1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 2001
REGISTRATION NOS. 333-63800, 333-63800-01, 333-63800-02, 333-63800-03,
333-63800-04, 333-63800-05, 333-63800-06, 333-63800-07, 333-63800-08,
333-63800-09, 333-63800-10, 333-63800-11,
333-63800-12, 333-63800-13, 333-63800-14, 333-63800-15, 333-63800-16,
333-63800-17,
333-63800-18, 333-63800-19, 333-63800-20
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
EL PASO ENERGY PARTNERS, L.P.
EL PASO ENERGY PARTNERS FINANCE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1311 76-0396023
DELAWARE 1311 76-0605880
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
BRITTON WHITE JR. D. MARK LELAND
EL PASO BUILDING SENIOR VICE PRESIDENT AND CONTROLLER
1001 LOUISIANA STREET, 30TH FLOOR 4 EAST GREENWAY PLAZA
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77046
(713) 420-2600 (832) 676-5332
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE (NAME, ADDRESS, INCLUDING ZIP CODE, AND
NUMBER INCLUDING TELEPHONE NUMBER,
AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE INCLUDING AREA CODE OF AGENT FOR SERVICE)
OFFICES)
------------------------
COPY TO:
J. VINCENT KENDRICK
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
1900 PENNZOIL PLACE, SOUTH TOWER
711 LOUISIANA STREET
HOUSTON, TEXAS 77002
(713) 220-5800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] __________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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TABLE OF ADDITIONAL REGISTRANT GUARANTORS
STATE OR OTHER
JURISDICTION OF I.R.S. EMPLOYER
INCORPORATION IDENTIFICATION
EXACT NAME OF REGISTRANT GUARANTOR (1) OR ORGANIZATION NUMBER
-------------------------------------- --------------- ---------------
Argo II, L.L.C. ............................................ Delaware 76-0396023
Crystal Holding, L.L.C. .................................... Delaware 76-0396023
Crystal Properties and Trading Company, L.L.C. ............. Delaware 76-0396023
Delos Offshore Company, L.L.C. ............................. Delaware 76-0396023
El Paso Energy Partners Deepwater, L.L.C. .................. Delaware 76-0396023
El Paso Energy Partners Oil Transport, L.L.C. .............. Delaware 76-0396023
El Paso Energy Partners Operating Company, L.L.C. .......... Delaware 76-0396023
Ewing Bank Gathering Company, L.L.C. ....................... Delaware 76-0396023
First Reserve Gas, L.L.C. .................................. Delaware 76-0396023
Flextrend Development Company, L.L.C. ...................... Delaware 76-0396023
Green Canyon Pipe Line Company, L.P. ....................... Delaware N/A
Hattiesburg Gas Storage Company............................. Delaware N/A
Hattiesburg Industrial Gas Sales Company, L.L.C. ........... Delaware 76-0396023
Manta Ray Gathering Company, L.L.C. ........................ Delaware 76-0396023
Petal Gas Storage Company, L.L.C. .......................... Delaware 76-0396023
Poseidon Pipeline Company, L.L.C. .......................... Delaware 76-0396023
VK Deepwater Gathering Company, L.L.C. ..................... Delaware 76-0396023
VK-Main Pass Gathering Company, L.L.C. ..................... Delaware 76-0396023
Viosca Knoll Gathering Company.............................. Delaware N/A
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(1) The address for each Registrant Guarantor is 4 East Greenway Plaza, Houston,
Texas, 77046.
3
Information in this prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. We may not exchange these securities until
the registration statement is effective. This prospectus is not an offer to sell
or a solicitation of an offer to buy the securities in any state where the offer
or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 28, 2001
[EL PASO LOGO]
EL PASO ENERGY PARTNERS, L.P.
EL PASO ENERGY PARTNERS FINANCE CORPORATION
$250,000,000
Offer to Exchange
8 1/2% Series B Senior Subordinated Notes due 2011
for any and all outstanding 8 1/2% Series A
Senior Subordinated Notes due 2011
CUSIP: 28368QAA7 and U5325MAA3
-------------------------
This prospectus, and accompanying letter of transmittal, relate to our
proposed exchange offer. We are offering to exchange up to $250,000,000
aggregate principal amount of new 8 1/2% Series B senior subordinated notes due
2011, which we call the Series B notes, which will be freely transferable, for
any and all outstanding 8 1/2% Series A senior subordinated notes due 2011,
which we call the Series A notes, issued in a private offering on May 17, 2001
and which have certain transfer restrictions.
In this prospectus we sometimes refer to the Series A notes and the Series
B notes collectively as the notes.
- The exchange offer expires at 5:00 p.m., New York City time, on September
28, 2001, unless extended.
- The terms of the Series B notes are substantially identical to the terms
of the Series A notes, except that the Series B notes will be freely
transferable and issued free of any covenants regarding exchange and
registration rights.
- All Series A notes that are validly tendered and not validly withdrawn
will be exchanged.
- Tenders of Series A notes may be withdrawn at any time prior to
expiration of the exchange offer.
- We will not receive any proceeds from the exchange offer.
- The exchange of Series A notes for Series B notes will not be a taxable
event for United States federal income tax purposes.
- Holders of Series A notes do not have any appraisal or dissenters' rights
in connection with the exchange offer.
- Series A notes not exchanged in the exchange offer will remain
outstanding and be entitled to the benefits of the Indenture, but except
under certain circumstances, will have no further exchange or
registration rights under the registration rights agreement discussed in
this prospectus.
-------------------------
PLEASE SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF FACTORS
YOU SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We may amend or supplement this prospectus from time to time by filing
amendments or supplements as required. You should read this entire prospectus,
the accompanying letter of transmittal and related documents and any amendments
or supplements to this prospectus carefully before making your investment
decision.
-------------------------
The date of this prospectus is , 2001.
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TABLE OF CONTENTS
PAGE
----
Summary..................................................... 1
Risk Factors................................................ 8
The Exchange Offer.......................................... 22
Use of Proceeds............................................. 34
Description of Notes........................................ 34
Federal Income Tax Considerations........................... 82
Plan of Distribution........................................ 85
Validity of the Series B Notes.............................. 86
Experts..................................................... 87
Where You Can Find More Information......................... 87
Forward-Looking Statements.................................. 88
Annex A Letter of Transmittal............................... A-1
-------------------------
The information contained in this prospectus was obtained from us and other
sources believed by us to be reliable. This prospectus also incorporates
important business and financial information about us that is not included in or
delivered with this prospectus.
You should rely only on the information contained in this prospectus or any
supplement and any information incorporated by reference in this prospectus or
any supplement. We have not authorized anyone to provide you with any
information that is different. If you receive any unauthorized information, you
must not rely on it. You should disregard anything we said in an earlier
document that is inconsistent with what is included in or incorporated by
reference in this prospectus.
You should not assume that the information in this prospectus or any
supplement is current as of any date other than the date on the front page of
this prospectus. This prospectus is not an offer to sell nor is it seeking an
offer to buy these securities in any state or jurisdiction where the offer or
sale is not permitted.
We include cross references in this prospectus to captions in these
materials where you can find further related discussions. The above table of
contents tells you where to find these captions.
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SUMMARY
This summary highlights some basic information from this prospectus to help
you understand the notes. It likely does not contain all the information that is
important to you. You should carefully read this prospectus to understand fully
the terms of the notes, as well as the tax and other considerations that are
important to you in making your investment decision. You should pay special
attention to the "Risk Factors" section beginning on page 8 of this prospectus
to determine whether an investment in the notes is appropriate for you. For
purposes of this prospectus, unless the context otherwise indicates, when we
refer to "us," "we," "our," or "ours," we are describing El Paso Energy
Partners, L.P., together with its subsidiaries, including El Paso Energy
Partners Finance Corporation.
EL PASO ENERGY PARTNERS, L.P.
El Paso Energy Partners, L.P. (NYSE: EPN) is one of the largest
publicly-traded master limited partnerships in terms of market capitalization.
Formed in 1993, we currently manage a balanced, diversified portfolio of
interests and assets that includes:
- natural gas and oil pipelines, platforms, processing facilities and
infrastructure in the deeper water regions of the Gulf of Mexico,
offshore Louisiana and Texas;
- natural gas storage facilities in Mississippi;
- intrastate natural gas pipeline assets in Alabama;
- natural gas liquids, or NGLs, transportation and fractionation facilities
in south Texas; and
- oil and natural gas properties.
We continue to benefit from the unique corporate sponsorship we receive
from El Paso Corporation, the indirect parent of our general partner. As of June
30, 2001, El Paso Corporation, one of the largest natural gas companies in the
world, had an enterprise value in excess of $30 billion and senior unsecured
credit ratings of Baa2 from Moody's and BBB from Standard & Poor's. We are El
Paso Corporation's primary financial vehicle for future midstream energy
infrastructure acquisitions. We have completed $410 million of asset transfers
from El Paso Corporation's significant portfolio of midstream assets since 1999,
and we expect to receive additional transfers in the future. Through its
subsidiaries, El Paso Corporation owns 26%, or 8,953,764, of our common units
and our 1% general partner interest. In addition, we issued $170 million of
Series B Cumulative Redeemable Preference Units to an El Paso Corporation
subsidiary in August 2000 in connection with our acquisition of the Crystal
natural gas storage businesses.
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The following chart depicts our ownership structure and our primary
business segments.
[El Paso Flow Chart]
PIPELINES OWNERSHIP
- - El Paso Intrastate-
Alabama 100.0%
- - Viosca Knoll 100.0%
- - East Breaks 50.0%
- - HIOS 50.0%
OWNERSHIP
- - East Cameron 373 100.0%
- - Prince TLP 100.0%(2)
- - Ship Shoal 331 100.0%
- - Viosca Knoll 817 100.0%
- - Ship Shoal 332 50.0%
- - Garden Banks 72 50.0%
FRACTIONATORS OWNERSHIP
- - Shoup 100.0%
- - Armstrong 100.0%
- - Delmita 100.0%
GATHERING PIPELINES
- - Thompsonville
Lateral 100.0%
- - Shilling Lateral 100.0%
- - SACC Mainline 100.0%
- - South Texas
Pipeline 100.0%
- - Allegheny 100.0%
- - Poseidon 36.0%
OWNERSHIP
- - Hattiesburg 100.0%
- - Petal 100.0%
OWNERSHIP
- - Viosca Knoll Block
817 100.0%
- - Garden Banks Block
72 50.0%
- - Garden Banks Block 117 50.0%
- - West Delta Block 35 38.8%
- - Prince Field 9.0%(3)
- - Garden Banks Block
73 2.5%(4)
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(1) El Paso Energy Partners Company, a wholly-owned indirect subsidiary of El
Paso Corporation, is our general partner. El Paso Corporation's ownership
interest in us, which is held by our general partner and its affiliates,
includes our 1% general partner interest and a 26% limited partner interest.
In addition, a subsidiary of El Paso Corporation holds $170 million of our
Series B Cumulative Redeemable Preference Units.
(2) We installed the tension leg platform in July 2001. We expect the first
production from the Prince TLP in the third quarter of 2001.
(3) Overriding royalty interest convertible into a 30% undivided working
interest. Production from this field is committed to our Prince TLP.
(4) Overriding royalty interest.
Gathering and Transportation
We have four natural gas pipeline systems and six multi-purpose offshore
platforms, including related production and processing facilities. Our natural
gas pipeline systems, which extend over 860 miles, have a combined maximum
design capacity of over 3.4 billion cubic feet per day, or Bcf/d, of natural
gas. Our offshore natural gas pipeline systems and our oil pipeline systems are
strategically located to serve production activities in some of the most active
drilling and development regions in the Gulf of Mexico, including some located
offshore Texas, Louisiana, and Mississippi, and provide relatively low cost
access to long line transmission pipelines that access multiple markets in the
eastern half of the United States. In addition to our offshore natural gas
pipeline systems, we have a gathering system in Alabama, which gathers coal bed
methane production in the Black Warrior Basin.
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Platforms
In July 2001, we installed our Prince tension leg platform, or TLP. We
expect the first production from the TLP in the third quarter of 2001. With the
TLP, our multi-purpose offshore platforms have a combined product handling
capacity of over 560 million cubic feet per day, or MMcf/d, of natural gas and
over 127 thousand barrels per day, or MBbls/d, of oil and condensate. Through
these facilities, we are able to provide a variety of midstream services to
increase deliverability and attract new volumes into our offshore pipeline
systems.
Liquids Transportation and Fractionation
We have two offshore oil pipeline systems, which extend over 300 miles and
have a combined maximum design capacity of over 400 MBbls/d of oil.
In February 2001, we acquired NGL transportation and fractionation assets
from subsidiaries of El Paso Corporation, which we now operate under the name
"EPN Texas." In connection with this acquisition, we entered into a twenty-year
transportation and fractionation agreement with El Paso NGL Marketing, L.P., an
affiliate of our general partner. In that agreement, El Paso Marketing agreed to
deliver all of the NGLs derived from processing operations at seven natural gas
processing plants in south Texas owned by affiliates of El Paso Marketing to our
south Texas NGL gathering and fractionation facilities, and we have dedicated
100% of the capacity of our facilities to El Paso Marketing. EPN Texas includes
more than 600 miles of NGL gathering and transportation pipelines and three
fractionation plants located in south Texas. The NGL pipeline system is
comprised of 379 miles of pipeline used to gather and transport unfractionated
NGLs from various processing plants to the Shoup Plant, located in Corpus
Christi, the largest of the three fractionators acquired. The system also
includes 177 miles of pipelines that deliver fractionated products such as
ethane, propane and butane to refineries and petrochemical plants along the
Texas Gulf Coast and to common carrier NGL pipelines. The three fractionation
facilities have a combined capacity of approximately 96 MBbls/d.
Natural Gas Storage
In August 2000, we acquired the Crystal salt dome natural gas storage
facilities located in Mississippi, which are well situated to serve the
Northeast, Mid-Atlantic and Southeast natural gas markets. These storage
facilities have a combined current working capacity of 6.7 Bcf and are capable
of delivering in excess of 670 MMcf/d of natural gas into three interstate
pipelines: Koch Gateway Pipeline, Transcontinental Gas Pipeline, and Tennessee
Gas Pipeline. Each of these facilities is capable of making deliveries at the
high rates necessary to satisfy peaking requirements in the electric generation
industry. The Federal Energy Regulatory Commission, or FERC, has approved a 6.8
Bcf expansion of these facilities, which we are currently constructing. This
additional capacity is dedicated under a twenty-year contract to a subsidiary of
The Southern Company, the largest producer of electricity in the United States.
We also intend to construct a 60-mile pipeline addition that will interconnect
with the storage facility and offer direct interconnects with Southern Natural
Gas, Transco and Destin pipelines. Construction of this pipeline addition will
commence when we receive FERC approval, which is expected to occur in the fall
of 2001.
Oil and Natural Gas Production
We own interests in natural gas and oil producing properties in the Gulf of
Mexico having total proved reserves of 11.5 Bcf of natural gas and 1,200 MBbls
of oil. We also own an approximate 9.0% overriding royalty interest in the
Prince Field, which is owned and operated by a subsidiary of El Paso
Corporation. In accordance with our strategy to de-emphasize our exposure to
commodity price volatility, especially production operations, we have not
acquired any additional natural gas and oil properties or drilled any
development or exploratory wells since 1998.
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OUR OBJECTIVE AND STRATEGY
Our objective is to operate as a growth-oriented master limited partnership
with a focus on enhancing the quality of our cash flow, earnings and other
financial results of operations. Our strategy is to combine our position as a
provider of midstream services in the deeper water regions of the Gulf of Mexico
with an aggressive effort to acquire and develop diversified onshore midstream
energy assets. Accordingly, we also expect a substantial portion of our growth
to relate to onshore activities and operations. Further, our strategy includes
identifying opportunities that create synergies with the other assets and
operations of El Paso Corporation. In the future, we intend to continue
de-emphasizing our commodity-based activities, such as exploration and
production operations, and to concentrate on fee-based operations, such as
gathering, processing, storage and fractionation, which provide more stable cash
flows. Other key aspects of our strategy include:
- capitalizing on our extensive infrastructure in the Gulf of Mexico and
expanding our existing assets further into the deeper water regions with
projects supported by new discoveries and long-term commitments;
- purchasing or constructing onshore pipelines, gathering systems, storage
and fractionation facilities and other midstream assets to provide a
broad range of stable, fee-based services to producers, marketers and
users of energy products; and
- leveraging the significant nationwide asset base and operational
expertise of El Paso Corporation.
The address of our principal executive offices is 4 East Greenway Plaza,
Houston, Texas 77046 and our telephone number at this address is (832) 676-5332.
Our limited partner interests trade under the New York Stock Exchange symbol
"EPN."
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THE EXCHANGE OFFER
You are entitled to exchange in the exchange offer your outstanding Series
A notes for Series B notes with substantially identical terms. You should read
the discussion under the heading "Description of Notes" beginning on page 34 for
further information regarding the Series B notes.
We summarize the terms of the exchange offer below. You should read the
discussion under the heading "The Exchange Offer" beginning on page 22 for
further information regarding the exchange offer and resale of the Series B
notes.
Registration Rights
Agreement.................. We sold $250 million in aggregate principal amount
of Series A notes to Credit Suisse First Boston
Corporation, Goldman, Sachs & Co. and J.P. Morgan
Securities Inc., as initial purchasers in a
transaction exempt from the registration
requirements of the Securities Act. We entered into
a registration rights agreement dated as of May 17,
2001 with the initial purchasers which grants the
holders of the Series A notes exchange and
registration rights. This exchange offer satisfies
those exchange rights.
The Exchange Offer......... $1,000 principal amount of Series B notes in
exchange for each $1,000 principal amount of Series
A notes. As of the date of this prospectus, $250
million aggregate principal amount of the Series A
notes are outstanding. We will issue Series B notes
to holders on the earliest practicable date
following the Expiration Date.
Resales of the Series B
Notes...................... Based on interpretations by the staff of the SEC
set forth in no-action letters issued to third
parties, we believe that, except as described
below, the Series B notes issued pursuant to the
exchange offer may be offered for resale, resold
and otherwise transferred by holders of the Series
B notes, other than a holder that is an "affiliate"
of ours within the meaning of Rule 405 under the
Securities Act, without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that the Series B
notes are acquired in the ordinary course of the
holder's business and the holder has no arrangement
or understanding with any person to participate in
the distribution of the Series B notes.
Each broker-dealer that receives Series B notes
pursuant to the exchange offer in exchange for
Series A notes that the broker-dealer acquired for
its own account as a result of market-making
activities or other trading activities, other than
Series A notes acquired directly from us or our
affiliates, must acknowledge that it will deliver a
prospectus in connection with any resale of the
Series B notes. The letter of transmittal states
that by acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act.
If we receive notices in the letter of transmittal,
this prospectus, as it may be amended or
supplemented from time to time, may be used for the
period described below by a broker-dealer in
connection with resales of Series B notes received
in exchange for Series A notes where the Series A
notes were acquired by the broker-dealer as a
result of market-making activities or other trading
activities and not acquired directly from us.
The letter of transmittal requires broker-dealers
tendering Series A notes in the exchange offer to
indicate whether the broker-dealer
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acquired the Series A notes for its own account as
a result of market-making activities or other
trading activities, other than Series A notes
acquired directly from us or any of our affiliates.
If no broker-dealer indicates that the Series A
notes were so acquired, we have no obligation under
the registration rights agreement to maintain the
effectiveness of the registration statement past
the consummation of the exchange offer or to allow
the use of this prospectus for such resales. See
"The Exchange Offer -- Registration Rights" and
"-- Resale of the Series B Notes; Plan of
Distribution."
Expiration Date............ The exchange offer expires at 5:00 p.m., New York
City time, on September 28, 2001, unless we extend
the exchange offer in our sole discretion, in which
case the term "Expiration Date" means the latest
date and time to which the exchange offer is
extended.
Conditions to the Exchange
Offer...................... The exchange offer is subject to certain conditions
which we may waive. See "The Exchange
Offer -- Conditions to the Exchange Offer."
Procedures for Tendering
the Series A Notes......... Each holder of Series A notes wishing to accept the
exchange offer must complete, sign and date the
accompanying letter of transmittal in accordance
with the instructions, and mail or otherwise
deliver the letter of transmittal together with the
Series A notes and any other required documentation
to the exchange agent identified below under
"Exchange Agent" at the address set forth in this
prospectus. By executing the letter of transmittal,
a holder will make certain representations to us.
See "The Exchange Offer -- Registration Rights" and
"-- Procedures for Tendering Series A Notes."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Series A notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact the registered
holder promptly and instruct the registered holder
to tender on its behalf. See "The Exchange
Offer -- Procedures for Tendering Series A Notes."
Guaranteed Delivery
Procedures................. Holders of Series A notes who wish to tender their
Series A notes when those securities are not
immediately available or who cannot deliver their
Series A notes, the letter of transmittal or any
other documents required by the letter of
transmittal to the exchange agent prior to the
Expiration Date must tender their Series A notes
according to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Procedures for
Tendering Series A Notes -- Guaranteed Delivery."
Withdrawal Rights.......... Tenders of Series A notes pursuant to the exchange
offer may be withdrawn at any time prior to the
Expiration Date.
Acceptance of Series A
Notes and Delivery of
Series B Notes........... We will accept for exchange any and all Series A
notes that are properly tendered in the exchange
offer, and not withdrawn, prior to the Expiration
Date. The Series B notes issued pursuant to the
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exchange offer will be issued on the earliest
practicable date following our acceptance for
exchange of Series A notes. See "The Exchange
Offer -- Terms of the Exchange Offer."
Exchange Agent............. The Chase Manhattan Bank is serving as exchange
agent in connection with the exchange offer. See
"The Exchange Offer -- Exchange Agent."
Federal Income Tax
Considerations........... The exchange of Series A notes for Series B notes
pursuant to the exchange offer will not be treated
as a taxable exchange for federal income tax
purposes. See "Federal Income Tax Considerations."
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for each of the periods indicated is
as follows:
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED --------------------------------
JUNE 30, 2001 2000 1999 1998 1997 1996
- ---------------- ---- ---- ---- ---- ----
2.38 1.53 1.80 1.17 --(1) 3.36
- -------------------------
(1) Earnings were inadequate to cover fixed charges by $5,362,000 for 1997.
These computations include us and our Restricted Subsidiaries. For these
ratios, "earnings" is the aggregate of the following items:
- pre-tax income from continuing operations before adjustment for minority
interests in consolidated subsidiaries or income and loss from equity
investees;
- plus fixed charges;
- plus distributed income of equity investees;
- less amortization of capitalized interest; and
- less minority interest in consolidated subsidiaries.
The term "fixed charges" means the sum of the following:
- interest expensed and capitalized;
- amortized premiums, discounts and capitalized expenses related to
indebtedness;
- an estimate of the interest within rental expenses; and
- minority interest in consolidated subsidiaries.
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12
RISK FACTORS
You should carefully consider the risks described below in addition to
other information contained or incorporated by reference in this prospectus.
Realization of any of the following risks could have a material adverse effect
on our business, financial condition, cash flows and results of operations.
RISKS RELATED TO THE EXCHANGE OFFER
THE MARKET VALUE OF YOUR SERIES A NOTES MAY BE LOWER IF YOU DO NOT EXCHANGE YOUR
SERIES A NOTES OR FAIL TO PROPERLY TENDER YOUR SERIES A NOTES FOR EXCHANGE.
CONSEQUENCES OF FAILURE TO EXCHANGE. To the extent that Series A notes are
tendered and accepted for exchange pursuant to the exchange offer, the trading
market for Series A notes that remain outstanding may be significantly more
limited, which might adversely affect the liquidity of the Series A notes not
tendered for exchange. The extent of the market and the availability of price
quotations for Series A notes would depend upon a number of factors, including
the number of holders of Series A notes remaining at such time and the interest
in maintaining a market in such Series A notes on the part of securities firms.
An issue of securities with a smaller outstanding market value available for
trading, or float, may command a lower price than would a comparable issue of
securities with a greater float. Therefore, the market price for Series A notes
that are not exchanged in the exchange offer may be affected adversely to the
extent that the amount of Series A notes exchanged pursuant to the exchange
offer reduces the float. The reduced float also may tend to make the trading
price of the Series A notes that are not exchanged more volatile.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER. Issuance of the Series B notes
in exchange for the Series A notes pursuant to the exchange offer will be made
following the prior satisfaction, or waiver, of the conditions set forth in "The
Exchange Offer -- Conditions to the Exchange Offer" and only after timely
receipt by the exchange agent of the Series A notes, a properly completed and
duly executed letter of transmittal and all other required documents. Therefore,
holders of Series A notes desiring to tender Series A notes in exchange for
Series B notes should allow sufficient time to ensure timely delivery of all
required documentation. Neither we, the exchange agent nor any other person is
under any duty to give notification of defects or irregularities with respect to
the tenders of Series A notes for exchange. Series A notes that may be tendered
in the exchange offer but which are not validly tendered will, following the
consummation of the exchange offer, remain outstanding and will continue to be
subject to the same transfer restrictions currently applicable to the Series A
notes.
THERE IS NO PUBLIC MARKET FOR THE NOTES AND YOU CANNOT BE SURE AN ACTIVE TRADING
MARKET FOR THE NOTES WILL DEVELOP.
The Series A notes have not been registered under the Securities Act, and
may not be resold by purchasers thereof unless the Series A notes are
subsequently registered or an exemption from the registration requirements of
the Securities Act is available. However, we cannot assure you that, even
following registration or exchange of the Series A notes for Series B notes,
that an active trading market for the Series A notes or the Series B notes will
exist, and we will have no obligation to create such a market. At the time of
the private placement of the Series A notes, the initial purchasers advised us
that they intended to make a market in the Series A notes and, if issued, the
Series B notes. However, the initial purchasers are not obligated to make a
market in the Series A notes or the Series B notes, and any such market-making
may be discontinued at any time at the sole discretion of the initial
purchasers. No assurance can be given as to the liquidity of or trading market
for the Series A notes or the Series B notes.
The liquidity of any market for the notes will depend upon the number of
holders of the notes, the overall market for high yield securities, our
financial performance or prospects or in the prospects for companies in our
industry generally, the interest of securities dealers in making a market in the
notes and other factors.
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If the number of outstanding Series A notes is reduced through the exchange
offer, the existing limited market for the Series A notes will become further
constricted, with a probable decrease in the liquidity of the Series A notes.
Further, the Series A notes that are not tendered in the exchange offer will
continue to be subject to the existing restrictions upon their transfer. We will
have no obligation to provide for the registration under the Securities Act of
unexchanged Series A notes.
RISKS RELATED TO OUR BUSINESS
OUR ABILITY TO MAKE PAYMENTS TO OUR CREDITORS DEPENDS ON FACTORS OUT OF OUR
CONTROL, INCLUDING THE RATES FOR, AND VOLUME OF, PRODUCTION THAT WE HANDLE.
We might not be able to satisfy our obligations to you. Our ability to make
payments on our indebtedness, including the notes, and to fund future working
capital, capital expenditures and other general corporate requirements will
depend on our ability to generate cash in the future. This, to a certain extent,
is subject to economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control.
Our future performance and, therefore, our ability to make payments to you
on the notes will largely depend on the volume of, and rates for, the natural
gas and oil handled by our pipelines, platforms and other energy infrastructure
assets. Many factors outside of our control can affect these volumes and rates.
The following factors, among others, affect the rates that our pipelines and
other facilities may charge:
- commodity prices for the production handled;
- regional, domestic and international supply and demand;
- energy legislation;
- environmental legislation and enforcement;
- federal or state taxes, if any, on the sale, storage or transportation of
natural gas and NGLs;
- abundance of supplies of alternative energy sources;
- future production and development costs;
- competition from others; and
- the maximum rates established by the FERC for our regulated facilities.
Any decrease in the rates charged or volumes handled by any of our pipelines and
other facilities could reduce our available cash. Accordingly, we cannot assure
you that we will be able to continue to generate enough cash flow to satisfy our
existing commitments, including making interest and principal payments on our
indebtedness and funding our other liquidity needs, including the purchase,
construction or other acquisition of assets or businesses in the future.
Based on our current and anticipated level of operations and revenue
growth, we believe our cash flow from operations, available cash and available
borrowings under our revolving credit facility will be adequate to conduct our
businesses as they currently exist. We cannot assure you, however, that these or
other sources of capital will be available to us in amounts sufficient to enable
us to pay our indebtedness, including the notes, or to fund our other liquidity
needs, including the purchase, construction or other acquisition of assets or
businesses in the future. We may need to pay or refinance all or a portion of
our indebtedness, including the notes, on or before maturity. We cannot assure
you that we will be able to do that on commercially reasonable terms or at all.
OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY RESTRICT OUR ABILITY TO OPERATE,
AFFECT OUR FINANCIAL CONDITION AND PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THE NOTES.
We have a significant amount of indebtedness and the ability to incur more
indebtedness. In May 1999 and May 2001, we issued $175 million of 10 3/8% senior
subordinated notes due in 2009 and
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$250 million of 8 1/2% senior subordinated notes due in 2011, both of which are
supported by guarantees of our subsidiaries. We are also party to a $600 million
revolving credit facility, which is collateralized by a pledge of the equity of
our subsidiaries and substantially all of our other assets and supported by
guarantees of our subsidiaries. As of June 30, 2001, we had $60 million
outstanding under this revolving credit facility. In addition, Argo, L.L.C., an
indirect wholly-owned subsidiary, obtained a $95 million limited recourse
project finance loan from a group of commercial lenders in August 2000. As of
June 30, 2001, Argo had $95 million outstanding under this loan, and the average
interest rate was 5.8%. If Argo defaults on its payment obligations, we could be
required to pay to the lenders all distributions we or any of our subsidiaries
have received from Argo up to $30 million.
Two of our joint ventures are also parties to credit agreements. In 1999,
Deepwater Holdings assumed Western Gulf Holdings L.L.C.'s obligations under its
$100 million revolving credit facility and subsequently increased the commitment
amount to $175 million. The credit facility is collateralized by substantially
all of the material contracts and agreements of Deepwater Holdings. As of June
30, 2001, Deepwater Holdings had $111 million outstanding under its credit
facility, and the average floating interest rate was 5.39%. If Deepwater
Holdings defaults on its payment obligations or upon the occurrence of other
specified events, we could be required to pay to the lenders all distributions
we or any of our subsidiaries have received from Deepwater Holdings up to $8.75
million. In addition, Poseidon Oil Pipeline Company, L.L.C. has an amended
revolving credit facility to provide up to $185 million, which is collateralized
by a substantial portion of Poseidon's assets. As of June 30, 2001, Poseidon had
$150 million outstanding under its credit facility and the average floating
interest rate was 5.56%.
We must comply with various affirmative and negative covenants contained in
the indenture related to our senior subordinated notes due 2009, which we issued
in May 1999, our revolving credit facility and the indenture covering the notes
in this offering. Among other things, these covenants limit our ability to:
- incur additional indebtedness or liens;
- make payments in respect of or redeem or acquire any debt or equity
issued by us;
- sell assets;
- make loans or investments;
- acquire or be acquired by other companies; and
- amend some of our contracts.
Our indebtedness also requires us to make mandatory repayments under certain
circumstances, including when we sell certain assets, fail to achieve or
maintain certain financial targets or experience a change in control. We cannot
prepay the balance outstanding under our senior subordinated notes without
incurring substantial economic penalties.
The restrictions under our indebtedness may prevent us from engaging in
certain transactions which might otherwise be considered beneficial to us. In
addition, our substantial indebtedness could have other important consequences
to you. For example, it could:
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to make distributions to unitholders, to fund future
working capital, capital expenditures and other general partnership
requirements, to engage in future acquisitions, construction or
development activities, or to otherwise fully realize the value of our
assets and opportunities because of the need to dedicate a substantial
portion of our cash flow from operations to payments on our indebtedness
or to comply with any restrictive terms of our indebtedness;
- limit our flexibility in planning for, or reacting to, changes in our
businesses and the industries in which we operate; and
- place us at a competitive disadvantage as compared to our competitors
that have less debt.
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We may incur additional indebtedness in the future, either under our
existing credit agreement, under joint venture credit agreements, on a project
finance or similar basis, or a combination of any of these. If we incur
additional indebtedness in the future, it would be under our existing credit
agreement or under arrangements which may have terms and conditions at least as
restrictive as those contained in our existing credit agreement and existing
indenture. Failure to comply with the terms and conditions of any existing or
future indebtedness would constitute an event of default. If an event of default
occurs, the lenders will have the right to accelerate the maturity of such
indebtedness and foreclose upon the collateral, if any, securing that
indebtedness, and if an event of default occurs under our joint ventures' credit
facilities, we may be required to repay amounts previously distributed to us and
our subsidiaries. Such an event could limit our ability to repay in full our
indebtedness, including the notes.
WE MAY NOT BE ABLE TO FULLY EXECUTE OUR ACQUISITION STRATEGY IF WE ENCOUNTER
DIFFICULT CAPITAL MARKETS OR INCREASED COMPETITION FOR QUALIFIED ASSETS.
