we incur additional debt following this offering, our increased
leverage could, for example:
8
. make it more difficult for us to satisfy our obligations under the new
notes or other indebtedness and, if we fail to comply with the
requirements of the other indebtedness, could result in an event of
default on the new notes or such other indebtedness;
. require us to dedicate a substantial portion of our cash flow from
operations to required payments on indebtedness, thereby reducing the
availability of cash flow for working capital, capital expenditures and
other general business activities;
. limit our ability to obtain additional financing in the future for working
capital, capital expenditures and other general corporate activities;
. limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
. detract from our ability to successfully withstand a downturn in our
business or the economy generally; and
. place us at a competitive disadvantage against less leveraged competitors.
Our senior credit facilities consist of (a) a $250 million five-year
revolving credit facility and a $250 million 364-day revolving credit facility,
each with current commitments of $235 million; and (b) a $10 million working
capital credit facility. In September 2001, the 364-day revolving facility will
be converted to a term loan whose outstanding amounts are due and payable in
full in September 2002. We intend to renegotiate or replace the 364-day
revolving facility prior to September 2002. As of June 30, 2001, we had
outstanding borrowings of $167.8 million under the five-year revolving facility,
$20.0 million under the 364-day revolving facility and no borrowing under the
working capital facility.
We are dependent upon cash from our subsidiaries to meet our debt service
obligations.
We conduct a significant portion of our operations through our subsidiaries.
Our ability to meet our debt service obligations will be dependent on receipt of
cash from our direct and indirect subsidiaries. Pure has one or more material
subsidiaries that are not guarantors, and such non-guarantor subsidiaries do not
have obligations with respect to the new notes although they generate a
significant portion of Pure's operating income and cash flow. A subsidiary
guarantee may also be released if, and for so long as, no other financial
indebtedness of Pure is guaranteed by such subsidiary. Future borrowings by our
non-guarantor subsidiaries may contain restrictions or prohibitions on the
payment of dividends by such subsidiaries to us. In addition, under applicable
state law, our subsidiaries may be limited in amounts that they are permitted to
pay as dividends to us on their capital stock.
Not all of our subsidiaries are guarantors and assets of non-guarantor
subsidiaries may not be available to make payments on the new notes.
Our existing and future subsidiaries that do not guarantee any of our other
funded indebtedness will also not guarantee the new notes. Only we and the
subsidiary guarantors must make payments on the new notes. As a result, no
payments are required to be made from assets of subsidiaries that do not
guarantee the new notes unless these subsidiaries transfer those assets, by
dividend or otherwise, to us or a subsidiary guarantor. In the event of a
bankruptcy, liquidation or reorganization of any of the non-guarantor
subsidiaries, holders of their debt, including their trade creditors, will
generally be entitled to payment of their claims from the assets of those
subsidiaries before any assets are made available for distribution to us.
Our subsidiary guarantees may be released in the future if certain events
occur.
Each subsidiary guarantor that is released from its obligations under our
other funded indebtedness will also be released as a guarantor under the new
notes. Upon such release, the new notes will effectively rank junior to all
liabilities of that subsidiary, whether or not those liabilities are secured or
unsecured.
9
Although we refer to your notes as senior notes, and the subsidiary guarantees
are senior obligations of our subsidiaries, each will be effectively
subordinated to our secured debt and any secured liabilities of our
subsidiaries.
The new notes will effectively rank junior to any of our secured debt or any
secured debt of our subsidiaries, to the extent of the assets securing that
debt. In the event of bankruptcy, liquidation, reorganization or other winding
up of Pure, our assets that secure secured debt will be available to pay
obligations on the new notes only after that secured debt has been repaid in
full from these assets. We advise you that there may not be sufficient assets
remaining to pay amounts due on any or all the new notes then outstanding. The
guarantees will similarly effectively rank junior to any secured debt of the
applicable subsidiary, to the extent of the assets securing that debt.
Fraudulent conveyance laws may limit the enforceability of the guarantees.
Various fraudulent conveyance laws enacted for the protection of creditors
may apply to the issuance of the guarantees. To the extent that a court were to
find that:
(1) a guarantee was incurred by a guarantor with intent to hinder,
delay or defraud any present or future credit of such guarantor or such
guarantor contemplated insolvency with a design to prefer one or more of its
creditors to the exclusion in whole or in part of others, or
(2) a guarantor did not receive fair consideration or reasonably
equivalent value for issuing its guarantee and such guarantor (a) was
insolvent, (b) was rendered insolvent by reason of the issuance of the
guarantee, (c) was engaged or about to engage in a business or transaction
for which the remaining assets of such guarantor constituted unreasonably
small capital, to carry on its business or (d) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they
mature,
the court could avoid or subordinate such guarantee in favor of other creditors
of such guarantor. Among other things, a legal challenge of any guarantee may
focus on the benefits, if any, realized by the guarantor as a result of Pure's
issuance of the new notes. The guarantees contain a savings clause, which
generally will limit the obligation of any guarantor under its guarantee to the
maximum amount as will, after giving effect to all of the liabilities of the
guarantor, result in its obligation not constituting a fraudulent conveyance.
To the extent a guarantee was avoided or limited as a fraudulent conveyance or
held unenforceable for any other reason, holders of the new notes would cease to
have any claim against the guarantor and would be creditors solely of Pure and
the other guarantors. In that event, the claims of holders of the new notes
against such guarantor would be subject to the prior payment of all liabilities
(including trade payables) of such guarantor. We cannot assure you that, after
providing for all prior claims, there would be sufficient assets to satisfy the
claims of the holders of the new notes relating to any avoided portion of any
guarantee.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally, however,
a guarantor may be considered insolvent if the sum of its debts, including
contingent liabilities, is greater than the fair market value of all of its
assets. Based upon financial and other information, including the terms of the
guarantees, we believe that the guarantors are solvent and will continue to be
solvent after issuing the guarantees, will have sufficient capital for carrying
on their business after such issuance and will be able to pay their debts as
they mature. We cannot assure you, however, that a court passing on such
standards would agree with such beliefs.
In the event of our bankruptcy or liquidation, holders of the new notes will
be paid from any assets remaining after payments to any holders of debt of
certain of our subsidiaries.
The new notes will be effectively subordinated to the liabilities of our
subsidiaries that are not guarantors, which may in the future include all of our
subsidiaries. If we are declared bankrupt or insolvent, or are liquidated, the
holders of any debt of our non-guarantor subsidiaries will be entitled to be
paid from our assets before any payment may be made with respect to the new
notes. If any of the foregoing events occur, we cannot assure you that we will
have sufficient assets to pay amounts due on the debt of our non-guarantor
subsidiaries and the new notes.
10
Your ability to transfer the new notes may be limited by the absence of an
active trading market, and there is no assurance that any active trading market
will develop for the new notes.
The notes are a new issue of securities for which there is no established
public market. The initial purchasers have informed us that they intend to make
a market in the new notes, as permitted by applicable laws and regulations.
However, the initial purchasers are not obligated to make a market in the new
notes, and they may discontinue their market-making activities at any time
without notice. Therefore, we cannot assure you that an active market for the
new notes will develop or, if developed, that it will continue. If a market for
the notes does not develop, you may be unable to resell the new notes for an
extended period of time, if at all. Moreover, even if a market for the new
notes does develop, the new notes may trade at a discount from their initial
offering price, depending upon prevailing interest rates, the market for similar
new notes, our performance and other factors.
Risks Related to Our Business
We are controlled by Union Oil.
Union Oil, a wholly-owned subsidiary of Unocal Corporation, owns
approximately 65.4% of the outstanding Pure common stock and is not prohibited
from acquiring more. By virtue of its stock ownership, Union Oil has the power
to control the direction and policies of Pure, the election of a majority of its
directors and the outcome of any matter requiring stockholder approval,
including adopting amendments to Pure's certificate of incorporation and
approving mergers or sales of all or substantially all of Pure's assets. In
addition, Pure has entered into agreements that enable Union Oil to maintain its
position of control. These include:
. A non-dilution agreement, which provides that if Pure issues additional
shares of common stock Union Oil will have preemptive rights to acquire
additional securities to maintain its percentage ownership of Pure, up
to 65.4%. This agreement could make it more difficult for Pure to raise
funds through future offerings of capital stock or to close
acquisitions using equity for payment. Union Oil will be the only Pure
stockholder with preemptive rights.
. A stockholders voting agreement which provides that Union Oil and Jack
Hightower (Pure's Chairman of the Board, President and Chief Executive
Officer) will vote their shares of Pure to cause two persons designated
by Mr. Hightower, up to five designees of Union Oil and an additional
director agreed upon by Union Oil to be elected to Pure's board of
directors. This agreement gives Union Oil the power to control the
election of a majority of the directors even if it owns as little as
35% of Pure's common stock.
We have agreed to limit our business activities.
In order to minimize conflicts of interest between Union Oil and Pure and
to permit Union Oil to continue to conduct its business without undue risk of
liability, the parties entered into a business opportunities agreement in which
Pure agreed that it has no interest or expectancy in business opportunities
developed by Union Oil in accordance with standards set forth in the business
opportunities agreement. Pure also agreed that, without the consent of Union
Oil, it will not conduct any business other than the oil and gas exploration,
development and production business and will not pursue any new business
opportunities that are outside of certain geographic areas. As a result of the
business opportunities agreement, as affected by limited waivers that Pure has
obtained from Union Oil, Pure is contractually prohibited from conducting
business outside of the continental United States and designated areas in the
offshore Gulf Coast region of the United States, which designated areas relate
to the programs and partnerships Pure acquired in the International Paper
transaction. Further, unless conducted through one of such programs or
partnerships, Pure is prohibited from conducting business in the designated
offshore areas if the opportunity relates to a prospect with gross unrisked
reserve target potential of less than 20 Bcf. The restrictions on our ability to
expand, develop and explore certain offshore assets related to those acquired
from International Paper may limit our ability to realize fully the value of
certain of the acquired assets. Because of Pure's geographic concentration, any
regional events that increase costs, reduce availability of equipment or
supplies, reduce demand or limit production may impact Pure more than if its
operations were more geographically diversified. The business opportunities
agreement does not affirmatively restrict Union Oil's business activities,
including within the designated areas.
11
Potential conflicts of interest between Pure and Union Oil may arise.
Conflicts of interest may arise between Pure and Union Oil. The interests
of Union Oil under contractual arrangements between Pure and Union Oil entered
into in connection with the Titan merger, such as a registration rights
agreement, a non-dilution agreement and the parties' agreements to indemnify
each other with respect to specified matters, will conflict with the interests
of Pure. Other conflicts may arise in the future if Union Oil and Pure enter
into additional contractual arrangements, which could include agreements
relating to marketing of production, financing, insurance or other matters.
Because Union Oil is free to engage in activities that may be competitive with
Pure, conflicts of interest may arise in acquisitions of oil and gas properties
or companies or other transactions that Union Oil may pursue.
Rights granted to Pure officers may result in charges to our earnings and may
increase our leverage.
Mr. Hightower's employment agreement and Pure officer severance agreements
entitle the covered officers to require Pure to purchase his or her Pure common
stock at a price that may be in excess of market value if specified events
occur. On June 30, 2001, when the trading price of Pure common stock was $18.00
per share, the "per share net asset value" of Pure, calculated in accordance
with the agreements, was estimated at approximately $28.90, and the covered
shares of Pure common stock on that date (including shares underlying options)
totaled 6.6 million. The amortization amounts and potential effect on our
leverage may change quarterly based on relative changes in the net asset value
and market value of Pure shares.
Contingent obligations of Pure may increase our leverage.
Under the terms of a partnership agreement with affiliates of International
Paper, Pure would be required to make contingent payments to its other partners
in the partnership if Pure causes the partnership, prior to January 2008, to
dispose of assets, as defined in the partnership agreement, with a fair market
value in excess of $25 million. Pure's maximum contingent payment at June 30,
2001 is approximately $75 million. Pure, at the present, does not believe it
is probable it will incur any of the contingent payment. To the extent Pure
incurred all or some of the contingent payment, it would reflect the contingent
payment as additional basis in its oil and gas properties.
A suit has been filed in Louisiana against our subsidiary.
Hallwood Petroleum, Inc. has been named as a defendant in a suit styled
Lamson Petroleum v. Hallwood Petroleum, Inc. et al., which was filed May 17,
2001 in the 15th Judicial District Court, Lafayette Parish, Louisiana. Lamson
Petroleum seeks proceeds from the sale of gas and condensate produced and sold
from units on 200 acres of land in the parish and a declaratory judgment
recognizing its interest in production from the units. We are unable at this
time to assess the likelihood of an unfavorable outcome. We believe the suit is
without merit and shall vigorously defend against it. In our opinion, the
ultimate disposition of this lawsuit, in the event of an unfavorable outcome,
should not have a material adverse effect on the Company's financial position or
liquidity, but could adversely affect results of operations in a given reporting
period.
Our rapid growth has placed significant demands upon our resources.
Our brief operating history has been characterized by rapid growth that
places significant demands on our financial, operational and administrative
resources. Any future growth of our oil and gas reserves, production and
operations would place significant further demands on our financial, operational
and administrative resources. Our future performance and profitability will
depend in part on our ability to successfully integrate the administrative and
financial functions of acquired properties and companies into our operations, to
hire additional personnel and to implement necessary enhancements to our
management systems.
You should not place undue reliance on our reserve data because numerous
uncertainties are inherent in the estimation of the reserve data.
Petroleum engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact manner.
Estimates of economically recoverable oil and gas reserves and of future net
cash flow necessarily depend upon a number of variable factors and assumptions,
including the following:
. historical production from the area compared with production from other
producing areas;
12
. the assumed effects of regulations by governmental agencies;
. assumptions concerning future oil and gas prices; and
. assumptions concerning future operating costs, severance, ad valorem
and excise taxes, development costs and workover and remedial costs.
Because all reserve estimates are to some degree subjective, each of the
following items may differ materially from those assumed in estimating reserves:
. the quantities of oil and gas that are ultimately recovered;
. the production and operating costs incurred;
. the amount and timing of future development expenditures; and
. future oil and gas sales prices.
Furthermore, different reserve engineers may make different estimates of
reserves and cash flows based on the same available data. Our actual
production, revenues and expenditures with respect to reserves will likely be
different from estimates and the difference may be material.
The discounted future net cash flows in this document should not be
considered as the current market value of the estimated oil and gas reserves
attributable to our properties. As required by the SEC, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate, while actual future prices and
costs may be materially higher or lower. Actual future net cash flows also will
be affected by factors such as:
. the amount and timing of actual production;
. supply and demand of oil and gas;
. increases or decreases in consumption; and
. changes in governmental regulations or taxation.
In addition, the SEC 10% discount factor, which is required by the SEC to
be used to calculate discounted future net cash flows for reporting purposes, is
not necessarily the most appropriate discount factor based on interest rates in
effect from time to time and risks associated with Pure or the oil and gas
industry in general.
Maintaining reserves and revenues in the future depends on successful
exploration and development.
Our future success will depend upon our ability to find or acquire
additional oil and gas reserves that are economically recoverable. Unless we
successfully explore or develop properties containing proved reserves, our
proved reserves will generally decline as a result of continued production. The
decline rate varies depending upon reservoir characteristics and other factors.
Our oil and gas reserves and production, and, therefore, cash flow and income,
will depend greatly upon our success in exploiting our current reserves and
acquiring or finding additional reserves.
Our exploration and development activities are subject to significant
risks.
The nature of the oil and gas business involves operating hazards such as
well blowouts, cratering, explosions, uncontrollable flows of oil, gas or well
fluids, fires, formations with abnormal pressures, pollution, releases of toxic
gas and other environmental hazards and risks. Any of these operating hazards
could result in substantial losses to us.
In addition, we may be liable for environmental damages caused by previous
owners of property purchased by Pure or its predecessors. As a result,
substantial liabilities to third parties or governmental entities may be
incurred. The payment of
13
these amounts could reduce or eliminate the funds available for exploration,
development or acquisitions. These reductions in funds could result in a loss of
our properties.
Offshore operations are also subject to a variety of operating risks
peculiar to the marine environment, such as capsizing, collisions or 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.
We cannot assure you that the new wells we drill will be productive or that
we will recover all or any portion of our investment in wells drilled. Drilling
for oil and gas may involve unprofitable efforts, not only from dry wells, but
from wells that are productive but do not produce net reserves to return a
profit after drilling, operating and other costs. The cost of drilling,
completing and operating wells is often uncertain. Numerous factors, many of
which are beyond our control, including economic conditions, mechanical
problems, title problems, weather conditions, compliance with governmental
requirements and shortages and delays in the delivery of equipment and services
may curtail, delay or cancel our drilling operations.
In accordance with customary industry practices, we maintain insurance
against some, but not all, of such risks and losses. The occurrence of an event
that is not fully covered by insurance could have a material adverse effect on
our financial position and results of operations.
Our use of enhanced oil recovery techniques involves certain risks,
especially the use of water flooding and CO\\2\\ flooding techniques. Part of
our inventory of development prospects includes enhanced recovery projects.
Enhanced recovery techniques involve significant capital expenditures and
uncertainty as to the total amount of recoverable secondary reserves. In such
operations, there is generally a delay between the initiation of water or
CO\\2\\ injection into a formation containing hydrocarbons and any resulting
increase in production. The operating cost per unit of production of enhanced
recovery projects is generally higher during the initial phases of such projects
due to the purchase of injection water or CO\\2\\ and related costs, as well as
during the later stages of the life of the project as production declines. The
degree of success, if any, of any enhanced recovery program depends on a large
number of factors, including the porosity of the formation, the technique used
and the location of injector wells.
We cannot assure you that our planned development and exploration projects
and acquisition activities will result in significant additional reserves or
that we will have success drilling productive wells at low finding and
development costs. Furthermore, while our revenues may increase if prevailing
oil and gas prices increase significantly, our finding costs for additional
reserves could also increase.
We face the risk of volatility of oil and gas prices.
Our revenues, operating results and future rate of growth depend upon the
prices we receive for our oil and gas. Historically, the markets for oil and
gas have been volatile and may continue to be volatile in the future. Various
factors that are beyond our control will affect prices of oil and gas, such as:
. the worldwide and domestic supplies of oil and gas;
. the ability of the members of the Organization of Petroleum Exporting
Countries ("OPEC") to agree to and maintain oil price and production
controls;
. political instability or armed conflict in oil-producing regions;
. the price and level of foreign imports;
. the level of consumer demand;
. the price and availability of alternative fuels;
. the availability of pipeline capacity;
. weather conditions;
14
. domestic and foreign governmental regulations and taxes; and
. the overall economic environment.
We are unable to predict the long-term effects of these and other
conditions on the prices of oil and gas. Lower oil and gas prices may reduce the
amount of oil and gas we will be able to produce economically, which may
adversely affect our revenues and operating income. Lower oil and gas prices may
also require a reduction in the carrying value of our oil and gas properties.
Currently, we anticipate making substantially all of our sales of oil and gas in
the spot market or under contracts based on spot market prices and not under
long-term fixed price contracts.
Our hedging activities may not adequately offset risks we face.
Our use of hedging contracts to reduce our sensitivity to oil and gas price
volatility is subject to a number of risks. If we do not produce reserves at
the rates we estimate due to inaccuracies in the reserve estimation process,
operational difficulties or regulatory limitations, we would be required to
satisfy obligations we may have under fixed price sales and hedging contracts on
potentially unfavorable terms without the ability to hedge that risk through
sales of comparable quantities of our own production. The terms under which we
will enter into fixed price sales and hedging contracts will be based on
assumptions and estimates of numerous factors, including transportation costs to
delivery points. Substantial variations between the assumptions and estimates
we will use and actual results we will experience could adversely affect our
anticipated profit margins and our ability to manage the risks associated with
fluctuations in oil and gas prices. Additionally, fixed price sales and hedging
contracts limit the benefits we will realize if actual prices rise above the
contract prices. Hedging contracts are also subject to the risk that the
counterparty may not be able or willing to perform its obligations.
Our acquisition strategy involves a degree of risk.
Our strategic plan includes the acquisition of additional reserves,
including through business combination transactions. We may not be able to
consummate future acquisitions on favorable terms. Additionally, acquisitions
may not achieve favorable financial results.
Acquisitions may require substantial financial expenditures that will need
to be financed through cash flow from operations or future debt and equity
offerings by Pure. We may not be able to acquire companies or oil and gas
properties using our equity as currency. In the case of cash acquisitions, we
may not be able to generate sufficient cash flow from operations or obtain debt
or equity financing sufficient to fund future acquisitions or reserves.
Although our management will review and analyze the properties that we will
acquire, such reviews are subject to uncertainties. The acquisition of
producing properties will involve an assessment of several factors, including
recoverable reserves, future oil and gas prices, operating costs, potential
environmental and other liabilities and other factors beyond our control. These
assessments are necessarily inexact, and it is generally not possible to review
in detail every individual property involved in an acquisition. However, even a
detailed review of all properties may not reveal all existing structural and
environmental problems. We will generally assume preclosing liabilities,
including environmental liabilities, and will generally acquire interests in oil
and gas properties on an "as is" basis. In addition, volatile oil and gas
prices will make it difficult for us to accurately estimate the value of
producing properties for acquisition and may cause disruption in the market for
oil and gas producing properties. Price volatility also makes it difficult to
budget for and project the return on acquisitions and development and
exploration projects. We will not be able to assure you that our acquisitions
will achieve desired profitability objectives.
Our business requires substantial capital expenditures.
We make substantial capital expenditures for the exploration, development,
acquisition and production of oil and gas reserves. We intend to finance these
capital expenditures primarily with funds provided by operations, the incurrence
of debt, the issuance of equity and the sale of non-core assets. If revenues
decrease as a result of lower oil or gas prices or for other reasons, we may not
be able to expend the capital necessary to replace our reserves or to maintain
production levels, resulting in a decrease in production over time. If our cash
flow from operations and availability under our credit facilities are not
sufficient to satisfy our capital expenditure requirements, we may not be able
to obtain additional debt or equity financing to meet these requirements.
15
We may not be able to market our production.
The marketability of our production depends, in part, upon the availability
and capacity of natural gas gathering systems, pipelines and processing
facilities. Most of our natural gas is delivered through gas gathering systems
and gas pipelines that we do not own. Our ability to produce and market our
oil and gas is subject to several factors, including federal and state
regulation of oil and gas production and transportation, tax and energy
policies, changes in supply and demand and general economic conditions.
We are subject to extensive government regulations.
Our business is subject to federal, state and local laws and regulations
relating to the oil and gas industry as well as regulations relating to safety
matters. Although we believe we are in substantial compliance with all
applicable laws and regulations, the requirements imposed by such laws and
regulations change frequently, and these laws and regulations are subject to
interpretation. Consequently, we cannot predict the ultimate cost of compliance
with these requirements or their effect on our operations. We may have to
expend a significant amount of resources to comply with government laws and
regulations.
We are subject to substantial environmental regulations.
Our operations are subject to complex and constantly changing environmental
laws and regulations adopted by federal, state and local governmental
authorities. The implementation of new or modified laws or regulations could
have a material adverse effect on our business or our financial condition. The
discharge of oil, gas or other pollutants into the air, soil or water may lead
to significant liability to the government and third parties and may require us
to incur substantial costs. Moreover, we have agreed to indemnify sellers of
producing properties purchased in each of our substantial acquisitions against
environmental claims associated with these properties. Furthermore, material
indemnity claims may arise against us.
The competition in our industry is intense, some of our competitors have
significantly greater resources than we, and this competition may adversely
affect our operations.
We operate in the highly competitive areas of oil and gas exploration,
development, acquisition and production with other companies, many of which have
substantially larger financial resources, staffs and facilities. In seeking to
acquire desirable producing properties or new leases for future exploration and
in marketing our oil and gas production, we face intense competition from both
major and independent oil and gas companies. Many of these competitors have
financial and other resources substantially in excess of those that will be
available to us. This highly competitive environment could have a material
adverse effect on us.
USE OF PROCEEDS
We intend the exchange offer to satisfy our obligations under the
registration rights agreement that we entered into in connection with the
offering of the old notes. We will not receive any cash proceeds from the
issuance of the new notes pursuant to the exchange offer. Old notes surrendered
in exchange for the new notes will be retired and cancelled and cannot be
reissued. As a result, the issuance of the new notes will not result in any
increase or decrease in our indebtedness. We have agreed to bear the expenses of
the exchange offer. No underwriter is being used in connection with the exchange
offer.
The net proceeds from the issuance and sale of the old notes was
approximately $344 million. We used all of the net proceeds of the sale of the
old notes (a) to repay all outstanding indebtedness under our interim credit
facility and (b) to reduce outstanding indebtedness under our revolving credit
facilities.
16
SELECTED CONSOLIDATED HISTORICAL
AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table presents selected historical consolidated and unaudited
pro forma combined financial data for Pure for the periods indicated. The
unaudited pro forma combined financial data is derived from the unaudited pro
forma combined financial information incorporated by reference into this
prospectus. The unaudited pro forma combined financial statements give effect to
(i) the merger of Titan Exploration, Inc. with a subsidiary of Pure, (ii) the
acquisition of oil and gas properties, fee mineral and royalty interests from
International Paper Company and affiliates and certain general and limited
partnership interests and (iii) the merger of our acquisition subsidiary with
Hallwood Energy Corporation; in each case as if they had occurred on January 1,
2000 with respect to operating and other data.
You should read this historical and pro forma information together with the
consolidated financial statements and related notes of Pure in the annual
reports and other information that Pure has filed with the SEC and incorporated
by reference.
