As filed with the United States Securities and Exchange
Commission on February 7, 2000.
Registration No. 333-95195
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
McMoRan Exploration Co.
(Exact name of registrant as specified in its charter)
Delaware 1615 Poydras Street 72-1424200
(State or other New Orleans, Louisiana 70112 (I.R.S. Employer
jurisdiction of incorporation (504) 582-4000 Identification Number)
or organization) (Address, including zip code,
and telephone number, including
area code, of registrant's
principal executive offices)
Copy to:
John G. Amato L. R. McMillan, II
General Counsel Jones, Walker, Waechter,
McMoRan Exploration Co. Poitevent, Carrere & Denegre,
1615 Poydras Street L.L.P.
New Orleans, Louisiana 70112 201 St. Charles Avenue, 51st
(504) 582-4000 Floor
(Name, address, including zip New Orleans, Louisiana 70170
code, and telephone (504) 582-8188
number, including area code,
of agent for service)
Approximate date of commencement of proposed sale to the public:
From time to time after this registration statement becomes
effective.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. __
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, please check the following box. x
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please 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(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. __
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. __
CALCULATION OF REGISTRATION FEE
==============================================================================
Proposed Proposed
maximum maximum
Title of each Amount offering aggregate
class of securities to be price per offering Amount of
to be registered registered(1) unit(2) price(2) registration fee
------------------------------------------------------------------------------
Common Stock(3)
Preferred Stock(4)
Depositary Shares(5)
Debt Securities(6) $300,000,000(8)(9) 100% $300,000,000 $79,200
Warrants(7)
==============================================================================
(1)In United States dollars or the equivalent in one or more
foreign currencies or currency units or composite currencies,
including the European currency unit.
(2)Estimated solely for purposes of calculating the registration
fee pursuant to Rule 457.
(3)Subject to note (8) below, we are registering an
indeterminate number of shares of common stock that we may
issue from time to time at indeterminate prices, including
shares issuable upon conversion of (a) debt securities that
are convertible into common stock or (b) preferred stock (or
depositary shares representing preferred stock) that is
convertible into common stock, and including shares issuable
upon exercise of warrants to purchase common stock.
(4)Subject to note (8) below, we are registering an
indeterminate number of shares of preferred stock that we may
issue from time to time at indeterminate prices, including
shares issuable upon conversion of debt securities that are
convertible into preferred stock, and including shares
issuable upon exercise of warrants to purchase preferred
stock. Shares of preferred stock may be convertible into
shares of common stock.
(5)Subject to note (8) below, we are registering an
indeterminate number of depositary shares that will be
evidenced by depositary receipts issued pursuant to a deposit
agreement. If we elect to offer fractional interests in
shares of preferred stock, the depositary receipts will be
distributed to those persons acquiring the fractional
interests, and the shares of preferred stock will be issued
to the depositary under the deposit agreement.
(6)Subject to note (8) below, we are registering an
indeterminate amount of debt securities that we may issue
from time to time at indeterminate prices. The debt
securities may be convertible into common stock.
(7)Subject to note (8) below, we are registering an
indeterminate number of warrants that we may issue from time
to time at indeterminate prices entitling the holder to
purchase shares of common stock, preferred stock or debt
securities.
(8)Represents the principal amount of any debt securities issued
at, or at a premium to, their principal amounts, and the
issue price rather than the principal amount of any debt
securities issued at an original issue discount; the
liquidation preference of any preferred stock; the amount
computed pursuant to Rule 457(c) for any common stock; the
issue price of any warrants; and the exercise price of any
warrants; all of which together will not exceed $300,000,000.
(9)No separate cash consideration will be received for (a)
common stock or preferred stock issuable upon conversion or
exchange of other securities registered, or (b) depositary
shares issued with respect to preferred stock.
________________
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 this registration statement
shall become effective on such date as the Commission, acting
pursuant to Section 8(a), may determine.
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and does not solicit an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated February 7, 2000
Prospectus
$300,000,000
McMoRan Exploration Co.
_______________
We may use this prospectus to offer the following
securities for sale:
. Common stock
. Preferred stock
. Depositary shares
. Debt securities
. Warrants
We will provide the specific terms of the
securities we are offering in supplements to this
prospectus. A supplement may also update or change
information contained in this prospectus. This
prospectus may not be used to sell securities unless
accompanied by a prospectus supplement.
We may sell securities directly to one or more
purchasers or to or through underwriters, dealers or
agents. If any underwriters, dealers or agents are
involved in the sale of securities, the accompanying
prospectus supplement will set forth their names, the
principal amounts, if any, to be purchased by
underwriters, any applicable fees, commissions or
discounts, and the net proceeds to be received by us.
Our common stock is traded on the New York Stock
Exchange under the symbol "MMR."
You should carefully consider the risks described
under the caption "Risk Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved these securities or passed on the adequacy
or accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
The date of this prospectus is_______ , 2000.
THE COMPANY
We engage in the exploration, development and production of
oil and gas offshore in the Gulf of Mexico and onshore in the
Gulf Coast region, and in the mining, purchasing, transporting,
terminaling, processing and marketing of sulphur.
Oil and gas operations. We (and our predecessors) have
conducted oil and gas exploration, development and production
operations principally in the Gulf of Mexico and the Gulf Coast
region for more than 25 years with virtually the same team of
geologists and geophysicists. These operations have provided us
with an extensive geological and geophysical database, as well as
significant technical and operational expertise. We believe
there are significant opportunities to discover meaningful oil
and gas reserves in these areas as well as to acquire oil and gas
properties through transactions with larger companies seeking to
divest properties in the Gulf of Mexico continental shelf.
Using our extensive geophysical, technical and operational
expertise, our strategy is to
. acquire large, active exploration positions in the Gulf
of Mexico and Gulf Coast region,
. identify prospects using 3-D seismic data and other
state-of-the art technology, and
. increase reserves through exploration and development.
As part of our strategy, effective January 1, 2000, we
acquired from Texaco Exploration and Production Inc. the right to
explore and earn assignments of operating rights in 89 oil and
gas properties. The properties cover about 391,000 gross acres
and are located in water depths ranging from 10 to 2,600 feet in
federal and state waters offshore Louisiana and Texas. We have
agreed to commit $110 million for exploration through June 30,
2003. If we drill wells to specified depths that are capable of
producing and commit to install facilities to develop the oil and
gas we discover, we will earn varying interests in the prospects,
depending on the options that Texaco elects. Generally, we will
earn at least a majority of Texaco's working interest in the
property, and Texaco can elect to retain either a working
interest or an overriding royalty.
On January 14, 2000, we purchased from Shell Offshore Inc.
its interest in 56 exploratory leases containing approximately
260,000 gross acres located primarily in the Louisiana offshore
Gulf of Mexico area for a total of $37.7 million. These leases
represent a substantial portion of Shell's remaining inventory of
undeveloped lease acreage in the Louisiana offshore Gulf of
Mexico shelf area. Shell retained an overriding royalty interest
in the properties. The leases are located in water depths up to
about 2,000 feet. Shell's ownership interests in the leases
acquired ranged from 25 to 100 percent. Four of the leases are
subject to preferential rights, which if exercised would exclude
these four leases from the purchase and result in a $2.6 million
reduction of the purchase price.
The Texaco and Shell transactions significantly enhance our
presence on the continental shelf of the Gulf of Mexico. These
two transactions, along with our current lease inventory, give us
exploratory rights to over 170 blocks covering approximately
750,000 gross acres. We now have a substantial foundation for an
aggressive exploration program with a broad exploration acreage
position in the Gulf of Mexico.
Sulphur operations. We are the largest sulphur supplier in
the U.S. and operate the largest molten sulphur handling system
in the world. Our unique molten sulphur handling and
transportation system includes five sulphur terminals located
across the Gulf Coast and has all permits required by
environmental laws. We own an 83.3 percent interest in an
operating sulphur mine known as Main Pass, located 32 miles
offshore Louisiana. We also own an 83.3 percent interest in oil
production operations at Main Pass, where we produce oil from
the same geologic formation from which we mine sulphur.
Our sulphur operations consist of sulphur services and
sulphur mining. Our sulphur services primarily involve the
purchase and resale of sulphur recovered as a by-product of
hydrocarbon refining and processing, and the handling and
transportation of sulphur. Our sulphur strategy is to
<PAGE> 2
. provide a reliable source of sulphur to our customers,
. increase our recovered sulphur sales and provide other
value added services to by-product sulphur producers,
. capitalize on our leadership position as the U.S.'s
largest sulphur transporter, discretionary sulphur
producer, buyer of U.S. recovered sulphur and sulphur
supplier, and
. increase utilization of our sulphur handling and
transportation system, which is currently approximately
60 percent utilized.
Combination of McMoRan Oil & Gas and Freeport Sulphur. Our
company was created on November 17, 1998 when McMoRan Oil & Gas
Co. and Freeport-McMoRan Sulphur Inc. combined their operations.
As a result, McMoRan Oil & Gas LLC and Freeport-McMoRan Sulphur
LLC (Freeport Sulphur) became our wholly owned subsidiaries. The
transaction was treated for accounting purposes as a purchase,
with McMoRan Oil & Gas as the acquiring entity. As a result, our
financial information for periods prior to the transaction
reflect only the historical operations of McMoRan Oil & Gas. The
operations of Freeport Sulphur are included on and after November
17, 1998. For the year ended December 31, 1999, approximately 81
percent of our earnings before interest, taxes, depreciation and
amortization, excluding exploration expenses, were from oil and
gas operations and 19 percent were from sulphur operations.
The address and telephone number of our principal executive
offices are:
1615 Poydras Street
New Orleans, Louisiana 70112
(504) 582-4000
<PAGE> 3
FORWARD-LOOKING STATEMENTS
This prospectus includes (or incorporates by reference)
"forward looking statements" within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act, including
statements about our plans, strategies, expectations, assumptions
and prospects. "Forward-looking statements" are all statements
other than statements of historical fact, such as statements
regarding drilling potential and results; anticipated flow rates
of producing wells; reserve estimates and depletion rates;
general economic and business conditions; risks and hazards
inherent in the production of oil, natural gas and sulphur;
demand and potential demand for oil and gas and for sulphur;
trends in commodity prices; amounts and timing of capital
expenditures and abandonment, closure and reclamation costs; the
need for and availability of financing; our reliance on IMC-
Agrico as a customer; competitive trends; and environmental
issues.
We caution you that our forward-looking statements are not
guarantees of future performance, and our actual results may
differ materially from those projected, anticipated or assumed in
the forward-looking statements. We undertake no obligation to
publicly update or revise any forward-looking statements.
Important factors that can cause our actual results to differ
materially from those anticipated in the forward-looking
statements include those described below under "Risk Factors."
RISK FACTORS
In addition to the other information in this prospectus, you
should carefully consider the following factors in evaluating our
company and our business before purchasing any securities.
Factors Relating to Our Oil and Gas Operations
The future financial results of our oil and gas business are
difficult to forecast primarily because the business has a
limited operating history and the results of our exploration
strategy are inherently unpredictable.
McMoRan Oil & Gas commenced operations in 1994. We
currently have six fields in production. Much of our oil and gas
business is devoted to exploration, the results of which are
inherently unpredictable. We use the successful efforts
accounting method for our oil and gas exploration and development
activities. This method requires us to expense geological and
geophysical costs and the costs of exploration wells as they occur,
rather than capitalize these costs as required by the full cost
accounting method. Because of the timing in incurring
exploration costs and realizing revenues from successful
properties, losses may be reported even though exploration
activities may be successful during a reporting period.
Accordingly, depending on the results of our exploration program,
we may continue to incur losses as we pursue significantly
expanded exploration activities. We cannot assure you that our oil
and gas operations will achieve or sustain positive earnings or
cash flows from operations in the future.
Our exploration and development activities may not be
commercially successful.
Oil and natural gas exploration and development involve a
high degree of risk that hydrocarbons will not be found, that
they will not be found in commercial quantities, or that their
production will be insufficient to recover drilling, completion
and operating costs. The 3-D seismic data and other technologies
we use do not allow us to know conclusively prior to drilling a
well that oil or gas are present or economically producible. The
cost of drilling, completing and operating a well is often
uncertain, especially when drilling offshore, and cost factors
can adversely affect the economics of a project. Our drilling
operations may be curtailed, delayed or canceled as a result of
numerous factors, including (1) unexpected drilling conditions,
(2) unexpected pressure or irregularities in formations, (3)
equipment failures or accidents, (4) title problems, (5) adverse
weather conditions, (6) regulatory requirements and (7)
unavailability of equipment or labor. Furthermore, completion of
a well does not guarantee that it will be profitable or even that
it will result in recovery of drilling, completion and operating
costs.
Our future performance depends on our ability to add reserves.
<PAGE> 4
Our future financial performance depends in large part on
our ability to find, develop and produce oil and gas reserves
that are economically recoverable. Without successful exploration
and development activities or reserve acquisitions, our reserves
will be depleted. We cannot assure you that we will be able to
find, develop, produce or acquire additional reserves on an
economic basis.
Although we are currently emphasizing reserve growth through
exploratory drilling, we may from time to time acquire producing
properties and/or properties with proved undeveloped reserves.
Evaluation of recoverable reserves of oil and natural gas, which
is an integral part of the property selection process, depends on
the assessment of geological, engineering and production data,
some or all of which may prove to be unreliable and not
indicative of future performance. Accordingly, we cannot assure
you that we will make a profit or fully recover our cost on any
reserves that we purchase.
Our revenues, profits and growth rates may vary significantly
with fluctuations in the market prices of oil and natural gas.
Approximately $54.3 million of our revenues for the year
ended December 31, 1999 were derived from the sale of oil and
natural gas. In recent years, oil and natural gas prices have
fluctuated widely. We have no control over the factors affecting
prices, which include the market forces of supply and demand, as
well as the regulatory and political actions of domestic and
foreign governments, and the attempts of international cartels to
control or influence prices. Any significant or extended decline
in oil and gas prices will have a material adverse effect on our
profitability, financial condition and operations.
If we are unable to generate sufficient cash from operations
or obtain financing when needed, we may find it necessary to
curtail our operations.
We must make substantial expenditures to conduct exploratory
activities and to develop oil and gas reserves. We cannot assure
you that we will generate sufficient cash from operations or
obtain financing when needed to conduct our exploration program
and develop our properties. Our future cash flow from operations
will depend on our ability to locate and produce hydrocarbons in
commercial quantities and on market prices for oil and gas, among
other things.