Part of our business strategy includes purchasing and constructing
additional assets to provide a broad range of stable cash flow assets. We
regularly consider and enter into discussions regarding, and are currently
contemplating, additional potential acquisitions. While there are currently no
unannounced agreements pending for the purchase of any businesses or assets,
such transactions can be effected quickly, may occur at any time and may be
significant in size relative to our existing assets. We will need new capital to
finance these acquisitions. Limitations on our access to capital will impair our
ability to execute this strategy. Expensive capital will limit our ability to
make accretive acquisitions.
In addition, we are experiencing increased competition for the assets we
purchase. Increased competition for a limited pool of assets could result in our
not being the successful bidder more often or our acquiring assets at a higher
price than we have paid historically. Either occurrence would limit our ability
to fully execute our acquisition strategy. Our ability to execute our
acquisition strategy may impact the market value of these notes and our other
securities.
POTENTIAL FUTURE ACQUISITIONS AND EXPANSIONS MAY ADVERSELY AFFECT OUR BUSINESS
BY SUBSTANTIALLY INCREASING THE LEVEL OF OUR INDEBTEDNESS AND CONTINGENT
LIABILITIES AND INCREASING OUR RISKS OF BEING UNABLE TO EFFECTIVELY INTEGRATE
THESE NEW OPERATIONS.
Part of our business strategy includes purchasing, constructing and
otherwise acquiring assets, including entire businesses, that we believe will
present opportunities to realize synergies, expand our role in the energy
infrastructure business or increase our market position. Although we intend to
continue to expand our business through acquisitions, this strategy may require
substantial capital, and we may not be able to raise the necessary funds on
satisfactory terms or at all.
We regularly engage in discussions with respect to potential acquisition
and investment opportunities. If we consummate any future acquisitions, our
capitalization and results of operations may change significantly and you will
not have the opportunity to evaluate the economic, financial and other relevant
information that we will consider in determining the application of these funds.
We are currently considering some specific future acquisitions or
investments, although we cannot assure you that we will be able to reach
agreement with respect to any of these opportunities. If consummated, any
acquisition or investment would likely result in the incurrence of indebtedness
and contingent liabilities and an increase in interest expense and amortization
expenses related to goodwill and other intangible assets, which could have a
material adverse effect upon our business.
While, historically, our operations have been focused primarily on
pipelines, platforms and other energy infrastructure assets in the Gulf of
Mexico, our current strategy contemplates substantial growth through the
acquisition and development of a wider range of midstream and other energy
infrastructure assets, including onshore and offshore, domestic and foreign, and
pipeline and non-pipeline assets. Acquisitions and business expansions involve
numerous risks, including difficulties in the assimilation of the operations,
technologies, services and products of the acquired companies or business
segments, inefficiencies and difficulties which arise because of unfamiliarity
with new assets and the businesses
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associated with them and new geographic areas and the diversion of management's
attention from other business concerns. Further, unexpected costs and challenges
may arise whenever businesses with different operations or management are
combined. Management and other personnel must devote substantial time to
integrate an acquired business with existing operations, for instance, and these
efforts may temporarily distract their attention from day-to-day business, the
development or acquisition of new businesses and other business opportunities.
For all of these reasons, as acquisitions and expansions occur, our business
could be adversely affected.
OUR ACTUAL PROJECT COSTS COULD EXCEED OUR FORECAST, AND OUR CASH FLOW FROM
PROJECTS MAY NOT BE IMMEDIATE.
Our forecast contemplates significant expenditures for the purchase,
construction or other acquisition of pipelines and other energy-related
infrastructure, including some projects with significant technological
challenges. Underwater operations, especially those in water depths in excess of
600 feet, are very expensive and involve much more uncertainty and risk than
other operations. Further, if a problem occurs, the solution, if one exists, may
be very expensive and time consuming. Accordingly, there is an increase in the
frequency and amount of cost overruns related to underwater operations,
especially in depths in excess of 600 feet. We cannot assure you that we will be
able to complete our projects at the costs currently estimated. If we experience
material cost overruns, we would have to finance these overruns using one or
more of the following methods:
- using cash from operations;
- delaying other planned projects; or
- issuing additional debt or equity.
Any or all of these methods may not be available when needed or may adversely
affect our future results of operations.
Our revenues and cash flow may not increase immediately upon the
expenditure of funds on a particular project. For instance, if we build a new
pipeline or platform or expand an existing facility, the construction may occur
over an extended period of time and we may not receive any material increase in
revenue or cash flow from that project until after it is placed in service and
customers enter into binding arrangements. If our revenues and cash flow do not
increase at projected levels because of substantial unanticipated delays of any
future projects, we might not meet our obligations as they become due.
WE WILL FACE COMPETITION FROM THIRD PARTIES TO HANDLE ANY NEW PRODUCTION.
Even if additional reserves exist in the areas accessed by our facilities
and are ultimately produced, we cannot assure you that any of these reserves
will be gathered, transported, processed, stored or otherwise handled by us. We
would compete with others, including producers of oil and natural gas, for any
such production on the basis of many factors, including:
- geographic proximity to the production;
- costs of connection;
- available capacity;
- rates; and
- access to onshore markets.
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FERC REGULATION AND A CHANGING REGULATORY ENVIRONMENT COULD AFFECT OUR CASH
FLOW.
The FERC extensively regulates certain of our pipelines, natural gas
storage assets and other facilities. This regulation extends to such matters as:
- rate structures;
- rates of return on equity;
- recovery of costs;
- the services that our regulated pipelines are permitted to perform;
- our ability to seek recovery of various categories of costs;
- the acquisition, construction and disposition of assets; and
- to an extent, the level of competition in that regulated industry.
Given the extent of this regulation, the extensive changes in FERC policy
over the last several years, the evolving nature of regulation and the
possibility for additional changes, we cannot assure you that the current
regulatory regime will remain unchanged or of the effect any changes in that
regime would have on our financial position, results of operations or cash
flows.
A NATURAL DISASTER, CATASTROPHE OR OTHER INTERRUPTION EVENT COULD DAMAGE
FACILITIES THAT ARE OWNED BY US OR THAT DELIVER NATURAL GAS, OIL OR OTHER
PRODUCTS TO US, WHICH COULD CURTAIL OUR OPERATIONS AND, POSSIBLY, ADVERSELY
AFFECT OUR CASH FLOW.
If one or more facilities that are owned by us or that deliver natural gas,
oil or other products to us is damaged by severe weather or any other natural
disaster, accident, catastrophe or other event, our operations could be
significantly interrupted. Similar interruptions could result from damage to
production facilities or other production stoppages arising from factors beyond
our control. These interruptions might range from a week or less for a minor
incident to six months or a year or more for a major interruption. Any event
that interrupts the fees generated by our pipelines or other income-producing
assets, or which causes us to make significant expenditures not covered by
insurance, could adversely impact the market price of, and the amount of cash
available for payment of, the notes. Further, although we carry limited business
interruption insurance, which we consider to be appropriate, it would not cover
many interruptions that might occur, and in the future we may not be able to
obtain other desirable insurance on commercially reasonable terms.
ENVIRONMENTAL COSTS AND LIABILITIES AND CHANGING ENVIRONMENTAL REGULATION COULD
AFFECT OUR CASH FLOW.
Our operations are subject to extensive federal, state and local regulatory
requirements relating to environmental affairs, health and safety, waste
management and chemical products. Governmental authorities have the power to
enforce compliance with applicable regulations and permits and to subject
violators to civil and criminal penalties, including civil fines, injunctions or
both. Third parties may also have the right to pursue legal actions to enforce
compliance. We will probably make expenditures in connection with environmental
matters as part of normal capital expenditure programs. However, future
environmental law developments, such as stricter laws, regulations or
enforcement policies, could significantly increase our cost of handling,
manufacture, use, emission or disposal of substances or wastes. Moreover, as
with other companies engaged in similar or related businesses, our operations
always have some risk of environmental costs and liabilities because we handle
petroleum products. We cannot assure you that we will not incur material
environmental costs and liabilities.
PERSONAL INJURY, MECHANICAL FAILURE AND DAMAGE TO THE STORAGE AND RELATED
FACILITIES COULD HAVE AN ADVERSE EFFECT ON REVENUES AND CASH FLOW FROM OUR
STORAGE ASSETS.
Our natural gas facilities operate at high pressures, sometimes in excess
of 1,100 pounds per square inch. If an accident or a natural event, like a
storm, were to cause an explosion or similar catastrophic
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event, there could be extensive injury to people and property. Additionally,
some of our storage contracts obligate us to indemnify our customers for any
damage or injury occurring during the period in which the customers' natural gas
is in our possession. In order to reduce the effects of any such incident, we
maintain insurance coverage that includes property and business interruption
insurance. We believe that this insurance coverage is adequate; however, we
cannot assure you that the proceeds of any such insurance would be paid in a
timely manner or be in an amount sufficient to meet our needs if such an event
were to occur or that we can renew it on similar terms or at all.
OUR STORAGE BUSINESSES DEPEND ON NEIGHBORING PIPELINES TO TRANSPORT NATURAL GAS.
To obtain natural gas, our storage businesses depend on the pipelines to
which they have access. Many of these pipelines are owned by parties not
affiliated with us. Any interruption of service on those pipelines or adverse
change in their terms and conditions of service could have a material adverse
effect on our ability (and the ability of our customers) to transport natural
gas to and from our facilities and a corresponding material adverse effect on
our storage revenues. In addition, the rates charged by those interconnected
pipelines for transportation to and from our facilities affect the utilization
and value of our storage services. Significant changes in the rates charged by
those pipelines or the rates charged by other pipelines with which the
interconnected pipelines compete could also have a material adverse effect on
our storage revenues.
THE FUTURE PERFORMANCE OF OUR PRODUCTION HANDLING OPERATIONS, AND THUS OUR
ABILITY TO SATISFY OUR DEBT REQUIREMENTS, DEPENDS ON SUCCESSFUL EXPLORATION AND
DEVELOPMENT OF ADDITIONAL OIL AND NATURAL GAS RESERVES.
The natural gas and oil reserves available to our energy-related
infrastructure from existing wells naturally decline over time. In order to
offset this natural decline, our energy-related infrastructure must access
additional reserves. Additionally, some of the projects we have planned or
recently completed are dependent on reserves that we expect to be produced from
newly discovered properties which producers are currently developing. This means
that our long-term prospects depend upon the successful exploration and
development of additional reserves in areas accessible to our pipelines and
other infrastructure, such as El Paso Corporation's Prince Field.
In fact, finding and developing new natural gas and oil reserves from
offshore properties is very expensive. The flextrend (water depths of 600 to
1,500 feet) and deepwater (water depths greater than 1,500 feet) areas,
especially, will require large capital expenditures by producers for
exploration, development drilling, installation of production facilities and
pipeline extensions to reach the new wells.
Many economic and business factors out of our control can adversely affect
the decision by any producer to explore for and develop new reserves. These
factors include relatively low natural gas and oil prices, cost and availability
of equipment, capital budget limitations or the lack of available capital. We
cannot assure you that additional reserves, if discovered, would be developed in
the near future or at all. For example, because of the level to which
hydrocarbon prices declined during 1998 and the first quarter of 1999, overall
oil and natural gas activity declined in relation to prior years. If hydrocarbon
prices decline to those levels again or capital spending by the energy industry
decreases or remains at low levels for prolonged periods, our results of
operations and cash flow could suffer.
PRICE AND VOLUME VOLATILITY IS SUBSTANTIALLY OUT OF OUR CONTROL AND COULD HAVE
AN ADVERSE EFFECT ON REVENUES AND CASH FLOW FROM OUR PRODUCING OIL AND NATURAL
GAS PROPERTIES.
Revenues and cash flows from our producing oil and natural gas properties
will be substantially affected by our future production from those properties
and the prices we receive for that production, both of which are often beyond
our ability to control. In 1998, oil and natural gas prices dramatically
declined, and although prices have since improved, we cannot assure you that
there will not be future declines in commodity prices.
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WE HAVE EXPOSURE TO MOVEMENTS IN INTEREST RATES AND COMMODITY PRICES RELATING TO
OUR NATURAL GAS AND OIL PRODUCTION, WHICH WE PARTIALLY HEDGE, FROM TIME TO TIME,
USING FINANCIAL DERIVATIVE INSTRUMENTS.
We have exposure to movements in interest rates and commodity prices
relating to our natural gas and oil production, which we partially hedge, from
time to time, using financial derivative instruments. Our results of operations,
and our cash flows, could be materially adversely affected by significant
increases in interest rates or declines in natural gas and oil commodity prices.
The interest rate on our senior subordinated notes is fixed and the interest
rates on our other indebtedness and the indebtedness of our joint ventures are
variable. In addition, the prices we receive for natural gas and oil production
vary from month to month.
Although we try to limit a portion of the adverse effects resulting from
changes in natural gas and oil commodity prices by using financial derivative
instruments and other hedging mechanisms from time to time, we do not currently
have any hedging mechanisms in place. To the extent we hedge our commodity price
exposure, we forego the benefits we would otherwise experience if commodity
prices were to increase. In addition, even though our management monitors our
hedging activities, we could experience losses resulting from them. Such losses
could occur under various circumstances, including if the other party to our
hedge does not perform its obligations under the hedge arrangement, our hedge is
imperfect, or our hedging policies and procedures are not followed.
THE FRACTIONATION BUSINESS IS CYCLICAL AND THE REQUIREMENT FOR THIS SERVICE
DEPENDS IN PART UPON THE SPREAD BETWEEN PRICES FOR NATURAL GAS AND NGLS.
A producer will process its natural gas and fractionate its resulting NGL
production only if it is profitable to do so. In many cases, processing and
fractionating is profitable only when the producer can receive more net proceeds
by physically separating and selling the NGL components contained in the raw
natural gas stream than it would receive by merely selling the raw natural gas
stream. The spread between the prices for natural gas and NGLs is greatest when
the demand for NGLs increases for use in petrochemical and refinery feedstock.
If, and when, this spread becomes too narrow to justify the costs, producers
have the option to sell the raw natural gas stream rather than process and
fractionate, and our fractionation facilities will be underutilized.
Utilization rates in the fractionation industry can fluctuate dramatically
from month to month, depending on the needs of producers. For example, the
monthly utilization rate for our fractionation facilities during the past 12
months was as low as 36% and as high as 100%. However, our average annual
utilization rate for 2000, 1999 and 1998 were 90%, 88% and 91%. Further, in
connection with our acquisition of these facilities, we were able to effectively
secure a commitment from a subsidiary of El Paso Corporation that the
utilization rate of these facilities during 2001 will be at least 76.8% at a
rate of $1.01 per barrel.
OUR FRACTIONATION FACILITIES ARE DEDICATED TO A SINGLE CUSTOMER, THE LOSS OF
WHICH COULD ADVERSELY AFFECT US.
In connection with our acquisition of our fractionation facilities from an
affiliate of our general partner, we entered into a twenty-year transportation
and fractionation agreement with El Paso NGL Marketing, L.P., an affiliate of
our general partner. In that agreement, El Paso Marketing agreed to deliver all
of the NGLs derived from processing operations at seven natural gas processing
plants in south Texas owned by affiliates of El Paso Marketing to our south
Texas NGL gathering and fractionation facilities, and we have dedicated 100% of
the capacity of our facilities to El Paso Marketing. For each gallon of NGLs we
fractionate, we receive a fee of which approximately 25% is adjusted using an
inflation index. Our operations are likely to be materially adversely affected
if this agreement is terminated or if El Paso Marketing does not deliver enough
NGL to us to ensure that we can maintain a profitable utilization rate.
NATURAL GAS PRICE STABILITY COULD HAVE AN ADVERSE EFFECT ON REVENUES AND CASH
FLOW FROM OUR STORAGE ASSETS.
Prices for natural gas have historically been seasonal and volatile, which
has enhanced demand for our storage services. The storage business has benefited
from large price swings resulting from seasonal price
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sensitivity through increased withdrawal charges and demand for non-storage hub
services. However, we cannot assure you that the market for natural gas will
continue to experience volatility and seasonal price sensitivity in the future
at the levels previously seen. If volatility and seasonality in the natural gas
industry decrease, because of increased storage capacity throughout the pipeline
grid, increased production capacity or otherwise, the demand for our storage
services and, therefore, the prices that we will be able to charge for those
services may decline.
RISKS INHERENT IN AN INVESTMENT IN THE NOTES
FEDERAL AND STATE STATUTES WOULD ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO
SUBORDINATE FURTHER OR VOID THE NOTES AND THE GUARANTEES AND REQUIRE NOTEHOLDERS
TO RETURN PAYMENTS RECEIVED FROM US.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a court could further subordinate or void the notes
and the guarantees if, at the time we issued the notes and the guarantees,
certain facts, circumstances and conditions existed, including that:
- we received less than reasonably equivalent value or fair consideration
for the incurrence of such indebtedness; or
- we were insolvent or rendered insolvent by reason of such incurrence; or
- we were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital; or
- we intended to incur, or believed that we would incur, indebtedness we
could not repay at its maturity.
In such a circumstance, a court could require you to return to us or pay to
our other creditors amounts we paid to you. This would entitle other creditors
to be paid in full before any payment could be made under the notes. We may not
have sufficient assets after the payment to other creditors. The guarantees of
the notes by our subsidiaries could be challenged on the same grounds as the
notes. In addition, a creditor may avoid a guarantee based on the level of
benefits received by a guarantor compared to the amount of the subsidiary
guarantee. The indenture will contain a savings clause, which generally limits
the obligations of each guarantor to the maximum amount that is not a fraudulent
conveyance. If a subsidiary guarantee is avoided, or limited as a fraudulent
conveyance or held unenforceable for any other reason, you would not have any
claim against the guarantors and would be only creditors of El Paso Energy
Partners and El Paso Finance and any guarantor whose subsidiary guarantee was
not avoided or held unenforceable. In such event, claims of holders of notes
against a guarantor would be subject to the prior payment of all liabilities
(including trade payables) of such guarantor. We cannot assure you that, after
providing for all prior claims, there would be sufficient assets to satisfy
claims of holders of notes relating to any avoided portions of any of the
subsidiary guarantees.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, we would be considered
insolvent if:
- the sum of our indebtedness, including contingent liabilities, were
greater than the fair value or fair saleable value of all of our assets;
- if the present fair value or fair saleable value of our assets were less
than the amount that would be required to pay our probable liability on
our existing indebtedness, including contingent liabilities, as it
becomes absolute and mature; or
- we could not pay our indebtedness as it becomes due.
There is a risk of a preferential transfer if:
- a subsidiary guarantor declares bankruptcy or its creditors force it to
declare bankruptcy within 90 days (or in certain cases, one year) after a
payment on the guarantee; or
- a subsidiary guarantee was made in contemplation of insolvency.
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The subsidiary guarantee could be avoided by a court as a preferential transfer.
In addition, a court could require holders of notes to return any payments made
on the notes during the 90-day (or one-year) period.
WE MAY NOT BE ABLE TO REPURCHASE NOTES UPON A CHANGE OF CONTROL.
Upon a change of control, we will be required to repay the amounts
outstanding under our revolving credit facility and to offer to repurchase the
outstanding senior subordinated notes due 2009, which we issued in May 1999, at
101% of the principal amount, plus accrued and unpaid interest to the date of
repurchase. In addition, we will be required to offer to repurchase any
outstanding notes issued to you. We cannot assure you that we will have
sufficient funds available or that we will be permitted by our other debt
instruments to fulfill these obligations upon the occurrence of a change of
control.
YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS UNSECURED AND CONTRACTUALLY
SUBORDINATED TO OUR EXISTING SENIOR INDEBTEDNESS AND, POSSIBLY, ANY ADDITIONAL
SENIOR INDEBTEDNESS WE INCUR. FURTHER, THE GUARANTEES OF THE NOTES ARE JUNIOR TO
ALL THE SUBSIDIARY GUARANTORS' EXISTING SENIOR INDEBTEDNESS AND POSSIBLY TO ALL
THEIR FUTURE SENIOR BORROWINGS.
The notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing senior indebtedness (which does not include
trade payables and certain other indebtedness) and all additional senior
indebtedness (which does not include trade payables) we incur unless, and to the
extent, that additional indebtedness expressly provides that it ranks equal
with, or junior in right of payment to, the notes and the guarantees. Further,
the notes will rank equal with our existing senior subordinated notes and the
guarantees of those notes.
In addition, all payments on the notes and the guarantees will be blocked
in the event of a payment default or in the event of certain non-payment
defaults on our significant senior indebtedness.
In the event of a bankruptcy, liquidation, reorganization or similar
proceeding relating to us, any subsidiary guarantors or our property, our assets
or the assets of the subsidiary guarantors would be available to pay obligors
under the notes only after all payments had been made on our or the guarantors'
senior indebtedness. Our creditors and the subsidiary guarantors' creditors
holding claims which are not subordinated to any applicable senior indebtedness
will in all likelihood be entitled to payments before all of our or the
subsidiary guarantors' senior indebtedness has been paid in full. Therefore,
holders of the notes will participate with trade creditors and all other holders
of our and the guarantors' unsubordinated indebtedness in the assets remaining
after we and the guarantors have paid all of the senior indebtedness. However,
because the indenture requires that amounts otherwise payable to holders of the
notes in a bankruptcy, liquidation, reorganization or similar proceeding be paid
to holders of senior indebtedness instead, holders of the notes may receive
less, ratably, than holders of trade payables and other creditors in any such
proceeding. In any of these cases, we and the subsidiary guarantors may not have
sufficient funds to pay all of our creditors and, therefore, holders of notes
would receive less, ratably, than the holders of senior indebtedness.
THE NOTES WILL BE EFFECTIVELY SUBORDINATED TO INDEBTEDNESS AND LIABILITIES OF
OUR SUBSIDIARIES THAT ARE NOT GUARANTORS.
The notes are effectively subordinated to claims of all creditors of any of
our subsidiaries that are not guarantors of the notes. If a non-guarantor
subsidiary defaults on its debt, the holders of the notes would not receive any
money from that subsidiary until its debts are repaid in full. All of our
existing subsidiaries other than El Paso Energy Partners Finance Corporation,
Argo, L.L.C. and Argo I, L.L.C. will guarantee the notes. As of June 30, 2001,
Argo and Argo I had approximately $95 million of indebtedness. See "Description
of Notes."
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CONFLICTS OF INTEREST RISKS
EL PASO CORPORATION AND ITS AFFILIATES HAVE CONFLICTS OF INTEREST WITH US AND,
ACCORDINGLY, YOU.
We have potential and existing conflicts of interest with El Paso
Corporation and its affiliates in four general areas:
- we often enter into transactions with each other, including some relating
to operating and managing assets, acquiring and selling assets, and
performing services;
- we often share personnel, assets, systems and other resources;
- from time to time, we compete for business and customers; and
- from time to time, we both may have an interest in acquiring the same
asset, business or other business opportunity.
Through its ownership of our general partner, El Paso Corporation manages our
day-to-day operations and strategic direction. Accordingly, it makes the final
determination regarding how any particular conflict of interest is resolved.
In the future, we expect to encounter more transactions and other
activities in which we have a conflict of interest with El Paso Corporation and
its affiliates resulting from our growth and our strategic expansion into new
businesses and geographic areas. We intend to provide integrated energy services
and solutions, without regard to geographic limitations, which may conflict with
El Paso Corporation's worldwide operations. Some more recent transactions
involving us in which El Paso Corporation and its affiliates had a conflict of
interest include:
- in February 2001, we purchased fee-based NGL transportation and
fractionation assets located in south Texas from subsidiaries of El Paso
Corporation;
- in January and April 2001, we and Deepwater Holdings, our equity
investee, sold our interests in several offshore Gulf of Mexico assets as
a result of an FTC order related to El Paso Corporation's merger with The
Coastal Corporation;
- in August 2000, we purchased natural gas storage facilities in
Mississippi from subsidiaries of El Paso Corporation;
- in March 2000, we purchased a natural gas gathering system located in
Alabama from a subsidiary of El Paso Corporation;
- in March 2000, we entered into a letter of intent relating to platform
construction and processing for the development of El Paso Corporation's
Prince Field;
- in October 1998, we purchased the Ewing Bank 958 Unit from El Paso
Corporation, and, in October 1999, we executed an agreement with El Paso
Production GOM, Inc. (formerly Sonat Production GOM, Inc.) to farmout our
working interest in the Ewing Bank 958 Unit;
- in September 1999, we entered into an agreement with an affiliate of El
Paso Corporation pursuant to which it operates the facilities of
Deepwater Holdings and its subsidiaries on our behalf;
- in June 1999, we purchased substantially all of El Paso Corporation's
interest in the Viosca Knoll gathering system; and
- pursuant to a management agreement, subsidiaries of El Paso Corporation
provide us administrative and operational services.
We expect to enter into substantial transactions with El Paso Corporation
and its affiliates in the future, because of the businesses and areas in which
we and El Paso Corporation currently operate, as well as those in which we plan
to operate in the future. As a result of El Paso Corporation's merger with The
Coastal Corporation, we anticipate entering into more transactions with El Paso
Corporation and its affiliates.
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In addition, we and our general partner and its affiliates share and,
therefore will compete for, the time and effort of general partner personnel who
provide services to us. Officers of the general partner and its affiliates do
not, and will not be required to, spend any specified percentage or amount of
time on our business. Since these shared officers function as both our
representatives and those of our general partner and its affiliates, conflicts
of interest could arise between our general partner and its affiliates, on the
one hand, and us or you, on the other.
In most instances in which an actual or potential conflict of interest
arises between us, on the one hand, and our general partner or its affiliates,
on the other hand, there will be a benefit to our general partner or its
affiliates in which neither we nor you will share. Such conflicts may arise in
situations which include:
- compensation paid to the general partner, which includes incentive
distributions and reimbursements for reasonable general and
administrative expenses;
- payments to the general partner and its affiliates for any services
rendered to us or on our behalf;
- our general partner's determination of which direct and indirect costs we
must reimburse;
- decisions to enter into and the terms of transactions between us and our
general partner or any of its affiliates, including transactions
involving joint ventures, acquisitions and gathering and transportation;
and
- the acquisition or operation of businesses by our general partner or its
affiliates that would compete with us.
Through its ownership of our general partner, El Paso Corporation manages
our day-to-day operations and strategic direction. It elects all of our general
partner's directors, who in turn select all of our executive officers and those
of the general partner. In addition, El Paso Corporation's beneficial ownership
interest in our outstanding partnership interests could have a substantial
effect on the outcome of some actions requiring partner approval. Accordingly,
subject to certain minimum legal requirements, El Paso Corporation makes the
final determination regarding how any particular conflict of interest is
resolved.
We cannot assure you that El Paso Corporation and its affiliates will
always act in your best interest, even though doing so may appear to:
- protect and enhance El Paso Corporation's substantial investment in us;
- generate substantial cash flows to El Paso Corporation; and
- provide El Paso Corporation with efficiently priced capital for its
planned acquisitions.
Although El Paso Corporation plans to use us as its primary financial vehicle
for future midstream energy infrastructure acquisitions, it is neither
contractually nor legally bound to do so, and it may reconsider at any time,
without notice. Further, El Paso Corporation is not required to pursue any
business strategy that will favor our business opportunities over the business
opportunities of El Paso Corporation or any of its affiliates (or any of our
other competitors acquired by El Paso Corporation). In fact, El Paso Corporation
may have financial motives to favor our competitors. El Paso Corporation and its
subsidiaries (many of which are wholly-owned) operate in some of the same lines
of business and in some of the same geographic areas in which we operate.
OUR PARTNERSHIP AGREEMENT PURPORTS TO LIMIT OUR GENERAL PARTNER'S FIDUCIARY
DUTIES AND CERTAIN OTHER OBLIGATIONS RELATING TO US.
Although our general partner owes certain fiduciary duties to us and will
be liable for all our debts, other than non-recourse debts, to the extent not
paid by us, certain provisions of our partnership agreement
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contain exculpatory language purporting to limit the liability of our general
partner to us and unitholders. For example, the partnership agreement provides
that:
- borrowings of money by us, or the approval thereof by our general
partner, will not constitute a breach of any duty of our general partner
to us or you whether or not the purpose or effect of the borrowing is to
permit distributions on our limited partner interests or to result in or
increase incentive distributions to our general partner;
- any action taken by our general partner consistent with the standards of
reasonable discretion set forth in certain definitions in our partnership
agreement will be deemed not to breach any duty of our general partner to
us or to unitholders; and
- in the absence of bad faith by our general partner, the resolution of
conflicts of interest by our general partner will not constitute a breach
of the partnership agreement or a breach of any standard of care or duty.
Provisions of the partnership agreement also purport to modify the
fiduciary duty standards to which our general partner would otherwise be subject
under Delaware law, under which a general partner owes its limited partners the
highest duties of good faith, fairness and loyalty. The duty of loyalty would
generally prohibit our general partner from taking any action or engaging in any
transaction as to which it had a conflict of interest. The partnership agreement
permits our general partner to exercise the discretion and authority granted to
it in that agreement in managing us and in conducting its retained operations,
so long as its actions are not inconsistent with our interests. Our general
partner and its officers and directors may not be liable to us or to unitholders
for certain actions or omissions which might otherwise be deemed to be a breach
of fiduciary duty under Delaware or other applicable state law. Further, the
partnership agreement requires us to indemnify our general partner to the
fullest extent permitted by law, which indemnification, in light of the
exculpatory provisions in the partnership agreement, could result in us
indemnifying our general partner for negligent acts. Neither El Paso Corporation
nor any of its other affiliates, other than our general partner, owes fiduciary
duties to us.
RISKS RELATED TO OUR LEGAL STRUCTURE
THE INTERRUPTION OF DISTRIBUTIONS TO US FROM OUR SUBSIDIARIES AND JOINT VENTURES
MAY AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE NOTES.
El Paso Energy Partners is a holding company. As such, our primary assets
are the capital stock and other equity interests in our subsidiaries and joint
ventures. Consequently, our ability to fund our commitments (including payments
on the notes) depends upon the earnings and cash flow of our subsidiaries and
joint ventures and the distribution of that cash to us. Distributions from our
joint ventures are subject to the discretion of their respective management
committees. In addition, several of our joint ventures have credit arrangements
that contain various restrictive covenants. Among other things, those covenants
limit or restrict each such joint venture's ability to make distributions to us
under certain circumstances. Further, the joint venture charter documents
typically vest in their management committees sole discretion regarding
distributions. We cannot assure you that our joint ventures will continue to
make distributions to us at current levels or at all.
Moreover, pursuant to some of the joint venture credit arrangements, we
have agreed to return a limited amount of the distributions made to us by the
applicable joint venture if certain conditions exist.
WE CANNOT CAUSE OUR JOINT VENTURES TO TAKE OR NOT TO TAKE CERTAIN ACTIONS UNLESS
SOME OR ALL OF OUR JOINT VENTURE PARTICIPANTS AGREE.
Due to the nature of joint ventures, each participant (including us) in
each of our joint ventures has made substantial investments (including
contributions and other commitments) in that joint venture and, accordingly, has
required that the relevant charter documents contain certain features designed
to provide each participant with the opportunity to protect its investment in
that joint venture, as well as any other assets which may be substantially
dependent on or otherwise affected by the activities of that joint venture.
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These protective features include a corporate governance structure which
requires at least a majority in interest vote to authorize many basic activities
and requires a greater voting interest (sometimes up to 100%) to authorize more
significant activities. Depending on the particular joint venture, these more
significant activities might involve large expenditures or contractual
commitments, the construction or acquisition of assets, borrowing money,
transactions with affiliates of a joint venture participant, litigation and
transactions not in the ordinary course of business, among others. Thus, without
the concurrence of joint venture participants with enough voting interests, we
cannot cause any of our joint ventures to take or not to take certain actions,
even though those actions may be in the best interest of the particular joint
venture or us.
WE DO NOT HAVE THE SAME FLEXIBILITY AS OTHER TYPES OF ORGANIZATIONS TO
ACCUMULATE CASH AND EQUITY TO PROTECT AGAINST ILLIQUIDITY IN THE FUTURE.
Unlike a corporation, our partnership agreement requires us to make
quarterly distributions to our partners of all available cash reduced by any
amounts reserved for commitments and contingencies, including capital and
operating costs and debt service requirements. The value of our units and other
limited partner interests will decrease in direct correlation with decreases in
the amount we distribute per unit. Accordingly, if we experience a liquidity
problem in the future, we may not be able to issue more equity to recapitalize.
CHANGES OF CONTROL OF OUR GENERAL PARTNER MAY ADVERSELY AFFECT YOU.
Our results of operations and, thus, our ability to pay amounts due under
the notes could be adversely affected if there is a change in control of our
general partner. El Paso Corporation is not restricted from selling our general
partner or any of the common units or other limited partner interests it holds,
although El Paso Corporation's sale of our general partner would constitute a
change of control under our existing credit agreement and indenture. In such a
circumstance, our indebtedness for borrowed money would effectively become due
and payable unless our creditors agreed otherwise. Thus, El Paso Corporation
could sell control of our general partner to another company with less
familiarity and experience with our businesses and with different business
philosophies and objectives, and that sale might require us to refinance our
indebtedness for borrowed money. We cannot assure you that any such acquiror
would continue our current business strategy, or even a business strategy
economically compatible with our current business strategy or that we would be
able to refinance our indebtedness.
