<PAGE>
As filed with the Securities and Exchange Commission August 10, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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PENNACO ENERGY, INC.
PENNACO CAPITAL TRUST I
(Exact Name of Registrant As Specified In Its Charter)
Delaware 88-0384598
(State or other jurisdiction of Applied For
incorporation or organization) (I.R.S. Employer
Identification Number)
----------------
1050 17th Street, Suite 700
Denver, Colorado 80265
(303) 629-6700
(Address, including zip code, and telephone number, including area code, of
Registration's principal executive offices)
Glen C. Warren, Jr., Chief Financial Officer
Pennaco Energy, Inc.
1050 17th Street, Suite 700
Denver, Colorado 80265
(303) 629-6700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
G. Michael O'Leary
Andrews & Kurth L.L.P.
600 Travis, Suite 4200
Houston, Texas 77002
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Approximate date of commencement of the proposed sale to the public:
From time to time after the effective date of this Registration Statement,
as determined in light of market conditions and other factors.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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 earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
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. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said section 8(a),
may determine.
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Maximum
Title of Each Class of Securities to be Aggregate Amount of
Registered Offering Price (1)(2) Registration Fee
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<S> <C> <C>
Senior Debt Securities of Pennaco Energy,
Inc. (3).................................
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Subordinated Debt Securities of Pennaco
Energy, Inc. (3).........................
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Common Stock of Pennaco Energy, Inc. (4)
(5)......................................
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Preferred Stock of Pennaco Energy, Inc.
(6)......................................
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Common Stock Purchase Warrants of Pennaco
Energy, Inc. (7).........................
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Trust Preferred Securities of Pennaco
Capital
Trust I (8)..............................
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Guarantee of Trust Preferred Securities by
Pennaco Energy, Inc. (9)..............
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Total................................. $100,000,000 $26,400
</TABLE>
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(1) The proposed maximum offering price per security or unit will be determined
by Pennaco Energy, Inc. from time to time in connection with its issuance
of the securities registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act. In no event will the
aggregate initial offering price of all securities issued from time to time
pursuant to this Registration Statement exceed $100,000,000. Any securities
registered hereunder may be sold separately or as units with other
securities registered hereunder.
(3) An indeterminate principal amount of Senior Debt Securities or Subordinated
Debt Securities of Pennaco Energy, Inc. as may be sold from time to time
are being registered hereunder. If any Senior Debt Securities or
Subordinated Debt Securities of Pennaco Energy, Inc. are issued at an
original issue discount, then the offering price shall be in such greater
principal amount as shall result in an aggregate initial offering price not
to exceed $100,000,000, less the dollar amount of any securities previously
issued hereunder.
(4) An indeterminate number of shares of Common Stock of Pennaco Energy, Inc.
as may be sold from time to time are being registered hereunder. Also
includes such indeterminate number of shares of Common Stock as may be
issued upon conversion or exchange for any Debt Securities, Preferred Stock
or Trust Preferred Securities, that provide for conversion or exchange into
Common Stock. No separate consideration will be received for the Common
Stock issuable upon conversion of or in exchange for such securities.
(5) Each share of Common Stock is accompanied by a common share purchase right
pursuant to the Rights Agreement, dated as of February 24, 1999, between
Pennaco Energy, Inc. and Harris Trust and Savings Bank, as rights agent.
(6) An indeterminate number of shares of Preferred Stock of Pennaco Energy,
Inc. as may be sold from time to time are being registered hereunder.
(7) An indeterminate number of Common Stock Purchase Warrants of Pennaco
Energy, Inc., under which the holder, upon settlement of the Common Stock
Purchase Warrant, will purchase an indeterminate number of shares of Common
Stock of Pennaco Energy, Inc.
(8) An indeterminate amount and number of Trust Preferred Securities as may be
sold from time to time are being registered hereunder.
(9) No separate consideration will be received for the Guarantee of the Trust
Preferred Securities. The Guarantee includes the rights of holders of Trust
Preferred Securities under the guarantee and certain back-up undertakings,
as described in this Registration Statement.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to buy nor +
+shall there be any sale of these securities in any State in which such offer, +
+solicitation or sale would be unlawful prior to registration or qualification +
+under the securities laws of any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated August 10, 2000.
PROSPECTUS
$100,000,000
Pennaco Energy, Inc.
Senior Debt Securities
Subordinated Debt Securities
Preferred Stock
Common Stock
-----------
Pennaco Capital Trust I
Trust Preferred Securities
(Guaranteed by Pennaco Energy, Inc.)
The Company:
--Pennaco Energy, Inc. is an independent natural gas exploration and
production company.
--Our address is:
Pennaco Energy, Inc.
1050 17th Street, Suite 700
Denver, Colorado 80265
(303) 629-6700
The Trust:
--Pennaco Capital Trust I is a Delaware statutory business trust.
The Securities and the Offering:
Pennaco Energy, Inc. may offer and sell from time to time in one or more
offerings:
--secured or unsecured debt securities consisting of senior notes and
debentures and subordinated notes and debentures and/or other secured or
unsecured evidences of indebtedness in one or more series which may be
convertible for shares of our common stock;
--shares of preferred stock, in one or more series, which may be convertible
or exchangeable for common stock or debt securities;
--shares of common stock; and
--common stock purchase warrants.
Pennaco Capital Trust I, a wholly owned subsidiary of Pennaco Energy, Inc.,
may issue in one offering one series of trust preferred securities representing
undivided beneficial interests in the assets of the trust. As described in this
document, we will provide a limited guarantee of the payment by the trust of
distributions on the trust preferred securities and the payment upon
liquidation and redemption.
The aggregate initial offering price of the securities that we offer will not
exceed $100,000,000. We will offer the securities in amounts, at prices and on
terms to be determined by market conditions at the time of our offerings.
We will provide the specific terms of the securities in supplements to this
prospectus. You should read this prospectus and the prospectus supplement(s)
carefully before you invest in any of our securities. This prospectus may not
be used to consummate sales of our securities unless it is accompanied by a
prospectus supplement.
Our common stock is listed for trading on the American Stock Exchange under
the symbol "PN."
This Investment Involves Risk. See "Risk Factors" Beginning on Page 3.
Neither the SEC nor any state securities commission has determined whether
this prospectus is truthful or complete. Nor have they made, nor will they
make, any determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
About this Prospectus..................................................... 1
Where You Can Find More Information....................................... 1
Incorporation by Reference................................................ 2
Pennaco Energy, Inc....................................................... 2
Risk Factors.............................................................. 3
Forward-Looking Statements................................................ 9
Use of Proceeds........................................................... 9
Ratios of Earnings to Fixed Charges....................................... 9
Description of Debt Securities............................................ 9
Description of Equity Securities.......................................... 15
Description of Common Stock Purchase Warrants............................. 20
Description of Trust Preferred Securities................................. 21
Description of the Trust Guarantee........................................ 22
Relationship Among the Trust Preferred Securities, the Subordinated Debt
Securities and the Trust Guarantee....................................... 25
Plan of Distribution...................................................... 26
Legal Matters............................................................. 27
Experts................................................................... 27
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the SEC utilizing a "shelf" registration process. Under this shelf process, we
may sell different types of securities described in this prospectus in one or
more offerings up to a total offering amount of $100 million. This prospectus
provides you with a general description of the securities we may offer. Each
time we sell securities, we will provide a prospectus supplement that will
contain specific information about the terms of that offering and the
securities offered by us in that offering. The prospectus supplement may also
add, update or change information in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information."
As used in this prospectus, (a) any reference to the "Company," "Pennaco,"
"we," "our," "ours" or "us" means Pennaco Energy, Inc. and (b) the "trust"
means Pennaco Capital Trust I.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC as required by the Securities Exchange Act of 1934.
You may inspect those reports, proxy statements and other information at the
Public Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the Regional Offices of the SEC at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511, and 7 World Trade Center, New York, New York 10048. Please call the SEC
at 1-800-SEC-0300 for further information on the public reference rooms. You
may also obtain copies of those materials from the Public Reference Section of
the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Our SEC filings are available to the public over
the Internet or at the SEC's web site at http://www.sec.gov.
You may request a copy of these filings by writing or calling us at the
following address:
Pennaco Energy, Inc.
1050 17th Street, Suite 700
Denver, Colorado 80265
(303) 629-6700
We have filed with the SEC a registration statement on Form S-3 covering the
securities offered by this prospectus. This prospectus is only a part of the
registration statement and does not contain all of the information in the
registration statement. For further information on us and the securities being
offered, please review the registration statement and the exhibits that are
filed with it.
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in this prospectus. This
prospectus incorporates by reference the documents set forth below that we
previously filed with the SEC. These documents contain important information
about us.
The following documents that we have filed with the SEC are incorporated by
reference into this prospectus:
. Our Annual Report on Form 10-KSB for the year ended December 31, 1999;
. Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
. Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
and
. The descriptions of our common stock and the common share purchase
rights associated with our common stock contained in our Registration
Statement on Form 8-A filed April 16, 1999, including any amendment or
report filed for the purpose of updating such description.
All documents that we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 after the date of this prospectus will be
deemed to be incorporated in this prospectus by reference and will be a part of
this prospectus from the date of the filing of the document. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus will be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference in this prospectus modifies or supersedes that
statement. Any statement that is modified or superseded will not constitute a
part of this prospectus, except as modified or superseded.
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, upon written or
oral request, a copy of any or all of the documents incorporated by reference
in this prospectus, other than the exhibits to those documents, unless the
exhibits are specifically incorporated by reference into the information that
this prospectus incorporates. You should direct a request for copies to us at
the following address: Pennaco Energy, Inc. Attention: Glen C. Warren, Jr.,
1050 17th Street, Suite 700, Denver, Colorado 80265 (303) 629-6700.
PENNACO ENERGY, INC.
We are an independent exploration and production company. Our current
operations are completely focused on the exploration, development, acquisition,
and production of natural gas from coal bed methane properties located in the
Powder River Basin of northeastern Wyoming and southeastern Montana. We are one
of the largest holders of oil and gas leases covering coal bed methane
properties in the Powder River Basin and we believe that Pennaco is the only
publicly traded company focused solely on coal bed methane development in the
Powder River Basin. We were the most active coal bed methane operator in the
Powder River Basin in 1999 with 473 gross wells drilled and operated by the
Company, based on State of Wyoming Oil and Gas Commission information.