The amount of oil and gas that we actually produce, and the
net cash flow that we receive from that production, may differ
materially from the amounts reflected in our reserve
estimates.
Our estimates of proved oil and gas reserves reflected in
our Form 10-K reports are based on reserve engineering estimates
using Securities and Exchange Commission (SEC) guidelines.
Reserve engineering is a subjective process of estimating
recoveries from underground accumulations of oil and natural gas
that cannot be measured in an exact manner. The accuracy of any
reserve estimate depends on the quality of available data and the
application of engineering and geological interpretation and
judgment. Estimates of economically recoverable reserves and
future net cash flows depend on a number of variable factors and
assumptions, such as (1) historical production from the area
compared with production from other producing areas, (2)
assumptions concerning future oil and gas prices, future
operating and development costs, workover, remedial and
abandonment costs, severance and excise taxes, and (3) the
assumed effects of government regulation. All of these factors
and assumptions are difficult to predict and may vary
considerably from actual results. In addition, different reserve
engineers may make different estimates of reserve quantities and
cash flows based upon varying interpretations of the same
available data. Also, estimates of proved reserves for wells
with limited or no production history are less reliable than
those based on actual production history. Subsequent evaluation
of the same reserves may result in variations, which may be
substantial, in our estimated reserves. As a result, all reserve
estimates are inherently imprecise.
You should not construe the estimated present values of
future net cash flows from proved oil and gas reserves
incorporated by reference into this prospectus as the current
market value of our estimated proved oil and gas reserves. In
accordance with applicable SEC requirements, we have estimated
the discounted future net cash flows from proved reserves based
on prices and costs generally prevailing at or near the date of
the estimate. Actual future prices and costs may be materially
higher or lower. Future net cash flows also will be affected by
factors such as the actual amount and timing of production,
curtailments or increases in consumption by gas purchasers, and
changes in governmental regulations or taxation. In addition, we
have used a 10 percent discount factor, which
<PAGE> 5
the SEC requires all companies to use to calculate discounted
future net cash flows for reporting purposes. That is not
necessarily the most appropriate discount factor to be used in
determining market value, since interest rates vary from time to
time, and the risks associated with operating particular oil and
gas properties can vary significantly.
Shortages of supplies, equipment and personnel may adversely
affect our operations.
Our ability to conduct operations in a timely and cost
effective manner depends on the availability of supplies,
equipment and personnel. The offshore oil and gas industry is
cyclical and experiences periodic shortages of drilling rigs,
work boats, tubular goods, supplies and experienced personnel.
Shortages can delay operations and materially increase operating
and capital costs.
The oil and gas exploration business is very competitive, and
most of our competitors are larger and financially stronger
than we are.
The business of oil and gas exploration, development and
production is intensely competitive, and we compete with many
companies that have significantly greater financial and other
resources than we have. Our competitors include the major
integrated oil companies and a substantial number of independent
exploration companies. We compete with these companies for
property acquisitions, supplies, equipment and labor. These
competitors may, for example, be better able to (1) pay more for
exploratory prospects, (2) purchase a greater number of
properties, (3) access less expensive sources of capital, (4)
access more information relating to prospects, (5) develop or
buy, and implement, new technologies, and (6) obtain equipment
and supplies on better terms.
Because a significant part of our reserves and production is
concentrated in a small number of offshore properties, any
production problems or significant changes in reserve
estimates related to any one of those properties could have a
material impact on our business.
All of our reserves and production come from our six fields
in the shallow waters of the Gulf of Mexico. If mechanical
problems, storms or other events curtailed a substantial portion
of this production, our cash flow would be adversely affected.
If the actual reserves associated with these six fields are less
than our estimated reserves, our results of operations and
financial condition could be adversely affected. Our Brazos Block
A-19 field commenced production on October 16, 1999, and during a
shutdown on November 15, 1999, the operator detected a pressure
buildup in the production casing and subsequently found significant
damage to the production tubing. The well currently remains
shut-in, and the operator is formulating a plan to restore the well
back onto production. While the estimates of proved reserves for
the well remain unchanged, additional costs will be required to
restore production, and revenues from the well will be delayed.
We are vulnerable to risks associated with the Gulf of Mexico
because we currently explore and produce exclusively in that
area.
We believe that concentrating our activities in the Gulf of
Mexico is advantageous because of our extensive experience
operating in that area. However, this strategy makes us more
vulnerable to the risks associated with operating in that area
than those of our competitors with more geographically diverse
operations. These risks include (1) adverse weather conditions,
(2) difficulties securing oil field services, and (3) compliance
with regulations. In addition, production of reserves from
reservoirs in the Gulf of Mexico generally declines more rapidly
than from reservoirs in many other producing regions of the
world. This results in recovery of a relatively higher
percentage of reserves from properties in the Gulf of Mexico
during the initial years of production, and, as a result, our
reserve replacement needs from new prospects are greater.
We cannot control the activities on properties we do not
operate.
Other companies operate some of the properties in which we
have an interest. As a result, we have a limited ability to
exercise influence over operations for these properties or their
associated costs. The success and timing of our drilling and
development activities on properties operated by others therefore
depend upon a number of factors outside of our control, including
(1) timing and amount of capital expenditures, (2) the operator's
expertise and financial resources, (3) approval of other
participants in drilling wells, and (4) selection of technology.
<PAGE> 6
Factors Relating to Our Sulphur Operations
Our revenues, profits and growth rates may vary significantly
with fluctuations in the market price of sulphur; the long-
term economic feasibility of our Main Pass sulphur mine may be
impaired if there were a sustained decline in sulphur prices
from recent levels.
Sulphur prices have declined in recent months to the lower
range of prices experienced in the 1990s. As a result, we
are currently unable to generate positive cash flow from our
Main Pass sulphur mining operations. In response to declining
prices, we announced on June 30, 1998 that we would permanently
discontinue sulphur production at our Culberson mine, and we
discontinued those operations on June 30, 1999. Although we are
currently pursuing cost reductions at our Main Pass sulphur
operations, a sustained decline in the price of sulphur from
recent levels could make continued operation of the mine
uneconomical. Because of the costs associated with closing and
re-opening this mine site we could decide to operate at Main Pass
for some period even if those operations did not generate positive
cash flow. If our Main Pass operations were suspended, it could
be difficult and expensive to subsequently re-open the mine.
We rely heavily on IMC-Agrico as a continuing customer under
the terms of a long-term sulphur supply agreement, and we are
involved in a dispute with them about the pricing terms of
that agreement.
Approximately 73 percent of sulphur sales for the year ended
December 31, 1999 were made to IMC-Agrico under a long-term
sulphur supply agreement, and we expect that sales to IMC-Agrico
under that agreement will continue to represent a substantial
percentage of our sulphur sales. Sales of sulphur to IMC-Agrico
are based on market prices and include a premium with respect to
approximately 40 percent of the sales. The agreement requires
IMC-Agrico to purchase approximately 75 percent of its annual
sulphur consumption from us as long as it has a requirement for
sulphur. The loss of, or a significant decline in, sales of
sulphur to IMC-Agrico could have a material adverse effect on our
financial condition and results of operations.
In the fourth quarter of 1999, several domestic phosphate
fertilizer producers announced production curtailments, including
a 20 percent reduction by IMC-Agrico. These curtailments
resulted primarily from global price decreases for phosphate
fertilizers. As a result, IMC-Agrico curtailed its sulphur
purchases from us in the fourth quarter. We expect that our
future sulphur sales to IMC-Agrico will also be curtailed, at
least in the near term.
Our sulphur supply agreement with IMC-Agrico contains a
provision that requires good faith renegotiation of the pricing
provisions if a party can prove that fundamental changes in IMC-
Agrico's operations or the sulphur and sulphur transportation
markets invalidate certain assumptions and result in the
performance by that party becoming "commercially impracticable"
or "grossly inequitable." In the fourth quarter of 1998, IMC-
Agrico attempted to invoke this contract provision in an effort
to renegotiate the pricing terms of the sulphur supply agreement.
After careful review of the agreement, IMC-Agrico's operations
and the referenced markets, we determined that there is no basis
for renegotiation of the pricing provisions under the terms of
the agreement. After discussions failed to resolve this dispute,
we filed suit against IMC-Agrico seeking a judicial declaration
that no basis exists under the agreement for a renegotiation of
its pricing terms.
In the fourth quarter of 1999, three of our major customers
announced plans to build a solid sulphur handling and melting
facility in Tampa, Florida with a design capacity of up to 2.0
million long tons of liquid sulphur annually. We cannot
predict what effect, if any, the facility would have on our
sulphur sales, if and when it becomes operational.
The facility would allow these customers and potentially
others to import solid sulphur. Thus, customers would have new
sources of sulphur supply that, depending on its ultimate costs
compared to our costs, could be more cost-competitive than our
sulphur. The announcement stated that the plant is not expected
to be operational until mid-2001. Solid sulphur handling is
widely recognized as inferior from an environmental standpoint to
molten sulphur handling, which is currently used throughout
Florida. The plant will need to obtain appropriate permits and
meet stringent state and federal environmental law requirements.
If the appropriate permits are received and the
<PAGE> 7
plant is
constructed, we believe that, based on current sulphur costs,
associated transportation and handling costs, melting costs and
the cost of capital, this type of facility will not be cost
competitive.
We cannot predict when or if the plant will be operational
or what impact it will have, if any, on our sulphur sales,
although it is possible that our sulphur sales could be adversely
affected. We currently have solid sulphur melting capabilities
in Galveston, Texas and Port Sulphur, Louisiana, and these
facilities have all permits required under current environmental
laws. All of our sulphur is currently handled in molten form;
however, we intend to remain competitive in sourcing and handling
sulphur in whatever form is commercially preferable.
Our minority joint venture partner in the Main Pass mine
claims that it has exercised its contractual right to elect
not to receive its share of sulphur produced at the mine
during 2000, not to pay its share of operating expenses for
2000 and not to pay us any fees for 2000 under our processing
and marketing agreement.
Homestake Sulphur Company LLC is our 16.7 percent partner in
the Main Pass mine. Under our agreements with Homestake,
Homestake may elect to waive its right to produce its share of
sulphur for one year at a time if conditions described in the
agreements are met. In that event, Homestake would be relieved
of its obligation to pay some of its share of operating expenses
during that year. Homestake claims that it has made this
election for 2000 and that, as a result, it is also not obligated
to pay us any fees for 2000 under our processing and marketing
agreement.
We have advised Homestake that in our opinion the conditions
precedent to its right to make the election do not exist.
Homestake has filed suit seeking a declaratory judgment
supporting its position and has not paid the first two monthly
installments of its operating expenses for 2000. We believe that
the election, even if effectively made, will not have a material
adverse effect on our financial condition or results of
operations, except that we may lose approximately $500,000 per
quarter of operating income from fees in 2000 under our
processing and marketing agreement with Homestake unless we are
successful in the litigation.
The competitive conditions in our sulphur business are
complex, both in terms of factors affecting supply and factors
affecting demand; sulphur prices are influenced by (1) world
agricultural conditions, (2) the phosphate fertilizer market,
(3) the rate of recovery of sulphur from oil and natural gas
refining, and (4) the handling and transportation costs
required to move sulphur to market.
There are two principal sources of elemental sulphur: (1)
mined sulphur and (2) recovered sulphur, which is a by-product of
oil refining and gas processing. Recovered sulphur from domestic
and foreign sources is the major source for most sulphur
customers and is our major source of competition. Because
recovered sulphur is a by-product of the producer's refining or
processing operations, its cost to customers depends in large
part on handling and transportation costs. Production of
recovered sulphur in the United States has increased at an
average rate of approximately 150,000 long tons per year for the
last three years.
Because the supply of U.S. recovered sulphur alone cannot
meet total domestic demand, mined sulphur, along with imported
recovered sulphur obtained principally from Canada and Mexico, is
required to supply the balance. Canadian recovered sulphur
producers have facilities for storing excess sulphur production
in solid form for unlimited periods of time, and thus can wait
for favorable market conditions to sell this sulphur. Nearly all
of the Western Hemisphere's sulphur inventories currently consist
of sulphur stored in solid form in the province of Alberta in
western Canada.
Since the early 1990s, the sulphur price at Tampa, Florida
has generally moved in the range of $55-$75 per long ton. We
believe market forces that define this range will continue for
the foreseeable future, absent a major supply disruption or a
substantial increase in demand. On the low end of the price
range, overland freight rates from western Canada to central
Florida tend to set a price floor. On the high end, the amount
of supply that can profitably access the market effectively sets
a price cap. Accordingly, depending on prices in the other
foreign markets they supply, Canadian producers can be expected
to progressively increase sulphur shipments to U.S. markets as
price levels in U.S. sulphur markets rise within the $55-$75 per
long ton range.
The principal competitive risks to our ability to mine
sulphur profitably are (1) decreased domestic demand for sulphur,
(2) increased production from domestic recovered sulphur
producers, and (3) increases in imported
<PAGE> 8
recovered sulphur,
including increases in the rate at which stored sulphur,
particularly in Canada, is released into the market. In
addition, the current levels of Canadian sulphur production and
inventories limits our potential to realize significant price
increases for our sulphur even if demand improves.
The market for sulphur is seasonal and cyclical, and market
prices for sulphur can fluctuate widely.
Because the principal use of sulphur is in the manufacture
of phosphate fertilizers, our ability to successfully market our
sulphur is materially dependent on prevailing agricultural
conditions and the worldwide demand for fertilizers. Although
phosphate fertilizer sales are fairly constant month-to-month,
seasonal increases occur in the domestic market prior to the fall
and spring planting season. Generally, domestic phosphate
fertilizer sales are at reduced levels after the spring planting
season, although the decline in domestic sales generally
coincides with the time when major commercial and governmental
buyers in China, India and Pakistan purchase product for mid-year
delivery in those countries.
Fertilizer sales are also cyclical, as they are influenced
by current and projected grain inventories and prices, quantities
of fertilizers imported to and exported from North America,
domestic fertilizer consumption and the agricultural policies of
foreign governments. Currently, the market for phosphate
fertilizers is soft, which we believe is primarily the result of
three factors: (1) a world oversupply of grain, which has led to
falling grain prices and a decreased demand for phosphate
fertilizers, (2) an oversupply of fertilizer worldwide and (3) an
anticipated increase in worldwide fertilizer production capacity
from two new plants under construction in India and Australia.
We continue to believe that the long-term fundamentals of the
phosphate fertilizer business remain sound. These fundamentals
include expected growth in world population and increased meat
consumption in many undeveloped countries.
Market prices for sulphur will likely continue to fluctuate.