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THE EXCHANGE OFFER
For the purposes of this section, "we" means El Paso Energy Partners, L.P.,
El Paso Energy Partners Finance Corporation and the Subsidiary Guarantors.
REGISTRATION RIGHTS
At the closing of the offering of the Series A notes, we entered into a
registration rights agreement with the initial purchasers pursuant to which we
agreed, for the benefit of the holders of the Series A notes, at our cost,
- to file an exchange offer registration statement with the SEC with
respect to the exchange offer for the Series B notes within 60 days after
the date of the original issuance of the Series A notes, and
- to use our best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act within 150
days after the date of original issuance of the Series A notes.
Upon the exchange offer registration statement being declared effective, we
agreed to offer the Series B notes in exchange for surrender of the Series A
notes. We agreed to use our best efforts to cause the exchange offer
registration statement to be effective continuously, to keep the exchange offer
open for a period of not less than 20 business days and to use our best efforts
to cause the exchange offer to be consummated no later than 30 business days
after the exchange offer registration statement is declared effective by the
SEC.
For each Series A note surrendered to us pursuant to the exchange offer,
the holder of such Series A note will receive a Series B note having a principal
amount equal to that of the surrendered Series A note. Interest on each Series B
note will accrue from the last interest payment date on which interest was paid
on the Series A note surrendered in exchange therefor or, if no interest has
been paid on such Series A note, from the date of its original issue. The
registration rights agreement also provides an agreement to include in the
prospectus for the exchange offer certain information necessary to allow a
broker-dealer who holds Series A notes that were acquired for its own account as
a result of market-making activities or other ordinary course trading activities
(other than Series A notes acquired directly from us or one of our affiliates)
to exchange such Series A notes pursuant to the exchange offer and to satisfy
the prospectus delivery requirements in connection with resales of Series B
notes received by such broker-dealer in the exchange offer. We agreed to use our
best efforts to maintain the effectiveness of the exchange offer registration
statement for these purposes for a period of not more than 30 business days plus
one year after the exchange offer registration statement has become effective.
The preceding agreement is needed because any broker-dealer who acquires
Series A notes for its own account as a result of market-making activities or
other trading activities is required to deliver a prospectus meeting the
requirements of the Securities Act. This prospectus covers the offer and sale of
the Series B notes pursuant to the exchange offer made hereby and the resale of
Series B notes received in the exchange offer by any broker-dealer who held
Series A notes of the same series acquired for its own account as a result of
market-making activities or other trading activities other than Series A notes
acquired directly from us or one of our affiliates.
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, we believe that the Series B notes issued
pursuant to the exchange offer would in general be freely tradeable after the
exchange offer without further registration under the Securities Act. However,
any purchaser of Series A notes who is an "affiliate" of ours or who intends to
participate in the exchange offer for the purpose of distributing the related
Series B notes
- will not be able to rely on the interpretation of the staff of the SEC,
- will not be able to tender its Series A notes in the exchange offer, and
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- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the Series
A notes unless such sale or transfer is made pursuant to an exemption
from such requirements.
Each holder of the Series A notes (other than certain specified holders)
who wishes to exchange Series A notes for Series B notes in the exchange offer
will be required to make certain representations, including
- that it is not an affiliate of El Paso Energy Partners,
- that it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B notes, and
- that it is acquiring the Series B notes in the exchange offer in its
ordinary course of business.
We further agreed to file with the SEC a shelf registration statement to
register for public resale the Transfer Restricted Securities held by any such
holder who provides El Paso Energy Partners with certain information for
inclusion in the shelf registration statement if:
- the exchange offer is not permitted by applicable law or SEC policy, or
- any holder of notes which are Transfer Restricted Securities notifies El
Paso Energy Partners prior to the 20th business day following the
consummation of the exchange offer that
- it is prohibited by law or SEC policy from participating in the exchange
offer,
- it may not resell the Series B notes acquired by it in the exchange
offer to the public without delivering a prospectus, and the prospectus
contained in the exchange offer registration statement is not
appropriate or available for such resales by it, or
- it is a broker-dealer and holds notes acquired directly from El Paso
Energy Partners or any of the affiliates of El Paso Energy Partners.
For the purposes of the registration rights agreement, Transfer Restricted
Securities means each Series A note or Series B note until the earliest of the
date of which
- such Series A note or Series B note is exchanged in the exchange offer
and entitled to be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the Securities
Act,
- such Series A note or Series B note has been disposed of in accordance
with the shelf registration statement,
- such Series A note or Series B note is disposed of by a broker-dealer as
set forth in "Plan of Distribution" (including delivery of the prospectus
contained therein), or
- such Series A note or Series B note is distributed to the public pursuant
to Rule 144 under the Securities Act.
The registration rights agreement provides that:
(1) if we fail to file an exchange offer registration statement with
the SEC on or prior to the 60th day after the closing of the offering of
the Series A notes,
(2) if the exchange offer registration statement is not declared
effective by the SEC on or prior to the 150th day after the closing of the
offering of the Series A notes,
(3) if the exchange offer is not consummated on or before the 30th
business day after the exchange offer registration statement is declared
effective,
(4) if obligated to file the shelf registration statement and we fail
to file the shelf registration statement with the SEC on or prior to the
30th day after such filing obligation arises,
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(5) if obligated to file a shelf registration statement and the shelf
registration statement is not declared effective on or prior to the 60th
day after the obligation to file a shelf registration statement arises, or
(6) subject to certain conditions, if the exchange offer registration
statement or the shelf registration statement, as the case may be, is
declared effective but thereafter ceases to be effective or useable in
connection with resales of the Transfer Restricted Securities, for such
time of non-effectiveness or non-usability (each, a "Registration
Default"),
we agree to pay to each holder of Transfer Restricted Securities affected
thereby liquidated damages in an amount equal to $0.05 per week per $1,000 in
original principal amount of Transfer Restricted Securities held by such holder
for each week or portion thereof that the Registration Default continues for the
first 90 day period immediately following the occurrence of such Registration
Default. The amount of the liquidated damages shall increase by an additional
$0.05 per week per $1,000 in original principal amount of Transfer Restricted
Securities with respect to each subsequent 90 day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $0.50
per week per $1,000 in principal amount of Transfer Restricted Securities. We
shall not be required to pay liquidated damages for more than one Registration
Default at any given time. Upon curing all Registration Defaults, liquidated
damages will cease to accrue.
A Registration Default will be cured and liquidated damages will cease to
accrue upon:
- filing of the exchange offer registration statement (and/or, if
applicable, the shelf registration statement), in the cases of the
Registration Defaults described in clauses (1) and (4) above,
- the effectiveness of the exchange offer registration statement (and/or,
if applicable, the shelf registration statement), in the cases of the
Registration Defaults described in clauses (2) and (5) above,
- consummation of the exchange offer, in the case of the Registration
Default described in clause (3) above, and
- the filing of a post-effective amendment to the registration statement or
an additional registration statement that causes the exchange offer
registration statement (and/or, if applicable, the shelf registration
statement) to again be declared effective or made usable, in the case of
the Registration Default described in clause (6) above.
All accrued liquidated damages shall be paid by us to holders entitled
thereto by wire transfer to the accounts specified by them or by mailing checks
to their registered address if no such accounts have been specified.
Holders of the notes will be required to make certain representations to us
(as described in the registration rights agreement) in order to participate in
the exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement.
If we effect the registered exchange offer, we will be entitled to close
the registered exchange offer 20 business days after the commencement thereof;
provided that the we have accepted all notes theretofore validly rendered in
accordance with the terms of the exchange offer and no brokers or dealers
continue to hold any notes.
This summary of the material provisions of the registration rights
agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the registration rights
agreement, a copy of which is filed as an exhibit to the registration statement
of which this prospectus is a part.
Except as set forth above, after consummation of the exchange offer,
holders of Series A notes which are the subject of the exchange offer have no
registration or exchange rights under the registration rights
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agreement. See "-- Consequences of Failure to Exchange," and "-- Resale of the
Series B Notes; Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series A notes which are not exchanged for Series B notes pursuant to
the exchange offer and are not included in a resale prospectus which, if
required, will be filed as part of an amendment to the registration statement of
which this prospectus is a part, will remain restricted securities and subject
to restrictions on transfer. Accordingly, such Series A notes may only be resold
(1) to us, upon redemption thereof or otherwise,
(2) so long as the Series A notes are eligible for resale pursuant to
Rule 144A, to a person whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities
Act, purchasing for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
other transfer is being made in reliance on Rule 144A,
(3) in an offshore transaction in accordance with Regulation S under
the Securities Act,
(4) pursuant to an exemption from registration in accordance with Rule
144, if available, under the Securities Act,
(5) in reliance on another exemption from the registration
requirements of the Securities Act, or
(6) pursuant to an effective registration statement under the
Securities Act.
In all of the situations discussed above, the resale must be in accordance
with any applicable securities laws of any state of the United States and
subject to certain requirements of the registrar or co-registrar being met,
including receipt by the registrar or co-registrar of a certification and, in
the case of (3), (4) and (5) above, an opinion of counsel reasonably acceptable
to us and the registrar.
To the extent Series A notes are tendered and accepted in the exchange
offer, the principal amount of outstanding Series A notes will decrease with a
resulting decrease in the liquidity in the market therefor. Accordingly, the
liquidity of the market of the Series A notes could be adversely affected. See
"Risk Factors -- Consequences of Failure to Exchange."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, a copy of which is attached to this prospectus
as Annex A, we will accept any and all Series A notes validly tendered and not
withdrawn prior to the Expiration Date. We will issue $1,000 principal amount of
Series B notes in exchange for each $1,000 principal amount of Series A notes
accepted in the exchange offer. Holders may tender some or all of their Series A
notes pursuant to the exchange offer. However, Series A notes may be tendered
only in integral multiples of $1,000 principal amount.
The form and terms of the Series B notes are the same as the form and terms
of the Series A notes, except that
- the Series B notes will have been registered under the Securities Act and
will not bear legends restricting their transfer pursuant to the
Securities Act, and
- except as otherwise described above, holders of the Series B notes will
not be entitled to the rights of holders of Series A notes under the
registration rights agreement.
The Series B notes will evidence the same debt as the Series A notes which
they replace, and will be issued under, and be entitled to the benefits of, the
indenture which governs all of the notes.
Solely for reasons of administration and for no other purpose, we have
fixed the close of business on August 24, 2001 as the record date for the
exchange offer for purposes of determining the persons
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to whom this prospectus and the letter of transmittal will be mailed initially.
Only a registered holder of Series A notes or such holder's legal representative
or attorney-in-fact as reflected on the records of the trustee under the
indenture may participate in the exchange offer. There will be no fixed record
date for determining registered holders of the Series A notes entitled to
participate in the exchange offer.
Holders of the Series A notes do not have any appraisal or dissenters'
rights under Delaware law or the indenture in connection with the exchange
offer. We intend to conduct the exchange offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder.
We shall be deemed to have accepted validly tendered Series A notes when,
as and if we have given oral or written notice thereof to the exchange agent.
The exchange agent will act as agent for the tendering holders of the Series A
notes for the purposes of receiving the Series B notes. The Series B notes
delivered pursuant to the exchange offer will be issued on the earliest
practicable date following our acceptance for exchange of Series A notes.
If any tendered Series A notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Series A notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Series A notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of the
Series A notes pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes, in connection with the exchange
offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" with respect to the exchange offer, shall mean
5:00 p.m., New York City time, on September 28, 2001 unless we, in our sole
discretion, extend the exchange offer, in which case the term "Expiration Date"
shall mean the latest date and time to which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice and will make a public announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date of the exchange offer.
We reserve the right, in our sole discretion,
(1) to delay accepting any Series A notes,
(2) to extend the exchange offer,
(3) if any of the conditions set forth below under "-- Conditions to
the Exchange Offer" have not been satisfied, to terminate the exchange
offer, or
(4) to amend the terms of the exchange offer in any manner.
We may effect any such delay, extension or termination by giving oral or
written notice thereof to the exchange agent.
Except as specified in the second paragraph under this heading, any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by a public announcement thereof. If the exchange offer
is amended in a manner determined by us to constitute a material change, we will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders of the Series A notes. The exchange
offer will then be extended for a period of five to 10 business days, as
required by law, depending upon the significance of the amendment and the manner
of disclosure to the registered holders, if the exchange offer would otherwise
expire during such five to 10 business day period.
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Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, termination or amendment of the exchange
offer, we shall not have an obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
thereof to the Dow Jones News Service.
PROCEDURES FOR TENDERING SERIES A NOTES
TENDERS OF SERIES A NOTES. The tender by a holder of Series A notes
pursuant to any of the procedures set forth below will constitute the tendering
holder's acceptance of the terms and conditions of the exchange offer. Our
acceptance for exchange of Series A notes tendered pursuant to any of the
procedures described below will constitute a binding agreement between such
tendering holder and us in accordance with the terms and subject to the
conditions of the exchange offer. Only holders are authorized to tender their
Series A notes. The procedures by which Series A notes may be tendered by
beneficial owners that are not holders will depend upon the manner in which the
Series A notes are held.
DTC has authorized DTC participants that are beneficial owners of Series A
notes through DTC to tender their Series A notes as if they were holders. To
effect a tender, DTC participants should either (1) complete and sign the letter
of transmittal or a facsimile thereof, have the signature thereon guaranteed if
required by Instruction 1 of the letter of transmittal, and mail or deliver the
letter of transmittal or such facsimile pursuant to the procedures for
book-entry transfer set forth below under "-- Book-Entry Delivery Procedures,"
or (2) transmit their acceptance to DTC through the DTC Automated Tender Offer
Program ("ATOP"), for which the transaction will be eligible, and follow the
procedures for book-entry transfer, set forth below under "-- Book-Entry
Delivery Procedures."
TENDER OF SERIES A NOTES HELD IN PHYSICAL FORM. To tender effectively
Series A notes held in physical form pursuant to the exchange offer,
- a properly completed letter of transmittal applicable to such notes (or a
facsimile thereof) duly executed by the holder thereof, and any other
documents required by the letter of transmittal, must be received by the
exchange agent at one of its addresses set forth below, and tendered
Series A notes must be received by the exchange agent at such address (or
delivery effected through the deposit of Series A notes into the exchange
agent's account with DTC and making book-entry delivery as set forth
below) on or prior to the Expiration Date of the exchange offer, or
- the tendering holder must comply with the guaranteed delivery procedures
set forth below.
LETTERS OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT ONLY TO THE
EXCHANGE AGENT AND SHOULD NOT BE SENT TO US.
TENDER OF SERIES A NOTES HELD THROUGH A CUSTODIAN. To tender effectively
Series A notes that are held of record by a custodian bank, depository, broker,
trust company or other nominee, the beneficial owner thereof must instruct such
holder to tender the Series A notes on the beneficial owner's behalf. A letter
of instructions from the record owner to the beneficial owner may be included in
the materials provided along with this prospectus which may be used by the
beneficial owner in this process to instruct the registered holder of such
owner's Series A notes to effect the tender.
TENDER OF SERIES A NOTES HELD THROUGH DTC. To tender effectively Series A
notes that are held through DTC, DTC participants should either
- properly complete and duly execute the letter of transmittal (or a
facsimile thereof), and any other documents required by the letter of
transmittal, and mail or deliver the letter of transmittal or such
facsimile pursuant to the procedures for book-entry transfer set forth
below, or
- transmit their acceptance through ATOP, for which the transaction will be
eligible, and DTC will then edit and verify the acceptance and send an
Agent's Message to the exchange agent for its acceptance.
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Delivery of tendering Series A notes held through DTC must be made to the
exchange agent pursuant to the book-entry delivery procedures set forth below or
the tendering DTC participant must comply with the guaranteed delivery
procedures set forth below.
The method of delivery of Series A notes and letters of transmittal, any
required signature guarantees and all other required documents, including
delivery through DTC and any acceptance or Agent's Message transmitted through
ATOP, is at the election and risk of the person tendering Series A notes and
delivering letters of transmittal. Except as otherwise provided in the letter of
transmittal, delivery will be deemed made only when actually received by the
exchange agent. If delivery is by mail, it is suggested that the holder use
properly insured, registered mail with return receipt requested, and that the
mailing be made sufficiently in advance of the Expiration Date to permit
delivery to the exchange agent prior to such date.
Except as provided below, unless the Series A notes being tendered are
deposited with the exchange agent on or prior to the Expiration Date
(accompanied by a properly completed and duly executed letter of transmittal or
a properly transmitted Agent's Message), we may, at our option, reject such
tender. Exchange of Series B notes for Series A notes will be made only against
deposit of the tendered Series A notes and delivery of all other required
documents.
BOOK-ENTRY DELIVERY PROCEDURES. The exchange agent will establish accounts
with respect to the Series A notes at DTC for purposes of the exchange offer
within two business days after the date of this prospectus, and any financial
institution that is a participant in DTC may make book-entry delivery of the
Series A notes by causing DTC to transfer such Series A notes into the exchange
agent's account in accordance with DTC's procedures for such transfer. However,
although delivery of Series A notes may be effected through book-entry at DTC,
the letter of transmittal (or facsimile thereof), with any required signature
guarantees or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the exchange agent at one or more of its addresses set forth in this
prospectus on or prior to the Expiration Date, or compliance must be made with
the guaranteed delivery procedures described below. Delivery of documents to DTC
does not constitute delivery to the exchange agent. The confirmation of a
book-entry transfer into the exchange agent's account at DTC as described above
is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the exchange agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each participant in DTC tendering the Series A notes and that such participant
has received the letter of transmittal and agrees to be bound by the terms of
the letter of transmittal and we may enforce such agreement against such
participant.
SIGNATURE GUARANTEES. Signatures on all letters of transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Series A notes tendered thereby are tendered
(1) by a registered holder of Series A notes (or by a participant in DTC whose
name appears on a DTC security position listing as the owner of such Series A
notes) who has not completed either the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the letter of transmittal,
or (2) for the account of an Eligible Institution. See Instruction 1 of the
letters of transmittal. If the Series A notes are registered in the name of a
person other than the signer of the letter of transmittal or if Series A notes
not accepted for exchange or not tendered are to be returned to a person other
than the registered holder, then the signatures on the letter of transmittal
accompanying the tendered Series A notes must be guaranteed by an Eligible
Institution as described above. See Instructions 1 and 5 of the letter of
transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Series A notes pursuant
to the exchange offer and time will not permit the letter of transmittal,
certificates representing such Series A notes and all other required documents
to reach the exchange agent, or the procedures for book-entry transfer cannot be
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completed, on or prior to the Expiration Date of the exchange offer, such Series
A notes may nevertheless be tendered if all the following conditions are
satisfied:
(1) the tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by us herewith, or an Agent's
Message with respect to guaranteed delivery that is accepted by us, is
received by the exchange agent on or prior to the Expiration Date, as
provided below; and
(3) the certificates for the tendered Series A notes, in proper form
for transfer (or a Book-Entry Confirmation of the transfer of such Series A
notes into the exchange agent's account at DTC as described above),
together with the letter of transmittal (or facsimile thereof), property
completed and duly executed, with any required signature guarantees and any
other documents required by the letter of transmittal or a properly
transmitted Agent's Message, are received by the exchange agent within two
business days after the date of execution of the Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be sent by hand delivery, telegram,
facsimile transmission or mail to the exchange agent and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, delivery of Series B notes by
the exchange agent for Series A notes tendered and accepted for exchange
pursuant to the exchange offer will, in all cases, be made only after timely
receipt by the exchange agent of such Series A notes (or Book-Entry Confirmation
of the transfer of such Series A notes into the exchange agent's account at DTC
as described above), and the letter of transmittal (or facsimile thereof) with
respect to such Series A notes, properly completed and duly executed, with any
required signature guarantees and any other documents required by the letter of
transmittal, or a properly transmitted Agent's Message.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Series A notes will be determined by us in our sole discretion, which
determination will be final and binding. We reserve the absolute right to reject
any and all Series A notes not properly tendered or any Series A notes our
acceptance of which, in the opinion of our counsel, would be unlawful.
We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular Series A notes. The interpretation of the
terms and conditions of our exchange offer (including the instructions in the
letter of transmittal) by us will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Series A
notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with
respect to tenders of Series A notes through the exchange agent, neither we, the
exchange agent nor any other person is under any duty to give such notice, nor
shall they incur any liability for failure to give such notification. Tenders of
Series A notes will not be deemed to have been made until such defects or
irregularities have been cured or waived.
Any Series A notes received by the exchange agent that are not validly
tendered and as to which the defects or irregularities have not been cured or
waived, or if Series A notes are submitted in a principal amount greater than
the principal amount of Series A notes being tendered by such tendering holder,
such unaccepted or non-exchanged Series A notes will either be
(1) returned by the exchange agent to the tendering holders, or
(2) in the case of Series A notes tendered by book-entry transfer into
the exchange agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described below, credited to an
account maintained with such Book-Entry Transfer Facility.
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By tendering, each registered holder will represent to us that, among other
things,
- the Series B notes to be acquired by the holder and any beneficial
owner(s) of the Series A notes in connection with the exchange offer are
being acquired by the holder and any beneficial owner(s) in the ordinary
course of business of the holder and any beneficial owner(s),
- the holder and each beneficial owner are not participating, do not intend
to participate, and have no arrangement or understanding with any person
to participate, in a distribution of the Series B notes,
- the holder and each beneficial owner acknowledge and agree that (x) any
person participating in the exchange offer for the purpose of
distributing the Series B notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction with respect to the Series B notes
acquired by such person and cannot rely on the position of the Staff of
the SEC set forth in no-action letters that are discussed herein under
"-- Resale of the Series B Notes; Plan of Distribution," and (y) any
broker-dealer that receives Series B notes for its own account in
exchange for Series A notes pursuant to the exchange offer must delivery
a prospectus in connection with any resale of such Series B notes, but by
so acknowledging, the holder shall not be deemed to admit that, by
delivering a prospectus, it is an "underwriter" within the meaning of the
Securities Act,
- neither the holder nor any beneficial owner is an "affiliate," as defined
under Rule 405 of the Securities Act, of ours except as otherwise
disclosed to us in writing, and
- the holder and each beneficial owner understands, that a secondary resale
transaction described in clause (3) above should be covered by an
effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the SEC.
Each broker-dealer that receives Series B notes for its own account in
exchange for Series A notes, where such Series A notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Series B notes. See "-- Resale of the Series B Notes;
Plan of Distribution."
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A notes pursuant to
the exchange offer may be withdrawn, unless accepted for exchange as provided in
the exchange offer, at any time prior to the Expiration Date of the exchange
offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the exchange agent at its address set forth herein prior to
the Expiration Date of the exchange offer. Any such notice of withdrawal must
- specify the name of the person having deposited the Series A notes to be
withdrawn,
- identify the Series A notes to be withdrawn, including the certificate
number or numbers of the particular certificates evidencing the Series A
notes (unless such Series A notes were tendered by book-entry transfer),
and aggregate principal amount of such Series A notes, and
- be signed by the holder in the same manner as the original signature on
the letter of transmittal (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the trustee
under the indenture register the transfer of the Series A notes into the
name of the person withdrawing such Series A notes.
If Series A notes have been delivered pursuant to the procedures for
book-entry transfer set forth in "-- Procedures for Tendering Series A
Notes -- Book-Entry Delivery Procedures," any notice of withdrawal must specify
the name and number of the account at the appropriate book-entry transfer
facility to be credited with such withdrawn Series A notes and must otherwise
comply with such book-entry transfer facility's procedures.
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If the Series A notes to be withdrawn have been delivered or otherwise
identified to the exchange agent, a signed notice of withdrawal meeting the
requirements discussed above is effective immediately upon written or facsimile
notice of withdrawal even if physical release is not yet effected. A withdrawal
of Series A notes can only be accomplished in accordance with these procedures.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by us in our sole discretion, which
determination shall be final and binding on all parties. No withdrawal of Series
A notes will be deemed to have been properly made until all defects or
irregularities have been cured or expressly waived. Neither we, the exchange
agent nor any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or revocation, nor shall
we or they incur any liability for failure to give any such notification. Any
Series A notes so withdrawn will be deemed not to have been validly tendered for
purposes of the exchange offer and no Series B notes will be issued with respect
thereto unless the Series A notes so withdrawn are retendered. Properly
withdrawn Series A notes may be retendered by following one of the procedures
described above under "-- Procedures for Tendering Series A Notes" at any time
prior to the Expiration Date of the exchange offer.
Any Series A notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the prior
termination of the exchange offer, or which have been validly withdrawn, will be
returned to the holder thereof unless otherwise provided in the letter of
transmittal, as soon as practicable following the Expiration Date of the
exchange offer or, if so requested in the notice of withdrawal, promptly after
receipt by us of notice of withdrawal without cost to such holder.
CONDITIONS TO THE EXCHANGE OFFER
The exchange offer shall not be subject to any conditions, other than that
(1) the SEC has issued an order or orders declaring the indenture
governing the notes qualified under the Trust Indenture Act of 1939,
(2) the exchange offer, or the making of any exchange by a holder,
does not violate applicable law or any applicable interpretation of the
staff of the SEC,
(3) no action or proceeding shall have been instituted or threatened
in any court or by or before any governmental agency with respect to the
exchange offer, which, in our judgment, might impair our ability to proceed
with the exchange offer,
(4) there shall not have been adopted or enacted any law, statute,
rule or regulation which, in our judgment, would materially impair our
ability to proceed with the exchange offer, or
(5) there shall not have occurred any material change in the financial
markets in the United States or any outbreak of hostilities or escalation
thereof or other calamity or crisis the effect of which on the financial
markets of the United States, in our judgment, would materially impair our
ability to proceed with the exchange offer.
If we determine in our sole discretion that any of the conditions to the
exchange offer are not satisfied, we may
(1) refuse to accept any Series A notes and return all tendered Series
A notes to the tendering holders,
(2) extend the exchange offer and retain all Series A notes tendered
prior to the Expiration Date applicable to the exchange offer, subject,
however, to the rights of holders to withdraw such Series A notes (see "--
Withdrawal of Original Tenders"), or
(3) waive such unsatisfied conditions with respect to the exchange
offer and accept all validly tendered Series A notes which have not been
withdrawn.
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If such waiver constitutes a material change to the exchange offer, we will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and will extend the exchange offer for a
period of five to 10 business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders, if the exchange
offer would otherwise expire during such five to 10 business day period.
EXCHANGE AGENT
The Chase Manhattan Bank, the trustee under the indenture governing the
notes, has been appointed as exchange agent for the exchange offer. Questions
and requests for assistance, requests for additional copies of this prospectus
or of the letter of transmittal and requests for Notices of Guaranteed Delivery
and other documents should be directed to the exchange agent addressed as
follows:
By Mail:
The Chase Manhattan Bank
600 Travis, Suite 1150
Houston, Texas 77002
Attention: Mauri J. Cowen
By Facsimile:
(713) 577-5200
Attention: Mauri J. Cowen
Confirm by
Telephone:
(713) 216-6686
Attention: Mauri J. Cowen
By Hand:
The Chase Manhattan Bank
600 Travis, Suite 1150
Houston, Texas 77002
Attention: Mauri J. Cowen
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, additional solicitation may be made by
telegraph, telecopy, telephone or in person by officers and regular employees of
El Paso Energy Partners, L.P., our general partner and their affiliates.
No dealer-manager has been retained in connection with the exchange offer
and no payments will be made to brokers, dealers or others soliciting acceptance
of the exchange offer. However, reasonable and customary fees will be paid to
the exchange agent for its services and it will be reimbursed for its reasonable
out-of-pocket expenses in connection therewith.
Our out of pocket expenses for the exchange offer will include fees and
expenses of the exchange agent and the trustee under the indenture, accounting
and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
Series A notes pursuant to the exchange offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Series A notes pursuant to
the exchange offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the letter of transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
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ACCOUNTING TREATMENT
The Series B notes will be recorded at the carrying value of the Series A
notes and no gain or loss for accounting purposes will be recognized. The
expenses of the exchange offer will be amortized over the term of the Series B
notes.
RESALE OF THE SERIES B NOTES; PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of Series B notes. This prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Series B notes received in exchange
for Series A notes where such Series A notes were acquired as a result of
market-making activities or other trading activities. In addition, until
, 2001 (90 days after the date of this prospectus), all dealers
effecting transactions in the Series B notes, whether or not participating in
this distribution, may be required to deliver a prospectus. This requirement is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
We will not receive any proceeds from any sale of Series B notes by
broker-dealers. Series B notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions
(1) in the over-the-counter market,
(2) in negotiated transactions,
(3) through the writing of options on the Series B notes or a
combination of such methods of resale,
(4) at market prices prevailing at the time of resale,
(5) at prices related to such prevailing market prices, or
(6) at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Series B
notes.
Any broker-dealer that resells Series B notes that were received by it for
its own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such Series B notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B notes and any commission on concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver a prospectus and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
We agreed to permit the use of this prospectus by such broker-dealers to
satisfy this prospectus delivery requirement. To the extent necessary to ensure
that the prospectus is available for sales of Series B notes by broker-dealers,
we agreed to use our best efforts to keep the exchange offer registration
statement continuously effective, supplemented, amended and current for a period
of 30 business days plus one year from the closing of the offering of the Series
A notes or such shorter period as will terminate when all Transfer Restricted
Securities covered by such registration statement have been sold. We will
provide sufficient copies of the latest version of this prospectus to such
broker-dealers no event later than one day after such request at any time during
this period.
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USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreement. We will not receive any cash proceeds from the
issuance of the Series B notes offered by this prospectus. In consideration for
issuing the Series B notes as contemplated in this prospectus, we will receive
in exchange Series A notes in like principal amount, the form and terms of which
are the same as the form and terms of the Series B notes, except as otherwise
described herein under "The Exchange Offer -- Terms of the Exchange Offer." The
Series A notes surrendered in exchange for the Series B notes will be retired
and canceled and cannot be reissued. Accordingly, issuance of the Series B notes
will not result in any increase in our indebtedness.
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Definitions." In this description, the word "Issuers"
refers only to El Paso Energy Partners and El Paso Finance and not to any of
their subsidiaries and any reference to "El Paso Energy Partners" or "El Paso
Finance" does not include any of their respective subsidiaries. As used in this
section, "El Paso Finance" means our subsidiary, El Paso Energy Partners Finance
Corporation, which is a co-issuer of the notes.
The Issuers issued the Series A notes under an Indenture (the "Indenture")
among the Issuers, the Subsidiary Guarantors and The Chase Manhattan Bank, as
trustee (the "Trustee") in a private transaction that is not subject to the
registration requirements of the Securities Act. The Series B notes will be
issued under the same Indenture. The terms of the notes include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act").
The following description is a summary of the material provisions of the
Indenture. It does not restate that agreement in its entirety. We urge you to
read the Indenture because it, and not this description, defines your rights as
a holder of these notes. We have filed a copy of the Indenture with the SEC as
an exhibit to the registration statement of which this prospectus is a part.
Certain terms used herein are defined below under "-- Definitions" beginning on
page 64.
GENERAL
The Series A notes and the Series B notes will constitute a single class of
debt securities under the Indenture. If the exchange offer is completed, holders
of Series A notes who do not exchange their Series A notes for Series B notes
will vote together with holders of the Series B notes for all relevant purposes
under the Indenture. In that regard, the Indenture requires that certain actions
by holders, including acceleration following an event of default, must be taken,
and certain rights must be exercised, by specified minimum percentages of the
aggregate principal amount of the outstanding securities issued under the
Indenture. In determining whether the required holders have given any notice,
consent or waiver or taken any other action permitted under the Indenture, any
Series A notes that remain outstanding after the exchange offer will be
aggregated with the Series B notes, and the holders of the Series A notes and
the Series B notes will vote together as a single series. All references in this
prospectus to specified percentages in aggregate principal amount of the notes
means, at any time after the exchange offer is completed, the percentages in
aggregate principal amount of the Series A notes and the Series B notes
collectively then outstanding.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The Notes
The notes are:
- general unsecured obligations of the Issuers;
- subordinated in right of payment to all existing and future Senior Debt
of the Issuers, including borrowings under the Partnership Credit
Facility;
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- senior or equal in right of payment to any future subordinated
Indebtedness of the Issuers and equal in right of payment to our existing
senior subordinated notes; and
- unconditionally guaranteed by the Subsidiary Guarantors.
The Guarantees
The notes are guaranteed by the following subsidiaries of El Paso Energy
Partners:
- Argo II, L.L.C.
- Crystal Holding, L.L.C.
- Crystal Properties and Trading Company, L.L.C.
- Delos Offshore Company, L.L.C.
- El Paso Energy Partners Deepwater, L.L.C.
- El Paso Energy Partners Oil Transport, L.L.C.
- El Paso Energy Partners Operating Company, L.L.C.
- Ewing Bank Gathering Company, L.L.C.
- First Reserve Gas, L.L.C.
- Flextrend Development Company, L.L.C.
- Green Canyon Pipe Line Company, L.P.