Year Ended December 31, Six months Ended June 30,
--------------------------------------------------------------- -------------------------------
Historical Pro Forma Historical Pro Forma
--------------------------------------------------- ----------- ------------------- -----------
(dollars in thousands, except ratios)
1996(a) 1997 1998 1999 2000 (b) 2000 2000 2001 (c) 2001
---------- -------- -------- -------- --------- -------- -------- --------- --------
Consolidated Statement of
Operations
Revenues:
Oil sales........................ $ 93,644 $ 75,162 $ 52,609 $ 64,613 $153,128 $217,985 $ 56,746 $ 95,632 $103,042
Gas sales........................ 50,278 62,671 53,186 48,633 133,484 301,035 41,375 164,145 202,311
Other operating revenues......... 503 415 1,161 879 1,553 8,672 1,250 449 3,789
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total revenues............... 144,425 138,248 106,956 114,125 288,165 527,692 99,371 260,226 309,142
-------- -------- -------- -------- -------- -------- -------- -------- --------
Expenses:
Oil and gas production........... 32,634 36,538 39,430 32,268 48,349 81,782 17,291 37,822 44,931
Production and other taxes....... 11,380 11,621 8,881 8,579 22,141 35,367 8,202 18,710 22,189
General and administrative....... 10,376 8,264 7,674 7,836 12,281 32,426 3,122 14,956 19,015
Amortization of deferred
compensation.................... -- -- -- -- 15,386 37,435 1,027 18,685 15,834
Exploration and abandonment...... 905 1,358 3,623 6,491 19,896 32,626 3,078 9,806 11,644
Depletion, depreciation and
amortization.................... 40,763 37,552 33,139 32,133 45,426 131,732 17,350 61,041 76,927
Impairment of long-lived assets.. -- 9,562 7,387 345 -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total expenses............... 96,058 104,895 100,134 87,652 163,479 351,368 50,070 161,020 190,540
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income................. 48,367 33,353 6,822 26,473 124,686 176,324 49,301 99,206 118,602
Interest expense................. -- -- -- -- (4,396) (45,560) (661) (11,036) (19,007)
Other, net....................... -- -- -- -- (2,455) (1,102) (1,414) 1,392 816
Income taxes expense............. (15,642) (11,180) (1,780) (8,685) (34,975) (45,944) (16,530) (30,570) (35,347)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income....................... $ 32,725 $ 22,173 $ 5,042 $ 17,788 $ 82,860 $ 83,718 $ 30,696 $ 58,992 $ 65,064
======== ======== ======== ======== ======== ======== ======== ======== ========
17
Year Ended December 31,
----------------------------------------------------- ----------
Historical Pro Forma
----------------------------------------------------- ----------
(dollars in thousands, except ratios)
1996(a) 1997 1998 1999 2000 (b) 2000
---------- -------- -------- -------- ---------- ----------
Other Data:
EBITDAX (d)......................... $ 90,035 $ 81,767 $ 50,865 $ 65,505 $ 189,106 $364,804
Capital expenditures................ 25,092 23,295 42,612 19,427 104,075 N/A
Net cash provided by operating
activities......................... 70,067 63,388 47,117 58,403 143,101 N/A
Net cash used in investing
activities......................... (24,719) (21,982) (41,892) (19,113) (100,051) N/A
Net cash provided by (used in)
financing activities............... (45,347) (41,106) (5,225) (39,290) (39,725) N/A
Ratio of EBITDAX to interest
expense............................ N/M N/M N/M N/M 43.02 8.01
Ratio of earnings to fixed charges.. 290.62 206.88 41.61 141.07 25.74 3.81
Consolidated Balance Sheet (at end
of period):
Cash and cash equivalents........... $ -- $ -- $ -- $ -- $ 3,325 N/A
Total assets........................ 329,255 307,826 311,270 294,690 719,115 N/A
Total long-term debt, including
current maturities................. -- -- -- -- 68,000 N/A
Stockholders' equity and owner's
net investment..................... 243,542 224,309 224,126 202,624 377,786 N/A
Six months Ended June 30,
---------------------------------
Historical Pro Forma
--------------------- -----------
2000 2001 (c) 2001
-------- --------- -----------
Other Data:
EBITDAX (d)......................... $ 66,101 $ 182,605 $215,818
Capital expenditures................ 35,984 389,353 N/A
Net cash provided by operating
activities......................... 46,745 162,466 N/A
Net cash used in investing
activities......................... (32,578) (533,972) N/A
Net cash provided by (used in)
financing activities............... (11,877) 383,130 N/A
Ratio of EBITDAX to interest
expense............................ 100.00 16.55 11.35
Ratio of earnings to fixed charges.. 68.37 8.95 6.19
Consolidated Balance Sheet (at end
of period):
Cash and cash equivalents........... $ 2,290 $ 14,949 N/A
Total assets........................ 632,312 1,409,455 N/A
Total long-term debt, including
current maturities................. 96,000 535,127 N/A
Stockholders' equity and owner's
net investment..................... 330,163 462,900 N/A
_____________________
(a) The balance sheet for 1996 is unaudited.
(b) Pure completed the Titan merger in May 2000. This transaction was accounted
for as a purchase of Titan. Accordingly, the operating and other data since
the Titan merger reflect the impact of the purchase.
(c) Includes the operating and other data from the (i) International Paper
transaction since the January 31, 2001 closing date and (ii) Hallwood since
May 1, 2001. The transactions were accounted for under the purchase method.
(d) EBITDAX as used herein is calculated by adding interest expense, income
taxes, depletion, depreciation and amortization, impairment of long-lived
assets, exploration abandonment expenses and other noncash charges to net
earnings. EBITDAX is not intended to represent cash flow or any other
measure of performance in accordance with GAAP. EBITDAX is included herein
because management believes that some investors find it to be a useful
analytical tool. Other companies may calculate EBITDAX differently, and we
cannot assure you that such figures are comparable with similarly-titled
figures for such other companies.
18
SELECTED HISTORICAL AND PRO FORMA RESERVE AND PRODUCTION DATA
(Dollars in thousands, except per unit amounts)
The pro forma reserve and other data included in the tables below gives
effect to (i) the merger of Titan Exploration, Inc. with a subsidiary of Pure,
(ii) the acquisition of oil and gas properties, fee mineral and royalty
interests from International Paper Company and affiliates, and certain general
and limited partnership interests, and (iii) the merger of our acquisition
subsidiary with Hallwood Energy Corporation, in each case as if the transaction
had occurred on January 1, 2000.
Year Ended December 31,
------------------------------------------------
Historical Pro Forma
---------------------------------- -----------
1998 1999 2000 2000
---------- -------- ---------- ----------
Estimated Proved Reserves (at December 31)(a):
Oil (Mbbls)..................................................... 38,538 39,982 72,606 89,389
Gas (MMcf)...................................................... 329,227 340,975 662,357 949,509
Oil equivalents (MBOE).......................................... 93,409 96,811 182,999 247,641
Percent natural gas............................................... 59% 59% 60% 64%
Percent proved developed.......................................... 95% 93% 81% 80%
Product prices (at December 31):
Oil (per Bbl)................................................... $ 10.38 $ 24.08 $ 25.76 $ 25.87
Natural gas (per Mcf)........................................... $ 1.73 $ 1.93 $ 8.49 $ 8.74
Future net cash flows (before income taxes) (at December 31):
Undiscounted.................................................... $328,074 $825,892 $5,530,207 $7,816,173
Discounted...................................................... $190,067 $453,226 $2,807,618 $4,183,505
Average Reserve Life (years) (b).................................. 10.4 11.4 15.5 10.8
Reserve additions (MBOE):
Acquisitions.................................................... 428 248 76,619 9,254
Extensions and discoveries...................................... 3,657 5,344 13,170 26,167
Revisions....................................................... 2,046 6,293 8,408 12,981
-------- -------- ---------- ----------
Total additions................................................. 6,131 11,885 98,197 48,402
======== ======== ========== ==========
Costs incurred:
Acquisitions.................................................... $ 2,471 $ 764 $ 265,730 N/A
Exploration and development costs............................... 43,091 21,775 86,457 N/A
-------- -------- ----------
Total costs incurred............................................ $ 45,562 $ 22,539 $ 352,187 N/A
======== ======== ==========
Three-year average all sources unit finding cost (per BOE) (c) $ 16.59 $ 4.67 $ 3.62 N/A
19
Year Ended December 31, Six months Ended June 30,
---------------------------------------- -------------------------------
Historical Pro Forma Historical Pro Forma
----------------------------- --------- -------------------- ---------
1998 1999 2000 2000 2000 2001 2001
----------- ------- ------- --------- ----------- ------- ---------
Production:
Oil and condensate (Mbbls)...................... 3,991 3,659 5,278 7,865 2,039 3,757 4,038
Gas (MMcf)...................................... 29,962 28,899 39,016 90,082 15,679 35,692 43,678
Total (MBOE)................................. 8,985 8,476 11,781 22,879 4,652 9,705 11,318
Average Sales Price Per Unit (including effects
of hedging):
Oil and condensate (per Bbl).................... $ 13.18 $ 17.66 $ 29.01 $ 27.72 $ 27.83 $ 25.85 $ 25.52
Gas (per Mcf)................................... 1.78 1.68 3.42 3.34 2.64 4.83 4.63
Total (per BOE)................................. 11.76 13.36 24.33 23.06 21.16 27.76 26.98
Expenses Per BOE:
Production costs, excluding production
and other taxes................................ $ 4.39 $ 3.81 $ 4.10 $ 3.57 $ 3.72 $ 3.90 $ 3.97
Production and other taxes...................... .99 1.01 1.88 1.55 1.76 1.93 1.96
General and administrative...................... .85 .92 1.04 1.42 .67 1.54 1.68
Depreciation, depletion and amortization........ 3.69 3.79 3.86 5.76 3.73 6.29 6.80
_____________________
(a) The reserve and present value data at December 31, 1998 and 1999 for the
Permian Basin business unit was prepared by Union Oil.
(b) Average reserve life is calculated by dividing total reserves by our actual
production for the period.
(c) Finding cost is calculated by dividing total three years costs incurred by
total three years reserve additions.
20
THE EXCHANGE OFFER
Purpose of the Exchange Offer
We completed the sale of the old notes on June 8, 2001 to the initial
purchasers pursuant to a purchase agreement dated June 5, 2001. The initial
purchasers subsequently sold the old notes to qualified institutional buyers, or
QIBs, in reliance on Rule 144A under the Securities Act. As a condition to the
sale of the old notes, we and the initial purchasers entered into a registration
rights agreement dated as of June 8, 2001. Pursuant to the registration rights
agreement, we agreed that, unless the exchange offer is not permitted by
applicable law or Securities and Exchange Commission policy, we would:
. file with the Securities and Exchange Commission a registration
statement under the Securities Act with respect to the new notes within
120 days after June 8, 2001;
. use our best efforts to cause the registration statement to become
effective under the Securities Act within 180 days after June 8, 2001;
. promptly after the effectiveness of the registration statement, offer
the new notes in exchange for the surrender of the old notes; and
. keep the offer to exchange the old notes for the new notes open for not
less than 30 days, or longer if required by applicable law, after the
date notice of the offer to exchange the old notes for new notes is
mailed to the holders of the old notes.
We have incorporated by reference the registration rights agreement as an
exhibit to the registration statement from our Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001. See "Where You Can Find More Information." The
registration statement, of which this prospectus forms a part, is intended to
satisfy our obligations under the registration rights agreement and the purchase
agreement.
Resale of the New Notes
We are making the exchange offer in reliance on the position of the staff
of the Securities and Exchange Commission as set forth in interpretive letters
addressed to third parties in other transactions. However, we have not sought
our own interpretive letter and we cannot assure you that the staff would make a
similar determination with respect to the exchange offer as it has in
interpretive letter to third parties. Based on these interpretations by the
staff, we believe that the new notes issued under the exchange offer may be
offered for resale, resold or otherwise transferred by you, without further
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 its business;
. are not participating in, and do not intend to participate in, a
distribution of the new notes within the meaning of the Securities Act
and have no arrangement or understanding with any person to participate
in a distribution of the new notes within the meaning of the Securities
Act;
. are not a broker-dealer who acquired the old notes directly from us; and
. are not an "affiliate" of ours, with the meaning of Rule 405 of the
Securities Act.
By tendering the old notes in exchange for new notes, you will be required
to represent to us that each of the above statements applies to you. If you are
participating in or intend to participate in, a distribution of the new notes,
or have any arrangement or understanding with any person to participate in a
distribution of the new notes to be acquired in this exchange offer, you may be
deemed to have received restricted securities and may not rely on the applicable
interpretations of the staff of the Securities and Exchange Commission. If you
are so deemed, you will have to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction.
21
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."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all old notes validly
tendered and not withdrawn prior to the expiration date. We will issue $1,000
principal amount of new notes in exchange for each $1,000 principal amount of
old notes surrendered pursuant to the exchange offer. Old notes may be tendered
only in integral multiples of $1,000.
The form and terms of the new notes are the same as the form and terms of
the old notes except that:
. the issuance of the new notes will be registered under the Securities Act
and, therefore, the new notes will not bear legends restricting their
transfer; and
. holders of the new notes will not be entitled to any of the rights of
holders of old notes under the registration rights agreement, which
rights will terminate upon the consummation of the exchange offer.
The new notes will evidence the same indebtedness as the old notes they
replace and will be issued under, and be entitled to the benefits of, the
indenture.
As of the date of this prospectus, $350 million in aggregate principal
amount of old notes is outstanding. Only a registered holder of the old notes,
or such holder's legal representative or attorney-in-fact, as reflected on the
records of the trustee under the indenture, may participate in the exchange
offer. There will be no fixed record date for determining registered holders of
the old notes entitled to participate in the exchange offer.
You do not have any appraisal or dissenters' rights under the indenture in
connection with the exchange offer. We intend to conduct the exchange offer in
accordance with the provisions of the registration rights agreement and the
applicable requirements of the Securities Act, the Securities Exchange Act and
the rules and regulations of the Securities and Exchange Commission thereunder.
We shall be deemed to have accepted validly tendered old notes when, as and if
we have given oral or written notice thereof to the exchange agent. The exchange
agent will act as agent for the tendering holders of old notes for the purpose
of receiving the new notes from us.
You will not be required to pay brokerage commissions or fees or, subject
to the instructions in the letter of transmittal, transfer taxes with respect to
the exchange of old notes pursuant to the exchange offer. We will pay all
charges and expenses, other than applicable taxes described below, in connection
with the exchange offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time, on
_________________, 2001, unless we, in our sole discretion, extend the exchange
offer, in which case the term "expiration date" shall mean the latest date and
time to which the exchange offer is extended. We may extend the exchange offer
at any time and from time to time by giving oral or written notice of the
extension to the exchange agent and by publicly announcing the extension no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our sole discretion:
. to delay accepting any old notes;
. to extend or amend the terms of the exchange offer; or
. if any conditions set forth below under "-- Conditions" shall not have
been satisfied, to terminate the exchange offer by giving oral or written
notice of such delay, extension or termination to the exchange agent.
22
If any delay in acceptance, extension, termination or amendment occurs, we
will notify the exchange agent and will either issue a press release or give
oral or written notice to the holders of the old notes as promptly as
practicable. If the exchange offer is amended in a manner determined by us to
constitute a material change, we will promptly disclose the amendment by means
of a posteffective amendment to the registration statement that will be
distributed to the registered holders, and we will extend the exchange offer for
a period of five to ten business days, depending upon the significance of the
amendment and the manner of disclosure to the registered holders, if the
exchange offer would otherwise expire during that period.
Interest on the New Notes
The new notes will bear interest at a rate equal to 7 1/8% per year.
Interest on the new notes will be payable semi-annually in arrears on each June
15 and December 15, commencing December 15, 2001. Interest on the new notes will
accrue from the last interest payment date on which interest was paid on the old
notes or, if no interest was paid on the old notes, from the date of issuance of
the old notes, which was June 8, 2001. If your old notes are accepted for
exchange, you will be deemed to have waived your right to receive any interest
on the old notes.
Procedures for Tendering
To tender your old notes in the exchange offer, you must complete, sign and
date the letter of transmittal, or a facsimile, have the signatures thereon
guaranteed if required by the letter of transmittal, and mail or otherwise
deliver the letter of transmittal or facsimile, or an agent's message, together
with the certificates representing the old notes being tendered and any other
required documents, to the exchange agent for receipt prior to the expiration
date. Alternatively, you may either:
(1) send a timely confirmation of a book-entry transfer of your old
notes, if this procedure is available, into the exchange agent's account at
The Depository Trust Company, or DTC, pursuant to the procedure for book-
entry transfer described below, prior to the expiration date; or
(2) comply with the guaranteed delivery procedures described below.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from its
participant tendering old notes which are the subject of this book-entry
confirmation that this participant has received and agrees to be bound by the
terms of the letter of transmittal, and that we may enforce the terms of the
letter of transmittal against the participant.
Unless withdrawn prior to the expiration date, your tender will constitute
an agreement between you and us in accordance with the terms and subject to the
conditions provided in this prospectus and in the letter of transmittal.
The method of delivery of old notes, the letter of transmittal and all
other required documents to the exchange agent is at your election and risk.
Instead of delivery by mail, we recommend that you use an overnight or hand
delivery service. If you choose delivery by mail, we recommend registered mail,
return receipt requested, and properly insured. In all cases, sufficient time
should be allowed to assure delivery to the exchange agent before the expiration
date. You should not send any letter of transmittal or old notes to us. You may
request your respective brokers, dealers, commercial banks, trust companies or
nominees to effect the above transactions on your behalf.
If you are the beneficial owner of the old notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to tender your old notes, you should contact the registered holder
promptly and instruct the registered holder to tender on your behalf. If you
wish to tender on your own behalf, you must, prior to completing and executing
the letter of transmittal and delivering your old notes, either make appropriate
arrangements to register ownership of the old notes in your name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution, as defined below,
unless the old notes are tendered:
23
. by a registered holder, or by a participant in DTC whose name appears
on a security position listing as the owner, who has not completed the
box titled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
. for the account of an eligible institution.
An eligible institution is:
. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
. a commercial bank or trust company having an office or correspondent
in the United States; or
. an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act which is a member of one of the
recognized signature guarantee programs identified in the letter of
transmittal.
If the letter of transmittal is signed by the registered holder(s) of the
old notes tendered, the signature must correspond with the name(s) written on
the face of the old notes without alteration, enlargement or any change
whatsoever. If the letter of transmittal is signed by a participant in DTC, the
signature must correspond with the name as it appears on the security position
listing as the holder of the old notes.
If the letter of transmittal is signed by a person other than the
registered holder of any old notes listed, the old notes must be endorsed or
accompanied by bond powers and a proxy that authorizes that person to tender the
old notes on behalf of the registered holder in satisfactory form to us as
determined in our sole discretion, in each case, signed exactly as the name of
the registered holder or holders appears on the old notes.
If the letter of transmittal or any old notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, those
persons should so indicate when signing. Unless waived by us, evidence
satisfactory to us of their authority to so act must be submitted with the
letter of transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed letter of transmittal accompanied by the old
notes tendered, or a timely confirmation received by a book-entry transfer of
old notes into the exchange agent's account at DTC with an agent's message, or a
notice of guaranteed delivery from an eligible institution is received by the
exchange agent. Issuances of new notes in exchange for old notes tendered under
a notice of guaranteed delivery by an eligible institution will be made only
against delivery of the letter of transmittal, and any other required documents,
and the tendered old notes, or a timely confirmation received of a book-entry
transfer of old notes into the exchange agent's account at DTC with an agent's
message, to the exchange agent.
All questions as to the validity, form, eligibility, time of receipt,
acceptance and withdrawal of tendered old notes will be determined by us in our
sole discretion. Our determination will be final and binding. We reserve the
absolute right to reject any and all old notes not properly tendered or any old
notes which, if accepted by us would, in the opinion of our counsel, be
unlawful. We also reserve the right 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, any
defects or irregularities in connection with tenders of old notes must be cured
within the time we 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 shall incur any liability for failure to give that
notice. Tenders of old notes will not be deemed to have been made until such
defects or irregularities have been cured or waived.
While we have no present plan to do so, we reserve the right in our sole
discretion to:
. purchase or make offers for any old notes that remain outstanding
subsequent to the expiration date or, as described under "--
Conditions," to terminate the exchange offer; and
24
. purchase old notes in the open market, to the extent permitted by
applicable law, in privately negotiated transactions or otherwise. The
terms of any purchases or offers could differ from the terms of the
exchange offer.
By tendering, you will be making several representations to us, including
that:
(1) the new notes to be acquired by you are being acquired by you in
the ordinary course of your business;
(2) you are not participating in, and do not intend to participate
in, a distribution of the new notes;
(3) you have no arrangement or understanding with any person to
participate in the distribution of the new notes;
(4) if you are a broker-dealer or are participating in the exchange
offer for the purposes of distributing the new notes, you will comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the new notes acquired by you
and you cannot rely on the position of the staff of the Securities and Exchange
Commission set forth in no-action letters issued to third parties; and
(5) you are not an affiliate of us as defined in Rule 405 under the
Securities Act.
If you are a broker-dealer that will receive new notes for your own account
in exchange for old notes that were acquired as a result of market-making
activities or other trading activities, you will also be required to acknowledge
in the letter of transmittal that you will deliver a prospectus in connection
with any resale of those new notes. However, by so acknowledging and by
delivering a prospectus, you will not be deemed to admit that you are an
underwriter within the meaning of the Securities Act.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the old notes at DTC for purposes of the exchange offer promptly after the
date of this prospectus. Any financial institution that is a participant in
DTC's systems may make book-entry delivery of old notes by causing DTC to
transfer the old notes into the exchange agent's account in accordance with
DTC's procedures for transfer.
However, although delivery of old notes may be effected through book-entry
transfer, an agent's message or the letter of transmittal or facsimile, with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received by the exchange agent at the address set
forth below under "-- Exchange Agent" on or prior to the expiration date or
pursuant to the guaranteed delivery procedures described below. Delivery of
documents to DTC does not constitute delivery to the exchange agent.
Guaranteed Delivery Procedures
If you are a registered holder and wish to tender your old notes and (a)
your old notes are not immediately available or (b) you cannot deliver your old
notes, the letter of transmittal or any other required documents to the exchange
agent prior to the expiration date, or (c) the procedures for book-entry
transfer cannot be completed on a timely basis and an agent's message delivered,
you may effect a tender if:
. you tender through an eligible institution;
. prior to the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form provided by us, by
facsimile transmission, mail or hand delivery, containing your name and
address, the certificate numbers of your old notes and the principal
amount of old notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three business days after the
expiration date, the letter of transmittal or a facsimile, together with
the certificates representing the old notes in proper form for transfer
or a book-entry confirmation, as the case may
25
be, and any other documents required by the letter of transmittal,
will be deposited by the eligible institution with the exchange agent;
and
. a properly executed letter of transmittal or facsimile thereof, as
well as the certificates representing all tendered old notes in proper
form for transfer and all other documents required by the letter of
transmittal are received by the exchange agent within three business
days after the expiration date.
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may withdraw tenders
of old notes at any time prior to 5:00 p.m. on the expiration date.
To withdraw a tender of old notes in the exchange offer, you must send a
written or facsimile transmission notice of withdrawal to the exchange agent at
its proper address prior to the expiration date. Any notice of withdrawal must:
. specify the name of the person having tendered the old notes to be
withdrawn;
. identify the old notes to be withdrawn, including the certificate
number or numbers and principal amount of the old notes;
. be signed by the person having tendered the old notes to be withdrawn
in the same manner as the original signature on the letter of
transmittal by which these old notes were tendered, including any
required signature guarantees, or be accompanied by documents of
transfer sufficient to permit the trustee with respect to the old
notes to register the transfer of these old notes into the name of the
person having made the original tender and withdrawing the tender;
. specify the name in which these old notes are to be registered, if
different from that of the person having tendered the old notes to be
withdrawn; and
. if applicable because the old notes have been tendered under the book-
entry procedures, specify the name and number of the participant's
account at DTC to be credited, if different than that of the person
having tendered the old notes to be withdrawn.
All questions as to the validity, form and eligibility, including time of
receipt, of withdrawal notices will be determined by us in our sole discretion.
Our determination will be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer and no new notes will be issued unless the old notes so withdrawn
are validly retendered. Properly withdrawn old notes may be retendered by
following one of the procedures described above under "Procedures for Tendering"
at any time prior to the expiration date.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, on the expiration date, all old notes properly tendered and will
issue the new notes promptly after such acceptance. See "--Conditions" below for
more detailed information. For purposes of the exchange offer, we will be deemed
to have accepted properly tendered old notes for exchange when, and if, we have
given oral or written notice of our acceptance to the exchange agent.
For each old note accepted for exchange, the holder of the old note will
receive a new note having a principal amount equal to that of the surrendered
old note.
In all cases, issuance of exchange notes for old notes that are accepted
for exchange pursuant to the exchange offer will be made only after:
. timely receipt by the exchange agent of certificates for the old notes
or a timely book-entry confirmation of the old notes into the exchange
agent's account at the book-entry transfer facility;
26
. a properly completed and duly executed letter of transmittal, or a
properly transmitted agent's message; and
. timely receipt by the exchange agent of all other required documents.
Conditions
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or exchange the new notes for, any old notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of such old notes, if we determine that the exchange offer
violates applicable law, rules or regulations or an applicable interpretation of
the Securities and Exchange Commission or any action or proceeding has been
instituted or threatened in any court or before any governmental agency with
respect to the exchange offer which, in our judgement, might impair our ability
to proceed with the exchange offer or materially and adversely affect us.
If we determine in our sole discretion that any of these conditions are not
satisfied, we may:
. refuse to accept any old notes and return all tendered old notes to
the tendering holders;
. extend the exchange offer and retain all old notes tendered prior to
the expiration of the exchange offer, subject, however, to the rights
of holders to withdraw such old notes; or
. waive such unsatisfied conditions with respect to the exchange offer
and accept all properly tendered old notes that have not been
withdrawn.
If our waiver constitutes a material change to the exchange offer, we will
promptly disclose our waiver by means of a prospectus supplement or
posteffective amendment that will be distributed to the registered holders of
the old notes, and we will extend the exchange offer for a period of five to ten
business days, depending upon the significance of the waiver and the manner of
disclosure to the registered holders, if the exchange offer would otherwise
expire during that period.
Termination of Specific Rights
All rights under the registration rights agreement, including registration
rights, of holders of the old notes eligible to participate in the exchange
offer and receive freely tradable new notes will terminate upon consummation of
the exchange offer except with respect to our continuing obligations to:
. indemnify holders and specific parties related to the holders against
specific liabilities, including liabilities under the Securities Act;
. provide, upon the request of any holder of a transfer-restricted
unregistered note, the information required by Rule 144A(d)(4) under
the Securities Act in order to permit resales of the holder's old
notes pursuant to Rule 144A;
. provide copies of the latest version of the prospectus to broker-
dealers upon their request for a period of up to 90 days after the
effective date of the registration statement; and
. use our best efforts to keep the registration statement effective and
to amend and supplement the prospectus in order to permit the
prospectus to be lawfully delivered by all persons subject to the
prospectus delivery requirements of the Securities Act for the period
of time that persons must comply with the prospectus delivery
requirements of the Securities Act in order to resell the new notes.
Shelf Registration Statement
In the event that:
. any change in law or in applicable interpretations of the staff of the
SEC do not permit us to effect the exchange offer;
27
. the exchange offer is not consummated within 220 days after June 8,
2001;
. any of the initial purchasers notify us within 10 business days after
consummation of the exchange offer that old notes held by it are not
eligible to be exchanged for new notes in the exchange offer; or
. any holder of old notes, with certain exceptions, shall notify us
within 10 business days following consummation of the offer that it is
not eligible to participate in the exchange offer or does not receive
freely tradable new notes in the exchange offer,
then we will, at our cost:
. promptly (but in no event later than 120 days after required to do
so), file a shelf registration statement with the SEC covering
resales of the old notes or the new notes, as the case may be ;
. use our commercially reasonable best efforts to cause the shelf
registration statement to be declared effective under the Securities
Act no later than 180 days after the date on which we become required
to file the shelf registration statement; and
. use our commercially reasonable best efforts to keep the shelf
registration statement effective until the earlier of the time when
the notes covered by the shelf registration statement can be sold
pursuant to Rule 144 without any limitations under clauses (c), (e),
(f) and (h) of Rule 144 and two years from the effective date of the
registration statement.
We will, in the event a shelf registration statement is filed, among other
things, provide to each holder for whom the 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).
Liquidated Damages
If (i) on or prior to October 6, 2001 or the 120th day following the date
on which we become obligated to file a shelf registration statement, neither an
exchange offer registration statement nor a shelf registration statement has
been filed with the SEC; (ii) by December 5, 2001 or the 180th day following the
date on which we become obligated to file a shelf registration statement,
neither the exchange offer registration statement nor shelf registration
statement has been declared effective; (iii) the exchange offer is not
consummated on or before the 40th day following the effectiveness of the
exchange offer registration statement; or (iv) after either the exchange offer
registration statement or the shelf registration statement is declared
effective, such registration statement ceases to be effective or usable (subject
to certain exceptions) in connection with resales of old notes or new notes in
accordance with and during the periods specified in the registration rights
agreement, additional cash interest will accrue on the old notes and the new
notes at the rate of 0.25% per annum for the first 90 days of the period
immediately following the occurrence of such registration default and at the
rate of 0.50% per annum thereafter, so long as a registration default continues
to exist, calculated on the principal amount of the notes as of the date on
which such interest is payable. Such interest is payable in addition to any
other interest payable from time to time with respect to the notes.