Our objective is to build an exploration and production company focused on
creating value for our stockholders through profitable per share growth in
reserves, production and cash flow.
We are incorporated in Delaware. Our principal executive offices are located
at 1050 17th Street, Suite 700, Denver, Colorado 80265 (303) 629-6700.
2
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RISK FACTORS
The securities to be offered by this prospectus may involve a high degree of
risk. These risks will be set forth in the prospectus supplement relating to
each such security. Certain risk factors relating to our business are set forth
below. These risk factors may be supplemented and amended by any risk factors
set forth in a prospectus supplement.
We depend on gas gathering, compression and transportation facilities to move
our production to market and we cannot guarantee that these facilities will be
available when needed or that we will have access to these facilities when
needed. If these facilities are not available, we will be unable to sell the
natural gas we have produced.
The marketability of our natural gas production depends in part on the
availability, proximity and capacity of gas gathering and compression systems,
pipelines and if necessary, processing facilities. To accommodate the amount of
gas expected to be produced in the area, existing pipelines must eventually be
expanded. The expansion of pipeline capacity in the area is likely to require
significant capital outlays by the pipeline companies and the related plans and
specifications are subject to government regulatory review, permits and
approvals. This approval process may result in delays in the commencement and
completion of any pipeline construction project. Our ability to market our
natural gas production could also be limited because much of our gas production
is transported on an interruptible basis and, therefore, the transporter could
unilaterally elect to stop transporting our natural gas due to lack of
available capacity. We cannot guarantee that our wells will not be shut-in for
significant periods of time due to the lack of capacity in existing pipelines
or an interruption in the transportation we have contracted for. Further, we
cannot guarantee that existing pipeline capacity will be expanded on a timely
basis or that we will be permitted to transport any volumes on these pipelines.
Estimates of oil and gas reserves are uncertain and inherently imprecise. Our
actual reserves could be materially less than the estimates incorporated by
reference in this document.
This document incorporates by reference estimates of our proved natural gas
reserves and the estimated future net revenues from these reserves. These
estimates are based upon various assumptions, including assumptions relating to
natural gas prices, drilling and operating expenses, capital expenditures,
taxes and the availability of funds. The process of estimating natural gas
reserves is complex. This process requires significant judgment in the
evaluation of available geological, geophysical, engineering and economic data
for each reservoir. Therefore, these estimates are inherently imprecise.
Because of the limited amount of performance data currently available for our
wells, the potential for future reserve revisions, either upward or downward,
is significantly greater than normal.
Actual future production, natural gas prices, revenues, operating expenses,
taxes, development expenditures and quantities of recoverable natural gas
reserves will most likely vary from those estimated. Any significant variance
could materially affect the estimated quantities and present value of future
net revenues set forth in this document. Our properties may also be susceptible
to hydrocarbon drainage from production by other operators on adjacent
properties. In addition, we may adjust estimates of proved reserves to reflect
production history, results of exploration and development, prevailing natural
gas prices and other factors, many of which are beyond our control.
At January 1, 2000, approximately 31% of our estimated proved reserves were
undeveloped. Undeveloped reserves, by their nature, are less certain. Recovery
of undeveloped reserves requires significant capital expenditures and
successful drilling operations. The reserve data assumes that we will make
significant capital expenditures to develop our reserves. Although we have
prepared estimates of our natural gas reserves and the costs associated with
these reserves in accordance with industry standards, we cannot assure you that
the estimated costs are accurate, that development will occur as scheduled or
that the actual results will be as estimated.
3
<PAGE>
You should not assume that the present value of future net cash flows
referred to in this document is the current market value of our estimated
natural gas reserves. In accordance with SEC requirements, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate. Actual future prices and costs
may be materially higher or lower than the prices and costs as of the date of
the estimate. Any changes in consumption by natural gas purchasers or changes
in governmental regulations or taxation could also affect actual future net
cash flows. The timing of both the production and the expenses from the
development and production of natural gas properties will affect the timing of
actual future net cash flows from proved reserves and their present value. In
addition, the 10% discount factor, which is required by the SEC to be used in
calculating discounted future net cash flows for reporting purposes, is not
necessarily the most appropriate discount factor. The effective interest rate
at various times and the risks associated with Pennaco or the oil and gas
industry in general will affect the accuracy of the 10% discount factor.
We have a limited operating history.
We generated no revenues until April 1999. We are subject to all the risks
inherent in the development of a new business. There is a limited operating
history upon which to base an assumption that we will be able to successfully
implement our business plans and achieve our business goals.
Compliance with environmental laws and regulations could limit our drilling
activities and increase our costs to operate. In turn, this could adversely
affect our development program.
The Wyoming Department of Environmental Quality controls the permitting
process relating to the surface discharge of water produced from our drilling
and production operations. The permitting process often requires testing and
analysis regarding the effect of water discharge on both the underground
aquifers and the surface, including erosion, irrigation and mineral deposits at
the discharge point. The completion of these studies as well as the
implementation of required remediation processes often causes considerable
delay in dewatering our wells and establishing commercial production. In some
cases, it may be necessary to install and operate treatment facilities or to
drill disposal wells to reinject the produced water back into underground
sedimentary formations adjacent to the coal seams. In the event we are unable
to obtain the appropriate permits or if applicable laws or regulations require
water to be disposed of in an alternative manner, the costs to dispose produced
water will increase. These costs could have a material adverse effect on some
of our operations in this area, including potentially rendering future
production and development in these affected areas uneconomic.
Drilling on federal lands in a large portion of the Powder River Basin is
currently limited until the completion of an environmental impact statement, or
EIS, by the BLM. The number of drilling permits allowed on federal lands
subject to the EIS are limited until the EIS is complete. This limitation could
adversely affect our ability to drill on federal lands. Approximately 50% of
our leasehold is comprised of federal acreage.
An EIS, the Existing EIS, was completed in November 1999 but will only allow
the issuance of approximately 800 to 1,000 drilling permits on federal lands.
Pennaco has received approximately 50 of these federal permits and estimates
that it will receive approximately 100 of these permits in total. The New EIS
will allow the drilling of wells on federal lands beyond the limits of the
Existing EIS. The BLM estimates that the New EIS, which began in the first
quarter of 2000, will require approximately 18 months to complete. The BLM also
estimates that the new EIS, when completed, will allow the drilling of 15,000
to 30,000 wells on federal, state and fee lands in the Wyoming portion of the
Powder River Basin before further drilling on federal lands is restricted.
Finally, there can be no assurance that the BLM will issue new drilling permits
on federal lands, once the New EIS is complete, at a pace that will allow the
Company to meet its drilling and growth objectives.
The BLM has also initiated an environmental assessment, or EA, which is
expected to allow the drilling of 1,500 to 2,500 wells on federal lands in the
Powder River Basin for the purpose of preventing the drainage of natural gas
from federal lands by producing wells on adjoining fee or state lands. The BLM
estimates that the
4
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EA will be completed in the fourth quarter of 2000. We cannot provide any
assurance as to the ultimate completion date of the New EIS or EA or that, when
completed, the New EIS and EA will permit us to develop our properties
according to our current plans.
We could face significant liabilities to governmental agencies and third
parties for discharging oil, natural gas or other pollutants into the air, soil
or water, and be required to spend substantial amounts on investigations,
litigation and remediation. We cannot be certain that existing environmental
laws or regulations, as interpreted now or in the future, or future laws or
regulations will not materially adversely affect our results of operations and
financial condition or that we will not face material indemnity claims with
respect to properties we own. Our industry is subject to extensive regulation
which may increase our costs.
Our business is subject to substantial regulation under local, state and
federal laws relating to the exploration for, and the development, production,
marketing, pricing, transportation and storage of natural gas, as well as
environmental and safety matters.
New laws or regulations, or changes to current requirements, could have a
material adverse effect on our business. In the past, prices of natural gas
have been controlled by governmental regulation and there can be no assurance
that price controls will not be implemented again.
Depressed prices for natural gas would affect our business.
Our revenues, operating results, profitability, future rate of growth and
the carrying value of our properties depend heavily on prevailing market prices
for natural gas. We expect the markets for natural gas to continue to be
volatile. Any substantial or extended decline in the price of natural gas would
have a material adverse effect on our financial condition and results of
operations. A decline could reduce our cash flow and borrowing capacity, as
well as the value and quantity of our natural gas reserves. Various factors
beyond our control will affect prices of natural gas, including:
--North American supplies of natural gas;
--domestic economic conditions;
--marketability of production;
--the level of consumer demand;
--the price, availability and acceptance of alternative fuels;
--the availability of pipeline and compressor capacity;
--weather conditions; and
--actions of federal, state, local and foreign authorities.
These external factors and the volatile nature of the energy markets make it
difficult to estimate future prices of natural gas.
We face risks related to title to the leases we enter into that may result in
additional costs and affect our operating results.
It is customary in the oil and gas industry to acquire a leasehold interest
in a property based upon a preliminary title investigation. If the title to the
leases we plan to acquire is defective, we could lose the money already spent
on acquisition and development, or incur substantial costs to cure the title
defect. Our oil and gas leases give us the right to develop and produce oil and
gas from the leased properties. It is possible that the terms of our oil and
gas leases may be interpreted differently depending on the state in which the
property is located. For instance, royalty calculations can be substantially
different from state to state, depending on each state's interpretation of
lease language concerning the costs of production. We cannot guarantee that
there will be no litigation concerning the proper interpretation of the terms
of our leases. Adverse decisions in such litigation could result in material
costs or the loss of one or more leases.
5
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We face competition from other companies in the exploration and development of
natural gas and for the acquisition of suitable leasehold interests. This
competition could result in an increase in our costs to acquire leasehold
interests and/or reduce the margins we achieve on sales of natural gas.
