<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 33-63923
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 15, 1995)
$250,000,000
[APACHE LOGO]
REMARKETED NOTES
---------------------
Apache Corporation ("Apache" or the "Company") may offer from time to time
up to $250,000,000 aggregate principal amount of its Remarketed Notes (the
"Notes") in minimum denominations of $100,000 and integral multiples of $1,000
in excess thereof. Each Note will mature on the date and will initially bear
interest at a fixed rate or floating rate as set forth in the applicable Pricing
Supplement (the "Initial Interest Rate") through the date set forth in the
applicable Pricing Supplement (the "Initial Interest Rate Period"). Thereafter,
each Note will bear interest at the Company's option in either the Short Term
Rate Mode or the Long Term Rate Mode. The interest rate, Interest Rate Mode,
Interest Rate Adjustment Date and Interest Rate Period and other terms for each
Note may differ. See "Description of Notes" herein and "Description of Debt
Securities -- Provisions Applicable to Remarketed Notes" in the accompanying
Prospectus. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to optional redemption by the Company prior to the
expiration of the Initial Interest Rate Period. Interest rates on any Notes in
the Short Term Rate Mode or the Long Term Rate Mode will be established as
described in the accompanying Prospectus by one or more remarketing agents
selected by the Company. The Notes, which will be subject to mandatory tender at
the end of each Interest Rate Period, will be issued in fully registered
book-entry form only. See "DTC -- Book-Entry-Only System" in the accompanying
Prospectus.
SEE "RISK FACTORS" ON PAGE S-2 FOR A DISCUSSION OF CERTAIN RISKS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED
HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY SUPPLEMENT
HERETO. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
=========================================================================================================
PRICE TO AGENTS' PROCEEDS TO THE
PUBLIC(1) COMMISSIONS(1)(2)(3) COMPANY(1)(2)(4)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note...................... 100% .100% - .750% 99.900% - 99.250%
- ---------------------------------------------------------------------------------------------------------
Total......................... $250,000,000 $250,000 - $1,875,000 $249,750,000 - $248,125,000
=========================================================================================================
</TABLE>
(1) Unless otherwise specified in an applicable Pricing Supplement, the Notes
will be issued at 100% of their principal amount.
(2) The Company will pay to First Chicago Capital Markets, Inc., Lehman
Brothers, Lehman Brothers Inc. and J.P. Morgan Securities Inc. (the
"Agents") a commission, ranging from .100% to .750% of the principal amount
of a Note, depending upon its Initial Interest Rate Period, sold through any
such Agent, and may sell Notes to any Agent, as principal for resale to
investors and other purchasers at varying prices relating to prevailing
market prices at the time of resale, as determined by such Agent or, if so
agreed, at a fixed public offering price. Unless otherwise specified in an
applicable Pricing Supplement, any Note sold to an Agent as principal shall
be purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to an agency
sale of the Notes.
(3) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution" in
this Prospectus Supplement.
(4) Before deducting expenses payable by the Company estimated at $850,000.
---------------------
The Notes are being offered by the Company through the Agents, who have
agreed to use their reasonable efforts to solicit offers to purchase the Notes.
The Company may also sell Notes to any Agent, as principal, for resale to
investors and other purchasers. Unless otherwise specified in an applicable
Pricing Supplement, the Notes will not be listed on any securities exchange and
there can be no assurance that the Notes offered by this Prospectus Supplement
will be sold or that there will be a secondary market for the Notes. The Company
reserves the right to cancel or modify the offer made hereby without notice. The
Company or an Agent, if it solicits the offer, may reject any offer to purchase
Notes in whole or in part. See "Plan of Distribution."
---------------------
FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS
J.P. MORGAN SECURITIES INC.
---------------------
The date of this Prospectus Supplement is December 15, 1995.
<PAGE> 2
RISK FACTORS
Prospective investors should carefully review the following factors
together with the other information contained in this Prospectus Supplement
prior to making an investment decision.
EFFECT OF VOLATILE PRODUCT PRICES
The Company's future financial condition and results of operations will
depend upon the prices received for the Company's oil and natural gas production
and the costs of acquiring, finding, developing and producing reserves. Prices
for oil and natural gas are subject to fluctuations in response to relatively
minor changes in supply, market uncertainty and a variety of additional factors
that are beyond the control of the Company. These factors include worldwide
political instability (especially in the Middle East and other oil-producing
regions), the foreign supply of oil and gas, the price of foreign imports, the
level of consumer product demand, government regulations and taxes, the price
and availability of alternative fuels and the overall economic environment. A
substantial or extended decline in oil and gas prices would have a material
adverse effect on the Company's financial position, results of operations,
quantities of oil and gas that may be economically produced and access to
capital. In addition, the sale of the Company's oil and gas production depends
upon a number of factors beyond the Company's control, including the
availability and capacity of transportation and processing facilities.
Oil and natural gas prices have historically been volatile and are likely
to continue to be volatile in the future. Such volatility makes it difficult to
estimate the value of producing properties for acquisition and to budget and
project the return on exploration and development projects involving the
Company's producing properties. In addition, unusually volatile prices often
disrupt the market for oil and gas properties, as buyers and sellers have more
difficulty agreeing on the purchase price of properties.
The Company engages in hedging activities with respect to some of its
projected oil and gas production through a variety of financial arrangements
designed to protect against price declines, including swaps, collars and futures
agreements. To the extent that Apache engages in such activities, it may be
prevented from realizing the benefits of price increases above the levels of the
hedges. Because the Company's reserve base was approximately 66% natural gas on
an energy equivalent basis as of December 31, 1994, it is more sensitive to
fluctuations in the price of natural gas than to fluctuations in the price of
oil.
The Company periodically reviews the carrying value of its oil and gas
properties under the full-cost accounting rules of the Securities and Exchange
Commission (the "SEC"). Under the full-cost accounting rules, capitalized costs
of oil and gas properties on a country-by-country basis may not exceed the
present value of estimated future net cash flows from proved reserves,
discounted at 10%, plus the lower of cost or fair market value of unproved
properties as adjusted for related tax effects. At the end of each fiscal
quarter, the test is applied at the unescalated prices in effect at the
applicable time and results in a write-down if the "ceiling" is exceeded, even
if prices decline for only a short period of time. Many full-cost companies,
including Apache, are currently concerned about the impact of prolonged
unfavorable oil and gas prices on their ceiling test calculations. Oil and gas
prices realized by the Company for the third quarter of 1995 were 11% below the
net realized price for the same period of 1994; oil and gas prices for the third
quarter of 1995 were $.76 per barrel and $.03 per Mcf, respectively, below the
net oil and gas realized prices for the second quarter of 1995. A further
deterioration of oil or gas prices from current levels could result in the
Company recording a noncash charge to earnings related to its oil and gas
properties in 1995. The SEC's rules permit the exclusion of capitalized costs
and present value of recently acquired properties in performing ceiling test
calculations. Pursuant to these rules, Apache has requested waivers and the SEC
has granted three separate one-year waivers with respect to the properties
acquired from Texaco Exploration and Production, Inc. ("Texaco"), Crystal Oil
Company ("Crystal"), and Aquila Energy Resources Corporation ("Aquila"), the
last of which will expire in the third quarter of 1996. Under these waivers, if
the ceiling is exceeded on all U.S. properties, Apache is permitted to perform
an additional ceiling test excluding the capitalized costs and present value of
the properties acquired from Texaco, Crystal and Aquila and required to record a
write-down of carrying value if the ceiling is still exceeded. If a write-down
is required, it would result in a one-time charge to earnings but would not
impact net cash flow from operating activities.
S-2
<PAGE> 3
RELIANCE ON ESTIMATES OF PROVED RESERVES AND FUTURE NET CASH FLOWS; DEPLETION OF
RESERVES
There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and in projecting future rates of production and
timing of development expenditures, including many factors beyond the control of
the producer. The reserve data incorporated by reference in the accompanying
Prospectus represent only estimates. In addition, the estimates of future net
cash flows from proved reserves of the Company and the present value thereof are
based upon various assumptions about future production levels, prices and costs
that may prove to be incorrect over time. Any significant variance from the
assumptions could result in the actual quantity of the Company's reserves and
future net cash flows therefrom being materially different from the estimates
set forth in this Prospectus Supplement or incorporated by reference in the
accompanying Prospectus. In addition, the Company's estimated reserves may be
subject to downward or upward revision based upon production history, results of
future exploration and development, prevailing oil and gas prices, operating and
development costs and other factors.
The rate of production from oil and gas properties declines as reserves are
depleted. Except to the extent that the Company acquires additional properties
containing proved reserves, conducts successful exploration and development
activities or, through engineering studies, identifies additional behind-pipe
zones or secondary recovery reserves, the proved reserves of the Company will
decline materially as reserves are produced. Future oil and gas production is,
therefore, highly dependent upon the Company's level of success in acquiring or
finding additional reserves.
ACQUISITION RISKS
The Company intends to continue acquiring oil and gas properties. Although
the Company performs a review of the acquired properties that it believes is
consistent with industry practices, such reviews are inherently incomplete. It
generally is not feasible to review in depth every individual property involved
in each acquisition. Ordinarily, the Company will focus its review efforts on
the higher-value properties and will sample the remainder. However, even a
detailed review of records and properties may not necessarily reveal existing or
potential problems, nor will it permit a buyer to become sufficiently familiar
with the properties to assess fully their deficiencies and potential.