For example, in 1999 U.S. sulphur prices fluctuated between
$62.50 and $71.50 per long ton and dropped to $57.50 per long
ton for the first quarter of 2000. The operating margins and cash
flow from our sulphur business are subject to substantial
fluctuations in response to changes in supply and demand for
sulphur, conditions in the U.S. and international agriculture
industry, market uncertainties and other factors beyond our
control. Any significant or extended decline in sulphur prices
will have a material adverse effect on our financial condition
and operations.
Our sulphur mining operations are sensitive to changes in
natural gas prices.
In the year ended December 31, 1999, we sold approximately
14.0 Bcf of natural gas in our oil and gas operations and
consumed approximately 7.6 Bcf of natural gas in our sulphur
mining operations. Natural gas is our most significant variable
cost in operating our sulphur mine. We estimate that a 10 cent
increase in natural gas prices would have resulted in a $1.4
million increase in our gas sales revenue and a $0.8 million
increase in our cost of mining sulphur for the year ended
December 31, 1999. A 10 cent decrease in natural gas prices
would result in a corresponding decrease in gas sales revenue and
decrease in mining costs.
The amount of sulphur that we actually produce may differ
materially from the amounts that we expect based on our
reserve estimates. In addition, our reserve estimates can
change significantly based on changes in the factors
underlying the assumptions we use in determining the reserves.
We recently reduced our proved reserves for our Main Pass
mine from 52.4 million long tons at December 31, 1998 to 13.7
million long tons at December 31, 1999.
Proved reserves are estimated quantities of commercially
recoverable minerals that geological, geophysical and engineering
data can demonstrate with a reasonably high degree of certainty
to be recoverable in the future from known mineral deposits by
conventional operating methods. Our estimates of proved sulphur
reserves at Main Pass are based on engineering estimates and
assumptions about future economic and operating conditions. All
of our sulphur reserves are considered physically producible
because of our extensive drilling and production experience.
However, reserve engineering is a subjective process of
estimating the recovery from underground accumulations of sulphur
that cannot be measured in an exact manner. The accuracy of any
reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment.
In addition, estimates of economically recoverable reserves
depend upon a number of variable factors and assumptions, such as
assumptions concerning future (1) sulphur prices and production
rates, (2) operating and development costs,
<PAGE> 9
including natural gas
prices, (3) processing, transportation and handling costs, (4)
workover, remedial and abandonment costs, (5) severance and
excise taxes, and (6) government regulation. Variations in these
items can cause reserve estimates to change even in the absence
of changes in assumptions regarding the size or physical
characteristics of the reservoirs. In particular, the sulphur
and oil reservoirs at our Main Pass mine are highly sensitive to
product prices and production volumes because of their relatively
high level of fixed production costs.
We recently reduced our proved reserves for our Main Pass
mine from 52.4 million long tons at December 31, 1998 to 13.7
million long tons at December 31, 1999. Although our estimated
physically producible sulphur reserves have not changed, we have
reduced our estimates of commercially recoverable reserves
primarily based on our expectations of decreased production rates
at the mine, partially offset by an anticipated decrease in
costs. These factors have also caused us to reduce the expected
useful life of the mine from 30 years to 10 years. The reduction
in the anticipated mine life will require us to accelerate
accruals of our estimated $59.5 million abandonment and
reclamation costs for the mine, resulting in an increase in
accruals by approximately $3.0 million per year. We will be
required to fund these costs once we permanently close the mine.
The price of sulphur is a critical factor in the determination
of commercially recoverable reserves. A future increase in
sulphur prices could result in a restoration of the reserves
being reduced at year-end 1999.
Factors Relating to Our Operations Generally
Our historical financial information may be of limited
relevance because our sulphur operations are included in our
historical financial information only for periods on and after
November 17, 1998.
Our company was created on November 17, 1998 when McMoRan
Oil & Gas Co. and Freeport-McMoRan Sulphur Inc. combined their
operations in a merger. The merger was treated for accounting
purposes as a purchase, with McMoRan Oil & Gas as the acquiring
entity. As a result, our financial information for periods prior
to the merger reflect the historical operations of McMoRan Oil &
Gas. The operations of Freeport Sulphur are included only on and
after November 17, 1998.
Offshore operations are hazardous, and the hazards are not
fully insurable.
Our operations are subject to the hazards and risks inherent
in drilling for, producing and transporting sulphur, oil and
natural gas. These hazards and risks include fires, natural
disasters, abnormal pressures in formations, blowouts, cratering,
pipeline ruptures and spills. If any of these or similar events
occur, we could incur substantial losses as a result of death,
personal injury, property damage, pollution and lost production.
Moreover, our drilling, production and transportation operations
in the Gulf of Mexico are subject to operating risks peculiar to
the marine environment. These risks include hurricanes and other
adverse weather conditions, more extensive governmental
regulation (including regulations that may, in certain
circumstances, impose strict liability for pollution damage) and
interruption or termination of operations by governmental
authorities based on environmental, safety or other
considerations.
We have in place liability, property damage, business
interruption and other insurance coverages in types and amounts
that we consider reasonable and believe to be customary in our
business. This insurance provides protection against loss from
some, but not all, potential liabilities incident to the ordinary
conduct of our business. Our insurance includes coverage for
some types of damages associated with environmental and other
liabilities that arise from sudden, unexpected and unforeseen
events, with coverage limits, retentions, deductibles and other
features as we deem appropriate. The occurrence of an event that
is not fully covered by insurance could have a material adverse
effect on our financial condition and results of operations.
Our operations are subject to extensive governmental
regulation, compliance with which is very expensive; changes
in the regulatory environment can occur at any time and
generally increase our costs.
Our operations are subject to extensive regulation under
federal and state law, and can be affected materially by
political developments and resulting changes in laws and
regulations. The operations and economics of oil and natural gas
exploration, production and development and sulphur production
are, or historically have been, affected by price controls, tax
policy and environmental regulation. We cannot predict how
existing laws and regulations may be interpreted by enforcement
agencies or the courts, whether additional laws and regulations
will
<PAGE> 10
be adopted, or the effect these changes may have on our
business or financial condition, but changes that have occurred
in the past generally have been more restrictive and have
increased our cost of operation.
In particular, our operations are subject to numerous laws
and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection.
These laws and regulations (1) require us to acquire permits
before we begin drilling, (2) restrict the types, quantities and
concentrations of substances that we can release into the
environment, (3) limit or prohibit drilling on some lands lying
within wilderness, wetlands and other protected areas, and (4)
impose substantial liabilities for pollution that could result
from our operations. We have incurred, and may in the future
incur, capital expenditures and operating expenses to comply with
these laws and regulations, some of which may be significant.
Continued governmental and public emphasis on environmental
issues may result in increased capital and operating costs in the
future, although we cannot predict or quantify the impact of
future laws and regulations or future changes to existing laws
and regulations.
The recent trend toward stricter standards in environmental
legislation and regulation is likely to continue. For instance,
legislation has been proposed in Congress from time to time that
would reclassify some crude oil and natural gas exploration and
production wastes as "hazardous wastes," which would make the
wastes subject to significantly more stringent handling, disposal
and clean-up requirements. If this or similar legislation is
enacted, it could have a significant impact on our operating
costs. Initiatives to further regulate the disposal of crude oil
and natural gas wastes are also pending in some states and could
have a similar impact. In addition to compliance costs,
government entities and other third parties may assert claims for
substantial liabilities against owners and operators of sulphur
mining and oil and gas properties for oil spills, discharges of
hazardous materials, remediation and clean-up costs and other
environmental damages, including damages caused by previous
property owners. If such claims arise, we could be held liable
in legal proceedings, which could have a material adverse effect
on our financial condition and results of operations.
Federal legislation (sometimes referred to as "Superfund"
legislation) imposes liability, without regard to fault, for
clean-up of waste sites, even though waste management activities
at the site were in compliance with regulations applicable at the
time of disposal. Under the Superfund legislation, one
responsible party may be required to bear more than its
proportional share of clean-up costs if adequate payments cannot
be obtained from other responsible parties. In addition, federal
and state regulatory programs and legislation mandate clean-up of
specified wastes at operating sites. Governmental authorities
have the power to enforce compliance with these regulations and
permits, and violators are subject to civil and criminal
penalties, including fines, injunctions or both. Third parties
also have the right to pursue legal actions to enforce
compliance. Liability under these laws can be significant and
unpredictable.
We may in the future receive notices from governmental
agencies that we are a potentially responsible party under
relevant federal and state environmental laws, although we are
not aware of any pending notices. Some of these sites may
involve significant clean-up costs. The ultimate settlement of
liability for the clean-up of these sites usually occurs many
years after the receipt of notices identifying potentially
responsible parties because of the many complex technical, legal
and financial issues associated with site clean-up. We cannot
predict our potential liability for clean-up costs that we may
incur in the future.
The Oil Pollution Act of 1990 (the "OPA") imposes a variety
of regulations on "responsible parties" related to the prevention
of oil spills. We could be materially and adversely affected by
the implementation of new, or the modification of existing,
environmental laws or regulations, including regulations
promulgated pursuant to the OPA.
In connection with its spin-off from Phosphate Resource
Partners (formerly named Freeport-McMoRan Resource Partners,
Limited Partnership) in December 1997, Freeport Sulphur assumed
responsibility for potential liabilities, including environmental
liabilities, associated with the prior conduct of the businesses
contributed by Phosphate Resource Partners to Freeport Sulphur.
Among these are potential liabilities arising from sulphur mines
that were depleted and closed in the past in accordance with
reclamation and environmental laws in effect at the time,
particularly in coastal or marshland areas that have experienced
subsidence or erosion. We believe that we are in compliance with
existing laws regarding these closed operations, and we have
implemented controls in some
<PAGE> 11
areas that we believe exceed our
legal responsibilities. Nevertheless, it is possible that new
laws or actions by governmental agencies could result in
significant unanticipated additional reclamation costs.
We could also be subject to potential liability for personal
injury or property damage relating to wellheads and other
materials at closed mines in coastal areas that have become
exposed through coastal erosion. Although we have insurance in
place to protect against some of these liabilities, we cannot
assure you that this insurance coverage would be sufficient.
There can also be no assurance that our current or future
accruals for reclamation costs will be sufficient to fully cover
the costs.
Hedging our production may result in losses.
Our hedging has to date been limited to natural gas option
contracts related to our Main Pass sulphur operations and forward
oil sales contracts related to our Main Pass oil operations. We
may in the future enter into these and other types of hedging
arrangements to reduce our exposure to fluctuations in the market
prices of natural gas and oil. Hedging exposes us to risk of
financial loss in some circumstances, including if (1) production
is less than expected, (2) the other party to the contract
defaults on its obligations, or (3) there is a change in the
expected differential between the underlying price in the hedging
agreement and actual prices received. In addition, hedging may
limit the benefit we would have otherwise received on a
consolidated basis from increases in the prices for natural gas
and oil. Furthermore, if we do not engage in hedging, we may be
more adversely affected by changes in natural gas and oil prices
than our competitors who engage in hedging.
Our holding company structure may limit our financial
flexibility.
We conduct our business through wholly owned subsidiaries.
As a result, we depend on the cash flow of our subsidiaries and
distributions from them to meet our financial obligations.
Future agreements with lenders to our subsidiaries may contain
restrictions or prohibitions on the payment of dividends by the
subsidiaries to us.
USE OF PROCEEDS
Unless we state otherwise in a prospectus supplement, we
will use the net proceeds from the sale of the securities for
general corporate purposes, which may include the repayment of
debt, acquisitions, capital expenditures and working capital.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges was as follows for
the years and period indicated:
Years ended December 31,
-----------------------------------------
1995 1996 1997 1998 1999
----- ----- ----- ---- -----
--(a) --(a) --(a) --(a) 1.02x
______________________
(a) There were no fixed charges during 1995. During 1996,
1997 and 1998, we recorded net losses of $9.8 million, $10.5
million and $18.1 million, respectively. These losses were
inadequate to cover our fixed charges of $0.4 million in 1996,
$1.3 million in 1997 and $1.3 million in 1998.
For this calculation, earnings consist of (1) income from
continuing operations before income taxes, (2) minority interests
and (3) fixed charges. Fixed charges include interest and that
portion of rent we believe to be representative of interest.
Information for periods prior to November 17, 1998 reflect only
the historical operations of McMoRan Oil & Gas Co. The
operations of Freeport Sulphur are included on and after November
17, 1998. See "The Company."
<PAGE> 12
DESCRIPTION OF COMMON STOCK
General
As of the date of this prospectus, our certificate of
incorporation authorized us to issue up to 150,000,000 shares of
common stock, par value $0.01 per share and up to 50,000,000
shares of preferred stock, par value $0.01 per share. As of
January 31, 2000, 12,550,603 shares of common stock and no
shares of preferred stock were outstanding. Our common stock is
listed on the New York Stock Exchange under the symbol "MMR."
Voting Rights
Each holder of our common stock is entitled to one vote for
each share of common stock held of record on all matters as to
which stockholders are entitled to vote. Holders of our common
stock may not cumulate votes for the election of directors.
Dividends
Subject to any preferences accorded to the holders of our
preferred stock, if and when issued by the board of directors,
holders of our common stock are entitled to dividends at such
times and amounts as the board of directors may determine. We do
not intend to pay dividends for the foreseeable future.
Other Rights
In the event of a voluntary or involuntary liquidation,
dissolution or winding up of our company, prior to any
distributions to the holders of our common stock, our creditors
and the holders of our preferred stock, if any, will receive any
payments to which they are entitled. Subsequent to those
payments, the holders of our common stock will share ratably,
according to the number of shares held by them, in our remaining
assets, if any.
Shares of our common stock are not redeemable and have no
subscription, conversion or preemptive rights.
Provisions of our Certificate of Incorporation
Our certificate of incorporation contains provisions that
are designed in part to make it more difficult and time-consuming
for a person to obtain control of our company unless they pay a
required value to our stockholders. Some provisions also are
intended to make it more difficult for a person to obtain control
of our board of directors. These provisions reduce the
vulnerability of our company to an unsolicited takeover proposal.
On the other hand, these provisions may have an adverse effect
on the ability of stockholders to influence the governance of our
company. You should read our certificate of incorporation and
bylaws for a more complete description of the rights of holders
of our common stock.
Classified Board of Directors. Our certificate of
incorporation divides the members of our board of directors into
three classes serving three-year staggered terms. The
classification of directors has the effect of making it more
difficult for our stockholders to change the composition of our
board. At least two annual meetings of stockholders may be
required for the stockholders to change a majority of the
directors, whether or not a majority of our stockholders believes
that this change would be desirable.