Competition to acquire leasehold interests, as well as competition in the
oil and gas exploration and production industry as a whole, is intense. We
compete with a number of companies that possess greater financial, marketing,
personnel, and other resources than are available to us. Different companies
evaluate potential acquisitions differently. This results in widely differing
bids. If other bidders are willing to pay higher prices than we believe are
supported by our evaluation criteria, then our ability to acquire prospects
could be limited. Low or uncertain prices for leasehold interests could cause
potential sellers to withhold or withdraw properties from the market. In such
an environment, we cannot guarantee that there will be a sufficient number of
suitable prospects available for acquisition. We may also be limited in our
options for developing prospects. As consolidation continues in the Powder
River Basin we expect leasehold acquisition costs to increase. In this type of
an environment, we will be required to acquire leasehold interests for costs
that are greater than we have paid historically.
We may not be able to obtain adequate financing to execute our operating
strategy.
We will address our long-term liquidity needs through the use of bank credit
facilities, the issuance of debt and equity securities, joint venture
financing, production payments and the use of cash provided by operating
activities.
The availability of these sources of capital will depend upon a number of
factors, some of which are beyond our control. These factors include general
economic and financial market conditions, natural gas prices and the market
value and operating performance of Pennaco. We may be unable to execute our
operating strategy if we cannot obtain capital from these sources.
Shut-in wells, curtailed production and other production interruptions may
affect our ability to do business and result in decreased revenues.
Our production may be curtailed or shut-in for considerable periods of time
due to any of the following factors:
--a lack of market demand;
--government regulation;
--pipeline and processing interruptions;
--production allocations;
--equipment or manpower shortages;
--diminished pipeline capacity; and
--force majeure.
These curtailments may continue for a considerable period of time resulting in
a material adverse effect on our results of operations and financial condition.
We are subject to operating risks that may not be covered by our insurance.
The exploration for and production of natural gas involves certain operating
hazards, such as:
--well blowouts;
--craterings;
--explosions;
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--fires;
--uncontrollable flows of natural gas or well fluids;
--formations with abnormal pressures;
--pipeline ruptures or spills;
--pollution;
--releases of toxic gas; and
--other environmental hazards and risks.
Any of these hazards could cause us to suffer substantial losses if they
occur. We may also be liable for environmental damage caused by previous owners
of the property we have leased. As a result, substantial liabilities to third
parties or governmental entities may be incurred, the payment of which could
reduce or eliminate our funds available for acquisitions, exploration and
development or cause us to suffer losses. In accordance with customary industry
practices, we maintain insurance against some, but not all, risks and losses.
We currently carry well control insurance as well as property and general
liability insurance. We may elect to self-insure if our management believes
that the cost of insurance, although available, is excessive relative to the
risks presented. The occurrence of an event that is not covered, or not fully
covered, by insurance could have a material adverse effect on our financial
condition and results of operations.
Exploratory drilling is an uncertain process with many risks.
Exploratory drilling involves numerous risks, including the risk that we
will not find any commercially productive natural gas reservoirs. The cost of
drilling, completing and operating wells is often uncertain, and a number of
factors can delay or prevent drilling operations, including:
--unexpected drilling conditions;
--pressure or irregularities in formations;
--equipment failures or accidents;
--adverse weather conditions;
--compliance with governmental requirements; and
--shortages or delays in the availability of drilling rigs and the delivery
of equipment.
Our future drilling activities may not be successful, nor can we be sure
that our overall drilling success rate or our drilling success rate for
activity within a particular area will not decline. Unsuccessful drilling
activities could have a material adverse effect on our results of operations
and financial condition. Also, we may not be able to obtain any options or
lease rights in potential drilling locations. Although we have identified
numerous potential drilling locations, we cannot be sure that we will ever
drill them or that we will produce natural gas from them or any other potential
drilling locations.
Hedging transactions may limit our potential gains.
To manage our exposure to price risks in the marketing of our natural gas,
we may enter into natural gas price hedging arrangements with respect to a
portion of our current production. These arrangements may include futures
contracts on the New York Mercantile Exchange or in the private over-the-
counter market. While intended to reduce the effects of volatile natural gas
prices, these transactions may limit our potential gains if natural gas prices
were to rise substantially over the price established by the hedge. In
addition, such transactions may expose us to the risk of financial loss in
certain circumstances, including instances in which:
--our production is less than expected;
--there is a widening of price differentials between delivery points for
our production and the delivery point assumed in the hedge arrangement;
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--the counterparties to our future contracts fail to perform the contracts;
or
--a sudden, unexpected event materially impacts natural gas prices.
The loss of key personnel could adversely affect our ability to operate.
Our operations depend on a relatively small group of key management and
technical personnel. We cannot assure you that these individuals will remain
with us for the immediate or foreseeable future. The unexpected loss of the
services of one or more of these individuals could have a detrimental effect on
Pennaco. We have entered into employment agreements with only two of our
principal executive officers, Mr. Rady and Mr. Warren. Our future success will
depend on our ability to attract and retain skilled management personnel.
Our shares that are eligible for future sale may have an adverse effect on the
price of our stock.
As of December 31, 1999, 18,813,344 shares of common stock were outstanding.
In addition, options and warrants to purchase 4,024,978 shares are outstanding,
of which 1,249,500 were exercisable at December 31, 1999. These outstanding
options and warrants are exercisable at prices ranging from $1.25 to $11.13 per
share. Sales of substantial amounts of common stock, or a perception that such
sales could occur, and the existence of options or warrants to purchase shares
of common stock at prices that may be below the then current market price of
the common stock could adversely affect the market price of the common stock
and could impair our ability to raise capital through the sale of our equity
securities.
We do not anticipate paying dividends in the foreseeable future.
We do not anticipate paying cash dividends on our common stock in the
foreseeable future. Further, our ability to pay dividends is limited by our
credit facility with US Bank.
Our certificate of incorporation and bylaws have provisions that discourage
corporate takeovers and could prevent stockholders from realizing a premium on
their investment.
Provisions in our certificate of incorporation, bylaws and stockholders'
rights plan and the provisions of the Delaware General Corporation Law may
encourage persons considering unsolicited tender offers or other unilateral
takeover proposals to negotiate with our board of directors rather than pursue
non-negotiated takeover attempts. Our certificate of incorporation provides for
a classified board of directors. Our certificate of incorporation also
authorizes our board of directors to issue preferred stock without stockholder
approval and to set the rights, preferences, voting rights and other
designations of those shares as the board may determine. Additional provisions
include restrictions on business combinations and the availability of
authorized but unissued common stock. These provisions, alone or in combination
with each other and with the rights plan described below, may discourage
transactions involving actual or potential changes of control, including
transactions that otherwise could involve payment of a premium over prevailing
market prices to stockholders for their common stock.
Our board of directors has adopted a stockholders' rights plan. The rights
plan is designed to enhance the board's ability to prevent an acquirer from
depriving stockholders of the long-term value of their investment and to
protect stockholders against attempts to acquire Pennaco by means of unfair or
abusive takeover tactics. However, the existence of the rights plan may impede
a takeover of Pennaco not supported by the board, including a takeover that may
be desired by a majority of our stockholders or involving a premium over the
prevailing stock price.
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FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus that relate to our
business and the industry we operate in are forward-looking. Statements or
assumptions related to or underlying such forward-looking statements include,
without limitation, statements regarding:
. the quality of our properties with regard to, among other things, the
existence of reserves in economic quantities;
. our ability to increase our reserves through exploration and
development;
. the number of locations to be drilled and the time frame within which
they will be drilled;
. our ability to transport gas out of the Powder River Basin in a timely
fashion;
. anticipated domestic demand for natural gas; and
. the adequacy of our sources of capital resources and liquidity.
Actual results may differ materially from those suggested by the forward-
looking statements for various reasons, including those discussed under the
caption "Risk Factors".
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, we will use the net
proceeds received by us from the sale of the securities offered by this
prospectus to refinance certain existing indebtedness and for general corporate
purposes. We may invest funds not required immediately for such purposes in
marketable securities and short-term investments. The trust will use the net
proceeds it receives from any sale of trust preferred securities offered by
this prospectus to purchase subordinated debt securities from us.
RATIOS OF EARNINGS TO FIXED CHARGES
FOR PENNACO ENERGY, INC.
A description of our ratio of earnings to fixed charges or earnings to
combined fixed charges and preferred stock dividends, as applicable, will
appear in an applicable prospectus supplement.
DESCRIPTION OF DEBT SECURITIES
Any debt securities we offer under our prospectus supplement will be our
direct general obligations. The debt securities may be secured or unsecured.
The debt securities will be either senior debt securities or subordinated debt
securities. The debt securities will be issued under one or more separate
indentures between us and a banking or financial institution, as trustee.
Senior debt securities will be issued under a "senior indenture" and
subordinated debt securities will be issued under a "subordinated indenture."
Together the senior indenture and the subordinated indenture are called
"indentures."
If Pennaco Capital Trust I issues trust preferred securities, we will also
issue subordinated debt securities to the trust or a trustee. If the trust is
subsequently dissolved upon the occurrence of the events described in the
prospectus supplement relating to the trust preferred securities, the trust or
trustee may distribute these subordinated debt securities ratably to the
holders of trust preferred securities.
We have summarized selected provisions of the indentures below. The summary
is not complete.
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General
The debt securities will be our direct obligations. The senior debt
securities will rank equally with all of our other senior and unsubordinated
debt. The subordinated debt securities will have a junior position to all of
our senior debt. If the debt securities are secured, the nature of the security
will be described in the prospectus supplement.
We conduct a substantial part of our operations through our subsidiaries. To
the extent of such operations, holders of debt securities will have a position
junior to the prior claims of creditors of our subsidiaries, including trade
creditors, debtholders, secured creditors, taxing authorities and guarantee
holders, and any preferred stockholders, except to the extent that we may
ourselves be a creditor with recognized claims against any subsidiary. Our
ability to pay the principal of and premium, if any, and interest on any debt
securities is, to a large extent, dependent upon the payment to us of
dividends, interest or other charges by our subsidiaries.
A prospectus supplement and an indenture relating to any series of debt
securities being offered will include specific terms relating to the offering.