Exchange Agent
We have appointed First Union National Bank as exchange agent for the
exchange offer. You should direct all questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for notice of guaranteed delivery to the exchange agent
as follows:
28
By Registered Mail or By Overnight Courier or
Hand Delivery: By Facsimile: Certified Mail:
First Union National Bank (704) 590-7628 First Union National Bank
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations - NC1153 Confirm by Telephone: Corporate Trust Operations - NC1153
1525 West W. T. Harris Blvd. - 3C3 1525 West W. T. Harris Blvd. - 3C3
Charlotte, North Carolina 28262-1153 (704) 590-7413 Charlotte, North Carolina 28262-1153
Attention: Marsha Rice Attention: Marsha Rice
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by telephone
or in person by our and our affiliates' officers and regular employees.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will pay the exchange agent reasonable and
customary fees for its services and will reimburse it for its reasonable out-of-
pocket expenses in connection with the exchange offer.
We will pay the cash expenses to be incurred in connection with the
exchange offer which we estimate in the aggregate to be not in excess of
approximately $350,000. Such expenses include registration fees, fees and
expenses of the exchange agent and the trustee, accounting and legal fees and
printing costs, among others.
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the exchange of old
notes pursuant to the exchange offer. If, however, transfer taxes are imposed
for any reason other than the exchange of the old notes pursuant to the exchange
offer, then the amount of any such transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
Consequences of Failing to Exchange Old Notes
The old notes that are not exchanged for the new notes pursuant to the
exchange offer will remain restricted securities. Accordingly, such old notes
may be resold by you only:
. to a person whom you reasonably believe is a QIB in a transaction
meeting the requirements of Rule 144A;
. in a transaction meeting the requirements of Rule 144 under the
Securities Act;
. outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act;
. in accordance with another exemption from the registration
requirements of the Securities Act, and based upon an opinion of
counsel if we so request;
. to us; or
. pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction.
In addition, you will no longer be able to obligate us to register the old
notes under the Securities Act, except in the limited circumstances provided
under our registration rights agreement. The restrictions on transfer of your
old notes arise
29
because we issued the old notes under exemptions from, or in transactions
outside the registration requirements of the Securities Act and applicable state
securities laws. In addition, if you want to exchange your old notes in the
exchange offer for the purpose of participating in a distribution of the new
notes, you may be deemed to have received registered securities, and, if so,
will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction. To
the extent the old notes are tendered and accepted in the exchange offer, the
trading market, if any, for the old notes would be adversely affected. You are
urged to consult your financial and tax advisors in making your own decisions on
whether to participate in the exchange offer.
Accounting Treatment
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The expenses of the exchange offer will be amortized over
the term of the new notes.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following description summarizes the material terms of our senior
credit facilities. The description may not contain all of the information that
may be important to you. To understand the agreements related to the senior
credit facilities fully, you should carefully read the agreements relating to
the senior credit facilities, copies of which are available as described under
"Where You Can Find More Information." The following description is qualified in
its entirety by reference to the agreements.
Revolving Credit Facilities
In September 2000, we entered into two unsecured credit agreements,
relating to a $250 million five-year revolving credit facility and a $250
million 364-day revolving credit facility, each with current commitments of $235
million. The five-year revolving facility is due in September 2005. In September
2001, the 364-day revolving facility will be converted to a term loan whose
outstanding amounts are due and payable in full in September 2002. A portion of
the five-year revolving facility is available for the issuance of up to $50
million of letters of credit.
At our option, interest for the revolving credit facilities is based upon a
floating rate based on either the announced base rate for a commercial bank or
the Eurodollar rate plus an applicable margin ranging from 0.80% to .95% for the
five-year revolving facility and from 0.85% to 1.0% for the 364-day revolving
facility. These margins increase as Pure's debt coverage ratio increases. Fees
on letters of credit are due quarterly and range from 0.925% to 1.075% per annum
of the outstanding amount of letters of credit. Facility fees are due quarterly
on the total of the outstanding commitments under the revolving credit
facilities and range from 0.20% to 0.30% on the five-year revolving facility and
from 0.15% to 0.25% for the 364-day revolving facility.
The credit agreements restrict us from paying dividends on our common stock
in excess of $10 million per fiscal year. The credit agreements also contain
restrictive covenants with respect to debt to EBITDAX ratios, hedging
arrangements and net worth. We were in compliance with all such covenants at
June 30, 2001.
At June 30, 2001, we had $215.0 million available under the 364-day
revolving facility and $67.2 million available on the five-year revolving
facility.
Working Capital Credit Facility
In October 2000, for purposes of maximizing daily cash management activity,
Pure entered into an unsecured $10 million working capital credit facility.
Individual borrowings may be made for up to a three week period. The working
capital credit facility has no maturity date and is cancelable at anytime by the
lender. The interest rate of each loan under the working capital credit facility
is determined by agreement between Pure and the lender. The rate shall not
exceed the maximum interest rate permitted under applicable law. Interest rates
generally are at the lender's cost of funds plus 1% per annum.
30
DESCRIPTION OF NEW NOTES
The new notes will be issued under an indenture dated as of June 8, 2001, by
and among Pure, the guarantors and First Union National Bank, as trustee. The
following summary highlights certain material terms of the new notes, which are
identical in all material respects to the terms of the old notes, except that
the registration rights and related liquidated damages provisions, and the
transfer restrictions that apply to the old notes, do not apply to the new
notes. We urge you to read the indenture because it, not this description,
defines your rights as holders of the new notes. As used in this Section, the
terms "note" and "notes" refer to the new notes.
General
The notes:
. are senior unsecured obligations of Pure;
. are equal in right of payment to any existing and future senior
unsecured debt of Pure; and
. are guaranteed by each guarantor.
Each guarantee of the notes by the guarantors will be:
. a senior unsecured obligation of the guarantor; and
. equal in right of payment to any other existing and future senior
unsecured debt of the guarantor.
Principal, Maturity and Interest
Pure will issue the notes in denominations of $1,000 and any integral
multiple of $1,000. The notes are limited to an aggregate principal amount of
$350,000 and will mature on June 15, 2011.
Interest on the notes will be payable semiannually in arrears on June 15 and
December 15, commencing on December 15, 2001. Pure will make each interest
payment to the holders of record of the notes on the immediately preceding May
31 and November 30.
Interest on the notes will accrue from the last interest payment date on
which interest was paid on the old notes, or, if no interest was paid on the old
notes, from the date of issuance of the old notes, which was June 8, 2001.
Interest will be computed on the basis of a 360-day year comprised of twelve 30-
day months.
The notes will be redeemable at any time at the option of Pure in whole or in
part at a price equal to the greater of (1) the principal amount of the notes
being redeemed or (2) the Make-Whole Amount (as defined below) for the notes
being redeemed, plus, in either case, accrued and unpaid interest to the
redemption date. See "__ Optional Redemption."
Guarantees
Certain subsidiaries of Pure will unconditionally guarantee on a joint and
several basis our obligations to pay principal and interest with respect to the
notes. We refer to each of these subsidiaries as a "guarantor" and collectively
as the "guarantors." Each of the guarantees is an unsecured obligation of the
guarantor providing such guarantee and will rank equal in right of payment with
the guarantee provided by such guarantor under our senior credit facilities and
with all existing and future unsecured indebtedness of such guarantor that is
not, by its terms, expressly subordinated in right of payment to such guarantee.
The indenture provides that if any subsidiary of Pure guarantees or becomes a
co-obligor on any Funded Indebtedness of Pure other than the notes at any time
subsequent to the date on which the notes are originally issued (including,
without limitation, following any release of such subsidiary from its guarantee
as described above), then Pure will cause the notes to be equally and ratably
guaranteed by such subsidiary, which shall thereupon become a guarantor.
The following Pure subsidiaries, each of which is also a guarantor of our
obligations under one or more of our senior
31
credit facilities, are currently guarantors: Titan Exploration, Inc., Pure
Resources Holdings, Inc., Pure Resources, L.P., Pure Resources I, Inc., PK I,
L.P., PK II, L.P., PK III, L.P. , PK IV, L.P., Pure GP, LLC, Pure Resources
Holdings, LLC, HEP Pure, LP (successor by conversion to Hallwood Energy
Corporation), HEC Petroleum, Inc. (formerly named Hallwood Petroleum, Inc.), HEP
Pure "cquisition, LLC, HEP Partners, L.P. (formerly named Hallwood Energy
Partners, L.P.), La Plata Associates, LLC and HEC La Plata, LLC (formerly named
Hallwood La Plata, LLC). These guarantors constitute all of our material
subsidiaries except Pure Partners, LP.
Under the terms of the indenture, a guarantor may be released from its
guarantee if such guarantor is not a guarantor of (or co-obligor on) any Funded
Indebtedness of Pure other than the notes and other than Funded Indebtedness of
Pure the related guarantee (or obligations) of which (i) is subject to a release
provision similar to the release provision described in this paragraph and (ii)
will be released concurrently with the release of the guarantee of such
guarantor pursuant to such release provision, provided that no Default or Event
of Default under the indenture has occurred and is continuing.
The obligations of each guarantor are limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
guarantor and after giving effect to any collections from or payments made by or
on behalf of any other guarantor in respect of the obligations of such other
guarantor under its guarantee or pursuant to its contribution obligations under
the indenture, result in the obligations of such guarantor under its guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal,
state or foreign law. Each guarantor that makes a payment or distribution under
a guarantee shall be entitled to a contribution from each other guarantor in a
pro rata amount based on the Adjusted Net Assets of each guarantor.
Optional Redemption
Pure may redeem all or part of the notes at any time at its option at a
redemption price equal to the greater of (1) the principal amount of the notes
being redeemed or (2) the Make-Whole Amount for the notes being redeemed, plus
in either case, accrued and unpaid interest to the redemption date.
As used in this prospectus:
"Make Whole Amount" means the sum, as determined by a Quotation Agent, of the
present values of the principal amount of the notes to be redeemed, together
with scheduled payments of interest (exclusive of interest to the redemption
date) from the redemption date to the maturity date of the notes being redeemed,
in each case discounted to the redemption date on a semi-annual basis, assuming
a 360-day year consisting of twelve 30-day months, at the Adjusted Treasury
Rate.
"Adjusted Treasury Rate" means, with respect to any redemption date, (i) the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated "H.15 (519)" or any successor publication which, is published weekly
by the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to constant
maturity under the caption "Treasury Constant Maturities," for the maturity
corresponding to the Comparable Treasury Issue (if no maturity is within three
months before or after the remaining term of the notes being redeemed, yields
for the two published maturities most closely corresponding to the Comparable
Treasury Issue shall be determined and the Adjusted Treasury Rate shall be
interpolated or extrapolated from such yields on a straight line basis, rounding
to the nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per year equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such redemption
date, in each case calculated on the third business day preceding the redemption
date, plus 0.25%.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the redemption date to the maturity date of the notes that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the notes.
"Comparable Treasury Price" means, with respect to any redemption date, if
clause (ii) of the Adjusted Treasury Rate is applicable, the average of three,
or such lesser number as is obtained by the indenture trustee, Reference
Treasury Dealer Quotations for such redemption date.
32
"Quotation Agent" means the Reference Treasury Dealer selected by the
indenture trustee after consultation with Pure.
"Reference Treasury Dealer" means any of Credit Suisse First Boston
Corporation and its successors and assigns and two other nationally recognized
investment banking firms selected by Pure that are primary U.S. Government
securities dealers.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
indenture trustee, of the bid and asked prices for the Comparable Treasury
Issue, expressed in each case as a percentage of its principal amount, quoted in
writing to the indenture trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third business day preceding such redemption date.
If less than all of the notes are to be redeemed, the trustee will select the
notes to be redeemed by such method as the trustee shall deem fair and
appropriate. The trustee may select for redemption notes and portions of notes
in amounts of $1,000 or whole multiples of $1,000.
The notes are not entitled to the benefit of any sinking fund or other
mandatory redemption provisions.
Certain Covenants
Limitation on Liens
Nothing in the indenture or the notes in any way limits the amount of
indebtedness or securities (other than the notes) that Pure or its subsidiaries
may incur or issue. The indenture provides, however, that Pure will not, and
will not permit any subsidiary of Pure to, issue, assume or guarantee any
Indebtedness for borrowed money secured by any Lien on any property (real or
personal) now owned or hereafter acquired by Pure or such subsidiary without
providing for all notes then or thereafter outstanding to be secured equally and
ratably with such Indebtedness for so long as such Indebtedness shall be so
secured.
The foregoing restriction does not, however, apply to:
(1) Liens existing on the date on which the notes are originally
issued or provided for under the terms of agreements existing on such date;
(2) Liens on any property (real or personal) securing (a) all or any
portion of the cost of acquiring, constructing, developing, altering,
expanding, improving or repairing such property or any assets or improvements
(real or personal) used or to be used in connection with such property or (b)
Indebtedness incurred by Pure or any subsidiary of Pure prior to or within
one year after the later of the acquisition, the completion of construction,
development, alteration, expansion, improvement or repair of any property or
the commencement of commercial operation thereof, which Indebtedness is
incurred for the purpose of financing all or any part of the purchase price
thereof or construction, development, alteration, expansion or improvements
or repairs thereon;
(3) Liens securing Indebtedness owed by a subsidiary of Pure (or
Pure) to Pure or to any other subsidiary of Pure;
(4) Liens on the property of any person or entity existing at the
time Pure or any of its subsidiaries acquires the property or the person or
entity owning such property (including any acquisition by means of a merger
or consolidation with Pure or any of its subsidiaries) and not incurred as a
result of (or in connection with or in anticipation of) such acquisition of
such property or such person or entity, provided that such Liens do not
extend to or cover any property or assets of Pure or any of its subsidiaries
other than the property encumbered at the time of such acquisition (plus any
improvements or accessions thereto) and do not secure Indebtedness for
borrowed money with a principal amount in excess of the principal amount
outstanding at such time;
(5) Liens on any property securing (a) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or (b) Indebtedness issued or guaranteed by the United States or
any State thereof or any department, agency or
33
instrumentality of either;
(6) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted under
clause (1), (2), (4) or (5) above, provided that such Lien extends to or
covers only the property that is subject to the Lien being extended, renewed
or replaced (plus any improvements or accessions thereto) and that the
principal amount of the Indebtedness secured thereby shall not exceed the
principal amount of Indebtedness so secured at the time of such extension,
renewal or replacement; or
(7) Liens (exclusive of any Lien of any type otherwise permitted
under clauses (1) through (6) above) securing Indebtedness for borrowed money
of Pure or any subsidiary of Pure in an aggregate principal amount which,
together with the aggregate amount of Attributable Indebtedness deemed to be
outstanding in respect of all Sale/Leaseback Transactions entered into
pursuant to clause (1) of the covenant described under "Limitation on
Sale/Leaseback Transactions" below (exclusive of any such Sale/Leaseback
Transactions otherwise permitted under clauses (1) through (6) above), does
not at the time such Indebtedness is incurred exceed 15% of the aggregate
amount of the assets of Pure and its subsidiaries, on a consolidated basis,
after deducting therefrom all current liabilities, as calculated on Pure=s
consolidated balance sheet as of a date within 150 days prior to the date of
determination.
The following types of transactions will not be prohibited or otherwise
limited by the foregoing covenant: (i) the sale, granting of Liens with respect
to, or other transfer of, crude oil, natural gas or other minerals in place for
a period of time until, or in an amount such that, the transferee will realize
therefrom a specified amount (however determined) of money or of such crude oil,
natural gas or other minerals; (ii) the sale or other transfer of any other
interest in property of the character commonly referred to as a production
payment, overriding royalty, forward sale or similar interest; (iii) the
entering into of Hedging Obligations or the granting of Liens to secure Hedging
Obligations (although Liens securing any indebtedness for borrowed money that is
the subject of any such Hedging Obligation shall be subject to the foregoing
covenant unless permitted under clauses (1) through (7) above); and (iv) the
granting of Liens required by any contract or statute in order to permit Pure or
any subsidiary of Pure to perform any contract or subcontract made by it with or
at the request of the United States or any State thereof or any department,
agency or instrumentality of either, or to secure partial, progress, advance or
other payments to Pure or any subsidiary of Pure by such governmental unit
pursuant to the provisions of any contract or statute.
Limitation on Sale/Leaseback Transactions
The indenture provides that Pure will not, and will not permit any,
subsidiary to, enter into any Sale/Leaseback Transaction with any person (other
than Pure or a subsidiary) unless:
(1) Pure or such subsidiary would be entitled to incur Indebtedness, in a
principal amount equal to the Attributable Indebtedness with respect to such
Sale/Leaseback Transaction, secured by a Lien on the property subject to such
Sale/Leaseback Transaction pursuant to the covenant described under
ALimitation on Liens@ above without equally and ratably securing the notes
pursuant to such covenant;
(2) after the date on which the notes are originally issued and within a
period commencing six months prior to the consummation of such Sale/Leaseback
Transaction and ending six months after the consummation thereof, Pure or
such subsidiary shall have expended for property used or to be used in the
ordinary course of business of Pure and its subsidiaries an amount equal to
all or a portion of the net proceeds of such Sale/Leaseback Transaction and
Pure shall have elected to designate such amount as a credit against such
Sale/Leaseback Transaction (with any such amount not being so designated to
be applied as set forth in clause (3) below); or
(3) Pure, during the 12-month period after the effective date of such
Sale/Leaseback Transaction, shall have applied to the voluntary defeasance or
retirement of notes or any Pari Passu Indebtedness an amount equal to the
greater of the net proceeds of the sale or transfer of the property leased in
such Sale/Leaseback Transaction and the fair value, as determined by the
board of directors of Pure, of such property at the time of entering into
such Sale/Leaseback Transaction (in either case adjusted to reflect the
remaining term of the lease and any amount expended by Pure as set forth in
clause (2) above), less an amount equal to the principal amount of notes and
Pari Passu Indebtedness voluntarily defeased or retired by Pure within such
12-month period and not designated as a credit against any other
Sale/Leaseback Transaction entered into by Pure or any subsidiary during such
period.
34
Limitations on Mergers and Consolidations
The indenture provides that neither Pure nor any guarantor (other than any
guarantor that shall have been released from its guarantee pursuant to the
provisions of the indenture) will consolidate with or merge into any entity, or
sell, lease, convey, transfer or otherwise dispose of all or substantially all
of its assets to any person or entity, unless: (1) the person or entity formed
by or surviving such consolidation or merger (if other than Pure or such
guarantor, as the case may be), or to which such sale, lease, conveyance,
transfer or other disposition shall be made (collectively, the "Successor"), is
a corporation, partnership, limited liability company or similar entity
organized and existing under the laws of the United States or any State thereof
or the District of Columbia (or, alternatively, in the case of a guarantor
organized under the laws of a jurisdiction outside the United States, a
corporation, partnership, limited liability company or similar entity organized
and existing under the laws of such foreign jurisdiction), and the Successor is
already a guarantor of the notes or, if not, assumes by supplemental indenture
in a form satisfactory to the trustee all of the obligations of Pure or such
guarantor, as the case may be, under the indenture and under the notes; and (2)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing.
Certain Definitions
"Adjusted Net Assets" of a guarantor at any date means the lesser of (x) the
amount by which the fair value of the property of such guarantor at such date
exceeds the total amount of liabilities, including, without limitation, the
probable amount of contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date) of such
guarantor at such date, but excluding liabilities under the guarantee of the
notes by such guarantor, and (y) the amount by which the present fair saleable
value of the assets of such guarantor at such date exceeds the amount that will
be required to pay the probable liability of such guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any subsidiary of
such guarantor in respect of any obligations of such subsidiary under the
guarantee of the notes by such guarantor), excluding debt in respect of the
guarantee of the notes by such guarantor, as they become absolute and matured.
"Attributable Indebtedness," when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at the rate set forth or implicit in the terms of the lease included
in such transaction) of the total obligations of the lessee for rental payments
(other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor
costs and other items which do not constitute payments for property rights)
during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Capitalized Lease Obligation" of any person or entity means any obligation
of such person or entity to pay rent or other amounts under a lease of property,
real or personal, that is required to be capitalized for financial reporting
purposes in accordance with generally accepted accounting principles; and the
amount of such obligation shall be the capitalized amount thereof determined in
accordance with generally accepted accounting principles.
"Funded Indebtedness" means all Indebtedness (including Indebtedness incurred
under any revolving credit, letter of credit or working capital facility) that
matures by its terms, or that is renewable at the option of any obligor thereon
to a date, more than one year after the date on which such Indebtedness is
originally incurred.
"Hedging Obligations" of any person or entity means the net obligation (not
the notional amount) of such person or entity pursuant to any interest rate swap
agreement, foreign currency exchange agreement, interest rate collar agreement,
forward contract, commodity swap or option agreement, option or future contract
or other similar agreement or arrangement designed to protect such person or
entity against fluctuations in interest rates, foreign exchange rates or
commodity prices, but excluding contracts (other than contracts on an exchange)
for the actual purchase or sale of commodities for physical delivery.
"Indebtedness" of any person or entity at any date means, without
duplication, (1) all indebtedness of such person or entity for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
person or entity or only to a portion thereof), (2) all obligations of such
person or entity evidenced by bonds, debentures, notes or other similar
instruments, (3) all obligations of such person or entity in respect of letters
of credit or other similar instruments (or reimbursement obligations with
respect thereto), other than standby letters of credit and performance bonds
obtained by such
35
person or entity in the ordinary course of business, to the extent not drawn or,
to the extent drawn, if such drawing is reimbursed not later than the third
business day following demand for reimbursement, (4) all obligations of such
person or entity to pay the deferred and unpaid purchase price of property or
services, except trade payables and accrued expenses incurred in the ordinary
course of business, (5) all Capitalized Lease Obligations of such person or
entity, (6) all Indebtedness of others secured by a Lien on any asset of such
person or entity, whether or not such Indebtedness is assumed by such person or
entity, (7) all Indebtedness of others guaranteed by such person or entity to
the extent of such guarantee and (8) all Hedging Obligations of such person or
entity.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind for security purposes in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law. For the purposes of the indenture, Pure or any subsidiary of
Pure shall be deemed to own subject to a Lien any asset which it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease Obligation or other title retention agreement
relating to such asset.
"Material Subsidiary" means any subsidiary of Pure whose percentage (after
intercompany eliminations) of the consolidated assets of Pure and its
subsidiaries exceeds 5% as of the end of Pure's most recently completed fiscal
quarter.
"Non-Recourse Indebtedness" means, at any date, the aggregate amount at such
date of Indebtedness of Pure or a subsidiary of Pure in respect of which the
recourse of the holder of such Indebtedness, whether direct or indirect and
whether contingent or otherwise, is effectively limited to specified assets, and
with respect to which neither Pure nor any of its subsidiaries provides any
guarantee or similar credit support.
"Pari Passu Indebtedness" means any Indebtedness of Pure or any guarantor,
whether outstanding on the date on which the notes are originally issued or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall be
subordinated in right of payment to the notes or such guarantor's guarantee of
the notes, as the case may be.
"Sale/Leaseback Transaction" means any arrangement with any person or entity
providing for the leasing by Pure or any subsidiary of Pure, for a period of
more than three years, of any real or tangible personal property, which property
has been or is to be sold or transferred by Pure or such subsidiary to such
person or entity in contemplation of such leasing.
Events of Default
An Event of Default is defined in the indenture as being:
(1) a default by Pure or any guarantor for 30 days in payment of any
interest on the notes;
(2) a default by Pure or any guarantor in any payment of principal of
or premium, if any, on the notes;
(3) a default by Pure or any guarantor in compliance with any of its
other covenants or agreements in, or provisions of, the notes, the guarantees
or the indenture which shall not have been remedied within 60 days after
written notice to Pure by the trustee or by the holders of at least 25% in
principal amount of the notes then outstanding;
(4) the acceleration of the maturity of any Indebtedness (other than
the notes or any Non-Recourse Indebtedness) of Pure or any Material
Subsidiary of Pure having an outstanding principal amount of $25 million or
more individually or in the aggregate, or a default in the payment of any
principal or interest in respect of any Indebtedness (other than the notes or
any Non-Recourse Indebtedness) of Pure or any Material Subsidiary of Pure
having an outstanding principal amount of $25 million or more individually or
in the aggregate and such default shall be continuing for a period of 30 days
without Pure or such Material Subsidiary, as the case may be, effecting a
cure of such default;
(5) a final, non-appealable judgment or order for the payment of
money in excess of $25 million (net of applicable insurance coverage) having
been rendered against Pure or any Material Subsidiary of Pure and such
judgment or order shall continue unsatisfied and unstayed for a period of 30
days; or
36
(6) certain events involving bankruptcy, insolvency or reorganization
of Pure or any Material Subsidiary of Pure.
Guarantors may not be released from their guarantees if a Default or Event of
Default has occurred and is continuing. The obligations of any subsidiary of
Pure that becomes a guarantor are not dependent upon whether such subsidiary
becomes a guarantor prior to or after an Event of Default. The indenture
provides that the trustee may withhold notice to the holders of the notes of any
default (except in payment of principal of or premium, if any, or interest on
the notes) if the trustee considers it in the interest of the holders of the
notes to do so.
If an Event of Default occurs and is continuing with respect to the
indenture, the trustee or the holders of not less than 25% in principal amount
of the notes outstanding may declare the principal of and premium, if any, and
accrued but unpaid interest on all the notes to be due and payable. Upon such a
declaration, such principal, premium, if any, and interest will be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of Pure or a guarantor occurs and is
continuing, the principal of and premium, if any, and interest on all the notes
will become and be immediately due and payable without any declaration or other
act on the part of the trustee or any holders of the notes. The amount due and
payable on the acceleration of any note will be equal to 100% of the principal
amount of such note, plus accrued interest to the date of payment. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
notes may rescind any such acceleration with respect to the notes and its
consequences.
No holder of a note may pursue any remedy under the indenture unless:
(1) such holder has previously given the trustee written notice of a
continuing Event of Default;
(2) the holders of at least 25% in principal amount of the notes shall
have made a written request to the trustee to pursue such remedy;
(3) the holders shall have offered the trustee indemnity reasonably
satisfactory to it; and
(4) the trustee shall have failed to act for a period of 60 days after
receipt of such notice and offer of indemnity.
However, this provision does not affect the right of a holder of a note to
sue for enforcement of any overdue payment thereon.
The holders of a majority in principal amount of the notes then outstanding
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the trustee under the indenture, subject
to certain limitations specified in the indenture. The indenture requires the
annual filing by Pure with the trustee of a written statement as to compliance
with the covenants contained in the indenture.
Modification and Waiver
The indenture provides that modifications and amendments to the indenture or
the notes may be made by Pure, the guarantors and the trustee with the consent
of the holders of a majority in principal amount of the notes then outstanding;
provided that no such modification or amendment may, without the consent of the
holder of each note then outstanding affected thereby:
(1) reduce the amount of notes whose holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any note;
(3) reduce the principal of or change the fixed maturity of any note or
alter the premium or other provisions with respect to redemption;
(4) make any note payable in money other than that stated in the note;
37
(5) impair the right to institute suit for the enforcement of any payment
of principal of, or premium, if any, or interest on, any note;
(6) make any change in the percentage of principal amount of notes
necessary to waive compliance with certain provisions of the indenture; or
(7) waive a continuing Default or Event of Default in the payment of
principal of, or premium, if any, or interest on the notes.
Modifications and amendments of the indenture may be made by Pure, the
guarantors and the trustee without the consent of any holders of notes in
certain limited circumstances, including:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption of the obligations of Pure or any
guarantor under the indenture upon the merger, consolidation or sale or other
disposition of all or substantially all of the assets of Pure or any such
guarantor;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes;
(4) to reflect the release of any guarantor from its guarantee of the
notes, or the addition of any subsidiary of Pure as a guarantor, in the
manner provided by the indenture;
(5) to comply with any requirement in order to effect or maintain the
qualification of the indenture under the Trust Indenture Act of 1939; or
(6) to make any change that does not adversely affect the rights of any
holder of notes in any material respect.