Inspections may not always be performed on every well, and environmental
problems, such as ground water contamination, are not necessarily observable
even when an inspection is undertaken. Even when problems are identified, the
Company often assumes certain environmental and other risks and liabilities in
connection with acquired properties. There are numerous uncertainties inherent
in estimating quantities of proved oil and gas reserves and actual future
production rates and associated costs with respect to acquired properties, and
actual results may vary substantially from those assumed in the estimates. In
addition, there can be no assurance that acquisitions will not have an adverse
effect upon the Company's operating results, particularly during the periods in
which the operations of acquired businesses are being integrated into the
Company's ongoing operations.
OPERATING RISKS; AVAILABILITY OF INSURANCE
Exploration for and production of oil and natural gas can be hazardous,
involving unforeseen occurrences such as blowouts, cratering, fires and loss of
well control, which can result in damage to or destruction of wells or
production facilities, injury to persons, loss of life or damage to property or
the environment. The Company maintains insurance against certain losses or
liabilities arising from its operations in accordance with customary industry
practices and in amounts that management believes to be prudent. However,
insurance is not available to the Company against all operational risks, and the
occurrence of a significant event that is not fully insured could have a
material adverse effect on the Company's financial position.
COMPETITION
The oil and gas industry is highly competitive. As an independent oil and
gas company, the Company frequently competes for reserve acquisitions,
exploration leases, licenses, concessions and marketing agreements against
companies having substantially larger financial and other resources than the
Company
S-3
<PAGE> 4
possesses. To the extent the Company's capital budget is lower than that of
certain of its competitors, the Company may be disadvantaged in effectively
competing for certain reserves, leases, licenses and concessions.
GOVERNMENT REGULATIONS
The Company's exploration, production and marketing operations are
regulated extensively at the federal, state and local levels, as well as by
other countries in which the Company does business. Oil and gas exploration,
development and production activities are subject to various laws and
regulations governing a wide variety of matters. For example, most states in
which Apache operates regulate the quantities of natural gas that may be
produced from wells within their borders to prevent waste in the production of
natural gas and to protect the correlative rights of competing interest owners.
It is impossible at this time to determine what changes may occur with respect
to such regulations and what effect, if any, such changes may have on the
Company and the natural gas industry as a whole.
As an owner and operator of oil and gas properties, the Company is also
subject to various federal, state, local and foreign country environmental
regulations, including air and water quality control laws. These laws and
regulations may, among other things, impose liability on the lessee under an oil
and gas lease for the cost of pollution cleanup resulting from operations,
subject the lessee to liability for pollution damages, require suspension or
cessation of operations in affected areas and impose restrictions on the
injection of liquids into subsurface aquifers that may contaminate groundwater.
Although the Company believes that it is in substantial compliance with existing
applicable environmental laws and regulations, there can be no assurance that
substantial costs for compliance will not be incurred in the future. Moreover,
it is possible that other developments, such as stricter environmental laws,
regulations and enforcement policies thereunder, could result in additional,
presently unquantifiable, costs or liabilities to the Company.
TITLE TO INTERESTS
The Company believes that its title to its various oil and gas interests is
satisfactory and consistent with the standards generally accepted in the oil and
gas industry, subject only to immaterial exceptions which do not detract
substantially from the value of the interests or materially interfere with their
use in the Company's operations. The interests owned by the Company may be
subject to one or more royalty, overriding royalty and other outstanding
interests customary in the industry. The interests may additionally be subject
to obligations or duties under applicable laws, ordinances, rules, regulations
and orders of arbitral or governmental authorities. In addition, the interests
may be subject to burdens such as net profits interests, liens incident to
operating agreements and current taxes, development obligations under oil and
gas leases and other encumbrances, easements and restrictions, none of which
currently detract substantially from the value of the interests or materially
interfere with their use in the Company's operations.
USE OF PROCEEDS
Unless otherwise specified in the applicable Pricing Supplement, the net
proceeds from the sale of the Remarketed Notes will be used to refinance
outstanding indebtedness and for other general corporate purposes. To the extent
proceeds are used to refinance outstanding indebtedness, certain terms of the
indebtedness being refinanced will be set forth in the applicable Pricing
Supplement.
S-4
<PAGE> 5
THE COMPANY
OVERVIEW
Apache Corporation, a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops, produces, gathers,
processes and markets crude oil and natural gas. In North America, Apache's
exploration and production interests are focused on the Gulf of Mexico, the
Anadarko Basin, the Permian Basin, the Gulf Coast, the Rocky Mountains and the
Western Sedimentary Basin of Canada. Outside of North America, Apache has
exploration and production interests offshore Western Australia and in Egypt,
and exploration interests in Indonesia, offshore China and offshore the Ivory
Coast. Apache's Common Stock, par value $1.25 per share ("Apache Common Stock"),
has been listed on the New York Stock Exchange since 1969 and on the Chicago
Stock Exchange since 1960.
The Company holds interests in many of its U.S., Canadian and international
properties through operating subsidiaries, such as MW Petroleum Corporation
("MW"), DEK Energy Company (formerly known as DEKALB Energy Company), Apache
Energy Resources Corporation ("AERC," formerly known as Hadson Energy Resources
Corporation), Apache Energy Limited ("AEL," formerly known as Hadson Energy
Limited), Apache International, Inc. and Apache Overseas, Inc. Properties
referred to in this Prospectus Supplement may be held by those subsidiaries. The
Company treats all operations as one segment of business.
On March 1, 1995, the Company acquired certain oil and gas properties from
Texaco for an adjusted purchase price of $564 million, effective January 1,
1995. On May 17, 1995, Apache acquired DEKALB Energy Company ("DEKALB"), an oil
and gas company engaged in the exploration for, and the development of, crude
oil and natural gas in Canada, through a merger which resulted in DEKALB
becoming a wholly owned subsidiary of Apache. The merger was accounted for as a
pooling of interests for financial accounting purposes. As a result, Apache's
financial information has been restated to include DEKALB on a combined basis.
On September 27, 1995, the Company acquired certain oil and gas assets of Aquila
for approximately $192 million, subject to adjustment, plus related transaction
costs. See "Recent Developments."
As of December 31, 1994, on a pro forma basis giving effect to the
completed Texaco, DEKALB and Aquila transactions, and net of certain property
dispositions completed in 1995, the Company's estimated proved reserves were 420
MMboe, of which approximately 62% was natural gas. These reserve values give
effect to approximately 40.6 MMboe of Apache's dispositions during 1995,
including the disposition of certain Rocky Mountain properties for $151 million
($143 million net to Apache), the sale of $20 million in properties on April 1,
1995, the sale of $31 million in properties on May 1, 1995, and other smaller
sales.
As of December 31, 1994, Apache (including DEKALB, but excluding the
properties acquired from Texaco and Aquila) had approximately 4,085 net oil and
gas wells and 1,032,982 net developed acres of oil and gas properties. In
addition, the Company had interests in 760,270 net undeveloped acres under U.S.
and Canadian leases and 4,239,290 net undeveloped acres under international
exploration and production rights. The Company completed 296 of 367 North
American wells during 1994 as producers, and completed 415 workover and
recompletion projects. For the third quarter of 1995, which includes results
from the Texaco, DEKALB and Aquila transactions and the sale of certain of the
Company's Rocky Mountain properties, the Company's daily average oil and gas
production was approximately 52 Mbbls and 568 MMcf, respectively.
The Company's principal executive offices are located at One Post Oak
Central, 2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400. The
Company's telephone number is (713) 296-6000.
STRATEGY
Apache's growth strategy is to increase oil and gas reserves, production
and cash flow through a combination of acquisitions, moderate-risk drilling and
development of its inventory of existing projects. Apache also emphasizes
reducing operating costs per unit produced and selling marginal and
non-strategic properties in order to increase its profit margins. An emerging
aspect of Apache's strategy is its exploration and development activity in the
international arena in pursuit of larger reserve targets than are generally
available
S-5
<PAGE> 6
domestically. Several recent international discoveries have created an inventory
of development projects to be drilled during the next several years.
Because the production of oil and gas results in depletion of reserves,
Apache's future oil and gas production is highly dependent upon its level of
success in adding reserves. Apache adds reserves by acquisition, active
exploration and development, and identification, through engineering studies, of
additional behind-pipe zones or secondary recovery reserves.
In conjunction with Apache's ongoing property acquisitions, the Company has
recently initiated the Apache private merger program to acquire privately held
interests in oil and gas properties. The primary focus of this program is to
acquire interests in properties in areas where the Company already operates. To
enable the Company to use Apache Common Stock as well as cash in such
acquisitions, the Company has filed a shelf registration statement on Form S-4
with the SEC pursuant to which the Company intends to offer and sell, from time
to time, up to 1,350,000 shares of Apache Common Stock.
Property acquisition is only one phase in a continuing cycle of Apache's
business growth. Apache's objective is to follow each material acquisition with
a cycle of reserve enhancement, property consolidation and cash flow
acceleration, facilitating asset growth and debt reduction. This approach
requires well-planned and carefully executed property development and a
commitment to a selective program of ongoing property dispositions. Apache
targets acquisitions that have ascertainable additional reserve potential to
which it applies an active drilling, workover and recompletion program to
realize the potential of undeveloped and partially developed properties. In
1994, the Company replaced over 114% of U.S. production through its drilling,
workover and recompletion program. Apache prefers to operate the properties in
which it has an interest so that it can more efficiently influence their
development and, as of September 30, 1995, Apache operated properties accounting
for over 75% of its production.