These terms will include some or all of the following:
. the title and type of the debt securities;
. the total principal amount of the debt securities;
. the percentage of the principal amount at which the debt securities will
be issued and any payments due if the maturity of the debt securities is
accelerated;
. the percentage of the principal of the debt securities will be payable;
. the interest rate which the debt securities will bear and the interest
payment dates, if any, for the debt securities;
. the form of the subordinated debt securities we will issue to the trust
or a trustee if the trust issues trust preferred securities;
. in the case of subordinated debt securities issued to the trust or
trustees, the right to extend payment periods and the duration of that
extension;
. any optional redemption periods;
. any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem some or all of the debt securities;
. any provisions granting special rights to holders when a specified event
occurs;
. any changes to or additional events of default or covenants;
. any special tax implications of the debt securities, including
provisions for original issue discount securities, if offered; and
. any other terms of the debt securities.
None of the indentures will limit the amount of debt securities that may be
issued. Each indenture will allow debt securities to be issued up to the
principal amount that may be authorized by us and may be in any currency or
currency unit designated by us.
Debt securities of a series may be issued in registered, coupon or global
form.
Denominations
The prospectus supplement for each issuance of debt securities will state
that the securities will be issued in registered form of $1,000 each or
multiples thereof.
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Subordination
Under a subordinated indenture, payment of the principal, interest and any
premium on the subordinated debt securities will generally be subordinated and
junior in right of payment to the prior payment in full of all senior debt. The
subordinated indenture will provide that no payment of principal, interest and
any premium on the subordinated debt securities may be made in the event:
. of any insolvency, bankruptcy or similar proceeding involving us or our
property; or
. we fail to pay the principal, interest, any premium or any other amounts
on any senior debt when due.
The subordinated indenture will not limit the amount of senior debt that we
may incur. "Senior debt" includes all notes or other unsecured evidences of
indebtedness, including guarantees given by us, for money borrowed by us, not
expressed to be subordinate or junior in right of payment to any of our other
indebtedness.
Consolidation, Merger or Sale
Each indenture generally will permit a consolidation or merger between us
and another corporation. They also will permit the sale by us of all or
substantially all of our property and assets. If this happens, the remaining or
acquiring corporation shall assume all of our responsibilities and liabilities
under the indentures, including the payment of all amounts due on the debt
securities and performance of the covenants in the indentures. However, we will
consolidate or merge with or into any other corporation or sell all or
substantially all of our assets only according to the terms and conditions of
the indentures. The remaining or acquiring corporation will be substituted for
us in the indentures with the same effect as if it had been an original party
to the indentures. Thereafter, the successor corporation may exercise our
rights and powers under any indenture, in our name or in its own name. Any act
or proceeding required or permitted to be done by our board of directors or any
of our officers may be done by the board or officers of the successor
corporation. If we sell all or substantially all of our assets, we shall be
released from all our liabilities and obligations under any indenture and under
the debt securities.
Modification of Indentures
Each indenture will provide that our rights and obligations and the rights
of the holders may be modified with the consent of the holders of a majority in
aggregate principal amount of the outstanding debt securities of each series
affected by the modification. No modification of the principal or interest
payment terms, and no modification reducing the percentage required for
modifications, will be effective against any holder without its consent.
Events of Default
"Event of default," when used in an indenture, will mean any of the
following:
. failure to pay the principal of or any premium on any debt security when
due;
. failure to deposit any sinking fund payment when due;
. failure to pay interest on any debt security for 30 days;
. failure to perform any other covenant in the indenture that continues
for 90 days after being given written notice;
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. certain events in bankruptcy, insolvency or reorganization of us; or
. any other event of default included in any indenture or supplemental
indenture.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under an indenture. The trustee may withhold notice to the
holders of debt securities of any default (except in the payment of principal
or interest) if it considers such withholding of notice to be in the best
interests of the holders.
If an event of default for any series of debt securities occurs and
continues, the trustee or the holders of a specified percentage in aggregate
principal amount of the debt securities of the series may declare the entire
principal of all the debt securities of that series to be due and payable
immediately. If this happens, subject to certain conditions, the holders of a
specified percentage of the aggregate principal amount of the debt securities
of that series can void the declaration.
Other than its duties in case of a default, a trustee is not obligated to
exercise any of its rights or powers under any indenture at the request, order
or direction of any holders, unless the holders offer the trustee reasonable
indemnity. If they provide this reasonable indemnity, the holders of a majority
in principal amount of any series of debt securities may direct the time,
method and place of conducting any proceeding or any remedy available to the
trustee, or exercising any power conferred upon the trustee, for any series of
debt securities.
Covenants
Under the indentures, we will:
. pay the principal of, and interest and any premium on, the debt
securities when due;
. maintain a place of payment;
. deliver a report to the trustee at the end of each fiscal year reviewing
our obligations under the indentures; and
. deposit sufficient funds with any paying agent on or before the due date
for any principal, interest or premium.
We will describe any restrictive covenants in the prospectus supplement.
Payment and Transfer
Principal, interest and any premium on fully registered securities will be
paid at designated places. Payment will be made by check mailed to the persons
in whose names the debt securities are registered on days specified in the
indentures or any prospectus supplement. Debt securities payments in other
forms will be paid at a place designated by us and specified in a prospectus
supplement.
Fully registered securities may be transferred or exchanged at the corporate
trust office of the trustee or at any other office or agency maintained by us
for such purposes, without the payment of any service charge except for any tax
or governmental charge.
Global Securities
Certain series of the debt securities may be issued as permanent global debt
securities to be deposited with a depositary with respect to that series.
Unless otherwise indicated in the prospectus supplement, the following is a
summary of the depository arrangements applicable to debt securities issued in
permanent global form and for which the Depositary Trust Company, or DTC, acts
as depositary.
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Each global debt security will be deposited with, or on behalf of, DTC, as
depositary, or its nominee and registered in the name of a nominee of DTC.
Except under the limited circumstances described below, global debt securities
are not exchangeable for definitive certificated debt securities.
Ownership of beneficial interests in a global debt security is limited to
institutions that have accounts with DTC or its nominee ("participants") or
persons that may hold interests through participants. In addition, ownership of
beneficial interests by participants in a global debt security will be
evidenced only by, and the transfer of that ownership interest will be effected
only through, records maintained by DTC or its nominee for a global debt
security. Ownership of beneficial interests in a global debt security by
persons that hold through participants will be evidenced only by, and the
transfer of that ownership interest within that participant will be effected
only through, records maintained by that participant. DTC has no knowledge of
the actual beneficial owners of the debt securities. Beneficial owners will not
receive written confirmation from DTC of their purchase, but beneficial owners
are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
participants through which the beneficial owners entered the transaction. The
laws of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global debt security.
Payment of principal of, and interest on, debt securities represented by a
global debt security registered in the name of or held by DTC or its nominee
will be made to DTC or its nominee, as the case may be, as the registered owner
and holder of the global debt security representing the debt securities. We
have been advised by DTC that upon receipt of any payment of principal of, or
interest on, a global debt security, DTC will immediately credit accounts of
participants on its book-entry registration and transfer system with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of that global debt security as shown in the records of DTC.
Payments by participants to owners of beneficial interests in a global debt
security held through those participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the sole responsibility of those participants, subject to any
statutory or regulatory requirements that may be in effect from time to time.
Neither we, nor any trustee nor any of our respective agents will be
responsible for any aspect of the records of DTC, any nominee or any
participant relating to, or payments made on account of, beneficial interests
in a permanent global debt security or for maintaining, supervising or
reviewing any of the records of DTC, any nominee or any participant relating to
such beneficial interests.
A global debt security is exchangeable for definitive debt securities
registered in the name of, and a transfer of a global debt security may be
registered to, any person other than DTC or its nominee, only if:
. DTC notifies us that it is unwilling or unable to continue as depositary
for that global debt security or at any time DTC ceases to be registered
under the Exchange Act;
. we determine in our discretion that the global debt security shall be
exchangeable for definitive debt securities in registered form; or
. there shall have occurred and be continuing an event of default or an
event which, with notice or the lapse of time or both, would constitute
an event of default under the debt securities.
Any global debt security that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive debt securities in
registered form, of like tenor and of an equal aggregate principal amount as
the global debt security, in denominations of $1,000 and integral multiples
thereof. The definitive debt securities will be registered by the registrar in
the name or names instructed by DTC. We expect that these instructions may be
based upon directions received by DTC from its participants with respect to
ownership of beneficial interests in the global debt security.
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Except as provided above, owners of the beneficial interests in a global
debt security will not be entitled to receive physical delivery of debt
securities in definitive form and will not be considered the holders of debt
securities for any purpose under the indentures. No global debt security shall
be exchangeable except for another global debt security of like denomination
and tenor to be registered in the name of DTC or its nominee. Accordingly, each
person owning a beneficial interest in a global debt security must rely on the
procedures of DTC and, if that person is not a participant, on the procedures
of the participant through which that person owns its interest, to exercise any
rights of a holder under the global debt security or the indentures.
DTC has advised us that DTC will take any action permitted to be taken by a
holder of debt securities only at the direction of one or more participants to
whose account the DTC interests in a global debt security are credited and only
in respect of the aggregate principal amount as to which the participant or
participants has or have given direction.
DTC has advised us that DTC is a limited purpose trust company organized
under the laws of the State of New York, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered under the Exchange Act. DTC was created
to hold securities of its participants and to facilitate the clearance and
settlement of securities transactions among its participants in those
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations. DTC is
owned by a number of its participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to DTC's book-entry system is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the SEC.
Defeasance
We will be discharged from our obligations on the debt securities of any
series at any time if we deposit with the trustee sufficient cash or government
securities to pay the principal, interest, any premium and any other sums due
to the stated maturity date or a redemption date of the debt securities of the
series. If this happens, the holders of the debt securities of the series will
not be entitled to the benefits of the indenture except for registration of
transfer and exchange of debt securities and replacement of lost, stolen or
mutilated debt securities.
This discharge may occur only if, among other things, we have delivered to
the trustee an opinion of counsel stating that we have received from, or there
has been published by, the United States Internal Revenue Service a ruling or,
since the date of execution of the indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the
debt securities of that series will not recognize income, gain or loss for
United States federal income tax purposes as a result of the deposit,
defeasance and discharge and will be subject to United States federal income
tax on the same amounts and in the same manner and at the same times as would
have been the case if the deposit, defeasance and discharge had not occurred.