The holders of a majority in aggregate principal amount of the notes then
outstanding may waive any past default under the indenture, except a default in
the payment of principal, or premium, if any, or interest.
Discharge or Termination
Defeasance of Certain Obligations
Pure and the guarantors may terminate certain of their obligations under the
indenture, including those described under the section "Certain Covenants," if
(1) Pure irrevocably deposits in trust with the trustee cash or non-
callable U.S. government obligations or a combination thereof sufficient to
pay principal of and interest on the notes to maturity, and to pay all other
sums payable by it under the indenture;
(2) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit;
(3) Pure shall have delivered to the trustee an opinion of counsel from
nationally recognized counsel acceptable to the trustee or a tax ruling to
the effect that the holders of the notes will not recognize income, gain or
loss for Federal income tax purposes as a result of Pure's exercise of its
option under such section and will be subject to Federal income tax on the
same amount and in the same manner and at the same times as would have been
the case if such option had not been exercised;
(4) Pure delivers to the trustee certain other documents called for by
the indenture, including an officers' certificate and opinions of counsel;
and
(5) certain other conditions are satisfied.
Pure's payment obligations and the guarantors' guarantees shall survive until
the notes are no longer outstanding.
38
Discharge
The indenture shall cease to be of further effect (subject to certain
exceptions relating to compensation and indemnity of the trustee and repayment
to Pure of excess money or securities) when:
(1) either (A) all outstanding notes theretofore authenticated and issued
(other than destroyed, lost or stolen notes that have been replaced or paid)
have been delivered to the trustee for cancellation; or (B) all outstanding
notes not theretofore delivered to the trustee for cancellation (x) have
become due and payable or (y) will become due and payable at their stated
maturity within one year and Pure has deposited or caused to be deposited
with the trustee as funds (immediately available to the holders in the case
of clause (x)) in trust for such purpose an amount which, together with
earnings thereon, will be sufficient to pay and discharge the entire
indebtedness on such notes for principal and interest to the date of such
deposit (in the case of notes which have become due and payable) or to the
stated maturity, as the case may be;
(2) Pure has paid all other sums payable by it under the indenture; and
(3) Pure has delivered to the trustee an officers' certificate stating
that all conditions precedent to satisfaction and discharge of the indenture
have been complied with, together with an opinion of counsel to the same
effect.
Book-Entry, Delivery and Form
The new notes will be issued in the form of one or more global notes. The
global notes will be deposited with, or on behalf of, The Depository Trust
Company or DTC and registered in the name of DTC or its nominee, who will be the
global notes holder. Except as set forth below, the global notes may be
transferred, in whole and not in part, only to DTC or another nominee of DTC.
Investors may hold their beneficial interests in the global notes directly
through DTC if they are participating organizations or "participants" in such
system or indirectly through organizations that are participants in such system.
DEPOSITORY PROCEDURES
DTC has advised us that DTC is a limited-purpose trust company that was
created to hold securities for its participants and to facilitate the clearance
and settlement of transactions in such securities between participants through
electronic book-entry changes in accounts of its participants. The participants
include securities brokers and dealers (including the initial purchasers), banks
and trust companies, clearing corporations and certain other organizations.
Access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies, which we refer to as "indirect
participants," that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants may
beneficially own securities held by or on behalf of DTC only through the
participants or the indirect participants.
We expect that pursuant to procedures established by DTC:
. upon deposit of the global notes, DTC will credit the accounts of
participants designated by the exchange agent with portions of the
principal amount of the global notes; and
. ownership of the new notes evidenced by the global notes will be shown
on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interests of the
participants), the participants and the indirect participants.
So long as the global notes holder is the registered owner of any new notes,
the global notes holder will be considered the sole holder under the indenture
of any new notes evidenced by the global notes. Beneficial owners of new notes
evidenced by the global notes will not be considered the owners or holders
thereof under the indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the trustee thereunder.
Neither Pure nor the trustee will have any responsibility or liability for any
aspect of the records of DTC or for maintaining, supervising or reviewing any
records of DTC relating to the new notes.
39
Payments in respect of the principal of, premium, if any, interest and
additional interest, if any, on any new notes registered in the name of the
global notes holder on the applicable record date will be payable by the trustee
to or at the direction of the global notes holder in its capacity as the
registered holder under the indenture. Under the terms of the indenture, Pure
and the trustee may treat the persons in whose names new notes, including the
global notes, are registered as the owners thereof for the purpose of receiving
such payments. Consequently, neither Pure nor the trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of new notes. We believe, however, that it is currently the policy of DTC to
immediately credit the accounts of the relevant participants with such payments,
in amounts proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of DTC. Payments by the
participants and the indirect participants to the beneficial owners of new notes
will be governed by standing instructions and customary practice and will be the
responsibility of the participants or the indirect participants.
Certificated Notes
The notes represented by the global notes are exchangeable for certificated
notes in definitive form of like tenor as such notes in denominations of 1,000
and integral multiples thereof if
(1) the DTC notifies Pure that it is unwilling or unable to continue
as depositary for the global notes or if at any time the DTC ceases to be a
clearing agency registered under the Securities Exchange Act of 1934 and a
successor depositary is not appointed by Pure within 90 days;
(2) Pure in its discretion at any time determines not to have all of
the notes represented by the global notes; or
(3) an Event of Default has occurred and is continuing and the DTC so
requests.
Any note that is exchangeable pursuant to the preceding sentence is
exchangeable for certified notes issuable in authorized denominations and
registered in such names as the DTC shall direct. Subject to the foregoing, the
global notes are not exchangeable, except for global notes of the same aggregate
denomination to be registered in the name of the DTC or its nominee.
Neither Pure nor the trustee shall be liable for any delay by the DTC or
any participant in identifying the beneficial owners of the related notes and
each such person may conclusively rely on, and shall be protected in relying on,
instructions from the DTC for all purposes (including with respect to the
registration and delivery, and the respective principal amounts, of the notes to
be issued).
Same-Day Payment
The indenture requires that payments in respect of notes (including
principal, premium and interest) be made 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 such holder's registered
address.
Governing Law
The indenture is, and the notes will be, governed by the laws of the State
of New York.
The Trustee
First Union National Bank is the trustee under the indenture. Its address
is First Union National Bank, Corporate Trust Group, 5847 San Felipe, Suite
1050, Houston, Texas 77057. Pure has also appointed the trustee as the initial
registrar and as initial paying agent under the indenture.
The indenture contains certain limitations on the right of the trustee,
should it become a creditor of Pure, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of any such claim
as security or otherwise. The trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act of 1939, as amended), it must eliminate such conflict or
resign.
40
The indenture provides that in case an Event of Default shall occur (and be
continuing), the trustee will be required to use the degree of care and skill of
a prudent man in the conduct of his own affairs. The trustee will be under no
obligation to exercise any of its powers under the indenture at the request of
any of the holders of the notes, unless such holders shall have offered the
trustee indemnity reasonably satisfactory to it.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition of
the notes by holders thereof, and the exchange of the notes by such holder for
Exchange Notes, but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
regulations, rulings and judicial decisions as of the date hereof. These
authorities may be changed, possibly retroactively, so as to result in United
States federal income tax consequences different from those set forth below. We
have not sought any ruling from the Internal Revenue Service (the "IRS") or an
opinion of counsel with respect to the statements made and the conclusions
reached in the following summary, and there can be no assurance that the IRS
will agree with such statements and conclusions.
This summary assumes that the notes are held as capital assets and holders
are initial purchasers of the notes who purchased the notes at their initial
offering price. This summary does not address the tax considerations arising
under the laws of any foreign, state or local jurisdiction. In addition, this
discussion does not address tax considerations applicable to a holder's
particular circumstances or to holders that may be subject to special tax rules,
including, without limitation:
. holders subject to the alternative minimum tax;
. banks;
. tax-exempt organizations;
. insurance companies;
. dealers in securities or commodities;
. traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings;
. financial institutions;
. holders whose "functional currency" is not the U.S. dollar;
. persons that will hold the notes as a position in a hedging
transaction, "straddle", "conversion transaction" or other risk
reduction transaction; or
. persons deemed to sell the notes under the constructive sale provisions
of the Code.
If a partnership holds notes, the tax treatment of a partner in the
partnership will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding our
notes, you should consult your tax advisor.
THIS SUMMARY OF CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. YOU ARE URGED TO CONSULT YOUR
TAX ADVISOR WITH RESPECT TO THE APPLICATION OF UNITED STATES FEDERAL INCOME TAX
LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER
THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY
STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX
TREATY.
41
Consequences to U.S. Holders
The following is a summary of the United States federal tax consequences
that will apply to you if you are a U.S. holder of the notes. Certain
consequences to "non-U.S. holders" of the notes are described under
"--Consequences to Non-U.S. Holders" below. "U.S. holder" means a beneficial
owner of a note that is:
. a citizen or resident of the United States;
. a corporation (or an entity that is treated as a corporation for U.S.
federal tax purposes) created or organized in or under the laws of the
United States or any political subdivision of the United States;
. an estate the income of which is subject to United States federal
income taxation regardless of its source; or
. a trust that (1) is subject to the supervision of a court within the
United States and that has one or more United States persons with
authority to control all substantial decisions of the trust or (2) has
a valid election in effect under applicable Treasury Regulations to be
treated as a United States person.
Exchange Offer
The new notes should not differ materially in kind or extent from the old
notes and, as a result, your exchange of old notes for new notes should not
constitute a taxable disposition of the old notes for United States federal
income tax purposes. As a result, you should not recognize taxable income, gain
or loss on such exchange, your holding period for the new notes should generally
include the holding period for the notes so exchanged, and your adjusted tax
basis in the new notes should generally be the same as your adjusted tax basis
in the notes so exchanged.
Payments of Interest
Stated interest on the notes will generally be taxable to you as ordinary
income at the time it is paid or accrued in accordance with your method of
accounting for tax purposes.
Amortizable Bond Premium
Generally, if you purchase a note for an amount that exceeds the sum of all
amounts payable on the note after the purchase date other than stated interest,
you will be considered to have purchased the note at a premium. You generally
may elect to amortize the premium over the remaining term (or an applicable call
date as discussed below) of the note on a yield to maturity basis. The
amortizable bond premium is treated as an offset to interest income on the note
for United States federal income tax purposes. If you elect to amortize bond
premium, you must reduce your tax basis in the note by the deductions allowable
for amortizable bond premium. An election to amortize bond premium is revocable
only with the consent of the IRS and applies to all obligations owned or
acquired by you on or after the first day of the taxable year to which the
election applies. We may redeem the notes at any time, as described in this
prospectus under "Description of the NotesCOptional Redemption." You will
calculate the amount of amortizable bond premium based on the amount payable at
the applicable call date, but only if use of the call date (in lieu of the
stated maturity date) results in a smaller amortizable bond premium for the
period ending on the call date. If a note purchased at a premium is redeemed
before its maturity and you have elected to deduct the bond premium, you may be
permitted to deduct any remaining unamortized bond premium as an ordinary loss
in the taxable year of the redemption.
If you do not elect to amortize bond premium, that premium will decrease
the gain or increase the loss you would otherwise recognize on disposition of
the note.
Market Discount
If you purchase a note for less than its principal amount, the difference
will be treated as a "market discount" for U.S. federal income tax purposes
unless the difference is a de minimis amount. Under the market discount rules,
you will be required to treat any principal payment on a note, or any gain on
its sale, exchange, retirement or other disposition, as ordinary income to the
extent of the accrued market discount that was not previously included in gross
income. If the note is
42
disposed of in a non-taxable transaction (other than a non-recognition
transaction described in Section 1276 of the Code), accrued market discount will
be taxable to you as ordinary income as if you had sold the note at its fair
market value. In addition, you may be required to defer, until the maturity of a
note or its earlier disposition (including a non-taxable transaction other than
a transaction described in Section 1276 of the Code), the deduction of all or a
portion of the interest expense in respect of any indebtedness incurred or
maintained to purchase or carry the note. Market discount will be considered to
accrue on a straight-line basis during the period from the date of acquisition
to the maturity date of the note unless you elect to accrue market discount on a
constant interest rate basis.
You may elect to include market discount in gross income as the discount
accrues, either on a straight-line basis or on a constant interest rate basis.
This current inclusion election, once made, applies to all market discount
obligations acquired by you on or after the first day of the first taxable year
to which the election applies, and may not be revoked without the consent of the
IRS. If you make such an election, the foregoing rules with respect to the
recognition of ordinary income on sales and other dispositions of such debt
instruments and on any partial principal payment with respect to the notes, and
the deferral of interest deductions on indebtedness incurred or maintained to
purchase or carry such debt instruments, would not apply.
Sale, Exchange or Disposition of Notes
Subject to the discussion of the exchange offer above, you will generally
recognize gain or loss upon the sale, exchange or other disposition of a note
equal to the difference between the amount realized upon the sale, exchange or
other disposition (less an amount attributable to any accrued stated interest
not previously included in income, which will be taxable as interest income) and
your adjusted tax basis in the note. Your adjusted tax basis in a note will
generally equal the amount you paid for the note, as adjusted by the bond
premium and market discount rules described above. Any gain or loss recognized
on a disposition of the note will be capital gain or loss. If you are an
individual and have held the note for more than one year, such capital gain will
generally be subject to tax at a maximum rate of 20%. Your ability to deduct
capital losses may be limited.
Information Reporting and Backup Withholding
In general, information reporting requirements will apply to certain
payments of principal and interest on the notes and the proceeds of sale of a
note unless you are an exempt recipient (such as a corporation). A 30.5% backup
withholding tax will apply to such payments if you fail to provide your taxpayer
identification number or certification of exempt status or have been notified by
the IRS that you are subject to backup withholding.
Any amounts withheld under the backup withholding rules will generally be
allowed as a refund or a credit against your United States federal income tax
liability provided the required information is furnished to the IRS.
Consequences to Non-U.S. Holders
The following is a summary of the United States federal tax consequences
that will apply to you if you are a non-U.S. holder of notes. The term "non-U.S.
holder" means a beneficial owner of a note that is not a U.S. holder.
Special rules may apply to certain non-U.S. holders such as "controlled
foreign corporations," "passive foreign investment companies" and "foreign
personal holding companies." Such entities should consult their own tax advisors
to determine the United States federal, state, local and other tax consequences
that may be relevant to them.
Payments of Interest
The 30% United States federal withholding tax will not apply to any payment
to you of principal or interest on a note provided that:
. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock that are entitled to
vote within the meaning of Section 871(h)(3) of the Code;
. you are not a controlled foreign corporation that is related to us
through stock ownership; and
43
. (a) you provide your name and address, and certify, under penalties of
perjury, that you are not a United States person (which certification
may be made on an IRS Form W-8BEN) or (b) a securities clearing
organization, bank, or other financial institution that holds
customers' securities in the ordinary course of its business holds the
note on your behalf and certifies, under penalties of perjury, that it
has received IRS Form W-8BEN from you or from another qualifying
financial institution intermediary, and provides a copy of the IRS Form
W-8BEN. If you hold your notes through certain foreign intermediaries
or certain foreign partnerships, such foreign intermediaries or
partnerships must also satisfy the certification requirements of
applicable Treasury Regulations.
If you cannot satisfy the requirements described above, payments of
interest will be subject to the 30% United States federal withholding tax,
unless you provide us with a properly executed (1) IRS Form W-8BEN claiming an
exemption from or reduction in withholding under the benefit of an applicable
tax treaty or (2) IRS Form W-8ECI stating that interest paid on the note is not
subject to withholding tax because it is effectively connected with your conduct
of a trade or business in the United States.
If you are engaged in a trade or business in the United States and interest
on a note is effectively connected with the conduct of that trade or business,
you will be required to pay United States federal income tax on that interest on
a net income basis (although you will be exempt from the 30% withholding tax
provided the certification requirement described above is met) in the same
manner as if you were a United States person as defined under the Code. In
addition, if you are a foreign corporation, you may be subject to a branch
profits tax equal to 30% (or lower applicable treaty rate) of your earnings and
profits for the taxable year, subject to adjustments, that are effectively
connected with your conduct of a trade or business in the United States. For
this purpose, interest that is effectively connected with your conduct of a
trade or business in the United States will be included in earnings and profits.
Sale, Exchange or Disposition of Notes
Any gain realized upon the sale, exchange or other disposition of a note
(except with respect to accrued and unpaid interest, which would be taxable as
described above) generally will not be subject to United States federal income
tax unless:
. that gain is effectively connected with your conduct of a trade or
business in the United States;
. you are an individual who is present in the United States for 183 days
or more in the taxable year of that disposition, and certain other
conditions are met; or
. you are subject to Code provisions applicable to certain United States
expatriates.
A holder described in the first bullet point above will be required to pay
United States federal income tax on the net gain derived from the sale, and if
such holder is a foreign corporation, it may also be required to pay a branch
profits tax at a 30% rate or a lower applicable treaty rate if so specified by
an applicable income tax treaty. A holder described in the second bullet point
above will be subject to a flat 30% United States federal income tax on the gain
derived from the sale, which may be offset by United States source capital
losses, even though the holder is not considered a resident of the United
States.
United States Federal Estate Tax
The United States federal estate tax will not apply to the notes owned by
you at the time of your death, provided that (1) you do not own actually or
constructively 10% or more of the total combined voting power of all classes of
our voting stock (within the meaning of the Code and the Treasury Regulations)
and (2) interest on the note would not have been, if received at the time of
your death, effectively connected with your conduct of a trade or business in
the United States.
Information Reporting and Backup Withholding
The amount of interest paid to you on the note and the amount of tax
withheld, if any, will generally be reported to you and the IRS. You will
generally not be subject to backup withholding with respect to payments that we
make to you provided that we do not have actual knowledge that you are a United
States person and you have made appropriate certifications as to your foreign
status, or you otherwise establish an exemption.
44
You will generally not be subject to backup withholding or information
reporting with respect to any payment of the proceeds of the sale of a note
effected outside the United States by a foreign office of a foreign "broker" (as
defined in applicable Treasury Regulations). However, if such a broker:
. derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States,
. is a controlled foreign corporation for United States federal income
tax purposes, or
. is a foreign partnership that, at any time during its taxable year, has
more than 50% of its income or capital interests owned by United States
persons or is engaged in the conduct of a United States trade or
business,
then you will be subject to information reporting, but not backup withholding
unless such broker has documentary evidence in its records that you are not a
United States person and certain other conditions are met, or you otherwise
establish an exemption. You will be subject to backup withholding and
information reporting with respect to any payment of the proceeds of a sale of a
note effected by the United States office of a broker unless you properly
certify under penalties of perjury as to your foreign status and certain other
conditions are met or you otherwise establish an exemption.
Any amounts witheld under the backup witholding rules will be allowed as a
refund or a credit against your United States federal income tax liability
provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account in exchange
for old notes 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 have agreed that, until , 200 , which is 90
days after the effective date of the registration statement, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
We will not receive any proceeds from any sale 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 commissions or concessions from any such broker-dealer 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.
Until , 200 , we 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 commissions
or concessions 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.
By its acceptance of the exchange offer, any broker-dealer that receives
exchange notes pursuant to the exchange offer agrees to notify us before using
this prospectus in connection with the sales or transfer of the new notes. The
broker-dealer further acknowledges and agrees that, upon receipt of notice from
us of the happening of any event which:
. makes any statement in this prospectus untrue in any material respect;
45
. requires the making of any changes in this prospectus to make the
statements in this prospectus not misleading; or
. may impose upon us disclosure obligations that may have a material
adverse effect on us,
which notice we agree to deliver promptly to the broker-dealer, the broker
dealer will suspend use of this prospectus until we have notified the broker
dealer that delivery of the prospectus may resume and have furnished copies of
any amendment or supplement to this prospectus to the broker-dealer.
LEGAL MATTERS
Thompson & Knight L.L.P., Dallas, Texas, will pass upon certain legal
matters relating to the issuance of the notes.
EXPERTS
The consolidated financial statements of Pure as of and for the year ended
December 31, 2000, have been incorporated by reference in this registration
statement in reliance upon the report of KPMG LLP, independent certified public
accountants, incorporated by reference herein, the report from Form 10-K having
been updated in Pure's current report on Form 8-K dated September 13, 2001, and
upon the authority of said firm as experts in accounting and auditing.
The financial statements of Pure (formerly "Union Oil's Permian Basin
business unit") as of December 31, 1999 and for the years ended December 31,
1999 and 1998, incorporated in this prospectus by reference to Pure's Current
Report on Form 8-K dated September 13, 2001, and the financial statements of
Pure for the same periods incorporated in this prospectus by reference to Pure's
Annual Report on Form 10-K for the year ended December 31, 2000 have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The statements of revenues and direct operating expenses of the oil and gas
properties we acquired from International Paper Company and its affiliates for
the years ended December 31, 2000, 1999 and 1998, have been incorporated by
reference in this registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, as stated in their report
incorporated by reference herein and given upon the authority of said firm as
experts in accounting and auditing.
The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from Hallwood Energy Corporation's
Annual Report on Form 10-K for the year ended December 31, 2000 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
ENGINEERS
Some of the estimates of Pure's oil and gas reserves included and
incorporated by reference in this document were based upon engineering
evaluations prepared by Netherland, Sewell & Associates, Inc., independent
petroleum consultants. Netherland evaluated properties representing
approximately 75% of Pure's total proved reserves for the year ended December
31, 2000 (which did not historically include International Paper or Hallwood
properties). These estimates are included or incorporated by reference in
reliance on the authority of such firm as experts in such matters.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy such material at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Our filings are also available to the public from the
SEC's web site at www.sec.gov.
46
Our common stock is quoted on the New York Stock Exchange. You may inspect
reports and other information concerning us at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The SEC's rules allow us to "incorporate by a reference" into this
prospectus the information we file with the SEC under the Securities Exchange
Act of 1934. This means that we are disclosing important information to you by
referring you to those filings. The information we incorporate by reference is
considered a part of this prospectus, and subsequent information that we file
with the SEC will automatically update and supersede this information. Any
information which is subsequently modified or superseded will not constitute a
part of this offering memorandum, except as so modified or superseded. We
incorporate by reference the documents listed below and any future filing we
make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this prospectus.
We incorporate by reference in this prospectus the following documents
filed by us with the SEC:
. our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2001;
. our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2001;
. our Annual Report on Form 10-K for the year ended December 31, 2000;
. our Current Reports on Form 8-K filed with the SEC on the following
dates:
- February 15, 2001, as amended by an amendment thereto filed on
April 16, 2001; and
- May 23, 2001, as amended by an amendment thereto filed on June 1,
2001; and
- September 14, 2001.
We also incorporate by reference in this offering circular the following
items filed by Hallwood Energy Corporation with the SEC:
. Parts I and II of Hallwood's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, including Consolidated Financial
Statements of Hallwood as of December 31, 2000 and 1999 and for each of
the years in the three-year period ended December 31, 2000 (together
with the related notes and report of independent auditors); and
. Hallwood's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001, including Hallwood's unaudited consolidated financial
statements as of March 31, 2001 and for the three months ended March
31, 2001 and 2000 (together with the related notes).
Upon written or oral request, we will provide you with a copy of any of the
incorporated documents without charge (not including exhibits to the documents
unless the exhibits are specifically incorporated by reference into the
documents). You may submit such a request for this material at the following
address and telephone number:
Pure Resources, Inc.
Attention: Vice President-Administration and Corporate Secretary
500 West Illinois
Midland, Texas 79701
(915) 498-8600
47
GLOSSARY OF OIL AND GAS TERMS
"Bbl" or "barrel" means 42 U.S. gallons.
"Bcf" means billion cubic feet of natural gas.
"Bcfe" means billion equivalent cubic feet of natural gas, calculated by
converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.
"BOE" means equivalent barrels of oil, calculated at a ratio of 6 Mcf to 1
Bbl of oil.
"Completion" means the installation of permanent equipment for the production
of oil or gas.
"Gross," when used with respect to acres or wells, refers to the total acres
or wells in which Pure has a working interest.
"Horizontal drilling" means a drilling technique that permits the operator to
contact and intersect a larger portion of the producing horizon than
conventional vertical drilling techniques and can result in both increased
production rates and greater ultimate recoveries of hydrocarbons.
"MBbls" means thousand barrels.
"Mcf" means thousand cubic feet.
"Mcfe" means thousand equivalent cubit feet of natural gas, calculated by
converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.
"MMBbls" means million of barrels.
"MMBOE" means millions of equivalent barrels of oil, calculated at a ratio of
6 Mcf to 1 Bbl of oil.
"MMcf" means million cubic feet of natural gas.
"MMcfe" means million cubic feet equivalent, determined using the ratio of 6
Mcf of natural gas to 1 Bbl of oil.
"Net," when used with respect to acres or wells, refers to gross acres of
wells multiplied, in each case, by the percentage working interest owned by
Pure.
"Oil" means crude oil or condensate.
"Operator" means the individual or company responsible for the exploration,
development, and production of an oil or gas well or lease.
"Proved developed reserves" means reserves that can be expected to be
recovered through existiong wells with existing equipment and operating methods
recovered through existing wells with existing equipment and operating methods.
Additional oil and gas expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing the natural
forces and mechanisms of primary recovery will be included as "proved developed
reserves" only after testing by a pilot project or after the operation of an
installed program has confirmed through production response that increased
recovery will be achieved.
"Proved reserves" means the estimated quantities of crude oil, natural gas,
and natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions, i.e., prices and costs as of
the date the estimate is made. Prices include consideration of changes in
existing prices provided only by contractual arrangements, but not on
escalations based upon future conditions.
48
i. Reservoirs are considered proved if economic producibility is
supported by either actual production or conclusive formation test. The area of
a reservoir considered proved includes (A) that portion delineated by drilling
and defined by gas-oil and/or oil-water contacts, if any; and (B) the
immediately adjoining portions not yet drilled, but which can be reasonably
judged as economically productive on the basis of available geological and
engineering data. In the absence of information on fluid contacts, the lowest
known structural occurrence of hydrocarbons controls the lower proved limit of
the reservoir.
ii. Reserves which can be produced economically through application of
improved recovery techniques (such as fluid injection) are included in the
"proved" classification when successful testing by a pilot project, or the
operation of an installed program in the reservoir, provides support for the
engineering analysis on which the project or program was based.
iii. Estimates of proved reserves do not include the following: (A) oil
that may become available from known reservoirs but is classified separately as
"indicated additional reserves"; (B) crude oil, natural gas, and natural gas
liquids, the recovery of which is subject to reasonable doubt because of
uncertainty as to geology, reservoir characteristics, or economic factors; (C)
crude oil, natural gas, and natural gas liquids that may occur in undrilled
prospects; and (D) crude oil, natural gas, and natural gas liquids that may be
recovered from oil shales, coal, gilsonite and other such sources.
"Recompletion" means the completion for production of an existing well bore
in another formation from that in which the well has been previously completed.
"Reserves" means proved reserves.
"Royalty" means an interest in an oil and gas lease that gives the owner of
the interest the right to receive a portion of the production from the leased
acreage (or of the proceeds of the sale thereof), but generally does not require
the owner to pay any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowner's royalties, which are
reserved by the owner of the leased acreage at the time the lease is granted, or
overriding royalties, which are usually reserved by an owner of the leasehold in
connection with a transfer to a subsequent owner.
"3-D seismic" means seismic data that are acquired and processed to yield a
three-dimensional picture of the subsurface.