S-6
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL, OPERATING AND RESERVE DATA
The following table sets forth certain information regarding Apache's
consolidated results of operations, financial position and operating and reserve
data as of and for the periods indicated. On May 17, 1995, Apache acquired
DEKALB through a merger which was accounted for under the pooling of interests
method. As a result, the financial, operating and reserve data presented below
has been restated to present Apache and DEKALB on a combined basis, including
certain conforming adjustments to depreciation, depletion and amortization and
income taxes. The financial data for the nine months ended September 30, 1994
and 1995, respectively, were derived from Apache's unaudited financial
statements, which, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth. The data presented below should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto incorporated by reference in the accompanying Prospectus. The following
financial information is not necessarily indicative of future results of the
Company and the results for the nine months ended September 30, 1995 are not
necessarily indicative of results for the full year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992(1)
---------- ---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AND PER UNIT AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas production revenues........................ $ 538,389 $ 481,848 $ 453,835
Consolidated revenues.................................. 592,626 512,632 517,403
Net income (loss)...................................... 45,583 46,755 (15,682)
Net income (loss) per common share..................... .65 .75 (.28)
Cash dividends per common share(2)..................... .28 .28 .28
CASH FLOW DATA:
Net income (loss) from continuing operations........... $ 45,583 $ 41,421 $ (14,632)
Depreciation, depletion and amortization............... 257,821 198,320 179,876
Impairments............................................ 7,300 23,200 65,320
Amortization of deferred loan costs.................... 3,987 3,896 3,888
Provision for deferred income taxes.................... 24,385 20,539 (998)
Gain on sale of investment in affiliate................ -- -- (30,259)
Change in working capital and other.................... 18,693 (31,385) 19,758
--------- --------- ---------
Net cash provided by operating activities...... $ 357,769 $ 255,991 $ 222,953
========= ========= =========
BALANCE SHEET DATA (period end):
Working capital (deficit).............................. $ (3,203) $ (55,538) $ (32,775)
Total assets........................................... 2,036,627 1,759,203 1,774,767
Long-term debt......................................... 719,033 504,334 524,098
Shareholders' equity................................... 891,087 868,596 554,524
PRODUCTION DATA:
Oil (Mbbls)............................................ 13,815 13,036 13,465
Natural gas (MMcf)..................................... 176,397 131,591 119,962
Natural gas liquids (Mbbls)............................ 724 733 885
Equivalent production (Mboe)........................... 43,939 35,701 34,344
AVERAGE SALES PRICE:
Oil (per bbl).......................................... $ 15.65 $ 16.74 $ 18.11
Natural gas (per Mcf).................................. 1.78 1.94 1.66
Natural gas liquids (per bbl).......................... 11.28 11.55 11.79
RESERVE DATA -- PROVED (period end):
Oil and natural gas liquids (Mbbls).................... 110,624 102,957 94,643
Natural gas (MMcf)..................................... 1,316,155 1,125,630 919,642
Equivalent reserves (Mboe)............................. 329,983 290,562 247,917
Present value of estimated future net cash flows,
before income taxes, discounted at 10%.............. $1,600,927 $1,626,096 $1,272,952
</TABLE>
- ---------------------------
(See notes on following page)
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<PAGE> 8
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- -----------------------
1995(3) 1994 1995(3)(4) 1994
--------- --------- ---------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER
UNIT AMOUNTS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Oil and gas production revenues............ $ 159,590 $ 140,044 $ 477,298 $ 399,462
Consolidated revenues...................... 181,247 152,971 555,017 432,746
Net income................................. 7,042 12,389 11,662 33,521
Net income per common share................ .10 .18 .17 .48
Cash dividends per common share(2)......... .07 .07 .21 .21
CASH FLOW DATA:
Net income from continuing operations...... $ 7,042 $ 12,389 $ 11,662 $ 33,521
Depreciation, depletion and amortization... 74,630 66,100 223,255 188,326
Impairments................................ -- 1,000 -- 7,300
Amortization of deferred loan costs........ 1,118 1,113 3,491 2,857
Provision for deferred income taxes........ 1,936 6,950 21,709 19,202
Change in working capital and other........ (25,699) 4,594 (59,851) (18,370)
--------- --------- ---------- ---------
Net cash provided by operating
activities....................... $ 59,027 $ 92,146 $ 200,266 $ 232,836
========= ========= ========= =========
BALANCE SHEET DATA (PERIOD END):
Working capital (deficit).................. $ (5,479) $ (42,743) $ (5,479) $ (42,743)
Total assets............................... 2,635,926 1,890,291 2,635,926 1,890,291
Long-term debt............................. 1,057,872 604,069 1,057,872 604,069
Shareholders' equity....................... 1,090,974 888,544 1,090,974 888,544
PRODUCTION DATA:
Oil (Mbbls)................................ 4,768 3,538 13,920 10,228
Natural gas (MMcf)......................... 52,275 46,342 156,434 127,662
Natural gas liquids (Mbbls)................ 185 182 550 545
Equivalent production (Mboe)............... 13,665 11,443 40,542 32,050
AVERAGE SALES PRICE:
Oil (per bbl).............................. $ 16.72 $ 16.95 $ 17.04 $ 15.29
Natural gas (per Mcf)...................... 1.49 1.68 1.49 1.86
Natural gas liquids (per bbl).............. 11.05 11.93 11.77 11.03
</TABLE>
- ---------------
(1) Includes a $40.6 million after-tax writedown of DEKALB's oil and gas
properties and a $25.6 million after-tax loss from the sale of
substantially all of DEKALB's U.S. assets. Also includes a $19.8 million
after-tax gain resulting from the sale by the Company of its 36.67%
interest in Natural Gas Clearinghouse.
(2) No cash dividends were paid on outstanding DEKALB common stock in 1995,
1994, 1993 or 1992. DEKALB stockholders are entitled to receive dividends
paid with respect to shares of Apache Common Stock for each record date on
or after May 17, 1995, upon exchange of their shares of DEKALB common stock
for shares of Apache Common Stock.
(3) The nine months ended September 30, 1995 include the effect of the
acquisition of properties from Texaco since March 1, 1995.
(4) Includes nonrecurring transaction costs totaling $8.7 million after-tax
relating to the DEKALB merger.
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<PAGE> 9
RECENT DEVELOPMENTS
ACQUISITION OF AQUILA PROPERTIES
In September, 1995, the Company acquired substantially all of the oil and
gas assets (the "Aquila Assets") of Aquila, a wholly owned, indirect subsidiary
of UtiliCorp United Inc., for approximately $192 million, subject to adjustment,
plus related transaction costs. The Aquila Assets, the acquisition of which was
accounted for under the purchase method of accounting, include: proved reserves
totaling an estimated 157 Bcf of gas equivalent; approximately 107,000 developed
and 49,000 undeveloped net acres located primarily in the Company's
Anadarko-Basin and Gulf of Mexico core areas; a five-year, four-month premium
gas contract effective September 1, 1995; and non-operated interests in four gas
processing plants. The gas contract calls for Aquila to purchase 20 to 25 MMcf
of gas per day from the Company at a price of $2.70 per Mcf in 1996, escalating
to $3.20 per Mcf in the year 2000.
Proved reserves included in the Aquila Assets include an estimated six
million barrels of oil and 121 Bcf of natural gas. The properties contain an
estimated 80 drilling locations, half of which are located in the Company's
core, deep-Springer play in the Anadarko Basin, where 17 of the Company's last
17 wells drilled have been productive.
At the time of acquisition, the Aquila properties were producing
approximately 67 MMcf of gas and 2,900 barrels of oil per day. The Company
expects that production level to rise by year-end 1995 as a result of additional
development drilling. Approximately 77% of the Aquila properties' proved
reserves are concentrated in the top seven fields and 77% percent of the
properties' net production will be operated by the Company. Approximately $143
million of the consideration for the Aquila Assets was provided through a
deferred tax-free exchange of like-kind properties of qualifying use. The
properties exchanged by the Company were primarily lower margin and
non-strategic properties located in the Rocky Mountains which were previously
selected for sale by the Company in connection with its ongoing program of
selective property dispositions. The remainder of the consideration for the
Aquila Assets was provided by the Company's public offering of common stock
described under "Financing Activities" below.
OTHER RECENT ACQUISITIONS
On March 1, 1995, Apache purchased certain U.S. oil and gas properties from
Texaco for an adjusted purchase price of $564 million, effective January 1,
1995. The Texaco properties comprised estimated proved reserves at the effective
date of approximately 105 MMboe (after adjustment for the exercise of
preferential rights and properties excluded following due diligence and using
unescalated prices), of which approximately 70% was oil. At the time of
purchase, the daily production of the acquired properties was approximately 20
Mbbls of oil and 85 MMcf of natural gas.
On May 17, 1995, Apache acquired DEKALB, an oil and gas company engaged in
the exploration for, and the development of, crude oil and natural gas in
Canada, through a merger which resulted in DEKALB's becoming a wholly owned
subsidiary of Apache. Pursuant to the merger agreement, the Company issued 8.4
million shares of Apache Common Stock in exchange for all outstanding DEKALB
capital stock and DEKALB employee stock options outstanding at the time of the
merger and tendered to Apache. The merger was accounted for as a pooling of
interests for financial accounting purposes.
