SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
----------------------
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-93722
---------------------------
DENBURY RESOURCES INC.
(Exact name of Registrant as specified in its charter)
Delaware 75-2815171
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
5100 Tennyson Parkway
Suite 3000 75024
Plano, TX (Zip code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (972) 673-2000
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1999
Common Stock, $.001 par value 45,434,926
<PAGE>
DENBURY RESOURCES INC.
INDEX
Part I. Financial Information
Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 1999 (Unaudited)
and December 31, 1998 3
Condensed Consolidated Statements of Operations for the three months
ended March 31, 1999 and 1998 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-20
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Part II. Other Information
Item 2. Change in Securities and Use of Proceeds 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
2
<PAGE>
DENBURY RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands of U.S. Dollars and in U.S. GAAP)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ---------
(Unaudited)
Assets
<S> <C> <C>
Current assets
Cash and cash equivalents $ 7,063 $ 2,049
Accrued production receivable 7,155 5,495
Trade and other receivables 11,294 16,390
--------- ----------
Total current assets 25,512 23,934
--------- ----------
Property and equipment (using full cost accounting)
Oil and gas properties 531,654 508,571
Unevaluated oil and gas properties 49,040 65,645
Less accumulated depreciation and depletion (398,660) (393,552)
--------- ----------
Net property and equipment 182,034 180,664
--------- ----------
Other assets 8,835 8,261
--------- ----------
Total assets $ 216,381 $ 212,859
========= ==========
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable and accrued liabilities $ 9,503 $ 13,570
Oil and gas production payable 6,028 5,118
--------- ----------
Total current liabilities 15,531 18,688
--------- ----------
Long-term liabilities
Long-term debt 234,630 225,000
Provision for site reclamation costs 1,513 1,436
--------- ----------
Total long-term liabilities 236,143 226,436
--------- ----------
Stockholders' deficit
Preferred stock, $.001 par value, 25,000,000
shares authorized; none issued and outstanding - -
Common stock, $.001 par value, 100,000,000
shares authorized; 26,801,680 shares issued
and outstanding at March 31, 1999 and
December 31, 1998 27 27
Paid-in capital in excess of par 227,769 227,769
Accumulated deficit (263,089) (260,061)
--------- ----------
Total stockholders' deficit (35,293) (32,265)
--------- ----------
Total liabilities and stockholders' deficit $ 216,381 $ 212,859
========= ==========
</TABLE>
(See accompanying notes to Condensed Consolidated Financial Statements)
3
<PAGE>
DENBURY RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share amounts)
(Unaudited - U.S. dollars and in U.S. GAAP)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues
Oil, gas and related product sales $ 14,703 $ 25,188
Interest and other income 361 367
--------- ---------
Total revenues 15,064 25,555
--------- ---------
Expenses
Production 5,855 7,854
General and administrative 1,890 1,776
Interest 4,858 4,391
Depletion and depreciation 5,335 12,387
Franchise taxes 154 200
--------- ---------
Total expenses 18,092 26,608
--------- ---------
Loss before income taxes (3,028) (1,053)
Income tax benefit - 373
--------- ---------
Net loss $ (3,028) $ (680)
========= =========
Net loss per common share
Basic $ (0.11) $ (0.03)
Diluted (0.11) (0.03)
Average number of common shares outstanding 26,802 23,425
========= =========
</TABLE>
(See accompanying notes to Condensed Consolidated Financial Statements)
4
<PAGE>
DENBURY RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands of U.S. dollars and in U.S. GAAP)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (3,028) $ (680)
Adjustments needed to reconcile to net
cash flow provided by operations:
Depreciation, depletion and amortization 5,335 12,387
Deferred income taxes - (373)
Other 190 121
--------- ---------
2,497 11,455
Changes in working capital items relating to operations:
Accrued production receivable (1,660) (1,593)
Trade and other receivables 5,096 2,077
Accounts payable and accrued liabilities (4,067) (6,965)
Oil and gas production payable 910 1,371
--------- ---------
Net cash flow provided by operations 2,776 6,345
--------- ---------
Cash flow from investing activities:
Oil and natural gas expenditures (4,678) (26,163)
Acquisition of oil and natural gas properties (1,800) (247)
Net purchases of other assets (439) (279)
--------- --------
Net cash used for investing activities (6,917) (26,689)
--------- ---------
Cash flow from financing activities:
Bank repayments - (200,000)
Bank borrowings 9,630 -
Issuance of senior subordinated debt - 125,000
Issuance of common stock - 93,345
Costs of debt financing (475) (3,518)
Other - (1)
--------- ---------
Net cash provided by financing activities 9,155 14,826
--------- ---------
Net increase (decrease) in cash and cash equivalents 5,014 (5,518)
Cash and cash equivalents at beginning of period 2,049 9,326
--------- ---------
Cash and cash equivalents at end of period $ 7,063 $ 3,808
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the quarter for interest $ 8,183 $ 3,225
</TABLE>
(See accompanying notes to Condensed Consolidated Financial Statements)
5
<PAGE>
DENBURY RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ACCOUNTING POLICIES
Interim Financial Statements
These financial statements and the notes thereto should be read in
conjunction with the Company's annual report on Form 10-K for the year ended
December 31, 1998. Any capitalized terms used but not defined in these Notes to
Consolidated Financial Statements have the same meaning given to them in the
Form 10-K.
Accounting measurements at interim dates inherently involve greater
reliance on estimates then at year end and the results of operations for the
interim periods shown in this report are not necessarily indicative of results
to be expected for the fiscal year. In the opinion of management of Denbury
Resources Inc. (the "Company" or "Denbury"), the accompanying unaudited
condensed consolidated financial statements include all adjustments (of a normal
recurring nature) necessary to present fairly the consolidated financial
position of the Company as of March 31, 1999 and the consolidated results of its
operations and cash flow for the three months ended March 31, 1999 and 1998.
Net Income and Loss per Common Share
Basic net income or loss per common share is computed by dividing the net
income or loss by the weighted average number of shares of common stock
outstanding. In accordance with generally accepted accounting principles
("GAAP"), the stock options and warrants would be included in the calculation of
diluted earnings per share but were anti-dilutive to the calculations of diluted
losses per share.
2. NOTES PAYABLE AND LONG-TERM INDEBTEDNESS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
-------- ---------
(Amounts in thousands)
(Unaudited)
<S> <C> <C>
Senior bank loan $109,630 $ 100,000
9% Senior Subordinated Notes due 2008 125,000 125,000
-------- ---------
Total long-term debt $234,630 $ 225,000
======== =========
</TABLE>
3. CHANGE TO UNITED STATES GAAP; DIFFERENCES IN GAAP BETWEEN UNITED STATES AND
CANADA
In April 1999, the Company moved its corporate domicile from Canada to the
United States as a Delaware corporation (see Note 4). As a result of this move,
the consolidated financial statements have been prepared in accordance with
United States GAAP rather than Canadian GAAP. For the periods presented herein,
there are not any differences between United States and Canadian GAAP.
Historically, the Company has had differences between the two accounting methods
in the areas of diluted earnings per share, the handling of losses on the early
extinguishment of debt and the guidelines regarding full cost ceiling tests.
6
<PAGE>
DENBURY RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. 1999 SALE OF EQUITY AND MOVE OF DOMICILE
At a special meeting of the stockholders held on April 20, 1999, the
stockholders approved (i) a move of the Corporate's domicile from Canada to the
United States as a Delaware corporation, (ii) the sale of 18,552,876 common
shares to an affiliate of the Texas Pacific Group ("TPG") for $100 million or
$5.39 per share, and (iii) increases in the number of shares available for
issuance under the Company's stock purchase and stock option plans. The move of
domicile was completed on April 21, 1999 and along with the move, the Company's
wholly-owned subsidiary, Denbury Management Inc. ("DMI"), was merged into the
new Delaware parent company, Denbury Resources Inc. This move of domicile did
not have any effect on the operations and assets of the Company and as part of
the move and merger, Denbury Resources Inc. expressly assumed any and all
liabilities of its subsidiary, DMI, including the obligation for the 9% Senior
Subordinated Notes due 2008 and the outstanding bank credit facility. The
financial statements and notes herein have been modified to reflect the capital
structure of the Company after the move of domicile even though this transaction
occurred after the balance sheet date.
The transaction with TPG was also completed on April 21, 1999. As a result
of the equity transaction, TPG's ownership of the outstanding common stock of
the Company increased from 32% to 60%. The Company intends to use the proceeds
from the equity sale for acquisitions, although in the interim, the funds were
used to reduce the outstanding bank debt to $9.6 million.
The following table sets forth as of March 31, 1999 the actual
capitalization of Denbury, and the pro forma capitalization of Denbury as
adjusted to give effect to the TPG purchase transaction and the use of the net
proceeds from that sale (estimated at $98.5 million after expenses) to reduce
bank debt. This table excludes 3,526,163 outstanding stock options as of March
31, 1999 exercisable at various prices ranging from $4.24 to $22.24 per share
with a weighted average price of approximately $8.93, of which 604,488 were
currently exercisable, and 75,000 common shares reserved for issuance upon
exercise of common share purchase warrants.
<TABLE>
<CAPTION>
As of March 31, 1999
-----------------------
As Adjusted
Company for the TPG
Historical Purchase
---------- ---------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................. $ 7,063 $ 5,563
========== =========
Short-term debt:
Credit Facility.................................... $ - $ -
---------- ---------
Long-term debt:
Credit Facility.................................... 109,630 9,630
9% Senior Subordinated Notes due 2008.............. 125,000 125,000
---------- ---------
Total long-term debt......................... 234,630 134,630
---------- ---------
Stockholders' equity (deficit):
Common stock, $.001 par value; 100,000,000 shares
authorized; 26,801,680 issued and outstanding;
45,354,556 issued and outstanding as
adjusted for the TPG purchase.................... 27 45
Paid-in capital in excess of par................... 227,769 326,251
Accumulated deficit................................ (263,089) (263,089)
---------- ---------
Total stockholders' equity (deficit)............ (35,293) 63,207
---------- ---------
Total capitalization........................ $ 199,337 $ 197,837
========== =========
</TABLE>
7
<PAGE>
DENBURY RESOURCES INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. PRODUCT PRICE HEDGING CONTRACTS
During June and July 1998, the Company entered into two no-cost financial
contracts ("collars") to hedge a total of 40 million cubic feet of natural gas
per day ("MMcf/d"). The first natural gas contract for 35 MMcf/d covers the
period from July 1998 to June 1999 and has a floor price of $1.90 per million
British Thermal Units ("MMBtu") and a ceiling price of $2.96 per MMBtu. The
second natural gas contract for five MMcf/d covers the period from September
1998 to August 1999 and has a floor price of $1.90 per MMBtu and a ceiling price
of $2.89 per MMBtu. During December 1998, the Company extended these natural gas
hedges through December 2000 by entering into an additional no-cost collar with
a floor price of $1.90 per MMBtu and a ceiling price of $2.58 per MMBtu for the
period of July 1999 through December 2000. This contract hedges 25 MMcf/d for
the months of July and August 1999 and 30 MMcf/d for each month thereafter. The
Company collected $539,000 on these financial contracts during the first quarter
of 1999. These three contracts cover over 100% of the Company's current net
natural gas production. Based on the futures market prices at March 31, 1999,
the Company would not receive or pay any material amounts under these commodity
contracts even though they covered more than the Company's production because
the futures market prices at March 31, 1999 were within the contract collars.
During the fourth quarter of 1998, the Company also modified certain of its
oil sales contracts. The new contracts, which are generally for a period of
eighteen months, provide that approximately 45% of the Company's oil production
as of January 31, 1999, has a price floor of between $8.00 and $10.00 per Bbl.
This equates to a NYMEX oil price of between $15.00 and $16.00 per Bbl. As
compensation for the price floors, the contracts provide that the premiums
received on the posted prices decrease as oil prices rise.
During March and April, 1999, the Company entered into two no-cost
financial contracts to hedge a portion of its oil production. The first contract
was a fixed price swap for 3,000 Bbls/d for the period of April through
December, 1999 at a price of $14.24 per Bbl. The second contract was a collar to
hedge 3,000 Bbls/d for the period of May, 1999 through December, 2000 with a
floor price of $14.00 per Bbl and a ceiling price of $18.05 per Bbl. No funds
were paid or received on these contracts during the first quarter of 1999. These
two oil financial contracts hedge approximately 60% of the Company's current oil
production. For further discussion regarding the Company's derivative financial
instruments, see "Market Risk Management" in Management's Discussion and
Analysis of Financial Condition and Results of Operations.
8
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Company's financial
statements contained herein and in Form 10-K for the year ended December 31,
1998, along with Management's Discussion and Analysis contained in such Form
10-K. Any capitalized terms used but not defined in the following discussion
have the same meaning given to them in the Form 10-K.