Supermajority Voting/Fair Price Requirements. Our
certificate of incorporation provides that a supermajority vote
of our stockholders and the approval of our directors as
described below are required for:
. any merger, consolidation or share exchange of our
company or any of our subsidiaries with any person or
entity, or any affiliate of that person or entity, who
was within the two years prior to the transaction a
beneficial owner of 15% or more of our common stock or
any class of our common stock (an "interested party");
<PAGE> 13
. any sale, lease, transfer, exchange, mortgage, pledge,
loan, advance or other disposition of assets of our
company or any of our subsidiaries having a market
value of 5% or more of the total market value of our
company's outstanding common stock or our company's net
worth as of the end of its most recently ended fiscal
quarter, whichever is less, in one or more transactions
with or for the benefit of an interested party;
. the adoption of any plan or proposal for liquidation or
dissolution of our company or any of our subsidiaries;
. the issuance or transfer by our company or any of our
subsidiaries of securities having a fair market value
of $1 million or more to any interested party, except
for the exercise of warrants or rights to purchase
securities offered pro rata to all holders of our
voting stock;
. any recapitalization, reclassification, merger,
consolidation or similar transaction of our company or
any of our subsidiaries that would increase an
interested party's voting power in our company or any
of our subsidiaries;
. any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or advantages
provided by our company or any of our subsidiaries to
any interested party; or
. any agreement providing for any of the transactions
described above.
To effect the transactions described above, the following
shareholder and director approvals are required:
. the vote of the holders of 80% of our outstanding
common stock;
. the vote of the holders of 75% of our outstanding
common stock, excluding stock owned by interested
parties;
. a majority of our directors currently in office; and
. a majority of our directors who are not affiliates of
the interested party and who were members of our board
prior to the time the interested party became an
interested party or directors appointed by these board
members.
However, the requirements for approval of our directors and
supermajority vote of our stockholders described above are not
applicable if:
. the transactions described above are between our
company and any of our subsidiaries, any person who
owned shares of our common stock prior to the date our
certificate of incorporation was first filed with the
Delaware Secretary of State, any of our employee
benefit plans, or a trustee or custodian of one of our
employee stock ownership plans or other benefit plans;
or
. our board approves the transaction prior to the time
the interested party becomes an interested party and
the vote includes the affirmative vote of a majority of
our directors who are not affiliates of the interested
party and who were members of our board prior to the
time the interested party became the interested party;
or
. all of the following conditions are met:
. the aggregate amount of consideration received by
our stockholders in the transaction meet the "fair
price" criteria described in our certificate of
incorporation; and
. after an interested party becomes an interested
party and prior to the completion of the
transaction:
<PAGE> 14
. our company has not failed to declare or pay
dividends on any outstanding preferred stock
. the interested party has not received
benefits (except proportionately as a
stockholder) of any loans, advances or other
financial assistance or tax advantage
provided by our company
. our company has not reduced the annual rate
of dividends paid on our common stock, except
as necessary to reflect adjustments or stock
splits, and has not failed to increase the
annual rate of dividends to adjust for any
recapitalization, reclassification,
reorganization or similar transaction; and
. the interested party has not become the
beneficial owner of additional shares of our
voting stock except as part of the
transaction that resulted in the interested
party becoming an interested party or as a
result of a pro rata stock dividend.
No Stockholder Action by Written Consent. Under Delaware
law, unless a corporation's certificate of incorporation
specifies otherwise, any action that could be taken by its
stockholders at an annual or special meeting may be taken without
a meeting and without notice to or a vote of other stockholders,
if a consent in writing is signed by holders of outstanding stock
having voting power that would be sufficient to take such action
at a meeting at which all outstanding shares were present and
voted. Our certificate of incorporation provides that
stockholder action may be taken only at an annual or special
meeting of stockholders. As a result, our stockholders may not
act upon any matter except at a duly called meeting.
Advance Notice of Stockholder Nominations and Stockholder
Business. Our bylaws permit stockholders to nominate a person
for election as a director or bring other matters before a
stockholders' meeting only if written notice of an intent to
nominate or bring business before a meeting is given a specified
time in advance of the meeting.
Supermajority Voting/Amendments to Certificate of
Incorporation. The affirmative vote of at least 80% of our
company's outstanding common stock is required to amend, alter,
change or repeal the provisions in our certificate of
incorporation providing for the following:
. the fair price requirements described above;
. the restriction on shareholder action by written
consent;
. limitation of liability and indemnification for
officers and directors;
. the supermajority vote required to amend our
certificate of incorporation;
. the amendment of our bylaws. Our bylaws also may be
amended by the vote of a majority of our directors
currently in office and a majority vote of our
directors who were members of our board prior to the
time an interested party, as described above, became an
interested party;
. the classification of our board of directors; and
. removal of directors and filing vacancies on our board
of directors as described below.
However, the 80% stockholder vote described above will not
be required if:
. our directors adopt resolutions amending, altering
or repealing the provisions in our certificate of
incorporation described above, and the vote of
directors adopting these resolutions includes:
. a majority of our board of directors; and
<PAGE> 15
. a majority of our board of directors in
office prior to the time an interested party
became an interested party or directors
appointed by these directors; and
. the amendment, alteration or repeal of the
provisions described above is approved by the vote
of holders of a majority of our outstanding common
stock.
Delaware Section 203. We are subject to Section 203 of the
Delaware General Corporation Law, which imposes a three-year
moratorium on the ability of Delaware corporations to engage in a
wide range of specified transactions with any interested
stockholder. An interested stockholder includes, among other
things, any person other than the corporation and its majority-
owned subsidiaries who owns 15% or more of any class or series of
stock entitled to vote generally in the election of directors.
However, the moratorium will not apply if, among other things,
the transaction is approved by:
. the corporation's board of directors prior to the date
the interested stockholder became an interested
stockholder; or
. the holders of two-thirds of the outstanding shares of
each class or series of stock entitled to vote
generally in the election of directors, not including
those shares owned by the interested stockholder.
Removal of Directors; Filling Vacancies on Board of
Directors; Size of the Board. Directors may be removed, with
cause, by the vote of 80% of the holders of all classes of stock
entitled to vote at an election of directors, voting together as
a single class. Directors may not be removed without cause by
stockholders. Vacancies in a directorship may be filled only by
the vote of a majority of the remaining directors and a majority
of all directors who were members of our board at the time an
interested party became an interested party. A newly created
directorship resulting from an increase in the number of
directors may only be filled by the board. Any director elected
to fill a vacancy on the board serves for the remainder of the
full term of the class of directors in which the new directorship
was created or in which the vacancy occurred. The number of
directors is fixed from time to time by the board.
Special Meetings of the Stockholders. Our bylaws provide
that special meetings of stockholders may be called only by
either (1) our Chairman, Co-Chairman or any Vice Chairman of our
board of directors, (2) our President and Chief Executive
Officer, or (3) by a vote of the majority of our board of
directors. Our stockholders do not have the power to call a
special meeting.
Limitation of Directors' Liability. Our certificate of
incorporation contains provisions eliminating the personal
liability of our directors to our company and our stockholders
for monetary damages for breaches of their fiduciary duties as
directors to the fullest extent permitted by Delaware law. Under
Delaware law and our certificate of incorporation, our directors
will not be liable for a breach of his or her duty except for
liability for:
. a breach of his or her duty of loyalty to our company
or our stockholders;
. acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
. dividends or stock repurchases or redemptions that are
unlawful under Delaware law; and
. any transaction from which he or she receives an
improper personal benefit.
These provisions pertain only to breaches of duty by
directors as directors and not in any other corporate capacity,
such as officers. In addition, these provisions limit liability
only for breaches of fiduciary duties under Delaware corporate
law and not for violations of other laws such as the federal
securities laws.
As a result of these provisions in our certificate of
incorporation, our stockholders may be unable to recover monetary
damages against directors for actions taken by them that
constitute negligence or gross negligence or that are in
violation of their fiduciary duties. However, our stockholders
may obtain injunctive or other equitable
<PAGE> 16
relief for these
actions. These provisions also reduce the likelihood of
derivative litigation against directors that might have
benefitted our company.
We believe that these provisions are necessary to attract
and retain qualified individuals to serve as our directors. In
addition, these provisions will allow directors to perform their
duties in good faith without concern for monetary liability if a
court determines that their conduct was negligent or grossly
negligent.
Shareholder Rights Plan
Our board of directors adopted a shareholder rights plan in
November 1998. The rights plan was amended on December 30, 1998.
Under the rights plan, we distributed one preferred stock
purchase right to each holder of record of common stock at the
close of business on November 13, 1998. Once exercisable, each
right will entitle stockholders to buy one one-hundredth of a
share of Series A participating cumulative preferred stock, par
value $0.01 per share, at a purchase price of $80 per one one-
hundredth of a share of Series A participating cumulative
preferred stock. Prior to the time the rights become
exercisable, the rights will be transferred with our common
stock.
The rights do not become exercisable until a person or group
acquires 25% or more of our common stock or announces a tender
offer which would result in that person or group owning 25% or
more of our common stock. However, if the person or group that
acquires 25% or more of our common stock agrees to "standstill"
arrangements described in the rights plan, the rights will not
become exercisable until the person or group acquires 35% or more
of our common stock.
Once a person or group acquires 25% or more (or 35% or more
under the conditions described above) of our common stock, each
right will entitle its holder (other than the acquirer) to
purchase, for the $80 purchase price, the number of shares of
common stock having a market value of twice the purchase price.
The rights will also entitle holders to purchase shares of an
acquirer's common stock under specified circumstances. In
addition, the board may exchange rights (other than the
acquirer's) for shares of our common stock.
Prior to the time a person or group acquires 25% or more (or
35% or more under the conditions described above) of our common
stock, the rights may be redeemed by our board of directors at a
price of $0.01 per right. As long as the rights are redeemable,
our board of directors may amend the rights agreement in any
respect. The terms of the rights are set forth in a rights
agreement between us and ChaseMellon Shareholder Services,
L.L.C., as rights agent. The rights expire on November 13, 2008
(unless extended).
The rights may cause substantial dilution to a person that
attempts to acquire our company, unless the person demands as a
condition to the offer that the rights be redeemed or declared
invalid. The rights should not interfere with any merger or
other business combination approved by our board of directors
because our board may redeem the rights as described above. The
rights are intended to encourage any person desiring to acquire a
controlling interest in our company to do so through a
transaction negotiated with our board of directors rather than
through a hostile takeover attempt. The rights are intended to
assure that any acquisition of control of our company will be
subject to review by our board to take into account, among other
things, the interests of all of our stockholders.
DESCRIPTION OF PREFERRED STOCK
Each series of preferred stock will have specific terms that
we will describe in a prospectus supplement. The description may
not contain all information that is important to you. The
complete terms of the preferred stock will be contained in our
certificate of incorporation and the certificate of designations
relating to the applicable series of the preferred stock. These
documents have been or will be included or incorporated by
reference as exhibits to the registration statement of which this
prospectus is a part. You should read our certificate of
incorporation and the applicable certificate of designations.
Our certificate of incorporation authorizes us to issue,
without stockholder approval, up to 50,000,000 shares of
preferred stock, par value $0.01 per share. Our board of
directors may from time to time authorize us to issue one or more
series of preferred stock and may fix various terms for each
series, including the following:
<PAGE> 17
. voting powers (if any);
. designations;
. preferences;
. relative participating and optional or other rights;
. qualifications; and
. limitations and restrictions.
Thus, our board of directors could authorize us to issue
preferred stock with voting, conversion and other rights that
could adversely affect the voting power and other rights of
holders of our common stock or other series of preferred stock.
Also, the issuance of preferred stock could have the effect of
delaying, deferring or preventing a change in control of our
company.
The particular terms of any series of preferred stock
offered by this prospectus will be contained in an amendment to
our certificate of incorporation and described in a prospectus
supplement. The applicable prospectus supplement will describe
the following terms of any series of the preferred stock (to the
extent the terms are applicable):
. the specific designation, number of shares, rank and
purchase price;
. any liquidation preference per share;
. any redemption, payment or sinking fund provisions;
. any dividend rates (fixed or variable) and the dates on
which any dividends will be payable (or the method by
which the rates or dates will be determined);
. any voting rights;
. the commodity, currency, or units based on or relating
to commodities, currencies or composite currencies, in
which the preferred stock is denominated and/or in
which payments will or may be payable;
. the methods by which amounts payable in respect of the
preferred stock may be calculated and any commodities,
currencies, indices or other measures relevant to the
calculation;
. whether the preferred stock is convertible or
exchangeable and, if so,
(1) the securities into which the preferred stock is
convertible or exchangeable,
(2) the terms and conditions upon which conversions or
exchanges will be effected, including the initial
conversion or exchange prices or rates,
(3) the conversion or exchange period, and
(4) any other related provision;
. the place or places where dividends and other payments
on the preferred stock will be payable; and
. any additional voting, dividend, liquidation,
redemption, sinking fund or other rights, preferences,
privileges, limitations and restrictions.
<PAGE> 18
As described under "Description of Depositary Shares" below,
we may, at our option, elect to offer depositary shares evidenced
by depositary receipts. Each depositary receipt will represent
an interest in a share of a particular series of preferred stock
that we will issue and deposit with a depositary. The interest
represented by the depositary receipt will be described in the
applicable prospectus supplement.
DESCRIPTION OF DEPOSITARY SHARES
We summarize below some of the provisions that will apply to
the depositary shares unless the applicable prospectus supplement
provides otherwise. The summary may not contain all information
that is important to you. The complete terms of the depositary
shares will be contained in the depositary receipts and the
deposit agreement relating to the applicable series of preferred
stock. These documents have been or will be included or
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part. You should read
the depositary receipts and the depositary agreement. You should
also read the prospectus supplement, which will contain
additional information and which may update or change some of the
information below.
General
We may, at our option, elect to have shares of preferred
stock represented by depositary shares. The shares of any series
of preferred stock underlying the depositary shares will be
deposited under a separate deposit agreement that we will enter
into with a bank or trust company of our choosing. The
prospectus supplement relating to a series of depositary shares
will give the name and address of the depositary. Subject to the
terms of the deposit agreement, each owner of a depositary share
will be entitled to all the rights and preferences of the
preferred stock underlying the depositary share in proportion to
the applicable interest in the preferred stock underlying the
depositary share.
The depositary shares will be evidenced by depositary
receipts issued pursuant to the deposit agreement. Each
depositary share will represent the applicable interest in a
number of shares of a particular series of the preferred stock
described in the applicable prospectus supplement.