DISPOSITIONS
In early 1995, Apache announced plans to accelerate the disposition of
certain properties, including the sale of a substantial portion of its Rocky
Mountain properties and lower margin and non-strategic properties, and to close
its Rocky Mountain regional office in Denver, Colorado. During the first half of
1995, Apache received approximately $73 million from completed sales of such
properties. On September 1, 1995, the Company disposed of certain non-strategic
oil and gas properties in its Rocky Mountain region for approximately $151
million ($143 million net to Apache). The divested assets included the Company's
interests in 138 fields with approximately 1,600 active wells in Colorado,
Montana, North and South Dakota, Utah and Wyoming, which had 28 MMboe of
estimated proved reserves at December 31, 1994.
S-9
<PAGE> 10
FINANCING ACTIVITIES
On September 27, 1995, the Company sold 7,450,000 shares of Apache Common
Stock at $27.375 per share in an underwritten public offering. After commissions
and offering costs, the offering resulted in net proceeds of $192 million.
Approximately $50 million of such net proceeds was used by the Company to
finance the acquisition of the Aquila Assets, which were acquired for an
aggregate consideration of approximately $192 million in cash, subject to
adjustment, plus related transaction costs. The remainder of the net proceeds of
such offering was applied to reduce indebtedness under the Company's principal
revolving bank credit facility.
On March 1, 1995, Apache's revolving bank credit facility agreement was
amended and restated, increasing the aggregate commitment from $700 million to
$1 billion, subject to borrowing base availability. In addition to the borrowing
base predicated on the Company's oil and gas reserve value, the facility
initially provided for a nonconforming borrowing base of $135 million to
accommodate the March 1, 1995 acquisition of certain Texaco properties. On
September 27, 1995, Apache voluntarily reduced the non-conforming borrowing base
to zero. As of September 30, 1995, the available portion of the commitment was
$686 million, of which $611 million was outstanding. The facility expires on
March 1, 2000, and may be extended in one-year increments with the lenders'
consent. Financial covenants of the amended agreement are similar to those
existing at December 31, 1994.
On January 4, 1995, Apache closed the placement of 6% Convertible
Subordinated Debentures due January 15, 2002 (the "Debentures"). The Debentures
were issued in transactions exempt from registration under the Securities Act of
1933, as amended. The Debentures are redeemable by Apache no earlier than
January 15, 1998, are subordinated in right of payment to all senior
indebtedness of Apache and are convertible at the option of the holders into
Apache Common Stock at a conversion price of $30.68 per share, subject to
adjustment. The aggregate principal amount of the Debentures placed, including
the overallotment option, was $172.5 million. The net proceeds from the
Debentures of $168.6 million were ultimately used to fund in part the
acquisition of properties from Texaco described above.
NATURAL GAS MARKETING
On September 30, 1995, the Company's contract with Natural Gas
Clearinghouse ("NGC") terminated and the Company began to market all of its own
natural gas, including the natural gas previously marketed by NGC. The Company
believes that prices that it obtains through its own natural gas marketing
activities are not substantially different from the prices that would have been
received in marketing through NGC.
On October 27, 1995, wholly-owned affiliates of the Company, Orxy Energy
Company and Parker & Parsley Petroleum Company formed Producers Energy
Marketing, LLC, a Delaware limited liability company ("ProEnergy"). Until
operations of ProEnergy are begun, the Company will continue to market its own
natural gas. Once fully operational (which is expected to occur in the second
quarter of 1996), ProEnergy will market substantially all of its members'
natural gas and natural gas liquids pursuant to member gas purchase agreements
having an initial term of ten years, subject to early termination following
specified events. The price of gas purchased by ProEnergy from its members will
be based upon agreed indexes. ProEnergy will also provide certain contract
administration and other services.
ProEnergy's limited liability company agreement provides that capital
funding obligations, allocations of profit and loss and voting rights are
calculated based upon the members' respective throughputs of natural gas sold
to, or whose sales are managed by, ProEnergy. The members' liability with
respect to future capital funding obligations are subject to certain
limitations. Natural gas throughputs will be calculated, profit distributed,
and/or capital called on a quarterly basis. As of the date of this Prospectus
Supplement, the Company is the holder of a majority interest in ProEnergy.
S-10
<PAGE> 11
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements
the description of the general terms and provisions set forth in the
accompanying Prospectus, to which description reference is hereby made.
The Notes are to be issued as a series of debt securities (the "Debt
Securities") under an indenture (the "Indenture") to be entered into between the
Company and Chemical Bank, as trustee (the "Trustee"), and initially will be
limited to $250,000,000 aggregate principal amount. The Company may, from time
to time, without the consent of the holders of the Notes, provide for the
issuance of additional Notes or other Debt Securities under the Indenture in
addition to the Notes offered hereby.
Notes will initially bear interest from the date set forth in the
applicable Pricing Supplement and thereafter from the most recent date upon
which interest has been paid or duly provided for, at a fixed rate or a floating
rate as set forth in the applicable Pricing Supplement (the "Initial Interest
Rate"), through the date set forth in the applicable Pricing Supplement (the
"Initial Interest Rate Period"). Interest on Notes bearing interest at the
Initial Interest Rate will be payable on the date or dates specified in the
applicable Pricing Supplement to the persons in whose names the Notes are
registered at the close of business on the dates specified in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
not be subject to optional redemption by the Company prior to the expiration of
the applicable Initial Interest Rate Period. After the Initial Interest Rate
Period, Notes may bear interest for any interest rate period (each, an "Interest
Rate Period") in the Short Term Rate Mode or the Long Term Rate Mode as
determined by the Company. See "Description of Debt Securities -- Provisions
Applicable to Remarketed Notes" in the accompanying Prospectus for a description
of the method and manner by and on which interest on the Notes is determined and
paid after the Initial Interest Rate Period.
Interest rates on any Notes in the Short Term Rate Mode or the Long Term
Rate Mode will be established as described in the accompanying Prospectus by one
or more remarketing agents selected by the Company (each, a "Remarketing
Agent"). If the Company appoints more than one Remarketing Agent with respect to
any of the Notes, then each such Remarketing Agent shall be responsible for
remarketing such Notes initially sold by, through or to such Remarketing Agent.
In such case, any notice required to be given to a Remarketing Agent as
described in the accompanying Prospectus shall be given to the applicable
Remarketing Agent.
Each Note will be automatically tendered for purchase, or deemed tendered
for purchase, at the end of each Interest Rate Period relating to such Note. The
Remarketing Agent may purchase tendered Notes for its own account in a
remarketing, but will not be obligated to do so.
The Company also may appoint a standby remarketing agent for any
Remarketing Agent (each, a "Standby Remarketing Agent"). In such case, in the
event that a Remarketing Agent is not able to remarket any Notes on any Interest
Rate Adjustment Date, then the applicable Standby Remarketing Agent shall use
its reasonable efforts to remarket such Notes, as described in the accompanying
Prospectus. The Remarketing Agent and any Standby Remarketing Agent in respect
of any Notes may be specified in the Pricing Supplement relating to such Notes.
The Company, however, reserves the right to appoint or replace Remarketing
Agents and Standby Remarketing Agents at any time, as described in the
accompanying Prospectus.
S-11
<PAGE> 12
PLAN OF DISTRIBUTION
The Notes are being offered from time to time for sale by the Company,
through First Chicago Capital Markets, Inc., Lehman Brothers, Lehman Brothers
Inc. and J.P. Morgan Securities Inc. (the "Agents"). The Agents may purchase
Notes, as principal, from the Company from time to time for resale to investors
and other purchasers at varying prices relating to prevailing market prices at
the time of resale as determined by the applicable Agent, or, if so specified in
the applicable Pricing Supplement, for resale at a fixed offering price. If
agreed to by the Company and an Agent, such Agent may also use its reasonable
efforts on an agency basis to solicit offers to purchase the Notes at 100% of
the principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to the applicable Agent,
ranging from .100% to .750% of the principal amount of each Note, depending upon
its Initial Interest Rate Period, sold through such Agent. Commissions with
respect to Notes with an Initial Interest Rate Period in excess of 30 years that
are sold through an Agent will be negotiated between the Company and the Agent
at the time of such sale.
Unless otherwise indicated in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a Note, and may be resold by the
Agent as principal to dealers for resale to investors and other purchasers 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 and may allow any portion of the discount received in connection with such
purchase from the Company to such dealers. After the initial public offering of
Notes to be resold to investors and other purchasers, the public offering price
(in the case of Notes to be resold at a fixed public offering price), the
concession and the discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers to purchase Notes in whole or in
part. The Agents will have the right, in their discretion reasonably exercised,
to reject in whole or in part any offer to purchase Notes received by them.
Unless otherwise specified in an applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in The City of New York on the date of settlement.
The Company does not intend to apply for listing of the Notes on a national
securities exchange, but has been advised by the Agents that they presently
intend to make a market in the Notes, as permitted by applicable laws and
regulations. The Agents are not obligated, however, to make a market in the
Notes and any such market making may be discontinued at any time at the sole
discretion of the Agents. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Notes.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agents against certain liabilities including liabilities under the
Act, or to contribute to payments the Agents may be required to make in respect
thereof. The Company has agreed to reimburse the Agents for certain other
expenses.