Meetings
Each indenture contains provisions describing how meetings of the holders of
debt securities of a series may be convened. A notice of the meeting must
always be given in the manner described under "--Notices" below. Generally
speaking, except for any consent that must be given by all holders of a series
as described under "--Modification of Indentures" above, any resolution
presented at a meeting of the holders of a series of debt securities may be
adopted by the affirmative vote of the holders of a majority in principal
amount of the outstanding debt securities of that series, unless the indenture
allows the action to be voted upon to be taken
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with the approval of the holders of a different specified percentage of
principal amount of outstanding debt securities of a series. In that case, the
holders of outstanding debt securities of at least the specified percentage
must vote in favor of the action for the action to be approved. Any resolution
passed or decision taken at any meeting of holders of debt securities of any
series in accordance with the applicable indenture will be binding on all
holders of debt securities of that series and any related coupons, unless, as
discussed in "--Modification of Indentures" above, the action is only effective
against holders that have approved it. The quorum at any meeting called to
adopt a resolution, and at any reconvened meeting, will be holders holding or
representing a majority in principal amount of the outstanding debt securities
of a series.
Governing Law
Each indenture and the debt securities will be governed by and construed in
accordance with the laws of the State of New York.
Notices
Notices to holders of debt securities will be given by mail to the addresses
of such holders as they appear in the security register for such debt
securities.
No Personal Liability of Officers, Directors, Employees or Stockholders
No director, officer, employee or stockholder, as such, of ours or of any of
our affiliates shall have any personal liability in respect of our obligations
under any indenture or the debt securities by reason of his, her or its status
as such.
DESCRIPTION OF EQUITY SECURITIES
As of July 31, 2000, our authorized capital stock consisted of 50,000,000
shares of $.001 par value common stock and 10,000,000 shares of $.001 par value
preferred stock. The following summary of the terms and provisions of our
capital stock does not purport to be complete and is qualified in its entirety
by reference to our certificate of incorporation and bylaws, which have been
filed as exhibits to our registration statement, of which this prospectus is a
part, and applicable law.
Common Stock
Listing
Our outstanding shares of common stock are listed on the American Stock
Exchange under the symbol "PN."
Dividends
We have never paid cash dividends on our capital stock and we do not
anticipate paying cash dividends in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of our board of
directors and will be dependent upon our financial condition, results of
operation, capital requirements and other factors that the board of directors
deems to be relevant. In addition, our credit facility contains restrictions on
our ability to pay cash dividends.
Voting Rights
Subject to any special voting rights of any series of preferred stock that
we may issue in the future, the holders of our common stock may vote one vote
for each share held in the election of directors and on all other matters voted
upon by our stockholders. Holders of common stock may not cumulate their votes
in the election of directors.
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Other Rights
We will notify our stockholders of any stockholders' meetings according to
our bylaws and applicable law. If we liquidate, dissolve or wind-up our
business, either voluntarily or not, our stockholders will share equally in the
assets remaining after we pay our creditors and preferred stockholders, if we
have outstanding preferred stock at such time. The holders of common stock have
no statutory preemptive rights to purchase our shares of stock. Shares of
common stock are not subject to any redemption provisions and are not
convertible into any of our other securities.
Preferred Stock
Subject to the provisions of our certificate of incorporation, the board of
directors has the authority to issue up to 10,000,000 shares of preferred stock
without the approval of our stockholders. The following description of the
terms of the preferred stock sets forth the general terms and provisions of our
authorized preferred stock. If we offer preferred stock, a description will be
filed with the SEC and with the Secretary of State of Delaware and the specific
designations and rights will be described in a prospectus relating to the
preferred stock, including the following terms:
. the series, the number of shares offered and the liquidation value of
the preferred stock;
. the price at which the preferred stock will be issued;
. whether the preferred stock is entitled to dividends, and if so, the
dividend rate, the dates on which the dividends will be payable and
other terms relating to the payment of dividends on the preferred stock;
. whether there is a liquidation preference for the preferred stock;
. whether the preferred stock has voting rights;
. whether the preferred stock is redeemable or subject to a sinking fund,
and the terms of any redemption or sinking fund;
. whether the preferred stock is convertible or exchangeable for any other
securities, and the terms of any conversion; and
. any additional rights, preferences, qualifications, limitations and
restrictions of the preferred stock.
Our board of directors can, without the approval of the stockholders, issue
one or more series of preferred stock. Subject to the provisions of our
certificate of incorporation and limitations prescribed by law, our board of
directors may adopt resolutions to determine the number of shares of each
series and the rights, preferences and limitations of each series including the
dividend rights, voting rights, conversion rights, redemption rights and any
liquidation preferences of any wholly unissued series of preferred stock, the
number of shares constituting each series and the terms and conditions of
issue. Under some circumstances, preferred stock could restrict dividend
payments to the holders of our common stock.
Undesignated preferred stock may enable our board of directors to render
more difficult or to discourage a third party's attempt to obtain control of
Pennaco by means of a tender offer, proxy contest, merger or otherwise, and to
thereby protect the continuity of our management. The issuance of shares of
preferred stock may adversely affect the rights of the holders of our common
stock. For example, any preferred stock issued may rank prior to our common
stock as to dividend rights, liquidation preference or both, may have full or
limited voting rights and may be convertible into shares of common stock. As a
result, this issuance of shares of preferred stock may discourage bids for our
common stock or may otherwise adversely affect the market price of our common
stock or any existing preferred stock.
Anti-Takeover Provisions
Certain provisions in our certificate of incorporation, bylaws and our
stockholders' rights plan and provisions of Section 203 of the Delaware General
Corporation Law, or the DGCL, may encourage persons
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considering unsolicited tender offers or other unilateral takeover proposals to
negotiate with our board of directors rather than pursue non-negotiated
takeover attempts.
Classified Board of Directors and Limitations of Removal of Directors
Our board of directors is divided into three classes. The directors of each
class are elected for three-year terms, and the terms of office of the three
classes are staggered so that directors from a single class are elected at each
annual meeting of stockholders. Directors can only be removed for cause. A
staggered board makes it more difficult for stockholders to change the majority
of the directors and instead promotes a continuity of existing management.
No Stockholder Action Without a Meeting
Under the DGCL, unless the certificate of incorporation specifies otherwise,
any action that could be taken by stockholders at an annual or special meeting
may be taken, instead, without a meeting and without notice to or a vote of
other stockholders if a consent in writing is signed by holders of outstanding
stock having voting power that would be sufficient to take such action at a
meeting at which all outstanding shares were present or voted. Our certificate
of incorporation provide that stockholder action may be taken only at an annual
or special meeting of stockholders. As a result, stockholders may not act upon
any matter except at a duly called meeting.
Blank Check Preferred Stock
Our certificate of incorporation authorizes the issuance of blank check
preferred stock. The board of directors can set the voting rights, redemption
rights, conversion rights and other rights relating to the preferred stock and
could issue the preferred stock in either a private or public transaction
without the approval of our stockholders. In some circumstances, the blank
check preferred stock could be issued and have the effect of preventing a
merger, tender offer or other takeover attempt which the board of directors
opposes.
Delaware Takeover Statute.
We are subject to Section 203 of the DGCL. In general, Section 203 prevents
an interested stockholder, i.e., any person owning 15% or more of the Company's
outstanding voting stock, from engaging in a business combination, as defined
below, with a Delaware corporation for a period of three years from the date
such person becomes an interested stockholder of such corporation, unless:
. before such person became an interested stockholder, the board of
directors of the corporation approved the transaction or the business
combination in which the interested stockholder became an interested
stockholder;
. upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held
by directors who are also officers of the corporation and stock held by
certain employee stock plans; or
. on or subsequent to the date of the transaction in which such person
became an interested stockholder, the business combination is approved
by the board of directors of the corporation and authorized at a meeting
of stockholders by the affirmative vote of the holders of at least two-
thirds of the outstanding voting stock of the corporation not owned by
the interested stockholder.
Section 203 defines a "business combination" to include:
. any merger or consolidation involving a corporation and an interested
stockholder;
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving an interested stockholder;
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. subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to an interested stockholder;
. any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series
of the corporation beneficially owned by the interested stockholder; or
. the receipt by an interested stockholder of any loans, guarantees,
pledges or other financial benefits provided by or through the
corporation.
In general, Section 203 defines an "interested stockholder" as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
Rights Plan
Our board of directors has adopted a stockholder's rights plan. In
connection with the adoption of the rights plan, our board of directors
declared a dividend distribution of one common stock purchase right for each
outstanding share of our common stock. The distribution was payable to the
stockholders of record at the close of business on the record date, March 9,
1999. Each right entitles its registered holder to purchase from Pennaco one-
half of a share of common stock, at a price of $20, which price is subject to
adjustment. The following is only a summary of the rights; the full description
and terms of the rights are set forth in a rights agreement between Pennaco and
Harris Trust and Savings Bank, as rights agent. The rights plan is filed as an
exhibit to a Form 8-A filed by Pennaco with the SEC on April 16, 1999. This
summary description of the rights is not complete. You should refer to the
Rights Agreement for a complete discussion of the rights.
Initially, the rights will attach to all certificates representing shares of
our outstanding stock, and no separate rights certificates will be distributed.
The rights will separate from our common stock and the distribution date of the
rights will occur upon the earlier of:
. ten days following the date of public announcement that a person or
group of persons has become an "acquiring person", which is defined
below; or
. ten business days, or a later date as may be determined by action of our
board of directors prior to the time a person becomes an acquiring
person, following the commencement of, or the announcement of an
intention to make, a tender offer or exchange offer upon consummation of
which the offeror would, if successful, become an acquiring person.
The foregoing date that is first to occur is the "distribution date."
The term "acquiring person" means any person who or which, together with all
of its affiliates and associates, is the beneficial owner of 15% or more of our
outstanding common stock, but shall not include:
. Pennaco or any of our subsidiaries or any of our employee benefit plans;
or
. RIS Resources International Corp. and its subsidiaries or any other
person or entity in which RIS is at the time of determination the direct
record and beneficial owner of all outstanding voting securities.