"SEC 10% present value" means the pretax present value of estimated future
revenues to be generated from the production of proved reserves calculated in
accordance with SEC guidelines, net of estimated production and future
development costs, using prices and costs as of the date of estimation without
future escalation, without giving effect to non-property related expenses such
as general and administrative expenses, debt service and depreciation, depletion
and amortization, and discounted using an annual discount rate of 10%.
"Standardized measure of discounted future net cash flows" is the SEC 10%
present value defined above, less applicable income taxes.
"Tertiary recovery" means enhanced recovery methods for the production of
oil or gas. Enhanced recovery of crude oil requires a means for displacing oil
from the reservoir rock, modifying the properties of the fluids in the reservoir
and/or the reservoir rock to cause movement of oil in an efficient manner, and
providing the energy and drive mechanism to force its flow to a production well.
Pure injects chemicals or energy as required for displacement and for the
control of flow rate and flow pattern in the reservoir, and a fluid drive is
provided to force the oil toward a production well.
"Working interest" means an interest in an oil and gas lease that gives the
owner of the interest the right to drill for and produce oil and gas on the
leased acreage and requires the owner to pay a share of the costs of drilling
and production operations. The share of production to which a working interest
owner is entitled will always be smaller than the share of costs that the
working interest owner is required to bear, with the balance of the production
accruing to the owners of royalties. For example, the owner of a 100% working
interest in a lease burdened only by a landowner's royalty of 12.5% would be
required to pay 100% of the costs of a well but would be entitled to retain
87.5% of the production.
49
"Workover" means operations on a producing well to restore or increase
production.
50
================================================================================
Offer to Exchange all of Our Outstanding
7 1/8% Senior Notes due 2011 for
7 1/8% Senior Notes due 2011, Which Have Been Registered
Under the Securities Act of 1933
of
[PURE RESOURCES, INC. LOGO]
Pure Resources, Inc.
__________________________
PROSPECTUS
__________________________
__________________, 2001
================================================================================
No person has been authorized to give any information or make any
representations in connection with this offering other than those contained in
this prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by Pure.
Neither the delivery of this prospectus nor any sale hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of Pure since the date of this prospectus or that the information
contained in this prospectus is correct as of any time subsequent to its date.
This prospectus does not constitute an offer to sell nor or the solicitation of
an offer to buy such securities in any circumstances in which such offer or
solicitation is unlawful.
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Set forth below is a description of certain provisions of the articles of
incorporation and bylaws of us and the corporate guarantors and the partnerships
agreement or operating agreement of our non-corporate guarantors. These
descriptions are intended as a summary only and are qualified in their entirety
to the appropriate articles of incorporation, bylaws, partnership agreements,
operating agreements and state law.
(a) Pure.
Section 102(b) of the Delaware General Corporation Law ("DGCL") allows a
corporation to include in its certificate of incorporation a provision to
eliminate or limit the personal liability of a director to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except in cases where the director breached his or her duty of loyalty to the
registrant or its stockholders, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of a law, willfully or negligently
authorized the unlawful payment of a dividend or approved an illegal stock
repurchase (as provided in Section 174 of the DGCL) or obtained an improper
personal benefit. Our certificate of incorporation contains provisions that
eliminate directors' personal liability, in certain circumstances, as set forth
below.
Our certificate of incorporation provides that a director will not be
personally liable to the registrant or its stockholders for monetary damages for
breach of duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the registrant or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit.
Our certificate of incorporation provides that each person who was or is made
a party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of Pure, or serves, in any capacity, any corporation, partnership or other
entity in which Pure has a partnership or other interest, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by Pure to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
case of any such amendment, only to the extent that such amendment permits Pure
to provide broader indemnification rights than said law permitted Pure to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators.
We also maintain officers' and directors' liability insurance for the benefit
of our officers and directors and the officers and directors of the subsidiary
guarantors.
(b) The Guarantors.
The certificate of incorporation of each of Titan Exploration, Inc., Pure
Resources I, Inc., and HEC Petroleum, Inc. provides, consistent with the
provisions of the Delaware General Corporation Law, that no director of such
respective corporation will be personally liable to the respective corporation
or any of their respective stockholders for monetary damages arising from the
director's breach of fiduciary duty as a director. This does not apply, however,
with respect to any action for unlawful payments of dividends, stock purchases
or redemptions, nor does it apply if the director (i) has breached his duty of
loyalty to the respective corporation and its respective stockholders; (ii) does
not act or, in failing to act, has not acted in good faith; (iii) has acted in a
manner involving intentional misconduct or a knowing violation of law or, in
failing to act, has acted in a manner involving intentional misconduct or a
knowing violation of law; or (iv) has derived an improper personal benefit. The
provisions of each certificate of incorporation eliminating liability of
directors for monetary damages
II-1
do not affect the standard of conduct to which directors must adhere, nor do
such provisions affect the availability of equitable relief. In addition, such
limitations on personal liability do not affect the availability of monetary
damages under claims based on federal law.
The bylaws of Titan Exploration, Inc., Pure Resources I, Inc. and HEC
Petroleum, Inc. each provide for indemnification of the officers and directors
of each of such respective corporation to the fullest extent permitted by the
Delaware General Corporation Law.
The articles of incorporation of Pure Resources Holdings, Inc. provide,
consistent with the provisions of the Nevada Revised Statutes, that no director
of the Pure Resources Holdings, Inc. will be personally liable to Pure Resources
Holdings, Inc. or any of its stockholders for monetary damages arising from the
director's breach of fiduciary duty as a director. This does not apply, however,
with respect to any action for unlawful payments of dividends, stock purchases
or redemptions, nor does it apply if the director has acted in a manner
involving intentional misconduct, fraud, or a knowing violation of law or, in
failing to act, has acted in a manner involving intentional misconduct, fraud,
or a knowing violation of law. The provisions of the articles of incorporation
eliminating liability of directors for monetary damages do not affect the
standard of conduct to which directors must adhere, nor do such provisions
affect the availability of equitable relief. In addition, such limitations on
personal liability do not affect the availability of monetary damages under
claims based on federal law.
The bylaws of Pure Resources Holdings, Inc. provide for indemnification of
the officers and directors of the Pure Resources Holdings, Inc. to the fullest
extent permitted by law.
The limited partnership agreement of Pure Resources, L.P. provides that, to
the fullest extent allowed by the Texas Revised Limited Partnership Act (the
"TRLPA"), Pure Resources, L.P. shall indemnify its general partner and officers
for acts or omissions performed or omitted in good faith, unless such acts or
omissions were the result of gross negligence, willful misconduct, a breach of a
fiduciary duty, or a breach of the express terms of the limited partnership
agreement.
The limited partnership agreement of HEP Partners, L.P. provides that, to the
fullest extent permitted by law, HEP Partners, L.P. shall indemnify and hold
harmless its general partner, directors, officers, employees and agents from and
against any and all losses, claims, damages, liabilities, joint and several,
expenses, judgments, fines, settlements and other amounts arising from any and
all claims, costs, demands, actions , suits or proceedings, civil, criminal,
administrative or investigative, in which any of them may be involved, or
threatened to be involved, as a party or otherwise by reason of their status as
the general partner or a director, officer, employee or agent of its general
partner in its management of the affairs of HEP Partners, L.P., or, at the
request of HEP Partners, L.P., as a general partner, director, officer, employee
or agent of another entity or enterprise, or which relate to the HEP Partners,
L.P., its property, business or affairs if (i) such party acted in good faith
and in a manner reasonably believed to be in, or not opposed to, the best
interests of HEP Partners, L.P., and, with respect to any criminal proceeding,
had no reasonable cause to believe its conduct was unlawful. The
indemnification provisions do not permit indemnification if the indemnified
party's conduct constituted gross negligence or willful or wanton misconduct.
The limited liability company agreement for each of Pure GP, LLC and HEP Pure
Acquisition, LLC (the "Delaware Limited Liability Company Guarantors") provides,
to the fullest extent allowed by the Delaware Limited Liability Company Act,
that the company shall indemnify and hold harmless its respective managers from
and against any and all claims and demands whatsoever, including, without
limitation, claims and demands for any debt, liability, contract, or other
obligation of the respective Delaware Limited Liability Company Guarantors.
The limited liability company agreement for each of the Delaware Limited
Liability Company Guarantors provides, to the fullest extent permitted by law,
that the company shall indemnify and hold harmless the officers of the company
from and against any and all claims and demands whatsoever, arising out of or in
any way relating to their positions as officers or the performance of their
duties, except to the extent such claim or demand results from an officer's
gross negligence or willful misconduct.
The articles of organization of Pure Resources Holdings, LLC provides, to the
fullest extent allowed by Nevada law, that Pure Resources Holdings, LLC shall
indemnify and hold harmless its respective managers and officers in any action,
suit, or proceeding by reason of the fact the he is or was a manager or officer
of the company.
II-2
The limited liability company agreement of Pure Resources Holdings, LLC
provides, to the fullest extent allowed by law, that the company shall indemnify
and hold harmless its managers from and against any and all claims and demands
whatsoever, including, without limitation, claims and demands for any debt,
liability, contract, or other obligation of the company.
The limited liability company agreement of Pure Resources Holdings, LLC
provides, to the fullest extent permitted by law, that the company shall
indemnify and hold harmless the officers of the company from and against any and
all claims and demands whatsoever, arising out of or in any way relating to
their positions as officers or the performance of their duties, except to the
extent such claim or demand results from an officer's gross negligence or
willful misconduct.
The operating agreement of HEC La Plata, LLC provides, to the fullest extent
permitted by law, the company shall indemnify the managers for and hold them
harmless from any liability, loss, damage, or expense incurred in connection
with the ordinary and proper conduct of the company's business and the
preservation of its business and property, or by reason of the fact that such
person is or was a manager, provided the manager acted in good faith and in a
manner consistent with the operating agreement. The operating agreement of HEC
La Plata, LLC provides, to the fullest extent permitted by law, that the company
shall indemnify its employees and other agents who are not managers, provided
that such indemnification in any given situation is approved by the managers.
The limited liability company agreement of La Plata Associates, LLC provides,
to the fullest extent permitted by law, that the company shall indemnify and
hold harmless each member, manager, officer, employee, and agent from any and
all claims, costs, demands, actions, suits, or proceedings by reason of its
status as (i) a member of the company; (ii) the manager of the company; (iii) an
officer, employee, or agent of the company.
II-3
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits are filed as part of this Registration Statement:
Number Exhibit
------ -------
4.1 Indenture, dated as of June 8, 2001, among Pure Resources, Inc., the
guarantors named therein and and First Union National Bank, as
trustee, relating to $350,000,000 aggregate principal amount of Series
A and Series B 7 1/8% Notes Due June 15, 2011 (filed as Exhibit 10.9
to Pure's Quarterly Report on Form 10-Q for the quarter ended June 30,
2001, and incorporated herein by reference).
4.2 Form of 7 1/8% Series B Note due June 15, 2011 (included in Exhibit
4.1).
4.3 Registration Rights Agreement, dated June 5, 2001, by and among Pure
Resources, Inc., the guarantors named therein and Credit Suisse First
Boston Corporation, First Union Securities, BNP Paribas Securities
Corp., Fleet Securities, Inc., Credit Lyonnais Securities (USA) Inc.,
BNY Capital Markets, Inc., and Wells Fargo Brokerage, LLC (filed as
Exhibit 10.10 to Pure's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001, and incorporated herein by reference).
4.4 Purchase Agreement dated June 5, 2001, by and among Pure Resources,
Inc., the guarantors named therein, Credit Suisse First Boston
Corporation, First Union Securities, BNP Paribas Securities Corp.,
Fleet Securities, Inc., Credit Lyonnais Securities (USA) Inc., BNY
Capital Markets, Inc., and Wells Fargo Brokerage, LLC (filed as
Exhibit 10.12 to Pure's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001, and incorporated herein by reference).
5.1* Opinion of Thompson & Knight L.L.P.
12.1* Statement re Computation of Ratios
23.1* Consent of KPMG LLP, independent auditors.
23.2* Consent of PricewaterhouseCoopers LLP, independent auditors.
23.3* Consent of Deloitte & Touche LLP, independent auditors.
23.4* Consent of Netherland, Sewell & Associates, Inc., independent
petroleum consultants.
23.5* Consent of Thompson & Knight L.L.P. (contained in its opinion filed
as Exhibit 5.1).
24.1* Power of attorney of Pure and each subsidiary guarantor (included on
the signature page of this Registration Statement).
25.1* Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of 1939 of First Union National Bank.
99.1* Form of Letter of Transmittal.
99.2* Form of Notices of Guaranteed Delivery.
99.3* Form of Letter to Beneficial Holders and Instructions to Registered
Holder.
99.4* Form of Letter to Registered Holders and DTC Participants.
99.5* Form of Guidelines for Certification.
__________________________
* Filed herewith.
II-4
Item 22. Undertakings.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of a prospectus
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offering therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referred to in Item 20 of this
Registration Statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question as to whether such indemnification by it is against public policy
as expressed in the act, and will be governed by the final adjudication of such
issue.
(b) The undersigned registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrants hereby undertake to supply by means of a
posteffective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of each
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(e) The undersigned registrants hereby undertake as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain
II-5
the information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(f) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (e) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
registrants has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Midland,
State of Texas (or, in the case of Pure Resources Holdings, Inc. and Pure
Resources Holdings, LLC, in Oxnard, California by Mr. Hightower and in Las
Vegas, Nevada by Mr. Klumpp, on the 19th day of September, 2001.
PURE RESOURCES, INC.
By: /s/ William K. White
-----------------------------------------------
William K. White
Vice President, Finance and Chief Financial
Officer
TITAN EXPLORATION, INC.
PURE RESOURCES I, INC.
HEC PETROLEUM, INC.
PURE GP, LLC
HEP PURE ACQUISITION, LLC
By: /s/ William K. White
-------------------------------------------
William K White
Vice President
PURE RESOURCES HOLDINGS, INC.
PURE RESOURCES HOLDINGS, LLC
By: /s/ Richard Klumpp
-------------------------------------------
Richard Klumpp
Vice President
II-6
PURE RESOURCES, L.P.
PK I, L.P.
PK II, L.P.
PK III, L.P.
PK IV, L.P.
By: PURE RESOURCES I, INC.,
its general partner
By: /s/ William K. White
------------------------------------------
William K. White
Vice President
HEP PURE, LP
By: PURE GP, LLC., its general partner
By: /s/ William K. White
------------------------------------------
William K. White
Vice President
HEP PARTNERS, L.P.
By: HEP PURE ACQUISITION, LLC,
its general partner
By: /s/ William K. White
------------------------------------------
William K. White
Vice President
LA PLATA ASSOCIATES, LLC
HEC LA PLATA, LLC
By: HEC PETROLEUM, INC., its general partner
By: /s/ William K. White
------------------------------------------
William K. White
Vice President
II-7
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Jack Hightower and William K. White, and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and for his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments
and any registration statement pursuant to Rule 462(b)) to this registration
statement on Form S-4 and to file the same with all exhibits thereto and any
other documents in connection therewith, with the Securities and Exchange
Commission under the Securities Act granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing necessary or desirable to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities indicated
and on September 17, 2001.
Signature Title Date
--------- ----- ----
PURE RESOURCES, INC.
/s/ Jack Hightower Chairman of the Board, September 19, 2001
----------------------------------
Jack Hightower President and Chief Executive Officer
(principal executive officer)
/s/ William K. White Vice President, Finance and September 19, 2001
----------------------------------
William K. White Chief Financial Officer (principal
financial and accounting officer)
/s/ George G. Staley Executive Vice President - September 7, 2001
----------------------------------
George G. Staley Exploration and Director
/s/ Darrell Chessum Director September 7, 2001
----------------------------------
Darrell Chessum
/s/ Keith A. Covington Director September 19, 2001
----------------------------------
Keith A. Covington
/s/ Graydon H. Laughbaum, Jr. Director September 19, 2001
----------------------------------
Graydon H. Laughbaum, Jr.
II-8
/s/ Timothy H. Ling Director September 19, 2001
----------------------------------
Timothy H. Ling
/s/ H D Maxwell Director September 19, 2001
----------------------------------
H D Maxwell
/s/ Herbert C. Williamson, III Director September 9, 2001
----------------------------------
Herbert C. Williamson, III
TITAN EXPLORATION, INC.
/s/ Jack Hightower President and Director September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ Darrell Chessum Director September 19, 2001
----------------------------------
Darrell Chessum
/s/ William K. White Vice President September 19, 2001
---------------------------------- (principal financial
William K. White and accounting officer)
PURE RESOURCES HOLDINGS, INC.
/s/ Jack Hightower President and Director September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ Richard Klumpp Vice President, Secretary, September 19, 2001
---------------------------------- Treasurer and Director
Richard Klumpp (principal financial
and accounting officer)
II-9
PURE RESOURCES I, INC. (which serves as general partner for the following
entities which have no officers:
Pure Resources, L.P., PK I, L.P., PK II, L.P., PK III, L.P. and PK IV,
L.P.)
/s/ Jack Hightower President and Director September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ William K. White Vice President September 19, 2001
---------------------------------- (principal financial
William K. White and accounting officer)
PURE GP, LLC (which serves as general partner for the following entity
which has no officers: HEP Pure, L.P.)
/s/ Jack Hightower President and Manager September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ William K. White Vice President September 19, 2001
---------------------------------- (principal financial
William K. White and accounting officer)
PURE RESOURCES HOLDINGS, LLC
/s/ Jack Hightower President and Manager September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ Richard Klumpp Vice President, Secretary, September 19, 2001
---------------------------------- Treasurer and Manager
Richard Klumpp (principal financial
and accounting officer)
HEC PETROLEUM, INC. (which serves as manager for the following entities
which have no officers: La Plata Associates, LLC and HEC La Plata, LLC)
/s/ Jack Hightower President and Director September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ William K. White Vice President September 19, 2001
---------------------------------- (principal financial
William K. White and accounting officer)
II-10
HEC ACQUISITION, LLC (which serves as general partner for the following
entity which has no officers: HEP Partners, L.P.)
/s/ Jack Hightower President and Manager September 19, 2001
---------------------------------- (principal executive officer)
Jack Hightower
/s/ William K. White Vice President September 19, 2001
---------------------------------- (principal financial
William K. White and accounting officer)
II-11
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
4.1 Indenture, dated as of June 8, 2001, among Pure Resources, Inc.,
the guarantors named therein and and First Union National Bank, as
trustee, relating to $350,000,000 aggregate principal amount of
Series A and Series B 7 1/8% Notes Due June 15, 2011 (filed as
Exhibit 10.9 to Pure's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, and incorporated herein by reference).
4.2 Form of 7 1/8% Series B Note due June 15, 2011 (included in Exhibit
4.1).
4.3 Registration Rights Agreement, dated June 5, 2001, by and among
Pure Resources, Inc., the guarantors named therein and Credit
Suisse First Boston Corporation, First Union Securities, BNP
Paribas Securities Corp., Fleet Securities, Inc., Credit Lyonnais
Securities (USA) Inc., BNY Capital Markets, Inc., and Wells Fargo
Brokerage, LLC (filed as Exhibit 10.10 to Pure's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2001, and incorporated
herein by reference).
4.4 Purchase Agreement dated June 5, 2001, by and among Pure Resources,
Inc., the guarantors named therein, Credit Suisse First Boston
Corporation, First Union Securities, BNP Paribas Securities Corp.,
Fleet Securities, Inc., Credit Lyonnais Securities (USA) Inc., BNY
Capital Markets, Inc., and Wells Fargo Brokerage, LLC (filed as
Exhibit 10.12 to Pure's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, and incorporated herein by reference).
5.1* Opinion of Thompson & Knight L.L.P.
12.1* Statement re Computation of Ratios
23.1* Consent of KPMG LLP, independent auditors.
23.2* Consent of PricewaterhouseCoopers LLP, independent auditors.
23.3* Consent of Deloitte & Touche LLP, independent auditors.
23.4* Consent of Netherland, Sewell & Associates, Inc., independent
petroleum consultants.
23.5* Consent of Thompson & Knight L.L.P. (contained in its opinion filed
as Exhibit 5.1).
24.1* Power of attorney of Pure and each subsidiary guarantor (included
on the signature page of this Registration Statement).
25.1* Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of 1939 of First Union National Bank.
99.1* Form of Letter of Transmittal.
99.2* Form of Notices of Guaranteed Delivery.
99.3* Form of Letter to Beneficial Holders and Instructions to Registered
Holder.
99.4* Form of Letter to Registered Holders and DTC Participants.
99.5* Form of Guidelines for Certification.
__________________________
* Filed herewith.
EX-5.1
3
dex51.txt
OPINION OF THOMPSON & KNIGHT L.L.P.
Exhibit 5.1
-----------
[Opinion of Thompson & Knight L.L.P.]
September 19, 2001
Pure Resources, Inc.
500 West Illinois Avenue
Midland, Texas 79701
Re: $350,000,000 Aggregate Principal Amount of
7 1/8% Senior Notes Due 2011 of Pure Resources, Inc.
Ladies and Gentlemen:
We have acted as counsel to Pure Resources, Inc., a Delaware corporation
(the "Company") and the Guarantors, as defined below, in connection with the
registration of $350,000,000 aggregate principal amount of Series B 7 1/8%
Senior Notes due 2011 (the "New Notes") by the Company on Form S-4 filed with
the Securities and Exchange Commission (the "Commission") on September 14, 2001
(the "Registration Statement"). The New Notes will be issued pursuant to an
indenture (the "Indenture"), dated June 8, 2001, among the Company, First Union
National Bank, as trustee (the "Trustee") and Titan Exploration, Inc., a
Delaware corporation, Pure Resources Holdings, Inc., a Nevada corporation, Pure
Resources, L.P., a Texas limited partnership, Pure Resources I, Inc., a Delaware
corporation, HEC Petroleum, Inc., a Delaware corporation, PK I, L.P., PK II,
L.P., PK III, L.P., PK IV, L.P., HEP Pure, LP, and HEP Partners, L.P., each of
which is a Delaware limited partnership, Pure GP, LLC and HEP Pure Acquisition,
LLC, each of which is a Delaware limited liability company, Pure Resources
Holdings, LLC, a Nevada limited liability company, and La Plata Associates, LLC
and HEC La Plata, LLC, each of which is a Colorado limited liability company
(collectively, the "Guarantors"). The New Notes will be issued in exchange for
the Company's outstanding Series A 7 1/8% Senior Notes due 2011 (the "Old
Notes") on the terms set forth in the prospectus contained in the Registration
Statement and the Letter of Transmittal filed as an exhibit thereto (the
"Exchange Offer"). References herein to the "Guarantees" refer to (a) the
provisions of Article 9 of the Indenture and (b) the Notation attached to the
New Notes, under which the Guarantors have guaranteed the payment of the New
Notes.
For purposes of this opinion, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction, of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate for purposes of this opinion. In our examination, we have assumed
the genuineness of all signatures, the authenticity of all documents submitted
to us as originals, and the conformity to authentic original documents of all
documents submitted to us as copies. We have obtained and relied upon such
certificates and assurances from public officials and we have deemed necessary.
Subject to the foregoing and the other matters set forth herein, it is our
opinion that, as of the date hereof:
1. The New Notes have been duly authorized by all necessary action of the
Company, and when duly executed, issued, authenticated and delivered in
accordance with the terms of the Exchange Offer and the Indenture, will be
legally valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms.
2. The Guarantees have been duly authorized by all necessary action of
the applicable Guarantors, and when duly executed and delivered and when the New
Notes are duly executed, issued, authenticated and delivered in accordance with
the terms of the Exchange Offer and the Indenture, will be legally valid and
binding obligations of the applicable Guarantors, enforceable against the
applicable Guarantors in accordance with their terms.
This opinion is limited by, subject to and based on the following:
(a) The opinion relating to the enforceability of the New Notes and the
Guarantees is subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(b) We express no opinion as to the enforceability of any provisions of
the New Notes or the Indenture
providing for (i) the waiver of a right of immunity, stay, extension,
or usury laws, or (ii) any party's consent to jurisdiction or venue.
(c) This opinion is limited in all respects to the laws of the State of
Texas, the General Corporation Law of the State of Delaware, the
General Corporation Law of the State of Nevada, Chapter 86 of the
Nevada Revised Statutes (which relates to limited liability
companies), the Colorado Limited Liability Company Act, and the
federal laws of the United States, and, only as to the enforceability
of the New Notes and the Guarantees, the laws of the State of New
York.
To the extent that the obligations of the Company and the Guarantors under
the New Notes and the Guarantees may be dependent upon such matters, we have
assumed for purposes of this opinion that (i) the Trustee is validly existing
and in good standing under the laws of its jurisdiction of organization; (ii)
the Trustee has been duly qualified to engage in the activities contemplated by
the Indenture; (iii) the Trustee is in compliance generally, and with respect to
acting as Trustee under the Indenture, with all applicable laws and regulations;
(iv) the Indenture has been duly authorized, executed and delivered by the
Trustee and constitutes the legally valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms; and (v) the
Trustee has the requisite organizational and other power and authority to
perform its obligations under the Indenture.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm's name under the heading
"Legal Matters" in the prospectus contained therein.
Very truly yours,
/s/ Thompson & Knight L.L.P.
--------------------------------------
EX-12.1
4
dex121.txt
COMPUTATION OF RATIOS
Exhibit 12.1
------------
Pure Resources, Inc.
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Historical
------------------------------------------------------------------------
Year ended December 31, Six Months ended
June 30,
----------------------------------------------- -------------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------ ------- -------- ------- --------
(in thousands)
Pretax earnings $48,367 $33,353 $6,822 $26,473 $117,835 $47,226 $ 89,562
Adjustments:
Add fixed charges and preferred stock dividends:
Interest:
Expensed -- -- -- -- 4,396 661 11,036
Capitalized -- -- -- -- -- -- --
Rental expense attributable to interest 167 162 168 189 367 40 233
Preferred stock dividends -- -- -- -- -- -- --
------- ------- ------ ------- -------- ------- --------
Total fixed charges and preferred stock 167 162 168 189 4,763 701 11,269
dividends ------- ------- ------ ------- -------- ------- --------
Deduct:
Interest capitalized -- -- -- -- -- -- --
Preferred stock dividends -- -- -- -- -- -- --
------- ------- ------ ------- -------- ------- --------
Total deducts -- -- -- -- -- -- --
------- ------- ------ ------- -------- ------- --------
Adjusted earnings $48,534 $33,515 $6,990 $26,662 $122,598 $47,927 $100,831
======= ======= ====== ======= ======== ======= ========
Ratio of earnings to fixed charges and preferred
stock dividends 290.62 206.88 41.61 141.07 25.74 68.37 8.95
======= ======= ====== ======= ======== ======= ========
Pro Forma
-------------------------
Six Months
Year ended ended
December 31, June 30,
--------------------------
2000 2001
--------- ----------
Pretax earnings $129,662 $100,441
Adjustments:
Add fixed charges and preferred stock dividends:
Interest:
Expensed 45,560 19,007
Capitalized -- --
Rental expense attributable to interest 652 341
Preferred stock dividends -- --
-------- --------
Total fixed charges and preferred stock 46,212 19,348
dividends -------- --------
Deduct:
Interest capitalized -- --
Preferred stock dividends -- --
-------- --------
Total deducts -- --
-------- --------
Adjusted earnings $175,874 $119,759
======== ========
Ratio of earnings to fixed charges and preferred
stock dividends 3.81 6.19
======== ========
EX-23.1
5
dex231.txt
CONSENT OF KPMG LLP
Exhibit 23.1
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Pure Resources, Inc.