Denbury is an independent energy company engaged in acquisition,
development and exploration activities in the U.S. Gulf Coast region, primarily
onshore in Louisiana and Mississippi. The Company's growth in proved reserves,
production and cash flow over the years has been achieved by concentrating on
the acquisition of properties which it believes have significant upside
potential and through the efficient development, enhancement and operation of
those properties.
1999 SALE OF EQUITY AND MOVE OF DOMICILE. At a special meeting of the
stockholders held on April 20, 1999, the stockholders approved (i) a move of the
Corporate's domicile from Canada to the United States as a Delaware corporation,
(ii) the sale of 18,552,876 common shares to an affiliate of the Texas Pacific
Group ("TPG") for $100 million or $5.39 per share, and (iii) increases in the
number of shares available for issuance under the Company's stock purchase and
stock option plans. The move of domicile was completed April 21, 1999 and along
with the move, the Company's wholly-owned subsidiary, Denbury Management Inc.
("DMI"), was merged into the new Delaware parent company, Denbury Resources Inc.
This move of domicile did not have any effect on the operations and assets of
the Company and as part of the move and merger, Denbury Resources Inc. expressly
assumed any and all liabilities of its subsidiary, DMI, including the obligation
for the 9% Senior Subordinated Notes due 2008 and the outstanding bank credit
facility.
The sale of equity to TPG was also completed on April 21, 1999. As a result
of this transaction, TPG's ownership of the outstanding common stock of the
Company increased from 32% to 60%. The Company has approximately 45.4 million
common shares outstanding after this transaction. The Company intends to use the
proceeds from the equity sale for acquisitions, although in the interim, the
funds were used to reduce its outstanding bank debt.
The following table sets forth as of March 31, 1999 the actual
capitalization of Denbury, and the pro forma capitalization of Denbury as
adjusted to give effect to the TPG purchase transaction and the use of the net
proceeds from that sale (estimated at $98.5 million after expenses) to reduce
bank debt. This table excludes 3,526,163 outstanding stock options as of March
31, 1999 exercisable at various prices ranging from $4.24 to $22.24 per share
with a weighted average price of approximately $8.93, of which 604,488 were
currently exercisable, and 75,000 common shares reserved for issuance upon
exercise of common share purchase warrants.
9
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
As of March 31, 1999
-----------------------
As Adjusted
Company for the TPG
Historical Purchase
---------- ---------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................. $ 7,063 $ 5,563
========== =========
Short-term debt:
Credit Facility.................................... $ - $ -
---------- ---------
Long-term debt:
Credit Facility.................................... 109,630 9,630
9% Senior Subordinated Notes due 2008.............. 125,000 125,000
---------- ---------
Total long-term debt......................... 234,630 134,630
---------- ---------
Stockholders' equity (deficit):
Common stock, $.001 par value; 100,000,000 shares
authorized; 26,801,680 issued and outstanding;
45,354,556 issued and outstanding as adjusted
for the TPG purchase............................ 27 45
Paid-in capital in excess of par................... 227,769 326,251
Accumulated deficit................................ (263,089) (263,089)
---------- ---------
Total stockholders' equity (deficit)............ (35,293) 63,207
---------- ---------
Total capitalization........................ $ 199,337 $ 197,837
========== =========
</TABLE>
FEBRUARY 1999 AMENDMENT TO BANK CREDIT FACILITY. On February 19, 1999, the
Company completed an amendment to its credit facility with Bank of America, as
agent for a group of eight other banks. This amendment set the borrowing base at
$110 million, of which $60 million was considered by the banks to be within
their normal credit guidelines. The credit facility continues with its other
restrictions such as a prohibition on the payment of dividends and a prohibition
on most debt, liens and corporate guarantees. This amendment:
o provided certain relief on the minimum equity and interest coverage
tests;
o changed the facility to one secured by substantially all of the
Company's oil and natural gas properties;
o requires that as long as the borrowing base is larger than a borrowing
base that conforms to normal credit guidelines (currently $60 million),
that at least 75% of the funds borrowed subsequent to the closing of
the TPG purchase must be used for either qualifying acquisitions or
capital expenditures made to maintain, enhance or develop its proved
reserves; and
o increased the interest rate to a range from LIBOR plus 1.0% to LIBOR
plus 1.75% (depending on the amounts outstanding) and LIBOR plus 2.125%
if the outstanding debt exceeds the borrowing base under normal credit
guidelines, currently set at $60 million.
After the repayment in April, 1999 with the proceeds from the sale of
equity to TPG, there was approximately $9.6 million outstanding on the facility,
leaving a total borrowing capacity of approximately $100 million. The next
scheduled re-determination of the borrowing base will be as of October 1, 1999,
based on June 30, 1999 assets and proved reserves. There can be no assurance
that the banks will not reduce the borrowing base at that time, as such
10
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
redetermination will depend on current and expected oil and natural gas prices
at that time, the Company's development and acquisition results during 1999, the
current level of debt and several other factors, some of which are beyond the
Company's control.
CAPITAL RESOURCES AND LIQUIDITY
As more fully described under "Results of Operations" below, through 1998
and continuing into the first quarter of 1999, the Company's average net oil
product prices were from 24% to 40% lower than during the prior comparable
period. Due to this drop in oil prices, the Company's cash flow and results of
operations were significantly reduced during 1998 and the first quarter of 1999.
This reduction in cash flow has also contributed to an increase in the Company's
debt levels, which as a multiple of cash flow, are at historic highs as of March
31, 1999. Because of the downturn in the oil and gas industry during 1998,
resulting from the decreases in oil and natural gas prices, the Company sought
additional capital in order to have funds to pursue acquisitions and in December
1998 entered into an agreement to sell $100 million of common shares to TPG.
This sale of equity was approved by stockholders on April 20, 1999 and closed on
April 21, 1999 (see "1999 Sale of Equity and Move of Domicile" above).
As a result of the equity infusion, the Company's bank debt was reduced to
$9.6 million outstanding as of April 30, 1999 and the Company's stockholders'
deficit was eliminated with a pro forma March 31, 1999 positive balance of $63.2
million. In addition, oil prices have climbed from a first quarter average NYMEX
price of approximately $13.00 per Bbl to current levels above $18.00 per Bbl.
Both the improved product prices and the reduction of debt will have a
significant positive impact on the Company's earnings and cash flow for future
periods and will allow the Company to pursue oil development opportunities that
were uneconomical at low oil prices which prevailed in the second half of 1998
and first quarter of 1999. However, there can be no assurance that the recent
increase in oil prices will be sustained.
In addition, the Company intends to pursue oil and gas acquisitions with
the funds from the equity sale to TPG which, if accomplished, should also be
accretive to the Company's operating results. However, there can be no assurance
that suitable acquisitions will be identified in the future or that any such
acquisitions will be successful in achieving desired profitability objectives.
Without suitable acquisitions or the capital to fund such acquisitions, the
Company's future growth could be limited or even eliminated.
The Company plans to keep its development budget for 1999 at approximately
$35 million, the upper end of the previously announced range, as the intent is
to minimize the use of the bank credit facility for anything other than
acquisitions. Although the level of the Company's projected cash flow is highly
variable and difficult to predict due to volatility in product prices, the
success of its drilling and other developmental work and other factors, the
Company does not expect its 1999 development spending to cause debt to increase
substantially. The Company also expects that this spending level should be
sufficient to cause a slight increase in production levels throughout the year.
Furthermore, if acquisitions are unavailable at attractive rates, the Company
does have an inventory of potential development projects that it could commence,
subject to the availability and allocation of capital resources.
SOURCES AND USES OF FUNDS
During the first quarter of 1999, the Company spent approximately $4.7
million on exploration and development expenditures and approximately $1.8
million on acquisitions. The exploration and development expenditures included
approximately $1.0 million spent on drilling, $1.5 million on geological,
geophysical and acreage expenditures and $2.2 million on workover costs. These
expenditures were funded by bank debt and cash flow from operations.
11
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the first quarter of 1998, the Company spent approximately $26.2
million on oil and natural gas development expenditures and approximately
$247,000 on acquisitions. The development expenditures included approximately
$17.6 million spent on drilling, $4.1 million on geological, geophysical and
acreage expenditures and the balance of $4.5 million was spent on workover
costs. These expenditures were funded by cash flow from operations and bank
debt.
RESULTS OF OPERATIONS
Operating Income
Operating income dropped 49% for the first quarter of 1999 as compared to
the first quarter of 1998 comprised of a 28% drop in production and a 19% drop
in prices on a BOE basis, as further set forth below.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------
1999 1998
- --------------------------------------------------------------
<S> <C> <C>
OPERATING INCOME (THOUSANDS)
Oil sales $ 8,532 $ 16,173
Natural gas sales 6,171 9,015
Less production expenses (5,855) (7,854)
--------------------
Operating income $ 8,848 $ 17,334
--------------------
UNIT PRICES
Oil price per barrel ("Bbl") $ 9.22 $ 12.20
Gas price per thousand cubic
feet ("Mcf") 2.23 2.49
NETBACK PER BOE (1):
Sales price $ 10.60 $ 13.05
Production expenses (4.22) (4.07)
--------------------
Production netback $ 6.38 $ 8.98
--------------------
AVERAGE DAILY PRODUCTION VOLUME:
Bbls 10,281 14,728
Mcf 30,818 40,275
BOE 15,417 21,441
- --------------------------------------------------------------
<FN>
(1) Barrel of oil equivalent using the ratio of one barrel of oil to 6 Mcf of
natural gas ("BOE").
</FN>
</TABLE>
Production for the first quarter of 1999 averaged 15,417 BOE/d, a drop of
28% from the first quarter of 1998 but only a 4% decrease from the fourth
quarter of 1998 average of 16,108 BOE/d despite a sharply reduced development
program since July, 1998. Production peaked in the second quarter of 1998 at
21,927 BOE/d before the Company curtailed its horizontal drilling program and
sharply reduced all its development expenditures, causing a decrease in
production each subsequent quarter. However, with the recent response from the
Company's East waterflood unit at Heidelberg, the production in recent months
has began to increase even though development spending for the first quarter of
1999 was only $4.7 million, the lowest level of development spending per quarter
in several years. The Company plans to increase spending during the second
quarter and the remainder of 1999 with a total budget of $35 million for the
year, which should result in production increases later this year.
Production during the first quarter of 1999 from the Company's two key
prior acquisitions, the properties acquired from Amerada Hess in 1996 and from
Chevron in 1997, averaged 4,544 and 4,541 BOE/d respectively. This compares to
9,393 and 2,992 BOE/d for the first quarter of 1998 on these properties and
5,736 and 4,255 BOE/d for the fourth
12
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
quarter of 1998. The production from the Chevron properties (Heidelberg Field)
represents the fifth consecutive quarterly increase since its purchase in late
1997. However, the Amerada Hess properties peaked in the second quarter of 1998
at 9,730 BOE/d and have declined since that time due to production declines on
horizontal oil wells drilled at Eucutta Field in late 1997 and early 1998 and
the lack of subsequent development work to replace this production.
Oil and gas revenue decreased as a result of the decrease in production and
also due to a decline in both oil and natural gas product prices. Between the
first quarter of 1998 and 1999, oil product prices decreased 24% ($2.98 per Bbl)
and natural gas product prices declined by 10% ($0.26 per Mcf). Included in the
gas revenue for the first quarter of 1999 was $523,000 related to a settlement
of a gas imbalance and $539,000 relating to a gain on the Company's natural gas
hedge contracts. These two items caused the average natural gas price per Mcf to
increase by $0.38 per Mcf. Without these two items, natural gas product prices
would have decreased by 26% ($0.64 per Mcf) from the comparable period in 1998.
Production and operating expenses decreased 25% between the first quarter
of 1998 and 1999 as a result of cost savings measures, shut-in wells and a
decline in production. On a BOE basis, operating expenses increased slightly
(4%) due to the declines in production. For the properties acquired from Amerada
Hess, the operating expenses declined from the 1996 level of $5.35 per BOE to
$3.39 per BOE for 1998, but had a slight increase to $3.81 for the first quarter
of 1999 as a result of the production declines. Operating expense per BOE on the
properties acquired from Chevron continued to decrease from their initial level
of $6.38 per BOE when acquired in late 1997 to an average of $5.04 per BOE
during 1998 and further reduced to an average of $4.79 per BOE for the first
quarter of 1999. These reductions result from general cost saving measures and
increased productivity per well through overall production increases at
Heidelberg.