The rights agreement provides that, until the distribution date, the rights
will be transferred with and only with our common stock. Until the distribution
date, or an earlier redemption or expiration of the rights, new common stock
certificates issued after March 9, 1999, upon transfer or new issuance of
common stock, will contain a notation incorporating the rights agreement by
reference. Until the distribution date, or an earlier redemption or expiration
of the rights, the surrender for transfer of any certificates for our common
stock outstanding as of March 9, 1999, even without the notation or a copy of
the summary of rights being attached, will also constitute the transfer of the
rights associated with our common stock represented by such certificate. As
soon as possible following the distribution date, separate certificates
evidencing the rights will be mailed to holders of record of our common stock
as of the close of business on the distribution date and such separate rights
certificates alone will evidence the rights.
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The rights are not exercisable until the distribution date and will expire
on March 9, 2009.
The price payable and the number of one-half of a share of our common stock
or other securities or property issuable upon exercise of the rights are
subject to adjustment from time to time to prevent dilution:
. in the event of a stock dividend on, or a subdivision, combination or
reclassification of, our common stock;
. upon the grant to holders of our common stock of rights or warrants to
subscribe for or purchase shares of our common stock at a price, or
securities convertible into our common stock with a conversion price,
less than the then current market price of our common stock; or
. upon the distribution to holders of our common stock of evidences of
indebtedness or assets, excluding regular periodic cash dividends paid
or dividends payable in our common stock, or of subscription rights or
warrants, other than those referred to in the second point above.
The number of outstanding rights and the number of one-half of a share of
common stock issuable upon exercise of each right are also subject to
adjustment in the event of a stock split of the common stock or a stock
dividend on the common stock payable in the common stock or subdivisions,
consolidations or combinations of the common stock occurring, in any such case,
before the distribution date.
In the event that following a stock acquisition date, which is the date of
public announcement that a person has become an acquiring person, we are
acquired in a merger or other business combination transaction or more than 50%
of our consolidated assets or earning power are sold, proper provision will be
made so that each holder of a right will thereafter have the right to receive,
upon the exercise thereof at the then current exercise price of the right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value of two times the exercise price of
the right, which is known as the flip-over right.
In the event that a person other than an exempt person becomes an acquiring
person, proper provision shall be made so that each holder of a right, other
than the acquiring person and its affiliates and associates, will thereafter
have the right to receive upon exercise that number of shares of common stock,
or, under certain circumstances, cash, other equity securities or property of
Pennaco having a market value equal to two times the purchase price of the
rights, which is known as the flip-in right. Upon the occurrence of the
foregoing event giving rise to the exercisability of the rights, any rights
that are or were at any time owned by an acquiring person will become void.
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment of at least 1% in
the purchase price. Upon exercise of the rights, no fractional shares of common
stock will be issued and cash will be paid in the place of fractional shares of
common stock.
At any time prior to the earlier to occur of (1) 5:00 p.m., Houston, Texas
time, on the 10th day after the stock acquisition date or (2) the expiration of
the rights, we may redeem the rights in whole, but not in part, at a price of
$0.01 per right, which is known as the redemption price; provided, that (a) if
the board of directors authorizes redemption on or after the time a person
becomes an acquiring person, then that authorization must be by board approval
and (b) the period for redemption may, upon board approval, be extended by
amending the rights agreement. The term "board approval" means the approval of
a majority of our directors. Immediately upon any redemption of the rights
described in this paragraph, the right to exercise the rights will terminate
and the only right of the holders of rights will be to receive the redemption
price.
The terms of the rights may be amended by the board of directors without the
consent of the holders of the rights at any time and from time to time provided
that such amendment does not adversely affect the interests of the holders of
the rights. In addition, during any time that the rights are subject to
redemption, the terms of the rights may be amended by board approval, including
an amendment that adversely affects the interests of the holders of the rights,
without the consent of the holders of rights.
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Until a right is exercised, the holder of the rights, as such, will have no
rights as a stockholder of Pennaco, including, without limitation, the right to
vote or to receive dividends. While the distribution of the rights will not be
taxable to our stockholders or to Pennaco, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the rights become
exercisable for common stock or other consideration.
Limitation of Liability of Officers and Directors
We believe that certain provisions of our certificate of incorporation and
bylaws will be useful to attract and retain qualified persons as directors and
officers. Our certificate of incorporation limits the liability of directors to
the fullest extent permitted by Delaware law. This is intended to allow our
directors the benefit of Section 102(b)(7) of the DGCL which provides that a
certificate of incorporation may contain a provision eliminating or limiting
the personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director
(a) for any breach of the director's duty of loyalty to the corporation
or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
(c) under Section 174 of the DGCL (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital
stock) or
(d) for any transaction for which the director derived an improper
personal benefit.
Article VIII of Pennaco's Certificate of Incorporation contain such a
provision.
Our certificate of incorporation and bylaws generally require us to
indemnify our directors and officers to the fullest extent permitted by
Delaware law. Our certificate of incorporation and bylaws also require us to
advance expenses to our directors and officers to the fullest extent permitted
by Delaware upon the receipt of an undertaking by or on behalf of such director
or officer to repay such amount if it should be ultimately determined that they
are not entitled to indemnification by Pennaco. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling Pennaco pursuant to the foregoing provisions,
we have been informed that, in the opinion of the SEC, this indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. We intend to obtain, prior to the completion of this offering,
officer and director liability insurance with respect to liabilities arising
out of certain matters, including matters arising under the Securities Act.
There is no pending litigation or proceeding involving a director, officer,
associate or other agent of Pennaco as to which indemnification is being
sought, nor are we aware of any threatened litigation that may result in claims
for indemnification by any director, officer, associate or other agent.
Transfer Agent
Our transfer agent and registrar for our common stock is Harris Trust and
Savings Bank, P.O. Box A3504, Chicago, Illinois 60690-3504.
DESCRIPTION OF COMMON STOCK PURCHASE WARRANTS
We may issue common stock purchase warrants, including warrants obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of common stock at a future date or dates. The consideration per
share of common stock may be fixed at the time the common stock purchase
warrants are issued or may be determined by reference to a specific formula set
forth in the common stock purchase warrants. Any formula may include anti-
dilution provisions to adjust the number of shares issuable pursuant to the
common stock purchase warrants upon the occurrence of certain events. The
applicable prospectus supplement will describe the terms of any common stock
purchase warrants.
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DESCRIPTION OF TRUST PREFERRED SECURITIES
Pennaco Capital Trust I may issue in one offering one series of trust
preferred securities having terms described in the prospectus supplement. The
trust's declaration of trust authorizes the administrative trustees to issue on
behalf of the trust one series of trust preferred securities. The trust's
declaration of trust, as amended in connection with the trust's sale of trust
preferred securities, will be qualified as an indenture under the Trust
Indenture Act.
The trust preferred securities will have such terms, including
distributions, redemption, voting, conversion, exchange, liquidation rights and
such other preferred, deferred or other special rights or such restrictions as
are set forth in the declaration or made part of the declaration by the Trust
Indenture Act. You should refer to the prospectus supplement relating to the
trust preferred securities of the trust for specific terms, including:
. the distinctive designation of the trust preferred securities;
. the number of trust preferred securities issued by the trust;
. the annual distribution rate (or method of determining such rate) for
trust preferred securities issued by the trust and the date or dates
upon which the distributions are payable;
. the date or dates or method of determining the date or dates from which
distributions on trust preferred securities will be cumulative;
. the amount or amounts that will be paid out of the assets of the trust
to the holders of trust preferred securities upon voluntary or
involuntary dissolution, winding-up or termination of the trust;
. the obligation, if any, of the trust to purchase or redeem the trust
preferred securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which, trust
preferred securities will be purchased or redeemed, in whole or in part,
pursuant to that obligation;
. the voting rights, if any, of trust preferred securities in addition to
those required by law, including the number of votes per trust preferred
security and any requirement for the approval by the holders of trust
preferred securities, as a condition to specified action or amendments
to the declaration of the trust;
. the terms and conditions, if any, upon which the assets of the trust may
be distributed to holders of trust preferred securities;
. provisions regarding convertibility or exchangeability of the trust
preferred securities for our capital stock or debt securities;
. if applicable, any securities exchange upon which the trust preferred
securities will be listed; and
. any other relevant rights, preferences, privileges, limitations or
restrictions of trust preferred securities not inconsistent with the
declaration of the trust or with applicable law.
We will guarantee all trust preferred securities offered to the limited
extent set forth below under "Description of the Trust Guarantee."
Any U.S. federal income tax considerations applicable to the offering of
trust preferred securities will be described in the applicable prospectus
supplement.
In connection with the issuance of trust preferred securities, the trust
will also issue one series of trust common securities. The declaration of trust
authorizes the administrative trustees of the trust to issue on behalf of the
trust one series of trust common securities. The trust's declaration of the
trust will set forth the terms of the trust common securities, including terms
regarding distributions, redemption, voting, liquidation rights and any
restrictions. The terms of the trust common securities issued by the trust will
be substantially identical to the terms of the trust preferred securities
issued by the trust. The trust common securities will rank equally, and
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payments will be made on the trust common securities pro rata, with the trust
preferred securities. However, upon an event of default under the declaration,
the rights of the holders of the trust common securities to payment in respect
of distributions and payments upon liquidation, redemption and otherwise will
be subordinated to the rights of the holders of the trust preferred securities.
Except in certain limited circumstances discussed in the declaration, the trust
common securities will also carry the right to vote to appoint, remove or
replace any of the trustees of the trust. All of the trust common securities of
the trust will be directly or indirectly owned by us.
DESCRIPTION OF THE TRUST GUARANTEE
A summary of information concerning the trust guarantee which we will
execute and deliver for the benefit of the holders of the trust preferred
securities is set forth below. The trust guarantee will be qualified as an
indenture under the Trust Indenture Act. A bank to be named in the prospectus
supplement will act as the trust guarantee trustee, or indenture trustee, under
the trust guarantee. The terms of the trust guarantee will be those set forth
in the trust guarantee and those made part of the trust guarantee by the Trust
Indenture Act. The following is a summary of the material terms and provisions
of the trust guarantee. You should refer to the provisions of the form of trust
guarantee and the Trust Indenture Act for a more complete discussion. We have
filed the form of trust guarantee as an exhibit to the registration statement
of which this prospectus is a part. The trust guarantee will be held by the
trust guarantee trustee for the benefit of the holders of the trust preferred
securities.