We consent to the use of (i) our report dated February 14, 2001, except for Note
20 in so far as it relates to December 31, 2000 and the year then ended which is
dated September 12, 2001, with respect to the consolidated financial statements
and schedules of Pure Resources, Inc. as of December 31, 2000 included in its
Current Report (Form 8-K) filed with the Securities and Exchange Commission on
September 14, 2001 and our report as included in its Annual Report on Form 10-K
as filed with the Securities and Exchange Commission on March 9, 2001 and as
updated by the aforementioned Form 8-K and (ii) our report dated April 4, 2001
relating to the statements of revenue and direct operating expenses of the oil
and gas properties acquired by Pure Resources, Inc. for the years ended December
31, 2000, 1999 and 1998 included in its Current Report (Form 8-K) filed with the
Securities and Exchange Commission on February 15, 2001 (as amended by an
amendment thereto filed on April 16, 2001) and to the reference to our firm
under the heading "Experts" in the Registration Statement (Form S-4) and related
Prospectus of Pure Resources, Inc. for the registration of $350,000,000 Senior
Notes due 2011.
KPMG LLP
Midland, Texas
September 17, 2001
EX-23.2
6
dex232.txt
CONSENT OF PRICEWATERHOUSECOOPERS LLP
Exhibit 23.2
------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Pure Resources, Inc. ("Pure"), formerly referred to as
Union Oil's Permian Basin business unit, of our report dated March 10, 2000,
except for Note 20, which the date is September 13, 2001 in so far as it relates
to December 31, 1999 and the years ended December 31, 1999 and 1998, relating to
the financial statements, which appears in Pure's Current Report on Form 8-K
dated September 13, 2001. We also consent to the incorporation by reference in
this Registration Statement on Form S-4 of Pure of our report dated March 10,
2000, relating to the financial statements of Pure as of December 31, 1999 and
for the years ended December 31, 1999 and 1998, which appears in Pure's Annual
Report on Form 10-K for the year ended December 31, 2000. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Houston, Texas
September 17, 2001
EX-23.3
7
dex233.txt
CONSENT OF DELOITTE & TOUCHE LLP
Exhibit 23.3
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Pure Resources, Inc. on Form S-4 of our report dated March 1, 2001, appearing in
and incorporated by reference in the Annual Report on Form 10-K of Hallwood
Energy Corporation for the year ended December 31, 2000 and the Current Report
on Form 8-K/A of Pure Resources dated May 23, 2001 (as amended by an amendment
thereto filed June 1, 2001) and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
Deloitte & Touche LLP
Denver, Colorado
September 13, 2001
EX-23.4
8
dex234.txt
CONSENT OF NETHERLAND, SEWELL & ASSOC.
Exhibit 23.4
------------
CONSENT OF NETHERLAND, SEWELL & ASSOCIATES, INC.
The Board of Directors of
Pure Resources, Inc.
As independent petroleum consultants, we consent to the reference to our firm
under the caption "Engineers" in the Registration Statement (Form S-4) and
related Prospectus of Pure Resources, Inc. for the registration of $350,000,000
Senior Notes due 2011 and to the incorporation by reference therein of the
information included in the Annual Report (Form 10-K) of Pure Resources, Inc.
for the year ended December 31, 2000 filed with the Securities and Exchange
Commission relating to the net proved oil and gas reserves of Pure Resources,
Inc. as of December 31, 2000, and the present value thereof.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell
------------------------
Name: Frederic D. Sewell
Title: President
September 12, 2001
EX-25.1
9
dex251.txt
FORM T-1
Exhibit 25.1
------------
Registration No. 333-
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a
Corporation Designated to Act as Trustee
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
_____
First Union National Bank
(Exact name of trustee as specified in its charter)
United States of America
(Jurisdiction of incorporation or organization if not a U.S. national bank)
22-1147033
(I.R.S. Employer Identification Number)
One First Union
301 South College Street
Charlotte, North Carolina
(Address of principal executive offices)
28288
(Zip code)
R. Douglas Milner
First Union National Bank
Corporate Trust Group
5847 San Felipe, Suite 1050
Houston, Texas 77057
(713) 278-4321
(Name, address and telephone number of agent for service)
Pure Resources, Inc.
(Exact name of each obligor as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
74-2952918
(I.R.S. Employer Identification No.)
500 West Illinois
Midland, Texas
(Address of principal executive offices)
79701
(Zip code)
7 1/8% Senior Notes due 2011
(Title of the indenture securities)
Item 1. General information. Furnish the following information as to the
trustee:
a. Name and address of each examining or supervising authority to which it is
subject.
NAME ADDRESS
Board of Governors of the Federal Washington, D.C.
Reserve System
Comptroller of the Currency Washington, D.C.
Federal Deposit Insurance Washington, D.C.
Corporation
b. Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with the obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting securities of the trustee. Furnish the following information as
to each class of voting securities of the trustee:
As of _____ (Insert date within 31 days).
COL. A COL. B
TITLE OF CLASS AMOUNT OUTSTANDING
Not Applicable
Item 4. Trusteeships under other indentures. If the trustee is a trustee under
another indenture under which any other securities, or certificates of interest
or participation in any other securities, of the obligor are outstanding,
furnish the following information:
a. Title of the securities outstanding under each such other indenture.
Not Applicable.
b. A brief statement of the facts relied upon as a basis for the claim that no
conflicting interest within the meaning of Section 310(b)(1) of the Act arises
as a result of the trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as compared with the
securities issued under such other indenture.
Not Applicable.
Item 5. Interlocking directorates and similar relationships with the obligor or
underwriters. If the trustee or any of the directors or executive officers of
the trustee is a director, officer, partner, employee, appointee, or
representative of the obligor of any underwriter for the obligor, identify each
such person having any such connection and state the nature of each such
connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the trustee
owned beneficially by the obligor and each director, partner, and executive
officer of the obligor.
As of _____ (Insert date within 31 days).
COL. A COL. B COL. C COL. D
NAME OF OWNER TITLE OF CLASS AMOUNT OWNED PERCENTAGE OF VOTING SECURITIES
BENEFICIALLY REPRESENTED BY AMOUNT GIVEN
IN COL. C
Not Applicable.
Item 7. Voting securities of the trustee owned by underwriters or their
officials. Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner, and executive officer of each such underwriter:
As of _____ (Insert date within 31 days).
COL. A COL. B COL. C COL. D
NAME OF OWNER TITLE OF CLASS AMOUNT OWNED PERCENTAGE OF VOTING SECURITIES
BENEFICIALLY REPRESENTED BY AMOUNT GIVEN
IN COL. C
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee. Furnish the
following information as to securities of the obligor owned beneficially or held
as collateral security for obligations in default by the trustee:
Not Applicable
COL. A COL. B COL. C COL. D
TITLE OF CLASS WHETHER THE SECURITIES AMOUNT OWNED PERCENT OF CLASS
ARE VOTING OR BENEFICIALLY OR REPRESENTED BY
NONVOTING SECURITIES HELD AS COLLATERAL AMOUNT GIVEN
SECURITY FOR IN COL. C
OBLIGATIONS IN DEFAULT
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee. If the
trustee owns beneficially or hold as collateral security for obligations in
default any securities of an underwriter for the obligor, furnish the following
information as to each class of securities of such underwriter any of which are
so owned or held by the trustee:
As of _____ (Insert date within 31 days).
COL. A COL. B COL. C COL. D
TITLE OF ISSUER AMOUNT AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS
AND TITLE OF CLASS OUTSTANDING OR HELD AS COLLATERAL REPRESENTED BY
SECURITY FOR OBLIGATIONS AMOUNT GIVEN
IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or security holders of the obligor. If the trustee owns beneficially
or holds as collateral security for obligations in default voting securities of
a person who, to the knowledge of the trustee (1) owns 10 percent or more of the
voting securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to the voting
securities of such person:
As of _____ (Insert date within 31 days).
COL. A COL. B COL. C COL. D
TITLE OF ISSUER AMOUNT AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS
AND TITLE OF CLASS OUTSTANDING OR HELD AS COLLATERAL REPRESENTED BY
SECURITY FOR OBLIGATIONS AMOUNT GIVEN
IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor. If the
trustee owns beneficially or holds as collateral security for obligations in
default any securities of a person who, to the knowledge of the trustee, owns 50
percent or more of the voting securities of the obligor, furnish the following
information as to each class of securities of such person any of which are so
owned or held by the trustee:
As of _____ (Insert date within 31 days).
COL. A COL. B COL. C COL. D
TITLE OF ISSUER AMOUNT AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS
AND TITLE OF CLASS OUTSTANDING OR HELD AS COLLATERAL REPRESENTED BY
SECURITY FOR OBLIGATIONS AMOUNT GIVEN
IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee. Except as noted in the
instructions, if the obligor is indebted to the trustee, furnish the following
information:
As of _____ (Insert date within 31 days).
COL. A COL. B COL. C
NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
Not Applicable
Item 13 Defaults by the Obligor.
a. State whether there is or has been a default with respect to the securities
under this indenture. Explain the nature of any such default.
None.
b. If the trustee is a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding, or is trustee for more than one
outstanding series of securities under the indenture, state whether there has
been a default under any such indenture or series, identify the indenture or
series affected, and explain the nature of any such default.
Not Applicable
Item 14. Affiliations with the Underwriters. If any underwriter is an
affiliate of the trustee, describe each such affiliation.
Not Applicable
Item 15. Foreign Trustee. Identify the order or rule pursuant to which the
foreign trustee is authorized to act as sole trustee under indentures qualified
or to be qualified under the Act.
Not Applicable
Item 16. List of exhibits. List below all exhibits filed as a part of this
statement of eligibility.
1. Articles of Association of First Union National Bank as now in
effect.*
2. Certificate of Authority of the trustee to commence business.*
3. Copy of the authorization of the trustee to exercise corporate trust
powers.*
4. Existing bylaws of the trustee.
5. Not Applicable.
6. The consent of the trustee required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
8. Not Applicable.
9. Not Applicable.
________________________
* Previously filed with the Securities and Exchange Commission as an
Exhibit to Form T-1 in connection with Registration Statement Number 333-47985
incorporated herein by reference.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, First Union National Bank, a national banking association organized and
existing under the laws of the United States of America, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the city of Houston, and State of Texas, on
the 7th day of September, 2001.
FIRST UNION NATIONAL BANK
(Trustee)
By: /s/ R. Douglas Milner
-------------------------------------
R. Douglas Milner, Vice President
(Name and Title)
EXHIBIT 6
First Union National Bank, pursuant to the requirements of Section 321(b)
of the Trust Indenture Act of 1939, as amended (the "Act") in connection with
the proposed issuance by Pure Resources, Inc. of its 7 1/8% Senior Notes due
2011 to be issued hereby consents that reports of examination by federal, state,
territorial, or district authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor, as contemplated by
Section 321(b) of the Act.
Dated: September 7, 2001
FIRST UNION NATIONAL BANK
By: /s/ R. Douglas Milner
-------------------------------------
R. Douglas Milner, Vice President
EXHIBIT 4
BY-LAWS OF
FIRST UNION NATIONAL BANK
Charter No. 1
Effective June 19, 2001
BY-LAWS OF
FIRST UNION NATIONAL BANK
ARTICLE I
Meetings of Shareholders
------------------------
Section 1.1 Annual Meeting. The annual meeting of the shareholders for
---------------------------
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on the third Tuesday of April in
each year, commencing with the year 1998, except that the Board of Directors
may, from time to time and upon passage of a resolution specifically setting
forth its reasons, set such other date for such meeting during the month of
April as the Board of Directors may deem necessary or appropriate; provided,
however, that if an annual meeting would otherwise fall on a legal holiday, then
such annual meeting shall be held on the second business day following such
legal holiday. The holders of a majority of the outstanding shares entitled to
vote which are represented at any meeting of the shareholders may choose persons
to act as Chairman and as Secretary of the meeting.
Section 1.2 Special Meetings. Except as otherwise specifically provided
-----------------------------
by statute, special meetings of the shareholders may be called for any purpose
at any time by the Board of Directors or by any three or more shareholders
owning, in the aggregate, not less than ten percent of the stock of the
Association. Every such special meeting, unless otherwise provided by law,
shall be called by mailing, postage prepaid, not less than ten days prior to the
date fixed for such meeting, to each shareholder at his address appearing on the
books of the Association, a notice stating the purpose of the meeting.
Section 1.3 Nominations for Directors. Nominations for election to the
--------------------------------------
Board of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of
the existing management of the bank, shall be made in writing and shall be
delivered or mailed to the President of the Bank and to the Comptroller of the
Currency, Washington, D. C., not less than 14 days nor more than 50 days prior
to any meeting of stockholders called for the election of directors, provided
however, that if less than 21 days' notice of such meeting is given to
shareholders, such nomination shall be mailed or delivered to the President of
the Bank and to the Comptroller of the Currency not later than the close of
business on the seventh day following the day on which the notice of meeting was
mailed. Such notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and address of each proposed
nominee; (b) the principal occupation of each proposed nominee; (c) the total
number of shares of capital stock of the bank that will be voted for each
proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the bank owned by
the notifying shareholder. Nominations not made in accordance herewith may, in
his discretion, be disregarded by the chairman of the meeting, and upon his
instructions, the vote tellers may disregard all votes cast for each such
nominee.
Section 1.4 Judges of Election. The Board may at any time appoint from
-------------------------------
among the shareholders three or more persons to serve as Judges of Election at
any meeting of shareholders; to act as judges and tellers with respect to all
votes by ballot at such meeting and to file with the Secretary of the meeting a
Certificate under their hands, certifying the result thereof.
Section 1.5 Proxies. Shareholders may vote at any meeting of the
--------------------
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and shall be filed with the records of the meeting.
Section 1.6 Quorum. A majority of the outstanding capital stock,
-------------------
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE II
Directors
---------
Section 2.1 Board of Directors. The Board of Directors (hereinafter
------------------------------
referred to as the "Board"), shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law, all
corporate powers of the Association shall be vested in and may be exercised by
said Board.
Section 2.2 Number. The Board shall consist of not less than five nor more
-------------------
than twenty-five directors, the exact number within such minimum and maximum
limits to be fixed and determined from time to time by resolution of a majority
of the full Board or by resolution of the shareholders at any meeting thereof;
provided, however, that a majority of the full Board of Directors may not
increase the number of directors to a number which, (1) exceeds by more than two
the number of directors last elected by shareholders where such number was
fifteen or less, and (2) to a number which exceeds by more than four the number
of directors last elected by shareholders where such number was sixteen or more,
but in no event shall the number of directors exceed twenty-five.
Section 2.3 Organization Meeting. The Secretary of the meeting upon
--------------------------------
receiving the certificate of the judges, of the result of any election, shall
notify the directors-elect of their election and of the time at which they are
required to meet at the Main Office of the Association for the purpose of
organizing the new Board and electing and appointing officers of the Association
for the succeeding year. Such meeting shall be held as soon thereafter as
practicable. If, at the time fixed for such meeting, there shall not be a quorum
present, the directors present may adjourn the meeting from time to time, until
a quorum is obtained.
Section 2.4 Regular Meetings. Regular meetings of the Board of Directors
----------------------------
shall be held at such place and time as may be designated by resolution of the
Board of Directors. Upon adoption of such resolution, no further notice of such
meeting dates or the places or times thereof shall be required. Upon the failure
of the Board of Directors to adopt such a resolution, regular meetings of the
Board of Directors shall be held, without notice, on the third Tuesday in
February, April, June, August, October and December, commencing with the year
1997, at the main office or at such other place and time as may be designated by
the Board of Directors. When any regular meeting of the Board would otherwise
fall on a holiday, the meeting shall be held on the next business day unless the
Board shall designate some other day.
Section 2.5 Special Meetings. Special meetings of the Board of Directors
----------------------------
may be called by the President of the Association, or at the request of three
(3) or more directors. Each member of the Board of Directors shall be given
notice stating the time and place, by telegram, letter, or in person, of each
such special meeting.
Section 2.6 Quorum. A majority of the directors shall constitute a quorum
------------------
at any meeting, except when otherwise provided by law; but a less number may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
Section 2.7 Vacancies. When any vacancy occurs among the directors, the
---------------------
remaining members of the Board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the Board, or at a special meeting called for that purpose.
Section 2.8 Advisory Boards. The Board of Directors may appoint Advisory
---------------------------
Boards for each of the states in which the Association conducts operations. Each
such Advisory Board shall consist of as many persons as the Board of Directors
may determine. The duties of each Advisory Board shall be to consult and advise
with the Board of Directors and senior officers of the Association in such state
with regard to the best interests of the Association and to perform such other
duties as the Board of Directors may lawfully delegate.
The senior officer in such state, or such officers as directed by such
senior officer, may appoint advisory boards for geographic regions within such
state and may consult with the State Advisory Boards prior to such appointments.
ARTICLE III
Committees of the Board
-----------------------
Section 3.1 The Board of Directors, by resolution adopted by a majority of
-----------
the number of directors fixed by these By-Laws, may designate two or more
directors to constitute an Executive Committee and other committees, each of
which, to the extent authorized by law and provided in such resolution, shall
have and may exercise all of the authority of the Board of Directors and the
management of the Association. The designation of any committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility or liability imposed
upon it or any member of the Board of Directors by law. The Board of Directors
reserves to itself alone the power to act on (1) dissolution, merger or
consolidation, or disposition of substantially all corporate property, (2)
designation of committees or filling vacancies on the Board of Directors or on a
committee of the Board (except as hereinafter provided), (3) adoption, amendment
or repeal of By-laws, (4) amendment or repeal of any resolution of the Board
which by its terms is not so amendable or repealable, and (5) declaration of
dividends, issuance of stock, or recommendations to stockholders of any action
requiring stockholder approval.
The Board of Directors or the Chairman of the Board of Directors of the
Association may change the membership of any committee at any time, fill
vacancies therein, discharge any committee or member thereof either with or
without cause at any time, and change at any time the authority and
responsibility of any such committee.
A majority of the members of any committee of the Board of Directors may
fix such committee's rules of procedure. All action by any committee shall be
reported to the Board of Directors at a meeting succeeding such action, except
such actions as the Board may not require to be reported to it in the resolution
creating any such committee. Any action by any committee shall be subject to
revision, alteration, and approval by the Board of Directors, except to the
extent otherwise provided in the resolution creating such committee; provided,
however, that no rights or acts of third parties shall be affected by any such
revision or alteration.
ARTICLE IV
Officers and Employees
----------------------
Section 4.1 Officers. The officers of the Association may be a Chairman of
--------------------
the Board, a Vice Chairman of the Board, one or more Chairmen or Vice Chairmen
(who shall not be required to be directors of the Association), a President, one
or more Vice Presidents, a Secretary, a Cashier or Treasurer, and such other
officers, including officers holding similar or equivalent titles to the above
in regions, divisions or functional units of the Association, as may be
appointed by the Board of Directors. The Chairman of the Board and the President
shall be members of the Board of Directors. Any two or more offices may be held
by one person, but no officer shall sign or execute any document in more than
one capacity.
Section 4.2 Election, Term of Office, and Qualification. Each officer shall
-------------------------------------------------------
be chosen by the Board of Directors and shall hold office until the annual
meeting of the Board of Directors held next after his election or until his
successor shall have been duly chosen and qualified, or until his death, or
until he shall resign, or shall have been disqualified, or shall have been
removed from office.
Section 4.2(a) Officers Acting as Assistant Secretary. Notwithstanding
-----------------------------------------------------
Section 1 of these By-laws, any Senior Vice President, Vice President, or
Assistant Vice President shall have, by virtue of his office, and by authority
of the By-laws, the authority from time to time to act as an Assistant Secretary
of the Bank, and to such extent, said officers are appointed to the office of
Assistant Secretary.
Section 4.3 Chief Executive Officer. The Board of Directors shall designate
-----------------------------------
one of its members to be the President of this Association, and the officer so
designated shall be an ex officio member of all committees of the Association
except the Examining Committee, and its Chief Executive Officer unless some
other officer is so designated by the Board of Directors.
Section 4.4 Duties of Officers. The duties of all officers shall be
------------------------------
prescribed by the Board of Directors. Nevertheless, the Board of Directors may
delegate to the Chief Executive Officer the authority to prescribe the duties of
other officers of the corporation not inconsistent with law, the charter, and
these By-laws, and to appoint other employees, prescribe their duties, and to
dismiss them. Notwithstanding such delegation of authority, any officer or
employee also may be dismissed at any time by the Board of Directors.
Section 4.5 Other Employees. The Board of Directors may appoint from time
---------------------------
to time such tellers, vault custodians, bookkeepers, and other clerks, agents,
and employees as it may deem advisable for the prompt and orderly transaction of
the business of the Association, define their duties, fix the salary to be paid
them, and dismiss them. Subject to the authority of the Board of Directors, the
Chief Executive Officer or any other officer of the Association authorized by
him, may appoint and dismiss all such tellers, vault custodians, bookkeepers and
other clerks, agents, and employees, prescribe their duties and the conditions
of their employment, and from time to time fix their compensation.
Section 4.6 Removal and Resignation. Any officer or employee of the
-----------------------------------
Association may be removed either with or without cause by the Board of
Directors. Any employee other than an officer elected by the Board of Directors
may be dismissed in accordance with the provisions of the preceding Section 4.5.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the Chief Executive Officer of the Association. Any such
resignation shall become effective upon its being accepted by the Board of
Directors, or the Chief Executive Officer.
ARTICLE V
Fiduciary Powers
----------------
Section 5.1 Capital Management Group. There shall be an area of this
------------------------------------
Association known as the Capital Management Group which shall be responsible for
the exercise of the fiduciary powers of this Association. The Capital Management
Group shall consist of four service areas: Fiduciary Services, Retail Services,
Investments and Marketing. The Fiduciary Services unit shall consist of personal
trust, employee benefits, corporate trust and operations. The General Office for
the Fiduciary Services unit shall be located in Charlotte, N.C., with additional
Trust Offices in such locations as the Association shall determine from time to
time.
Section 5.2 Trust Officers. There shall be a General Trust Officer of this
--------------------------
Association whose duties shall be to manage, supervise and direct all the
activities of the Capital Management Group. Further, there shall be one or more
Senior Trust Officers designated to assist the General Trust Officer in the
performance of his duties. They shall do or cause to be done all things
necessary or proper in carrying out the business of the Capital Management Group
in accordance with provisions of applicable law and regulation.
Section 5.3 General Trust Committee. There shall be a General Trust
-----------------------------------
Committee composed of not less than four (4) members of the Board of Directors
or officers of this Association who shall be appointed annually, or from time to
time, by the Board of Directors of this Association. Each member shall serve
until his successor is appointed. The Board of Directors or the Chairman of the
Board may change the membership of the General Trust Committee at any time, fill
any vacancies therein, or discharge any member thereof with or without cause at
any time. The General Trust Committee shall counsel and advise on all matters
relating to the business or affairs of the Capital Management Group and shall
adopt overall policies for the conduct of the business of the Capital Management
Group, including, but not limited to: general administration, investment
policies, new business development, and review for approval of major assignments
of functional responsibilities. The General Trust Committee shall appoint the
members of the following subcommittees: the Investment Policy Committee,
Personal Trust Administration Committee, Account Review Committee, and Corporate
and Institutional Accounts Committee. The General Trust Committee shall meet at
least quarterly or as called for by its Chairman or any three (3) members of the
Committee. A quorum shall consist of three (3) members. In carrying out its
responsibilities, the General Trust Committee shall review the fiduciary
activities of the Capital Management Group and may assign the administration and
performance of any fiduciary powers or duties to any officers or employees of
the Capital Management Group or to the Investment Policy Committee, Personal
Trust Administration Committee, Account Review Committee, or Corporate and
Institutional Accounts Committee, or other committees it may designate. One of
the methods to be used in the review process will be the scrutiny of the Reports
of Examination by the Office of the Comptroller of the Currency and the reports
of the Audit Division
of First Union Corporation, as they relate to the activities of the Capital
Management Group. The Chairman of the General Trust Committee shall be appointed
by the Chairman of the Board of Directors. The Chairman of the General Trust
Committee shall cause to be recorded in appropriate minutes all actions taken by
the Committee. The minutes shall be signed by its Secretary, approved by its
Chairman and submitted to the Board of Directors at its next regularly scheduled
meeting following a meeting of the General Trust Committee. The Board of
Directors retains responsibility for the proper exercise of this Association's
fiduciary powers.
Section 5.4 Investment Policy Committee. There shall be an Investment
---------------------------------------
Policy Committee composed of not less than seven (7) officers and/or employees
of this Association, who shall be appointed annually or from time to time by the
General Trust Committee. Each member shall serve until his or her successor is
appointed. Meetings shall be called by the Chairman or by any two (2) members of
the Committee. A quorum shall consist of five (5) members. The Investment Policy
Committee shall exercise such fiduciary powers and perform such duties as may be
assigned to it by the General Trust Committee. All actions taken by the
Investment Policy Committee shall be recorded in appropriate minutes, signed by
the Secretary thereof, approved by its Chairman, and submitted to the General
Trust Committee at its next ensuing regular meeting for its review and
approval."
Section 5.5 Personal Trust Administration Committee. There shall be a
---------------------------------------------------
Personal Trust Administration Committee composed of not less than five (5)
officers and/or employees of this Association, who shall be appointed annually
or from time to time by the General Trust Committee. Each member shall serve
until his or her successor is appointed. Meetings shall be called by the
Chairman or by any three (3) members of the Committee. A quorum shall consist of
three (3) members. The Personal Trust Administration Committee shall exercise
such fiduciary powers and perform such duties as may be assigned to it by the
General Trust Committee. All actions taken by the Personal Trust Administration
Committee shall be recorded in appropriate minutes, signed by the Secretary
thereof, approved by its Chairman, and submitted to the General Trust Committee
at its next ensuing regular meeting for its review and approval."
Section 5.6 Account Review Committee. There shall be an Account Review
------------------------------------
Committee composed of not less than four (4) officers and/or employees of this
Association, who shall be appointed annually or from time to time by the General
Trust Committee. Each member shall serve until his or her successor is
appointed. Meetings shall be called by the Chairman or by any two (2) members of
the Committee. A quorum shall consist of three (3) members. The Account Review
Committee shall exercise such fiduciary powers and perform such duties as may be
assigned to it by the General Trust Committee. All actions taken by the Account
Review Committee shall be recorded in appropriate minutes, signed by the
Secretary thereof, approved by its Chairman, and submitted to the General Trust
Committee at its next ensuing regular meeting for its review and approval."
Section 5.7 Corporate and Institutional Accounts Committee. There shall be
----------------------------------------------------------
a Corporate and Institutional Accounts Committee composed of not less than five
(5) officers and/or employees of this Association, who shall be appointed
annually or from time to time by the General Trust Committee. Each member shall
serve until his or her successor is appointed. Meetings shall be called by the
Chairman or by any two (2) members of the Committee. A quorum shall consist of
three (3) members. The Corporate and Institutional Accounts Committee shall
exercise such fiduciary powers and perform such duties as may be assigned to it
by the General Trust Committee. All actions taken by the Corporate and
Institutional Accounts Committee shall be recorded in appropriate minutes,
signed by the Secretary thereof, approved by its Chairman, and submitted to the
General Trust Committee at its next ensuing regular meeting for its review and
approval."
ARTICLE VI
Stock and Stock Certificates
----------------------------
Section 6.1 Transfers. Shares of stock shall be transferable on the books
---------------------
of the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights and liabilities of the
prior holder of such shares.
Section 6.2 Stock Certificates. Certificates of stock shall bear the
-------------------------------
signature of the Chairman, the Vice Chairman, the President, or a Vice President
(which may be engraved, printed, or impressed), and shall be signed manually or
by facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant
Cashier, or any other
officer appointed by the Board of Directors for that purpose, to be known as an
Authorized Officer, and the seal of the Association shall be engraved thereon.