The Agents and/or certain of their affiliates may engage in commercial
and/or investment banking transactions with and perform services for the Company
and certain of its affiliates in the ordinary course of business.
Concurrently with the offering of Notes as described herein, the Company
may issue other Debt Securities described in the accompanying Prospectus
pursuant to the Indenture.
S-12
<PAGE> 13
PROSPECTUS
$250,000,000
APACHE CORPORATION
DEBT SECURITIES
Apache Corporation (the "Company" or "Apache") intends from time to time to
issue senior unsecured debt securities ("Debt Securities") in one or more
series, consisting of (a) Debt Securities with interest rates that may be
periodically established by a remarketing agent selected by the Company
("Remarketed Notes") or (b) any other Debt Security, or any combination of the
foregoing, at an aggregate initial offering price not to exceed $250,000,000, at
prices and on terms to be determined at or prior to the time of sale. The
specific designation, aggregate principal amount, maturity, interest rate or
method for determining interest rate, method of distribution, any remarketing or
refunding provisions, and any exchangeability, conversion, redemption or
prepayment and any other variable terms with regard to the Debt Securities in
respect of which this Prospectus is delivered will be, to the extent not set
forth herein, set forth in an accompanying Prospectus Supplement.
Unless otherwise specified herein or in the applicable Prospectus
Supplement, Debt Securities will be issued in fully registered book-entry form
and will be registered in the name of The Depository Trust Company, as
depository ("DTC"), or its nominee. Interests in the Debt Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Debt Securities issued in book-entry
form will not be issuable as certificated securities except as specified herein
or in the applicable Prospectus Supplement. See "DTC Book-Entry Only System."
Payment of the principal of, and premium, if any, and interest on the Debt
Securities will be made to DTC if and so long as DTC or its nominee is the
registered owner of the Debt Securities. The disbursement of such payments to
beneficial owners of the Debt Securities ("Beneficial Owners") will be the
responsibility of the DTC Participants and the Indirect Participants, all as
defined and more fully described in this Prospectus under the caption "DTC
Book-Entry-Only System."
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be subject to redemption at the option of the Company prior
to maturity as set forth herein and in the applicable Prospectus Supplement. See
"Description of Debt Securities." The applicable Prospectus Supplement will also
contain information, where applicable and to the extent not set forth herein,
concerning certain United States federal income tax considerations relating to,
and any listing on a securities exchange of, the Debt Securities covered by such
Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Debt Securities may be sold directly by the Company to one or more
institutional purchasers, through agents designated from time to time, through
dealers or underwriters or through any combination of the above. If any agents
of the Company or any underwriters are involved in the sale of the Debt
Securities, the names of such agents or underwriters and any applicable
commissions or discounts will be set forth in the Prospectus Supplement. See
"Plan of Distribution" for indemnification arrangements which the Company is
prepared to make available to underwriters and agents for the sale of the Debt
Securities.
The date of this Prospectus is December 15, 1995.
<PAGE> 14
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEBT SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
Apache is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "SEC"). Reports, proxy statements and other information filed by
Apache can be inspected and copied at the public reference facilities maintained
by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained by mail from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, reports, proxy statements and other
information concerning Apache may be inspected at the offices of the New York
Stock Exchange, Inc. ("NYSE"), 20 Broad Street, New York, New York 10005, and
also at the offices of the Chicago Stock Exchange ("CSE"), One Financial Place,
440 S. LaSalle Street, Chicago, Illinois 60605-1070. The address of the
Company's principal executive offices and its telephone number are 2000 Post Oak
Boulevard, Houston, Texas 77056-4400 and (713) 296-6000.
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits and schedules thereto,
certain portions of which have been omitted pursuant to the rules and
regulations of the SEC. The information so omitted may be obtained from the
SEC's principal office in Washington, D.C. upon payment of the fees prescribed
by the SEC. For further information, reference is hereby made to the
Registration Statement. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement or
otherwise filed with the SEC are not necessarily complete, and in each instance
reference is made to the copy of such document so filed, each such statement
being qualified in its entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act (SEC File No. 1-4300) are incorporated in and made
a part of this Prospectus:
(i) Annual Report on Form 10-K/A for the fiscal year ended December 31,
1994, filed August 2, 1995.
(ii) Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1995,
filed August 4, 1995.
(iii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
filed August 14, 1995.
(iv) Current Report on Form 8-K dated March 1, 1995, amended by Amendment
No. 1 on Form 8-K/A, filed March 22, 1995.
(v) Current Report on Form 8-K/A dated May 17, 1995, filed July 17, 1995.
(vi) Current Report on Form 8-K dated June 30, 1995, filed July 24, 1995.
(vii) Current Report on Form 8-K dated August 28, 1995, filed September 6,
1995.
(viii) Current Report on Form 8-K dated October 27, 1995, filed November 1,
1995.
(ix) Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, filed November 14, 1995.
2
<PAGE> 15
All documents which the Company files pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering described herein shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement contained in a document
incorporated by reference, or deemed to be incorporated by reference, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document or in any accompanying prospectus supplement modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company undertakes to provide without charge, upon the written or oral
request of any person to whom a copy of this Prospectus has been delivered, a
copy of any or all of the documents referred to above which are incorporated in
this Prospectus by reference, other than exhibits to such documents. Requests
should be directed to Cheri L. Peper, Corporate Secretary, Apache Corporation,
2000 Post Oak Boulevard, Suite 100, Houston, Texas 77056-4400; (713) 296-6000.
All defined terms under Rule 4-10(a) of Regulation S-X shall have their
statutorily-prescribed meanings when used in this Prospectus. Quantities of
natural gas are expressed in this Prospectus in terms of thousand cubic feet
("Mcf"), million cubic feet ("MMcf") or billion cubic feet ("Bcf"). Oil (which
includes condensate) is quantified in terms of barrels ("bbls"), thousands of
barrels ("Mbbls") and millions of barrels ("MMbbls"). One barrel of oil is the
energy equivalent of six Mcf of natural gas, expressed as a barrel of oil
equivalent. Natural gas is compared to oil in terms of thousand barrels of oil
equivalent ("Mboe") and in million barrels of oil equivalents ("MMboe"). Oil and
natural gas liquids are compared with natural gas in terms of million cubic feet
equivalent ("MMcfe") and billion cubic feet equivalent ("Bcfe"). Daily oil and
gas production is expressed in terms of barrels of oil per day ("bopd") and
thousands of cubic feet of gas per day ("Mcfd"), respectively. The Company's
"net" working interest in wells or acreage is determined by multiplying gross
wells or acreage by the Company's working interest therein. Unless otherwise
specified, all references to wells and acres are gross.
THE COMPANY
Apache Corporation, a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops, produces, gathers,
processes and markets crude oil and natural gas. In North America, the Company's
exploration and production interests are focused on the Gulf of Mexico, the
Anadarko Basin, the Permian Basin, the Gulf Coast, the Rocky Mountains and the
Western Sedimentary Basin of Canada. Outside of North America, the Company has
exploration and production interests offshore Western Australia and in Egypt,
and exploration interests in Indonesia, offshore China and offshore the Ivory
Coast. The Company's common stock, par value $1.25 per share ("Apache Common
Stock"), has been listed on the NYSE since 1969, and on the CSE since 1960.
The Company holds interests in many of its North American and international
properties through operating subsidiaries, such as Apache Canada Ltd., MW
Petroleum Corporation, Apache Energy Resources Corporation, Apache Energy
Limited, Apache International, Inc. and Apache Overseas, Inc. The Company treats
all operations as one segment of business.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the net
proceeds from the sale of the Debt Securities will be used to refinance
outstanding indebtedness and for other general corporate purposes. To the extent
proceeds are used to refinance outstanding indebtedness, certain terms of the
indebtedness being refinanced will be set forth in the applicable Prospectus
Supplement.
3
<PAGE> 16
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges were as follows for the
respective periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------- ----------------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1.09 2.39 2.34 2.37 .72 -- 3.23
</TABLE>
The Company's ratios of earnings to fixed charges were computed based on:
(A) income or losses from continuing operations before income taxes and fixed
charges (excluding capitalized amounts); and (B) fixed charges consist of
interest on indebtedness (including amounts capitalized), amortization of debt
discount and expenses and the estimated portion of rental expenses attributable
to interest. Earnings were inadequate to cover fixed charges for the year 1991
by $68.1 million and $14.8 million for the year 1992 due to write downs of the
carrying value of United States and Canadian oil and gas properties of DEK
Energy Company (formerly known as DEKALB Energy Company ("DEKALB")) and losses
incurred on the divestiture of certain of DEKALB's United States assets.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an indenture to be entered into
between the Company and, unless otherwise specified in the applicable Prospectus
Supplement, Chemical Bank, as trustee (the "Trustee") (the "Indenture"). The
Debt Securities to be offered by this Prospectus are limited to an aggregate
initial offering price not to exceed $250,000,000. However, the Indenture does
not limit the amount of Debt Securities which can be issued thereunder and
provides that additional Debt Securities of any series may be issued thereunder
up to the aggregate principal amount which may be authorized from time to time
by the Company. The payment of principal of, or premium, if any, or interest on
the Debt Securities will rank pari passu with all other unsecured unsubordinated
indebtedness of the Company. Unless otherwise indicated herein or in the
applicable Prospectus Supplement, the Debt Securities will be issued in
denominations of $100,000 and integral multiples of $1,000 in excess thereof.