- Hattiesburg Gas Storage Company
- Hattiesburg Industrial Gas Sales Company, L.L.C.
- Manta Ray Gathering Company, L.L.C.
- Petal Gas Storage Company, L.L.C.
- Poseidon Pipeline Company, L.L.C.
- VK Deepwater Gathering Company, L.L.C.
- VK-Main Pass Gathering Company, L.L.C.
- Viosca Knoll Gathering Company
Each Guarantee of a Subsidiary Guarantor of these notes:
- is a general unsecured obligation of that Subsidiary Guarantor;
- is subordinated in right of payment to all existing and future Senior
Debt of that Subsidiary Guarantor; and
- is senior or equal in right of payment to any future subordinated
Indebtedness of that Subsidiary Guarantor.
As of June 30, 2001, the Issuers and the Subsidiary Guarantors had total
Senior Debt and Guarantor Senior Debt of approximately $60 million, although the
Indenture will allow us to incur at least $600 million of Senior Debt. As
indicated above and as discussed in detail below under the subheading
"Subordination," payments on the notes and the Guarantees will be subordinated
to the payment of Senior Debt and Guarantor Senior Debt, respectively. The
Indenture will permit the Issuers and the Subsidiary Guarantors to incur
additional Senior Debt and Guarantor Senior Debt. The Guarantee of each
Subsidiary Guarantor will be subordinated to all Senior Debt of that Subsidiary
Guarantor. In addition, payments on the notes will be effectively subordinated
to claims of creditors (other than El Paso Energy Partners) of
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our subsidiaries that are not guarantors of the notes. As of June 30, 2001, our
non-guarantor subsidiaries had total indebtedness of approximately $95 million.
As of the date of the Indenture, all of our Subsidiaries (other than El
Paso Finance, Argo, L.L.C. and Argo I, L.L.C.) will be "Restricted
Subsidiaries." Certain Subsidiaries in the future may not be Subsidiary
Guarantors. Also, under the circumstances described below under the subheading
"Covenants -- Designation of Restricted and Unrestricted Subsidiaries," we will
be permitted to designate certain of our Subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the Indenture. Unrestricted Subsidiaries will not
guarantee the notes. Argo, L.L.C. and Argo I, L.L.C. will be designated as
Unrestricted Subsidiaries. In addition, El Paso Energy Partners has invested,
and may invest in the future, in Joint Ventures. The rights of El Paso Energy
Partners to receive assets from any Subsidiary that is not a Subsidiary
Guarantor or from any Joint Venture that are attributable to El Paso Energy
Partners's Equity Interests therein (and thus the ability of the holders of the
notes to benefit indirectly from such assets) are subject to the claims of all
existing and future third party indebtedness and liabilities (including trade
debt) of such Subsidiary or Joint Venture.
PRINCIPAL, MATURITY AND INTEREST
The Issuers will issue notes in an initial aggregate principal amount of
$250 million. Subject to compliance with the covenant described below under
"-- Incurrence of Indebtedness and Issuance of Disqualified Equity," we may
issue additional notes from time to time under the Indenture. The Issuers will
issue notes in denominations of $1,000 and integral multiples of $1,000. The
notes will mature on June 1, 2011.
Interest on these notes will accrue at the rate of 8 1/2% per annum and
will be payable semi-annually in arrears on June 1 and December 1, commencing on
December 1, 2001. The Issuers will make each interest payment to the holders of
record of these notes on the immediately preceding May 15 and November 15.
Interest on these notes will accrue from the date of original issuance or,
if interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder has given wire transfer instructions to the Issuers, the
Issuers will make all payments of principal of, premium, if any, and interest
and Liquidated Damages, if any, on the notes in accordance with those
instructions. All other payments on these notes will be made at the office or
agency of the Paying Agent and Registrar within the City and State of New York,
unless the Issuers elect to make interest payments by check mailed to the
holders at their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. The Issuers
may change the Paying Agent or Registrar without prior notice to the holders of
the notes, and the Issuers or any of their Subsidiaries may act as Paying Agent
or Registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the Indenture.
The Registrar and the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any note
selected for redemption or repurchase (except in the case of a note to be
redeemed or repurchased in part, the portion not to be redeemed or repurchased).
Also, the Issuers are not required to transfer or exchange any note for a period
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of 15 days before a selection of notes to be redeemed or between a record date
and the next succeeding interest payment date.
The registered holder of a note will be treated as the owner of it for all
purposes.
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, and other Obligations on, the notes, including upon the
acceleration or redemption of the notes, will be subordinated to the prior
payment in full in cash of all Senior Debt of the Issuers.
The holders of Senior Debt of the Issuers and the holders of Guarantor
Senior Debt of the Subsidiary Guarantors will be entitled to receive payment in
full in cash of all Obligations due in respect of Senior Debt and Guarantor
Senior Debt (including interest after the commencement of any of the following
specified proceedings at the rate specified in the applicable Senior Debt,
whether or not such interest would be an allowed claim in such proceeding), as
applicable, before the holders of notes will be entitled to receive any payment
or distribution with respect to the notes (except that holders of notes may
receive and retain Permitted Junior Securities and payments made from the trust
described under "-- Legal Defeasance and Covenant Defeasance," provided that the
funding of such trust was permitted), in the event of any payment or
distribution to creditors of an Issuer:
(1) in a liquidation or dissolution of that Issuer;
(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to that Issuer or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshalling of that Issuer's assets and liabilities.
Neither of the Issuers may make any payment or distribution (whether by
redemption, purchase, defeasance or otherwise) in respect of the notes (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:
(1) a default in the payment of principal, premium or interest (and
other Obligations in the case of the Credit Facilities) on Designated
Senior Debt occurs and is continuing; or
(2) any other default occurs and is continuing on Designated Senior
Debt that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Issuers or the holders of any Designated Senior
Debt (or their representative).
Payments on the notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived and 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice unless such default shall have
been cured or waived for a period of not less than 120 days.
If the Trustee or any holder receives payment that violates the above, such
payment shall be held in trust by the Trustee or such holder for the benefit of,
and upon written request shall be paid to, the holder of Designated Senior Debt.
Holders of the notes shall have subrogation rights.
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The Issuers must promptly notify holders of Senior Debt if payment of the
notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of El Paso Energy Partners or El
Paso Finance, holders of these notes may recover less ratably than creditors of
the Issuers who are holders of Senior Debt. See "Risk Factors -- Risks Inherent
in an Investment in the Notes" beginning on page 16.
THE GUARANTEES
To the extent that any of our Restricted Subsidiaries guarantees any of our
indebtedness or any indebtedness of any other Restricted Subsidiary, such
guarantor will be required to guarantee our obligations under the notes and the
Indenture.
The Subsidiary Guarantors will jointly and severally guarantee the Issuers'
obligations under these notes. Each Guarantee and the related obligations will
be subordinated to the prior payment in full of all Senior Debt of that
Subsidiary Guarantor. The obligations of each Subsidiary Guarantor under its
Guarantee will be limited as necessary to prevent that Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors -- Risks Inherent in an Investment in the Notes" beginning on page 16.
The Obligations of each Subsidiary Guarantor with respect to the notes
under its Guarantee will be subordinated to its Guarantor Senior Debt on the
same basis as the notes are subordinated to Senior Debt.
No Subsidiary Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Guarantor Senior Debt of such Subsidiary Guarantor and
senior in any respect in right of payment to such Subsidiary Guarantor's
Guarantee.
A Subsidiary Guarantor may not consolidate with or merge with or into
(whether or not such Subsidiary Guarantor is the surviving Person), another
Person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
(2) the Person (if not otherwise a Subsidiary Guarantor) formed by or
surviving any such consolidation or merger assumes all the obligations of
that Subsidiary Guarantor pursuant to a supplemental indenture satisfactory
to the Trustee, except as provided in the next paragraph.
El Paso Energy Partners or any Subsidiary Guarantor, however, may be merged or
consolidated with or into any one or more Subsidiary Guarantors or El Paso
Energy Partners.
The Guarantee of a Subsidiary Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Subsidiary Guarantor (including by
way of merger or consolidation), if El Paso Energy Partners applies the Net
Proceeds of that sale or other disposition in accordance with the
applicable provisions of the Indenture; or
(2) in connection with any sale or other disposition of all of the
Equity Interests of a Subsidiary Guarantor, if El Paso Energy Partners
applies the Net Proceeds of that sale in accordance with the applicable
provisions of the Indenture applicable to Asset Sales; or
(3) if El Paso Energy Partners designates any Restricted Subsidiary
that is a Subsidiary Guarantor as an Unrestricted Subsidiary; or
(4) at such time as such Subsidiary Guarantor ceases to guarantee any
other Indebtedness of El Paso Energy Partners.
See "Repurchase at the Option of Holders -- Asset Sales" beginning on page 41.
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Any Restricted Subsidiary that guarantees Indebtedness of either of the
Issuers or any other Restricted Subsidiary at a time when it is not a Subsidiary
Guarantor shall execute a Guarantee.
OPTIONAL REDEMPTION
Prior to June 1, 2004, the Issuers may on any one or more occasions redeem
up to 33% of the aggregate principal amount of notes originally issued under the
Indenture at a redemption price of 108.500% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, to the
redemption date, with the net cash proceeds of one or more Equity Offerings.
However, at least 67% of the aggregate principal amount of notes must remain
outstanding immediately after the occurrence of such redemption (excluding notes
held by El Paso Energy Partners, El Paso Finance and our Restricted
Subsidiaries). Any redemption must occur within 90 days of the date of the
closing of such Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be
redeemable at the Issuers' option prior to June 1, 2006.
On or after June 1, 2006, the Issuers may redeem all or a part of these
notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon, if any, and Liquidated Damages, if any, to
the applicable redemption date, if redeemed during the 12-month period beginning
on June 1st of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2006...................................................... 104.250%
2007...................................................... 102.833%
2008...................................................... 101.417%
2009 and thereafter....................................... 100.000%
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the Trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of
the principal national securities exchange on which the notes are listed;
or
(2) if the notes are not so listed or there are no such requirements,
on a pro rata basis, by lot or by such method as the Trustee shall deem
fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest and
Liquidated Damages, if applicable, ceases to accrue on notes or portions of them
called for redemption unless the Issuers default in making such redemption
payment.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require the Issuers to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that holder's notes pursuant
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to the Change of Control Offer. In the Change of Control Offer, the Issuers will
offer a Change of Control Payment in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest thereon,
if any, and Liquidated Damages, if any, to the date of purchase (the "Change of
Control Payment"), subject to the rights of holders in whose name a note is
registered on a record date occurring prior to the Change of Control Payment
Date to receive interest on an interest payment date occurring after such Change
of Control Payment Date. Within 30 days following any Change of Control, the
Issuers will mail a notice to each holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
notes on the Change of Control Payment Date specified in such notice, pursuant
to the procedures required by the Indenture and described in such notice. The
Issuers will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the Trustee the notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions thereof being purchased by El Paso
Energy Partners.
The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuers will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Issuers will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of notes required by this covenant.
The provisions described above that require the Issuers to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the holder of the notes to require that the
Issuers repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
El Paso Energy Partners's outstanding Senior Debt currently prohibits El
Paso Energy Partners from purchasing any notes, and also provides that certain
change of control events with respect to El Paso Energy Partners would
constitute a default under the agreements governing the Senior Debt. Any future
credit agreements or other agreements relating to Senior Debt to which El Paso
Energy Partners becomes a party may contain similar restrictions and provisions.
Moreover, the exercise by the holders of their right to require the Issuers to
repurchase the notes could cause a default under such Senior Debt, even if the
Change of Control does not, due to the financial effect of such a repurchase on
El Paso Energy Partners. If a Change of Control occurs at a time when El Paso
Energy Partners is prohibited from purchasing notes, El Paso Energy Partners
could seek the consent of its senior lenders to the purchase of notes or could
attempt to refinance the borrowings that contain such prohibition. If El Paso
Energy Partners does not obtain such a consent or repay such borrowings, El Paso
Energy Partners will remain prohibited from purchasing notes. In such case, El
Paso Energy Partners's failure to purchase tendered notes would constitute an
Event of Default under the Indenture which would, in turn, in all likelihood
constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the Indenture
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would likely restrict payments to the holders of notes. Finally, the Issuers'
ability to pay cash to the holders upon a repurchase may be limited by El Paso
Energy Partners's then existing financial resources. We cannot assure you that
sufficient funds will be available when necessary to make any required
repurchases.
Notwithstanding the preceding paragraphs of this covenant, the Issuers will
not be required to make a Change of Control Offer upon a Change of Control and a
holder will not have the right to require the Issuers to repurchase any notes
pursuant to a Change of Control Offer if a third party makes an offer to
purchase the notes in the manner, at the times and otherwise in substantial
compliance with the requirements set forth in the Indenture applicable to a
Change of Control Offer and purchases all notes validly tendered and not
withdrawn under such purchase offer.
The definition of Change of Control includes a phrase relating to the sale,
transfer, lease, conveyance or other disposition of "all or substantially all"
of the assets of El Paso Energy Partners and its Subsidiaries taken as a whole.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
El Paso Energy Partners to repurchase such notes as a result of a sale,
transfer, lease, conveyance or other disposition of less than all of the assets
of El Paso Energy Partners and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Issuers will not, and will not permit any of El Paso Energy Partners's
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) El Paso Energy Partners (or the Restricted Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests issued or
sold or otherwise disposed of;
(2) such fair market value is determined by (a) an executive officer
of El Paso Energy Partners if the value is less than $10.0 million, as
evidence by an Officers' Certificate delivered to the Trustee or (b) the
Board of Directors of the General Partner if the value is $10.0 million or
more, as evidenced by a resolution of such Board of Directors of the
General Partner; and
(3) at least 75% of the consideration therefor received by El Paso
Energy Partners or such Restricted Subsidiary is in the form of cash or
Cash Equivalents. For purposes of this provision, each of the following
shall be deemed to be cash:
(a) any liabilities (as shown on the Issuer's or such Restricted
Subsidiary's most recent balance sheet) of El Paso Energy Partners or
any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the notes or any
Guarantee) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases El Paso Energy
Partners or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by El Paso
Energy Partners or any such Restricted Subsidiary from such transferee
that are within 90 days after the Asset Sale (subject to ordinary
settlement periods) converted by such Issuer or such Restricted
Subsidiary into cash (to the extent of the cash received in that
conversion).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
El Paso Energy Partners or a Restricted Subsidiary may apply (or enter into a
definitive agreement for such application within such 360-day period, provided
that such capital expenditure or purchase is closed within 90 days after the end
of such 360-day period) such Net Proceeds at its option:
(1) to repay Senior Debt of El Paso Energy Partners and/or its
Restricted Subsidiaries (or to make an offer to repurchase or redeem Senior
Debt, provided that such repurchase or redemption
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closes within 45 days after the end of such 360-day period) with a
permanent reduction in availability for any revolving credit Indebtedness;
(2) to make a capital expenditure in a Permitted Business;
(3) to acquire other long-term tangible assets that are used or useful
in a Permitted Business; or
(4) to invest in any other Permitted Business Investment or any other
Permitted Investments other than Investments in Cash Equivalents, Interest
Swaps or Currency Agreements.
Pending the final application of any such Net Proceeds, we may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Issuers will make
a pro rata offer (an "Asset Sale Offer") to all holders of notes and all holders
of other Indebtedness that is pari passu with the notes containing provisions
similar to those set forth in the Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum principal
amount of notes and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to
100% of principal amount plus accrued and unpaid interest (including any
Liquidated Damages in the case of the notes), if any, and premium, if any, to
the date of purchase, and will be payable in cash. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, El Paso Energy Partners may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture,
including, without limitation, the repurchase or redemption of Indebtedness of
the Issuers or any Subsidiary Guarantor that is subordinated to the notes or, in
the case of any Subsidiary Guarantor, the Guarantee of such Subsidiary
Guarantor. If the aggregate principal amount of notes tendered into such Asset
Sale Offer exceeds the amount of Excess Proceeds allocated for repurchases of
notes pursuant to the Asset Sale Offer for notes, the Trustee shall select the
notes to be purchased on a pro rata basis. Upon completion of each Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
The term Asset Sale excludes:
(1) any transaction whereby assets or properties (including (a)
ownership interests in any Subsidiary or Joint Venture and (b) in the case
of an exchange or contribution for tangible assets, up to 25% in the form
of cash, Cash Equivalents, accounts receivable or other current assets),
owned by El Paso Energy Partners or a Restricted Subsidiary are exchanged
or contributed for the Equity Interests of a Joint Venture or Unrestricted
Subsidiary in a transaction that satisfies the requirements of a Permitted
Business Investment or for other assets (not more than 25% of which
consists of cash, Cash Equivalents, accounts receivables or other current
assets) or properties (including interests in any Subsidiary or Joint
Venture) so long as (i) the fair market value of the assets or properties
(if other than a Permitted Business Investment) received are substantially
equivalent to the fair market value of the assets or properties given up,
and (ii) any cash received in such exchange or contribution by El Paso
Energy Partners or any Restricted Subsidiary is applied in accordance with
the foregoing "-- Asset Sales" provision;
(2) any sale, transfer or other disposition of cash or Cash
Equivalents;
(3) any sale, transfer or other disposition of Restricted Investments;
and
(4) any sale, transfer or other disposition of interests in oil and
gas leaseholds (including, without limitation, by abandonment, farm-ins,
farm-outs, leases, swaps and subleases), hydrocarbons and other mineral
products in the ordinary course of business of the oil and gas operations
conducted by El Paso Energy Partners or any Restricted Subsidiary, which
sale, transfer or other disposition is made by El Paso Energy Partners or
any Restricted Subsidiary.
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COVENANTS
Restricted Payments
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of El Paso Energy Partners's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving El
Paso Energy Partners or any of its Restricted Subsidiaries) or to the
direct or indirect holders of El Paso Energy Partners's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other
than distributions or dividends payable in Equity Interests of El Paso
Energy Partners (other than Disqualified Equity) and other than
distributions or dividends payable to El Paso Energy Partners or a
Restricted Subsidiary);
(2) except to the extent permitted in clause (4) below, purchase,
redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving an
Issuer) any Equity Interests of El Paso Energy Partners or any of its
Restricted Subsidiaries (other than any such Equity Interests owned by El
Paso Energy Partners or any of its Restricted Subsidiaries);
(3) except to the extent permitted in clause (4) below, make any
payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is pari passu with or
subordinated to the notes or the Guarantees (other than the notes or the
Guarantees), except (a) a payment of interest or principal at the Stated
Maturity thereof, (b) a purchase, redemption, acquisition or retirement
required to be made pursuant to the terms of such Indebtedness (including
pursuant to an asset sale or change of control provision) and (c) any such
Indebtedness of El Paso Energy Partners or a Restricted Subsidiary owned by
El Paso Energy Partners or a Restricted Subsidiary; or
(4) make any Investment other than a Permitted Investment or a
Permitted Business Investment (all such payments and other actions set
forth in clauses (1) through (4) above being collectively referred to as
"Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment, no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof and either:
(1) if the Fixed Charge Coverage Ratio for El Paso Energy Partners's
four most recent fiscal quarters for which internal financial statements
are available is not less than 2.0 to 1.0, such Restricted Payment,
together with the aggregate amount of all other Restricted Payments made by
El Paso Energy Partners and its Restricted Subsidiaries during the quarter
in which such Restricted Payment is made, is less than the sum, without
duplication, of:
(a) Available Cash constituting Cash from Operations as of the end
of the immediately preceding quarter, plus
(b) the aggregate net cash proceeds of any (i) substantially
concurrent capital contribution to El Paso Energy Partners from any
Person (other than a Restricted Subsidiary of El Paso Energy Partners)
made after the Issue Date, (ii) substantially concurrent issuance and
sale made after the Issue Date of Equity Interests (other than
Disqualified Equity) of El Paso Energy Partners or from the issuance or
sale made after the Issue Date of convertible or exchangeable
Disqualified Equity or convertible or exchangeable debt securities of El
Paso Energy Partners that have been converted into or exchanged for such
Equity Interests (other than Disqualified Equity), (iii) to the extent
that any Restricted Investment that was made after the Issue Date is
sold for cash or Cash Equivalents or otherwise liquidated or repaid for
cash or Cash Equivalents, the lesser of the refund of capital or similar
payment made in cash or Cash Equivalents with respect to such Restricted
Investment (less the cost of such disposition, if any) and the initial
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amount of such Restricted Investment (other than to a Restricted
Subsidiary of El Paso Energy Partners), plus
(c) the net reduction in Investments in Restricted Investments
resulting from dividends, repayments of loans or advances, or other
transfers of assets in each case to El Paso Energy Partners or any of
its Restricted Subsidiaries from any Person (including, without
limitation, Unrestricted Subsidiaries) or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries, to the extent such
amounts have not been included in Available Cash constituting Cash from
Operations for any period commencing on or after the Issue Date (items
(b) and (c) being referred to as "Incremental Funds"), minus
(d) the aggregate amount of Incremental Funds previously expended
pursuant to this clause (1) or clause (2) below; or
(2) if the Fixed Charge Coverage Ratio for El Paso Energy Partners's
four most recent fiscal quarters for which internal financial statements
are available is less than 2.0 to 1.0, such Restricted Payment, together
with the aggregate amount of all other Restricted Payments made by El Paso
Energy Partners and its Restricted Subsidiaries during the quarter in which
such Restricted Payment is made, is less than the sum, without duplication,
of:
(a) $60.0 million less the aggregate amount of all Restricted
Payments made by El Paso Energy Partners and its Restricted Subsidiaries
pursuant to this clause (2)(a) during the period ending on the last day
of the fiscal quarter of El Paso Energy Partners immediately preceding
the date of such Restricted Payment and beginning on the Issue Date,
plus
(b) Incremental Funds to the extent not previously expended
pursuant to this clause (2) or clause (1) above.
For purposes of clauses (1) and (2) above, the term "substantially concurrent"
means that either (x) the offering was consummated within 120 days of the date
of determination or (y) the offering was consummated within 24 months of the
date of determination and the proceeds therefrom were used for the purposes
expressly stated in the documents related thereto and may be traced to such use
by segregating, separating or otherwise specifically identifying the movement of
such proceeds.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment by El Paso Energy Partners or any Restricted
Subsidiary of any distribution or dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness of El Paso
Energy Partners or any of its Restricted Subsidiaries or of any Equity
Interests of El Paso Energy Partners or any of its Restricted Subsidiaries
in exchange for, or out of the net cash proceeds of, a substantially
concurrent (a) capital contribution to El Paso Energy Partners or such
Restricted Subsidiary from any Person (other than El Paso Energy Partners
or another Restricted Subsidiary) or (b) sale (a sale will be deemed
substantially concurrent if such redemption, repurchase, retirement,
defeasance or acquisition occurs not more than 120 days after such sale)
(other than to a Restricted Subsidiary of El Paso Energy Partners) of (i)
Equity Interests (other than Disqualified Equity) of El Paso Energy
Partners or such Restricted Subsidiary or (ii) Indebtedness that is
subordinated to the notes or the Guarantees, provided that such new
subordinated Indebtedness with respect to the redemption, repurchase,
retirement, defeasance or other acquisition of pari passu or subordinated
Indebtedness (W) is subordinated to the same extent as such refinanced
subordinated Indebtedness, (X) has a Weighted Average Life to Maturity of
at least the remaining Weighted Average Life to Maturity of the refinanced
subordinated Indebtedness, (Y) is for the same principal amount as either
such refinanced subordinated Indebtedness plus original issue discount to
the extent not reflected therein or the redemption or purchase price of
such
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Equity Interests (plus reasonable expenses of refinancing and any premiums
paid on such refinanced subordinated Indebtedness) and (Z) is incurred by
El Paso Energy Partners or the Restricted Subsidiary that is the obligor on
the Indebtedness so refinanced or the issuer of the Equity Interests so
redeemed, repurchased or retired; provided, however, that the amount of any
net cash proceeds that are utilized for any such redemption, repurchase or
other acquisition or retirement shall be excluded or deducted from the
calculation of Available Cash and Incremental Funds;
(3) the defeasance, redemption, repurchase or other acquisition of
pari passu or subordinated Indebtedness of El Paso Energy Partners or any
Restricted Subsidiary with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) the payment of any distribution or dividend by a Restricted
Subsidiary to El Paso Energy Partners or to the holders of its Equity
Interests (other than Disqualified Equity) on a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of El Paso Energy Partners or any Restricted
Subsidiary of El Paso Energy Partners held by any member of the General
Partner's or El Paso Energy Partners's or any Restricted Subsidiary's
management pursuant to any management equity subscription agreement or
stock option agreement or to satisfy obligations under any Equity Interests
appreciation rights or option plan or similar arrangement; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $5.0 million in any 12-month
period; and
(6) any payment by El Paso Energy Partners pursuant to section 3.1(b)
of the Management Agreement to compensate for certain tax liabilities
resulting from certain allocated income.
In computing the amount of Restricted Payments previously made for purposes of
the immediately preceding paragraph, Restricted Payments made under clauses (1)
(but only if the declaration of such dividend or other distribution has not been
counted in a prior period) and, to the extent of amounts paid to holders other
than El Paso Energy Partners or a Restricted Subsidiary, (4) of this paragraph
shall be included, and Restricted Payments made under clauses (2), (3), (5) and
(6) and, except to the extent noted above, (4) of this paragraph shall not be
included. The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by El Paso Energy Partners or
such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that are required to
be valued by this covenant shall be determined by the Board of Directors of the
General Partner whose resolution with respect thereto shall be delivered to the
Trustee.
Incurrence of Indebtedness and Issuance of Disqualified Equity
El Paso Energy Partners will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and El Paso Energy Partners will not issue any Disqualified Equity and
will not permit any of its Restricted Subsidiaries to issue any Disqualified
Equity; provided, however, that El Paso Energy Partners and any Restricted
Subsidiary may incur Indebtedness (including Acquired Debt), and El Paso Energy
Partners and the Restricted Subsidiaries may issue Disqualified Equity, if the
Fixed Charge Coverage Ratio for El Paso Energy Partners's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Equity is issued would have been at least 2.25 to 1.0,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Equity had been issued, as the case may be, at the beginning of
such four-quarter period.
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So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by El Paso Energy Partners and any Restricted
Subsidiary of the Indebtedness under Credit Facilities and the guarantees
thereof; provided that the aggregate principal amount of all Indebtedness
of El Paso Energy Partners and the Restricted Subsidiaries outstanding
under all Credit Facilities after giving effect to such incurrence does not
exceed $600.0 million less the aggregate amount of all repayments of
Indebtedness under a Credit Facility that have been made by El Paso Energy
Partners or any of its Restricted Subsidiaries in respect of Asset Sales to
the extent such repayments constitute a permanent reduction of commitments
under such Credit Facility;
(2) the incurrence by El Paso Energy Partners and its Restricted
Subsidiaries of Existing Indebtedness;
(3) the incurrence by El Paso Energy Partners and the Subsidiary
Guarantors of Indebtedness represented by the notes and the Guarantees and
the related Obligations;
(4) the incurrence by El Paso Energy Partners or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of El Paso Energy Partners or such Restricted Subsidiary, in an
aggregate principal amount not to exceed $20.0 million at any time
outstanding;
(5) the incurrence by El Paso Energy Partners or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace,
Indebtedness (other than intercompany Indebtedness) that was not incurred
in violation of the Indenture;
(6) the incurrence by El Paso Energy Partners or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among El Paso Energy
Partners and any of its Restricted Subsidiaries; provided, however, that:
(a) if El Paso Energy Partners or any Subsidiary Guarantor is the
obligor on such Indebtedness, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to the notes, in the case of El Paso Energy Partners, or
the Guarantee of such Subsidiary Guarantor, in the case of a Subsidiary
Guarantor, and
(b)(i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than El
Paso Energy Partners or a Restricted Subsidiary thereof and (ii) any
sale or other transfer of any such Indebtedness to a Person that is not
either El Paso Energy Partners or a Restricted Subsidiary thereof, shall
be deemed, in each case, to constitute an incurrence of such
Indebtedness by El Paso Energy Partners or such Restricted Subsidiary,
as the case may be, that was not permitted by this clause (6);
(7) the incurrence by El Paso Energy Partners or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging foreign currency exchange rate risk of El Paso Energy
Partners or any Restricted Subsidiary or interest rate risk with respect to
any floating rate Indebtedness of El Paso Energy Partners or any Restricted
Subsidiary that is permitted by the terms of this Indenture to be
outstanding or commodities pricing risks of El Paso Energy Partners or any
Restricted Subsidiary in respect of hydrocarbon production from properties
in which El Paso Energy Partners or any of its Restricted Subsidiaries owns
an interest;
(8) the guarantee by El Paso Energy Partners or any of the Restricted
Subsidiaries of Indebtedness of El Paso Energy Partners or a Restricted
Subsidiary that was permitted to be incurred by another provision of this
covenant;
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(9) bid, performance, surety and appeal bonds in the ordinary course
of business, including guarantees and standby letters of credit supporting
such obligations, to the extent not drawn;
(10) the incurrence by El Paso Energy Partners or any of its
Restricted Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (10), not to exceed $20.0 million;
(11) the incurrence by El Paso Energy Partners's Unrestricted
Subsidiaries of Non-Recourse Debt; provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary,
such event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of El Paso Energy Partners that was not permitted by
this clause (11);
(12) the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Equity, in the form of additional shares of the same class
of Disqualified Equity, provided, in each such case, that the amount
thereof is included in Fixed Charges of El Paso Energy Partners as so
accrued, accredited or amortized; and
(13) Indebtedness incurred by El Paso Energy Partners or any of its
Restricted Subsidiaries arising from agreements or their respective bylaws
providing for indemnification, adjustment of purchase price or similar
obligations.
For purposes of determining compliance with this "-- Incurrence of
Indebtedness and Issuance of Disqualified Equity" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (13) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant, El
Paso Energy Partners will be permitted to classify such item of Indebtedness in
any manner that complies with this covenant. An item of Indebtedness may be
divided and classified in one or more of the types of Permitted Indebtedness.
Limitation on Layering
The Issuers will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of either Issuer and senior in any respect in right
of payment to the notes. No Subsidiary Guarantor will incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt of such Subsidiary
Guarantor and senior in any respect in right of payment to such Subsidiary
Guarantor's Guarantee.
Liens
El Paso Energy Partners will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness, Attributable Debt or trade
payables on any asset now owned or hereafter acquired, except Permitted Liens,
without making effective provision whereby all Obligations due under the notes
and Indenture or any Guarantee, as applicable, will be secured by a Lien equally
and ratably with any and all Obligations thereby secured for so long as any such
Obligations shall be so secured.
Dividend and Other Payment Restrictions Affecting Subsidiaries
El Paso Energy Partners will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Equity
Interests to El Paso Energy Partners or any of El Paso Energy Partners's
Restricted Subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any indebtedness owed
to El Paso Energy Partners or any of the other Restricted Subsidiaries;
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(2) make loans or advances to or make other investments in El Paso
Energy Partners or any of the other Restricted Subsidiaries; or
(3) transfer any of its properties or assets to El Paso Energy
Partners or any of the other Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) agreements as in effect on the Issue Date and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings of any such agreements or any Existing
Indebtedness to which such agreement relates, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as
a whole, with respect to such distribution, dividend and other payment
restrictions and loan or investment restrictions than those contained in
such agreement, as in effect on the date of the Indenture;
(2) the Partnership Credit Facility and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive, taken as a whole, with respect to
such distribution, dividend and other payment restrictions and loan or
investment restrictions than those contained in such Credit Facility as in
effect on the date of the Indenture;
(3) the Indenture, the notes and the Guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Equity Interests of a
Person acquired by El Paso Energy Partners or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the
extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than such Person, or the property or assets of such Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted
by the terms of the Indenture to be incurred;
(6) customary non-assignment provisions in licenses and leases entered
into in the ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(8) any agreement for the sale or other disposition of a Restricted
Subsidiary that contains any one or more of the restrictions described in
clauses (1) through (3) of the preceding paragraph by such Restricted
Subsidiary pending its sale or other disposition, provided that such sale
or disposition is consummated, or such restrictions are canceled or
terminated or lapse, within 90 days;
(9) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(10) Liens securing Indebtedness otherwise permitted to be issued
pursuant to the provisions of the covenant described above under the
caption "-- Liens" that limit the right of El Paso Energy Partners or any
of its Restricted Subsidiaries to dispose of the assets subject to such
Lien;
(11) any agreement or instrument relating to any property or assets
acquired after the Issue Date, so long as such encumbrance or restriction
relates only to the property or assets so acquired and is not and was not
created in anticipation of such acquisitions;
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(12) any agreement or instrument relating to any Acquired Debt of any
Restricted Subsidiary at the date on which such Restricted Subsidiary was
acquired by El Paso Energy Partners or any Restricted Subsidiary (other
than Indebtedness incurred in anticipation of such acquisition and provided
such encumbrances or restrictions extend only to property of such acquired
Restricted Subsidiary);
(13) any agreement or instrument governing Indebtedness permitted to
be incurred under the Indenture, provided that the terms and conditions of
any such restrictions and encumbrances, taken as a whole, are not
materially more restrictive than those contained in the Indenture, taken as
a whole;
(14) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements, including clawback, "make-well" or "keep-well" agreements, to
maintain financial performance or results of operations of a joint venture
entered into in the ordinary course of business; and
(15) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation, or Sale of Assets
Neither of the Issuers may, directly or indirectly: (1) consolidate or
merge with or into another Person (whether or not such Issuer is the survivor);
or (2) sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either: (a) such Issuer is the surviving entity of such
transaction; or (b) the Person formed by or surviving any such
consolidation or merger (if other than such Issuer) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have
been made is an entity organized or existing under the laws of the United
States, any state thereof or the District of Columbia, provided that El
Paso Finance may not consolidate or merge with or into any entity other
than a corporation satisfying such requirement for so long as El Paso
Energy Partners remains a partnership;
(2) the Person formed by or surviving any such consolidation or merger
(if other than such Issuer) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made
expressly assumes all the obligations of such Issuer under the notes and
the Indenture pursuant to agreements reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) such Issuer or the Person formed by or surviving any such
consolidation or merger (if other than such Issuer):
(a) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of such
Issuer immediately preceding the transaction; and
(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Disqualified Equity;" provided, however,
that this clause (b) shall be suspended during any period in which we
and our Restricted Subsidiaries are not subject to the Suspended
Covenants.