General and Administrative Expenses
The net general and administrative ("G&A") expenses increased as set forth
below.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ------------------------------------------------------------
1999 1998
- ------------------------------------------------------------
<S> <C> <C>
NET G&A EXPENSES (THOUSANDS)
Gross expenses $ 4,788 $ 4,902
State franchise taxes 154 200
Operator overhead charges (2,167) (2,475)
Capitalized exploration expenses (731) (651)
--------------------
Net expenses $ 2,044 $ 1,976
--------------------
Average G&A cost per BOE $ 1.47 $ 1.02
Employees as of March 31 197 199
- ------------------------------------------------------------
</TABLE>
Gross G&A expenses decreased 2% between the first quarter of 1998 and 1999
as a result of general cost saving measures, even though the Company incurred
approximately $175,000 of additional non-recurring expenses during the first
quarter of 1999 as part of the cost of the move of domicile from Canada to the
United States (see "1999 Sale of Equity and Move of Domicile"). However, the
respective well operating agreements allow the Company, when it is the operator,
to charge a well with a specified overhead rate during the drilling phase and to
also charge a monthly fixed overhead rate for each producing well. As a result
of the decreased drilling activity in the first quarter of 1999, the
13
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
percentage of gross G&A recovered through these types of allocations (listed in
the above table as "Operator overhead charges") decreased when compared to the
corresponding period in 1998. During the first quarter of 1998, approximately
50% of gross G&A was recovered by operator overhead charges, while during the
first quarter of 1999 this recovery was reduced to 45%. The net effect was a
slight increase (3%) in net G&A expense during the first quarter of 1999. On a
BOE basis, G&A costs increased 44% from the first quarter of 1998 to the
comparable quarter in 1999 primarily because of decreased production on both an
absolute and per well basis.
Interest and Financing Expenses
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ---------------------------------------------------------------
AMOUNTS IN THOUSANDS EXCEPT PER UNIT AMOUNTS 1999 1998
- ---------------------------------------------------------------
<S> <C> <C>
Interest expense $ 4,858 $ 4,391
Non-cash interest expense (191) (121)
------------------
Cash interest expense 4,667 4,270
Interest and other income (361) (367)
------------------
Net interest expense $ 4,306 $ 3,903
- ---------------------------------------------------------------
Average interest expense per BOE $ 3.10 $ 2.02
Average debt outstanding 229,932 211,685
- ---------------------------------------------------------------
</TABLE>
In December 1997, the Company borrowed $202 million to fund the Chevron
Acquisition resulting in $240 million of outstanding bank debt during January
and most of February 1998. On February 26, 1998 this debt was refinanced with
proceeds from the issuance of equity and subordinated notes, leaving a bank
balance of $40 million for the rest of the first quarter of 1998, plus $125
million of debt from the issuance of the subordinated notes. During the first
quarter of 1999, the Company began the year with $225 million of total debt and
further increased this to $234.6 million by the end of the period. Furthermore,
the bank amendment in February 1999 (see "February 1999 Amendment to Bank Credit
Facility") resulted in higher bank interest rates as the margins over LIBOR
rates were increased at that time. The cumulative effect of an overall higher
level of average debt plus the increased interest rates from the bank amendment
resulted in an increase of $467,000 (11%) in interest expense during the first
quarter of 1999 as compared to the first quarter of 1998. The 53% increase in
interest expense on a BOE basis was due to the overall increase in costs and was
further compounded by the decrease in production. The overall debt level was
decreased by approximately $100 million in April 1999 with the proceeds from the
sale of equity to TPG (see "1999 Sale of Equity and Move of Domicile").
Depletion, Depreciation and Site Restoration
The Company's depletion, depreciation and amortization ("DD&A") rate
dropped from $6.42 per BOE for the first quarter of 1998 (an average of $7.26
for 1998) to $3.85 per BOE for the comparable period in 1999. This resulted from
an increase in the proved reserve quantities since December 31, 1998 related to
improved oil prices at the end of the first quarter of 1999 and the reduced oil
and gas property basis after the 1998 full cost pool writedowns.
Under full cost accounting rules, each quarter the Company is required to
perform a ceiling test calculation. In determining the limitation on property
carrying values, U.S. accounting rules require the discounting of estimated
future net revenues from its proved reserves at 10% using constant current
prices following the guidelines of the Securities and Exchange Commission
("SEC"). The accounting guidelines also allow Company to exclude acquired
properties
14
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
from a ceiling test calculation in certain circumstances. Due to the higher
product prices as of March 31, 1999, the Company did not have any ceiling test
limitation at that date. However, for the first quarter of 1998, the Company
excluded the value of the properties acquired from Chevron in December 1997 from
the ceiling test calculation. Had these properties been included, the Company
would have had a write-down of the property carrying costs as of March 31, 1998
of approximately $35 million.
The Company also provides for the estimated future costs of well
abandonment and site reclamation, net of any anticipated salvage, on a
unit-of-production basis. This provision is included in the DD&A expense.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------
AMOUNTS IN THOUSANDS EXCEPT PER UNIT AMOUNTS 1999 1998
- --------------------------------------------------------------
<S> <C> <C>
Depletion and depreciation $ 5,258 $12,298
Site restoration provision 77 89
-----------------
Total amortization $ 5,335 $12,387
-----------------
Average DD&A cost per BOE $ 3.85 $ 6.42
- --------------------------------------------------------------
</TABLE>
Income Taxes
Due to a net operating loss of the Company for tax purposes, the Company
does not have any current tax provision. The deferred income tax provision as a
percentage of net income varies slightly depending on the mix of Canadian and
U.S. expenses.
In addition, as a result of the net pre-tax loss of $3.0 million for the
quarter ended March 31, 1999, an income tax provision for that quarter using the
effective tax rate of 37% would have resulted in a $1.1 million income tax
benefit and an increase to the deferred tax asset. Since the Company currently
has a large tax net operating loss and it was uncertain whether this total tax
asset will ultimately be realized, the Company has impaired the tax benefit
generated in the first quarter of 1999, resulting in no effective income tax
provision.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------
1999 1998
- --------------------------------------------------------------
<S> <C> <C>
Deferred income tax benefit (thousands) $ - $ (373)
Average income tax costs per BOE $ - $ (0.19)
Effective tax rate - 35%
- --------------------------------------------------------------
</TABLE>
Results of Operations
Primarily as a result of the decreased production and product prices
between the quarters, net income and cash flow from operations decreased on both
a gross and per share basis between the first quarter of 1998 and the first
quarter of 1999 as set forth below.
15
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------
AMOUNTS IN THOUSAND EXCEPT PER SHARE AMOUNTS 1999 1998
- --------------------------------------------------------------
<S> <C> <C>
Net loss $(3,028) $ (680)
Net loss per common share:
Basic $ (0.11) $ (0.03)
Diluted (0.11) (0.03)
Cash flow from operations (1) $ 2,497 $11,455
- --------------------------------------------------------------
<FN>
(1) Represents cash flow provided by operations, exclusive of the net change in
non-cash working capital balances.
</FN>
</TABLE>
The following table summarizes the cash flow, DD&A and results of
operations on a BOE basis for the comparative periods. Each of the individual
components are discussed above.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ---------------------------------------------------------
Per BOE Data 1999 1998
- ---------------------------------------------------------
<S> <C> <C>
Revenue $ 10.60 $ 13.05
Production expenses (4.22) (4.07)
- ---------------------------------------------------------
Production netback 6.38 8.98
General and administrative (1.47) (1.02)
Interest and other income (3.10) (2.02)
- ---------------------------------------------------------
Cash flow from operations (a) 1.81 5.94
DD&A (3.85) (6.42)
Deferred income taxes - 0.19
Other non-cash items (0.14) (0.06)
- ---------------------------------------------------------
Net loss $ (2.18) $ (0.35)
- ---------------------------------------------------------
<FN>
(a) Represents cash flow provided by operations, exclusive of the net change in
non-cash working capital balances.
</FN>
</TABLE>
Market Risk Management
The Company uses fixed and variable rate debt to partially finance budgeted
expenditures. These agreements expose the Company to market risk related to
changes in interest rates. The Company does not hold or issue derivative
financial instruments for trading purposes. The carrying and fair value of these
debt instruments have not changed materially since year-end.
The Company also enters into various financial contracts to hedge its
exposure to commodity price risk associated with anticipated future gas
production. These contracts consist of price ceilings and floors (no-cost
collars). During June and July 1998, the Company entered into two no-cost
financial contracts ("collars") to hedge a total of 40 million cubic feet of
natural gas per day ("MMcf/d"). The first natural gas contract for 35 MMcf/d
covers the period from July 1998
16
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
to June 1999 and has a floor price of $1.90 per million British Thermal Units
("MMBtu") and a ceiling price of $2.96 per MMBtu. The second natural gas
contract for five MMcf/d covers the period from September 1998 to August 1999
and has a floor price of $1.90 per MMBtu and a ceiling price of $2.89 per MMBtu.
During December 1998, the Company extended these natural gas hedges through
December 2000 by entering into an additional no-cost collar with a floor price
of $1.90 per MMBtu and a ceiling price of $2.58 per MMBtu for the period of July
1999 through December 2000. This contract hedges 25 MMcf/d for the months of
July and August 1999 and 30 MMcf/d for each month thereafter. The Company
collected $539,000 on these financial contracts during the first quarter of
1999. These three contracts cover over 100% of the Company's current net natural
gas production. Based on the futures market prices at March 31, 1999, the
Company would not receive or pay any material amounts under these commodity
contracts even though they covered more than the Company's production because
prices at March 31, 1999 were within the contract collars.
During the fourth quarter of 1998, the Company also modified certain of its
oil sales contracts. The new contracts which are generally for a period of
eighteen months, provide that approximately 45% of the Company's oil production
as of January 31, 1999, has a price floor of between $8.00 and $10.00 per Bbl.
This equates to a NYMEX oil price of between $15.00 and $16.00 per Bbl. As
compensation for the price floors, the contracts provide that the premiums
received on the posted prices decrease as oil prices rise.
During March and April, 1999, the Company entered into two no-cost
financial contracts to hedge a portion of its oil production. The first contract
was a fixed price swap for 3,000 Bbls/d for the period of April through
December, 1999 at a price of $14.24 per Bbl. The second contract was a collar to
hedge 3,000 Bbls/d for the period of May, 1999 through December, 2000 with a
floor price of $14.00 per Bbl and a ceiling price of $18.05 per Bbl. No funds
were paid or received on these contracts during the first quarter of 1999. These
two oil financial contracts hedge approximately 60% of the Company's current oil
production.
These contracts in effect at March 31, 1999 expire at various dates with
the latest being December 2000. Gain or loss on these derivative commodity
contracts would be offset by a corresponding gain or loss on the hedged
commodity positions. Based on future market prices at March 31, 1999, the
Company would expect to pay approximately $1.78 million on the oil hedge
contracts and neither pay or receive anything on the natural gas hedge
contracts. If the futures market prices were to increase 10% from those in
effect at March 31, 1999, the Company would be required to make additional cash
payments under the commodity contracts of approximately $1.95 million. If the
futures market prices were to decline 10% from those in effect as March 31,
1999, the Company would receive cash payments under the natural gas commodity
contacts of approximately $270,000 and reduce the payments due under the oil
contracts by $1.36 million.
Year 2000 Modifications
Year 2000 issues relate to the ability of computer programs or equipment to
accurately calculate, store or use dates after December 31, 1999. These dates
can be handled or interpreted in a number of different ways, but the most common
error is for the system to contain a two digit year which may cause the system
to interpret the year 2000 as 1900. Errors of this type can result in system
failures, miscalculations and the disruption of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business. In response to the Year 2000 issues, the
Company has developed a strategic plan divided into the following phases:
inventory, product compliance based on vendor representations and in-house
testing, third party integration and development of a contingency plan.
17
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
All of the Company's processing needs are handled by third party systems,
none of which have been substantially modified and all of which have been
purchased within the last few years. Therefore, the Company's initial review of
its in-house systems with regard to Year 2000 issues required an inventory of
its systems and a review of the vendor representations. The Company has
completed this initial review of its information systems. The licensor of the
Company's core financial software system has certified that such software is
Year 2000 compliant. Additionally, most other less critical software systems,
various types of equipment and non-information technology have been reviewed,
and based on vendor representations, are either compliant, will be compliant
with the next forthcoming software release or are systems that are not date
specific.
The Company's non-information technology consists primarily of various oil
and gas exploration and production equipment. The initial review has established
that the primary non-information technology systems functions are either not
date sensitive or are Year 2000 compliant based on vendor representations, and
are therefore predicted to operate in customary manners when faced with Year
2000 issues. However, the Company has determined that in the event such systems
are unable to address the Year 2000, employees can manually perform most, if not
all, functions. In anticipation of Year 2000 issues, the Company is also
evaluating the Year 2000 readiness status of its third party service suppliers.
In addition to reviewing Year 2000 readiness statements issued by the third
parties handling the Company's processing needs, to date the Company has
received, and is relying upon, Year 2000 readiness reports periodically issued
by its financial services and electrical service providers, vendors and
purchasers of the Company's oil and natural gas products. The Company is
continuing to review Year 2000 readiness of third party service suppliers and,
based on their representations, does not currently foresee material disruptions
in the Company's business as a result of Year 2000 issues. Unanticipated
prolonged losses of certain services, such as electrical power, could cause
material disruptions for which no economically feasible contingency plan has
been developed.
The Company is continuing to conduct in-house testing of the core systems
and non-information technology, and to date either all systems tested have
adequately addressed possible Year 2000 scenarios or the Company has a plan in
place to remedy the deficiency. The Company expects testing to be completed
during the second quarter of 1999. After the completion of its Year 2000 review
and testing, the Company will further develop a contingency plan as required,
including replacing or upgrading by December 31, 1999 any system incapable of
addressing the Year 2000. This final step is expected to be completed during the
third quarter of 1999.