General
Pennaco will irrevocably and unconditionally agree, to the extent set forth
in the trust guarantee, to pay the trust guarantee payments described below in
full to the holders of the trust preferred securities issued by the trust, in
the event they are not paid by or on behalf of the trust when due, regardless
of any defense, right of set-off or counterclaim which the trust may have or
assert.
The following payments with respect to trust preferred securities of the
trust, or trust guarantee payments, not paid by the trust when due, will be
subject to the related trust guarantee:
. any accrued and unpaid distributions required to be paid on the trust
preferred securities, to the extent the trust will have funds legally
and immediately available for payment;
. the redemption price of any trust preferred securities called for
redemption by that trust, including all accrued and unpaid distributions
to the date of redemption, to the extent the trust has funds available
for payment; and
. upon dissolution, winding-up or termination of the trust (other than in
connection with the distribution of the assets of the trust to the
holders of trust preferred securities or the redemption of all of the
trust preferred securities), the lesser of:
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the trust preferred securities to the date of payment,
to the extent the trust has funds available for payment; and
(b) the amount of assets of the trust remaining available for
distribution to holders of its trust preferred securities in
liquidation of the trust.
Our obligation to make a trust guarantee payment will be satisfied by our
direct payment of the required amounts to the holders of the trust preferred
securities or by causing the trust to pay the required amounts to the holders.
The trust guarantee will be a full and unconditional guarantee with respect
to the trust preferred securities, but will not apply to any payment of
distributions when the trust does not have funds "legally and immediately"
available for payment. If we do not make interest payments on the subordinated
debt securities purchased by the trust, the trust will not pay distributions on
the trust preferred securities issued by it and will not have funds "legally
and immediately" available for such payment.
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We have also agreed separately to irrevocably and unconditionally guarantee
the obligations of the trust with respect to the trust common securities (the
trust common securities guarantee) to the same extent as the trust guarantee,
except that upon an event of default under the subordinated indenture relating
to the subordinated debt securities purchased by that trust, holders of trust
preferred securities will have priority over holders of trust common
securities with respect to distributions and payments on liquidation,
redemption or otherwise.
Covenants
In the trust guarantee, we will covenant that, so long as any trust
preferred securities remain outstanding, if any event that would constitute an
event of default under the trust guarantee or the declaration of trust occurs,
then we will not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make any liquidation payment with respect
to, any of our capital stock, with the following exceptions:
. purchases or acquisitions of shares of our common stock in connection
with our obligations under our employee benefit plans;
. purchases or acquisitions of shares of our common stock in connection
with our obligations under any contract or security requiring us to
purchase shares of our common stock; or
. the purchase of fractional interests in shares of our capital stock as a
result of a reclassification of our capital stock or the exchange or
conversion of one class or series of our capital stock for another class
or series of our capital stock, or make any guarantee payments with
respect to the foregoing.
Additionally, we will not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities,
including guarantees, issued by us which rank equally with or junior to the
subordinated debt securities.
Modification of the Trust Guarantee; Assignment
Except with respect to any changes which do not adversely affect the rights
of holders of trust preferred securities, in which case no vote will be
required, the trust guarantee may be amended only with the prior approval of
the holders of not less than a majority in liquidation amount of the
outstanding trust preferred securities of the trust. The manner of obtaining
this approval of holders of the trust preferred securities will be described
in an accompanying prospectus supplement. All guarantees and agreements
contained in the trust guarantee will bind our successors, assigns, receivers,
trustees and representatives and will inure to the benefit of the holders of
the trust preferred securities of the trust then outstanding.
Termination
The trust guarantee will terminate as to the trust preferred securities of
the trust upon the first to occur of:
. full payment of the redemption price of all trust preferred securities
of the trust;
. distribution of the assets of the trust to the holders of the trust
preferred securities of the trust; and
. full payment of the amounts payable upon liquidation of the trust in
accordance with the declaration of trust.
The trust guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of trust preferred securities
issued by the trust must restore payment of any sums paid under the trust
preferred securities or the trust guarantee.
Events of Default
An event of default under the trust guarantee will occur upon our failure
to perform any of our payment or other obligations under the trust guarantee.
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The holders of a majority in liquidation amount of the trust preferred
securities to which the trust guarantee relates have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trust guarantee trustee in respect of the trust guarantee or to direct the
exercise of any trust or power conferred upon the trust guarantee trustee under
the trust guarantee. If the trust guarantee trustee fails to enforce the trust
guarantee, any holder of trust preferred securities relating to the trust
guarantee may institute a legal proceeding directly against us to enforce the
trust guarantee trustee's rights under the trust guarantee, without first
instituting a legal proceeding against the relevant trust, the trust guarantee
trustee or any other person or entity. However, if we have failed to make a
guarantee payment, a holder of trust preferred securities may directly
institute a proceeding against us for enforcement of the trust guarantee for
such payment. We waive any right or remedy to require that any action be
brought first against the trust or any other person or entity before proceeding
directly against us.
Status of the Trust Guarantee
The trust guarantee will constitute an unsecured obligation of Pennaco and
will rank:
. subordinate and junior in right of payment to all of our other
liabilities, except those obligations or liabilities made equal in
priority or subordinate by their terms;
. equally with the most senior preferred or preference stock that we may
issue and with any guarantee that we may enter into in respect of any
preferred or preference stock of any our affiliates; and
. senior to our common stock.
The terms of the trust preferred securities provide that each holder of
trust preferred securities of the trust, by acceptance of the securities,
agrees to the subordination provisions and other terms of the trust guarantee
relating to the trust preferred securities.
The trust guarantee will constitute a guarantee of payment and not of
collection. Accordingly, the guaranteed party may institute a legal proceeding
directly against the guarantor to enforce its rights under the trust guarantee
without instituting a legal proceeding against any other person or entity.
Information Concerning the Trust Guarantee Trustee
Prior to the occurrence of a default with respect to the trust guarantee and
after the curing or waiving of all events of default with respect to the trust
guarantee, the trust guarantee trustee undertakes to perform only those duties
as are specifically set forth in the trust guarantee. In case an event of
default has occurred and has not been cured or waived, the trust guarantee
trustee will exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to these provisions,
the trust guarantee trustee is under no obligation to exercise any of the
powers vested in it by the trust guarantee at the request of any holder of
trust preferred securities, unless offered reasonable indemnity against the
costs, expenses and liabilities which might be incurred through the exercise of
those powers.
We and certain of our affiliates may, from time to time, maintain a banking
relationship with the trust guarantee trustee.
Governing Law
The trust guarantee will be governed by, and construed in accordance with,
the laws of the State of New York.
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RELATIONSHIP AMONG THE TRUST PREFERRED
SECURITIES, THE SUBORDINATED DEBT
SECURITIES AND THE TRUST GUARANTEE
As long as we make payments of interest and other payments when due on the
subordinated debt securities, those payments will be sufficient to cover
distributions and other payments due on the trust preferred securities,
primarily because:
. the aggregate principal amount of the subordinated debt securities will
be equal to the sum of the aggregate stated liquidation preference of
the trust preferred securities;
. the interest rate and interest and other payment dates of the
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the trust preferred securities;
. we will pay any and all costs, expenses and liabilities of the trust,
except the trust's obligations to holders of its trust preferred
securities under the terms of such trust preferred securities; and
. the declaration of trust prohibits the trust from engaging in any
activity that is not consistent with the limited purposes of the trust.
We irrevocably guarantee payments of distributions and other amounts due on
the trust preferred securities of the trust, to the extent the trust has funds
available for the payment of such distributions as described in "Description of
the Trust Guarantee" in this prospectus. Taken together, our obligations under
the subordinated debt securities, the subordinated indenture, the declaration
of trust and the trust guarantee provide a full, irrevocable and unconditional
guarantee of payments of distributions and other amounts due on the trust
preferred securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such a
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under its trust preferred securities. If we do not make
payments on the subordinated debt securities, the trust will not pay
distributions or other amounts due on the trust preferred securities. The trust
guarantee does not cover payment of distributions when the trust does not have
sufficient funds to pay the distributions. In this event, the remedies of a
holder of the trust preferred securities of the trust are described in this
prospectus under "Description of the Trust Guarantee--Events of Default." Our
obligations under the trust guarantee are unsecured and are subordinate and
junior in right of payment to all of our other liabilities.
Notwithstanding anything to the contrary in the subordinated indenture and
to the extent set forth in the subordinated indenture, we have the right to
set-off any payment we are otherwise required to make under the subordinated
indenture with and to the extent we have made, or are concurrently on the date
of such payment making, a payment under the trust guarantee.
A holder of trust preferred securities of the trust may institute a legal
proceeding directly against us to enforce its rights under the trust guarantee
without first instituting a legal proceeding against the trust guarantee
trustee, the trust or any other person or entity.
The trust preferred securities of the trust evidence a beneficial interest
in the trust. The trust exists for the sole purpose of issuing the trust
securities and investing the proceeds in subordinated debt securities. A
principal difference between the rights of a holder of trust preferred
securities and a holder of subordinated debt securities is that a holder of
subordinated debt securities is entitled to receive from us the principal
amount of and interest accrued on subordinated debt securities held, while a
holder of trust preferred securities is entitled to receive distributions from
the trust, or from us under the trust guarantee, if and to the extent the trust
has funds available for the payment of such distributions.
Upon any voluntary or involuntary termination, winding-up or liquidation of
the trust involving the liquidation of the subordinated debt securities, the
holders of the trust preferred securities of the trust will be entitled to
receive, out of assets held by the trust and after satisfaction of liabilities
to creditors of the trust as
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provided by applicable law, the liquidation distribution in cash. Upon any
voluntary or involuntary liquidation or bankruptcy of us, the property trustees
of the trust, as holder of the subordinated debt securities of the trust, would
be a subordinated creditor of us, subordinated in right of payment to all of
our senior debt, but entitled to receive payment in full of principal and
interest, before any of our stockholders receive payments or distributions.