(5) such Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger or
transfer and, if a supplemental indenture is required, such supplemental
indenture comply with the Indenture and all conditions precedent therein
relating to such transaction have been satisfied.
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Notwithstanding the foregoing paragraph, El Paso Energy Partners is
permitted to reorganize as any other form of entity in accordance with the
procedures established in the Indenture; provided that:
(1) the reorganization involves the conversion (by merger, sale,
contribution or exchange of assets or otherwise) of El Paso Energy Partners
into a form of entity other than a limited partnership formed under
Delaware law;
(2) the entity so formed by or resulting from such reorganization is
an entity organized or existing under the laws of the United States, any
state thereof or the District of Columbia;
(3) the entity so formed by or resulting from such reorganization
assumes all the obligations of El Paso Energy Partners under the notes and
the Indenture pursuant to agreements reasonably satisfactory to the
Trustee;
(4) immediately after such reorganization no Default or Event of
Default exists; and
(5) such reorganization is not adverse to the holders of the notes
(for purposes of this clause (5) it is stipulated that such reorganization
shall not be considered adverse to the holders of the notes solely because
the successor or survivor of such reorganization (i) is subject to federal
or state income taxation as an entity or (ii) is considered to be an
"includible corporation" of an affiliated group of corporations within the
meaning of Section 1504(b)(i) of the Code or any similar state or local
law).
The "Merger, Consolidation, or Sale of Assets" covenant described in the
first paragraph of this section will not apply to a merger or consolidation, or
any sale, assignment, transfer, lease, conveyance or other disposition of assets
between or among El Paso Energy Partners and any of its Restricted Subsidiaries.
No Subsidiary Guarantor may consolidate with or merge with or into (whether
or not such Subsidiary Guarantor is the surviving Person) another Person,
whether or not affiliated with such Subsidiary Guarantor, but excluding El Paso
Energy Partners or another Subsidiary Guarantor, unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Subsidiary Guarantor) assumes
all the obligations of such Subsidiary Guarantor pursuant to the Subsidiary
Guarantor's Guarantee of the notes and the Indenture pursuant to a supplemental
indenture and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists. Any Subsidiary Guarantor may be merged or
consolidated with or into any one or more Subsidiary Guarantors.
In the event of a sale or other disposition of all or substantially all of
the assets of any Subsidiary Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all or substantially all of the
Equity Interests of any Subsidiary Guarantor, then such Subsidiary Guarantor (in
the event of a sale or other disposition, by way of such a merger, consolidation
or otherwise, of all of the Equity Interests of such Subsidiary Guarantor) or
the Person acquiring the property (in the event of a sale or other disposition
of all or substantially all of the assets of such Subsidiary Guarantor) will be
released and relieved of any obligations under its Guarantee; provided that the
transaction complies with the provisions set forth under "Asset Sales."
Transactions with Affiliates
El Paso Energy Partners will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to El Paso Energy Partners or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by El Paso Energy
Partners or such Restricted Subsidiary with an unrelated Person; and
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(2) El Paso Energy Partners delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million but less than or equal to $25.0 million, an Officers'
Certificate certifying that such Affiliate Transaction complies with
this covenant and that such Affiliate Transaction has been approved
(either pursuant to specific or general resolutions) by the Board of
Directors of the General Partner or has been approved by an officer
pursuant to a delegation (specific or general) of authority from the
Board of Directors of the General Partner; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$25.0 million, (A) a resolution of the Board of Directors of the General
Partner set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the General Partner
and (B) either (I) an opinion as to the fairness to El Paso Energy
Partners of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of
national standing recognized as an expert in rendering fairness opinions
on transactions such as those proposed, (II) with respect to assets
classified, in accordance with GAAP, as property, plant and equipment on
El Paso Energy Partners's or such Restricted Subsidiary's balance sheet,
a written appraisal from a nationally recognized appraiser showing the
assets have a fair market value not less than the consideration to be
paid (provided that if the fair market value determined by such
appraiser is a range of values or otherwise inexact, the Board of
Directors of the General Partner shall determine the exact fair market
value, provided that it shall be within the range so determined by the
appraiser), (III) in the case of gathering, transportation, marketing,
hedging, production handling, operating, construction, storage, platform
use, or other operational contracts, any such contracts are entered into
in the ordinary course of business on terms substantially similar to
those contained in similar contracts entered into by El Paso Energy
Partners or any Restricted Subsidiary and third parties or, if none of
El Paso Energy Partners or any Restricted Subsidiary has entered into a
similar contract with a third party, that the terms are no less
favorable than those available from third parties on an arm's-length
basis, as determined by the Board of Directors of the General Partner or
(IV) in the case of any transaction between El Paso Energy Partners or
any of its Restricted Subsidiaries and any Affiliate thereof in which El
Paso Energy Partners beneficially owns 50% or less of the Voting Stock
and one or more Persons not Affiliated with El Paso Energy Partners
beneficially own (together) a percentage of Voting Stock at least equal
to the interest in Voting Stock of such Affiliate beneficially owned by
El Paso Energy Partners, a resolution of the Board of Directors of the
General Partner set forth in the Officers' Certificate certifying that
such Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the General Partner.
Even though a particular Affiliate Transaction or series of Affiliate
Transactions may be covered by two or more of clauses (I) through (IV)
above, the compliance with any one of such applicable clauses shall be
satisfactory.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) transactions pursuant to the Management Agreement as in effect on
the date hereof,
(2) any employment, equity option or equity appreciation agreement or
plan entered into by El Paso Energy Partners or any of its Restricted
Subsidiaries in the ordinary course of business and, as applicable,
consistent with the past practice of El Paso Energy Partners or such
Restricted Subsidiary;
(3) transactions between or among El Paso Energy Partners and/or its
Restricted Subsidiaries;
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(4) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments;"
(5) transactions effected in accordance with the terms of agreements
as in effect on the Issue Date;
(6) customary compensation, indemnification and other benefits made
available to officers, directors or employees of El Paso Energy Partners or
a Restricted Subsidiary, including reimbursement or advancement of
out-of-pocket expenses and provisions of officers' and directors' liability
insurance; and
(7) loans to officers and employees made in the ordinary course of
business in an aggregate amount not to exceed $1.0 million at any one time
outstanding.
Additional Subsidiary Guarantees
If El Paso Energy Partners or any of its Restricted Subsidiaries acquires
or creates another Restricted Subsidiary after the date of the Indenture that
guarantees any Indebtedness of either of the Issuers, then that newly acquired
or created Restricted Subsidiary must become a Subsidiary Guarantor and execute
a supplemental indenture satisfactory to the Trustee and deliver an Opinion of
Counsel to the Trustee within 10 Business Days of the date on which it was
acquired or created. If a Restricted Subsidiary that is not then a Subsidiary
Guarantor guarantees Indebtedness of either of the Issuers or any other
Restricted Subsidiary, such Restricted Subsidiary shall execute and deliver a
Guarantee. El Paso Energy Partners will not permit any of its Restricted
Subsidiaries, directly or indirectly, to guarantee or pledge any assets to
secure the payment of any other Indebtedness of either Issuer unless such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture providing for the guarantee of the payment of the notes by such
Restricted Subsidiary, which guarantee shall be senior to or pari passu with
such Restricted Subsidiary's guarantee of or pledge to secure such other
Indebtedness, unless such other Indebtedness is Senior Debt, in which case the
guarantee of the notes may be subordinated to the guarantee of such Senior Debt
to the same extent as the notes are subordinated to such Senior Debt.
Notwithstanding the foregoing, any Guarantee of a Restricted Subsidiary that was
incurred pursuant to this paragraph shall provide by its terms that it shall be
automatically and unconditionally released upon the release or discharge of the
guarantee which resulted in the creation of such Restricted Subsidiary's
Subsidiary Guarantee, except a discharge or release by, or as a result of
payment under, such guarantee.
Designation of Restricted and Unrestricted Subsidiaries
The General Partner may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default or Event
of Default. If a Restricted Subsidiary is designated as an Unrestricted
Subsidiary, all outstanding Investments owned by El Paso Energy Partners and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the amount
available for Restricted Payments under the first paragraph of the covenant
described above under the caption "-- Restricted Payments," for Permitted
Investments or for Permitted Business Investments, as applicable. All such
outstanding Investments will be valued at their fair market value at the time of
such designation. That designation will only be permitted if such Restricted
Payment, Permitted Investments or Permitted Business Investments would be
permitted at that time and such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary. All Subsidiaries of an Unrestricted
Subsidiary shall be also Unrestricted Subsidiaries. The Board of Directors of
the General Partner may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if a Default or Event of Default is not continuing, the
redesignation would not cause a Default or Event of Default and provided that,
if at the time of such designation such Subsidiary is a Subsidiary Guarantor,
after giving effect to such designation, El Paso Energy Partners and its
remaining Restricted Subsidiaries could incur at least $1.00 of additional
Indebtedness under the limitation on indebtedness included in the first
paragraph under the caption "Incurrence of Indebtedness and Issuance of
Disqualified Equity" above. A Subsidiary may not be designated as an
Unrestricted Subsidiary unless at the time of such designation,
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(x) it has no Indebtedness other than Non-Recourse Debt; (y) no portion of the
Indebtedness or any other obligation of such Subsidiary (whether contingent or
otherwise and whether pursuant to the terms of such Indebtedness or the terms
governing the organization and operation of such Subsidiary or by law) (A) is
guaranteed by El Paso Energy Partners or any other Restricted Subsidiary, except
as such Indebtedness is permitted by the covenants under "-- Restricted
Payments" and "-- Incurrence of Indebtedness and Issuance of Disqualified
Equity" above, (B) is recourse to or obligates El Paso Energy Partners or any
Restricted Subsidiary in any way (including any "claw-back," "keep-well" or
"make-well" agreements or other agreements, arrangements or understandings to
maintain the financial performance or results of operations of such Subsidiary,
except as such Indebtedness or Investment is permitted by the covenants
captioned "-- Incurrence of Indebtedness and Issuance of Disqualified Equity"
and "-- Restricted Payments") or (C) subjects any property or assets of El Paso
Energy Partners or any Restricted Subsidiary, directly or indirectly,
contingently or otherwise, to the satisfaction thereof; and (z) no Equity
Interests of a Restricted Subsidiary are held by such Subsidiary, directly or
indirectly. Upon the designation of a Restricted Subsidiary that is a Subsidiary
Guarantor as an Unrestricted Subsidiary, the Guarantee of such entity shall be
released.
Sale and Lease-Back Transactions
El Paso Energy Partners will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and lease-back transaction; provided that
El Paso Energy Partners or any Restricted Subsidiary that is a Subsidiary
Guarantor may enter into a sale and lease-back transaction if:
(1) El Paso Energy Partners or that Subsidiary Guarantor, as
applicable, could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and lease-back transaction under
the Fixed Charge Coverage Ratio test in the first paragraph of the covenant
described above under the caption "-- Incurrence of Additional Indebtedness
and Issuance of Disqualified Equity," and (b) incurred a Lien to secure
such Indebtedness pursuant to the covenant described above under the
caption "-- Liens;" provided, however, that clause (a) of this clause (1)
shall be suspended during any period in which we and our Restricted
Subsidiaries are not subject to the Suspended Covenants;
(2) the gross cash proceeds of that sale and lease-back transaction
are at least equal to the fair market value, as determined in good faith by
the Board of Directors of the General Partner, of the property that is the
subject of such sale and lease-back transaction; and
(3) the transfer of assets in that sale and lease-back transaction is
permitted by, and El Paso Energy Partners applies the proceeds of such
transaction in compliance with, the covenant described above under the
caption "-- Repurchase at the Option of Holders -- Asset Sales."
Business Activities
El Paso Energy Partners will not, and will not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses.
Payments for Consent
El Paso Energy Partners will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any holder of notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the notes unless such consideration is offered to be paid
and is paid to all holders of the notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
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Reports
Whether or not required by the SEC, so long as any notes are outstanding,
El Paso Energy Partners will file with the SEC (unless the SEC will not accept
such a filing) within the time periods specified in the SEC's rules and
regulations, and upon request, El Paso Energy Partners will furnish (without
exhibits) to the Trustee for delivery to the holders of the notes:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
El Paso Energy Partners were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by El Paso Energy Partners's certified
independent accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if El Paso Energy Partners were required to file such
reports.
If as of the end of any such quarterly or annual period El Paso Energy
Partners has designated any of its Subsidiaries as Unrestricted Subsidiaries or
if El Paso Energy Partners owns more than 50% of Deepwater Holdings, but such
entity or any of its Subsidiaries still is designated as a Joint Venture, then
El Paso Energy Partners shall deliver (promptly after such SEC filing referred
to in the preceding paragraph) to the Trustee for delivery to the holders of the
notes quarterly and annual financial information required by the preceding
paragraph as revised to include a reasonably detailed presentation, either on
the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of El Paso
Energy Partners and its Restricted Subsidiaries separate from the financial
condition and results of operations of the Unrestricted Subsidiaries and the
designated Joint Ventures of El Paso Energy Partners.
In addition, whether or not required by the SEC, El Paso Energy Partners
will make such information available to securities analysts, investors and
prospective investors upon request.
SUSPENDED COVENANTS
During any period when the notes have an Investment Grade Rating from both
Rating Agencies and no Default has occurred and is continuing under the
Indenture, we and our Restricted Subsidiaries will not be subject to the
provisions of the Indenture described above under the following headings under
the caption "-- Covenants":
- "-- Incurrence of Indebtedness and Issuance of Disqualified Equity,"
- "-- Restricted Payments,"
- "-- Dividend and Other Payment Restrictions Affecting Subsidiaries,"
- "-- Asset Sales,"
- "-- Transactions with Affiliates,"
- "-- Sale -- Leaseback Transactions" (only to the extent set forth in that
covenant), and
- "-- Merger, Consolidation, or Sale of Assets" (only to the extent set
forth in that covenant)
(collectively, the "Suspended Covenants"); provided, however, that the
provisions of the Indenture described above under the caption "-- Change of
Control," and described below under the following headings:
- "-- Liens,"
- "-- Additional Subsidiary Guarantees,"
- "-- Reports"
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- "-- Business Activities,"
- "-- Payments for Consent," and
- "-- Limitation on Layering"
will not be so suspended; and provided further, that if we and our Restricted
Subsidiaries are not subject to the Suspended Covenants for any period of time
as a result of the preceding portion of this sentence and, subsequently, either
of the Rating Agencies withdraws its ratings or downgrades the ratings assigned
to the notes below the Investment Grade Ratings so that the notes do not have an
Investment Grade Rating from both Rating Agencies, or a Default (other than with
respect to the Suspended Covenants) occurs and is continuing, we and our
Restricted Subsidiaries will thereafter again be subject to the Suspended
Covenants, subject to the terms, conditions and obligations set forth in the
Indenture (each such date of reinstatement being the "Reinstatement Date").
Compliance with the Suspended Covenants with respect to Restricted Payments made
after the Reinstatement Date will be calculated in accordance with the terms of
the covenant described under "-- Restricted Payments" as though such covenants
had been in effect during the entire period of time from which the notes are
issued. As a result, during any period in which we and our Restricted
Subsidiaries are not subject to the Suspended Covenants, the notes will be
entitled to substantially reduced covenant protection.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the notes, whether or not prohibited by
the subordination provisions of the Indenture;
(2) default in payment when due of the principal of or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the Indenture;
(3) failure by El Paso Energy Partners or any of its Subsidiaries to
comply with the provisions described under the captions "-- Change of
Control" or "-- Asset Sales."
(4) failure by El Paso Energy Partners or any of its Restricted
Subsidiaries for 60 days after notice to comply with any of the other
agreements in the Indenture (provided that notice need not be given, and an
Event of Default shall occur, 60 days after any breach of the covenants
under "-- Covenants -- Restricted Payments," "-- Covenants -- Incurrence of
Indebtedness and Issuance of Disqualified Equity" and "-- Merger,
Consolidation or Sale of Assets");
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by an Issuer or any of El Paso Energy
Partners's Restricted Subsidiaries (or the payment of which is guaranteed
by El Paso Energy Partners or any of its Restricted Subsidiaries), whether
such Indebtedness or guarantee now exists or is created after the date of
the Indenture, if that default:
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $20.0 million or more;
(6) failure by an Issuer or any of El Paso Energy Partners's
Restricted Subsidiaries to pay final judgments aggregating in excess of
$10.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days;
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(7) except as permitted by the Indenture, any Guarantee shall be held
in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in force and effect or any Subsidiary Guarantor, or
any Person acting on behalf of any Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to El Paso
Energy Partners or any of its Restricted Subsidiaries that is a Significant
Subsidiary or any group of Restricted Subsidiaries that, taken together,
would constitute a Significant Subsidiary.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuers, all outstanding notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately. Notwithstanding the foregoing, so
long as any Credit Facility shall be in full force and effect, if an Event of
Default pursuant to clause (5) above with regard to such Credit Facility shall
have occurred and be continuing, the notes shall not become due and payable
until the earlier to occur of (x) five business days following delivery of
written notice of such acceleration of the notes to the agent under such Credit
Facility and (y) the acceleration of any Indebtedness under such Credit
Facility.
Holders of the notes may not enforce the Indenture or the notes except as
provided in the Indenture. Subject to certain limitations, holders of a majority
in principal amount of the then outstanding notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from holders of the
notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The holder of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest (or Liquidated Damages, if any) on, or the principal of, the notes.
The Issuers and the Subsidiary Guarantors are required to deliver to the
Trustee annually a statement regarding compliance with the Indenture. Upon any
officer of the General Partner or El Paso Finance becoming aware of any Default
or Event of Default, the Issuers are required to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, partner, employee,
incorporator, stockholder or member of the Issuers, the General Partner, or any
Subsidiary Guarantor, as such, shall have any liability for any obligations of
the Issuers or the Subsidiary Guarantors under the notes, the Indenture, the
Guarantees or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of the
Issuers' obligations discharged with respect to the outstanding notes and all
obligations of the Subsidiary Guarantors discharged with respect to their
Guarantees ("Legal Defeasance"), except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due (but not the Change of Control Payment or the
payment pursuant to an Asset Sale Offer) from the list referred to below;
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(2) the Issuers' obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Issuers' obligations in connection therewith;
(4) the Legal Defeasance provisions of the Indenture; and
(5) the Issuers' rights of optional redemption.
In addition, El Paso Energy Partners may, at its option and at any time,
elect to have the obligations of the Issuers and the Guarantors released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with those covenants shall
not constitute a Default or Event of Default with respect to the notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Issuers must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the notes, cash in U.S. dollars,
non-callable U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding notes at the Stated Maturity
thereof or on the applicable redemption date, as the case may be, and El
Paso Energy Partners must specify whether the notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, El Paso Energy Partners shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable
to the Trustee confirming that (a) El Paso Energy Partners has received
from, or there has been published by, the Internal Revenue Service a ruling
or (b) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the holders of
the outstanding notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, El Paso Energy Partners shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable
to the Trustee confirming that the holders of the outstanding notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or a
portion of the proceeds of which shall be applied to such deposit); or (b)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which El Paso Energy
Partners or any of its Restricted Subsidiaries is a party or by which El
Paso Energy Partners or any of its Restricted Subsidiaries is bound;
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(6) El Paso Energy Partners must have delivered to the Trustee an
Opinion of Counsel to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(7) El Paso Energy Partners must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by El Paso Energy
Partners with the intent of preferring the holders of notes over the other
creditors of El Paso Energy Partners with the intent of defeating,
hindering, delaying or defrauding other creditors of El Paso Energy
Partners; and
(8) El Paso Energy Partners must deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Generally, the Issuers, the Subsidiary Guarantors and the Trustee may amend
or supplement the Indenture, the Guarantees and the notes with the consent of
the holders of at least a majority in principal amount of the debt securities
then outstanding. However, without the consent of each holder affected, an
amendment or waiver may not (with respect to any notes held by a non-consenting
holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter or waive the provisions with respect to the redemption of the
notes (other than provisions relating to the covenants described above
under the caption "-- Repurchase at the Option of Holders"):
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration);
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of or premium, if any, or interest on the notes;
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders");
(8) except as otherwise permitted in the Indenture, release any
Subsidiary Guarantor from its obligations under its Guarantee or the
Indenture or change any Guarantee in any manner that would adversely affect
the rights of holders; or
(9) make any change in the preceding amendment and waiver provisions
(except to increase any percentage set forth therein).
In addition, any amendment to, or waiver of, the provisions of the
Indenture relating to subordination that adversely affects the rights of the
holders of the notes will require the consent of the holders of at least 75% in
aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of notes,
the Issuers, the Subsidiary Guarantors and the Trustee may amend or supplement
the Indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
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(3) to provide for the assumption of an Issuer's or Subsidiary
Guarantor's obligations to holders of notes in the case of a merger or
consolidation or sale of all or substantially all of such Issuer's assets;
(4) to add or release Subsidiary Guarantors pursuant to the terms of
the Indenture;
(5) to make any change that would provide any additional rights or
benefits to the holders of notes or surrender any right or power conferred
upon the Issuers or the Subsidiary Guarantors by the Indenture that does
not adversely affect the rights under the Indenture of any holder of the
Notes;
(6) to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act;
(7) to evidence or provide for the acceptance of appointment under the
Indenture of a successor Trustee;
(8) to add any additional Events of Default; or
(9) to secure the notes and/or the Guarantees.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of an Issuer or any Subsidiary Guarantor,
the Indenture limits its right to obtain payment of claims in certain cases, or
to realize on certain property received in aspect of any such claim as security
or otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent person in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any holder of notes, unless such holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to El Paso Energy
Partners at 4 East Greenway Plaza, Houston, Texas, 77046, Attention: Investor
Relations.
BOOK-ENTRY, DELIVERY AND FORM
The Series A notes were offered and sold to QIBs in reliance on Rule 144A
("Rule 144A notes") and in offshore transactions in reliance on Regulation S
("Regulation S notes").
Rule 144A notes were represented by one or more notes in registered, global
form without interest coupons (collectively, the "Rule 144A Global notes"). Upon
issuance, the Rule 144A Global notes were:
- deposited with the Trustee as custodian for The Depository Trust Company
("DTC"), in New York, New York, and
- registered in the name of DTC or its nominee,
in each case for credit to an account of a direct or indirect participant as
described below. Regulation S notes were represented by one or more Global notes
in registered, global form without interest coupons (collectively, the
"Regulation S Global notes"). The Regulation S Global notes were deposited with
the Trustee, as a custodian for DTC, in New York, New York and registered in the
name of a nominee of
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DTC for credit to the accounts of Indirect Participants participating in DTC
through the Euroclear System ("Euroclear") and Clearstream International
("Clearstream"). During the 40-day period commencing on the day after the later
of the commencement of the offering of the original notes and the original Issue
Date (as defined) of the notes (the "Distribution Compliance Period"),
beneficial interests in the Regulation S Global note may be held only through
Euroclear or Clearstream, and, pursuant to DTC's procedures, Indirect
Participants that hold a beneficial interest in the Regulation S Global note
will not be able to transfer such interest to a person that takes delivery
thereof in the form of an interest in the Rule 144A Global notes. After the
Distribution Compliance Period, (i) beneficial interests in the Regulation S
Global Notes may be transferred to a person that takes delivery in the form of
an interest in the Rule 144A Global Notes and (ii) beneficial interests in the
Regulation S Global notes may be transferred to a person that takes delivery in
the form of an interest in the Regulation S Global notes, provided, in each
case, that the certification requirements described below are complied with. See
"-- Transfers of Interests in One Global Note for Interests in Another Global
Note."
Except as set forth below, the Series B notes issued in the exchange offer
will be represented by one or more registered notes in global form (referred to
herein collectively as the "Exchange Global note") and the Series A notes, if
any remain outstanding after the exchange offer, will be represented by one ore
more registered notes in global form, in each case without interest coupons
(collectively, the "Global notes"). The Exchange Global note will be deposited
with, or on behalf of, the DTC and registered in the name of Cede & Co., as
nominee of DTC, or will remain in the custody of the Trustee pursuant to the
FAST Balance Certificate Agreement between DTC and the Trustee.
Beneficial interests in Series A notes, if any remain outstanding after the
exchange offer, will be subject to certain restrictions on transfer and will
bear a restrictive legend. In addition, transfer of beneficial interests in any
Global notes will be subject to the applicable rules and procedures of DTC and
its direct or Indirect Participants (including, if applicable, those of
Euroclear and Clearstream), which may change from time to time.
The Global notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global notes may be exchanged
for notes in certificated form in certain limited circumstances. See
"-- Transfers of Interests in Global Notes for Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The notes
may be presented for registration of transfer and exchange at the officers of
the Registrar.
DEPOSITARY PROCEDURES
DTC has advised El Paso Energy Partners that DTC is a limited-purpose trust
company created to hold securities for its participating organizations
(collectively, the "Direct Participants") and to facilitate the clearance and
settlement of transactions in those securities between Direct Participants
through electronic book-entry changes in accounts of Participants. The Direct
Participants include securities brokers and dealers (including the Initial
Purchasers), banks, trust companies, clearing corporations and certain other
organizations, including Euroclear and Clearstream. Access to DTC's system is
also available to other entities that clear through or maintain a direct or
indirect, custodial relationship with a Direct Participant (collectively, the
"Indirect Participants").
DTC has advised El Paso Energy Partners that, pursuant to DTC's procedures,
(i) upon deposit of the Global notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global notes that have been allocated to them by the Initial
Purchasers, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global notes and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global notes. Direct Participants and Indirect Participants must maintain their
own records of the ownership interests of, and
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the transfer of ownership interests by and between, Indirect Participants and
other owners of beneficial interests in the Global notes.
Investors in the Rule 144A Global notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. Investors in the
Regulation S Global notes may hold their interests therein directly through
Euroclear or Clearstream or indirectly through organizations that are
participants in Euroclear or Clearstream. After the expiration of the
Distribution Compliance Period (but not earlier), investors may hold interests
in the Regulation S Global notes through organizations other than Euroclear and
Clearstream that are Direct Participants in the DTC system. Morgan Guaranty
Trust Company of New York, Brussels office will act initially as depository for
Euroclear, and Citibank, N.A. will act initially as depository for Clearstream
(each a "Nominee" of Euroclear and Clearstream, respectively). Therefore, they
will each be recorded on DTC's records as the holders of all ownership interests
held by them on behalf of Euroclear and Clearstream, respectively. Euroclear and
Clearstream must maintain on their own records the ownership interests, and
transfers of ownership interests by and between, their own customers' securities
accounts. DTC will not maintain such records. All ownership interests in any
Global notes, including those of customers' securities accounts held through
Euroclear or Clearstream, may be subject to the procedures and requirements of
DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interest in a
Global note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global note to pledge
such interest to persons or entities that are not Direct Participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the notes see "-- Transfers of Interests
in Global Notes for Certificated Notes."
EXCEPT AS DESCRIBED IN "-- TRANSFERS ON INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES," OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Issuers, the Subsidiary Guarantors
and the Trustee will treat the persons in whose names the notes are registered
(including notes represented by Global notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal of premium, if any, and interest and
Liquidated Damages, if any, on Global notes registered in the name of DTC or its
nominee will be payable by the Trustee to DTC or its nominee as the registered
holder under the Indenture. Consequently, none of the Issuers, the Trustee nor
any agent of the Issuers or the Trustee has or will have any responsibility or
liability for (i) any aspect of DTC's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global notes or for maintaining,
supervising or reviewing any of DTC's records or any Direct Participant's or
Indirect Participant's records relating to the beneficial ownership interests in
any Global note or (ii) any other matter relating to the actions and practices
of DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Issuers that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Issuers or the Subsidiary Guarantors. None of the Issuers, the
Subsidiary Guarantors or the Trustee will be liable for any delay by DTC or its
Direct Participants or Indirect Participants in identifying the beneficial
owners of the notes, and the Issuers and the Trustee may conclusively relay on
and will be
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protected in relying on instructions from DTC or its nominee as the registered
owner of the notes for all purposes.
The Global notes will trade in DTC's Same-day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the notes through Euroclear or Clearstream) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interests in the notes through Euroclear and Clearstream will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described herein, cross-market transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the notes
through Euroclear or Clearstream, on the other hand, will be effected by
Euroclear's or Clearstream's respective Nominee through DTC in accordance with
DTC's rules on behalf of Euroclear or Clearstream; however, delivery of
instructions relating to crossmarket transactions must be made directly to
Euroclear or Clearstream and within their established deadlines (Brussels time)
of such systems. Indirect Participants who hold interest in the notes through
Euroclear and Clearstream may not deliver instructions directly to Euroclear's
and Clearstream's Nominee. Euroclear and Clearstream will, if the transaction
meets its settlement requirements, deliver instructions to its respective
Nominee to deliver or receive interests on Euroclear's or Clearstream's behalf
in the relevant Global note in DTC, and make or receive payment in accordance
with normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the notes through Euroclear or Clearstream
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or Clearstream
during the European business day immediately following the settlement date of
DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and Clearstream customers will not have
access to the cash amount credited to their accounts as a result of a sale of an
interest in a Regulation S Global Note to a DTC Participant unit the European
business for Euroclear and Clearstream immediately following DTC's settlement
date.
DTC has advised El Paso Energy Partners that it will take any action
permitted to be taken by a holder of notes only at the direction of one or more
Direct Participants to whose account interests in the Global notes are credited
and only in respect of such portion of the aggregate principal amount of the
notes to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the notes, DTC
reserves the right to exchange Global notes (without the direction of one or
more of its Direct Participants) for legended notes in certificated form, and to
distribute such certificated forms of notes to its Direct Participants. See
"-- Transfers of Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Global notes among Direct
Participants, including Euroclear and Clearstream, they are under no obligation
to perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. None of the Issuers, the Subsidiary Guarantors, the
Initial Purchasers or the Trustee shall have any responsibility for the
performance by DTC, Euroclear and Clearstream or their respective Direct and
Indirect Participants of their respective obligations under the rules and
procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and Clearstream
and their book-entry systems has been obtained from sources that the Issuers
believe to be reliable, but the Issuers take no responsibility for the accuracy
thereof.
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Transfers of Interests in One Global Note for Interests in Another Global Note
Prior to the expiration of the Distribution Compliance Period, an Indirect
Participant who holds an interest in the Regulation S Global Note through
Euroclear or Clearstream will not be permitted to transfer its interest to a
U.S. Person who takes delivery in the form of an interest in Rule 144A Global
notes. After the expiration of the Distribution Compliance Period, an Indirect
Participant who holds an interest in Regulation S Global notes will be permitted
to transfer its interest to a U.S. Person who takes delivery in the form of an
interest in Rule 144A Global notes only upon receipt by the Trustee of a written
certification from the transferor to the effect that such transfer is being made
in accordance with the restrictions on transfer set forth under "-- Transfer
Restrictions" and set forth in the legend printed on the Regulation S Global
note.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a U.S.
Person (other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared investment
discretion with respect to its assets), (iv) any trust of which any trustee is a
U.S. Person (other than a trust of which at least one trustee is a non-U.S.
Person who has sole or shared investment discretion with respect to its assets
and no beneficiary of the trust (and no settler, if the trust is revocable) is a
U.S. Person), (v) any agency or branch of a foreign entity located in the United
States, (vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
Person, (vii) any discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held for
the benefit or account of a non-U.S. Person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign jurisdiction
and formed by a U.S. Person principally for the purpose of investing in
securities not registered under the Securities Act (unless it is organized or
incorporated and owned by "accredited investors" within the meaning of Rule
501(a) under the Securities Act who are not natural persons, estates or trusts);
provided, however, that the term "U.S. Person" shall not include (A) a branch or
agency of a U.S. Person that is located and operating outside the United States
for valid business purposes as a locally regulated branch or agency engaged in
the banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(o)(7) of Regulation S under the Securities Act and any other similar
international organizations, and their agencies, affiliates and pension plans.