Although the effects of Year 2000 issues cannot be predicted with
certainty, the Company believes that the potential impact, if any, of such
events will, at most, require employees to manually complete otherwise automated
tasks or calculations, other than those which might occur in a "worst case"
scenario as described below, which the Company does not anticipate will occur.
After considering Year 2000 effects on in-house operations, the Company
does not expect that any additional training would be required to perform these
tasks on a manual basis due to the level of experience of its personnel and the
routine nature of the tasks being performed. If, based on the results of its
in-house testing, the Company should determine that certain systems are not Year
2000 compliant and it appears as though the system is not likely to be compliant
within a reasonable time period, the Company will either elect to perform the
task manually or will attempt to purchase a different system for that particular
task and convert before December 31, 1999. The Company does not believe that
either option would impact the Company's ability to continue exploration,
drilling, production or sales activities, although the tasks may require
additional time and personnel to complete the same function or may require
incremental time and personnel during 1999 for a conversion to a new system.
18
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's core business consists primarily of oil and gas acquisition,
development and exploration activities. The equipment which is deemed "mission
critical" to the Company's activities requires external power sources such as
electricity supplied by third parties. Although the Company maintains limited
on-site secondary power sources such as generators, it is not economically
feasible to maintain secondary power supplies for any major component of its
"mission critical" equipment. Therefore, the most reasonably likely worst case
Year 2000 scenario for the Company would involve a disruption of third party
supplied electrical power, which would result in a substantial decrease in the
Company's oil production. Such event could result in a business interruption
that could materially affect the Company's operations, liquidity or capital
resources.
The Company has initiated the third party integration phase and will
continue to have formal communications with its significant suppliers, business
partners and key customers to determine the extent to which the Company is
vulnerable to either the third parties' or its own failure to correct their Year
2000 issues. The Company has been communicating with such third parties to keep
them informed of the Company's internal assessment of its Year 2000 review and
plans. This portion of the review and discussions with third parties is expected
to be completed during the second quarter of 1999. To date, approximately
one-half of these third parties have provided certain favorable representations
as to their Year 2000 readiness and received similar representations from the
Company. There can be no guarantee that the systems of other companies on which
the Company relies will be timely converted or that the conversion will be
compatible with the Company's systems. However, after reviewing and estimating
the effects of such events, the Company's contingency plan involves identifying
and arranging for other vendors, purchasers and third party contractors to
provide such services, if necessary, in order to maintain its normal operations.
The Company has, and will continue to, utilize both internal and external
resources to complete tasks and perform testing necessary to address the Year
2000 issue. The Company has not incurred, and does not anticipate that it will
incur, any significant costs relating to the assessment and remediation of Year
2000 issues.
Forward-Looking Information
The statements contained in this Quarterly Report on Form 10-Q ("Quarterly
Report") that are not historical facts, including, but not limited to,
statements found in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, are forward-looking statements, as that
term is defined in Section 21E of the Securities and Exchange Act of 1934, as
amended, that involve a number of risks and uncertainties. Such forward-looking
statements may be or may concern, among other things, capital expenditures,
drilling activity, acquisition plans and proposals and dispositions, development
activities, cost savings, production efforts and volumes, hydrocarbon reserves,
hydrocarbon prices, liquidity, regulatory matters and competition. Such
forward-looking statements generally are accompanied by words such as "plan,"
"estimate," "budgeted," "expect," "predict," "anticipate," "projected,"
"should," "assume," "believe" or other words that convey the uncertainty of
future events or outcomes. Such forward-looking information is based upon
management's current plans, expectations, estimates and assumptions and is
subject to a number of risks and uncertainties that could significantly affect
current plans, anticipated actions, the timing of such actions and the Company's
financial condition and results of operations. As a consequence, actual results
may differ materially from expectations, estimates or assumptions expressed in
or implied by any forward-looking statements made by or on behalf of the
Company. Among the factors that could cause actual results to differ materially
are: fluctuations of the prices received or demand for the Company's oil and
natural gas, the uncertainty of drilling results and reserve estimates,
operating hazards, acquisition risks, requirements for capital, general economic
conditions, competition and government regulations, as well as the risks and
uncertainties discussed in this Quarterly Report, including, without limitation,
the portions referenced above, and the uncertainties set forth from time to time
in the Company's other public reports, filings and public statements.
19
<PAGE>
DENBURY RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
In assessing Year 2000 issues, the Company has relied on certain
representations of third parties and has attempted to predict and address all
possible scenarios which could arise. However, uncertainties exist which could
cause Year 2000 effects to be more significant than the Company anticipates.
Such uncertainties include the success of the Company in identifying systems and
programs that are not Year 2000 compliant, the nature and amount of programming
required to up-grade or replace each of the affected programs, the availability,
rate and magnitude of related labor and consulting costs and the success of the
Company's vendors in addressing the Year 2000 issue.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information required by Item 3 is set forth under "Market Risk
Management" in Management's Discussion and Analysis of Financial Condition and
Results of Operations.
20
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds.
(a) In connection with the move of corporate domicile of the Company from
Canada to Delaware, the Delaware Certificate of Incorporation and Bylaws of the
Company which are included in this report as Exhibits 3(a) and 3(b) now define
the rights of the holders of the Company's shares of common stock, par value
$.001 per share. The effects of the modification of the rights of the Company's
common stockholders resulting from the move of domicile are described in detail
in the Company's Registration Statement No. 333-69577 on Form S-4, specifically
the sections of the Proxy Statement/Prospectus dated March 19, 1999 contained
therein under the captions "Moving the Corporate Domicile--Effects of the Move
of Corporate Domicile and Merger" and "--Comparison of Shareholders' Rights,"
and under "Description of Capital Stock", which are incorporated herein by
reference and made a part hereof.
By means of a Supplemental Indenture dated April 21, 1999, which is
included in this report as Exhibit 4(a), Denbury Resources Inc., a Delaware
corporation, has become directly liable for the 9% Senior Subordinated Notes Due
2008 originally issued in February 1998 by its former wholly-owned subsidiary
Denbury Management, Inc., a Texas corporation. Denbury Management, Inc. was
merged into the Delaware corporation in connection with the Company's move of
corporate domicile, all effective April 21, 1999. Accordingly, Denbury Resources
Inc., a Delaware corporation, has succeeded to and assumed all of the
obligations relating to these Notes pursuant to the Supplemental Indenture.
(c) On April 21, 1999, the Company closed the sale of 18,552,876 shares of
common stock, par value $.001 per share, of Denbury Resources Inc., a Delaware
corporation, to affiliates of the Texas Pacific Group, the Company's largest
shareholder, for U.S. $100 million, or $5.39 per share. The transaction was
described in detail in the Company's Proxy Statement/Prospectus dated March 19,
1999 contained as part of Registration Statement No. 333-69577 on Form S-4 first
filed with the Securities and Exchange Commission ("SEC") on December 23, 1998.
There was no underwriter engaged in connection with such sale. This sale was
made in reliance upon an exemption from the registration provisions of the
Securities Act of 1933, as amended, provided in Section 4(2) thereof, based on
the sophistication of the purchasers and their extensive knowledge of the
Company. This sale was approved by the stockholders of the Company at a special
meeting of stockholders held on April 20, 1999.
Item 4. Submission of Matters to a Vote of Security Holders.
On April 20, 1999, the Company held a special meeting of stockholders to
(i) approve the move of the Company's corporate domicile from Canada to
Delaware, (ii) approve the sale of 18,552,876 of Denbury's common shares to
affiliates of the Texas Pacific Group and (iii) increase the number of common
shares available for issuance under the Company's employee stock purchase and
stock option plans. All of these matters are described in detail in the
Company's Proxy Statement/Prospectus dated March 19, 1999 contained in
Registration Statement No. 333-69577 on Form S-4. All of the proposals before
the special meeting were approved by stockholders of the Company as follows:
<TABLE>
<CAPTION>
Absentions
or
Votes Votes Broker
For Against Non-Votes
---------- --------- -----------
<S> <C> <C> <C>
Move of corporate domicile 18,128,069 1,413,929 2,540
Sale of shares to TPG affiliates (1) 10,781,517 41,383 200
Additional shares under employee stock
purchase plan 19,339,214 198,453 6,871
Additional shares under stock option 15,488,648 4,014,664 41,226
plan
<FN>
(1) Excludes 8,721,438 shares held by TPG.
</FN>
</TABLE>
21
<PAGE>
Item 6. Exhibits and Reports on Form 8-K during the First Quarter of 1999
Exhibits:
3(a)* Certificate of Incorporation of Denbury Resources Inc. filed
with the Delaware Secretary of State April 20, 1999.
3(b)* Bylaws of Denbury Resources Inc., a Delaware corporation,
adopted April 20, 1999.
4(a)* First Supplemental Indenture dated as of April 21, 1999,
between Denbury Resources Inc., a Delaware corporation, and
Chase Bank of Texas, National Association, as Trustee,
relating to Denbury Management, Inc.'s 9% Senior Subordinated
Notes due 2008.
10(a) Fourth Amendment to First Restated Credit Agreement, by and
among Denbury Management, as borrower, Denbury Resources Inc.,
as guarantor, NationsBank of Texas, N.A., as administrative
agent, and NationsBank of Texas, N.A., as bank, entered into
as of February 19, 1999 (incorporated by reference to Exhibit
10(m) of the Registrant's Form 10-K for the year ended
December 31, 1998).
10(b)* Fifth amendment to First Restated Credit Agreement dated April
21, 1999 between the Company and NationsBank of Texas, N.A.,
as agent, and each of the financial institutions described on
the signature page therein.
27* Financial Data Schedule (EDGAR version only).
*Filed herewith.
Reports on Form 8-K:
None
22
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DENBURY RESOURCES INC.
(Registrant)
By: /s/ Phil Rykhoek
-------------------------------
Phil Rykhoek
Chief Financial Officer
By: /s/ Mark Allen
-------------------------------
Mark Allen
Chief Accounting Officer & Controller
Date: May 11, 1999
23
EXHIBIT 3(a)
Certificate of Incorporation
<PAGE>
CERTIFICATE OF INCORPORATION
OF
DENBURY RESOURCES INC.
The undersigned, a natural person acting as incorporator of a corporation
under the General Corporation Law of the State of Delaware, as the same exists
or may hereafter from time to time be amended (the "DGCL"), hereby makes this
Certificate of Incorporation for such corporation.
ARTICLE I
NAME
The name of the corporation is Denbury Resources Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is 1209
Orange Street, Wilmington, Delaware 19801, County of New Castle. The name of the
registered agent of the Corporation at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSES AND STOCKHOLDER LIABILITY
(a) Purposes. The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful business, act or activity
for which corporations may be organized under the DGCL.
(b) Stockholder Liability. The private property of the stockholders shall
not be subject to the payment of corporate debts to any extent whatsoever.
ARTICLE IV
AUTHORIZED CAPITAL STOCK
The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is 125,000,000 shares, consisting of:
(i) 100,000,000 shares of common stock, par value $.001 per share (the "Common
Stock"), and (ii) 25,000,000 shares of preferred stock, par value $.001 per
share (the "Preferred Stock"). Shares of any class of capital stock of the
Corporation may be issued for such consideration and for such corporate purposes
as the Board of Directors of the Corporation (the "Board of Directors") may from
time to time determine. Each share of Common Stock shall be entitled to one
vote.
A. Preferred Stock. The Preferred Stock may be divided into and issued from
time to time in one or more series as may be fixed and determined by the Board
of Directors. The relative rights and preferences of the Preferred Stock of each
series shall be such as shall be stated in any resolution or resolutions adopted
by the Board of Directors setting
3(a) - 1
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forth the designation of the series and fixing and determining the relative
rights and preferences thereof (a "Directors' Resolution"). The Board of
Directors is hereby authorized to fix and determine the powers, designations,
preferences and relative, participating, optional or other rights, including,
without limitation, voting powers, full or limited, preferential rights to
receive dividends or assets upon liquidation, rights of conversion or exchange
into Common Stock, Preferred Stock of any series or other securities, any right
of the Corporation to exchange or convert shares into Common Stock, Preferred
Stock of any series or other securities, or redemption provision or sinking fund
provisions, as between series and as between the Preferred Stock or any series
thereof and the Common Stock, and the qualifications, limitations or
restrictions thereof, if any, all as shall be stated in a Directors' Resolution,
and the shares of Preferred Stock or any series thereof may have full or limited
voting powers, or be without voting powers, all as shall be stated in the
Directors' Resolution. Except where otherwise set forth in the Directors'
Resolution providing for the issuance of any series of Preferred Stock, the
number of shares comprising such series may be increased or decreased (but not
below the number of shares then outstanding) from time to time by like action of
the Board of Directors. The shares of Preferred Stock of any one series shall be
identical with the other shares in the same series in all respects except as to
the dates from and after which dividends thereon shall cumulate, if cumulative.