Each certificate shall recite on its face that the stock represented thereby is
transferable only upon the books of the Association properly endorsed.
ARTICLE VII
Corporate Seal
--------------
Section 7.1 The President, the Cashier, the Secretary, or any Assistant
-----------
Cashier, or Assistant Secretary, or other officer thereunto designated by the
Board of Directors shall have authority to affix the corporate seal to any
document requiring such seal, and to attest the same. Such seal shall be
substantially in the following form.
ARTICLE VIII
Miscellaneous Provisions
------------------------
Section 8.1 Fiscal Year. The fiscal year of the Association shall be the
-----------------------
calendar year.
Section 8.2 Execution of Instruments. All agreements, indentures,
------------------------------------
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, notices,
applications, schedules, accounts, affidavits, bonds, undertakings, proxies, and
other instruments or documents may be signed, executed, acknowledged, verified,
delivered or accepted in behalf of the Association by the Chairman of the Board,
the Vice Chairman of the Board, any Chairman or Vice Chairman, the President,
any Vice President or Assistant Vice President, the Secretary or any Assistant
Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant
Treasurer, or any officer holding similar or equivalent titles to the above in
any regions, divisions or functional units of the Association, or, if in
connection with the exercise of fiduciary powers of the Association, by any of
said officers or by any Trust Officer or Assistant Trust Officer (or equivalent
titles); provided, however, that where required, any such instrument shall be
attested by one of said officers other than the officer executing such
instrument. Any such instruments may also be executed, acknowledged, verified,
delivered or accepted in behalf of the Association in such other manner and by
such other officers as the Board of Directors may from time to time direct. The
provisions of this Section 8.2 are supplementary to any other provision of these
By-laws.
Section 8.3 Records. The Articles of Association, the By-laws, and the
-------------------
proceedings of all meetings of the shareholders, the Board of Directors,
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, Cashier, or other officer appointed to act as Secretary of the
meeting.
ARTICLE IX
By-laws
-------
Section 9.1 Inspection. A copy of the By-laws, with all amendments thereto,
----------------------
shall at all times be kept in a convenient place at the Head Office of the
Association, and shall be open for inspection to all shareholders, during
banking hours.
Section 9.2 Amendments. The By-laws may be amended, altered or repealed, at
----------------------
any regular or special meeting of the Board of Directors, by a vote of a
majority of the whole number of Directors.
Exhibit A
---------
First Union National Bank
Article X
Emergency By-laws
In the event of an emergency declared by the President of the United States
or the person performing his functions, the officers and employees of this
Association will continue to conduct the affairs of the Association under such
guidance from the directors or the Executive Committee as may be available
except as to matters which by statute require specific approval of the Board of
Directors and subject to conformance with any applicable governmental directives
during the emergency.
OFFICERS PRO TEMPORE AND DISASTER
Section 1. The surviving members of the Board of Directors or the Executive
Committee shall have the power, in the absence or disability of any officer, or
upon the refusal of any officer to act, to delegate and prescribe such officer's
powers and duties to any other officer, or to any director, for the time being.
Section 2. In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of this
Association by its directors and officers as contemplated by these By-laws, any
two or more available members of the then incumbent Executive Committee shall
constitute a quorum of that Committee for the full conduct and management of the
affairs and business of the Association in accordance with the provisions of
Article II of these By-laws; and in addition, such Committee shall be empowered
to exercise all of the powers reserved to the General Trust Committee under
Section 5.3 of Article V hereof. In the event of the unavail- ability, at such
time, of a minimum of two members of the then incumbent Executive Committee, any
three available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Association in
accordance with the foregoing provisions of this section. This By-law shall be
subject to implementation by resolutions of the Board of Directors passed from
time to time for that purpose, and any provisions of these By-laws (other than
this section) and any resolutions which are contrary to the provisions of this
section or to the provisions of any such implementary resolutions shall be
suspended until it shall be determined by an interim Executive Committee acting
under this section that it shall be to the advantage of this Association to
resume the conduct and management of its affairs and business under all of the
other provisions of these By-laws.
Officer Succession
BE IT RESOLVED, that if consequent upon war or warlike damage or disaster,
the Chief Executive Officer of this Association cannot be located by the then
acting Head Officer or is unable to assume or to continue normal executive
duties, then the authority and duties of the Chief Executive Officer shall,
without further action of the Board of Directors, be automatically assumed by
one of the following persons in the order designated:
Chairman
President
Division Head/Area Administrator - Within this officer class, officers
shall take seniority on the basis of length of service in such office or,
in the event of equality, length of service as an officer of the
Association.
Any one of the above persons who in accordance with this resolution assumes
the authority and duties of the Chief Executive Officer shall continue to serve
until he resigns or until five-sixths of the other officers who are attached to
the then acting Head Office decide in writing he is unable to perform said
duties or until the elected Chief Executive Officer of this Association, or a
person higher on the above list, shall become available to perform the duties of
Chief Executive Officer of the Association.
BE IT FURTHER RESOLVED, that anyone dealing with this Association may
accept a certification by any three officers that a specified individual is
acting as Chief Executive Officer in accordance with this resolution;
and that anyone accepting such certification may continue to consider it in
force until notified in writing of a change, said notice of change to carry the
signatures of three officers of the Association.
Alternate Locations
The offices of the Association at which its business shall be conducted
shall be the main office thereof in each city which is designated as a City
Office (and branches, if any), and any other legally authorized location which
may be leased or acquired by this Association to carry on its business. During
an emergency resulting in any authorized place of business of this Association
being unable to function, the business ordinarily conducted at such location
shall be relocated elsewhere in suitable quarters, in addition to or in lieu of
the locations heretofore mentioned, as may be designated by the Board of
Directors or by the Executive Committee or by such persons as are then, in
accordance with resolutions adopted from time to time by the Board of Directors
dealing with the exercise of authority in the time of such emergency, conducting
the affairs of this Association. Any temporarily relocated place of business of
this Association shall be returned to its legally authorized location as soon as
practicable and such temporary place of business shall then be discontinued.
Acting Head Offices
BE IT RESOLVED, that in case of and provided because of war or warlike
damage or disaster, the General Office of this Association, located in
Charlotte, North Carolina, is unable temporarily to continue its functions, the
Raleigh office, located in Raleigh, North Carolina, shall automatically and
without further action of this Board of Directors, become the "Acting Head
Office of this Association";
BE IT FURTHER RESOLVED, that if by reason of said war or warlike damage or
disaster, both the General Office of this Association and the said Raleigh
Office of this Association are unable to carry on their functions, then and in
such case, the Asheville Office of this Association, located in Asheville, North
Carolina, shall, without further action of this Board of Directors, become the
"Acting Head Office of this Association"; and if neither the Raleigh Office nor
the Asheville Office can carry on their functions, then the Greensboro Office of
this Association, located in Greensboro, North Carolina, shall, without further
action of this Board of Directors, become the "Acting Head Office of this
Association"; and if neither the Raleigh Office, the Asheville Office, nor the
Greensboro Office can carry on their functions, then the Lumberton Office of
this Association, located in Lumberton, North Carolina, shall, without further
action of this Board of Directors, become the "Acting Head Office of this
Association". The Head Office shall resume its functions at its legally
authorized location as soon as practicable.
EXHIBIT 7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the First Union National Bank
at the close of business on June 30, 2001 published in response to call made by
Comptroller of the Currency, under title 12, United States Code, Section 161.
Charter Number 33869 Comptroller of the Currency Northeastern District.
Statement of Resources and Liabilities
ASSETS
Thousand of Dollars
-------------------
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin........................ 9,537,000
Interest-bearing balances................................................. 1,509,000
Securities.................................................................. / / / / / / / / /
Held-to-maturity securities............................................... 0
Available-for-sale securities............................................. 45,221,000
Federal funds sold and securities purchased under agreements................ / / / / / / / / /
to resell................................................................. 6,315,000
Loans and lease financing receivables:
Loan and leases, net of unearned income..................................... 122,125,000
LESS: Allowance for loan and lease losses................................... 1,740,000
LESS: Allocated transfer risk reserve....................................... 0
Loans and leases, net of unearned income, allowance, and
reserve................................................................... 120,385,000
Assets held in trading accounts............................................. 19,000,000
Premises and fixed assets (including capitalized leases).................... 2,742,000
Other real estate owned..................................................... 100,000
Investment in unconsolidated subsidiaries and associated.................... / / / / / / / / /
companies................................................................. 316,000
Customer's liability to this bank on acceptances outstanding................ 856,000
Intangible assets........................................................... 2,329,000
Other assets................................................................ 12,844,000
Total assets................................................................ 227,646,000
LIABILITIES
Deposits:
In domestic offices....................................................... 131,429,000
Noninterest-bearing.................................................... 20,764,000
Interest-bearing....................................................... 110,665,000
In foreign offices, Edge and Agreement subsidiaries,
and IBFs............................................................... 11,657,000
Noninterest-bearing.................................................... 80,000
Interest-bearing....................................................... 11,577,000
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and IBFs
Federal fund purchased.................................................... 19,794,000
Securities sold under agreements to repurchase............................
Trading liabilities......................................................... 11,908,000
Other borrowed money:....................................................... 22,811,000
Bank's liability on acceptances executed and outstanding.................... 859,000
Subordinated notes and debentures........................................... 5,993,000
Other liabilities........................................................... 6,513,000
Total liabilities........................................................... 210,964,000
Minority interest in consolidated subsidiaries.............................. 964,000
EQUITY CAPITAL
Perpetual preferred stock and related surplus............................... 161,000
Common Stock................................................................ 455,000
Surplus..................................................................... 13,309,000
Retained earnings........................................................... 1,877,000
Accumulated other comprehensive income...................................... (84,000)
Total equity capital........................................................ 15,718,000
Total liabilities, limited-life preferred stock and equity.................. / / / / / / / / /
capital................................................................... 227,646,000
EX-99.1
10
dex991.txt
FORM OF LETTER OF TRANSMITTAL
Exhibit 99.1
------------
LETTER OF TRANSMITTAL
With Respect to Tender of
Any and All Outstanding 7 1/8% Series A Senior Notes due 2011
In Exchange For
7 1/8% Series B Senior Notes due 2011
of
Pure Resources
Pursuant to the prospectus dated ________, 2001
--------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
___________, 2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE
EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE.
--------------------------------------------------------------------------------
The exchange agent is:
FIRST UNION NATIONAL BANK
By Registered Mail or By Overnight Courier or
Hand Delivery: By Facsimile: Certified Mail:
First Union National Bank (704) 590-7628 First Union National Bank
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations - NC1153 Confirm by Telephone: Corporate Trust Operations - NC1153
1525 West W. T. Harris Blvd. - 3C3 1525 West W. T. Harris Blvd. - 3C3
Charlotte, North Carolina 28262-1153 (704) 590-7413 Charlotte, North Carolina 28262-1153
Attention: Marsha Rice Attention: Marsha Rice
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION TO A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE VALID DELIVERY TO THE EXCHANGE AGENT.
The instructions set forth in this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed. The undersigned
acknowledges that he or she has received and reviewed the prospectus dated
____________, 2001, of Pure Resources, Inc., a Delaware corporation ("Pure" or
the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 7 1/8% Series B Senior Notes due 2011 (the
"Exchange Notes") that have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), for each $1,000 principal amount of its
outstanding 7 1/8% Series A Senior Notes due 2011 (the "Old Notes"). Recipients
of the prospectus should read the requirements described in the prospectus with
respect to eligibility to participate in the Exchange Offer. Capitalized terms
used but not defined herein have the meaning given to them in the prospectus.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY
BOX BELOW.
This Letter of Transmittal is to be used by a holder of Old Notes:
. if certificates representing tendered Old Notes are to be forwarded
herewith, or
. if a tender is made pursuant to the guaranteed delivery procedures in
the section of the prospectus entitled "The Exchange Offer --
Guaranteed Delivery Procedures."
Holders that are tendering by book-entry transfer to the exchange agent's
account at DTC can execute the tender through the Automated Tender Offer Program
("ATOP") for which the Exchange Offer will be eligible. DTC participants that
are accepting the Exchange Offer must transmit their acceptance to DTC which
will verify the acceptance and execute a book-entry delivery to the exchange
agent's account at DTC. DTC will then send an agent's message forming part of a
book-entry transfer in which the participant agrees to be bound by the terms of
the Letter of Transmittal (an "Agent's Message") to the exchange agent for its
acceptance. Transmission of the Agent's Message by DTC will satisfy the terms of
the Exchange Offer as to execution and delivery of a Letter of Transmittal by
the participant identified in the Agent's Message.
In order to properly complete this Letter of Transmittal, a holder of Old
Notes must:
. complete the box entitled, "Description of Old Notes Tendered;"
. if appropriate, check and complete the boxes relating to book-entry
transfer, guaranteed delivery, Special Issuance Instructions and
Special Delivery Instructions;
. sign the Letter of Transmittal by completing the box entitled "Sign
Here;" and
. complete the Substitute Form W-9.
Each holder of Old Notes should carefully read the detailed instructions
below prior to completing the Letter of Transmittal.
Holders of Old Notes who desire to tender their Old Notes for exchange and
whose Old Notes are not immediately available or who cannot deliver their Old
Notes, this Letter of Transmittal and all other documents required hereby to the
exchange agent or complete the procedures for book-entry transfer on or prior to
the Expiration Date, must tender the Old Notes pursuant to the guaranteed
delivery procedures set forth in the section of the prospectus entitled "The
Exchange Offer -- Guaranteed Delivery Procedures." See Instruction 2. Delivery
of documents to DTC does not constitute delivery to the exchange agent. In order
to ensure participation in the Exchange Offer, Old Notes must be properly
tendered prior to the Expiration Date.
Holders of Old Notes who wish to tender their Old Notes for exchange must
complete columns (1) through (3) in box below entitled "Description of Old Notes
Tendered," and sign the box below entitled "Sign Here." If only those columns
are completed, such holder of Old Notes will have tendered for exchange all Old
Notes listed in column (3) below. If the holder of Old Notes wishes to tender
for exchange less than all of such Old Notes, column (4) must be completed in
full. In such case, such holder of Old Notes should refer to Instruction 5.
The Exchange Offer may be extended, terminated or amended, as provided in
the prospectus. During any such extension of the Exchange Offer, all Old Notes
previously tendered and not withdrawn pursuant to the Exchange Offer will remain
subject to such Exchange Offer. The Exchange Offer is scheduled to expire at
5:00 p.m., New York City time, on _________, 2001, unless extended by Pure.
The undersigned hereby tenders for exchange the Old Notes described in the
box entitled "Description of Old Notes Tendered" below pursuant to the terms and
conditions described in the prospectus and this Letter of Transmittal.
=======================================================================================================================
DESCRIPTION OF OLD NOTES TENDERED
-----------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Name(s) and Address(es) of Aggregate Principal Principal Amount
Registered Holder(s) Amount Represented by Tendered for Exchange
(Please Fill In, If Blank) Certificate Number(s) Certificate(s) (A)(B)
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Total Principal
Amount Tendered
-----------------------------------------------------------------------------------------------------------------------
(A) Unless otherwise indicated in this column, any tendering holder will
be deemed to have tendered the entire principal amount represented by
the Old Notes indicated in the column labeled "Aggregate Principal
Amount Represented by Certificate(s)." See Instruction 5.
(B) The minimum permitted tender is $1,000 in principal amount of Old
Notes. All other tenders must be integral multiples of $1,000.
=======================================================================================================================
--------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s)_______________________________________
Window Ticket Number (if any)_________________________________________
Date of Execution of Notice of Guaranteed Delivery____________________
Name of Institution that guaranteed delivery__________________________
--------------------------------------------------------------------------------
Only registered holders are entitled to tender their Old Notes for exchange
in the Exchange Offer. Any financial institution that is a participant in DTC's
system and whose name appears on a security position listing as the record owner
of the Old Notes and who wishes to make book-entry delivery of Old Notes as
described above must complete and execute a participant's letter (which will be
distributed to participants by DTC) instructing DTC's nominee to tender such Old
Notes for exchange. Persons who are beneficial owners of Old Notes but are not
registered holders and who seek to tender Old Notes should:
. contact the registered holder of such Old Notes and instruct such
registered holder to tender on his or her behalf;
. obtain and include with this Letter of Transmittal, Old Notes properly
endorsed for transfer by the registered holder or accompanied by a
properly completed bond power from the registered holder, with
signatures on the endorsement or bond power guaranteed by a firm that
is a member of a registered national securities exchange, a member of
the National Association of Securities Dealers, Inc., a commercial
bank or trading company having an office in the United States or
certain other eligible guarantors (each, an "Eligible Institution");
or
. effect a record transfer of such Old Notes from the registered holder
to such beneficial owner and comply with the requirements applicable
to registered holders for tendering Old Notes prior to the Expiration
Date.
See the section entitled "The Exchange Offer Procedures for Tendering" in the
prospectus.
SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to Pure for exchange the Old Notes indicated above.
Subject to, and effective upon, acceptance for purchase of the Old Notes
tendered herewith, the undersigned hereby sells, assigns, transfers and
exchanges to Pure all right, title and interest in and to all such Old Notes
tendered for exchange hereby. The undersigned hereby irrevocably constitutes and
appoints the exchange agent as the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that the exchange agent also acts as agent
of Pure) with respect to such Old Notes, with full power of substitution and
resubstitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to:
. deliver certificates representing such Old Notes, or transfer
ownership of such Old Notes on the account books maintained by DTC,
together, in each such case, with all accompanying evidences of
transfer and authenticity to Pure;
. present and deliver such Old Notes for transfer on the books of Pure;
and
. receive all benefits or otherwise exercise all rights and incidents of
beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer.
The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to acquire
Exchange Notes issuable upon the exchange of such tendered Old Notes, and that,
when the same are accepted for exchange, Pure will acquire good and unencumbered
title to the tendered Old Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the exchange agent or Pure to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes or transfer
ownership of such Old Notes on the account books maintained by the book-entry
transfer facility. The undersigned further agrees that acceptance of any and
all validly tendered Old Notes by Pure and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by Pure of its
obligations under the Registration Rights Agreement.
By tendering, each holder of Old Notes represents that the Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not participating in, and does not intend
to participate in, a distribution of the Exchange Notes. Any holder of Old
Notes who is an affiliate of the Company or who tenders Old Notes in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes cannot rely on the position of the staff of the Securities and
Exchange Commission (the "Commission") enunciated in its series of interpretive
"no-action" letters with respect to exchange offers and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer holding Old Notes that
were acquired for its own account as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
Exchange Notes received in respect of such Old Notes pursuant to the Exchange
Offer, however, by so acknowledging and by delivering a prospectus in connection
with the exchange of Old Notes, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal and every obligation of the undersigned hereunder shall be
binding upon the successors, assigns, heirs, executors, administrators, trustees
in bankruptcy, and personal and legal representatives of the undersigned and
shall not be affected by, and shall survive, the death or incapacity of the
undersigned. Old Notes properly tendered may be withdrawn at any time prior to
the Expiration Date in accordance with the terms of this Letter of Transmittal.
The Exchange Offer is subject to certain conditions, each of which may be
waived or modified by Pure, in whole or in part, at any time and from time to
time, as described in the prospectus under the caption "The Exchange Offer
Conditions." The undersigned recognizes that as a result of such conditions Pure
may not be required to accept for exchange, or to issue Exchange Notes in
exchange for, any of the Old Notes properly tendered hereby. In such event, the
tendered Old Notes not accepted for exchange will be returned to the undersigned
without cost to the undersigned at the address shown
below the undersigned's signature(s) unless otherwise indicated under "Special
Issuance Instructions" below.
Unless otherwise indicated under "Special Issuance Instructions" below,
please return any certificates representing Old Notes not tendered or not
accepted for exchange in the name(s) of the holder(s) appearing under
"Description of Old Notes Tendered." Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail any certificates representing Old
Notes not tendered or not accepted for exchange (and accompanying document, as
appropriate) to the address(es) of the holder(s) appearing under "Description of
Old Notes Tendered." In the event that both the "Special Issuance Instructions"
and the "Special Delivery Instructions" are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Old
Notes accepted for exchange in the name(s) of, and return any Old Notes not
tendered or not accepted for exchange to, the person or persons so indicated.
Unless otherwise indicated under "Special Issuance Instructions," in the case of
a book-entry delivery of Old Notes, please credit the account maintained at DTC
with any Old Notes not tendered or not accepted for exchange. The undersigned
recognizes that Pure does not have any obligation pursuant to the Special
Issuance Instructions, to transfer any Old Notes from the name of the holder
thereof if Pure does not accept for exchange any of the Old Notes so tendered or
if such transfer would not be in compliance with any transfer restrictions
applicable to such Old Notes.
--------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if (i) Exchange Notes issued for Old Notes,
certificates for Old Notes in a principal amount not exchanged for Exchange
Notes, or Old Notes (if any) not tendered for exchange are to be issued in the
name of someone other than the undersigned, or (ii) Old Notes tendered by book-
entry transfer which are not exchanged are to be returned by credit to an
account maintained at DTC other than the account indicated above.
Issue to:
Name:_________________________________________________________________________
(Please Print)
Address:______________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
______________________________________________________________________________
(Taxpayer Identification or Social Security Number)
Credit Old Notes not exchanged and delivered by book-entry transfer to the
DTC account set forth below:
______________________________________________________________________________
(Account Number)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the Exchange Notes issued for Old Notes,
certificates for Old Notes in a principal amount not exchanged for Exchange
Notes, or Old Notes (if any) not tendered for exchange are to be sent to someone
other than the undersigned or to the undersigned at an address other than that
shown above.
Mail to:
Name:_________________________________________________________________________
(Please Print)
Address:______________________________________________________________________
_____________________________________________________________________________
(Include Zip Code)
______________________________________________________________________________
(Taxpayer Identification or Social Security Number)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SIGN HERE TO TENDER YOUR OLD NOTES IN THE EXCHANGE OFFER
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of holder(s) of Old Notes
Dated:__________________________________________________________________________
(Must be signed by the registered holder(s) of Old Notes exactly as name(s)
appear(s) on certificate(s) representing the Old Notes or on a security position
listing or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by an attorney-
in-fact, executor, administrator, trustee, guardian, officer of a corporation or
other person acting in a fiduciary or representative capacity, please provide
the following information and see Instruction 6.)
Capacity (Full Title)___________________________________________________________
Name(s)_________________________________________________________________________
(Please type or Print)
Address_________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number__________________________________________________
Tax Identification or Social Security No._______________________________________
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(If required -- see Instructions 1 and 6)
Authorized Signature:___________________________________________________________
Name:___________________________________________________________________________
(Please Type or Print)
Title:__________________________________________________________________________
Name of Firm:___________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number:_________________________________________________
Dated:__________________________________________________________________________
--------------------------------------------------------------------------------
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN THIS LETTER OF
TRANSMITTAL
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Guarantee of Signatures. Signatures on this Letter of Transmittal need
not be guaranteed if the Old Notes tendered hereby are tendered:
. by the registered holder(s) of Old Notes thereof, unless such holder
has completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" above; or
. to the account of a firm that is an Eligible Institution.
In all other cases, all signatures on this Letter of Transmittal must be
guaranteed by an Eligible Institution. Persons who are beneficial owners of Old
Notes but are not the registered holder(s) and who seek to tender Old Notes for
exchange should:
. contact the registered holder(s) of such Old Notes and instruct such
registered holder(s) to tender on such beneficial owner's behalf;
. obtain and include with this Letter of Transmittal, Old Notes properly
endorsed for transfer by the registered holder(s) or accompanied by a
properly completed bond power from the registered holder(s) with
signatures on the endorsement or bond power guaranteed by an Eligible
Institution; or
. effect a record transfer of such Old Notes from the registered
holder(s) to such beneficial owner and comply with the requirements
applicable to registered holder(s) for tendering Old Notes for
exchange prior to the Expiration Date. See Instruction 6.
2. Delivery of this Letter of Transmittal and Certificates for Old Notes
or Book-Entry Confirmations; Guaranteed Delivery Procedures. This Letter of
Transmittal is to be completed by registered holder(s) if certificates
representing Old Notes are to be forwarded herewith. All physically delivered
Old Notes, as well as a properly completed and duly executed Letters of
Transmittal (or manually signed facsimile thereof) and any other required
documents, must be received by the exchange agent at its address set forth on
the cover of this Letter of Transmittal prior to the Expiration Date or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Delivery of the documents to DTC does not constitute delivery to the
exchange agent.
The method of delivery of this Letter of Transmittal, Old Notes and all
other required documents to the exchange agent is at the election and risk of
the holder thereof. If such delivery is by mail, it is suggested that holders
use properly insured registered mail, return receipt requested, and that the
mailing be sufficiently in advance of the Expiration Date, to permit delivery to
the exchange agent prior to such date. Except as otherwise provided below, the
delivery will be deemed made when actually received or confirmed by the exchange
agent. This Letter of Transmittal and Old Notes tendered for exchange should be
sent only to the exchange agent, not to Pure.
A holder who desires to tender Old Notes for exchange and who cannot comply
with the procedures set forth herein for tender on a timely basis or whose Old
Notes are not immediately available must comply with the guaranteed delivery
procedures described below.
If holders desire to tender Old Notes for exchange pursuant to the Exchange
Offer and:
. certificates representing such Old Notes are not lost but are not
immediately available;
. time will not permit this Letter of Transmittal, certificates
representing Old Notes or other required documents to reach the
exchange agent prior to the Expiration Date; or
. the procedures for book-entry transfer cannot be completed prior to
the Expiration Date, such holder may effect a tender of Old Notes for
exchange in accordance with the guaranteed delivery procedures set
forth in the prospectus under the caption "The Exchange Offer--
Guaranteed Delivery Procedures."
Pursuant to the guaranteed delivery procedures:
(a) such tender must be made by or through an Eligible Institution
(defined as a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an institution
that is a recognized member in good standing of a Medallion Signature Guarantee
Program recognized by the exchange agent, i.e., the Securities Transfer Agent's
Medallion Program, the Stock Exchange's Medallion Program and the New York Stock
Exchange's Medallion Signature Program);
(b) prior to the Expiration Date, the exchange agent must have received
from such Eligible Institution, at one of the addresses of the exchange agent
set forth herein, a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile, mail or hand delivery) substantially in the form
provided by Pure setting forth the name(s) and address(es) of the registered
holder(s) of such Old Notes, the certificate number(s) and the principal amount
of Old Notes being tendered for exchange and stating that the tender is being
made thereby and guaranteeing that, within three (3) New York Stock Exchange
trading days after the Expiration Date, a properly completed and duly executed
Letter of Transmittal, or a facsimile thereof, together with certificates
representing the Old Notes (or confirmation of book-entry transfer of such Old
Notes into the exchange agent's account with DTC and an Agent's Message) and any
other documents required by this Letter of Transmittal and the instructions
hereto, will be deposited by such Eligible Institution with the exchange agent;
and
(c) this Letter of Transmittal or a facsimile thereof, properly completed
together with duly executed certificates for all physically delivered Old Notes
in proper form for transfer (or confirmation of book-entry transfer of such Old
Notes into the exchange agent's account with DTC as described above) and all
other required documents must be received by the exchange agent within three (3)
New York Stock Exchange trading days after the date of the Notice of Guaranteed
Delivery.
All tendering holders, by execution of this Letter of Transmittal, waive
any right to receive any notice of the acceptance of their Old Notes for
exchange.
3. Inadequate Space. If the space provided in the box entitled
"Description of Old Notes Tendered" above is adequate, the certificate numbers
and principal amounts of Old Notes tendered should be listed on a separate
signed schedule affixed hereto.