Unless otherwise provided in the applicable prospectus
supplement, upon surrender of depositary shares at the office of
the depositary and upon payment of the charges provided in the
deposit agreement, a holder of depositary shares will be entitled
to the number of whole shares of preferred stock evidenced by the
surrendered depositary shares.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other
cash distributions received in respect of the preferred stock to
the record holders of depositary shares representing the
preferred stock in proportion to the number of the depositary
shares owned by the holders on the relevant record date.
In the event of a distribution other than in cash, the
depositary will distribute the property received by it to the
record holders of depositary shares entitled to the property.
Alternatively, the depositary may, with our approval, sell the
property and distribute the net proceeds from the sale to the
record holders of depositary shares.
The deposit agreement will also contain provisions relating
to the manner in which any subscription or similar rights we
offer to holders of preferred stock will be made available to
holders of depositary shares.
Conversion and Exchange
If any preferred stock underlying depositary shares is
convertible or exchangeable, each record holder of depositary
shares will have the right or obligation to convert or exchange
the depositary shares in the manner provided in the deposit
agreement and described in the applicable prospectus supplement.
<PAGE> 19
Redemption
If the preferred stock underlying depositary shares is
subject to redemption, the depositary shares will be redeemed
from the redemption proceeds received by the depositary. The
redemption price per depositary share will be equal to the
aggregate redemption price payable with respect to the number of
shares of preferred stock underlying the depositary shares.
Whenever we redeem preferred stock from the depositary, the
depositary will redeem as of the same redemption date a
proportionate number of depositary shares representing the shares
of preferred stock that we redeemed. If less than all the
depositary shares are to be redeemed, the depositary shares to be
redeemed will be selected by lot or pro rata as we may determine.
After the date fixed for redemption, the depositary shares
called for redemption will no longer be deemed to be outstanding
and all rights of the holders of the depositary shares will
cease, except the right to receive the redemption price. Any
funds we deposit with the depositary for any depositary shares
which the holders fail to redeem will be returned to us after two
years from the date the funds are deposited.
Voting
Upon receipt of notice of any meeting or action in lieu of
any meeting at which the holders of any shares of preferred stock
underlying the depositary shares are entitled to vote, the
depositary will mail the information contained in the notice to
the record holders of the depositary shares relating to the
preferred stock. Each record holder of the depositary shares on
the record date, which will be the same date as the record date
for the preferred stock, will be entitled to instruct the
depositary as to the exercise of the voting rights pertaining to
the number of shares of preferred stock underlying the holder's
depositary shares. The depositary will endeavor, insofar as
practicable, to vote the number of shares of preferred stock
underlying the depositary shares in accordance with these
instructions, and we will agree to take all action that the
depositary deems necessary to enable the depositary to do so.
Amendment
The depositary receipt evidencing the depositary shares and
any provision of the deposit agreement may at any time be amended
by agreement between us and the depositary. However, any
amendment that materially and adversely alters the rights of the
existing holders of depositary shares will not be effective
unless the amendment has been approved by the record holders of
at least a majority of the depositary shares then outstanding.
Charges of Depositary
We will pay all transfer and other taxes and governmental
charges that arise solely from the existence of the depositary
arrangements. We will pay charges of the depositary in
connection with the initial deposit of the preferred stock and
any exchange or redemption of the preferred stock. Holders of
depositary shares will pay all other transfer and other taxes and
governmental charges, and, in addition, any other charges that
are expressly provided in the deposit agreement to be for their
accounts.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove
the depositary. Any resignation or removal will take effect upon
the appointment of a successor depositary and its acceptance of
the appointment. We will appoint the successor depositary within
60 days after delivery of the notice of resignation or removal.
Termination of Deposit Agreement
The depositary may terminate, or we may direct the
depositary to terminate, the deposit agreement if 45 days has
expired after the depositary has delivered to us written notice
of its election to resign and we have not appointed a successor
depositary. Upon termination of the deposit agreement, the
depositary will discontinue the transfer of depositary receipts,
will suspend the distribution of dividends, and will not give any
further notices (other than notice of the termination) or perform
any further acts under the deposit agreement. However, the
depositary
<PAGE> 20
will continue to deliver preferred stock certificates,
together with dividends and distributions and the net proceeds of
any sales of property, in exchange for depositary receipts
surrendered. Upon our request, the depositary will deliver to us
all books, records, certificates evidencing preferred stock,
depositary receipts and other documents relating to the deposit
agreement.
Miscellaneous
We, or at our option the depositary, will forward to the
holders of depositary shares all reports and communications that
we are required to furnish to the holders of preferred stock.
Neither we nor the depositary will be liable if the
depositary is prevented or delayed by law or any circumstance
beyond its control in performing its obligations under the
deposit agreement. Our obligations and those of the depositary
under the deposit agreement will be limited to performance in
good faith of our respective duties under the deposit agreement.
Neither we nor the depositary will be obligated to prosecute or
defend any legal proceeding regarding any depositary share or
preferred stock unless satisfactory indemnity has been furnished.
We and the depositary may rely upon written advice of counsel or
accountants. We and the depositary may also rely upon
information provided to us by persons presenting preferred stock
for deposit, holders of depositary shares or other persons we or
the depositary believe to be competent. We and the depositary
may also rely upon documents we believe to be genuine.
DESCRIPTION OF DEBT SECURITIES
General
We may issue debt securities from time to time in one or
more series. Debt securities will be our unsecured obligations
and will be designated as:
. senior securities;
. senior subordinated securities; or
. subordinated securities.
Senior securities, senior subordinated securities and
subordinated securities will each be issued under separate
indentures we enter into with a trustee.
We have summarized below some of the provisions that will
apply to the debt securities unless the applicable prospectus
supplement provides otherwise. The summary may not contain all
information that is important to you. The complete terms of the
debt securities will be contained in the applicable indenture and
note. These documents have been or will be included or
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part. You should read
the indenture and the note. You should also read the prospectus
supplement, which will contain additional information and which
may update or change some of the information below.
A principal difference between the indentures are provisions
relating to subordination. The "subordination" of a series of
debt securities is the degree to which holders of the debt
securities are subordinated in right of payment to our other
obligations. The senior securities will rank equally with all of
our other senior unsecured debt. Senior subordinated securities
and subordinated securities will be subordinated in right of
payment to the prior payment in full of the senior securities and
our other senior indebtedness. Subordinated securities will also
be subordinated in right of payment to the prior payment in full
of any outstanding senior subordinated securities. The
subordination provisions of the senior subordinated securities
and subordinated securities are discussed in greater detail below
under "" Subordination of Senior Subordinated Securities and
Subordinated Securities."
Unless we state otherwise in the related prospectus
supplement, the indentures will not contain provisions that (1)
limit the total amount of debt that we or any of our subsidiaries
may issue or incur, (2) limit our ability or
<PAGE> 21
the ability of any
of our subsidiaries to incur secured indebtedness, or (3) limit
our ability or the ability of any of our subsidiaries to pay
dividends or make other distributions or payments. Also, unless
we state otherwise in the related prospectus supplement, the
indentures will not contain provisions that would afford you, as
a holder of the debt securities, protection if we were to undergo
a change in control or enter into a highly leveraged transaction,
recapitalization or similar transaction, any of which could
adversely affect your rights as a holder of the debt securities.
We may issue debt securities under each indenture from time
to time in separate series up to the aggregate amount specified
in the indenture.
We will describe the specific terms of the series of debt
securities being offered in the related prospectus supplement.
These terms will include some or all of the following:
. the title of the debt securities and whether the
debt securities are senior securities, senior
subordinated securities or subordinated
securities;
. any limit on the aggregate principal amount of the
debt securities;
. whether the debt securities will be issued as
registered debt securities, bearer debt securities
or both, any limitation on issuance of bearer debt
securities and provisions regarding the transfer
or exchange of bearer debt securities;
. whether any of the debt securities are to be
issuable as a global security and whether global
securities are to be issued in temporary global
form or permanent global form;
. the person to whom any interest on the debt
security will be payable if other than the person
in whose name the debt security is registered on
the record date;
. the date or dates on which the debt securities
will mature;
. the rate or rates of interest, if any, that the
debt securities will bear, or the method of
calculation of the interest rate or rates;
. the date or dates from which any interest on the
debt securities will accrue, the dates on which
any interest will be payable and the record date
for any interest payable on any interest payment
date;
. the place or places where the principal of,
interest, premium and additional amounts (if any)
on the debt securities will be payable;
. whether we will have the right or obligation to
redeem or repurchase any of the debt securities,
and the terms applicable to any optional or
mandatory redemption or repurchase;
. the denominations in which the debt securities
will be issuable;
. any index or formula used to determine the amount
of payments of principal of and any premium,
additional amounts (if any) and interest on the
debt securities;
. the currency or currencies or currency units or
composite currencies in which the principal of and
any premium, additional amounts (if any) and
interest on the debt securities will be made (if
other than U.S. dollars);
. if the principal of or any premium, additional
amounts (if any) or interest on the debt
securities may be paid in a different currency or
currencies or currency units or composite
currencies at our option or the option of the
holder, the currency or currencies
<PAGE> 22
or currency
units or composite currencies in which these
payments may be made and the terms and conditions
applicable to the payments;
. if other than the principal amount, the portion of
the principal amount of the debt securities that
will be payable if there is an acceleration of the
maturity of the debt securities;
. if the debt securities are convertible into other
securities, the conversion price, the period
during which the debt securities may be converted
and other terms of conversion;
. any sinking fund provisions applicable to the debt
securities;
. the extent to which the provisions described under
" Certain of Our Covenants" below will apply to
the debt securities, and whether the indenture
includes any additional restrictive covenants for
the benefit of the holders of the debt securities;
. the extent to which the provisions described under
" Events of Default with Respect to the Debt
Securities" below will apply to the debt
securities, and the extent to which the provisions
have been supplemented or modified;
. the extent to which the provisions described under
" Defeasance" below will apply to the debt
securities; and
. any other terms of the debt securities not
inconsistent with the provisions of the respective
indentures.
Debt securities may bear interest at a fixed rate or a
floating rate, or may not bear interest. Debt securities bearing
no interest or interest at a rate that at the time of issuance is
below the prevailing market rate may be sold at a discount (which
may be significant) below their stated principal amount. We will
describe in the related prospectus supplement special United
States federal income tax considerations applicable to any
discounted debt securities or to debt securities issued at par
that are treated as having been issued at a discount for United
States federal income tax purposes.
If the purchase price of any of the debt securities is
denominated in a foreign currency or currencies or currency units
or composite currencies or if payments may be made in a foreign
currency or currencies or currency units or composite currencies,
we will set forth the general tax considerations with respect to
these debt securities in the related prospectus supplement.
Subordination of Senior Subordinated Securities and Subordinated
Securities
The indebtedness evidenced by the senior subordinated
securities and the subordinated securities will be subordinated
and junior in right of payment to the extent described in the
related indenture to the prior payment in full of amounts then
due on all of our senior indebtedness (as defined below),
including the senior securities. The subordinated securities
will also be subordinated and junior in right of payment to the
prior payment in full of all amounts then due on any outstanding
senior subordinated securities. Thus, if you hold senior
subordinated securities or subordinated securities:
. you will not be entitled to receive any payments
of principal (or premium or additional amounts, if
any) or interest on your debt securities until all
amounts due have been paid on our senior
indebtedness
. in the event of any voluntary or involuntary
insolvency or bankruptcy proceedings, or any
receivership, dissolution, winding-up, total
or partial liquidation, reorganization or
other similar proceeding;or
<PAGE> 23
. if there is any default with respect to the
principal (or premium or additional amounts,
if any) or interest of any of our senior
indebtedness or any acceleration of any of
our senior indebtedness; and
. you will not be entitled to receive assets or
money in respect of payments of principal (or
premium or additional amounts, if any) or interest
due on your debt securities in connection with a
voluntary or involuntary receivership,
dissolution, winding-up, liquidation,
reorganization, bankruptcy, insolvency or similar
proceeding until our senior indebtedness has been
paid in full.
You may, as a result, recover less, ratably, than our other
creditors, including holders of senior indebtedness.
With respect to any series of senior subordinated securities
or subordinated securities, "senior indebtedness" means the
principal of (and premium or additional amounts, if any) and
interest on all of our indebtedness (as defined below), whether
outstanding on the date of the related indenture or created,
incurred or assumed after the date of the related indenture,
other than
. the indebtedness represented by the senior
subordinated securities or subordinated securities
and
. any particular indebtedness that expressly states
in its governing terms (or in our assumption or
guarantee) that it is not senior in right of
payment to the senior subordinated securities or
the subordinated securities, as the case may be,
or that the indebtedness ranks equal to or junior
to the senior subordinated securities or the
subordinated securities.
Our "indebtedness" includes all of our obligations
. for borrowed money;
. that are evidenced by a bond, debenture, note or
similar instrument;
. with respect to letters of credit or similar
instruments;
. to pay the deferred purchase price of any property
or services (other than trade payables);
. as lessee under leases we are required to
capitalize on our balance sheet under generally
accepted accounting principles;
. any indebtedness of others secured by a lien on
our assets, whether or not we have assumed the
indebtedness; and
. any indebtedness of others that we have
guaranteed.
Each series of senior subordinated securities will be
"senior indebtedness" with respect to each series of subordinated
securities. If this prospectus is being delivered in connection
with a series of senior subordinated securities or subordinated
securities, we will describe in the accompanying prospectus
supplement or the information incorporated by reference the
approximate amount of senior indebtedness outstanding as of the
end of our most recent fiscal quarter.
<PAGE> 24
Convertible Debt Securities
We may issue debt securities from time to time that are
convertible into our common stock, preferred stock or other
securities. If you hold convertible debt securities, you will be
permitted at certain times specified in the related prospectus
supplement to convert your debt securities into the other
securities for a specified price. We will describe the
conversion price (or the method for determining the conversion
price) and the other terms applicable to conversion in the
related prospectus supplement.
Debt Securities with Payment Terms Tied to Commodities,
Currencies or Indices
We may issue debt securities with payment terms that are
calculated by reference to the value, rate or price of one or
more commodities, currencies, currency units, composite
currencies or indices. If you hold these debt securities, you
may receive payments of principal or any premium, additional
amounts (if any) or interest on any payment date that are greater
than or less than the amounts that would otherwise be payable to
you, depending upon the fluctuations in the value, rate or price
of the applicable commodity, currency, currency unit, composite
currency or index. We will include in the applicable prospectus
supplement information as to the methods for determining the
amount of principal, premium, additional amounts (if any) or
interest payable on any date, the referenced commodities,
currencies, currency units or composite currencies or indices and
additional tax considerations.