B. Reacquired Shares of Preferred Stock. Shares of any series of any
Preferred Stock that have been redeemed (whether through the operation of a
sinking fund or otherwise), purchased by the Corporation, or which, if
convertible or exchangeable, have been converted into, or exchanged for, shares
of stock of any other class or classes or any evidences of indebtedness shall
have the status of authorized and unissued shares of Preferred Stock and may be
reissued as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock or as part
of any other series of Preferred Stock, all subject to the conditions or
restrictions on issuance set forth in the Directors' Resolution providing for
the issuance of any series of Preferred Stock and to any filing required by law.
C. Increase in Authorized Preferred Stock. The number of authorized shares
of Preferred Stock may be increased or decreased by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote without
the separate vote of holders of Preferred Stock as a class.
ARTICLE V
EXISTENCE
The existence of the Corporation is to be perpetual.
ARTICLE VI
NO PREEMPTIVE RIGHTS
No stockholder shall be entitled, as a matter of right, to subscribe for or
acquire additional, unissued or treasury shares of any class of capital stock of
the Corporation whether now or hereafter authorized, or any bonds, debentures or
other securities convertible into, or carrying a right to subscribe to or
acquire such shares, but any shares or other securities convertible into, or
carrying a right to subscribe to or acquire such shares may be issued or
disposed of by the Board of Directors to such persons and on such terms as in
its discretion it shall deem advisable.
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ARTICLE VII
NO CUMULATIVE VOTING
At each election of directors, every stockholder entitled to vote at such
election shall have the right to vote in person or by proxy the number of shares
owned by him for as many persons as there are directors to be elected and for
whose election he has a right to vote. No stockholder shall have the right to
cumulate his votes in any election of directors.
ARTICLE VIII
BOARD OF DIRECTORS
A. Powers. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the authority
and powers conferred upon the Board of Directors by the DGCL or by the other
provisions of this Certificate of Incorporation (this "Certificate of
Incorporation"), the Board of Directors is hereby authorized and empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject to the provisions of the DGCL, this Certificate
of Incorporation and the Bylaws of the Corporation (the "Bylaws"); provided,
however, that no Bylaws hereafter adopted by the stockholders of the
Corporation, or any amendments thereto, shall invalidate any prior act of the
Board of Directors that would have been valid if such Bylaws or amendment had
not been adopted.
B. Number, Election and Terms. The number of directors which shall
constitute the whole Board of Directors shall be fixed from time to time by the
members of the Board of Directors then in office subject to Section D(2) of this
Article VIII. Each director shall hold office until the next annual meeting of
stockholders and shall serve until his successor shall have been duly elected
and qualified or until his earlier death, resignation or removal. Election of
directors need not be by written ballot.
C. Bylaws. Subject to Section D(3) of this Article VIII, the Board of
Directors is expressly authorized to adopt, amend or repeal the Bylaws, or adopt
new Bylaws, without any action on the part of the stockholders, except as may be
otherwise provided by applicable law or the Bylaws.
D. Special Voting Requirements. The following matters shall be decided by a
majority of not less than 2/3 of the members of the Board of Directors of the
Corporation voting in favor of a resolution in respect of any of the following
matters:
(1) an acquisition having a purchase price in excess of 20% of the Assets
(as herein defined) of the Corporation or a disposition having a sale
price in excess of 20% of the Assets of the Corporation;
(2) any increase or decrease in the total number of members of the Board
of Directors of the Corporation;
(3) any amendment to the Certificate of Incorporation or Bylaws of the
Corporation;
(4) any issuance of equity securities or securities convertible into
equity securities of the Corporation (other than pursuant to any
rights, options, warrants or convertible or exchangeable securities
outstanding prior to the date of this Certificate of Incorporation is
made effective, and other than pursuant to any stock option plan or
3(a) - 3
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employee benefit plans of the Corporation existing from time to time);
(5) the creation of any series of Preferred Stock and the powers,
designations, preferences and relative, participating, optional or
other rights, and qualifications, limitations or restrictions thereof
attached thereto; any change in the powers, designations, preferences
and relative, participating, optional or other rights, and
qualifications, limitations or restrictions thereof attached to
unissued shares of any series; or
(6) the issuance of any debt securities in excess of 10% of the Assets of
the Corporation and (i) any borrowings by the Corporation, other than
advances against existing credit lines and (ii) any increase in the
existing credit lines of the Corporation, in each case, in excess of
10% of the Assets of the Corporation in respect of which the
Corporation is required to grant security for the debt obligations or
any borrowed money.
For the purposes of subsections (1) and (6) above, "Assets" shall mean the
total assets of the Corporation as reported on the consolidated balance sheet at
the end of the last fiscal quarter of the Corporation, prepared in accordance
with generally accepted accounting principles.
ARTICLE IX
INDEMNIFICATION
A. Mandatory Indemnification. Each person who at any time is or was a
director or officer of the Corporation, and is threatened to be or is made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative or investigative (a
"Proceeding"), by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, partner, venturer, proprietor, member,
employee, trustee, agent or similar functionary of another domestic or foreign
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other for-profit or non-profit enterprise, whether the basis of
a Proceeding is an alleged action in such person's official capacity or in
another capacity while holding such office, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the DGCL, or any
other applicable law as may from time to time be in effect (but, in the case of
any amendment to such law or enactment of new law, only to the extent that such
amendment or enactment permits the Corporation to provide broader
indemnification rights than such law prior to such amendment or enactment
permitted the Corporation to provide), against all expense, liability and loss
(including, without limitation, court costs and attorneys' fees, judgments,
fines, excise taxes or penalties, and amounts paid or to be paid in settlement)
actually and reasonably incurred or suffered by such person in connection with a
Proceeding, and such indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation or a director, officer,
partner, venturer, proprietor, member, employee, trustee, agent or similar
functionary of another domestic or foreign corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other for-profit
or non-profit enterprise, and shall inure to the benefit of such person's heirs,
executors and administrators. The Corporation's obligations under this Section A
include, but are not limited to, the convening of any meeting, and the
consideration of any matter thereby, required by statute in order to determine
the eligibility of any person for indemnification.
B. Advancement of Expenses. Expenses incurred by a director or officer of
the Corporation in defending a Proceeding shall be paid by the Corporation in
advance of the final disposition of such Proceeding to the fullest extent
permitted by, and only in compliance with, the DGCL or any other applicable laws
as may from time to time be in effect, including, without limitation, any
provision of the DGCL which requires, as a condition precedent to such expense
advancement, the delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all
3(a) - 4
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amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under Section A of this Article IX or
otherwise. Repayments of all amounts so advanced shall be upon such terms and
conditions, if any, as the Corporation's Board of Directors deems appropriate.
C. Vesting. The Corporation's obligation to indemnify and to prepay
expenses under Sections A and B of this Article IX shall arise, and all rights
granted to the Corporation's directors and officers hereunder shall vest, at the
time of the occurrence of the transaction or event to which a Proceeding
relates, or at the time that the action or conduct to which such Proceeding
relates was first taken or engaged in (or omitted to be taken or engaged in),
regardless of when such Proceeding is first threatened, commenced or completed.
Notwithstanding any other provision of this Certificate of Incorporation or the
Bylaws, no action taken by the Corporation, either by amendment of this
Certificate of Incorporation or the Bylaws or otherwise, shall diminish or
adversely affect any rights to indemnification or prepayment of expenses granted
under Sections A and B of this Article IX which shall have become vested as
aforesaid prior to the date that such amendment or other corporate action is
effective or taken, whichever is later.
D. Enforcement. If a claim under Section A or Section B or both Sections A
and B of this Article IX is not paid in full by the Corporation within thirty
(30) days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit in a court of competent
jurisdiction against the Corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall also be entitled to
be paid the expense of prosecuting such claim, including attorneys' fees. It
shall be a defense to any such suit (other than a suit brought to enforce a
claim for expenses incurred in defending any Proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the DGCL or other applicable law to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. The failure of the Corporation (including
its Board of Directors, independent legal counsel, or stockholders) to have made
a determination prior to the commencement of such suit as to whether
indemnification is proper in the circumstances based upon the applicable
standard of conduct set forth in the DGCL or other applicable law shall neither
be a defense to the action nor create a presumption that the claimant has not
met the applicable standard of conduct. The termination of any Proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which such person reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal Proceeding, had reasonable cause to believe that his conduct was
unlawful.
E. Nonexclusive. The indemnification provided by this Article IX shall not
be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under any statute, bylaw, other provisions of
this Certificate of Incorporation, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
F. Permissive Indemnification. The rights to indemnification and prepayment
of expenses which are conferred to the Corporation's directors and officers by
Sections A and B of this Article IX may be conferred upon any employee or agent
of the Corporation if, and to the extent, authorized by the Board of Directors.
G. Insurance. The Corporation shall have power to purchase and maintain
insurance, at its expense, on behalf of any person who 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, partner, venturer,
proprietor, member, employee, trustee, agent or similar functionary of another
domestic or foreign corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other for-profit or non-profit
enterprise against any expense, liability or loss asserted against such person
and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
provisions of this Article IX, the Corporation's Bylaws, the DGCL or other
applicable law.
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H. Implementing Arrangements. Without limiting the power of the Corporation
to procure or maintain insurance or other arrangement on behalf of any of the
persons as described in Section G of this Article IX, the Corporation may, for
the benefit of persons eligible for indemnification by the Corporation, (i)
create a trust fund, (ii) establish any form of self-insurance, (iii) secure its
indemnity obligation by grant of a security interest or other lien on the assets
of the Corporation, or (iv) establish a letter of credit, guaranty or surety
arrangement.
ARTICLE X
LIMITED DIRECTOR LIABILITY
No director of the Corporation shall be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this Article X 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 DGCL, as it may hereafter be amended from
time to time, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the DGCL 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 DGCL, as so amended. No amendment to or repeal of this Article
X will apply to, or have any effect on, the liability or alleged liability of
any director of the Corporation for or with respect to any acts or omissions of
the director occurring prior to such amendment or repeal.
ARTICLE XI
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
The Corporation shall not be governed by Section 203 of the DGCL.
ARTICLE XII
INSPECTION RIGHTS OF BONDHOLDERS
The holders of any bonds, debentures or other obligations issued or to be
issued by the Corporation shall have the same right of inspection of the
Corporation's books, accounts and other records which the stockholders of
Corporation have.
3(a) - 6
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ARTICLE XIII
INCORPORATOR
The name and mailing address of the incorporator:
Phil Rykhoek
Denbury Resources Inc.
5100 Tennyson Parkway, Suite 3000
Plano, Texas 75024
ARTICLE XIV
DOMESTICATION
The Corporation was first incorporated in the Province of Manitoba (Canada)
as a specially limited company on March 7, 1951. On February 16, 1968, by
supplementary letters patent, the Corporation was converted to a limited
company. On September 13, 1984, the Corporation was continued under the Canada
Business Corporations Act. Simultaneously with the filing of this Certificate of
Incorporation, the Corporation has filed its Certificate of Domestication with
the Secretary of State of the State of Delaware in order to domesticate itself
in the State of Delaware. This Certificate of Incorporation amends and
supersedes in all respects the previously adopted Articles of Continuance, as
amended to date, of the Corporation. Each common share of the Corporation
outstanding on the effective date of this Certificate of Incorporation is hereby
converted into one share of the Common Stock without any further action by the
Corporation or any stockholder, and the currently outstanding share certificates
representing such common shares outstanding on the effective date of this
Certificate of Incorporation shall represent one share of the Common Stock until
such share certificate is surrendered for transfer or reissue.
I, the undersigned, being the incorporator, for the purpose of forming a
corporation pursuant to the DGCL, do make this Certificate of Incorporation,
hereby declaring under the penalties of perjury that this is my act and deed and
that the facts stated herein are true, and accordingly have executed this
Certificate of Incorporation effective as of April 20, 1999.
Phil Rykhoek, Sole Incorporator
3(a) - 7
EXHIBIT 3(b)
BY-LAWS OF DENBURY RESOURCES INC
A DELAWARE CORPORATION
<PAGE>
DENBURY RESOURCES INC.
BYLAWS
ARTICLE I
OFFICES
Section 1.1. Registered Office. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The corporation may also have offices at such
other places, either within or without the State of Delaware, as the board of
directors may from time to time to determine or as the business of the
corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.l. Place of Meetings. All meetings of the stockholders shall be
held at the office of the corporation or at such other places as may be fixed
from time to time by the board of directors, either within or without the State
of Delaware, and stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Annual Meetings. Annual meetings of stockholders, commencing
with the year 1999, shall be held at the time and place to be selected by the
board of directors. At the meeting, the stockholders shall elect a board of
directors and transact such other business as may properly be brought before the
meeting. The board of directors acting by resolution may postpone and reschedule
any previously scheduled annual meeting of stockholders.