A copy of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The information herein includes a
summary of certain provisions of the Indenture and does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all provisions of the Indenture including the definition therein of certain
terms. The following summaries set forth certain general terms and provisions of
the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities offered by any Prospectus Supplement and
the extent, if any, to which such general provisions may apply to the Debt
Securities so offered will, to the extent not described herein, be described in
the Prospectus Supplement relating to such Debt Securities.
PROVISIONS APPLICABLE TO ALL DEBT SECURITIES
General
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for the following terms, to the extent permitted by the Indenture,
and other information with respect to the Debt Securities being offered thereby,
to the extent not described herein: (i) the designation, aggregate principal
amount and authorized denominations of such Debt Securities; (ii) the percentage
of the principal amount at which such Debt Securities will be issued; (iii) the
date (or the manner of determining or extending the date or dates) on which the
principal of such Debt Securities will be payable; (iv) whether such Debt
Securities will be issued in fully registered form or in bearer form or any
combination thereof; (v) whether such Debt Securities will be issued in the form
of one or more global securities and whether such global securities are to be
issuable in a temporary global form or permanent global form; (vi) if other than
U.S. dollars, the currency or currencies or currency unit or units in which Debt
Securities may be denominated and purchased and the currency or currencies or
currency units in which principal, premium (if any) and any interest may be
payable; (vii) if the currency for which Debt Securities may be purchased or in
which principal, premium (if any) and any interest
4
<PAGE> 17
may be payable is at the election of the Company or the purchaser, the manner in
which such an election may be made and the terms of such election; (viii) the
rate or rates per annum at which such Debt Securities will bear interest, if
any, or the method or methods of determination of such rate or rates and the
basis upon which interest will be calculated if other than that of a 360-day
year of twelve 30-day months; (ix) the date or dates from which such interest,
if any, on such Debt Securities will accrue or the method or methods, if any, by
which such date or dates are to be determined, the date or dates on which such
interest, if any, will be payable, the date on which payment of such interest,
if any, will commence and the Regular Record Dates for such Interest Payment
Dates, if any; (x) the date or dates, if any, on or after which, or the period
or periods, if any, within which, and the price or prices at which the Debt
Securities may, pursuant to any optional redemption provisions, be redeemed at
the option of the Company or of the holder thereof and the other terms and
provisions of such optional redemption; (xi) information with respect to
book-entry procedures relating to global Debt Securities; (xii) whether and
under what circumstances the Company will pay Additional Amounts as contemplated
by Section 1004 of the Indenture (the term "interest," as used in this
Prospectus, shall include such Additional Amounts) on such Debt Securities to
any holder who is a United States Alien (as defined in the Indenture) (including
any modification to the definition of such terms contained in the Indenture as
originally executed) in respect of any tax, assessment or governmental charge
and, if so, whether the Company will have the option to redeem such Debt
Securities rather than pay such Additional Amounts (and the terms of any such
option); (xiii) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to any of such Debt
Securities; (xiv) if either or both of Section 402(2) relating to defeasance or
Section 402(3) relating to covenant defeasance shall not be applicable to the
Debt Securities of such series, or any covenants in addition to those specified
in Section 402(3) relating to the Debt Securities of such series shall be
subject to covenant defeasance, and any deletions from, or modifications or
additions to, the provisions of Article Four of the Indenture relating to
satisfaction and discharge in respect of the Debt Securities of such series;
(xv) any index or other method used to determine the amount of payments of
principal, premium (if any) and interest, if any, on such Debt Securities; (xvi)
if a trustee other than Chemical Bank is named for such Debt Securities, the
name of such trustee; and (xvii) any other specific terms of the Debt
Securities. All Debt Securities of any one series need not be issued at the same
time and all the Debt Securities of any one series need not bear interest at the
same rate or mature on the same date.
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of, or premium, if any, or interest, if any,
on any series of Debt Securities is payable in foreign currencies or foreign
currency units, the restrictions, elections, tax consequences, specific terms
and other information with respect to such Debt Securities and such foreign
currencies or foreign currency units will be set forth in the applicable
Prospectus Supplement.
Other than as described below under "Limitation on Liens" and "Company's
Obligation to Purchase Debt Securities on Change in Control," the Indenture does
not contain any provision that would limit the ability of the Company to incur
indebtedness or that would afford holders of Debt Securities protection in the
event of a decline in the credit quality of the Company or a takeover,
recapitalization or highly leveraged or similar transaction involving the
Company. Reference is made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby, to the extent not
otherwise described herein, for any information with respect to any deletions
from, modifications of or additions to the Events of Default described below or
covenants of the Company contained in the Indenture, including any addition of a
covenant or other provision providing event risk or similar protection.
Discount, Series, Maturities, Registration, and Payment
The Debt Securities may be sold at a substantial discount below their
stated principal amount, bearing no interest or interest at a rate that at the
time of issuance is below market rates. See "Certain United States Federal
Income Tax Considerations" herein. Federal income tax consequences and special
considerations applicable to any such series may also be described in the
Prospectus Supplement relating thereto.
The Debt Securities may be issued in one or more series with the same or
various maturities. (Section 301) Debt Securities may be issued solely in fully
registered form without coupons ("Registered
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Securities"), solely in bearer form with or without coupons ("Bearer
Securities"), or as both Registered Securities and Bearer Securities. (Section
301) Registered Securities may be exchangeable for other Debt Securities of the
same series, registered in the same name, for a like aggregate principal amount
in authorized denominations and will be transferable at any time or from time to
time at the aforementioned office. No service charge will be made to the holder
for any such exchange or transfer except for any tax or governmental charge
incidental thereto. If Debt Securities of any series are issued as Bearer
Securities, the applicable Prospectus Supplement will contain any restrictions
applicable to the offer, sale or delivery of Bearer Securities and the terms
upon which Bearer Securities of the series may be exchanged for Registered
Securities of the series and, if permitted by applicable laws and regulations,
the terms upon which Registered Securities of the series may be exchanged for
Bearer Securities of the series, whether such Debt Securities are to be issuable
in permanent global form with or without coupons and, if so, whether beneficial
owners of interests in any such permanent global security may exchange such
interests for Debt Securities of such series and the circumstances under which
any such exchanges may occur.
Unless otherwise specified in the applicable Prospectus Supplement,
principal and interest, if any, on the Debt Securities offered thereby are to be
payable at the office or agency of the Company maintained for such purposes in
the city where the principal corporate trust office of the Trustee is located,
and will initially be the principal corporate trust office of the Trustee,
provided that payment of interest, if any, may be made (subject to collection)
at the option of the Company by check mailed to the persons in whose names the
Debt Securities are registered at the close of business on the day specified in
the applicable Prospectus Supplement.
Form, Exchange, Registration and Transfer
Debt Securities will be exchangeable for other Debt Securities of the same
series and of like tenor, of any authorized denominations and of a like
aggregate principal amount and Stated Maturity (as defined in the Indenture).