Form, Exchange, Registration and Transfer of Debt Securities
Debt securities are issuable in definitive form as
registered debt securities, as bearer debt securities or both.
Unless we state otherwise in the related prospectus supplement,
bearer debt securities will have interest coupons attached. Debt
securities are also issuable in temporary or permanent global
form.
Registered debt securities of any series will be
exchangeable for other registered debt securities of the same
series and of a like aggregate principal amount and tenor of
different authorized denominations.
If you hold bearer debt securities of any series, at your
option and subject to the terms of the indenture, you may
exchange them (with all unmatured coupons, except as provided
below, and all matured coupons in default) for registered debt
securities of the same series of any authorized denominations and
of a like aggregate principal amount and tenor. Bearer debt
securities that you surrender in exchange for registered debt
securities between a record date and the relevant date for
payment of interest must be surrendered without the coupon
relating to that date for payment of interest. Interest accrued
as of that date will not be payable in respect of the registered
debt security issued in exchange for the bearer debt security,
but will be payable only to the holder of the coupon when due in
accordance with the terms of the indenture.
You may only present bearer debt securities for exchange at
one of our offices or agencies maintained for that purpose
located outside the United States and referred to in the
applicable prospectus supplement. You may present registered
debt securities for registration of transfer at any office or
agency maintained for that purpose. If the debt securities are
registered debt securities, you must execute the form of transfer
on the debt security. We will list the offices or agencies
maintained for exchange and registration of transfer in the
related prospectus supplement. You will not be required to pay
any service charge in connection with an exchange or transfer,
but you may be required to pay taxes and other governmental
charges. We or our agent will not effect an exchange or transfer
unless we are satisfied, or our agent is satisfied, with the
documents of title and identity of the person making the request.
In the event of any partial redemption of debt securities,
we will not be required to
. issue, register the transfer of or exchange debt
securities of any series during the period
beginning at the opening of business 15 days prior
to the selection of debt securities of that series
for redemption and ending on the close of business
on
(1) if debt securities of the series are issued
only as registered debt securities, the day
the relevant notice of redemption is mailed
and
<PAGE> 25
(2) if debt securities of the series are issued
as bearer debt securities, the day of the
first publication of the relevant notice of
redemption, except that, if debt securities
of the series are also issued as registered
debt securities and there is no publication,
the day the relevant notice of redemption is
mailed;
. register the transfer of or exchange any
registered debt security, or portion of any
registered debt security, called for redemption,
except the unredeemed portion of any registered
debt security being redeemed in part; or
. exchange any bearer debt security called for
redemption, except to exchange that bearer debt
security for a registered debt security of that
series and like tenor which is simultaneously
surrendered for redemption.
Payment and Paying Agents
Unless we state otherwise in the applicable prospectus
supplement, payment of principal of (and any premium), additional
amounts (if any) and interest on bearer debt securities will be
payable, subject to any applicable laws and regulations, in the
designated currency, at the offices of the paying agents outside
the United States as we may designate from time to time by check
or by transfer to an account you maintain with a bank located
outside the United States. Unless we state otherwise in the
applicable prospectus supplement, to receive an interest payment
with respect to a bearer debt security on a particular interest
payment date you will be required to surrender the related coupon
to the paying agent. No payment with respect to any bearer debt
security will be made at any of our offices or agencies in the
United States or by check mailed to any address in the United
States, by transfer to any account maintained with a bank located
in the United States, nor shall any payments be made in respect
of bearer debt securities upon presentation to us or our paying
agents within the United States. Notwithstanding the foregoing,
payments of principal of (and any premium) and interest on bearer
debt securities denominated and payable in U.S. dollars will be
made at the office of our paying agent in the United States, if
(but only if) payment of the full amount thereof in U.S. dollars
at all offices or agencies outside the United States is illegal
or effectively precluded by exchange controls or other similar
restrictions.
Unless we state otherwise in the applicable prospectus
supplement, payment of principal of (and any premium), additional
amounts (if any) and interest on registered debt securities will
be made in the designated currency at the office of our paying
agent or paying agents as we may designate from time to time.
However, we may make payment, at our option, by check mailed to
the address of the person entitled to these payments as the
person's address appears on the records of the security
registrar. Unless we state otherwise in the applicable
prospectus supplement, payment of any installment of interest on
registered debt securities will be made to the person in whose
name the registered debt security is registered at the close of
business on the record date for the interest.
Unless we state otherwise in the applicable prospectus
supplement, the corporate trust office of the trustee will be
designated as a paying agent for the trustee for payments with
respect to debt securities that are issuable solely as registered
debt securities. We will maintain a paying agent outside the
United States for payments with respect to debt securities that
are issued solely as bearer debt securities, or as both
registered debt securities and bearer debt securities. Any
paying agents outside the United States and any other paying
agents in the United States we initially designate for the debt
securities will be named in the related prospectus supplement.
We may at any time designate additional paying agents or rescind
the designation of any paying agent or approve a change in the
office through which any paying agent acts. However, if debt
securities of a series are issued solely as registered debt
securities, we will be required to maintain a paying agent in
each place of payment for the series. If debt securities of a
series are issued as bearer debt securities, we will be required
to maintain
. a paying agent in the United States for payments
with respect to any registered debt securities of
the series (and for payments with respect to
bearer debt securities of the series in the
circumstances where payment outside the United
States is illegal or effectively precluded, but
not otherwise); and
<PAGE> 26
. a paying agent in a place of payment located
outside the United States where debt securities of
the series and any related coupons may be
presented and surrendered for payment.
All amounts we pay to a paying agent for the payment of
principal of and any premium, additional amounts (if any) or
interest on any debt security which you hold or with respect to
which you hold any coupon that remain unclaimed at the end of two
years after the principal, premium or interest shall have become
due and payable will (subject to applicable escheat laws) be
repaid to us, and you will thereafter have to look only to us for
payment.
Temporary Global Securities
If we so state in the applicable prospectus supplement, all
or any portion of the debt securities of a series that are
issuable as bearer debt securities will initially be represented
by one or more temporary global debt securities, without interest
coupons, which will be deposited with a common depository in
London for the Euroclear System ("Euroclear") and CEDEL Bank S.A.
("CEDEL") for credit to the designated accounts.
On and after the date determined as provided in the
temporary global debt security, the temporary global debt
security will be exchangeable for definitive bearer debt
securities, definitive registered debt securities or all or a
portion of a permanent global security, or any combination, as
specified in the applicable prospectus supplement. No bearer
debt security delivered in exchange for a portion of a temporary
global debt security will be mailed or otherwise delivered to any
location in the United States in connection with the exchange.
Unless we state otherwise in the applicable prospectus
supplement, interest in respect of any portion of a temporary
global debt security payable in respect of a payment date
occurring prior to the issuance of definitive debt securities or
a permanent global subordinated security will be paid to each of
Euroclear and CEDEL with respect to the portion of the temporary
global debt security held for its account.
Permanent Global Securities
If any debt securities of a series are issuable in permanent
global form, we will describe in the applicable prospectus
supplement the circumstances, if any, under which beneficial
owners of interests in the permanent global debt securities may
exchange the interests for debt securities of the series and of
like tenor and principal amount in any authorized form and
denomination. No bearer debt security delivered in exchange for
a portion of a permanent global debt security will be mailed or
otherwise delivered to any location in the United States in
connection with the exchange. Notwithstanding the foregoing,
unless we state otherwise in an applicable prospectus supplement,
if you hold an interest in a permanent global bearer debt
security, you may exchange your interest in whole (but not in
part) at our expense for definitive bearer debt securities.
Book-Entry Debt Securities
The debt securities of a series may be issued in whole or in
part in the form of one or more global securities that will be
deposited with, or on behalf of, a depositary or its nominee
identified in the applicable prospectus supplement. In this
case, one or more global securities will be issued in a
denomination or aggregate denominations equal to the portion of
the aggregate principal amount of outstanding debt securities of
the series to be represented by the global security or
securities. Unless we state otherwise in the applicable
prospectus supplement, unless and until it is exchanged in whole
or in part for debt securities in registered form, a global
security may not be registered for transfer or exchange except as
a whole by the depositary to a nominee of that depositary or to a
successor depositary.
We will describe the specific terms of the depositary
arrangement with respect to any portion of a series of debt
securities to be represented by a global security in the
applicable prospectus supplement. We expect that the following
provisions will generally apply.
Unless we state otherwise in the applicable prospectus
supplement, debt securities which are to be represented by a
global security to be deposited with or on behalf of a depositary
will be represented by a global security registered in the name
of that depositary or its nominee. Upon the issuance of the
global security, and the
<PAGE> 27
deposit of the global security with or
on behalf of the depositary, the depositary will credit, on its
book-entry registration and transfer system, the respective
principal amounts of the debt securities represented by the
global security to the accounts of institutions that have
accounts with the depositary or its nominee ("participants").
The accounts to be credited will be designated by the
underwriters or agents of the debt securities or by us, if we
offer and sell the debt securities directly. Ownership of
beneficial interests in the global security will be limited to
participants or persons that hold interests through participants.
Ownership of beneficial interests by participants in the global
security will be shown on, and the transfer of that ownership
interest will be effected only through, records maintained by the
depositary or its nominee. If you hold a beneficial interest in
a global security through a participant, your ownership interest
will be shown on, and the transfer of your ownership interest
will be effected only through, records maintained by that
participant.
The laws of some jurisdictions require that some purchasers
of securities take physical delivery of the securities in
certificated form. If you own a beneficial interest in a global
security, these laws may impair your ability to transfer your
beneficial interest.
So long as the depositary for a global security, or its
nominee, is the registered owner of the global security, the
depositary or nominee will be considered the sole owner or holder
of the debt securities represented by the global security for all
purposes under the related indenture. Unless we state otherwise
in the applicable prospectus supplement, if you own a beneficial
interest in a global security
. you will not be entitled to have debt securities
of the series represented by the global security
registered in your name;
. you will not receive or be entitled to receive
physical delivery of debt securities of the series
in certificated form; and
. you will not be considered the holder of the debt
securities for any purposes under the applicable
indenture.
Accordingly, if you own a beneficial interest in a global
security, you will have to rely on the procedures of the
depositary and, if you are not a participant, on the procedures
of the participant through which you own your interest, to
exercise any of your rights as a holder. We understand that
under existing industry practices, if we request any action of
holders or if you desire to give any notice or take any action
you are entitled to give or take under an indenture, the
depositary would authorize the participant through which you hold
your interest to give the notice or take the action, and the
participant would in turn authorize you to give the notice or
take the action or would otherwise act upon your instructions.
However, we have no control over the practices of the depositary
or the participants, and there can be no assurance that these
practices will not be changed.
Principal of and any premium, additional amounts and
interest on a global security will be payable in the manner we
describe in the applicable prospectus supplement.
Limitations on the Issuance of Bearer Debt Securities
In compliance with United States Federal tax laws and
regulations, we will not offer or sell bearer debt securities
(including securities in permanent global form that are either
bearer debt securities or exchangeable for bearer debt
securities) during the "restricted period" specified by the
United States Treasury Regulations within the United States or to
United States persons (as defined below). The "restricted
period" is, generally, the first 40 days after the closing date,
and with respect to unsold allotments, until sold. We may,
however, offer or sell bearer debt securities to an office
located outside the United States of a United States financial
institution purchasing for its own account, for resale or for the
accounts of customers. We will require the financial institution
to provide a certificate stating that it will comply with laws
and regulations relating to the bearer debt securities.
Moreover, the bearer debt securities will not be delivered within
the United States during the restricted period in connection with
any sale.
We will require any underwriters and dealers participating
in an offering of bearer debt securities to agree not to offer or
sell bearer debt securities within the United States or to United
States persons (other than the persons described above) during
the restricted period, or to deliver bearer debt securities
within the United States during the
<PAGE> 28
restricted period in
connection with any sale. We will also require these
underwriters and dealers to certify that they have in effect
procedures reasonably designed to ensure that their employees and
agents who are directly engaged in selling the bearer debt
securities are aware of these restrictions.
We will not deliver a bearer debt security (other than a
temporary global bearer debt security) in connection with its
original issuance or pay interest on any bearer debt security
until we have received the written certification provided for in
the indenture. Each bearer debt security, other than a temporary
global bearer debt security, will bear a legend similar to the
following: "Any United States person who holds this obligation
will be subject to limitations under the United States Federal
income tax laws, including the limitations provided in Sections
165(j) and 1287(a) of the Internal Revenue Code."
As used above, "United States person" means any citizen or
resident of the United States, any corporation, partnership or
other entity created or organized in or under the laws of the
United States and any estate or trust the income of which is
subject to United States federal income taxation regardless of
its source, and "United States" means the United States of
America (including the states and the District of Columbia) and
its possessions.
Certain of Our Covenants
Unless we state otherwise in the applicable prospectus
supplement, we will agree under the indentures not to consolidate
with or merge into any individual, corporation, partnership or
other entity (each, a "person"), or sell, lease, convey, transfer
or otherwise dispose of all or substantially all of our assets to
any person, or permit any person to consolidate or merge into us
or sell, lease, convey, transfer or otherwise dispose of all or
substantially all of its assets to us unless:
. the person formed by or surviving the
consolidation or merger (if not us), or to which
the sale, lease, conveyance, transfer or other
disposition is to be made is a corporation,
limited liability company or partnership organized
and existing under the laws of the United States
or any state or the District of Columbia, and the
person assumes by supplemental indenture in a form
satisfactory to the trustee all of our obligations
under the indenture;
. immediately after giving effect to the transaction
and treating any debt that becomes an obligation
of ours or of any of our subsidiaries as a result
as having been incurred by us or our subsidiary at
the time of the transaction, no default or event
of default shall have occurred and be continuing;
and
. we have delivered to the trustee an officer's
certificate and opinion of counsel, each stating
that the merger, consolidation, sale or conveyance
and the supplemental indenture, if any, comply
with the indenture.