Prior to the expiration of the Distribution Compliance Period, a Direct or
Indirect Participant who holds an interest in the Rule 144A Global note will not
be permitted to transfer its interests to any person that takes delivery thereof
in the form of an interest in Regulation S Global notes. After the expiration of
the Distribution Compliance Period, a Direct or Indirect Participant who holds
an interest in Rule 144A Global notes may transfer its interests to a person who
takes delivery in the form of an interest in Regulation S Global notes only upon
receipt by the Trustee of a written certification from the transferor to the
effect that such transfer is being made in accordance with Rule 904 of
Regulation S.
Transfers involving an exchange of a beneficial interest in Regulation S
Global notes for a beneficial interest in Rule 144A Global notes or vice versa
will be effected by DTC by means of an instruction originated by the Trustee
through DTC/Deposit Withdraw at Custodian (DWAC) system. In connection with such
transfer, therefore, appropriate adjustments will be made to reflect a decrease
in the principal amount of the one Global note and a corresponding increase in
the principal amount of the other Global note, as applicable. Any beneficial
interest in the one Global note that is transferred to a person who takes
delivery in the form of the other Global note will, upon transfer, cease to be
an interest in such first Global note and become an interest in such other
Global note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global note for as long as it remains such an interest.
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Transfers of Interests in Global Notes for Certificated Notes
An entire Global note may be exchanged for definitive notes in registered,
certificated form without interest coupons ("Certificated notes") if (i) DTC (x)
notifies the Issuers that it is unwilling or unable to continue as depositary
for the Global notes and the Issuers thereupon fail to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuers, at their option, notify the Trustee in
writing that they elect to cause the issuance of Certificated notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the notes. In any such case, the Issuers will notify the Trustee
in writing that, upon surrender by the Direct and Indirect Participants of their
interest in such Global Note, Certificated notes will be issued to each person
that such Direct and Indirect Participants and the DTC identify as being the
beneficial owner of the related notes.
Beneficial interests in the Global notes held by any Direct or Indirect
Participant may be exchanged for Certificated notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated notes
delivered in exchange for any beneficial interest in any Global note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
None of the Issuers, the Subsidiary Guarantors or the Trustee will be
liable for any delay by the holder of any Global note or DTC in identifying the
beneficial owners of notes, and the Issuers and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the holder of
the Global note or DTC for all purposes.
Same Day Settlement and Payment
Payments in respect of the notes represented by the Global notes (including
principal, premium, if any, interest and Liquidated Damages, if any) will be
made by wire transfer of immediately available same day funds to the accounts
specified by the holder of interests in such Global Note. With respect to
Certificated notes, the Issuers will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available same day funds to the accounts specified by the holders thereof or, if
no such account is specified, by mailing a check to each such holder's
registered address. The Issuers expect that secondary trading in the
Certificated notes will also be settled in immediately available funds.
DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person, but excluding Indebtedness which is
extinguished, retired or repaid in connection with such Person merging with
or becoming a Subsidiary of such specific Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether
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through the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the Voting Stock of a specified
Person shall be deemed to be control by the other Person; provided, further,
that any third Person which also beneficially owns 10% or more of the Voting
Stock of a specified Person shall not be deemed to be Affiliate of either the
specified Person or the other Person merely because of such common ownership in
such specified Person. For purposes of this definition, the terms "controlling,"
"controlled by" and "under common control with" shall have correlative meanings.
Notwithstanding the foregoing, the term "Affiliate" shall not include a
Restricted Subsidiary of any specified Person.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business
consistent with past practices; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of El Paso Energy
Partners or El Paso Energy Partners and its Restricted Subsidiaries taken
as a whole will be governed by the provisions of the Indenture described
above under the caption "-- Change of Control," and/or the provisions
described above under the caption "-- Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of El Paso Energy
Partners's Restricted Subsidiaries or the sale by El Paso Energy Partners
or any of its Restricted Subsidiaries of Equity Interests in any of its
Restricted Subsidiaries;
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $5.0 million; or
(b) results in net proceeds to El Paso Energy Partners and its Restricted
Subsidiaries of less than $5.0 million;
(2) a transfer of assets between or among El Paso Energy Partners and
its Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted Subsidiary to El
Paso Energy Partners or to another Restricted Subsidiary;
(4) a Restricted Payment that is permitted by the covenant described
above under the caption "-- Restricted Payments;" and
(5) a transaction of the type described in the last paragraph of the
covenant entitled "Asset Sales."
"Attributable Debt" in respect of a sale and lease-back transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and lease-back transaction including any period for which such lease has
been extended or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Available Cash" has the meaning assigned to such term in the Partnership
Agreement, as in effect on the date of the Indenture.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Cash Equivalent" means:
(1) United States dollars or, in an amount up to the amount necessary
or appropriate to fund local operating expenses, other currencies;
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(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than one year from the date
of acquisition;
(3) certificates of deposit, time deposits and Eurodollar deposits
with maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding 365 days, demand and overnight
bank deposits and other similar types of investments routinely offered by
commercial banks, in each case, with any domestic commercial bank having
capital and surplus in excess of $500.0 million and a Thompson Bank Watch
Rating of "B" or better or any commercial bank of any other country that is
a member of the Organization for Economic Cooperation and Development
("OECD") and has total assets in excess of $500.0 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having one of the two highest ratings obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Ratings Group and
in each case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Cash from Operations" shall have the meaning assigned to such term in the
Partnership Agreement, as in effect on the date of the Indenture.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, lease, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of El Paso Energy
Partners and its Restricted Subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act) other than
the El Paso Group;
(2) the adoption of a plan relating to the liquidation or dissolution
of El Paso Energy Partners or the General Partner; and
(3) such time as the El Paso Group ceases to own, directly or
indirectly, the general partner interests of El Paso Energy Partners, or
members of the El Paso Group cease to serve as the only general partners of
El Paso Energy Partners.
Notwithstanding the foregoing, a conversion of El Paso Energy Partners from
a limited partnership to a corporation, limited liability company or other form
of entity or an exchange of all of the outstanding limited partnership interests
for capital stock in a corporation, for member interests in a limited liability
company or for Equity Interests in such other form of entity shall not
constitute a Change of Control, so long as following such conversion or exchange
the El Paso Group beneficially owns, directly or indirectly, in the aggregate
more than 50% of the Voting Stock of such entity, or continues to own a
sufficient number of the outstanding shares of Voting Stock of such entity to
elect a majority of its directors, managers, trustees or other persons serving
in a similar capacity for such entity.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to the dividends or distributions paid during such
period in cash or Cash Equivalents to such Person or any of its Restricted
Subsidiaries by a Person that is not a Restricted Subsidiary of such
Person; plus
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(2) an amount equal to any extraordinary loss of such Person and its
Restricted Subsidiaries plus any net loss realized by such Person and its
Restricted Subsidiaries in connection with an Asset Sale, to the extent
such losses were deducted in computing such Consolidated Net Income; plus
(3) the provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(4) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with aspect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations), to the extent
that any such expense was deducted in computing such Consolidated Net
Income, excluding any such expenses to the extent incurred by a Person that
is not a Restricted Subsidiary of the Person for which the calculation is
being made; plus
(5) depreciation, depletion and amortization (including amortization
of goodwill and other intangibles but excluding amortization of prepaid
cash expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an
accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income (excluding any such
expenses to the extent incurred by a Person that is neither El Paso Energy
Partners, El Paso Finance, nor a Restricted Subsidiary;) minus
(6) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of El Paso Energy Partners shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of El Paso Energy
Partners only to the extent that a corresponding amount would be permitted at
the date of determination to be dividended or distributed to El Paso Energy
Partners by such Restricted Subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the aggregate Net Income (but not net loss in excess of such
aggregate Net Income) of all Persons that are Unrestricted Subsidiaries
shall be excluded (without duplication);
(2) the earnings included therein attributable to all entities that
are accounted for by the equity method of accounting and the aggregate Net
Income (but not net loss in excess of such aggregate Net Income) included
therein attributable to all entities constituting Joint Ventures that are
accounted for on a consolidated basis (rather than by the equity method of
accounting) shall be excluded;
(3) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any
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agreement (other than the Indenture or its Guarantee), instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(4) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(5) the cumulative effect of a change in accounting principles shall
be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of:
(1) the consolidated equity of the common stockholders or members (or
consolidated partners' capital in the case of a partnership) of such Person
and its consolidated Subsidiaries as of such date as determined in
accordance with GAAP; plus
(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Equity) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock.
"Credit Facilities" means, with respect to El Paso Energy Partners, El Paso
Finance or any Restricted Subsidiary, one or more debt facilities or commercial
paper facilities, including the Partnership Credit Facility, providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means any Indebtedness under the Partnership
Credit Facility and any Senior Debt permitted under the Indenture the principal
amount of which is $25.0 million or more and that has been designated by El Paso
Energy Partners as "Designated Senior Debt."
"Disqualified Equity" means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date on which the notes mature.
Notwithstanding the preceding sentence, any Equity Interest that would
constitute Disqualified Equity solely because the holders thereof have the right
to require El Paso Energy Partners or a Restricted Subsidiary to repurchase such
Equity Interests upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Equity if the terms of such Equity Interests
provide that El Paso Energy Partners or Restricted Subsidiary may not repurchase
or redeem any such Equity Interests pursuant to such provisions unless such
repurchase or redemption complies with the covenant described above under the
caption "-- Covenants -- Restricted Payments."
"El Paso" means El Paso Corporation, a Delaware corporation, and its
successors.
"El Paso Group" means, collectively, (1) El Paso, (2) each Person of which
El Paso is a direct or indirect Subsidiary and (3) each Person which is a direct
or indirect Subsidiary of any Person described in (1) or (2) above.
"Equity Interests" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
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(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, and any rights (other than debt securities
convertible into capital stock) warrants or options exchangeable for or
convertible into such capital stock; and
(5) all warrants, options or other rights to acquire any of the
interests described in clauses (1) - (4) above (but excluding any debt
security that is convertible into, or exchangeable for, any of the
interests described in clauses (1) - (4) above).
"Equity Offering" means any sale for cash of Equity Interests of El Paso
Energy Partners (excluding sales made to any Restricted Subsidiary and excluding
sales of Disqualified Equity).
"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of El Paso Energy Partners and its Restricted Subsidiaries in
existence on the date of the Indenture.
"Fixed Charges" means, with respect to any Person for any period, without
duplication, (A) the sum of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries (excluding for purposes of this clause (1)
consolidated interest expense included therein that is attributable to
Indebtedness of a Person that is not a Restricted Subsidiary of the Person
for which the calculation is being made) for such period, whether paid or
accrued, including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts, and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period (excluding for
purposes of this clause (2) any such consolidated interest included therein
that is attributable to Indebtedness of a Person that is not a Restricted
Subsidiary); plus
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such guarantee or Lien is called upon, provided that this
clause (3) excludes interest on "claw-back," "make-well" or "keep-well"
payments made by El Paso Energy Partners or any Restricted Subsidiary; plus
(4) the product of (a) all dividend payments, whether or not in cash,
on any series of Disqualified Equity of such Person or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of El Paso Energy Partners (other than
Disqualified Equity) or to El Paso Energy Partners or a Restricted
Subsidiary of El Paso Energy Partners, times (b) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP; less
(B) to the extent included in (A) above, amortization or write-off of
deferred financing costs of such Person and its Restricted Subsidiaries during
such period and any charge related to, or any premium or penalty paid in
connection with, incurring any such Indebtedness of such Person and its
Restricted Subsidiaries prior to its Stated Maturity.
In the case of both (A) and (B), such amounts will be determined after
elimination of intercompany accounts among such Person and its Restricted
Subsidiaries and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed
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Charges of such Person for such period. In the event that the specified Person
or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays or
redeems any Indebtedness (other than revolving credit borrowings not
constituting a permanent commitment reduction) or issues or redeems Disqualified
Equity subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence (and the application of the net
proceeds thereof), assumption, guarantee, repayment or redemption of
Indebtedness, or such issuance or redemption of Disqualified Equity, as if the
same had occurred at the beginning of the applicable four-quarter reference
period (and if such Indebtedness is incurred to finance the acquisition of
assets (including, without limitation, a single asset, a division or segment or
an entire company) that were conducting commercial operations prior to such
acquisition, there shall be included pro forma net income for such assets, as if
such assets had been acquired on the first day of such period).
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be deemed to have occurred on the first day of
the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (4) of
the proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded;
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date;
(4) interest on outstanding Indebtedness of the specified Person or
any of its Restricted Subsidiaries as of the last day of the four-quarter
reference period shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on such last
day after giving effect to any Hedging Obligation then in effect; and
(5) if interest on any Indebtedness incurred by the specified Person
or any of its Restricted Subsidiaries on such date may optionally be
determined at an interest rate based upon a factor of a prime or similar
rate, a eurocurrency interbank offered rate or other rates, then the
interest rate in effect on the last day of the four-quarter reference
period will be deemed to have been in effect during such period.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets, or through letters of credit or reimbursement, "claw-back," "make-well,"
or "keep-well" agreements in respect thereof, of all or any part of any
Indebtedness.
"Guarantor Senior Debt" of a Subsidiary Guarantor means all Obligations
with respect to any Indebtedness of such Subsidiary Guarantor, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
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evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall be on a parity with or subordinated in
right of payment to such Subsidiary Guarantor's Guarantee. Without limiting the
generality of the foregoing, (x) "Guarantor Senior Debt" shall include the
principal of, premium, if any, and interest on all Obligations of every nature
of such Subsidiary Guarantor from time to time owed to the lenders under the
Partnership Credit Facility, including, without limitation, principal of and
interest on, and all fees, indemnities and expenses payable by such Subsidiary
Guarantor under, the Partnership Credit Facility, and (y) in the case of amounts
owing by such Subsidiary Guarantor under the Partnership Credit Facility and
guarantees of Designated Senior Indebtedness, "Guarantor Senior Debt" shall
include interest accruing thereon subsequent to the occurrence of any bankruptcy
Event of Default specified in the Indenture relating to such Subsidiary
Guarantor, whether or not the claim for such interest is allowed under any
applicable Bankruptcy Law. Notwithstanding the foregoing, "Guarantor Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the notes or the
Guarantees, (ii) Indebtedness that is expressly subordinate or junior in right
of payment to any other Indebtedness of such Subsidiary Guarantor, (iii) any
liability for federal, state, local or other taxes owed or owing by such
Subsidiary Guarantor, (vi) Indebtedness of such Subsidiary Guarantor to El Paso
Energy Partners or a Subsidiary of El Paso Energy Partners or any other
Affiliate of El Paso Energy Partners, (vii) any trade payables of such
Subsidiary Guarantor, and (viii) any Indebtedness which is incurred by such
Subsidiary Guarantor in violation of the Indenture.
"Hedging Obligations" means, with respect to any Person, the net
obligations (not the notional amount) of such Person under interest rate and
commodity price swap agreements, interest rate and commodity price cap
agreements, interest rate and commodity price collar agreements and foreign
currency and commodity price exchange agreements, options or futures contract or
other similar agreements or arrangements or hydrocarbon hedge contracts or
hydrocarbon forward sale contracts, in each case designed to protect such Person
against fluctuations in interest rates, of foreign exchange rates, or commodity
prices.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof), other
than standby letters of credit and performance bonds issued by such Person
in the ordinary course of business, to the extent not drawn;
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) all Attributable Debt of such Person in respect of any sale and
lease-back transactions not involving a Capital Lease Obligation;
(6) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable incurred in the ordinary course of business;
(7) representing Disqualified Equity; or
(8) representing any Hedging Obligations other than to (in the
ordinary course of business and consistent with prior practice) hedge risk
exposure in the operations, ownership of assets or the management of
liabilities of such Person and its Restricted Subsidiaries;
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other
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Person, provided that a guarantee otherwise permitted by the Indenture to be
incurred by El Paso Energy Partners or any of its Restricted Subsidiaries of
Indebtedness incurred by El Paso Energy Partners or a Restricted Subsidiary in
compliance with the terms of the Indenture shall not constitute a separate
incurrence of Indebtedness.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
For purposes of clause (7) of the preceding paragraph, Disqualified Equity shall
be valued at the maximum fixed redemption, repayment or repurchase price, which
shall be calculated in accordance with the terms of such Disqualified Equity as
if such Disqualified Equity were repurchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture; provided, however,
that if such Disqualified Equity is not then permitted by its terms to be
redeemed, repaid or repurchased, the redemption, repayment or repurchase price
shall be the book value of such Disqualified Equity. The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
guarantees at such date; provided that for purposes of calculating the amount of
any non-interest bearing or other discount security, such Indebtedness shall be
deemed to be the principal amount thereof that would be shown on the balance
sheet of the issuer thereof dated such date prepared in accordance with GAAP,
but that such security shall be deemed to have been incurred only on the date of
the original issuance thereof. The amount of Indebtedness of any Person at any
date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's or BBB -- (or the equivalent) by S&P.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of the lender and
commission, moving, travel and similar advances to officers and employees made
in the ordinary course of business) or capital contributions, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. For purposes of
the definition of "Unrestricted Subsidiary," the definition of "Restricted
Payment" and the covenant described under the "Limitation on Restricted
Payments" covenant (i) the term "Investment" shall include the portion
(proportionate to El Paso Energy Partners's Equity Interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of El Paso Energy
Partners or any of its Restricted Subsidiaries at the time that such Subsidiary
is designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, El Paso Energy
Partners or such Restricted Subsidiary shall be deemed to continue to have a
permanent "Investment" in such Subsidiary at the time immediately before the
effectiveness of such redesignation less the portion (proportionate to El Paso
Energy Partners's or such Restricted Subsidiary's Equity Interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at the
time of such redesignation, and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors of the General Partner. If El Paso Energy Partners or any Restricted
Subsidiary of El Paso Energy Partners sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of El Paso Energy
Partners such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of El Paso Energy Partners, El Paso
Energy Partners shall be deemed to have made an Investment on the date of any
such sale or
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disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "-- Restricted Payments."
"Issue Date" means the date of the first issuance of the notes under the
Indenture.
"Lien" means, with respect to any asset, any mortgage, lien (statutory or
otherwise), pledge, charge, security interest, hypothecation, assignment for
security, claim, preference, priority or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement or any lease in the nature thereof, any option or other agreement to
grant a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statute) of
any jurisdiction.
"Liquidated Damages" means all liquidated damages then owing pursuant to
the Registration Rights Agreement.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Income" means, with respect to any Person, the consolidated net income
(loss) of such Person and its Restricted Subsidiaries, determined in accordance
with GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) the aggregate gain (but not loss in excess of such aggregate
gain), together with any related provision for taxes on such gain, realized
in connection with:
(a) any Asset Sale; or
(b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
such Person or any of its Restricted Subsidiaries; and
(2) the aggregate extraordinary gain (but not loss in excess of such
aggregate extraordinary gain), together with any related provision for
taxes on such aggregate extraordinary gain (but not loss in excess of such
aggregate extraordinary gain).
"Net Proceeds" means, with respect to any Asset Sale or sale of Equity
Interests, the aggregate proceeds received by El Paso Energy Partners or any of
its Restricted Subsidiaries in cash or Cash Equivalents in respect of any Asset
Sale or sale of Equity Interests (including, without limitation, any cash
received upon the sale or other disposition of any non-cash consideration
received in any such sale), net of, without duplication, (i) the direct costs
relating to such Asset Sale or sale of Equity Interests, including, without
limitation, brokerage commissions and legal, accounting and investment banking
fees, sales commissions, recording fees, title transfer fees, and any relocation
expenses incurred as a result thereof, (ii) taxes paid or payable as a result
thereof, in each case after taking into account any available tax credits or
deductions and any tax sharing arrangements and amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that
were the subject of such Asset Sale or sale of Equity Interests, (iii) all
distributions and payments required to be made to minority interest holders in
Restricted Subsidiaries as a result of such Asset Sale and (iv) any amounts to
be set aside in any reserve established in accordance with GAAP or any amount
placed in escrow, in either case for adjustment in respect of the sale price of
such asset or assets or for liabilities associated with such Asset Sale or sale
of Equity Interests and retained by El Paso Energy Partners or any of its
Restricted Subsidiaries until such time as such reserve is reversed or such
escrow arrangement is terminated, in which case Net Proceeds shall include only
the amount of the reserve so reversed or the amount returned to El Paso Energy
Partners or its Restricted Subsidiaries from such escrow arrangement, as the
case may be.
"Non-Recourse Debt" means Indebtedness as to which:
(1) neither El Paso Energy Partners nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute
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Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender of such Indebtedness;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes) of El Paso Energy Partners or
any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(3) the lenders have been notified in writing that they will not have
any recourse to the stock or assets of El Paso Energy Partners or any of
its Restricted Subsidiaries; provided that in no event shall Indebtedness
of any Person which is not a Restricted Subsidiary fail to be Non-Recourse
Debt solely as a result of any default provisions contained in a guarantee
thereof by El Paso Energy Partners or any of its Restricted Subsidiaries
provided that El Paso Energy Partners or such Restricted Subsidiary was
otherwise permitted to incur such guarantee pursuant to the Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of El Paso Energy Partners, L.P., amended and restated
effective as of August 31, 2000, as such may be amended, modified or
supplemented from time to time.
"Partnership Credit Facility" means the Fourth Amended and Restated Credit
Agreement among El Paso Energy Partners, El Paso Finance, the lenders from time
to time party thereto and The Chase Manhattan Bank, as administrative agent,
including any deferrals, renewals, extensions, replacements, refinancings or
refundings thereof, and any amendments, modifications or supplements thereto and
any agreement providing therefor (including any restatement thereof and any
increases in the amount of commitments thereunder), whether by or with the same
or any other lenders, creditors, group of lenders or group of creditors and
including related notes, guarantees, collateral security documents and other
instruments and agreements executed in connection therewith.
"Permitted Business" means (1) gathering, transporting (by barge, pipeline,
ship, truck or other modes of hydrocarbon transportation), terminalling,
storing, producing, acquiring, developing, exploring for, processing,
dehydrating and otherwise handling hydrocarbons, including, without limitation,
constructing pipeline, platform, dehydration, processing and other
energy-related facilities, and activities or services reasonably related or
ancillary thereto, (2) any business that generates gross income that constitutes
"qualifying income" under Section 7704(d) of the Internal Revenue Code of 1986,
as amended, other than any business that generates any gross income arising from
the refining of a natural resource, and (3) any other business that does not
constitute a reportable segment (as determined in accordance with GAAP) for El
Paso Energy Partners's annual audited consolidated financial statements.
"Permitted Business Investments" means Investments by El Paso Energy
Partners or any of its Restricted Subsidiaries in any Unrestricted Subsidiary of
El Paso Energy Partners or in any Person that does not constitute a direct or
indirect Subsidiary of El Paso Energy Partners (a "Joint Venture"), provided
that:
(1) either (a) at the time of such Investment and immediately
thereafter, El Paso Energy Partners could incur $1.00 of additional
Indebtedness under the first paragraph in the limitation of indebtedness
set forth under the caption "-- Incurrence of Indebtedness and Issuance of
Disqualified Equity" above or (b) such Investment is made with the proceeds
of Incremental Funds (as defined in the covenant described under
"-- Covenants -- Restricted Payments");
(2) if such Unrestricted Subsidiary or Joint Venture has outstanding
Indebtedness at the time of such Investment, either (a) all such
Indebtedness is non-recourse to El Paso Energy Partners and its Restricted
Subsidiaries or (b) any such Indebtedness of such Unrestricted Subsidiary
or Joint Venture that is recourse to El Paso Energy Partners or any of its
Restricted Subsidiaries (which shall
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include all Indebtedness of such Unrestricted Subsidiary or Joint Venture
for which El Paso Energy Partners or any of its Restricted Subsidiaries may
be directly or indirectly, contingently or otherwise, obligated to pay,
whether pursuant to the terms of such Indebtedness, by law or pursuant to
any guaranty or "claw-back," "make-well" or "keep-well" arrangement) could,
at the time such Investment is made and, if later, at the time any such
Indebtedness is incurred, be incurred by El Paso Energy Partners and its
Restricted Subsidiaries in accordance with the limitation on indebtedness
set forth in the first paragraph under the caption "-- Incurrence of
Indebtedness and Issuance of Disqualified Equity" above; and
(3) such Unrestricted Subsidiary's or Joint Venture's activities are
not outside the scope of the Permitted Business.
The term "Joint Venture" shall include Poseidon Oil Pipeline Company,
L.L.C. and Deepwater Holdings, L.L.C. ("Deepwater Holdings") and its
Subsidiaries, and no such Person shall constitute a Restricted Subsidiary for
purposes of the Indenture (even if such Person is then a Subsidiary of El Paso
Energy Partners), until such time as the Board of Directors of the General
Partner designates, in a manner consistent with the designation of an
Unrestricted Subsidiary as a Restricted Subsidiary or a Restricted Subsidiary as
an Unrestricted Subsidiary, each as described under "Covenants -- Designation of
Restricted and Unrestricted Subsidiaries," Poseidon Oil Pipeline Company or
Deepwater Holdings, including one or more of its Subsidiaries, as the case may
be, as a Restricted Subsidiary or an Unrestricted Subsidiary.
"Permitted Investments" means:
(1) any Investment in, or that results in the creation of, any
Restricted Subsidiary of El Paso Energy Partners;
(2) any Investment in El Paso Energy Partners or in a Restricted
Subsidiary of El Paso Energy Partners (excluding redemptions, purchases,
acquisitions or other retirements of Equity Interests in El Paso Energy
Partners) at any one time outstanding;
(3) any Investment in cash or Cash Equivalents;
(4) any Investment by El Paso Energy Partners or any Restricted
Subsidiary of El Paso Energy Partners in a Person if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary of El Paso Energy
Partners; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, El Paso Energy Partners or a Restricted Subsidiary of
El Paso Energy Partners;
(5) any Investment made as a result of the receipt of consideration
consisting of other than cash or Cash Equivalents from an Asset Sale that
was made pursuant to and in compliance with the covenant described above
under the caption "-- Repurchase at the Option of Holders -- Asset Sales;"
(6) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Equity) of El Paso Energy
Partners;
(7) payroll advances in the ordinary course of business and other
advances and loans to officers and employees of El Paso Energy Partners or
any of its Restricted Subsidiaries, so long as the aggregate principal
amount of such advances and loans does not exceed $1.0 million at any one
time outstanding;
(8) Investments in stock, obligations or securities received in
settlement of debts owing to El Paso Energy Partners or any of its
Restricted Subsidiaries as a result of bankruptcy or insolvency proceedings
or upon the foreclosure, perfection or enforcement of any Lien in favor of
El Paso Energy Partners or any such Restricted Subsidiary, in each case as
to debt owing to El Paso Energy Partners or any of its Restricted
Subsidiary that arose in the ordinary course of business of El Paso Energy
Partners or any such Restricted Subsidiary;
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(9) any Investment in Hedging Obligations;
(10) any Investments in prepaid expenses, negotiable instruments held
for collection and lease, utility, workers' compensation and performance
and other similar deposits and prepaid expenses made in the ordinary course
of business;
(11) any Investments required to be made pursuant to any agreement or
obligation of El Paso Energy Partners or any Restricted Subsidiary in
effect on the Issue Date and listed on a schedule to the Indenture; and
(12) other Investments in any Person engaged in a Permitted Business
(other than an Investment in an Unrestricted Subsidiary) having an
aggregate fair market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (12) since
the date of the Indenture and existing at the time the Investment, which is
the subject of the determination, was made, not to exceed $5.0 million.
"Permitted Junior Securities" means: (1) nonmandatorily redeemable Equity
Interests in El Paso Energy Partners or any Subsidiary Guarantor, as reorganized
or readjusted; or (2) debt securities of El Paso Energy Partners or any
Subsidiary Guarantor as reorganized or readjusted that are subordinated to all
Senior Debt and Guarantor Senior Debt and any debt securities issued in exchange
for Senior Debt and Guarantor Senior Debt to substantially the same extent as,
or to a greater extent than, the notes and the Guarantees are subordinated to
Senior Debt and Guarantor Senior Debt pursuant to the Indenture, provided that
the rights of the holders of Senior Debt and Guarantor Senior Debt under the
Partnership Credit Facility are not altered or impaired by such reorganization
or readjustment.
"Permitted Liens" means:
(1) Liens on the assets of El Paso Energy Partners and any Subsidiary
securing Senior Debt and Guarantor Senior Debt;
(2) easements, rights-of-way, restrictions, minor defects and
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the business of El Paso Energy
Partners or its Restricted Subsidiaries;
(3) Liens securing reimbursement obligations of El Paso Energy
Partners or a Restricted Subsidiary with respect to letters of credit
encumbering only documents and other property relating to such letters of
credit and the products and proceeds thereof;
(4) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of El Paso
Energy Partners and its Restricted Subsidiaries;
(5) Liens in favor of El Paso Energy Partners or any of the Restricted
Subsidiaries;
(6) any interest or title of a lessor in the property subject to a
Capital Lease Obligation;
(7) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with El Paso Energy Partners or any
Restricted Subsidiary of El Paso Energy Partners, provided that such Liens
were in existence prior to the contemplation of such merger or
consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with El Paso Energy Partners or such
Restricted Subsidiary;
(8) Liens on property existing at the time of acquisition thereof by
El Paso Energy Partners or any Restricted Subsidiary of El Paso Energy
Partners, provided that such Liens were in existence prior to the
contemplation of such acquisition and relate solely to such property,
accessions thereto and the proceeds thereof;
(9) Liens to secure the performance of tenders, bids, leases,
statutory obligations, surety or appeal bonds, government contracts,
performance bonds or other obligations of a like nature incurred in the
ordinary course of business;
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(10) Liens on any property or asset acquired, constructed or improved
by El Paso Energy Partners or any Restricted Subsidiary (a "Purchase Money
Lien"), which (A) are in favor of the seller of such property or assets, in
favor of the Person constructing or improving such asset or property, or in
favor of the Person that provided the funding for the acquisition,
construction or improvement of such asset or property, (B) are created
within 360 days after the date of acquisition, construction or improvement,
(C) secure the purchase price or construction or improvement cost, as the
case may be, of such asset or property in an amount up to 100% of the fair
market value (as determined by the Board of Directors of the General
Partner) of such acquisition, construction or improvement of such asset or
property, and (D) are limited to the asset or property so acquired,
constructed or improved (including proceeds thereof, accessions thereto and
upgrades thereof);
(11) Liens to secure performance of Hedging Obligations of El Paso
Energy Partners or a Restricted Subsidiary;
(12) Liens existing on the date of the Indenture and Liens on any
extensions, refinancing, renewal, replacement or defeasance of any
Indebtedness or other obligation secured thereby;
(13) Liens on and pledges of the Equity Interests of any Unrestricted
Subsidiary or any Joint Venture owned by El Paso Energy Partners or any
Restricted Subsidiary to the extent securing Non-Recourse Debt or
Indebtedness (other than Permitted Debt) otherwise permitted by the first
paragraph under "-- Incurrence of Indebtedness and Issuance of Disqualified
Equity;"
(14) statutory Liens of landlords and warehousemen's, carriers',
mechanics', suppliers', materialman's, repairmen's, or other like Liens
(including contractual landlord's liens) arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor;
(15) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other similar types of social security, old age pension or public
liability obligations;
(16) Liens on pipelines or pipeline facilities that arise by operation
of law;
(17) Liens arising under operating agreements, joint venture
agreements, partnership agreements, oil and gas leases, farmout agreements,
division orders, contracts for sale, transportation or exchange of oil and
natural gas, unitization and pooling declarations and agreements, area of
mutual interest agreements and other agreements arising in the ordinary
course of El Paso Energy Partners's or any Restricted Subsidiary's business
that are customary in the Permitted Business;
(18) judgment and attachment Liens not giving rise to a Default or
Event of Default;
(19) Liens securing the Obligations of the Issuers under the notes and
the indenture and of the Subsidiary Guarantors under the Guarantees;
(20) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(21) Liens arising from protective filings made in the appropriate
office(s) for the filing of a financing statement in the applicable
jurisdiction(s) in connection with any lease, consignment or similar
transaction otherwise permitted hereby, which filings are made for the
purpose of perfecting the interest of the secured party in the relevant
items, if the transaction were subsequently classified as a sale and
secured lending arrangement;
(22) Liens arising out of consignment or similar arrangements for sale
of goods;
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(23) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(24) Liens securing any Indebtedness which includes a covenant that
limits liens in a manner substantially similar to the covenant entitled
"Liens;"
(25) Liens incurred in the ordinary course of business of El Paso
Energy Partners or any Restricted Subsidiary of El Paso Energy Partners
with respect to obligations that do not exceed $10.0 million at any one
time outstanding; and
(26) Liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to money or
instruments of El Paso Energy Partners or any of its Restricted
Subsidiaries on deposit with or in possession of such bank.