Nominations of persons for election to the board of directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the notice of
meeting, (b) by or at the direction of the board of directors, or (c) by any
stockholder of the corporation who was a stockholder of record at the record
date for the meeting, who is entitled to vote at the meeting.
Section 2.3. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 2.4. Voting List. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 2.5. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, shall be called by the board of directors or by
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holders of capital stock representing at least twenty-five percent (25%) of the
aggregate voting power of the issued and outstanding capital stock of the
corporation. The board of directors acting by resolution may postpone and
reschedule any previously scheduled special meeting of stockholders called by
the board of directors, but shall have such right with respect to any special
meeting called by stockholders of the corporation only with the consent of such
shareholders calling the meeting.
Section 2.6. Notice of Special Meetings. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting, to each
stockholder entitled to vote at such meeting. Business transacted at any special
meeting of the stockholders shall be limited to the purposes stated in the
notice.
Section 2.7. Quorum. The holders of one-third (1/3) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 2.8. Order of Business. At each meeting of the stockholders, one of
the following persons, in the order in which they are listed (and in the absence
of the first, the next, and so on), shall serve as chairman of the meeting:
chairman of the board, president, vice presidents (in the order of their
seniority if more than one) and secretary. The order of business at each such
meeting shall be as determined by the chairman of the meeting. The chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or comments on the affairs
of the corporation, restrictions on entry to such meeting after the time
prescribed for the commencement thereof, and the opening and closing of the
voting polls.
Section 2.9. Majority Vote. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which, by express provision of the
statutes or of the certificate of incorporation, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Section 2.10. Method of Voting. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period.
Section 2.11. Action Without Meeting. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the stockholders may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. The writing or writings shall be delivered to the
corporation by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
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ARTICLE 3
DIRECTORS
Section 3.1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors, which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by law or by the certificate of incorporation of the
corporation or by these bylaws directed or required to be exercised or done by
the stockholders.
Section 3.2. Number of Directors. Except as otherwise fixed by the
certificate of incorporation of the corporation, the board of directors shall
have not less than three (3) nor more than fifteen (15) directors. The number of
directors constituting the board shall be such number as from time to time shall
be specified by resolution of the board of directors; provided, however, no
director's term shall be shortened by reason of a resolution reducing the number
of directors.
Section 3.3. Election Qualification and Term of Office of Directors.
Directors shall be elected at each annual meeting of stockholders to hold office
until the next annual meeting. Directors need not be stockholders unless so
required by the certificate of incorporation or these bylaws, wherein other
qualifications for directors may be prescribed. Each director, including a
director elected to fill a vacancy, shall hold office until his successor is
elected and qualified or until his earlier resignation or removal. Elections of
directors need not be by written ballot.
Section 3.4. Regular Meetings. Written notice of the regular meetings of
the board of directors stating the place, date and hour of any of the regular
meetings shall be given to each director not less than two (2) days before the
date of any such meeting.
Section 3.5. Special Meetings. Special meetings of the board may be called
by the chairman of the board or the president, and shall be called by the
president or secretary on the written request of two (2) directors unless the
board consists of only a sole director, in which case special meetings shall be
called by the president or secretary in like manner and on like notice on the
written request of the sole director.
Section 3.6. Quorum, Majority Vote. At all meetings of the board, a
majority of the entire board of directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as may be otherwise specifically provided by statute or by the
certificate of incorporation. If a quorum shall not be present at any meeting of
the board of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 3.7. Action Without Meeting. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of the proceedings of the board or committee.
Section 3.8. Telephone and Similar Meetings. Unless otherwise restricted by
the certificate of incorporation or these bylaws, members of the board of
directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 3.9. Notice of Meetings. Notice of each meeting of the board shall
be given to each director by telegraph, facsimile, electronic mail, overnight
delivery or be given personally or by telephone, at least two (2) days before
the
3(b) - 3
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meeting is to be held. Notice need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of such notice or who
shall attend such meeting without protesting, prior to or at its commencement,
the lack of notice to such director. Every such notice shall state the time and
place but need not state the purpose of the meeting.
Section 3.10. Rules and Regulations. The board of directors may adopt such
rules and regulations not inconsistent with the provisions of law, the
certificate of incorporation of the corporation or these bylaws for the conduct
of its meetings and management of the affairs of the corporation as the board
may deem proper.
Section 3.11. Resignations. Any director of the corporation may at any time
resign by giving written notice to the board of directors, the chairman of the
board, the president or the secretary of the corporation. Such resignation shall
take effect at the time specified therein or, if the time be not specified, upon
receipt thereof; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.12. Removal of Directors. Unless otherwise restricted by statute
or by the certificate of incorporation, any director or the entire board of
directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
Section 3.13. Vacancies. Subject to the rights of the holders of any class
or series of stock having a preference over the common stock of the corporation
as to dividends or upon liquidation, any vacancies on the board of directors
resulting from death, resignation, removal or other cause, shall only be filled
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the board of directors, or by a sole remaining
director, and newly created directorships resulting from any increase in the
number of directors shall be filled by the board of directors, or if not so
filled, by the stockholders at the next annual meeting thereof or at a special
meeting called for that purpose in accordance with Section 2.5 of these bylaws.
Any director elected in accordance with the preceding sentence of this Section
3.13 shall hold office for the remainder of the full term of any class of
directors in which the new directorship was created or the vacancy occurred and
until such successor shall have been elected and qualified.
Section 3.14. Compensation of Directors. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the board of directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the board of directors
and may be paid a fixed sum for attendance at each meeting of the board of
directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
ARTICLE 4
EXECUTIVE AND OTHER COMMITTEES
Section 4.1. Executive Committee. The board of directors may designate
annually one (1) or more of its members to constitute members or alternate
members of an executive committee, which committee shall have and may exercise,
between meetings of the board, all the powers and authority of the board in the
management of the business and affairs of the corporation, including, if such
committee is so empowered and authorized by resolution adopted by a majority of
the entire board, the power and authority to declare a dividend and to authorize
the issuance of stock, and may authorize the seal of the corporation to be
affixed to all papers which may require it, except that the executive committee
shall not have such power or authority with reference to:
(a) amending the certificate of incorporation of the corporation;
(b) adopting an agreement of merger or consolidation involving the
corporation;
(c) recommending to the stockholders the sale, lease or exchange of all or
substantially all of the property and
3(b) - 4
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assets of the corporation;
(d) recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution;
(e) adopting, amending or repealing any Bylaw;
(f) filling vacancies on the board or on any committee of the board,
including the executive committee;
(g) fixing the compensation of directors for serving on the board or on
any committee of the board, including the executive committee; or
(h) amending or repealing any resolution of the board which by its terms
may be amended or repealed only by the board.
Section 4.2. Other Committees. The board of directors may designate from
among its members one or more other committees, each of which shall, except as
otherwise prescribed by law, have such authority of the board as may be
specified in the resolution of the board designating such committee. A majority
of all the members of such committee may determine its action and fix the time
and place of its meetings, unless the board shall otherwise provide. The board
shall have the power at any time to change the membership of, to increase or
decrease the membership of, to fill all vacancies in and to discharge any such
committee, or any member thereof, either with or without cause.
Section 4.3. Procedure; Meetings; Quorum. Regular meetings of the executive
committee or any other committee of the board of directors may be held at such
times and places as shall be fixed by resolution adopted by a majority of the
members thereof. Special meetings of the executive committee or any other
committee of the board shall be called at the request of any member thereof.
Notice of each meeting of the executive committee or any other committee of the
board shall be given to each member of such committee by mailing written notice,
addressed to each member's residence, usual place of business or such other
place as designated by the member in writing provided to the secretary of the
corporation or shall be sent to such member at such place by telegraph,
facsimile, electronic mail or overnight delivery or to be given personally or by
telephone at least two (2) days before the meeting is to be held. Notice need
not be given to any member who shall, either before or after the meeting, submit
a signed waiver of such notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of such notice to such
member. Every such notice shall state the time and place but need not state the
purpose of the meeting.
Any special meeting of the executive committee or any other committee of
the board shall be a legal meeting without any notice thereof having been given,
if all the members thereof shall be present thereat. Notice of any adjourned
meeting of any committee of the board need not be given if scheduled at the
original meeting. The executive committee or any other committee of the board
may adopt such rules and regulations not inconsistent with the provisions of
law, the certificate of incorporation of the corporation or these bylaws for the
conduct of its meetings as the executive committee or any other committee of the
board may deem proper. A majority of the executive committee or any other
committee of the board shall constitute a quorum for the transaction of business
at any meeting, and the vote of a majority of the members thereof present at any
meeting at which a quorum is present shall be the act of such committee. The
executive committee or any other committee of the board of directors shall keep
written minutes of its proceedings, a copy of which is to be filed with the
secretary of the corporation, and shall report on such proceedings to the board.
ARTICLE 5
NOTICES
Section 5.l. Method. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any director, officer or
stockholder shall be given in writing, by hand delivery or mail, addressed to
such director, officer or stockholder, at his or her address as it appears on
the records of the corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be hand delivered or
deposited in the United States mail. Except as otherwise required by law, notice
to directors shall also be given in accordance with Section 3.9 of these bylaws.
3(b) - 5
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Section 5.2. Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 6
OFFICERS
Section 6.1. Election, Qualification. The officers of the corporation shall
be chosen by the board of directors and shall be a president, one or more vice
presidents, a secretary and a treasurer. The board of directors may also choose
a chairman of the board, one or more assistant secretaries and assistant
treasurers and such other officers and agents as it shall deem necessary. Any
number of offices may be held by the same person, unless the certificate of
incorporation or these bylaws otherwise provide.
Section 6.2. Salary. The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 6.3. Term, Removal. The officers of the corporation shall hold
office until their successors are chosen and qualify. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
Section 6.4. Resignation. Subject at all times to the right of removal as
provided in Section 6.3 of these bylaws, any officer may resign at any time by
giving notice to the board of directors, the president or the secretary of the
corporation. Any such resignation shall take effect at the date of receipt of
such notice or at any later date specified therein; provided that the president
or, in the event of the resignation of the president, the board of directors may
designate an effective date for such resignation which is earlier than the date
specified in such notice but which is not earlier than the date of receipt of
such notice; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 6.5. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired portion
of the term in the manner prescribed in these bylaws for election to such
office.
Section 6.6. Chairman of the Board. The chairman of the board shall, if
there be such an officer, preside at meetings of the board of directors and at
meetings of the stockholders. The chairman of the board shall counsel with and
advise the president and perform such other duties as the president or the board
or the executive committee may from time to time determine. Except as otherwise
provided by resolution of the board, the chairman of the board shall be
ex-officio a member of all committees of the board. The chairman of the board
may sign and execute in the name of the corporation deeds, mortgages, bonds,
contracts or other instruments authorized by the board or any committee thereof
empowered to authorize the same.
Section 6.7. President. The president shall be the chief executive officer
of the corporation, shall preside, if present, and in the absence of the
chairman of the board, at all meetings of the board of directors and at all
meetings of the stockholders, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
board of directors are carried into effect. He shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation.
Section 6.8. Vice Presidents. In the absence of the president and the
chairman of the board or, in the event of their
3(b) - 6
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inability or refusal to act, the vice president (or in the event there be more
than one vice president, the vice presidents in the order designated by the
directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice presidents shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 6.9. Secretary. The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
Section 6.10. Assistant Secretary. The assistant secretary, or if there be
more than one, the assistant secretaries in the order determined by the board of
directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 6.11. Treasurer. The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors. He shall disburse the funds of the corporation as may be ordered by
the board of directors, taking proper vouchers for such disbursements, and shall
render to the president and the board of directors, at its regular meetings, or
when the board of directors so requires, an account of all his transactions as
treasurer and of the financial condition of the corporation. If required by the
board of directors, he shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 6.12. Assistant Treasurer. The assistant treasurer, or if there
shall be more than one, the assistant treasurers in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
ARTICLE 7
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 7.1. Indemnification. The corporation shall indemnify any person
who is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director or officer of another entity, as
provided in the certificate of incorporation.
3(b) - 7
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Section 7.2. Definitions of Certain Terms. For purposes of indemnification
pursuant to the certificate of incorporation or this Article 7, references to
"the corporation shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article 7 with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
For purposes of this Article 7, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by such director, officer, employee or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this Article 7.
ARTICLE 8
CERTIFICATES OF STOCK
Section 8.1. Certificates. Every holder of stock in the corporation shall
be entitled to have a certificate, signed by, or in the name of the corporation
by, the chairman or vice chairman of the board of directors, or the president or
a vice president and the treasurer or an assistant treasurer, or the secretary
or an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation.