4. Withdrawal of Tenders. A tender of Old Notes may be withdrawn at any
time prior to the Expiration Date by delivery of written or facsimile (receipt
confirmed by telephone) notice of withdrawal to the exchange agent at the
address set forth on the cover of this Letter of Transmittal. To be effective,
a notice of withdrawal must:
. specify the name of the person having tendered the Old Notes to be
withdrawn (the "Depositor");
. identify the Old Notes to be withdrawn (including the certificate
number or numbers and principal amount of such Old Notes);
. include a statement that such holder is withdrawing his election to
have such Old Notes exchanged;
. be signed by the holder in the same manner as the original signature
on the Letter of Transmittal by which such Old Notes were tendered or
as otherwise described above (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to
have the trustee under the Indenture register the transfer of such Old
Notes into the name of the person withdrawing the tender;
. specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor; and
. if applicable because the Old Notes have been tendered under the book-
entry procedures, specify the name and number of the participant's
account at DTC to be credited, if different from that of the person
having tendered the Old Notes to be withdrawn.
The exchange agent will return the properly withdrawn Old Notes promptly
following receipt of notice of withdrawal. All questions as to the validity of
notices of withdrawals, including, time of receipt, will be determined by Pure
and such determination will be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the exchange agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such book-
entry transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under the caption "The Exchange Offer--Procedures for Tendering" in
the prospectus at any time prior to the Expiration Date.
5. Partial Tenders (Not Applicable To Holders Of Old Notes Who Tender By
Book-Entry Transfer). Tenders of Old Notes will be accepted only in integral
multiples of $1,000 principal amount. If a tender for exchange is to be made
with respect to less than the entire principal amount of any Old Notes, fill in
the principal amount of Old Notes which are tendered for exchange in column (4)
of the box entitled "Description of Old Notes Tendered," as more fully described
in the footnotes thereto. In the case of a partial tender for exchange, a new
certificate, in fully registered form, for the remainder of the principal amount
of the Old Notes, will be sent to the holders of Old Notes unless otherwise
indicated in the boxes entitled "Special Issuance Instructions" or "Special
Delivery Instructions" above, as soon as practicable after the expiration or
termination of the Exchange Offer.
6. Signatures on This Letter of Transmittal; Bond Powers and
Endorsements. If this Letter of Transmittal is signed by the holder(s) of the
Old Notes tendered for exchange hereby, the signature(s) must correspond exactly
with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal. If any
tendered Old Notes are registered in different names on several certificates, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal and any necessary or required documents as there are names
in which certificates are held.
If this Letter of Transmittal or any certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and proper evidence satisfactory to
Pure of its authority so to act must be submitted, unless waived by Pure.
If this Letter of Transmittal is signed by the holder(s) of the Old Notes
listed and transmitted hereby, no endorsements of certificates or separate bond
powers are required unless certificates for Old Notes not tendered or not
accepted for exchange are to be issued or returned in the name of a person other
than for the holder(s) thereof. Signatures on such certificates must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Old Notes, the certificates representing such Old
Notes must be properly endorsed for transfer by the registered holder or be
accompanied by a properly completed bond power from the registered holder, in
either case signed by such registered holder(s) exactly as the name(s) of the
registered holder(s) the Old Notes appear(s) on the certificates. Signatures on
the endorsement or bond power must be guaranteed by an Eligible Institution
(unless signed by an Eligible Institution).
7. Transfer Taxes. Except as set forth in this Instruction 7, Pure will
pay or cause to be paid any transfer taxes applicable to the exchange of Old
Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of Old Notes pursuant to the Exchange
Offer, then the amount of any transfer taxes (whether imposed on the registered
holder(s) or any other persons) will be payable by the tendering holder. If
satisfactory evidence of the payment of such taxes or exemptions therefrom is
not submitted with this Letter of Transmittal, the amount of such transfer taxes
will be billed directly to such tendering holder.
8. Special Issuance and Delivery Instructions. If the Exchange Notes are
to be issued or if any Old Notes not tendered or not accepted for exchange are
to be issued or sent to a person other than the person(s) signing this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed. Holders of Old Notes
tendering Old Notes by book-entry transfer may request that Old Notes not
accepted for exchange be credited to such account maintained at DTC as such
holder may designate.
9. Irregularities. All questions as to the forms of all documents and
the validity of (including time of receipt) and acceptance of the tenders and
withdrawals of Old Notes will be determined by Pure, in its sole discretion,
which
determination shall be final and binding. Alternative, conditional or contingent
tenders will not be considered valid. Pure reserves the absolute right to reject
any or all tenders of Old Notes that are not in proper form or the acceptance of
which would, in Pure's opinion, be unlawful. Pure also reserves the right to
waive any defects, irregularities or conditions of tender as to particular Old
Notes. Pure's interpretations of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and
binding. Any defect or irregularity in connection with tenders of Old Notes must
be cured within such time as Pure determines, unless waived by Pure. Tenders of
Old Notes shall not be deemed to have been made until all defects or
irregularities have been waived by Pure or cured. Neither Pure, the exchange
agent, nor any other person will be under any duty to give notice of any defects
or irregularities in tenders of Old Notes, or will incur any liability to
registered holders of Old Notes for failure to give such notice.
10. Waiver of Conditions. To the extent permitted by applicable law, Pure
reserves the right to waive any and all conditions to the Exchange Offer as
described under "The Exchange Offer--Conditions" in the prospectus, and accept
for exchange any Old Notes tendered.
11. Tax Identification Number and Backup Withholding. Federal income tax
law generally requires that a holder of Old Notes whose tendered Old Notes are
accepted for exchange or such holder's assignee (in either case, the "Payee"),
provide the exchange agent (the "Payor") with such Payee's correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Payor is not
provided with the correct TIN or an adequate basis for an exemption, such Payee
may be subject to a $50 penalty imposed by the Internal Revenue Service and
backup withholding in an amount equal to 30.5% of the gross proceeds received
pursuant to the Exchange Offer. If withholding results in an overpayment of
taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide such Payee's correct
TIN by completing the "Substitute Form W-9" set forth herein, certifying that
the TIN provided is correct (or that such Payee is awaiting a TIN) and that:
. the Payee is exempt from backup withholding;
. the Payee has not been notified by the Internal Revenue Service that
such Payee is subject to backup withholding as a result of a failure
to report all interest or dividends; or
. the Internal Revenue Service has notified the Payee that such Payee is
no longer subject to backup withholding.
If the Payee does not have a TIN, such Payee should consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 (the "W-9 Guidelines") for instructions on applying for a TIN, write
"Applied For" in the space for the TIN in Part 1 of the Substitute Form W-9, and
sign and date the Substitute Form W-9 and the Certificate of Awaiting Taxpayer
Identification Number set forth herein. If the Payee does not provide such
Payee's TIN to the Payor within 60 days, backup withholding will begin and
continue until such Payee furnishes such Payee's TIN to the Payor. Note:
Writing "Applied For" on the form means that the Payee has already applied for a
TIN or that such Payee intends to apply for one in the near future.
If Old Notes are held in more than one name or are not in the name of the
actual owner, consult the W-9 Guidelines for information on which TIN to report.
Exempt Payees (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
must enter its correct TIN in Part I of the Substitute Form W-9, write "Exempt"
in Part 2 of such form and sign and date the form. See the W-9 Guidelines for
additional instructions. In order for a nonresident alien or foreign entity to
qualify as exempt, such person must submit a completed Form W-8BEN or W-8ECI
signed under penalty of perjury attesting to such exempt status. Such form may
be obtained from the Payor.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder of Old
Notes whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the exchange agent at the address or telephone number set forth on the
cover of this Letter of Transmittal for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the prospectus, this Letter of Transmittal, the
Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be directed to the exchange
agent at its address set forth on the cover of this Letter of Transmittal.
IMPORTANT- This Letter of Transmittal, together with certificates for
tendered Old Notes and all other required documents, with any required signature
guarantees and all other required documents must be received by the exchange
agent prior to the Expiration Date.
--------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: FIRST UNION NATIONAL BANK
--------------------------------------------------------------------------------------------------------------------------------
PART 1 - PLEASE PROVIDE YOUR TIN ON THE TIN: ________________________________
LINE AT RIGHT AND CERTIFY BY SIGNING AND (Social Security Number or
DATING BELOW Employer Identification Number)
-------------------------------------------------------------------------------------------------
PART 2--TIN Applied For [_]
--------------------------------------------------------------------------------------------------
SUBSTITUTE CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Form W-9 (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for
a number to be issued to me).
Department Of The (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I
Treasury Internal have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup
Revenue Service withholding as a result of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding, and
Payor's Request For (3) any other information provided on this form is true and correct.
Taxpayer Identification
Number ("TIN") and Signature ___________________________________________________________ Date _______________, 2001
Certification
------------------------------------------------------------------------------------------------------------------------------------
You must cross out Part (2) above if you have been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to
backup withholding.
------------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 30.5% OF ANY AMOUNTS PAID TO YOU PURSUANT
TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
--------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 30.5% of all
payments made to me on account of the Exchange Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 30.5% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature ________________________________________ Date ____________, 2001
--------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 30.5 PERCENT OF ANY CASH PAYMENTS. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
EX-99.2
11
dex992.txt
FORM OF NOTICES OF GUARANTEED DELIVERY
Exhibit 99.2
------------
Notice of Guaranteed Delivery
With Respect to Tender of
Any and All Outstanding 7 1/8% Series A Senior Notes due 2011
In Exchange For
7 1/8% Series B Senior Notes due 2011
of
Pure Resources, Inc.
Pursuant to the prospectus dated __________, 2001
--------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________,
2001, UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME
TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO
THE EXPIRATION DATE.
--------------------------------------------------------------------------------
The Exchange Agent is:
FIRST UNION NATIONAL BANK
By Registered or Certified Mail: By Facsimile: By Hand Delivery:
First Union National Bank (704) 590-7628 First Union National Bank
First Union Customer Information Center First Union Customer Information Center
Corporate Trust Operations - NC1153 Confirm by Telephone: Corporate Trust Operations - NC1153
1525 West W. T. Harris Blvd. - 3C3 1525 West W. T. Harris Blvd. - 3C3
Charlotte, NC 28288 (704) 590-7413 Charlotte, NC 28288
Attention: Marsha Rice Attention: Marsha Rice
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE
VALID DELIVERY.
As set forth in the prospectus dated ___________, 2001 of Pure Resources,
Inc. ("Pure") and in the accompanying Letter of Transmittal and instructions
thereto (the "Letter of Transmittal"), this form or one substantially equivalent
hereto must be used to accept Pure's offer (the "Exchange Offer") to exchange
new 7 1/8% Series B Senior Notes due 2011 ("Exchange Notes") that have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
for all of its outstanding 7 1/8% Series A Senior Notes due 2011 (the "Old
Notes") if the Letter of Transmittal or any other documents required thereby
cannot be delivered to the exchange agent, or Old Notes cannot be delivered or
if the procedures for book-entry transfer cannot be completed prior to the
Expiration Date. This form may be delivered by an eligible institution (as
described in the prospectus) by mail or hand delivery or transmitted, via
facsimile, to the exchange agent as set forth above. Capitalized terms used but
not defined herein shall have the meaning given to them in the prospectus.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to Pure upon the terms and subject to the
conditions set forth in the prospectus and the related Letter of Transmittal
(receipt of which is hereby acknowledged), the principal amount of Old Notes
specified below pursuant to the guaranteed delivery procedures set forth in the
prospectus and in Instruction 2 of the Letter of Transmittal. By so tendering,
the undersigned does hereby make, at and as of the date hereof, the
representations and warranties of a tendering holder of Old Notes set forth in
the Letter of Transmittal.
The undersigned understands that tenders of Old Notes may be withdrawn if
the exchange agent receives at one of its addresses specified on the cover of
this Notice of Guaranteed Delivery, not later than 5:00 p.m., New York City time
on the Expiration Date, a facsimile transmission or letter setting forth the
name of the holder, the aggregate principal amount of Old Notes the holder
delivered for exchange, the certificate number(s) (if any) of the Old Notes and
a statement that such holder is withdrawing his election to have such Old Notes
or any portion thereof exchanged, in accordance with the procedures set forth in
the prospectus.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of registered holder(s)
or Authorized Signatory:
_________________________________________________
_________________________________________________ Date: _______________________________________
Name(s) of Registered Holder(s): Address: ____________________________________
_________________________________________________ _____________________________________________
_________________________________________________ _____________________________________________
Area Code and Telephone No.:
_____________________________________________
If Old Notes Will be Tendered by Book-Entry
Transfer:
Principal Amount of Old Notes Tendered: Name of Tendering Institution:
_________________________________________________ _____________________________________________
Certificate No.(s) of Old Notes (if available): The Depository Trust Company Account
_________________________________________________ No.:_________________________________________
--------------------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE EXCHANGE
AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
--------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of the Old Notes exactly as their name(s) appear on certificate(s) for
the Old Notes or, if tendered by a participant in one of the book-entry transfer
facilities, exactly as such participant's name appears on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this Notice
of Guaranteed Delivery. If the signature above is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s): _______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Capacity: ______________________________________________________________________
______________________________________________________________________
Address(es): ___________________________________________________________________
___________________________________________________________________
--------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"), hereby (i)
represents that the above-named persons are deemed to own the Old Notes tendered
hereby within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 14e-4"), (ii) represents that such
tender of Old Notes complies with Rule 14e-4 and (iii) guarantees that the Old
Notes tendered hereby in proper form for transfer or confirmation of book-entry
transfer of such Old Notes into the exchange agent's account at the book-entry
transfer facility, in each case together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof) with any
required signature guarantees and any other documents required by the Letter of
Transmittal, will be received by the exchange agent at its address set forth
above within three New York Stock Exchange trading days after the date of
execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the exchange agent and must deliver the Letter of Transmittal and
Old Notes to the exchange agent within the time period shown herein. Failure to
do so could result in a financial loss to such Eligible Institution.
Name of Firm: _____________________________________________________________
________________________________________________________________________________
Authorized Signature: _____________________________________________________
Title: ____________________________________________________________________
________________________________________________________________________________
Address:___________________________________________________________________
________________________________________________________________________________
(Zip Code)
Area Code and Telephone Number: ___________________________________________
--------------------------------------------------------------------------------
EX-99.3
12
dex993.txt
FORM OF LETTER TO BENEFICIAL HOLDERS
Exhibit 99.3
------------
Letter to Beneficial Holders
Regarding the Offer to Exchange
Any and All Outstanding 7 1/8% Series A Senior Notes due 2011
for
7 1/8% Series B Senior Notes due 2011
of
Pure Resources, Inc.
Pursuant to the prospectus dated ____________, 2001
================================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_____________, 2001 UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE
EXTENDED FROM TIME TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN
AND AT ANY TIME PRIOR TO THE EXPIRATION DATE.
================================================================================
____________, 2001 To Our Clients:
Enclosed for your consideration is the prospectus dated __________, 2001 and
the accompanying Letter of Transmittal (the "Letter of Transmittal") that
together constitute the offer (the "Exchange Offer") by Pure Resources, Inc., to
exchange new 7 1/8% Series B Senior Notes due 2011 ("Exchange Notes") that have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), for all of its outstanding 7 1/8% Series A Senior Notes due 2011 (the
"Old Notes"), upon the terms and subject to the conditions set forth in the
prospectus. The prospectus and the Letter of Transmittal more fully describe
the Exchange Offer. Capitalized terms used but not defined herein have the
respective meanings ascribed to them in the prospectus.
To participate in the Exchange Offer, persons in whose names Old Notes are
registered on the books of the registrar ("Registered Holders") must either:
. cause to be delivered to First Union National Bank (the "Exchange
Agent") at the address set forth in the Letter of Transmittal, Old
Notes in proper form for transfer, together with a properly executed
Letter of Transmittal; or
. cause a DTC Participant to tender such holder's Old Notes to the
Exchange Agent's account maintained at the Depository Trust Company
("DTC") for the benefit of the Exchange Agent through the DTC's
Automated Tender Offer Program ("ATOP"), including transmission of an
agent's message in which the Registered Holder acknowledges and agrees
to be bound by the terms of the Letter of Transmittal.
By complying with DTC's ATOP procedures with respect to the Exchange Offer,
the DTC Participant confirms on behalf of itself and the beneficial owners of
tendered Old Notes all provisions of the Letter of Transmittal applicable to it
and such beneficial owners as fully as if it completed, executed and returned
the Letter of Transmittal to the Exchange Agent.
We are the holder of Old Notes held for your account. A tender of such Old
Notes can be made only by us as the holder for your account and pursuant to your
instructions. The enclosed Letter of Transmittal is furnished to you for your
information only and cannot be used to tender Old Notes.
We request instructions as to whether you wish to tender any or all of the
Old Notes held by us for your account, pursuant to the terms and subject to the
conditions set forth in the prospectus and the Letter of Transmittal.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender your Old Notes on your behalf in accordance with
the provisions of the prospectus and the Letter of Transmittal. The Exchange
Offer will expire at 5:00 p.m., New York City time, on ___________, 2001, unless
extended by Pure. Old Notes properly tendered may be withdrawn at any time on
or prior to the Expiration Date.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes must
represent to Pure that:
. the Exchange Notes to be acquired by such holder pursuant to the
Exchange Offer are being acquired in the ordinary course of business
of the holder;
. such holder is not participating, does not intend to participate, and
has no arrangement or understanding with any person to participate, in
a distribution of the Exchange Notes;
. such holder is not an "affiliate," as defined under Rule 405 of the
Securities Act, of Pure;
. such holder acknowledges that any person who is a broker-dealer
registered under the Securities Exchange Act of 1934, as amended, or
who tenders Old Notes in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes must comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction of
the Exchange Notes and cannot rely on the position of the staff of the
Securities and Exchange Commission enunciated in its series of
interpretive "no-action" letters with respect to exchange offers; and
. if the holder is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Old Notes, it must represent that the
Old Notes to be exchanged for Exchange Notes were acquired as a result
of market-making activities or other trading activities and must
acknowledge that it will deliver a prospectus meeting the requirements
of the Securities Act in connection with any resale of Exchange Notes
received in respect of such Old Notes pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus in
connection with the exchange of Old Notes, the holder will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The enclosed "Instruction to Registered Holder or DTC Participant from
Beneficial Owner" form contains an authorization by you, as the beneficial owner
of Old Notes, for us to make the foregoing representations on your behalf.
We urge you to read the enclosed Letter of Transmittal in conjunction with
the Exchange Offer carefully before instructing us to tender your Old Notes.
Your attention is directed to the following:
1. The Exchange Offer is described in and subject to the terms and
conditions set forth in the prospectus dated _________, 2001.
2. Subject to the terms and conditions of the Exchange Offer, Pure will
accept for exchange on the Expiration Date all Old Notes properly tendered and
will issue Exchange Notes promptly after such acceptance.
3. If you desire to tender any Old Notes pursuant to the Exchange Offer,
we must receive your instructions in ample time to permit us to effect a tender
of the Old Notes on your behalf prior to the Expiration Date.
4. Any brokerage fees, commissions or transfer taxes will be borne by
Pure, except as otherwise provided in Instruction 7 of the Letter of
Transmittal.
If you wish to tender any or all of the Old Notes held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form attached hereto. If you authorize the tender of your
Old Notes, all such Old Notes will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf on or prior to the Expiration Date.
The specimen Letter of Transmittal is furnished to you for your information only
and cannot be used by you to tender Old Notes held by us for your account.
Pure is not aware of any jurisdiction in which the making of the Exchange
Offer or the tender of Old Notes in connection therewith would not be in
compliance with the laws of such jurisdiction. If Pure becomes aware of any
jurisdiction in which the making of the Exchange Offer would not be in
compliance with such laws, Pure will make a good faith effort to comply with any
such laws or seek to have such laws declared inapplicable to the Exchange Offer.
If, after such good faith effort, Pure cannot comply with any such laws, the
Exchange Offer will not be made to the Registered Holders residing in such
jurisdiction.
Instructions to Registered Holder or DTC Participant from Beneficial Owner of
7 1/8% Series A Senior Notes due 2011
of
Pure Resources, Inc.
The undersigned hereby acknowledges receipt of the prospectus dated
_________, 2001 of Pure Resources, Inc. ("Pure") and the accompanying Letter of
Transmittal, that together constitute Pure's offer (the "Exchange Offer").
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 7 1/8% Series A Senior
Notes due 2011 (the "Old Notes") held by you for the account of the undersigned,
on the terms and subject to the conditions in the prospectus and Letter of
Transmittal.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in the amount):
$_______________ of the Old Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Old Notes held by you for the account of the
undersigned (insert principal amount of Old Notes to be tendered, if
any):
$_______________ of the Old Notes.
[_] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized:
. to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representations and
warranties contained in the Letter of Transmittal that are to be made
with respect to the undersigned as a beneficial owner of the Old
Notes, including but not limited to the representations that:
. the undersigned is acquiring the Exchange Notes in the ordinary course
of business of the undersigned;
. the undersigned is not participating, does not intend to participate,
and has no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes;
. the undersigned is not an "affiliate," as defined under Rule 405 of
the Securities Act of 1933, as amended ("Securities Act"), of Pure;
the undersigned acknowledges that any person who is a broker-dealer
registered under the Securities Exchange Act of 1934, as amended, or
is participating in the Exchange Offer for the purpose of distributing
the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act, in connection with a
secondary resale transaction of the Exchange Notes acquired by such
person and cannot rely on the position of the staff of the Securities
and Exchange Commission enunciated in its series of interpretative no-
action letter with respect to exchange offers; and
. if the undersigned is a broker dealer that will receive Exchange Notes
for its own account in exchange for Old Notes, it represents that the
Old Notes to be exchanged for the Exchange Notes were acquired by it
as a result of market-making activities or other trading activities
and acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
. to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and
. to take such other action as necessary under the prospectus or the
Letter of Transmittal to effect the valid tender of Old Notes.
================================================================================
SIGN HERE
Name of Beneficial
Owner(s):_______________________________________________________________________
________________________________________________________________________________
Signature(s):___________________________________________________________________
________________________________________________________________________________
Name(s) (please print):_________________________________________________________
________________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone Number(s):____________________________________________________________
________________________________________________________________________________
Taxpayer Identification or Social Security Number(s):___________________________
________________________________________________________________________________
Date:___________________________________________________________________________
EX-99.4
13
dex994.txt
FORM OF LETTER TO REGISTERED HOLDERS
Exhibit 99.4
------------
Letter to Registered Holders and DTC Participants
Regarding the Offer to Exchange
Any and All Outstanding 7 1/8% Series A Senior Notes due 2011
for
7 1/8% Series B Senior Notes due 2011
of
Pure Resources, Inc.
Pursuant to the prospectus dated ____________, 2001
================================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ___________,
2001 UNLESS EXTENDED (SUCH TIME AND DATE, AS THE SAME MAY BE EXTENDED FROM TIME
TO TIME, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO
THE EXPIRATION DATE.
================================================================================
______________, 2001
To Registered Holders and Depositary Trust Company Participants:
We have been appointed by Pure Resources, Inc., to act as exchange agent in
connection with its offer (the "Exchange Offer") to exchange new 7 1/8% Series B
Senior Notes due 2011 ("Exchange Notes") that have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for all of its
outstanding 7 1/8% Series A Senior Notes due 2011 (the "Old Notes"), upon the
terms and subject to the conditions set forth in the prospectus dated
___________, 2001 and in the accompanying Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Exchange Offer. Capitalized terms
used but not defined herein have the respective meanings ascribed to them in the
prospectus.
Enclosed herewith are copies of the following documents:
1. The prospectus dated ___________, 2001;
2. The Letter of Transmittal for your use and for the information of your
clients, together with guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute Form W-9 providing
information relating to backup federal income tax withholding;
3. The Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Old Notes and all other required documents cannot be delivered to
the exchange agent prior to the Expiration Date;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes in your name or in the name of a nominee, with space provided
for obtaining such clients' instructions with regard to the Exchange Offer; and
5. A return envelope addressed to the exchange agent.
DTC Participants will be able to execute tenders and deliver consents
through the DTC Automated Tender Offer Program.
Please note that the Exchange Offer will expire at 5:00 p.m., New York City
time, on ______________, 2001, unless extended by Pure. We urge you to contact
your clients as promptly as possible.
You will be reimbursed for customary mailing and handling expenses incurred
by you in forwarding the enclosed materials to your clients.
Additional copies of the enclosed materials may be obtained from the
exchange agent, at the address and telephone numbers set forth below.
Very truly yours,
First Union National Bank
First Union Customer Information Center
Corporate Trust Operations - NC1153
1525 West W. T. Harris Blvd. - 3C3
Charlotte, NC 28262-1153
Attention: Marsha Rice
____________________
Nothing contained herein or in the enclosed documents shall constitute you
or any other person as the agent of Pure or the exchange agent or authorize you
or any other person to give any information or make any representation on behalf
of any of them with respect to the Exchange Offer not contained in the
prospectus or the Letter of Transmittal.
EX-99.5
14
dex995.txt
FORM OF GUIDELINES FOR CERTIFICATION
Exhibit 99.5
------------
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payor -
Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-
0000. Employer identification numbers have nine digits separated by only one
hyphen: i.e., 00-0000000. The table below will help determine the name and
number to give the Payor.
-------------------------------------------------------- -----------------------------------------------------------------
For this type of Give the name and SOCIAL For this type of account: Give the name and
account: SECURITY number of - EMPLOYER IDENTIFICATION
number of -
-------------------------------------------------------- -----------------------------------------------------------------
1. An individual's The individual 6. A valid trust, estate, or Legal entity (Do not
account pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.) (4)
2. Two or more The actual owner of the 7. Corporate account The corporation
individuals (joint account or, if combined
account) funds, the first individual
on the account (1)
3. Custodian account The minor (2) 8. Association, club, religious, The organization
of a minor (Uniform charitable, educational, or other
Gift to Minors Act) tax-exempt organization account
4. a. The usual The grantor-trustee (1) 9. Partnership The partnership
revocable savings
trust account
(grantor is also
trustee)
b. So-called trust The actual owner (1) 10. A broker or registered nominee The broker or nominee
account that is
not a legal or
valid trust
under state law
5. Sole The owner (3) 11. Account with the Department The public entity
proprietorship of Agriculture in the name of a
account public entity (such as a state or
local government, school district
or prison) that receives
agricultural program payments
-------------------------------------------------------- -----------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name. You may also enter your business or
"doing business as" name. You may use either your social security number
or, if you have one, your employer identification number.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name listed, the number
will be considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at a local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number. You may also obtain Form SS-4 by calling the IRS at 1-800-TAX-FORM.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include the
following:
. An organization exempt from tax under section 501(a), or an individual
retirement account.
. The United States or any wholly-owned agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or any
political subdivision or wholly-owned agency or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
wholly-owned agency or instrumentality thereof.
. An international organization or any wholly-owned agency or instrumentality
thereof.
Payees specifically exempted from backup withholding on interest and dividend
payments include the following:
. A corporation.
. A financial institution.
. A registered dealer in securities or commodities registered in the U.S., the
District of Columbia, or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947.
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
. A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
that have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above may file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE
FORM, AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045, 6049,
6050A, 6050N, and their regulations.
Privacy Act Notice. Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of tax returns. The IRS
also may provide this information to the Department of Justice for civil and
criminal litigation and to cities, states, and the District of Columbia to carry
out their tax laws. Payers must be given the numbers whether or not recipients
are required to file tax returns. Payers must generally withhold 30.5% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a taxpayer identification number to a payer. Certain penalties may also
apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.-If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False information With Respect to Withholding.-If you make
a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.-Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.