"Permitted Refinancing Indebtedness" means any Indebtedness of El Paso
Energy Partners or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Indebtedness of El Paso Energy Partners or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of necessary fees and expenses incurred in
connection therewith and any premiums paid on the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded);
(2) such Permitted Refinancing Indebtedness has a final maturity date
no earlier than the final maturity date of, and has a Weighted Average Life
to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes or
the Guarantees, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the notes or the Guarantees, as the case may be, on
terms at least as favorable to the holders of notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by El Paso Energy Partners or
by the Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Rating Agency" means each of S&P and Moody's, or if S&P or Moody's or both
shall not make a rating on the notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by the
Issuer (as certified by a resolution of the Board of Directors) which shall be
substituted for S&P or Moody's, or both, as the case may be.
"Restricted Investment" means an Investment other than a Permitted
Investment or a Permitted Business Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referenced
Person that is not an Unrestricted Subsidiary, provided that Deepwater Holdings
and its Subsidiaries shall not constitute a Restricted Subsidiary of El Paso
Energy Partners, even if such Person is then a Subsidiary of El Paso Energy
Partners, until such time as either such entity becomes a Restricted Subsidiary
in the manner provided in the final paragraph under the definition of "Permitted
Business Investments" above. Notwithstanding anything in the Indenture to the
contrary, El Paso Finance shall be designated as a Restricted Subsidiary of El
Paso Energy Partners.
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"S&P" means Standard & Poor's Ratings Group, Inc., or any successor to the
rating agency business thereof.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all
Hedging Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred by El Paso Energy
Partners and the Restricted Subsidiaries under the terms of the Indenture,
unless the instrument under which such Indebtedness is incurred expressly
provides that it is on a parity with or subordinated in right of payment to
the notes; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any Indebtedness that is expressly subordinate or junior in right
of payment to any Indebtedness of El Paso Energy Partners or any Subsidiary
Guarantor;
(2) Indebtedness evidenced by the notes or the Guarantees;
(3) any liability for federal, state, local or other taxes owed or
owing by El Paso Energy Partners or any Subsidiary Guarantor;
(4) any Indebtedness of El Paso Energy Partners or any of its
Subsidiaries to any of its Subsidiaries or other Affiliates;
(5) any trade payables; or
(6) any Indebtedness that is incurred in violation of the Indenture.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act and the Exchange Act, as such Regulation is in
effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50% of the Voting Stock is at the time owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (whether general or limited), limited liability
company or joint venture (a) the sole general partner or the managing
general partner or managing member of which is such Person or a Subsidiary
of such Person, or (b) if there are more than a single general partner or
member, either (i) the only general partners or managing members of which
are such Person and/or one or more Subsidiaries of such Person (or any
combination thereof) or (ii) such Person owns or controls, directly or
indirectly, a majority of the outstanding general partner interests, member
interests or other Voting Stock of such partnership, limited liability
company or joint venture, respectively;
provided, however, that each of Deepwater Holdings and its Subsidiaries shall be
deemed not to be a Subsidiary of El Paso Energy Partners or any of its
Subsidiaries unless, and to the extent, any of Deepwater Holdings or any of its
Subsidiaries is redesignated as a Restricted Subsidiary of El Paso Energy
Partners in accordance with the terms of the Indenture.
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"Subsidiary Guarantors" means each of:
(1) Argo II, L.L.C.; Crystal Holding, L.L.C.; Crystal Properties and
Trading Company, L.L.C.; Delos Offshore Company, L.L.C.; El Paso Energy
Partners Deepwater, L.L.C.; El Paso Energy Partners Oil Transport, L.L.C.;
El Paso Energy Partners Operating Company, L.L.C.; Ewing Bank Gathering
Company, L.L.C.; First Reserve Gas, L.L.C.; Flextrend Development Company,
L.L.C.; Green Canyon Pipe Line Company, L.P.; Hattiesburg Gas Storage
Company; Hattiesburg Industrial Gas Sales Company, L.L.C.; Manta Ray
Gathering Company, L.L.C.; Petal Gas Storage Company, L.L.C.; Poseidon
Pipeline Company, L.L.C.; Viosca Knoll Gathering Company; VK Deepwater
Gathering Company, L.L.C.; VK-Main Pass Gathering Company, L.L.C.; and
(2) any other Subsidiary that executes a Guarantee in accordance with
the provisions of the Indenture; and
(3) their respective successors and assigns.
Notwithstanding anything in the Indenture to the contrary, El Paso Finance shall
not be a Subsidiary Guarantor.
"Suspended Covenants" has the meaning given to such term under the caption
"-- Suspended Covenants."
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged; (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clauses (i) or (ii) above, are not callable or redeemable at the option of the
issuers thereof: or (iii) depository receipts issued by a bank or trust company
as custodian with respect to any such U.S. Government Obligations or a specific
payment of interest on or principal of any such U.S. Government Obligation held
by such custodian for the account of the holder of a Depository receipt,
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such Depository
receipt from any amount received by the custodian in respect of the U.S.
Government Obligation evidenced by such Depository receipt.
"Unrestricted Subsidiary" means any Subsidiary of El Paso Energy Partners
(other than El Paso Finance) that is designated by the Board of Directors of the
General Partner as an Unrestricted Subsidiary pursuant to a Board Resolution,
provided that, at the time of such designation, (x) no portion of the
Indebtedness or other obligation of such Subsidiary (whether contingent or
otherwise and whether pursuant to the terms of such Indebtedness or the terms
governing the organization of such Subsidiary or by law (a) is guaranteed by El
Paso Energy Partners or any other Restricted Subsidiary, (B) is recourse to or
obligates El Paso Energy Partners or any Restricted Subsidiary in any way
(including any "claw-back," "keep-well," "make-well" or other agreements,
arrangements or understandings to maintain the financial performance or results
of operations of such Subsidiary or to otherwise infuse or contribute cash to
such Subsidiary), or (C) subjects any property or assets of El Paso Energy
Partners or any Restricted Subsidiary, directly or indirectly, contingently or
otherwise, to the satisfaction of such Indebtedness, unless such Investment or
Indebtedness is permitted by the provisions of the Indenture described above
under the captions "-- Restricted Payments" and "-- Incurrence of Indebtedness
and Issuance of Disqualified Equity," (y) no Equity Interests of a Restricted
Subsidiary are held by such Subsidiary, directly or indirectly, and (z) the
amount of El Paso Energy Partners's Investment, as determined at the time of
such designation, in such Subsidiary since the Issue Date to the date of
designation is treated as of the date of such designation as a Restricted
Investment, Permitted Investment or Permitted Business Investment, as
applicable. Initially, Argo and Argo I shall be designated as Unrestricted
Subsidiaries. Notwithstanding anything in the Indenture to the contrary, El Paso
Finance shall not be, and shall not be designated as, an Unrestricted
Subsidiary.
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Any designation of a Subsidiary of El Paso Energy Partners as an
Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolutions of the Board of Directors of the
General Partner giving effect to such designation and an Officers' Certificate
certifying that such designation compiled with the preceding conditions and was
permitted by the covenant described above under the caption
"-- Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of El Paso Energy Partners as
of such date and, if such Indebtedness is not permitted to be incurred as of
such date under the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Preferred Stock," El Paso Energy Partners shall be
in default of such covenant. The Board of Directors of the General Partner may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of El Paso Energy Partners of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (1) such Indebtedness is permitted under the covenant
described under the caption "-- Covenants -- Incurrence of Indebtedness and
Issuance of Disqualified Equity," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference period;
and (2) no Default or Event of Default would be in existence following such
designation.
"Voting Stock" of any Person as of any date means the Equity Interests of
such Person pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers, general partners or trustees of any Person (regardless of
whether, at the time, Equity Interests of any other class or classes shall have,
or might have, voting power by reason of the occurrence of any contingency) or,
with respect to a partnership (whether general or limited), any general partner
interest in such partnership.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of United States federal income tax
considerations applicable to the initial holders of the notes who purchase the
notes at their "issue price," that is, the first price at which a substantial
amount of the notes is sold for money to the public (not including bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers). This summary is based upon
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
regulations, rulings and decisions currently in effect, all of which are subject
to change, possibly with retroactive effect. The discussion does not purport to
deal with all aspects of the United States federal taxation that may be relevant
to particular investors in light of their particular circumstances (for example,
to persons holding notes as part of a conversion transaction or as part of a
hedge or hedging transaction, or as a position in a straddle for tax purposes),
nor does it discuss the United States federal income tax considerations
applicable to certain types of investors subject to special treatment under the
federal income tax laws (for example, insurance companies, tax-exempt
organizations and financial institutions). In addition, the discussion does not
consider the effect of any foreign, state, local or other tax laws that may be
applicable to a particular investor. The discussion assumes that investors hold
the notes as "capital assets" within the meaning of Section 1221 of the Code. We
intend to treat the notes as indebtedness and not as equity for United States
federal income tax purposes, and the United States federal income and estate tax
considerations described below are based on that characterization.
PROSPECTIVE INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT
THEIR TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used in this tax discussion, the term "United States holder" means a
beneficial owner of a note that is, for United States federal income tax
purposes,
- a citizen or resident of the United States,
- a corporation, partnership or other entity created or organized in or
under the laws of the United States or of any political subdivision
thereof,
- an estate, the income of which is subject to United States federal income
taxation regardless of its source, or
- a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust.
The term also includes certain former citizens and certain former long-term
residents of the United States.
INTEREST ON A NOTE. The notes were not issued with original issue discount
for United States federal income tax purposes. Accordingly, interest on a note
will generally be taxable to a United States holder as ordinary interest income
at the time it accrues or is received in accordance with the United States
holder's method of accounting for United States federal income tax purposes.
SALE OR RETIREMENT OF A NOTE. Upon the sale or retirement of a note, a
United States holder will recognize a taxable gain or loss equal to the
difference between the amount realized on the sale or retirement and the
holder's adjusted tax basis in the note. This gain or loss generally will be
capital gain or loss and will be long-term capital gain or loss if the notes
have been held for more than one year. To the extent the amount realized
represents accrued but unpaid interest, that amount must be taken into account
as interest income, if it was not previously included in income of the holder.
EXCHANGE OFFER. The exchange of the Series A notes for Series B notes
pursuant to the exchange offer will not result in any United States federal
income tax consequences to the United States holders.
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When a United States holder exchanges a Series A note for a Series B note
pursuant to the exchange offer, the holder will have the same adjusted tax basis
and holding period in the Series B note as in the Series A note immediately
before the exchange.
PAYMENTS UNDER REGISTRATION RIGHTS AGREEMENT. As more fully discussed under
"The Exchange Offer -- Registration Rights," we may be required to pay
liquidated damages to holders in the event we do not comply with certain
covenants. Although the matter is not free from doubt, we intend to take the
position that a holder should be required to report any liquidated damages as
ordinary income for United States federal income tax purposes at the time it
accrues or is received in accordance with the holder's regular method of
accounting. It is possible, however, that the Internal Revenue Service may take
a different position, in which case the timing and amount of income may be
different.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Information reporting will
apply to payments of principal, premium and interest on, and the proceeds of
disposition of, a note with respect to certain noncorporate United States
holders and backup unitholding at a rate of 31% may also apply. Backup
withholding will apply only if the United States holder (i) fails to furnish its
Taxpayer Identification Number ("TIN") which, for an individual, would be his
Social Security number, (ii) furnishes an incorrect TIN, (iii) is notified by
the Internal Revenue Service that it has failed to properly report payments of
interest or dividends or (iv) under certain circumstances, fails to certify,
under penalties of perjury, that it has not been notified by the IRS that it is
subject to backup withholding for failure to report interest and dividend
payments. United States holders should consult their tax advisors regarding
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
The amount of any backup withholding from a payment to a United States
holder will be allowed as a credit against the holder's United States federal
income tax liability and may entitle the holder to a refund, provided that the
required information is furnished to the Internal Revenue Service.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
As used in this tax discussion, a non-United States holder means any
beneficial owner of a note that is not a United States holder. The rules
governing the United States federal income and estate taxation of a non-United
States holder are complex, and no attempt will be made herein to provide more
than a summary of those rules. Special rules may apply to a non-United States
holder if that holder is a controlled foreign corporation, passive foreign
investment company or foreign personal holding company and therefore subject to
special treatment under the Code. NON-UNITED STATES HOLDERS SHOULD CONSULT WITH
THEIR OWN TAX ADVISORS TO DETERMINE THE EFFECT OF FEDERAL, STATE, LOCAL AND
FOREIGN TAX LAWS WITH REGARD TO AN INVESTMENT IN THE NOTES, INCLUDING ANY
REPORTING REQUIREMENTS.
PAYMENT OF INTEREST. Generally, payment of interest on a note to a
non-United States holder will qualify for the "portfolio interest" exemption
and, therefore, will not be subject to United States federal income tax or
withholding tax, provided that this interest income is not effectively connected
with a United States trade or business of the non-United States holder and
provided that the non-United States holder:
- does not actually or constructively own 10% or more of the capital or
profits interest in any issuer or 10% or more of the combined voting
power of all classes of stock of any issuer entitled to vote,
- is not, for United States federal income tax purposes, a controlled
foreign corporation related to the issuer within the meaning of the Code,
- is not a bank receiving interest on a loan entered into in the ordinary
course of its business within the meaning of the Code and
- either:
(a) provides a Form W-8BEN or W-8IMY, as appropriate (or a suitable
substitute form), signed under penalties of perjury that includes its name
and address and certifies as to its non-United States holder status in
compliance with applicable law and regulations or
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(b) holds its notes through a securities clearing organization, bank
or other financial institution that holds customers' securities in the
ordinary course of its trade or business and that provides a statement
signed under penalties of perjury in which it certifies to the issuers or
the issuers' agent that a Form W-8BEN or W-8IMY, as appropriate (or
suitable substitute), has been received by it from the non-United States
holder or qualifying intermediary and furnishes the issuers or the issuers'
agent with a copy thereof.
Recently adopted United States Treasury Regulations provide alternative
methods for satisfying these certification requirements and are generally
effective for payments made after December 31, 2000, subject to certain
transition rules. For example, in the case of notes held by a foreign
partnership, the new regulations require that the certification described above
be provided by the partners rather than by the partnership and that the
partnership provide certain information, including a U.S. taxpayer
identification number. A look-through rule applies in the case of tiered
partnerships. Non-United States holders are urged to consult their own tax
advisors regarding the new regulations.
Except to the extent that an applicable treaty otherwise provides, a
non-United States holder generally will be taxed in the same manner as a United
States holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the non-United States
holder. Effectively connected interest received by a corporate non-United States
holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though this effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax,
unless derived through a partnership, if the non-United States holder delivers
IRS Form W-8ECI (or successor form) annually to the payor.
Interest income of a non-United States holder that is not effectively
connected with a United States trade or business and that does not qualify for
the portfolio interest exemption described above will generally be subject to a
withholding tax at a 30% rate unless that rate is reduced or eliminated pursuant
to an applicable tax treaty.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES. A non-United States holder of a
note will generally not be subject to United States federal income tax or
withholding tax on any gain realized on the sale, exchange, redemption or other
disposition of the note unless:
- the gain is effectively connected with a United States trade or business
of the non-United States holder,
- in the case of a non-United States holder who is an individual, the
holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition,
and either the holder has a "tax home" in the United States or the
disposition is attributable to an office or other fixed place of business
maintained by that holder in the United States or
- the non-United States holder is subject to tax pursuant to the provisions
of the Code applicable to certain United States expatriates.
U.S. FEDERAL ESTATE TAX CONSIDERATIONS. A note beneficially owned by an
individual who is not a citizen or resident of the United States at the time of
death will generally not be includable in the decedent's gross estate for United
States federal estate tax purposes, provided that the beneficial owner did not
at the time of death actually or constructively own 10% or more of the capital
or profits interests in any issuer or 10% or more of the combined voting power
of all classes of stock of any issuer entitled to vote, and provided that, at
the time of the holder's death, payments with respect to that note would not
have been effectively connected with the holder's conduct of a trade or business
within the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX. United States information
reporting requirements and backup withholding tax generally will not apply to
payments of interest and principal on a note to a non-United States holder if
the statement described in "-- Payment of Interest" is duly provided by
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the holder or the holder otherwise establishes an exemption, provided that the
issuers do not have actual knowledge that the holder is a United States person.
Information reporting requirements and backup withholding tax generally
will not apply to any payment of the proceeds of the sale of a note effected
outside the United States by a foreign office of a "broker" (as defined in
applicable United States Treasury Regulations). However, if the broker:
- is a United States person,
- derives 50% or more of its gross income from all sources for certain
periods from the conduct of a United States trade or business,
- is a controlled foreign corporation for United States tax purposes or
- is a foreign partnership in which one or more United States persons, in
the aggregate, own more than 50% of the income or capital interests in
the partnership or a foreign partnership that is engaged in a trade or
business in the United States,
payment of the proceeds will be subject to information reporting requirements
unless the broker has documentary evidence in its records that the beneficial
owner is a non-United States holder and certain other conditions are met, or the
beneficial owner otherwise establishes an exemption.
Payment of the proceeds of any sale of a note to or through the United
States office of a broker, whether foreign or United States, is subject to
information reporting and backup withholding requirements, unless the beneficial
owner of the note provides the statement described in "-- Payment of Interest"
or otherwise establishes an exemption and the broker does not have actual
knowledge that the payee is a United States person or that the exemption
conditions are not satisfied.
Any amounts withheld from a payment to a non-United States holder under the
backup withholding rules will be allowed as a credit against the holder's United
States federal income tax liability and may entitle the non-United States holder
to a refund, provided that the required information is provided to the IRS.
United States Treasury Regulations, which generally are effective for
payments made after December 31, 2000, provide certain presumptions under which
a non-United States holder is subject to backup withholding and information
reporting unless such holder provides a certification as to its non-United
States status. Non-United States holders should consult their own tax advisors
with respect to the impact of the new regulations.
THE FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS
AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
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PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC set forth in no-action
letters issued to third parties, we believe that you may freely transfer Series
B notes issued under the exchange offer in exchange for Series A notes, unless
you are:
- our "affiliate" within the meaning of Rule 405 under the Securities Act;
- a broker-dealer or an initial purchaser that acquired Series A notes
directly from us; or
- a broker-dealer that acquired Series A notes as a result of market-making
or other trading activities without compliance with the registration and
prospectus delivery provisions of the Securities Act;
provided that you acquire the Series B notes in the ordinary course of your
business and you are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of the Series B notes. Broker-dealers receiving Series B notes in the exchange
offer in exchange for Series A notes that were acquired in market-making or
other trading activities will be subject to a prospectus delivery requirement
with respect to resales of the Series B notes.
To date, the staff of the SEC has taken the position that participating
broker-dealers may fulfill their prospectus delivery requirements with respect
to transactions involving an exchange of securities such as this exchange offer,
other than a resale of an unsold allotment from the original sale of the Series
A notes, with the prospectus contained in the exchange offer registration
statement. Pursuant to the registration agreement, we have agreed to permit such
participating broker-dealers to use this prospectus in connection with the
resale of Series B notes.
If you wish to exchange your Series A notes for Series B notes in the
exchange offer, you will be required to make certain representations to us as
set forth in "The Exchange Offer -- Registration Rights" and "-- Procedures for
Tendering Series A Notes -- Determination of Validity" of this prospectus
beginning on pages 22 and 27, and in the letter of transmittal. In addition, if
you are a broker-dealer who receives Series B notes for your own account in
exchange for Series A notes that were acquired by you as a result of
market-making activities or other trading activities, you will be required to
acknowledge that you will deliver a prospectus in connection with any resale by
you of those Series B notes. See "The Exchange Offer -- Resale of Series B
Notes; Plan of Distribution" beginning on page 33.
We will not receive any proceeds from any sale of Series B notes by
broker-dealers. Broker-dealers who receive Series B notes for their own account
in the exchange offer may sell them from time to time in one or more
transactions in the over-the-counter market:
- in negotiated transactions;
- through the writing of options on the Series B notes or a combination of
such methods of resale;
- at market prices prevailing at the time of resale; or
- at prices related to the prevailing market prices or negotiated prices.
Any resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any broker-dealer or the purchasers of any Series B notes. Any
broker-dealer that resells Series B notes it received for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of Series B notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any resale of Series B notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. Although the letter of
transmittal requires a broker-dealer to deliver a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act as a result of such delivery.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the Series A notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act, as set forth in the
registration rights agreement.
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VALIDITY OF THE SERIES B NOTES
The validity of the Series B notes being offered hereby will be passed upon
for us by Akin, Gump, Strauss, Hauer & Feld, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of El Paso Energy Partners, L.P.,
Neptune Pipeline Company, L.L.C., Deepwater Holdings, L.L.C., VK -- Deepwater
Gathering Company, L.L.C. and Crystal Holding, L.L.C., incorporated in this
Registration Statement by reference to the Annual Report on Form 10-K of El Paso
Energy Partners, L.P. for the year ended December 31, 2000, have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Manta Ray Gathering Company, L.L.C., Ewing Bank
Gathering Company, L.L.C., El Paso Energy Partners Operating Company, L.L.C.,
VK -- Main Pass Gathering Company, L.L.C., El Paso Energy Partners Deepwater,
L.L.C., Delos Offshore Company, L.L.C., El Paso Energy Partners Oil Transport,
L.L.C., Poseidon Pipeline Company, L.L.C., Flextrend Development Company, L.L.C.
and Green Canyon Pipeline Company, L.P., incorporated in this Registration
Statement by reference to the Annual Report on Form 10-K of El Paso Energy
Partners, L.P. for the year ended December 31, 2000, have been so incorporated
in reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements incorporated in this Registration Statement by
reference to the Current Report on Form 8-K dated August 28, 2001 of El Paso
Energy Partners, L.P. have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Poseidon Oil Pipeline Company, L.L.C.
incorporated in this Registration Statement by reference to our Annual Report on
Form 10-K for the year ended December 31, 2000 have been so incorporated in
reliance upon the report of Arthur Andersen LLP, independent accountants, and
upon the authority of said firm as experts in auditing and accounting.
Information derived from the report of Netherland, Sewell & Associates,
Inc., independent petroleum engineers, with respect to estimated oil and natural
gas reserves of El Paso Energy Partners, L.P. and its subsidiaries incorporated
in this Registration Statement by reference have been so incorporated in
reliance upon the authority of said firm as experts with respect to such matters
contained in their report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy any reports, statements or other information filed by us at the SEC's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, NW,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our filings with the SEC are also
available to the public from commercial document retrieval services and at the
SEC's web site at http://www.sec.gov.
We "incorporate by reference" information into this prospectus, which means
that we disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this prospectus, except for any information
superceded by information contained directly in this prospectus. The documents
listed below and any future filings we make with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act are incorporated by reference into this
prospectus and contain important information about us and our financial
condition.
- Annual Report on Form 10-K for the year ended December 31, 2000;
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92
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001; and
- Current Reports on Form 8-K filed January 30, 2001; February 13, 2001;
March 6, 2001; March 15, 2001; March 21, 2001; March 27, 2001; May 7,
2001; May 14, 2001; May 24, 2001 and August 28, 2001.
You may request a copy of any of these filings, at no cost, by writing or
telephoning us at the following address or phone number:
El Paso Energy Partners, L.P.
4 East Greenway Plaza
Houston, Texas 77046
(832) 676-5332
Attention: Investor Relations
TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO LATER THAN
SEPTEMBER 21, 2001.
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements relate to analyses and other information which are based
on forecasts of future results and estimates of amounts not yet determinable.
These statements also relate to our future prospects, developments and business
strategies.
These forward-looking statements are identified by their use of terms and
phrases such as "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will," and similar terms and
phrases, including references to assumptions. These statements are contained in
the sections entitled "Summary," "Risk Factors," and other sections of this
prospectus and in the documents incorporated by reference in this prospectus.
These forward-looking statements involve risks and uncertainties that may
cause our actual future activities and results of operations to be materially
different from those suggested or described in this prospectus. These risks
include the risks that are identified in this prospectus, which are primarily
listed in the "Risk Factors" section. These risks are also specifically
described in our Annual Report on Form 10-K, Quarterly Report on Form 10-Q and
Current Reports on Forms 8-K and other documents we have filed with the
Securities and Exchange Commission. We undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future or otherwise. If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, our actual results
may vary materially from those expected, estimated or projected.
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ANNEX A
LETTER OF TRANSMITTAL
94
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
8 1/2% SERIES A SENIOR SUBORDINATED NOTES DUE 2011
OF
EL PASO ENERGY PARTNERS, L.P.
EL PASO ENERGY PARTNERS FINANCE CORPORATION
PURSUANT TO THE PROSPECTUS DATED , 2001
THIS OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON SEPTEMBER 28, 2001
UNLESS EXTENDED BY EL PASO ENERGY PARTNERS, L.P. AND EL PASO ENERGY PARTNERS
FINANCE CORPORATION IN THEIR SOLE DISCRETION (THE "EXPIRATION DATE"). TENDERS OF
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE CHASE MANHATTAN BANK
By Mail: By Facsimile: By Hand:
The Chase Manhattan Bank (713) 577-5200 The Chase Manhattan Bank
600 Travis, Suite 1150 Attention: Mauri J. Cowen 600 Travis, Suite 1150
Houston, Texas 77002 Houston, Texas 77002
Attention: Mauri J. Cowen Attention: Mauri J. Cowen
Confirm by Telephone:
(713) 216-6686
Attention: Mauri J. Cowen
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN
AS LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE SERIES B NOTES PURSUANT TO THE
EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR SERIES A NOTES TO
THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
This Letter of Transmittal is to be used by holders ("Holders") of 8 1/2%
Series A Senior Subordinated Notes due 2011 (the "Series A Notes") of El Paso
Energy Partners, L.P. and El Paso Energy Partners Finance Corporation (together,
the "Issuers") to receive 8 1/2% Series B Senior Subordinated Notes due 2011
(the "Series B Notes") if: (i) certificates representing Series A Notes are to
be physically delivered to the Exchange Agent herewith by such Holders; (ii)
tender of Series A Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC") pursuant to the
procedures set forth under the caption "The Exchange Offer -- Procedures for
Tendering Series A Notes -- Book-Entry Delivery Procedures" in the Prospectus
dated , 2001 (the "Prospectus"); or (iii) tender of Series A Notes is
to be made according to the guaranteed delivery procedures set forth under the
caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Guaranteed Delivery" in the Prospectus, and, in each case, instructions
are not being transmitted through the DTC Automated Tender Offer Program
("ATOP"). The undersigned hereby acknowledges receipt of the Prospectus. All
capitalized terms used herein and not defined shall have the meanings ascribed
to them in the Prospectus.
Holders of Series A Notes that are tendering by book-entry transfer to the
Exchange Agent's account at DTC can execute the tender through ATOP, for which
the transaction will be eligible. DTC participants that are accepting the
exchange offer as set forth in the Prospectus and this Letter of Transmittal
(together, the
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95
"Exchange Offer") must transmit their acceptance to DTC which will edit and
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send an Agent's Message to the Exchange Agent for
its acceptance. Delivery of the Agent's Message by DTC will satisfy the terms of
the Offer as to execution and delivery of a Letter of Transmittal by the
participant identified in the Agent's Message. DTC participants may also accept
the Exchange Offer by submitting a notice of guaranteed delivery through ATOP.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If a Holder desires to tender Series A Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Series A Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, then such Holder must tender such Series A Notes
according to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Procedures for Tendering Series A Notes -- Guaranteed
Delivery" in the Prospectus. See Instruction 2.
The undersigned should complete, execute and deliver this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
TENDER OF SERIES A NOTES
================================================================================
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:___________________________________________
Account Number:__________________________________________________________
Transaction Code Number:_________________________________________________
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):_________________________________________
Window Ticker Number (if any):___________________________________________
Date of Execution of Notice of Guaranteed Delivery:______________________
Name of Eligible Institution that Guaranteed Delivery:___________________
_________________________________________________________________________
================================================================================
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List below the Series A Notes to which this Letter of Transmittal relates.
The name(s) and address(es) of the registered Holder(s) should be printed, if
not already printed below, exactly as they appear on the Series A Notes tendered
hereby. The Series A Notes and the principal amount of Series A Notes that the
undersigned wishes to tender would be indicated in the appropriate boxes. If the
space provided is inadequate, list the certificate number(s) and principal
amount(s) on a separately executed schedule and affix the schedule to this
Letter of Transmittal.
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SERIES A NOTES
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) TOTAL PRINCIPAL
(PLEASE FILL IN IF BLANK) CERTIFICATE AGGREGATE PRINCIPAL PRINCIPAL AMOUNT AMOUNT OF
SEE INSTRUCTION 3. NUMBER(S)* AMOUNT REPRESENTED** TENDERED** SERIES A NOTES
- ------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise specified, the entire aggregate principal amount represented by the Series A
Notes described above will be deemed to be tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to El Paso Energy Partners, L.P. and El Paso
Energy Partners Finance Corporation (together, the "Issuers"), upon the terms
and subject to the conditions set forth in its Prospectus dated , 2001
(the "Prospectus"), receipt of which is hereby acknowledged, and in accordance
with this Letter of Transmittal (which together constitute the "Exchange
Offer"), the principal amount of Series A Notes indicated in the foregoing table
entitled "Description of Series A Notes" under the column heading "Principal
Amount Tendered." The undersigned represents that it is duly authorized to
tender all of the Series A Notes tendered hereby which it holds for the account
of beneficial owners of such Series A Notes ("Beneficial Owner(s)") and to make
the representations and statements set forth herein on behalf of such Beneficial
Owner(s).
Subject to, and effective upon, the acceptance for purchase of the
principal amount of Series A Notes tendered herewith in accordance with the
terms and subject to the conditions of the Exchange Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Issuers, all
right, title and interest in and to all of the Series A Notes tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
the true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Issuers) with
respect to such Series A Notes, with full powers of substitution and revocation
(such power of attorney being deemed to be an irrevocable power coupled with an
interest) to (i) present such Series A Notes and all evidences of transfer and
authenticity to, or transfer ownership of, such Series A Notes on the account
books maintained by DTC to, or upon the order of, the Issuers, (ii) present such
Series A Notes for transfer of ownership on the books of the Issuers, and (iii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of such Series A Notes, all in accordance with the terms and conditions of the
Exchange Offer as described in the Prospectus.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that:
(1) the Series B Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being
acquired by the undersigned and any Beneficial Owner(s) in the ordinary
course of business of the undersigned and any Beneficial Owner(s),
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97
(2) the undersigned and each Beneficial Owner are not participating,
do not intend to participate, and have no arrangement or understanding with
any person to participate, in the distribution of the Series B Notes,
(3) except as indicated below, neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), of the Issuers, and
(4) the undersigned and each Beneficial Owner acknowledge and agree
that (x) any person participating in the Exchange Offer with the intention
or for the purpose of distributing the Series B Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale of the Series B Notes acquired by such
person with a registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Securities and
Exchange Commission (the "SEC") and cannot rely on the interpretation of
the Staff of the SEC set forth in the no-action letters that are noted in
the section of the Prospectus entitled "The Exchange Offer -- Registration
Rights" and (y) any broker-dealer that pursuant to the Exchange Offer
receives Series B Notes for its own account in exchange for Series A Notes
which it acquired for its own account as a result of market-making
activities or other trading activities must deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of
such Series B Notes.
If the undersigned is a broker-dealer that will receive Series B Notes for
its own account in exchange for Series A Notes that were acquired as the result
of market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Series B Notes.
By so acknowledging and by delivering a prospectus, a broker-dealer shall not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
The undersigned understands that tenders of Series A Notes may be withdrawn
by written notice of withdrawal received by the Exchange Agent at any time prior
to the Expiration Date in accordance with the Prospectus. In the event of a
termination of the Exchange Offer, the Series A Notes tendered pursuant to the
Exchange Offer will be returned to the tendering Holders promptly (or, in the
case of Series A Notes tendered by book-entry transfer, such Series A Notes will
be credited to the account maintained at DTC from which such Series A Notes were
delivered). If the Issuers make a material change in the terms of the Exchange
Offer or the information concerning the Exchange Offer or waives a material
condition of such Exchange Offer, the Issuers will disseminate additional
Exchange Offer materials and extend such Exchange Offer, if and to the extent
required by law.
The undersigned understands that the tender of Series A Notes pursuant to
any of the procedures set forth in the Prospectus and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Exchange Offer. The Issuers' acceptance for exchange of Series A Notes tendered
pursuant to any of the procedures described in the Prospectus will constitute a
binding agreement between the undersigned and the Issuers in accordance with the
terms and subject to the conditions of the Exchange Offer. For purposes of the
Exchange Offer, the undersigned understands that validly tendered Series A Notes
(or defectively tendered Series A Notes with respect to which the Issuers have,
or have caused to be, waived such defect) will be deemed to have been accepted
by the Issuers if, as and when the Issuers give oral or written notice thereof
to the Exchange Agent.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Series A Notes
tendered hereby, and that when such tendered Series A Notes are accepted for
purchase by the Issuers, the Issuers will acquire good title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim or right. The undersigned and each Beneficial Owner will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or by the Issuers to be necessary or desirable to complete the sale,
assignment and transfer of the Series A Notes tendered hereby.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall not be affected by, and shall survive the death or incapacity
of the undersigned and any Beneficial Owner(s), and any obligation
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98
of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon
the heirs, executors, administrators, trustees in bankruptcy, personal and legal
representatives, successors and assigns of the undersigned and such Beneficial
Owner(s).