Section 8.2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 8.3. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 8.4. Transfers of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 8.5. Fixing Record Date. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to any corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any changes, conversion or exchange of stock
or for any other lawful purpose, the board of directors may fix, in advance, a
record date, which shall not be more than sixty nor less than ten days before
the date of such meeting, more than ten days after the date of adoption of the
Board resolution for actions
3(b) - 8
<PAGE>
by written consent, or more than sixty days prior to any other action. In no
event shall the record date precede the date of adoption of the applicable Board
resolution. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 8.6. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE 9
AFFILIATED TRANSACTIONS
Section 9.1. Validity. Except as otherwise provided for in the certificate
of incorporation, if Section 9.2 of these bylaws is satisfied, no contract or
transaction between the corporation and any of its directors, officers or
security holders, or any corporation, partnership, association or other
organization in which any of such directors, officers or security holders are
directly or indirectly financially interested, shall be void or voidable solely
because of this relationship, or solely because of the presence of the director,
officer or security holder at the meeting authorizing the contract or
transaction, or solely because of his or their participation in the
authorization of such contract or transaction or vote at the meeting therefor,
whether or not such participation or vote was necessary for the authorization of
such contract or transaction.
Section 9.2. Disclosure, Approval; Fairness. Section 9.1 shall apply only
if:
(a) the material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known:
(i) to the board of directors (or committee thereof) and it
nevertheless in good faith authorizes or ratifies the contract or
transaction by a majority of the directors present, each such interested
director to be counted in determining whether a quorum is present but not
in calculating the number necessary to carry the vote; or
(ii) to the stockholders and they nevertheless authorize or ratify the
contract or transaction by a majority of the shares present at a meeting
considering such contract or transaction, each such interested person
(stockholder) to be counted in determining whether a quorum is present but
not in calculating the number necessary to carry the vote; or
(b) the contract or transaction is fair to the corporation as of the time
it is authorized, approved or ratified by the board of directors (or
committee thereof) or the stockholders.
Section 9.3. Nonexclusive. This provision shall not be construed to
invalidate a contract or transaction which would be valid in the absence of this
provision.
3(b) - 9
<PAGE>
ARTICLE 10
GENERAL PROVISIONS
Section 10.1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 10.2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 10.3. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
Section 10.4. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 10.5. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, the year of its organization and the words "Corporate
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed, affixed, reproduced or otherwise.
ARTICLE 11
AMENDMENTS
Section 11.1. Amendments. These bylaws may be altered, amended or repealed
or new bylaws may be adopted by a majority of not less than 2/3 of the members
of the board of directors voting in favor thereof, at any meeting of the board
of directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such meeting. The stockholders of the
corporation shall have the power to adopt, amend or repeal any provisions of the
bylaws.
Phil Rykhoek, Secretary
3(b) - 10
EXHIBIT 4(a)
FIRST SUPPLEMENTAL INDENTURE
<PAGE>
DENBURY MANAGEMENT, INC.,
Issuer
DENBURY RESOURCES INC.,
Guarantor
9% Senior Subordinated Notes Due 2008
FIRST SUPPLEMENTAL INDENTURE
Dated as of April 21, 1999
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
As Trustee
4(a) - 1
<PAGE>
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of April 21, 1999, between
DENBURY RESOURCES INC., a Delaware corporation (the "Company"), and CHASE BANK
OF TEXAS, NATIONAL ASSOCIATION, as Trustee (the "Trustee"), amends and
supplements the Indenture (as defined below).
RECITALS
WHEREAS, Denbury Management, Inc.("DMI"), as Issuer, Denbury Resources
Inc., a corporation formed under the Canadian Business Corporation Act ("Denbury
Canada"), as Guarantor, and the Trustee entered into the Indenture, dated as of
February 26, 1998 (the "Indenture"), relating to DMI's 9% Senior Subordinated
Notes due 2008 (the "Notes"); and
WHEREAS, Denbury Resources Inc. has moved its corporate domicile from
Canada to the United States under the laws of the State of Delaware (the
"Move"), and thereafter, DMI has merged with and into the Company (the
"Merger"), with the Company being the surviving entity; and
WHEREAS, the Company is required pursuant to the Indenture to succeed to
and be substituted for, and exercise every right and power of DMI under the
Indenture; and
WHEREAS, the Company has assumed and does hereby assume the direct and
primary obligation to pay the Notes and all DMI obligations under the Indenture,
and by virtue of the Merger and by operation of law DMI and the Company have
become the same entity, and thus, the Guaranty, if not otherwise eliminated by
operation of law, is thereby extinguished; and
WHEREAS, the Company has furnished to the Trustee an Officer's Certificate
and Opinion of Counsel as required by Section 5.01(vi) of the Indenture; and
WHEREAS, all conditions and requirements necessary to make this First
Supplemental Indenture a valid, binding and legal instrument in accordance with
its terms upon the Company and the Trustee have been fulfilled;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally binding, the parties hereto hereby
agree as follows:
ARTICLE ONE
ASSUMPTION OF OBLIGATIONS
Section 1.01. The Company hereby acknowledges and agrees that, by virtue of
the Merger and by operation of law, it has become a party to the Indenture and
has assumed and does hereby assume all of the liabilities and obligations of DMI
under the Indenture and the Notes in accordance with Section 5.01(i)(B) of the
Indenture.
Section 1.02. Pursuant to Section 9.05 of the Indenture, the Company shall
issue and the Trustee shall authenticate new Notes that reflect this First
Supplemental Indenture to be used upon issuance or reissuance of Notes after the
date hereof.
Section 1.03. Pursuant to Section 9.06 of the Indenture, the Company hereby
indemnifies and holds harmless the Trustee from all liability, claims and
damages which the Trustee may sustain or incur by reason of entering into this
First Supplemental Indenture.
4(a) - 2
<PAGE>
ARTICLE TWO
MISCELLANEOUS PROVISIONS
Section 2.01. Capitalized terms used herein and not otherwise defined
herein are used as defined in the Indenture.
Section 2.02. This First Supplemental Indenture shall be governed by, and
construed in accordance with, the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws.
Section 2.03. This First Supplemental Indenture may be executed in any
number of counterparts, each of which, when so executed, shall be deemed to be
an original, but all of which shall together constitute but one and the same
instrument.
Section 2.04. This First Supplemental Indenture is an amendment
supplemental to the Indenture and said Indenture and this First Supplemental
Indenture shall henceforth be read together.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be executed as of the day and year first above written.
DENBURY RESOURCES INC., CHASE BANK OF TEXAS, NATIONAL
a Delaware corporation, successor ASSOCIATION, Trustee
by merger to Denbury Management, Inc.
By:______________________________ By:_____________________________
Name: Phil Rykhoek Name: Michael D. Scrivner
Title: Chief Financial Officer and Secretary Title: Vice President
4(a) - 3
EXHIBIT 10(b)
FIFTH AMENDMENT TO FIRST
RESTATED CREDIT AGREEMENT
<PAGE>
FIFTH AMENDMENT TO FIRST RESTATED CREDIT AGREEMENT
This Fifth Amendment to First Restated Credit Agreement (this "Fifth
Amendment") is entered into as of the 21st day of April, 1999 (the "Effective
Date"), by and among Denbury Resources, Inc. ("DRI"), a corporation previously
incorporated under the Canadian Business Corporation Act which has been
domesticated in the State of Delaware and which is the successor by merger to
Denbury Management, Inc. ("Management"), a Texas corporation, NationsBank, N.A.,
successor by merger to NationsBank of Texas, N.A., as Administrative Agent
("Agent"), and the financial institutions parties hereto as Banks ("Banks").
W I T N E S S E T H:
WHEREAS, Management, DRI, Agent and Banks are parties to that certain First
Restated Credit Agreement dated as of December 29, 1997, as amended by (a) that
certain First Amendment to First Restated Credit Agreement dated as of January
27, 1998, (b) that certain Second Amendment to First Restated Credit Agreement
dated as of February 25, 1998, (c) that certain Third Amendment to First
Restated Credit Agreement dated as of August 10, 1998, and (d) that certain
Fourth Amendment to First Restated Credit Agreement dated February 19, 1999 (as
amended, "Credit Agreement") (unless otherwise defined herein, all terms used
herein with their initial letter capitalized shall have the meaning given such
terms in the Credit Agreement); and
WHEREAS, pursuant to the Credit Agreement the Banks have made certain Loans
to Management; and
WHEREAS, DRI was formerly incorporated under the Canadian Business
Corporation Act and was domesticated in the State of Delaware; and
WHEREAS, Management merged with and into DRI with DRI being the surviving
corporation (such merger is referred to herein as the "Merger"); and
WHEREAS, as a result of the Merger, DRI assumed and is primarily liable for
all of the debts, obligations and liabilities of Management under the Credit
Agreement and the other Loan Papers and DRI became the "Borrower" under and as
defined in the Credit Agreement and the other Loan Papers; and
WHEREAS, the parties desire to (a) evidence in writing the assumption by
DRI of the debts, obligations and liabilities of Management under the Credit
Agreement and the other Loan Papers, and (b) make certain conforming amendments
to the Credit Agreement.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, DRI,
Agent and each Bank hereby agree as follows:
Section 1. Assumption. DRI acknowledges and agrees that as a result of the
Merger DRI has assumed and is directly and primarily liable for the due and
punctual payment and performance in full of the Obligations. DRI represents and
warrants that it has no counterclaim, right of set off or other defense to
payment or performance of such Obligations.
Section 2. Amendments. The Credit Agreement is hereby amended effective as
of the Effective Date in the manner provided in this Section 2.
2.1 Additional Definitions. Section 1.1 of the Credit Agreement is
amended to add thereto in alphabetical order the definitions of "Merger" and
"Fifth Amendment" which shall read in full as follows:
10(b) - 1
<PAGE>
"Merger" means the merger of Denbury Management, Inc. into Borrower,
in each case with Borrower being the surviving corporation.
"Fifth Amendment" means that certain Fifth Amendment to First Restated
Credit Agreement dated as of April 21, 1999 among Borrower, Administrative
Agent and Banks.
2.2 Amendment to Definitions. The definitions of "Administrative Agent,"
"Borrower," "Consolidated Current Assets," "Consolidated Current Liabilities,"
"Credit Parties," "GAAP," "Loan Papers," "Parent," and "Required Consolidated
Tangible Net Worth" set forth in Section 1.1 of the Credit Agreement are amended
to read in full as follows:
"Administrative Agent" means NationsBank, N.A., successor by merger to
NationsBank of Texas, N.A., in its capacity as Administrative Agent for
Banks hereunder or any successor thereto.
"Borrower" means Denbury Resources, Inc., a corporation previously
incorporated under the Canadian Business Corporation Act and which was
domesticated in the State of Delaware, and which is the successor by merger
to Denbury Management, Inc., a Texas corporation.
"Consolidated Current Assets" means, for any Person at any time, the
current assets of such Person and its Consolidated Subsidiaries at such
time, plus, in the case of Borrower, the Availability at such time.
"Consolidated Current Liabilities" means, for any Person at any time,
the current liabilities of such Person and its Consolidated Subsidiaries at
such time, but, in the case of Borrower, excluding the current portion (if
any) of the outstanding principal balance of the Revolving Loan.
"Credit Parties" means Borrower and any Subsidiary or Affiliate of
Borrower which Required Banks and Borrower may hereafter jointly designate
in writing as a "Credit Party" for purposes of this Agreement. Unless and
until any such designation is made, "Credit Party" and "Credit Parties"
shall refer only to Borrower.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Securities and Exchange
Commission, the American Institute of Certified Public Accountants acting
through its Accounting Principles Board or by the Financial Accounting
Standards Board or through other appropriate boards or committees thereof
and which are consistently applied for all periods after the date hereof so
as to properly reflect the financial condition, and the results of
operations and changes in financial position, of Borrower and its
Consolidated Subsidiaries, except that any accounting principle or practice
required to be changed by the said Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board or committee
thereof) in order to continue as a generally accepted accounting principle
or practice may be so changed.
"Loan Papers" means this Agreement, the Notes, the Existing Mortgages
(as amended by the Amendment to Mortgages), the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment,
and each Security Document now or at any time hereafter delivered pursuant
to Section 5.2, and all other certificates, documents or instruments
delivered in connection with this Agreement, as the foregoing may be
modified, amended, renewed, extended or restated from time to time.
"Parent" means Denbury Resources, Inc., a corporation previously
incorporated under the Canadian Business Corporations Act, which, prior to
the Merger, was the owner and holder of one hundred percent (100%) of the
issued and outstanding capital stock of Denbury Management, Inc., a Texas
corporation.
10(b) - 2
<PAGE>
"Required Consolidated Tangible Net Worth" means, (a) as of June 30,
1999, the sum of (i) Parent's Consolidated Tangible Net Worth as of
December 31, 1998 plus (ii) an amount equal to sixty percent (60%) of the
Net Cash Proceeds received by Parent or Borrower from any issuance by
Parent or Borrower of its equity securities after January 1, 1999 and on or
prior to June 30, 1999 (including pursuant to the Proposed Equity
Contribution) (the sum of (i) and (ii) preceding is referred to herein as
the "June 30, 1999 Required Net Worth"), and (b) from and after (but
excluding), June 30, 1999, "Required Consolidated Tangible Net Worth" shall
increase (but not decrease) above the Required Consolidated Tangible Net
Worth previously in effect pursuant to this definition (i) on each
Quarterly Date by an amount equal to fifty percent (50%) of Borrower's
Consolidated Net Income for the Fiscal Quarter then ended, and (ii) on the
date of issuance by Borrower of its equity securities by amount equal to
fifty percent (50%) of the net proceeds received by Borrower from the
issuance of such securities. Notwithstanding anything to the contrary
contained herein, in no event will Required Consolidated Tangible Net Worth
be less than $25,000,000.