Registered Securities may be presented for registration of transfer (with the
form of transfer endorsed thereon duly executed) at the office of the Trustee or
at the office of any transfer agent designated by the Company for such purpose,
without service charge and upon payment of any taxes and other governmental
charges as described in the Indenture. Such transfer or exchange will be
effected upon the books of the Trustee or such transfer agent contingent upon
such Trustee or transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. (Section 305)
In the event of any redemption of Debt Securities, the Company shall not be
required to: (i) issue, register the transfer of or exchange such Debt
Securities during a period beginning at the opening of business 15 days before
any selection of such Debt Securities to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; or (ii)
register the transfer of or exchange any such Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any such Debt Security
being redeemed in part. (Section 305)
Limitation on Liens
Nothing in the Indenture or the Debt Securities will in any way limit the
amount of indebtedness or securities (other than the Debt Securities) which may
be incurred or issued by the Company or any of its Subsidiaries (as defined in
the Indenture). The Indenture provides that neither the Company nor any
Subsidiary will issue, assume or guarantee any notes, bonds, debentures or other
similar evidences of indebtedness for money borrowed secured by a mortgage,
lien, pledge, security interest or other encumbrance (defined in the Indenture
as "Liens") upon any of its property, subject to certain exceptions set forth in
the Indenture, without making effective provisions whereby any and all Debt
Securities then outstanding shall be secured by a Lien equally and ratably with
any and all other obligations thereby secured. Such restrictions will not,
however, apply to (a) Liens existing on the date of the Indenture or provided
for under the terms of agreements existing on the date thereof; (b) Liens
securing (i) all or part of the cost of exploration, production, gathering,
processing, marketing, drilling or development of any properties of the Company
or any of its Subsidiaries, or securing indebtedness incurred to provide funds
therefor; or (ii) indebtedness incurred to finance all or part of the cost of
acquiring, constructing, altering, improving or repairing any such property or
assets, or securing indebtedness incurred to provide funds therefor; (c) Liens
which secure only indebtedness
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owing by a Subsidiary to the Company, or to one or more Subsidiaries, or the
Company and one or more Subsidiaries; (d) Liens on the property of any
corporation or other entity existing at the time such corporation or entity
becomes a Subsidiary; (e) Liens on any property to secure indebtedness incurred
in connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or indebtedness issued or guaranteed by the United States, any state
or any department, agency or instrumentality of either or indebtedness issued to
or guaranteed for the benefit of a foreign government, any state or any
department, agency or instrumentality of either or an international finance
agency or any division or department thereof, including the World Bank, the
International Finance Corp. and the Multilateral Investment Guarantee Agency;
(f) any extension, renewal or replacement (or successive extensions, renewals or
replacements) of any Lien referred to in the foregoing clauses (a) through (e)
existing on the date of the Indenture; (g) certain Liens incurred in the
ordinary course of business or (h) Liens which secure Limited Recourse
Indebtedness (as defined in the Indenture). The following types of transactions,
among others, shall not be deemed to create indebtedness secured by Liens: (i)
the sale or other transfer of crude oil, natural gas or other petroleum
hydrocarbons in place for a period of time until, or in an amount such that, the
transferee will realize therefrom a specified amount (however determined) of
money or such crude oil, natural gas or other petroleum hydrocarbons, or the
sale or other transfer of any other interest in property of the character
commonly referred to as a production payment, overriding royalty, forward sale
or similar interest and (ii) Liens required by any contract or statute in order
to permit the Company or a Subsidiary to perform any contract or subcontract
made by it with or at the request of the United States government or any foreign
government or international finance agency, any state or any department thereof,
or any agency or instrumentality of either, or to secure partial, progress,
advance or other payments to the Company or any Subsidiary by any such entity
pursuant to the provisions of any contract or statute. (Section 1005)
Limitation on Sale/Leaseback Transactions
The Indenture provides that neither the Company nor any Subsidiary will
enter into any arrangement with any person (other than the Company or a
Subsidiary) providing for the leasing to the Company or a Subsidiary for a
period of more than three years of any property which has been, or is to be,
sold or transferred by the Company or such Subsidiary to such person or to any
person (other than the Company or a Subsidiary) to which funds have been or are
to be advanced by such person on the security of the leased property unless
either (a) the Company or such Subsidiary would be entitled, pursuant to the
provisions described under "Limitation on Liens" above, to incur indebtedness in
a principal amount equal to or exceeding the value of such sale/leaseback
transaction, secured by a Lien on the property to be leased; (b) since the date
of the Indenture and within a period commencing six months prior to the
consummation of such arrangement and ending six months after the consummation
thereof, the Company or such Subsidiary has expended or will expend for any
property (including amounts expended for the acquisition, exploration, drilling
or development thereof, and for additions, alterations, improvements and repairs
thereto) an amount equal to all or a portion of the net proceeds of such
arrangement and the Company elects to designate such amount as a credit against
such arrangement (with any such amount not being so designated to be applied as
set forth in (c) below); or (c) the Company, during or immediately after the
expiration of the 12 months after the effective date of such transaction,
applies to the voluntary defeasance or retirement of the Debt Securities and its
other Senior Indebtedness (as defined in the Indenture) an amount equal to the
greater of the net proceeds of the sale or transfer of the property leased in
such transaction or the fair value, in the opinion of the board of directors of
the Company of such property at the time of entering into such transaction (in
either case adjusted to reflect the remaining term of the lease and any amount
utilized by the Company as set forth in (b) above), less an amount equal to the
principal amount of Senior Indebtedness voluntarily retired by the Company
within such 12-month period. (Section 1006)
Events of Default
Unless otherwise specified in the applicable Prospectus Supplement, any one
of the following events will constitute an Event of Default under the Indenture
with respect to the Debt Securities of any series: (a) failure to pay any
interest on any Debt Security of such series when due, continued for 30 days;
(b) failure
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<PAGE> 20
to pay principal of (or premium, if any) on the Debt Securities of such series
when due and payable, either at maturity or, if applicable, at 12:00 noon on the
Business Day following the Change in Control Purchase Date; (c) failure to
perform, or breach of, any other covenant or warranty of the Company in the
Indenture or the Debt Securities (other than a covenant or warranty included in
the Indenture solely for the benefit of a series of securities other than the
Debt Securities), continued for 60 days after written notice as provided in the
Indenture; (d) the acceleration of any Indebtedness (as defined in the
Indenture) of the Company or any Subsidiary in excess of an aggregate of
$25,000,000 in principal amount under any event of default as defined in any
mortgage, indenture or instrument and such acceleration has not been rescinded
or annulled within 30 days after written notice as provided in the Indenture
specifying such Event of Default and requiring the Company to cause such
acceleration to be rescinded or annulled; (e) failure to pay, bond or otherwise
discharge within 60 days of entry, a judgment, court order or uninsured monetary
damage award against the Company or any Subsidiary exceeding an aggregate of
$25,000,000 in principal amount which is not stayed on appeal or otherwise being
appropriately contested in good faith; (f) certain events of bankruptcy,
insolvency or reorganization involving the Company or any Subsidiary; and (g)
any other Event of Default provided with respect to the Debt Securities of that
series. (Section 501)
If an Event of Default with respect to the Debt Securities of any series
(other than an Event of Default described in (e) or (f) of the preceding
paragraph) occurs and is continuing, either the Trustee or the holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
such series by notice as provided in the Indenture may declare the principal
amount of such Debt Securities to be due and payable immediately. At any time
after a declaration of acceleration has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, and subject to
applicable law and certain other provisions of the Indenture, the holders of a
majority in aggregate principal amount of the Debt Securities of such series
may, under certain circumstances, rescind and annul such acceleration. An Event
of Default described in (e) or (f) of the preceding paragraph shall cause the
principal amount and accrued interest (or such lesser amount as provided for in
the Debt Securities of such series) to become immediately due and payable
without any declaration or other act by the Trustee or any holder. (Section 502)
The Indenture provides that, within 90 days after the occurrence of any
Event of Default thereunder with respect to the Debt Securities of any series,
the Trustee shall transmit, in the manner set forth in the Indenture, notice of
such Event of Default to the holders of the Debt Securities of such series
unless such Event of Default has been cured or waived; provided, however, that
except in the case of a default in the payment of principal of, or premium, if
any, or interest, if any, or additional amounts, if any, on any Debt Security of
such series, the Trustee may withhold such notice if and so long as the board of
directors, the executive committee or a trust committee of directors or
Responsible Officers of the Trustee has in good faith determined that the
withholding of such notice is in the interest of the holders of Debt Securities
of such series. (Section 602)
If an Event of Default occurs and is continuing with respect to the Debt
Securities of any series, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the holders of Debt Securities of such
series by all appropriate judicial proceedings. (Section 504)
The Indenture provides that, subject to the duty of the Trustee during any
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the holders of Debt Securities, unless such
holders shall have offered to the Trustee reasonable indemnity. (Section 601)
Subject to such provisions for the indemnification of the Trustee, and subject
to applicable law and certain other provisions of the Indenture, the holders of
a majority in aggregate principal amount of the outstanding Debt Securities of a
series will have the right to 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 Debt Securities of such
series. (Section 512)
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Company's Obligation to Purchase Debt Securities on Change in Control
Upon the occurrence of a "Change in Control" as defined in the Indenture,
the Company shall mail within 15 days of the occurrence of such Change in
Control written notice regarding such Change in Control to the Trustee of the
Debt Securities of each series and to every holder thereof, after which the
Company shall be obligated, at the election of each holder thereof, to purchase
such Debt Securities. Under the Indenture, a "Change in Control" is deemed to
occur upon (a) the occurrence of any event requiring the filing of any report
under or in response to Schedule 13D or 14D-1 pursuant to the Exchange Act
disclosing beneficial ownership of either (i) 50% or more of the Company's
Common Stock then outstanding, or (ii) 50% or more of the voting power of the
voting stock of the Company then outstanding, (b) the consummation of sale,
transfer, lease, or conveyance of the Company's properties and assets
substantially as an entirety to any Person or Persons who are not Subsidiaries
of the Company; and (c) the consummation of any consolidation of the Company
with or merger of the Company into any other Person in a transaction in which
either (i) the Company is not the sole surviving corporation or (ii) Common
Stock existing prior to such transaction is converted into cash, securities or
other property and those exchanging the Company's Common Stock do not receive
either (x) 75% or more of the survivor's common stock or (y) 75% or more of the
voting power of the survivor's voting stock, following the consummation of such
transaction. The notice to be sent to every Trustee and holder upon a Change in
Control shall, in addition, be published at least once in an Authorized
Newspaper (as defined in the Indenture) and shall state (a) the event causing