The undersigned understands that the delivery and surrender of any Series A
Notes is not effective, and the risk of loss of the Series A Notes does not pass
to the Exchange Agent or the Issuers, until receipt by the Exchange Agent of
this Letter of Transmittal, or a manually signed facsimile hereof, properly
completed and duly executed, together with all accompanying evidences of
authority and any other required documents in form satisfactory to the Issuers.
All questions as to form of all documents and the validity (including time of
receipt) and acceptance of tenders and withdrawals of Series A Notes will be
determined by the Issuers, in their discretion, which determination shall be
final and binding.
Unless otherwise indicated herein under "Special Issuance Instructions,"
the undersigned hereby requests that any Series A Notes representing principal
amounts not tendered or not accepted for exchange be issued in the name(s) of
the undersigned (and in the case of Series A Notes tendered by book-entry
transfer, by credit to the account of DTC), and Series B Notes issued in
exchange for Series A Notes pursuant to the Exchange Offer be issued to the
undersigned. Similarly, unless otherwise indicated herein under "Special
Delivery Instructions," the undersigned hereby requests that any Series A Notes
representing principal amounts not tendered or not accepted for exchange and
Series B Notes issued in exchange for Series A Notes pursuant to the Exchange
Offer be delivered to the undersigned at the address shown below the
undersigned's signature(s). In the event that the "Special Issuance
Instructions" box or the "Special Delivery Instructions" box is, or both are,
completed, the undersigned hereby requests that any Series A Notes representing
principal amounts not tendered or not accepted for purchase be issued in the
name(s) of, certificates for such Series A Notes be delivered to, and Series B
Notes issued in exchange for Series A Notes pursuant to the Exchange Offer be
issued in the name(s) of, and be delivered to, the person(s) at the address(es)
so indicated, as applicable. The undersigned recognizes that the Issuers have no
obligation pursuant to the "Special Issuance Instructions" box or "Special
Delivery Instructions" box to transfer any Series A Notes from the name of the
registered Holder(s) thereof if the Issuers do not accept for exchange any of
the principal amount of such Series A Notes so tendered.
[ ] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD SERIES A NOTES
IS AN AFFILIATE OF THE ISSUERS.
[ ] CHECK HERE IF YOU OR ANY BENEFICIAL OWNER FOR WHOM YOU HOLD SERIES A NOTES
TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED SUCH NOTES DIRECTLY FROM THE
ISSUERS OR AN AFFILIATE OF THE ISSUERS.
[ ] CHECK HERE AND COMPLETE THE LINES BELOW IF YOU OR ANY BENEFICIAL OWNER FOR
WHOM YOU HOLD SERIES A NOTES TENDERED HEREBY IS A BROKER-DEALER WHO ACQUIRED
SUCH NOTES IN MARKET-MAKING OR OTHER TRADING ACTIVITIES. IF THIS BOX IS
CHECKED, THE ISSUERS WILL SEND 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO TO YOU OR SUCH BENEFICIAL
OWNER AT THE ADDRESS SPECIFIED IN THE FOLLOWING LINES.
Name:
-------------------------------------------
Address:
----------------------------------------
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================================================================================
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Series A Notes in a principal amount not
tendered or not accepted for exchange are to be issued in the name of, or
Series B Notes are to be issued in the name of, someone other than the
person(s) whose signature(s) appear(s) within this Letter of Transmittal
or issued to an address different from that shown in the box entitled
"Description of Series A Notes" within this Letter of Transmittal.
Issue: [ ] Series A Notes [ ] Series B Notes
(check as applicable)
Name
-------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
(PLEASE PRINT)
-------------------------------------------------------------------------
(ZIP CODE)
-------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
================================================================================
================================================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if Series A Notes in a principal amount not
tendered or not accepted for exchange or Series B Notes are to be sent to
someone other than the person(s) whose signature(s) appear(s) within this
Letter of Transmittal or to an address different from that shown in the
box entitled "Description of Series A Notes" within this Letter of
Transmittal.
Issue: [ ] Series A Notes [ ] Series B Notes
(check as applicable)
Name
-------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
(PLEASE PRINT)
-------------------------------------------------------------------------
(ZIP CODE)
-------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 HEREIN)
================================================================================
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================================================================================
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS OF SERIES A NOTES
REGARDLESS OF WHETHER SERIES A NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
This Letter of Transmittal must be signed by the registered Holder(s)
exactly as name(s) appear(s) on certificate(s) for Series A Notes or, if
tendered by a participant in DTC exactly as such participant's name appears on a
security position listing as owner of Series A Notes, or by the person(s)
authorized to become registered Holder(s) by endorsements and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Registered Holder(s) or Authorized Signatory
(See guarantee requirement below)
Dated:
- --------------------------------------------------------------------------------
Name(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (Full Title):
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Tax Identification or Social Security Number:
- --------------------------------------------------------------------------------
COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9
================================================================================
================================================================================
SIGNATURE GUARANTEE
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Name of Firm)
================================================================================
[PLACE SEAL HERE]
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INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Signature Guarantees. Signatures of this Letter of Transmittal must be
guaranteed by a recognized member of the Medallion Signature Guarantee Program
or by any other "eligible guarantor institution," as such term is defined in
Rule 17Ad-15 promulgated under the Exchange Act (each of the foregoing, an
"Eligible Institution"), unless the Series A Notes tendered hereby are tendered
(i) by a registered Holder of Series A Notes (or by a participant in DTC whose
name appears on a security position listing as the owner of such Series A Notes)
that has not completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" on this Letter of
Transmittal, or (ii) for the account of an Eligible Institution. If the Series A
Notes are registered in the name of a person other than the signer of this
Letter of Transmittal, if Series A Notes not accepted for exchange or not
tendered are to be returned to a person other than the registered Holder or if
Series B Notes are to be issued in the name of or sent to a person other than
the registered Holder, then the signatures on this Letter of Transmittal
accompanying the tendered Series A Notes must be guaranteed by an Eligible
Institution as described above. See Instruction 5.
2. Delivery of Letter of Transmittal and Series A Notes. This Letter of
Transmittal is to be completed by Holders if (i) certificates representing
Series A Notes are to be physically delivered to the Exchange Agent herewith by
such Holders; (ii) tender of Series A Notes is to be made by book-entry transfer
to the Exchange Agent's account at DTC pursuant to the procedures set forth
under the caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Book-Entry Delivery Procedures" in the Prospectus; or (iii) tender of
Series A Notes is to be made according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer -- Procedures for Tendering Series A
Notes -- Guaranteed Delivery" in the Prospectus. All physically delivered Series
A Notes, or a confirmation of a book-entry transfer into the Exchange Agent's
account at DTC of all Series A Notes delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof), any required signature guarantees and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at one of its addresses set forth on the cover page hereto on or prior to the
Expiration Date, or the tendering Holder must comply with the guaranteed
delivery procedures set forth below. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
If a Holder desires to tender Series A Notes pursuant to the Exchange Offer
and time will not permit this Letter of Transmittal, certificates representing
such Series A Notes and all other required documents to reach the Exchange
Agent, or the procedures for book-entry transfer cannot be completed, on or
prior to the Expiration Date, such Holder must tender such Series A Notes
pursuant to the guaranteed delivery procedures set forth under the caption "The
Exchange Offer -- Procedures for Tendering Series A Notes -- Guaranteed
Delivery" in the Prospectus. Pursuant to such procedures, (i) such tender must
be made by or through an Eligible Institution; (ii) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by the Issuers, or an Agent's Message with respect to guaranteed delivery that
is accepted by the Issuers, must be received by the Exchange Agent, either by
hand delivery, mail, telegram, or facsimile transmission, on or prior to the
Expiration Date; and (iii) the certificates for all tendered Series A Notes, in
proper form for transfer (or confirmation of a book- entry transfer or all
Series A Notes delivered electronically into the Exchange Agent's account at DTC
pursuant to the procedures for such transfer set forth in the Prospectus),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal, or in the case of a book-entry transfer, a properly
transmitted Agent's Message, must be received by the Exchange Agent within two
business days after the date of the execution of the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE SERIES A NOTES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC AND ANY
ACCEPTANCE OR AGENT'S MESSAGE DELIVERED THROUGH ATOP, IS AT THE ELECTION AND
RISK OF THE TENDERING HOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS
INSTRUCTION 2, DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, IT IS SUGGESTED THAT THE HOLDER USE
PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
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AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO
PERMIT DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE.
No alternative, conditional or contingent tenders will be accepted. All
tendering Holders, by execution of this Letter of Transmittal (or a facsimile
thereof), waive any right to receive any notice of the acceptance of their
Series A Notes for exchange.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the principal amount represented by Series A Notes
should be listed on separate signed schedule attached hereto.
4. Partial Tenders. (Not applicable to Holders who tender by book-entry
transfer). If Holders wish to tender less than the entire principal amount
evidenced by a Series A Note submitted, such Holders must fill in the principal
amount that is to be tendered in the column entitled "Principal Amount
Tendered." The minimum permitted tender is $1,000 in principal amount of Series
A Notes. All other tenders must be in integral multiples of $1,000 in principal
amount. In the case of a partial tender of Series A Notes, as soon as
practicable after the Expiration Date, new certificates for the remainder of the
Series A Notes that were evidenced by such Holder's old certificates will be
sent to such Holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal. The entire principal amount that is represented by Series
A Notes delivered to the Exchange Agent will be deemed to have been tendered,
unless otherwise indicated.
5. Signatures on Letter of Transmittal, Instruments of Transfer and
Endorsements. If this Letter of Transmittal is signed by the registered
Holder(s) of the Series A Notes tendered hereby, the signatures must correspond
with the name(s) as written on the face of the certificate(s) without
alteration, enlargement or any change whatsoever. If this Letter of Transmittal
is signed by a participant in DTC whose name is shown as the owner of the Series
A Notes tendered hereby, the signature must correspond with the name shown on
the security position listing as the owner of the Series A Notes.
If any of the Series A Notes tendered hereby are registered in the name of
two or more Holders, all such Holders must sign this Letter of Transmittal. If
any of the Series A Notes tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Series A Note or instrument of
transfer is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to the Issuers of such person's
authority to so act must be submitted.
When this Letter of Transmittal is signed by the registered Holder(s) of
the Series A Notes listed herein and transmitted hereby, no endorsements of
Series A Notes or separate instruments of transfer are required unless Series B
Notes are to be issued, or Series A Notes not tendered or exchanged are to be
issued, to a person other than the registered Holder(s), in which case
signatures on such Series A Notes or instruments of transfer must be guaranteed
by an Eligible Institution.
IF THIS LETTER OF TRANSMITTAL IS SIGNED OTHER THAN BY THE REGISTERED
HOLDER(S) OF THE SERIES A NOTES LISTED HEREIN, THE SERIES A NOTES MUST BE
ENDORSED OR ACCOMPANIED BY APPROPRIATE INSTRUMENTS OF TRANSFER, IN EITHER CASE
SIGNED EXACTLY AS THE NAME(S) OF THE REGISTERED HOLDER(S) APPEAR ON THE SERIES A
NOTES AND SIGNATURES ON SUCH SERIES A NOTES OR INSTRUMENTS OF TRANSFER ARE
REQUIRED AND MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION, UNLESS THE SIGNATURE
IS THAT OF AN ELIGIBLE INSTITUTION.
6. Special Issuance and Delivery Instructions. If certificates for Series
B Notes or unexchanged or untendered Series A Notes are to be issued in the name
of a person other than the signer of this Letter of Transmittal, or if Series B
Notes or such Series A Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown herein, the
appropriate boxes on this Letter of Transmittal should be completed. All Series
A Notes tendered by book-entry transfer and not accepted for payment will be
returned by crediting the account at DTC designated herein as the account for
which such Series A Notes were delivered.
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7. Transfer Taxes. Except as set forth in this Instruction 7, the Issuers
will pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Series A Notes to it, or to its order, pursuant to the Exchange Offer.
If Series B Notes, or Series A Notes not tendered or exchanged are to be
registered in the name of any persons other than the registered owners, or if
tendered Series A Notes are registered in the name of any persons other than the
persons signing this Letter of Transmittal, the amount of any transfer taxes
(whether imposed on the registered Holder or such other person) payable on
account of the transfer to such other person must be paid to the Issuers or the
Exchange Agent (unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted) before the Series B Notes will be issued.
8. Waiver of Conditions. The conditions of the Exchange Offer may be
amended or waived by the Issuers, in whole or in part, at any time and from time
to time in the Issuers' discretion, in the case of any Series A Notes tendered.
9. Substitute Form W-9. Each tendering owner of a Note (or other payee) is
required to provide the Exchange Agent with a correct taxpayer identification
number ("TIN"), generally the owner's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided hereafter under "Important Tax Information," and to
certify that the owner (or other payee) is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
tendering owner (or other payee) to a $50 penalty imposed by the Internal
Revenue Service and 31% federal income tax withholding. The box in Part 3 of the
Substitute Form W-9 may be checked if the tendering owner (or other payee) has
not been issued a TIN and has applied for a TIN or intends to apply for a TIN in
the near future. If the box in Part 3 is checked and the Exchange Agent is not
provided with a TIN within 60 days of the date on the Substitute Form W-9, the
Exchange Agent will withhold 31% until a TIN is provided to the Exchange Agent.
10. Broker-dealers Participating in the Exchange Offer. If no
broker-dealer checks the last box on page 7 of this Letter of Transmittal, the
Issuers have no obligation under the Registration Rights Agreement to allow the
use of the Prospectus for resales of the Series B Notes by broker-dealers or to
maintain the effectiveness of the Registration Statement of which the Prospectus
is a part after the consummation of the Exchange Offer.
11. Requests for Assistance or Additional Copies. Any questions or
requests for assistance or additional copies of the Prospectus, this Letter of
Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange
Agent at the telephone numbers and location listed above. A Holder or owner may
also contact such Holder's or owner's broker, dealer, commercial bank or trust
company or nominee for assistance concerning the Exchange Offer.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES REPRESENTING THE SERIES A NOTES AND ALL OTHER REQUIRED
DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE EXCHANGE
AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, an owner of Series A Notes whose tendered
Series A Notes are accepted for exchange is required to provide the Exchange
Agent with such owner's current TIN on Substitute Form W-9 below. If such owner
is an individual, the TIN is his or her social security number. If the Exchange
Agent is not provided with the correct TIN, the owner or other recipient of
Series B Notes may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, any interest on Series B Notes paid to such owner or other
recipient may be subject to 31% backup withholding tax.
Certain owners of Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that owner must submit to the Exchange Agent a properly
completed Internal Revenue Service Forms W-8ECI, W-8BEN, W-8EXP or W-8IMY
(collectively, a "Form W-8"), signed under penalties of perjury, attesting to
that individual's exempt status. A Form W-8 can be obtained from the
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Exchange Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
Backup withholding is not an additional tax. Rather, the federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding the owner is required to notify the Exchange
Agent of the owner's current TIN (or the TIN of any other payee) by completing
the following form, certifying that the TIN provided on Substitute Form W-9 is
correct (or that such owner is awaiting a TIN), and that (i) the owner is exempt
from withholding, (ii) the owner has not been notified by the Internal Revenue
Service that the owner is subject to backup withholding as a result of failure
to report all interest or dividends or (iii) the Internal Revenue Service has
notified the owner that the owner is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the owner of the Series A
Notes. If the Series A Notes are registered in more than one name or are not
registered in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9," for
additional guidance on which number to report.
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- --------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN Social Security Number(s)
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY or
SIGNING AND DATING BELOW. Employer Identification Number
-------------------------------
- ----------------------------------------------------------------------------------------------------------------
PART 2 -- CERTIFICATION -- Under
DEPARTMENT OF THE penalties of perjury, I certify that:
TREASURY
INTERNAL REVENUE SERVICE (1) The number shown on this form is my
correct taxpayer identification
PAYER'S REQUEST FOR number (or I am waiting for a
TAXPAYER IDENTIFICATION number to be issued to me), and
NO. ("TIN")
(2) I am not subject to backup
withholding because: (a) I am exempt
from backup withholding, or (b) I
have not been notified by the
Internal Revenue Service ("IRS")
that I am subject to backup
withholding as a result of a
failure to report all interest or
dividends, or (c) the IRS has
notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must
cross out item (2) above if you have
been notified by the IRS that you are
currently subject to backup withholding
because of under-reporting interest or
dividends on your tax return.
- ----------------------------------------------------------------------------------------------------------------
Signature
---------------------------------------
Date
---------------------------------------
- ----------------------------------------------------------------------------------------------------------------
PART 3 -- Awaiting TIN [ ]
- ----------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF
31%. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days of the date
in this form, 31% of all reportable cash payments made to me will be withheld
until I provide a taxpayer identification number.
Signature______________________________________________ Date ___________________
- --------------------------------------------------------------------------------
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our partnership agreement provides that we
- will indemnify our general partner, any departing partner and any person
who is or was an officer, director or other representative of our general
partner, any departing partner or us, to the fullest extent permitted by
law, and
- may indemnify, to the fullest extent permitted by law, (1) any person who
is or was an affiliate of our general partner, any departing partner or
us, (2) any person who is or was an employee, partner, agent or trustee
of our general partner, any departing partner, us or any such affiliate,
or (3) any person who is or was serving at our request as an officer,
director, employee, partner, member, agent or other representative of
another corporation, partnership, joint venture, trust, committee or
other enterprise;
(each, as well as any employee, partner, agent or other representative of our
general partner, any departing partner, us or any of their affiliates, an
"Indemnitee") from and against any and all claims, damages, expenses and fines,
whether civil, criminal, administrative or investigative, in which any
Indemnitee may be involved, or is threatened to be involved, as a party or
otherwise, by reason of its status as (1) our general partner, departing
partner, us or an affiliate of either, (2) an officer, director, employee,
partner, agent, trustee or other representative of our general partner, any
departing partner, us or any of their affiliates or (3) a person serving at our
request in any other entity in a similar capacity. Indemnification will be
conditioned on the determination that, in each case, the Indemnitee acted in
good faith, in a manner which such Indemnitee believed to be in, or not opposed
to, our best interests and, with respect to any criminal proceeding, had no
reasonable cause to believe its conduct was unlawful.
The above indemnification may result in indemnification of Indemnitees for
negligent acts, and may include indemnification for liabilities under the
Securities Act. We have been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. Any indemnification under these provisions will be
only out of our assets. We are authorized to purchase (or to reimburse our
general partner or its affiliates for the cost of) insurance against liabilities
asserted against and expenses incurred by such persons in connection with our
activities, whether or not we would have the power to indemnify such person
against such liabilities under the provisions described above.
Subject to any terms, conditions or restrictions set forth in the
Partnership Agreement, Section 17-108 of the Delaware Revised Uniform Limited
Partnership Act empowers a Delaware limited partnership to indemnify and hold
harmless any partner or other person from and against all claims and demands
whatsoever.
Section 145(a) of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a Delaware corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses actually
and reasonably incurred by him in connection with the defense or settlement of
such action or suit if he acted under similar standards, except that no
II-1
107
indemnification may be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue, or matter therein, he shall be indemnified against any expenses
actually and reasonably incurred by him in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of a director,
officer, employee or agent of the corporation against any liability asserted
against him or incurred by him in any such capacity or arising out of his status
as such whether or not the corporation would have the power to indemnify him
against such liabilities under Section 145.
Section 102(b)(7) of the DGCL provides that a corporation in its original
certificate of incorporation or an amendment thereto validly approved by
stockholders may eliminate or limit personal liability of members of its board
of directors or governing body for breach of a director's fiduciary duty.
However, no such provision may eliminate or limit the liability of a director
for breaching his duty of loyalty, failing to act on good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was illegal or obtaining an improper personal
benefit. A provision of this type has no effect on the availability of equitable
remedies, such as injunction or rescission, for breach of fiduciary duty.
The Certificate of Incorporation of our general partner contains a
provision which limits the liability of the directors of our general partner to
our general partner or its stockholder (in their capacity as directors but not
in their capacity as officers) to the fullest extent permitted by the DGCL. In
addition, the Amended and Restated Bylaws of our general partner (as amended and
restated, the "Bylaws"), in substance, require our general partner to indemnify
each person who is or was a director, officer, employee or agent of our general
partner to the full extent permitted by the laws of the State of Delaware in the
event such person is involved in legal proceedings by reason of the fact that he
is or was a director, officer, employee or agent of our general partner, or is
or was serving at our general partner's request as a director, officer, employee
or agent of our general partner and its subsidiaries, another corporation,
partnership or other enterprise. Our general partner is also required to advance
to such persons payments incurred in defending a proceeding to which
indemnification might apply, provided the recipient provides an undertaking
agreeing to repay all such advanced amounts if it is ultimately determined that
he is not entitled to be indemnified. In addition, the Bylaws specifically
provide that the indemnification rights granted thereunder are non-exclusive.
Our general partner has entered into indemnification agreements with
certain of its current and past directors providing for indemnification to the
full extent permitted by the laws of the State of Delaware. These agreements
provide for specific procedures to assure the directors' rights to
indemnification, including procedures for directors to submit claims, for
determination of directors' entitlement to indemnification (including the
allocation of the burden of proof and selection of a reviewing party) and for
enforcement of directors' indemnification rights.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us or our general
partner pursuant to the foregoing, us and our general partner have been informed
that in the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Reference is made to Exhibit 1.1 hereto, which will contain provisions for
indemnification of us, our general partner and its directors, officers, and any
controlling persons, against certain liabilities for information furnished by
the underwriters and/or agents, as applicable, expressly for use in a prospectus
supplement.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
1.1* -- Purchase Agreement dated May 11, 2001 among El Paso
Energy Partners, L.P., El Paso Energy Partners Finance
Corporation, the Subsidiary Guarantors listed on Schedule
A thereto, Credit Suisse First Boston Corporation,
Goldman, Sachs & Co. and J.P. Morgan Securities Inc.
4.1* -- Indenture dated May 17, 2001 among El Paso Energy
Partners, L.P., El Paso Energy Partners Finance
Corporation, the Subsidiary Guarantors named therein and
The Chase Manhattan Bank, as Trustee.
4.2* -- Form of 8 1/2% Note (contained in the Indenture filed as
Exhibit 4.1).
4.3* -- A/B Exchange Registration Rights Agreement dated as of
May 17, 2001 between El Paso Energy Partners, El Paso
Energy Partners Finance Corporation, the Subsidiary
Guarantors listed on Schedule A thereto, Credit Suisse
First Boston Corporation, Goldman, Sachs & Co. and J.P.
Morgan Securities Inc.
5.1* -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as
to the legality of the securities being offered.
12.1** -- Calculation of Earnings to Fixed Charges.
23.1* -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in its opinion filed as Exhibit 5 hereto).
23.2** -- Consent of PricewaterhouseCoopers LLP.
23.3* -- Consent of Arthur Andersen LLP.
23.4* -- Consent of Netherland, Sewell & Associates, Inc.
24.1* -- Power of attorney (included on signature page).
25.1* -- Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
- -------------------------
* Previously filed.
** Filed herewith.
(b) Financial Statement Schedules
No financial statement schedules are included herein. All other schedules
for which provision is made in the applicable accounting regulation of the
Commission are not required under the related instructions, are inapplicable, or
the information is included in the consolidated financial statements, and have
therefore been omitted.
(c) Reports, Opinions, and Appraisals
None.
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ITEM 22. UNDERTAKINGS.
(a) Regulation S-K, Item 512 Undertakings
(1) The undersigned registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) Registration on Form S-4 of Securities Offered for Resale.
(i) The undersigned hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through the use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the
applicable form.
(ii) The registrant undertakes that every prospectus: (a) that is
filed pursuant to the paragraph immediately preceding, or (b) that
purports to meet the requirements of section 10(a)(3) of the Act and is
used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement
and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the
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securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became
effective.
II-5
111
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants have
duly caused this registration statement or amendment thereto to be signed on
their behalf by the undersigned, thereunto duly authorized, in the city of
Houston, state of Texas, on August 28, 2001.
EL PASO ENERGY PARTNERS, L.P.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
EL PASO ENERGY PARTNERS FINANCE
CORPORATION
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
ARGO II, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
CRYSTAL HOLDING, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
CRYSTAL PROPERTIES AND TRADING
COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
DELOS OFFSHORE COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
II-6
112
EL PASO ENERGY PARTNERS DEEPWATER,
L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
EL PASO ENERGY PARTNERS OIL
TRANSPORT, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
EL PASO ENERGY PARTNERS OPERATING
COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
EWING BANK GATHERING COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
FIRST RESERVE GAS, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
FLEXTREND DEVELOPMENT COMPANY,
L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
II-7
113
GREEN CANYON PIPE LINE COMPANY, L.P.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
HATTIESBURG GAS STORAGE COMPANY
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
HATTIESBURG INDUSTRIAL GAS SALES
COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
MANTA RAY GATHERING COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
PETAL GAS STORAGE COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
POSEIDON PIPELINE COMPANY, L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
II-8
114
VIOSCA KNOLL GATHERING COMPANY
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
VK DEEPWATER GATHERING COMPANY,
L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
VK-MAIN PASS GATHERING COMPANY,
L.L.C.
By: /s/ KEITH B. FORMAN
-------------------------------------
Name: Keith B. Forman
Title: Vice President and Chief
Financial Officer
II-9
115
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement or amendment thereto has been signed by the
following persons in the capacities and on the dates indicated below:
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board and August 28, 2001
- --------------------------------------------------- Director
William A. Wise
* Chief Executive Officer and August 28, 2001
- --------------------------------------------------- Director
Robert G. Phillips
* Vice President and August 28, 2001
- --------------------------------------------------- Chief Financial Officer
Keith B. Forman
* President and Director August 28, 2001
- ---------------------------------------------------
James H. Lytal
* Senior Vice President and August 28, 2001
- --------------------------------------------------- Controller (Chief Accounting
D. Mark Leland Officer)
* Executive Vice President and August 28, 2001
- --------------------------------------------------- Director
H. Brent Austin
* Director August 28, 2001
- ---------------------------------------------------
Michael B. Bracy
* Director August 28, 2001
- ---------------------------------------------------
H. Douglas Church
* Director August 28, 2001
- ---------------------------------------------------
Malcolm Wallop
*By:/s/ H. BRENT AUSTIN
- ---------------------------------------------------
H. Brent Austin
Attorney-in-fact
II-10
116
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
1.1* -- Purchase Agreement dated May 11, 2001 among El Paso
Energy Partners, L.P., El Paso Energy Partners Finance
Corporation, the Subsidiary Guarantors listed on Schedule
A thereto, Credit Suisse First Boston Corporation,
Goldman, Sachs & Co. and J.P. Morgan Securities Inc.
4.1* -- Indenture dated May 17, 2001 among El Paso Energy
Partners, L.P., El Paso Energy Partners Finance
Corporation, the Subsidiary Guarantors named therein and
The Chase Manhattan Bank, as Trustee.
4.2* -- Form of 8 1/2% Note (contained in the Indenture filed as
Exhibit 4.1).
4.3* -- A/B Exchange Registration Rights Agreement dated as of
May 17, 2001 between El Paso Energy Partners, El Paso
Energy Partners Finance Corporation, the Subsidiary
Guarantors listed on Schedule A thereto, Credit Suisse
First Boston Corporation, Goldman, Sachs & Co. and J.P.
Morgan Securities Inc.
5.1* -- Opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. as
to the legality of the securities being offered.
12.1** -- Calculation of Earnings to Fixed Charges.
23.1* -- Consent of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
(included in its opinion filed as Exhibit 5 hereto).
23.2** -- Consent of PricewaterhouseCoopers LLP.
23.3* -- Consent of Arthur Andersen LLP.
23.4* -- Consent of Netherland, Sewell & Associates, Inc.
24.1* -- Power of attorney (included on signature page).
25.1* -- Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of The Chase Manhattan Bank.
- -------------------------
*Previously filed.
** Filed herewith.
1
EXHIBIT 12.1
EL PASO ENERGY PARTNERSHIP, L.P.
COMPUTATION OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS
(DOLLARS IN THOUSANDS)
FOR THE
SIX
MONTHS
ENDED
JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
2001 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- --------
Earnings
Pre-tax income (loss) from continuing operations $ 24,817 $ 20,192 $ 18,382 $ 275 $ (1,449) 37,891
Minority interest in consolidated subsidiaries 100 95 197 15 (7) 427
Income from equity investees 344 (22,931) (32,814) (26,724) (29,327) (20,434)
-------- -------- -------- -------- -------- --------
Pre-tax income (loss) from continuing operations before
minority interest in consolidated subsidiaries and income
from equity investees 25,261 (2,644) (14,235) (26,434) (30,783) 17,884
Fixed charges 26,126 51,184 37,336 21,330 15,883 17,939
Distributed income of equity investees 17,182 33,960 46,180 31,171 27,135 36,823
Capitalized interest (6,230) (4,005) (1,799) (1,066) (1,721) (11,910)
Minority interest in consolidated subsidiaries (100) (95) (197) (15) 7 (427)
-------- -------- -------- -------- -------- --------
Totals earnings available for fixed charges $ 62,239 $ 78,400 $ 67,285 $ 24,986 $ 10,521 60,309
======== ======== ======== ======== ======== ========
Fixed charges
Interest and debt expense $ 25,996 $ 51,077 $ 37,122 $ 21,308 $ 15,890 17,470
Interest component of rent 30 12 17 7 -- 42
Minority interest in consolidated subsidiaries 100 95 197 15 (7) 427
-------- -------- -------- -------- -------- --------
Total fixed charges $ 26,126 $ 51,184 $ 37,336 $ 21,330 $ 15,883 $ 17,939
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges (1) 2.38 1.53 1.80 1.17 - (2) 3.36
======== ======== ======== ======== ======== ========
(1) The ratio of earnings to combined fixed charges and preferred
and preference stock dividend requirements for the periods presented
is the same as the ratio of earnings to fixed charges since El Paso
has no outstanding preferred stock or preference stock and, therefore,
no dividend requirements.
(2) Earnings were inadequate to cover fixed charges by $5,362 for 1997.
For purposes of calculating these ratios: (i) "fixed charges"
represent interest cost (exclusive of interest on rate refunds),
amortization of debt costs, the estimated portion of rental expense
representing the interest factor, pretax preferred stock dividend
requirements of consolidated subsidiaries, and minority interests in
consolidated subsidiaries; and (ii) "earnings" represent the aggregate
of pre-tax income (loss) from continuing operations before adjustment
for minority interest in consolidated subsidiaries and income from
equity investees, fixed charges, and distributed income of equity
investees, less capitalized interest, minority interest in
consolidated subsidiaries, and preferred stock dividend requirement of
consolidated subsidiaries.
1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-4 (No. 333-63800) of El Paso Energy Partners,
L.P. (the "Partnership"), El Paso Energy Partners Finance Corporation, and the
Subsidiary Guarantors listed therein of (i) our report dated March 7, 2001
relating to the consolidated financial statements of the Partnership and
subsidiaries, (ii) our report dated March 28, 2001 relating to the consolidated
financial statements of Deepwater Holdings, L.L.C., (iii) our report dated March
29, 2001 relating to the consolidated financial statements of Neptune Pipeline
Company, L.L.C., (iv) our report dated March 28, 2001 relating to the financial
statements of Manta Ray Gathering Company, L.L.C., (v) our report dated March
28, 2001 relating to the financial statements of Ewing Bank Gathering Company,
L.L.C., (vi) our report dated March 28, 2001 relating to the financial
statements of El Paso Energy Partners Operating Company, L.L.C., (vii) our
report dated March 28, 2001 relating to the financial statements of VK - Main
Pass Gathering Company, L.L.C., (viii) our report dated March 28, 2001 relating
to the financial statements of El Paso Energy Partners Deepwater, L.L.C., (ix)
our report dated March 28, 2001 relating to the financial statements of Delos
Offshore Company, L.L.C., (x) our report dated March 28, 2001 relating to the
consolidated financial statements of VK - Deepwater Gathering Company, L.L.C.,
(xi) our report dated March 28, 2001 relating to the financial statements of El
Paso Energy Partners Oil Transport, L.L.C., (xii) our report dated March 28,
2001 relating to the financial statements of Poseidon Pipeline Company, L.L.C.,
(xiii) our report dated March 28, 2001 relating to the financial statements of
Flextrend Development Company, L.L.C., (xiv) our report dated March 28, 2001
relating to the consolidated financial statements of Crystal Holding, L.L.C. and
(xv) our report dated March 28, 2001 relating to the financial statements of
Green Canyon Pipeline Company, L.P., each of which appears in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2000. We hereby
consent to the incorporation by reference in such registration statement of our
reports dated August 24, 2001 relating to the consolidated balance sheet of El
Paso Energy Partners Company and the balance sheets of El Paso Energy Partners
Finance Corporation, which appear in the Partnership's Current Report on Form
8-K dated August 28, 2001. We also consent to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
August 28, 2001