Events of Default with Respect to the Debt Securities
Unless we state otherwise in the applicable prospectus
supplement, an "event of default" is defined under each indenture
with respect to debt securities of any series issued under such
indenture as being:
. our default for 30 days in payment of any interest
or additional amounts, if any, on the debt
securities of the series or any related coupon;
. our default in payment of any principal on the
debt securities of the series upon maturity or
otherwise; provided that, if the default is a
result of the voluntary redemption by the holders
of the debt securities, the amount of the default
must be in excess of the dollar amount listed in
the indenture (or the equivalent in any other
currency);
. our default, for 60 days after delivery of written
notice, in the observance or performance of any
other agreement in the debt securities of the
series or the indenture, other than an
<PAGE> 29
agreement
included in the indenture that is not applicable
to the debt securities of that series;
. bankruptcy, insolvency or reorganization events
relating to us; or
. our failure to pay at maturity, or other default
by us which results in acceleration of, debt in an
amount in excess of the dollar amount listed in
the indenture without the debt having been
discharged or the acceleration having been cured,
waived, rescinded or annulled for 30 days after
written notice. "Debt" for this purpose means
our obligation, or obligations we have guaranteed
or assumed, for borrowed money or evidenced by
bonds, debentures, notes or other similar
instruments, other than non-recourse obligations
or the debt securities of the series.
The consequences of an event of default, and the remedies
available under the indenture, will vary depending upon the type
of event of default that has occurred.
Unless we state otherwise in the applicable prospectus
supplement, each indenture will provide that if an event of
default has occurred and is continuing and is due to
. our failure to pay principal, premium or
additional amounts, if any, or interest on, any
series of debt securities under the indenture,
. our default in the performance of any agreements
applicable to outstanding debt securities of one
or more series issued under the indenture or
. our failure to pay at maturity, or other default
which results in the acceleration of, any debt in
an amount in excess of the dollar amount listed in
the indenture,
then either the trustee or the holders of not less than 25% in
principal amount of the outstanding debt securities of each
affected series (each series treated as a separate class) may
declare the principal (or the portion of the principal that is
specified in the terms of the affected debt securities) of all
the affected debt securities and interest accrued to be due and
payable immediately.
Unless we state otherwise in the applicable prospectus
supplement, each indenture will provide that if an event of
default has occurred and is continuing and is due to a
bankruptcy, insolvency or reorganization event relating to us,
then the principal (or such portion of the principal as is
specified in the terms of the debt securities) of and interest
accrued on all debt securities then outstanding will become due
and payable automatically, without further action by the trustee
or the holders.
Under conditions specified in the indenture, the holders of
a majority of the principal amount of the debt securities of each
affected series (each series treated as a separate class) may
annul or waive the declarations and past defaults described
above. These holders may not, however, waive a continuing
default in payment of principal of (or premium, if any) or
interest on, or in respect of the conversion of, debt securities.
Each indenture provides that the trustee, subject to the
duty of the trustee during a default to act with the required
standard of care, has no obligation to exercise any right or
power granted to it under the indenture at the request of holders
of debt securities unless the holders have indemnified the
trustee. Subject to the provisions in each indenture for the
indemnification of the trustee and other limitations in the
indenture, the holders of a majority in principal amount of the
outstanding debt securities of each affected series issued under
the indenture (each series treated as a separate class) may
direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust
or power conferred on the trustee with respect to the series.
If you hold debt securities of any series, you will not be
permitted under the terms of the indenture to institute any
action against us in connection with any default (except actions
for payment of overdue principal, premium and additional amounts,
(if any) or interest or to enforce conversion rights (if any))
unless
<PAGE> 30
. you have given the trustee written notice of the
default and its continuance;
. holders of not less than 25% in principal amount
of the debt securities of each affected series
issued under the indenture (each series treated as
a separate class) have made a written request upon
the trustee to institute the action and have
offered the trustee reasonable indemnity;
. the trustee has not instituted the action within
60 days of the request; and
. the trustee has not received directions
inconsistent with the written request by the
holders of a majority in principal amount of the
outstanding debt securities of all affected series
issued under the indenture (each series treated as
a separate class).
Each indenture contains a covenant requiring us to file
annually with the trustee a certificate of no default or a
certificate specifying any default that exists.
Defeasance Provisions Applicable to the Debt Securities
The following provisions relating to defeasance may be
modified in connection with the issuance of any series of debt
securities. We will describe any modification in the related
prospectus supplement.
"Legal" defeasance. Each indenture provides that we may
defease and be discharged from any and all of our non-
administrative obligations with respect to the debt securities of
any series which have not already been delivered to the trustee
for cancellation and which have either become due and payable or
are by their terms due and payable within one year (or scheduled
for redemption within one year). We may effect the defeasance
by irrevocably depositing with the trustee money or, in the case
of debt securities payable only in U.S. dollars, U.S. government
securities, which through the payment of principal and interest
in accordance with their terms will provide money in an amount we
certify to be sufficient to pay at maturity (or upon redemption)
the principal of (and premium and additional amounts, if any) and
interest on the debt securities.
In addition, we may elect to defease and be discharged from
any and all of our non-administrative obligations with respect to
the debt securities of a series upon our:
. irrevocable deposit with the trustee (or other
qualifying trustee), in trust, money or U.S.
government securities in the amounts described in
the immediately preceding paragraph; and
. delivery to the trustee of an opinion of counsel
to the effect that due to an Internal Revenue
Service ruling or change in federal income tax
law, holders of the debt securities of the series
will not recognize income, gain or loss for
federal income tax purposes, other than with
respect to interest earned on the amounts
defeased, as a result
<PAGE> 31
of the defeasance and will
be subject to federal income tax as if the
defeasance had not occurred.
"Covenant" defeasance. We may elect to be released from the
restrictions described under "Certain of our Covenants" above
or, to the extent specified in connection with the issuance of a
series of debt securities, other covenants applicable to the
series of debt securities upon our:
. irrevocable deposit with the trustee (or other
qualifying trustee), in trust, money or U.S.
government securities in the amounts described in
the paragraph titled "Legal defeasance"; and
. delivery to the trustee of an opinion of counsel
to the effect that holders of the debt securities
of the series will not recognize income, gain or
loss for federal income tax purposes, other than
with respect to interest earned on the amounts
defeased, as a result of the defeasance and will
be subject to federal income tax as if the
defeasance had not occurred.
If we exercise the "covenant" defeasance option described
above and the debt securities of a series are declared due and
payable because of the occurrence of an event of default other
than an event of default related to the covenants from which we
have been released, the amount of money and U.S. government
securities on deposit with the trustee will be sufficient to pay
amounts due on the related series at the time of their stated
maturity, but may not be sufficient to pay amounts due on the
debt securities of the series if the debt securities are
accelerated as a result of the event of default.
Modification of the Indenture
Unless we state otherwise in the applicable prospectus
supplement, each indenture provides that we and the trustee may
enter into supplemental indentures without the consent of the
holders of debt securities to
. secure the debt securities;
. evidence the assumption of our obligations by a
successor entity;
. add covenants or events of default for the
protection of the holders of any debt securities;
. establish the form or terms of debt securities of
any series;
. provide for uncertificated securities in addition
to certificated securities (so long as the
uncertificated securities are in registered form
for tax purposes)
. evidence the acceptance of appointment by a
successor trustee;
. cure any ambiguity or correct any inconsistency in
the indenture or amend the indenture in any other
manner which we may deem necessary or desirable,
if such action will not adversely affect the
interests of the holders of debt securities; or
. make any change to comply with any requirement of
the Securities and Exchange Commission relating to
the qualification of the indenture under the Trust
Indenture Act of 1939.
Unless we state otherwise in the applicable prospectus
supplement, each indenture will also contain provisions
permitting us and the trustee to modify the provisions of the
indenture or modify in any manner the rights of the holders of
the debt securities of each such series if we first obtain the
consent of the holders of not less than a majority in principal
amount of debt securities of all series issued under the
indenture then outstanding and affected (voting as a single
class). However, we must get the consent of the holder of each
debt security affected to
. extend the final maturity of any debt security;
. reduce the principal amount of any debt security;
. reduce or alter the method of computation of any
amount payable in respect of interest on any debt
security;
. extend the time for payment of interest on any
debt security;
. reduce or alter the method of computation of any
amount payable on redemption of any debt security
. extend the time for any redemption payment;
<PAGE> 32
. change the currency or currencies or currency
units, or composite currencies in which the
principal of, premium or additional amounts, if
any, or interest on any debt security is payable;
. reduce the amount payable upon acceleration of any
debt security;
. alter specified provisions of the indenture
relating to debt securities that are not
denominated in U.S. dollars;
. impair the right to institute suit for the
enforcement of any conversion or any payment on
any debt security when due or materially and
adversely affect any conversion rights;
. reduce the percentage in principal amount of debt
securities of a series required to make other
modifications to the indenture.
The subordinated indenture may not be amended to alter the
subordination of any outstanding subordinated securities without
the consent of each holder of senior indebtedness then
outstanding that would be adversely affected by the amendment.
The Trustee
We will include information regarding the trustee under an
indenture in any prospectus supplement relating to the debt
securities to be issued under the indenture. The indentures will
provide that in case any event of default shall occur (and be
continuing), the trustee will be required to use the degree of
care and skill of a prudent man in the conduct of his own
affairs. The trustee will be under no obligation to exercise any
of its powers under the indentures at the request of any of the
holders of the debt securities, unless the holders shall have
offered the trustee reasonable indemnity against the costs,
expenses and liabilities it might incur. The indentures and
provisions of the Trust Indenture Act incorporated by reference
in the indenture contain limitations on the right of a trustee,
should it become a creditor of ours, to obtain payment of claims
or to realize on property received by it in respect of any claims
as security or otherwise.
DESCRIPTION OF WARRANTS
We summarize below some of the provisions that will apply to
the warrants unless the applicable prospectus supplement provides
otherwise. The summary may not contain all information that is
important to you. The complete terms of the warrants will be
contained in the applicable warrant certificate and warrant
agreement. These documents have been or will be included or
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part. You should read
the warrant certificate and the warrant agreement. You should
also read the prospectus supplement, which will contain
additional information and which may update or change some of the
information below.
General
We may issue warrants, including warrants to purchase common
stock and debt securities, as well as other types of warrants.
We may issue the warrants independently or together with other
securities. The warrants may be attached to or separate from the
other securities. Each series of warrants will be issued under a
separate warrant agreement to be entered into between us and a
warrant agent. The warrant agent will be our agent and will not
assume any obligations to any owner of the warrants.
Common Stock Warrants
General. Under the common stock warrant agreement, warrants
may be issued in one or more series. The prospectus supplement
and the common stock warrant agreement relating to any series of
warrants will include specific terms of the warrants. These terms
include the following:
. the title and aggregate number of warrants;
<PAGE> 33
. the price or prices at which the common stock
warrants will be issued;
. the currency or currencies or currency units or
composite currencies in which the price of the
warrants may be payable;
. the amount of common stock for which the warrant
can be exercised and the price or the manner of
determining the price and currency or other
consideration to purchase the common stock;
. the date on which the right to exercise the
warrant begins and the date on which the right
expires;
. if applicable, the minimum or maximum amount of
warrants that may be exercised at any one time;
. if applicable, the designation and terms of the
securities with which the warrants are issued and
the number of warrants issued with each other
security;
. any provision dealing with the date on which the
warrants and related securities will be separately
transferable;
. any mandatory or optional redemption provision;
. the identity of the common stock warrant agent;
and
. any other terms of the warrants.
The warrants will be represented by certificates. The
warrants may be exchanged under the terms outlined in the common
stock warrant agreement. We will not charge any service charges
for any transfer or exchange of warrant certificates, but we may
require payment for tax or other governmental charges in
connection with the exchange or transfer. Unless the prospectus
supplement states otherwise, until a common stock warrant is
exercised, a holder will not be entitled to any payments on or
have any rights with respect to the common stock issuable upon
exercise of the common stock warrant.
Exercise of Common Stock Warrants. To exercise the
warrants, the holder must provide the common stock warrant agent
with the following:
. payment of the exercise price;
. any required information described on the warrant
certificates;
. the number of warrants to be exercised;
. an executed and completed warrant certificate; and
. any other items acquired by the common stock
warrant agreement.
The common stock warrant agent will issue a new warrant
certificate for any warrants not exercised. Unless the
prospectus supplement states otherwise, no fractional shares will
be issued upon exercise of warrants, but we will pay the cash
value of any fractional shares otherwise issuable.
The exercise price and the number of shares of common stock
that each warrant can purchase will be adjusted upon the
occurrence of events described in the common stock warrant
agreement, including the issuance of a common stock dividend or a
combination, subdivision or reclassification of common stock.
Unless the prospectus supplement states otherwise, no adjustment
will be required until cumulative adjustments require an
adjustment of at
<PAGE> 34
least 1%. From time to time, we may reduce the
exercise price as may be provided in the common stock warrant
agreement.
Unless the prospectus supplement states otherwise, if we
enter into any consolidation, merger, or sale or conveyance of
our property as an entirety, the holder of each outstanding
warrant will have the right to the kind and amount of shares of
stock, other securities, property or cash receivable by a holder
of the number of shares of common stock into which the warrants
were exercisable immediately prior to the occurrence of the
event.
Modification of the Common Stock Warrant Agreement. The
common stock warrant agreement will permit us and the common
stock warrant agent, without the consent of the common stock
warrant holders, to supplement or amend the agreement in the
following circumstances:
. to cure any ambiguity;
. to correct or supplement any provision which may
be defective or inconsistent with any other
provisions; or
. to add new provisions regarding matters or
questions that we and the common stock warrant
agent may deem necessary or desirable and which do
not adversely affect the interests of the common
stock warrant holders.
Debt Warrants
The applicable prospectus supplement will describe the
following terms of warrants to purchase debt securities:
. the title and aggregate number of the debt
warrants;
. the price or prices at which the debt warrants
will be issued;
. the currency or currencies or currency units or
composite currencies in which the price of the
debt warrants may be payable;
. the designation, aggregate principal amount and
terms of the debt securities purchasable upon
exercise of the debt warrants;
. the price at which, and currency or currencies or
currency units or composite currencies in which,
the debt securities purchasable upon exercise of
the debt warrants may be purchased;
. the date on which the right to exercise the debt
warrants begins and the date on which the right
expires;
. if applicable, the minimum or maximum amount of
the debt warrants that may be exercised at any one
time;
. if applicable, the designation and terms of the
securities with which the debt warrants are issued
and the number of the debt warrants issued with
each other security;
. if applicable, the date on and after which the
debt warrants and the related other securities
will be separately transferable;
. any mandatory or optional redemption provision;
. the identity of the debt securities warrant agent;
<PAGE> 35
. information with respect to book-entry procedures,
if any;
. if applicable, a discussion of United States
federal income tax considerations; and
. any other terms of the debt warrants, including
terms, procedures and limitations relating to the
exchange and exercise of the debt warrants.