Since we are the guarantor under the trust guarantee and we have agreed to pay
for all costs, expenses and liabilities of the trust other than the trust's
obligations to the holders of the trust preferred securities, the positions of
a holder of trust preferred securities and a holder of subordinated debt
securities relative to other creditors and to our shareholders in the event of
our liquidation or bankruptcy would be substantially the same.
A default or event of default under any of our senior debt will not
constitute a default or event of default under the subordinated indenture.
However, in the event of payment defaults under, or acceleration of, our senior
debt, the subordination provisions of the subordinated indenture may provide
that no payments may be made on the subordinated debt securities until our
senior debt has been paid in full or any payment default under our senior debt
has been cured or waived. Our failure to make required payments on a series of
subordinated debt securities would constitute an event of default under the
subordinated indenture.
PLAN OF DISTRIBUTION
We may sell the securities through agents, through underwriters or dealers
or directly to one or more purchasers.
By Agents
Securities may be sold through agents designated by us. The agents agree to
use their reasonable best efforts to solicit purchases for the period of their
appointment.
By Underwriters
If underwriters are used in the sale, the securities will be acquired by the
underwriters for their own account. The underwriters may resell the securities
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase the securities will be subject to
certain conditions. The underwriters will be obligated to purchase all the
securities of the series offered if any of the securities are purchased. Any
initial public offering price and any discounts or concessions allowed or re-
allowed or paid to dealers may be changed from time to time.
Direct Sales
We may also sell these securities directly. In this case, no underwriters or
agents would be involved.
General Information
Underwriters, dealers and agents that participate in the distribution of the
securities may be underwriters as defined in the Securities Act, and any
discounts or commissions received by them from us and any profit on the resale
of the securities by them may be treated as underwriting discounts and
commissions under the Securities Act. Any underwriters or agents will be
identified and their compensation described in a prospectus supplement.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, us or our subsidiaries in the ordinary course of their business.
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LEGAL MATTERS
The validity of the securities will be passed upon by Andrews & Kurth
L.L.P., Houston, Texas. The validity of the trust preferred securities under
Delaware Law will be passed upon for the Pennaco Capital Trust I by special
Delaware counsel identified in the related prospectus supplement. If the
securities are being distributed in an underwritten offering, the validity of
the securities will be passed upon for the underwriters by counsel identified
in the related prospectus supplement.
EXPERTS
Some of the information incorporated by reference in this registration
statement regarding the estimated quantities of reserves of the underlying
properties we own, the future net revenues from those reserves and their
present value is based on estimates of the reserves and present values prepared
by or derived from estimates prepared by Ryder Scott Company independent
petroleum engineers.
The financial statements of Pennaco Energy, Inc. as of December 31, 1999 and
1998, and the related statements of operations, stockholders' equity, and cash
flows for the year ended December 31, 1999 and for the period from January 25,
1998 (inception) to December 31, 1998, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein
and upon the authority of said firm as experts in accounting and auditing. To
the extent that KPMG LLP audits and reports on financial statements of Pennaco
Energy, Inc. issued at future dates, and consents to the use of their report
thereon, such financial statements also will be incorporated by reference in
the registration statement in reliance upon their report and said authority.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The expenses of the offering are estimated to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $26,400
Printing Expenses................................................ 10,000
Legal Fees and Expenses.......................................... 15,000
Accounting Fees and Expenses..................................... 5,000
Miscellaneous.................................................... 5,000
-------
TOTAL........................................................ $61,400
=======
</TABLE>
Item 15. Indemnification of Directors and Officers
Subsection (a) of Section 145 of the General Corporation Law of the State of
Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any
claim, issue or matter as to which such person shall have been made to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in the defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
Section 145 in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; that indemnification provided
for by Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's heirs,
executors and administrators; and empowers the corporation to purchase and
maintain insurance on behalf of a director or officer of the corporation
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such whether or not the corporation
would have the power to indemnify him against such liabilities under Section
145.
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<PAGE>
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation 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 Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit.
Article VIII and IX of Pennaco's Certificate of Incorporation provide that:
"A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation 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 General Corporation
Law of the State of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit. If the General Corporation Law
of the State of Delaware is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or modification of this paragraph by the stockholders of
the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
"The Corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Delaware (including, without limitation,
Section 145 thereof), as amended from time to time, indemnify any officer or
director whom it shall have power to indemnify from and against any and all of
the expenses, liabilities or other losses of any nature. The indemnification
provided in this Article X shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity, while holding
such office, and shall continue as to a person who has ceased to be a officer
or director and shall inure to the benefit of the heirs, executors and
administrators of such a person."
Article VI of Pennaco's bylaws further provides that Pennaco shall indemnify
its officers, directors, employees and agents to the fullest extent permitted
by law.
In addition, Pennaco and certain other persons may be entitled under
agreements entered into with agents or underwriters to indemnification by such
agents or underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, or to contribution with respect to payments which
Pennaco or such persons may be required to make in respect thereof.
The limitations on liability in Article VIII described above would apply to
violations of the federal securities laws. However, the registrant has been
advised that in the opinion of the SEC, indemnification for liabilities under
the Securities Act of 1933 is against public policy and therefore
unenforceable.
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<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Title
<C> <S> <C>
*1.1 Form Securities Underwriting Agreement
*1.2 Form of Equity Securities Underwriting Agreement
3.1 Certificate of Incorporation (filed as Exhibit 3.1 to the
Company's Post-Effective Amendment No. 1 to Form SB-2 on
Form S-3 File No. 333-68317, filed June 27, 2000 and
included herein by reference)
3.2 Bylaws (filed as Exhibit 3.2 to the Company's Post-
Effective Amendment No. 1 to Form SB-2 on Form S-3 File
No. 333-68317, filed June 27, 2000 and included herein by
reference)
*4.1 Form of Senior Indenture (including form of Senior Debt
Security)
*4.2 Form of Subordinated Debt Indenture (including form of
Subordinated Debt Security)
4.3 Certificate of Trust of Pennaco Capital Trust I
4.4 Declaration of Trust of Pennaco Capital Trust I (including
form of certificate of Trust Preferred Securities)
*4.5 Form of Trust Guarantee between Pennaco Energy, Inc. and
Pennaco Capital Trust I
*5.1 Opinion of Andrews & Kurth L.L.P.
*5.2 Opinion of Counsel as to the legality of the Trust
Preferred Securities of Pennaco Capital Trust I
*12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG LLP
23.2 Consent of Ryder Scott Company
*23.3 Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1)
*23.4 Consent of Delaware counsel (included in Exhibit 5.2)
24.1 Power of Attorney (included on signature page)
*25.1 Form T-1 Statement of Eligibility of trustee for the
Senior Debt Securities
*25.2 Form T-1 Statement of Eligibility of trustee for the
Subordinated Debt Securities
</TABLE>
--------
*To be filed as an exhibit to our Current Report on Form 8-K in connection with
a specific offering.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(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 end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
II-3
<PAGE>
(iii) to include any additional or changed material information on the
plan of distribution.
(2) that, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) that, for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereto.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, 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 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.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, to the City of Denver, State of Colorado, on the 9th day of
August, 2000.
PENNACO ENERGY, INC.
/s/ Paul M. Rady
By: _________________________________
Paul M. Rady
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature appears
below constitutes and appoints Paul M. Rady and Glen C. Warren, Jr., and each
of them, his true and lawful attorneys-in-fact and agents with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any subsequent registration
statements filed by the Registrant pursuant to Rule 462(b) of the Securities
Act of 1933, which relates to this Registration Statement, and to file same,
with all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary 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 his or their
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 9, 2000.
<TABLE>
<S> <C>
/s/ Paul M. Rady Chairman of the Board of Directors,
___________________________________________ Chief Executive Officer,
Paul M. Rady President (Principal Executive Officer)
/s/ Glen C. Warren, Jr. Chief Financial Officer, Executive Vice
___________________________________________ President, and Director (Principal
Glen C. Warren, Jr. Financial and Accounting Officer)
Vice President--Legal, Secretary, Director
___________________________________________
Gregory V. Gibson
/s/ David W. Lanza Director
___________________________________________
David W. Lanza
/s/ Paul M. Rady Director
___________________________________________
Paul M. Rady
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Penneco Capital
Trust I certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on the 9th day of August,
2000.
PENNACO CAPITAL TRUST I
By: Pennaco Energy, Inc.
/s/ Paul M. Rady
By: _________________________________
Paul M. Rady
Chief Executive Officer and
President
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Title
------- -----
<C> <S> <C>
*1.1 Form Securities Underwriting Agreement
*1.2 Form of Equity Securities Underwriting Agreement
3.1 Certificate of Incorporation (filed as Exhibit 3.1 to the
Company's Post-Effective Amendment No. 1 to Form SB-2 on Form
S-3 File No. 333-68317, filed June 27, 2000 and included
herein by reference)
3.2 Bylaws (filed as Exhibit 3.2 to the Company's Post-Effective
Amendment No. 1 to Form SB-2 on Form S-3 File No. 333-68317,
filed June 27, 2000 and included herein by reference)
*4.1 Form of Senior Indenture (including form of Senior Debt
Security)
*4.2 Form of Subordinated Debt Indenture (including form of
Subordinated Debt Security)
4.3 Certificate of Trust of Pennaco Capital Trust I
4.4 Declaration of Trust of Pennaco Capital Trust I (including
form of certificate of Trust Preferred Securities)
*4.5 Form of Trust Guarantee between Pennaco Energy, Inc. and
Pennaco Capital Trust I
*5.1 Opinion of Andrews & Kurth L.L.P.
*5.2 Opinion of Counsel as to the legality of the Trust Preferred
Securities of Pennaco Capital Trust I
*12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of KPMG LLP
23.2 Consent of Ryder Scott Company
*23.3 Consent of Andrews & Kurth L.L.P. (included in Exhibit 5.1)
*23.4 Consent of Delaware counsel (included in Exhibit 5.2)
24.1 Power of Attorney (included on signature page)
*25.1 Form T-1 Statement of Eligibility of trustee for the Senior
Debt Securities
*25.2 Form T-1 Statement of Eligibility of trustee for the
Subordinated Debt Securities
</TABLE>
--------
*To be filed as an exhibit to our Current Report on Form 8-K in connection with
a specific offering.
II-7