2.3 Deletion of Definitions. Section 1.1 of the Credit Agreement shall
be amended to delete therefrom in their entirety the definitions of "Facility
Guaranty", and "Parent Pledge Agreement."
2.4 Amendments to Certain Interpretive Provisions. Section 1.2 of the
Credit Agreement shall be amended to read in full as follows:
"SECTION 1.2. Accounting Terms and Definitions. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be expressed in U.S. Dollars and shall be prepared
in accordance with GAAP, applied on a basis consistent with the most recent
audited consolidated financial statements of Borrower and its Consolidated
Subsidiaries delivered to Banks except for changes concurred in by Borrower's
independent certified public accountants and which are disclosed to
Administrative Agent on the next date on which financial statements are required
to be delivered to Banks pursuant to Sections 8.1(a) or (b); provided that,
unless Required Banks shall otherwise agree in writing, no such change shall
modify or affect the manner in which compliance with the covenants contained in
Article X are computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods."
2.5 Amendment to Collateral and Guarantee Requirements. Article V of the
Credit Agreement is amended to read in full as follows:
ARTICLE V
COLLATERAL AND GUARANTEES
SECTION 5.1. Required Security. The Obligations shall be secured by first
priority perfected Liens on such Proved Mineral Interests owned by Borrower as
Administrative Agent shall require but which shall, in all events, include
Proved Mineral Interests with a Recognized Value representing not less than
eighty five percent (85%) of the Recognized Value of all Proved Mineral
Interests evaluated by Banks for purposes of determining the Borrowing Base;
provided, that, from and after the occurrence of a Borrowing Base Deficiency, a
Default or an Event of Default, the Obligations shall be secured by first
priority perfected Liens on one hundred percent (100%) of all Mineral Interests
owned by Borrower.
SECTION 5.2. Security Documents. Not later than March 1, 1999 and
thereafter simultaneously with any Redetermination or the occurrence of any
Default or Event of Default, and at such other times as Administrative Agent or
Required Banks shall request, Borrower shall execute and deliver to
Administrative Agent such deeds of trust, mortgages, security agreements,
assignments, financing statements, pledge agreements, collateral assignments and
other documents, instruments and agreements (including, without limitation, any
modifications,
10(b) - 3
<PAGE>
amendments, supplements, restatements, renewals or extensions of any of the
foregoing) as Administrative Agent shall request to fully create, evidence and
perfect the liens and security interests required by Section 5.1 (collectively,
the "Security Documents").
SECTION 5.3. Evidence of Existence, Authority, Proper Execution and
Delivery and Title; Opinions. At any time Borrower is required to execute and
deliver Security Documents pursuant to Section 5.2, Borrower shall also deliver
to Administrative Agent and its counsel (a) such certificates of Authorized
Officers of Borrower, certificates of Governmental Authorities, resolutions of
the Boards of Directors of Borrower, certified copies of the charter and bylaws
of Borrower and other documents, instruments and agreements as Administrative
Agent shall require to evidence (i) the valid corporate existence and authority
to transact business of Borrower, and (ii) the due authorization, execution and
delivery of the Security Documents by Borrower, (b) opinions of counsel
(addressed to Administrative Agent) or other evidence of title as Administrative
Agent shall require to verify Borrower's title to all Proved Mineral Interests
subject to the Liens of such Security Documents and the priority of such Liens,
and (c) opinions of counsel addressed to Administrative Agent favorably opining
as to the due authorization, execution, delivery and enforceability of such
Security Documents and such other matters related to Borrower or such Security
Documents as Administrative Agent shall require.
2.6 Financial Representation and Warranty. Section 7.5 of the Credit
Agreement is amended to delete the words "Parent" and "Parent's" each time such
words appear therein and substitute in lieu thereof the words "Borrower" and
"Borrower's."
2.7 Organization Structure; Nature of Business Representation and
Warranty. Section 7.14 of the Credit Agreement is amended to delete the first
two (2) sentences thereof in their entirety.
2.8 Fiscal Year Representation and Warranty. Section 7.17 of the Credit
Agreement is amended to delete the word "Parent's" where it appears therein, and
substitute in lieu thereof "Borrower's."
2.9 Financial Information Covenant. Section 8.1 of the Credit Agreement
is amended to delete the words "Parent" and "Parent's" each time they appear
therein and to substitute in lieu thereof the words "Borrower" and "Borrower's."
2.10 Business of the Credit Parties Covenant. Section 8.2 of the Credit
Agreement is amended to delete the first sentence thereof in its entirety.
2.11 Maintenance of Existence Covenant. Section 8.3 of the Credit
Agreement is amended to delete the phrase "Each of Parent and" which are the
first four
words of such covenant.
2.12 Title Data Representation and Warranty. Section 8.4 of the Credit
Agreement is hereby amended to read in full as follows:
"SECTION 8.4. Title Data. In addition to the title information required by
Sections 5.3 and 6.1(c) hereof, Borrower shall, upon the request of Required
Banks, cause to be delivered to Administrative Agent such title opinions and
other information regarding title to Mineral Interests owned by Borrower as are
appropriate to determine the status thereof; provided, however, that the Banks
may not require the Credit Parties to furnish title opinions (except pursuant to
Section 5.3 and 6.1(c)) unless (a) an Event of Default shall have occurred and
be continuing, or (b) the Required Banks have reason to believe that there is a
defect in or encumbrance upon Borrower's title to such Mineral Interests that is
not a Permitted Encumbrance."
2.13 Maintenance of Insurance Covenant. Section 8.6 of the Credit
Agreement is amended to delete the phrase "and
10(b) - 4
<PAGE>
Parent" in the third sentence thereof and delete the word "assign" in such
sentence and substitute in lieu of the word "assign" the word "assigns."
2.14 Merger Covenant. Section 9.4 of the Credit Agreement is amended to
read in full as follows:
"SECTION 9.4. Consolidations and Mergers. The Credit Parties will not, nor
will the Credit Parties permit any of their Subsidiaries to, consolidate or
merge with or into any other Person; provided, that so long as no Default exists
or will result any wholly owned Subsidiary of Borrower may merge or consolidate
with any other Person so long as a wholly owned Subsidiary of Borrower is the
surviving corporation."
2.15 Fiscal Year Covenant. Section 9.12 of the Credit Agreement is
amended to delete the word "Parent" where it appears therein and substitute in
lieu thereof, the word "Borrower."
2.16 Financial Covenants. Article X of the Credit Agreement is amended
to delete the words "Parent" and "Parent's" each time such words appear therein
and to substitute in lieu thereof, the words "Borrower" and "Borrower's."
2.17 Change of Control. Section 11.1(k) of the Credit Agreement is
amended to read in full as follows:
"(k) as of any date any Person or group (as defined in Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934) other than the Texas
Pacific Group shall become the direct or indirect beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of more
than 30% of the total voting power of all classes of capital stock then
outstanding of Borrower entitled (without regard to the occurrence of any
contingency) to vote in elections of directors of Borrower;" or
2.18 Miscellaneous Provisions. Article XIV of the Credit Agreement is
hereby amended to delete the word "Parent's" and the phrases "Parent and" and
"Parent or" each time such words and such phrases appear in such Article.
Section 3. Representations and Warranties of Borrower. To induce the Banks
and Administrative Agent to enter into this Fifth Amendment, DRI hereby
represents and warrants to Banks and Administrative Agent as follows:
3.1 Confirmation of Representations and Warranties. After giving effect
to the Amendments contained in Section 2 hereof, each representation and
warranty of Borrower contained in the Credit Agreement and the other Loan Papers
is true and correct on the date hereof.
3.2 Corporate Power; Due Authorization; No Conflicts. The execution,
delivery and performance by DRI of this Fourth Amendment are within DRI's
corporate powers, have been duly authorized by necessary action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not violate or constitute a default under any provision of
applicable law or any Material Agreement binding upon DRI or any Subsidiary of
DRI or result in the creation or imposition of any Lien upon any of the assets
of DRI or any of the Subsidiaries of DRI except Permitted Encumbrances.
3.3 Validity of Binding Effect. This Fifth Amendment constitutes the
valid and binding obligations of DRI enforceable in accordance with its terms,
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditor's rights generally, and (b) the
availability of equitable remedies may be limited by equitable principles of
general application.
3.4 No Defenses. DRI has no defenses to payment, counterclaim or rights
of set-off with respect to the Obligations existing on the date hereof.
10(b) - 5
<PAGE>
3.5 Merger . The domestication of DRI in Delaware and the Merger were
consummated (a) substantially in accordance with the descriptions thereof set
forth in that certain Consent Letter dated November 30, 1998, by and among
Denbury Management, Inc., Parent and Banks, and (b) in accordance with all
applicable Laws and the Articles or Certificate of Incorporation, bylaws and
other charter documents of DRI and Management. The domestication of DRI in
Delaware and the Merger did not, and do not, result in a breach or violation of
any material contract, agreement, indenture, mortgage or other instrument to
which DRI or Management is or was a party and did not and will not result in the
imposition of any Lien on any of the properties or assets of DRI or Management
or a default under or the acceleration of any Debt of DRI, Management; as a
result of the domestication of DRI in Delaware and the Merger, DRI has succeeded
to, and holds good and defensible title, to all assets of Management, subject to
no Liens other than Permitted Encumbrances.
Section 4. Miscellaneous.
4.1 Reaffirmation of Loan Papers; Extension of Liens. Any and all of the
terms and provisions of the Credit Agreement and the Loan Papers shall, except
as amended and modified hereby, remain in full force and effect. DRI hereby
extends the Liens securing the Obligations until the Obligations have been paid
in full or are specifically released by Agent and Banks prior thereto, and agree
that the amendments and modifications herein contained shall in no manner
adversely affect or impair the Obligations or the Liens securing payment and
performance thereof.
4.2 Parties in Interest. All of the terms and provisions of this Fifth
Amendment shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.
4.3 Legal Expenses. DRI hereby agrees to pay on demand all reasonable
fees and expenses of counsel to Administrative Agent incurred by Administrative
Agent, in connection with the preparation, negotiation and execution of this
Fifth Amendment and all related documents.
4.4 Counterparts. This Fifth Amendment may be executed in counterparts,
and all parties need not execute the same counterpart; however, no party shall
be bound by this Fifth Amendment until all parties have executed a counterpart.
Facsimiles shall be effective as originals.
4.5 Complete Agreement. THIS FIFTH AMENDMENT, THE CREDIT AGREEMENT AND
THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
4.6 Headings. The headings, captions and arrangements used in this Fifth
Amendment are, unless specified otherwise, for convenience only and shall not be
deemed to limit, amplify or modify the terms of this Fifth Amendment, nor affect
the meaning thereof.
10(b) - 6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
be duly executed by their respective authorized officers on the date and year
first above written.
BORROWER:
DENBURY RESOURCES, INC.,
a Delaware corporation
By:_____________________________________
Gareth Roberts
President and Chief Executive
Officer
By:_____________________________________
Phil Rykhoek
Chief Financial Officer and
Secretary
ADMINISTRATIVE AGENT:
NATIONSBANK, N.A., successor by merger to
NationsBank of Texas, N.A.
By:_____________________________________
J. Scott Fowler
Vice President
BANKS:
NATIONSBANK, N.A., successor by merger to
NationsBank of Texas, N.A.
By:_____________________________________
J. Scott Fowler
Vice President
10(b) - 7
<PAGE>
BANKBOSTON, N.A.
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
BANK ONE, TEXAS, N.A.
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
CHRISTIANAIA BANK, OG KREDITKASSE ASA
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
PARIBAS
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
CREDIT LYONNAIS - NEW YORK BRANCH
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
10(b) - 8
<PAGE>
WELLS FARGO BANK (TEXAS), N.A.
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
NATEXIS BANQUE BFCE
By:_____________________________________
Name:_____________________________________
Title:_____________________________________
10(b) - 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
DENBURY RESOURCES INC. MARCH 31, 1999 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000945764
<NAME> Denbury Resources Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 7,063
<SECURITIES> 0
<RECEIVABLES> 18,449
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,512
<PP&E> 580,694
<DEPRECIATION> 398,660
<TOTAL-ASSETS> 216,381
<CURRENT-LIABILITIES> 15,531
<BONDS> 234,630
0
0
<COMMON> 27
<OTHER-SE> (35,320)
<TOTAL-LIABILITY-AND-EQUITY> 216,381
<SALES> 14,703
<TOTAL-REVENUES> 15,064
<CGS> 0
<TOTAL-COSTS> 13,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,858
<INCOME-PRETAX> (3,028)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,028)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