Other Warrants
We may issue warrants to purchase other securities,
including preferred stock. The applicable prospectus supplement
will describe the following terms of any other warrants:
. the title and aggregate number of the warrants;
. the price or prices at which the warrants will be
issued;
. the currency or currencies or currency units or
composite currencies in which the price of the
warrants may be payable;
. the designation and terms of the preferred stock
or other securities purchasable upon exercise of
the warrants;
. the price at which, and the currency or currencies
or currency units or composite currencies in which
the securities purchasable upon exercise of such
warrants may be purchased;
. the date on which the right to exercise the
warrants begins and the date on which the right
expires;
. if applicable, the minimum or maximum amount of
warrants that may be exercised at any one time;
. if applicable, the designation and terms of the
securities with which the warrants are issued and
the number of warrants issued with each other
security;
. if applicable, the date on and after which the
warrants and the related other securities will be
separately transferable;
. any mandatory or optional redemption provision;
. the identity of the warrant agent;
. information with respect to book-entry procedures,
if any;
. if applicable, a discussion of United States
federal income tax considerations; and
. any other terms of the warrants, including terms,
procedures and limitations relating to the
exchange and exercise of the warrants.
PLAN OF DISTRIBUTION
We may sell securities directly to one or more purchasers or
to or through underwriters, dealers or agents. Our prospectus
supplement will set forth the terms of the offering, including
the name or names of any underwriters, the purchase price and
proceeds to us from such sale, any underwriting discounts and
other items constituting underwriters' compensation, the initial
public offering price and any discounts or concessions allowed,
reallowed or paid to dealers, and any securities exchanges on
which the securities may be listed.
<PAGE> 36
We may distribute our securities from time to time in one or
more transactions at a fixed price or prices (which may be
changed), at market prices prevailing at the time of sale, at
prices related to prevailing market prices or at negotiated
prices. Our prospectus supplement will describe the method of
distribution.
If underwriters are used in the sale, the underwriters may
acquire the securities for their own account and may resell them
from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. Securities may be
offered to the public through underwriting syndicates represented
by one or more managing underwriters or directly by one or more
underwriters without a syndicate. If an underwriting syndicate
is used, the managing underwriter or underwriters will be named
in the prospectus supplement. Unless otherwise set forth in the
prospectus supplement, the obligations of the underwriters to
purchase securities will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all
securities offered if any are purchased. Any initial public
offering price and any discounts or concessions allowed,
reallowed or paid to dealers may be changed from time to time.
If a dealer is used in an offering of securities, we may
sell the securities to the dealer, as principal. The dealer may
then resell the securities to the public at varying prices to be
determined by the dealer at the time of sale. The terms of the
transaction will be set forth in a prospectus supplement.
Commissions payable by us to any agent involved in the offer
or sale of securities (or the method by which such commissions
may be determined) will be set forth in a prospectus supplement.
Unless otherwise indicated in the prospectus supplement, the
agent will be acting on a best efforts basis.
If so indicated in the prospectus supplement, we may
authorize underwriters, dealers or agents to solicit offers by
certain specified institutions to purchase securities from us
pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. These contracts will
be subject to the conditions set forth in the prospectus
supplement, and the prospectus supplement will set forth the
commission payable by us for solicitation of the contracts.
Dealers and agents named in a prospectus supplement may be
deemed to be underwriters of the securities within the meaning of
the Securities Act. Underwriters, dealers and agents may be
entitled under agreements entered into with us to indemnification
by us against certain civil liabilities, including liabilities
under the Securities Act, or to contribution with respect to
payments that the underwriters, dealers or agents may be required
to make. Underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for us in the
ordinary course of business.
As of the date of this prospectus, only our common stock is
traded on the New York Stock Exchange. Except for our common
stock, each security sold using this prospectus will have no
established trading market. Any underwriters to whom securities
are sold may make a market in the securities, but will not be
obligated to do so and may discontinue their market making
activities at any time. There can be no assurance that a
secondary market will be created for any of the securities that
may be sold using this prospectus or that any market created will
continue.
LEGAL MATTERS
The validity of the securities will be passed upon for us by
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P.,
New Orleans, Louisiana.
EXPERTS
Our audited financial statements and schedules incorporated
in this prospectus by reference to our Annual Report on Form 10-K
for the year ended December 31, 1999 have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in
their reports contained in the Form 10-K, and are incorporated in
this prospectus by reference in reliance upon the authority of
Arthur Andersen LLP as experts in accounting and auditing in
giving these reports.
<PAGE> 37
The information included in this prospectus regarding the
quantities of reserves of our oil and gas properties and the
related future cash flows and present values is based on
estimates of the reserves and present values prepared by Ryder
Scott Company,L.P. Petroleum Engineers, in reliance upon their
authority as experts in petroleum engineering.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange
Commission (the "SEC"). You can read and copy that information at
the public reference room of the SEC at 450 Fifth Street, NW,
Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330
for more information about the public reference room. The SEC
also maintains an Internet site that contains reports, proxy and
information statements and other information regarding
registrants, like us, that file reports with the SEC
electronically. The SEC's Internet address is
http://www.sec.gov.
We have filed a registration statement and related exhibits
with the SEC under the Securities Act of 1933. The registration
statement contains additional information about us and our
securities. You may read the registration statement and exhibits
without charge at the SEC's public reference room, and you may
obtain copies from the SEC at prescribed rates.
The SEC allows us to "incorporate by reference" the
information we file with it, which means that we can disclose
important information to you by referring to documents on file
with the SEC. Some information that we currently have on file is
incorporated by reference and is an important part of this
prospectus. Some information that we file later with the SEC
will automatically update and supersede this information.
We incorporate by reference the following documents that we
have filed with the SEC pursuant to the Securities Exchange Act
of 1934:
. Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 (filed February 7, 2000);
. Current Reports on Form 8-K dated January 14, 2000
(filed January 20, 2000), and dated January 19,
2000 (filed January 20, 2000); and
. All documents filed by us with the SEC pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this prospectus and prior to
the termination of this offering.
<PAGE> 38
At your request, we will provide you with a free copy of any
of these filings (except for exhibits, unless the exhibits are
specifically incorporated by reference into the filing). You may
request copies by writing or telephoning us at:
McMoRan Exploration Co.
1615 Poydras Street
New Orleans, Louisiana 70112
Attention: John G. Amato
(504) 582-4000
You should rely only on information incorporated by
reference or provided in this prospectus and any prospectus
supplement. We have not authorized anyone else to provide you
with different information.
<PAGE> 39
Prospective investors may
rely only on the information
contained in this
prospectus. Neither McMoRan
Exploration Co. nor any McMoRan
underwriter has authorized Exploration Co.
anyone to provide
prospective investors with
different or additional
information. This
prospectus is not an offer
to sell nor is it seeking an
offer to buy these
securities in any
jurisdiction where the offer
or sale is not permitted.
The information contained in
this prospectus is correct
only as of the date of this
prospectus, regardless of
the time of the delivery of
this prospectus or any sale
of these securities.
Common Stock
Preferred Stock
Depositary Shares
Debt Securities
Warrants
TABLE OF CONTENTS
PROSPECTUS
Page
The Company ............... 2
Risk Factors ............. 4
Use of Proceeds ...........12
Ratio of Earnings to Fixed
Charges ..................12
Description of Common
Stock ....................13
Description of Preferred
Stock ....................17
Description of Depositary
Shares ....................19
Description of Debt
Securities ...............21
Description of Warrants ..33
Plan of Distribution .....36
Legal Matters ............37
Experts ..................37
Where You Can Find More
Information ..............38
_______, 2000
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated fees and expenses payable by us in connection
with the issuance and distribution of the securities being
registered are as follows:
SEC registration fee......................$79,200
Printing costs............................ 75,000
Legal fees and expenses...................100,000
Accounting fees and expenses.............. 30,000
Rating agency fees........................ 25,000
Blue sky fees and expenses................ 5,000
Trustee's and registrar's fees............ 15,000
Miscellaneous............................. 10,800
--------
Total....................................$340,000
========
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware
empowers us to indemnify, subject to the standards prescribed in
that Section, any person in connection with any action, suit or
proceeding brought or threatened by reason of the fact that the
person is or was our director, officer, employee or agent.
Article VIII of our certificate of incorporation provides that
our company shall indemnify any person who is or was a director,
officer, employee or agent of our company, to the fullest extent
authorized by law. In addition, Section 9 of our bylaws provides
that we shall defend and indemnify each person who was or is made
a party to, or is threatened to be made a party to, or is
otherwise involved in, any action, suit, or proceeding by reason
of the fact that the person is or was our director, officer,
employee or agent if:
. the director, officer, agent or employee is successful
in defending the claim on its merits or otherwise; or
. the director, officer, agent or employee meets the
standard of conduct described in Section 9 of our
bylaws.
However, the director, officer, agent or employee of our
company will not be entitled to indemnification if:
. the claim is one brought by the director, officer,
agent or employee against our company;
. the claim is one brought by the director, officer,
agent or employee as a derivative action by our company
or in the right of our company, and the action is not
approved by our board of directors.
The rights conferred by Article VIII of our certificate of
incorporation and Section 9 of our bylaws are contractual rights
and include the right to be paid by us the expenses incurred in
defending the action, suit or proceeding in advance of its final
disposition.
Article VIII of our certificate of incorporation provides
that our directors will not be personally liable to us or our
stockholders for monetary damages resulting from breaches of
their fiduciary duty as directors except (1) for
<Page II-1>
any breach of
the duty of loyalty to us or our stockholders, (2) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (3) under Section 174
of the General Corporation Law of Delaware, which makes directors
liable for unlawful dividend or unlawful stock repurchases or
redemptions or (4) transactions from which directors derive
improper personal benefit.
We have an insurance policy insuring our directors and
officers against certain liabilities, including liabilities under
the Securities Act of 1933.
Item 16. Exhibits.
1.1 Form of Underwriting Agreement.**
1.2 Form of Sales Agency Agreement.**
1.3 Form of Distribution Agreement.**
4.1 Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 to
the Annual Report on Form 10-K of the Company for the
fiscal year ended December 31, 1998.
4.2 By-Laws of the Company, as amended, effective as of
February 14, 1999. Incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K of the Company for
the fiscal year ended December 31, 1998.
4.3 Form of Indenture for Senior Debt Securities.*
4.4 Form of Senior Debt Security.**
4.5 Form of Indenture for Senior Subordinated Debt Securities.*
4.6 Form of Subordinated Debt Security.**
4.7 Form of Indenture for Subordinated Securities.*
4.8 Form of Subordinated Debt Security.**
4.9 Form of Certificate of Designations of Preferred Stock.*
4.10 Form of Stock Certificate of the Company's Common Stock.
Incorporated by reference to Exhibit 4.1 to Amendment
No. 1 to the Registration Statement on Form S-4 (File
Number 333-61171) of the Company filed with the SEC on
October 6, 1998.
4.11 Form of Deposit Agreement.*
4.12 Form of Depositary Receipt.*
5 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P., as to the legality of the securities.*
12 Statement re computation of ratios.*
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere
& Denegre, L.L.P. included as part of Exhibit 5.
23.3 Consent of Ryder Scott Company, L.P.
24 Powers of Attorney.*
25.1 Statement of Eligibility of Trustee on Form T-1 with
respect to Senior Debt Securities.**
25.2 Statement of Eligibility of Trustee on Form T-1 with
respect to Subordinated Debt Securities.**
____________
*Filed previously.
**To be filed by amendment or subsequently incorporated into this
registration statement.
<PAGE> II-3
Item 17. Undertakings.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this 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 this 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 SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in this registration statement or any material
change to such information in this registration
statement;
Provided, however, that paragraphs (a)(1)(i) and
(a)(1)(ii) do not apply if the information required to be
included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in
this registration statement.
(b) 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.
(c) 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 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) 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.
(4) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the
trustee to act under subsection (a) of section 310 of the Trust
Indenture Act of 1939 in accordance with the rules and
regulations prescribed by the SEC under section 305(b)(2) of the
Trust Indenture Act.
<PAGE> II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it had reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Admendment No. 1 Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in New Orleans, Louisiana, on February 7, 2000.
McMoRan Exploration Co.
By: /s/ Richard C. Adkerson
-----------------------
Richard C. Adkerson
President, Chief Executive
Officer and
Co-Chairman of the Board of
Directors
Pursuant to the requirements of the Securities Act of 1933,
this Admendment No. 1 Registration Statement has been signed by
the following persons and in the capacities indicated on February
7, 2000.
Signature Title
--------- -----
/s/Richard C. Adkerson President, Chief Executive Officer
----------------------- and Co-Chairman of the
Richard C. Adkerson Board of Directors
(Principal Executive Officer)
* Senior Vice President, Chief
---------------------- Financial Officer and Secretary
Nancy D. Parmelee (Principal Financial Officer)
* Vice President and Controller -
---------------------- Financial Reporting
C. Donald Whitmire, Jr. (Principal Accounting Officer)
* Co-Chairman of the
---------------------- Board of Directors
James R. Moffett
* Vice Chairman of the
----------------------- Board of Directors
Rene L. Latiolais
----------------------- Director
Morrison C. Bethea
* Director
-----------------------
Robert A. Day
* Director
---------------------
Gerald J. Ford
<PAGE> S-1
* Director
--------------------
H. Devon Graham, Jr.
-------------------- Director
Gabrielle K. McDonald
* Director
--------------------
B.M. Rankin, Jr.
-------------------- Director
J. Taylor Wharton
*By:/s/ Richard C. Adkerson
---------------------
Richard C. Adkerson
Attorney-in-Fact
<PAGE> S-2
EXHIBIT INDEX
Exhibit No.
Description
23.1 Consent of Arthur Andersen LLP.
23.3 Consent of Ryder Scott Company L.P..
<PAGE> E-1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement on our reports dated January 19,
1999, included in the McMoRan Exploration Co. Annual Report on Form 10-K for
the year ended December 31, 1999, and to all references to our Firm included
in this registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen,LLP
New Orleans, Louisiana
February 7, 2000
Exhibit 23.2
CONSENT OF INDEPENDENT PETROLUEM ENGINEER
As independent petroleum engineers, we hereby consent to the use of our
name included herein or incorporated by reference in this Admendment No. 1 of
McMoRan Exploration Co.'s Registration Statement on Form S-3 (File No.
333-95195) and to the reference to our estimates of reserves and present
value of future net reserves as of December 31, 1999 incorporated by
reference therein.
/s/ Ryder Scott Company, L.P.
RYDER SCOTT COMPANY, L.P.
Houston, Texas
February 4, 2000