the Change in Control and the date thereof, (b) the date by which notice of such
Change in Control is required by the Indenture to be given, (c) the date (which
date shall be 35 business days after the occurrence of the Change in Control) by
which the Company shall purchase Debt Securities to be purchased pursuant to the
selling holder's exercise of rights on Change in Control (the "Change in Control
Purchase Date"), (d) the price specified in such Debt Securities for their
purchase by the Company (the "Change in Control Purchase Price"), (e) the name
and address of the Trustee, (f) the procedure for surrendering Debt Securities
to the Trustee or other designated office or agent for payment, (g) a statement
of the Company's obligation to make prompt payment on proper surrender of such
Debt Securities, (h) the procedure for holders' exercise of rights of sale of
such Debt Securities by delivery of a "Change in Control Purchase Notice", and
(i) the procedures for withdrawing a Change in Control Purchase Notice. No
purchase of any Debt Securities shall be made if there has occurred and is
continuing an Event of Default under the Indenture (other than default in
payment of the Change in Control Purchase Price). In connection with any
purchase of Debt Securities under this paragraph, the Company will comply with
all Federal and state securities laws, including, specifically, Rule 13E-4, if
applicable, of the Exchange Act, and any related Schedule 13E-4 required to be
submitted under such Rule. (Section 1601)
Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to holders of any series of
Debt Securities that have not already been delivered to the Trustee for
cancellation and that either have become due and payable or will become due and
payable within one year (or scheduled for redemption within one year) by
depositing with the Trustee, in trust, funds in U.S. dollars or in the Foreign
Currency in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities with respect to principal
(and premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the Maturity thereof, as the case
may be. (Section 401)
The Indenture provides that, unless the provisions of Section 402 thereof
are made inapplicable to the Debt Securities of or within any series pursuant to
Section 301 thereof, the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to such Debt Securities
(except for, among other things, the obligation to pay Additional Amounts, if
any upon the occurrence of certain events of taxation, assessment or
governmental charge with respect to payments on such Debt Securities and other
obligations to register the transfer or exchange of such Debt Securities, to
replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an office or agency with respect to such Debt Securities and to hold
moneys for payment in trust) ("defeasance") (Section 402(2)) or (b) to be
released from its obligations with respect to such Debt Securities under the
covenants described in "Limitation on Liens" and "Limitation on Sale/Leaseback
Transactions" above or, if provided pursuant to Section 301 of the Indenture,
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<PAGE> 22
its obligations with respect to any other covenant, and any omission to comply
with such obligations shall not constitute a default or an Event of Default with
respect to such Debt Securities ("covenant defeasance"). (Section 402(3))
Defeasance or covenant defeasance, as the case may be, shall be conditioned upon
the irrevocable deposit by the Company with the Trustee, in trust of an amount,
in U.S. dollars or in the Foreign Currency in which such Debt Securities are
payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities on the scheduled due dates therefor. (Section 402(4))
Such a trust may only be established if, among other things, (i) the
applicable defeasance or covenant defeasance does not result in a breach or
violation of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the Company is a party or by which it is bound,
(ii) no default or Event of Default with respect to the Debt Securities to be
defeased shall have occurred and be continuing on the date of the establishment
of such a trust and (iii) the Company has delivered to the Trustee an Opinion of
Counsel (as specified in the Indenture) to the effect that the holders of such
Debt Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a letter ruling of the Internal
Revenue Service received by the Company, a Revenue Ruling published by the
Internal Revenue Service or a change in applicable U.S. federal income tax law
occurring after the date of the Indenture. (Section 402(4)(d) and (e))
"Foreign Currency" means any currency, currency unit or composite currency,
including, without limitation, the ECU, issued by the government of one or more
countries other than the United States of America or by any recognized
confederation or association of such governments. (Section 101)
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government or the governments in the
confederation which issued the Foreign Currency in which the Debt Securities of
a particular series are payable, for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America or
such government or governments which issued the Foreign Currency in which the
Debt Securities of such series are payable, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government or governments, which, in the case of
clauses (i) and (ii), are not callable or redeemable at the option of the issuer
or issuers thereof, and shall also include a depository receipt issued by a bank
or trust company as custodian with respect to any such Government Obligation or
a specific payment of interest on or principal of or any other amount with
respect to any such Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian with respect to the Government Obligation or the specific payment of
interest on or principal of or any other amount with respect to the Government
Obligation evidenced by such depository receipt. (Section 101)
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of the Indenture or the terms of such Debt Security to
receive payment in a currency other than that in which such deposit has been
made in respect of such Debt Security, or (b) a Conversion Event (as defined
below) occurs in respect of the Foreign Currency in which such deposit has been
made, the indebtedness represented by such Debt Security shall be deemed to have
been, and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest, if any, on such Debt Security
as such Debt Security becomes due out of the proceeds yielded by converting the
amount or other properties so deposited in respect of such Debt Security into
the currency in which such Debt Security
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<PAGE> 23
becomes payable as a result of such election or such Conversion Event based on
(x) in the case of payments made pursuant to clause (a) above, the applicable
market exchange rate for such currency in effect on the second business day
prior to such payment date, or (y) with respect to a Conversion Event, the
applicable market exchange rate for such Foreign Currency in effect (as nearly
as feasible) at the time of the Conversion Event. (Section 402(5))
"Conversion Event" means the cessation of use of (i) a Foreign Currency
other than the ECU both by the government of the country or the confederation
which issued such Foreign Currency and for the settlement of transactions by a
central bank or other public institutions of or within the international banking
community, (ii) the ECU both within the European Monetary System and for the
settlement of transactions by public institutions of or within the European
Community or (iii) any currency unit or composite currency other than the ECU
for the purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium, if
any) and interest on any Debt Security that are payable in a Foreign Currency
that ceases to be used by the government or confederation of issuance shall be
made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than an Event of Default with
respect to Sections 1005 and 1006 of the Indenture (which Sections would no
longer be applicable to such Debt Securities after such covenant defeasance) or
with respect to any other covenant as to which there has been covenant
defeasance, the amount in such Foreign Currency in which such Debt Securities
are payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of the Stated
Maturity but may not be sufficient to pay amounts due on such Debt Securities at
the time of the acceleration resulting from such Event of Default. However, the
Company would remain liable to make payment of such amounts due at the time of
acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Under the Indenture, the Company is required to furnish to the Trustee
annually a statement as to performance by the Company of certain of its
obligations under the Indenture and as to any default in such performance. The
Company is also required to deliver to the Trustee, within five days after
occurrence thereof, written notice of any event which after notice or lapse of
time or both would constitute an Event of Default. (Section 1009)
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of not less than a majority in
aggregate principal amount of the Debt Securities of each series affected
thereby; provided, however, that no such modification or amendment may, without
the consent of the holder of each Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or premium, if any, on, or any installment
of principal, if any, of or interest on, or any Additional Amounts with respect
to, any Debt Security, (b) reduce the principal amount of, or premium or
interest on, or any Additional Amounts with respect to any Debt Security, (c)
change the coin or currency in which any Debt Security or any premium or any
interest thereon or any Additional Amounts with respect thereto is payable, (d)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity of any Debt Securities (or, in the case of redemption,
on or after the Redemption Date or, in the case of repayment at the option of
any holder, on or after the date for repayment or in the case of a change in
control, after the change in control purchase date), (e) reduce the percentage
and principal amount of the outstanding Debt Securities, the consent of whose
holders is required in order to take certain actions, (f) change any obligation
of the Company to maintain an office or agency in the places and for the
purposes required by the Indenture, or (g) modify any of the above provisions.
(Section 902)
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The holders of at least a majority in aggregate principal amount of Debt
Securities of any series may, on behalf of the holders of all Debt Securities of
such series, waive compliance by the Company with certain restrictive provisions
of the Indenture. (Section 1008) The holders of not less than a majority in
aggregate principal amount of Debt Securities of any series may, on behalf of
all holders of Debt Securities of such series, waive any past default and its
consequences under the Indenture with respect to the Debt Securities of such
series, except a default (a) in the payment of principal of (or premium, if any)
or any interest on or any Additional Amounts with respect to Debt Securities of
such series or (b) in respect of a covenant or provision of the Indenture that
cannot be modified or amended without the consent of the holder of each Debt
Security of any series. (Section 513)
Consolidation, Merger and Sale of Assets
The Company may, without the consent of the holders of the Debt Securities,
consolidate or merge with or into, or convey, transfer or lease its properties
and assets substantially as an entirety to, any Person that is a corporation,
limited liability company, partnership or trust organized and validly existing
under the laws of any domestic jurisdiction, or may permit any such Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, provided that
any successor Person assumes the Company's obligations on the Debt Securities
and under the Indenture, that after giving effect to the transaction no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing, and that certain
other conditions are met. (Section 801)
Concerning the Trustee
Unless otherwise specified in the applicable Prospectus Supplement,
Chemical Bank, New York, New York will be the Trustee under the Indenture.
PROVISIONS APPLICABLE TO REMARKETED NOTES
Interest
General. Each Remarketed Note initially will earn interest at the fixed or
floating rate (the "Initial Interest Rate") for the period of time (the "Initial
Interest Rate Period") specified in the applicable Prospectus Supplement.
Thereafter, unless otherwise specified in the applicable Prospectus Supplement,
each Remarketed Note will earn interest at the Company's option in either the
Short Term Rate Mode or the Long Term Rate Mode (collectively, "Interest Rate
Modes"), in each case as described below under "Interest Rate Modes." A
Remarketed Note will have Interest Rate Periods of 365 days or less ("Short Term
Rate Periods") if in the Short Term Rate Mode and more than 365 days ("Long Term
Rate Periods" ) if in the Long Term Rate Mode. Unless otherwise specified in the
applicable Prospectus Supplement, each Remarketed Note may bear interest at
different rates and have different Interest Rate Modes, Interest Rate Periods
and other terms as described herein.
Following the Initial Interest Rate Period, the interest rate for each
Remarketed Note will be established by a remarketing agent (the "Remarketing
Agent") selected by the Company or otherwise as specified herein. While a
Remarketed Note is in the Short Term Rate Mode, it will earn interest during
each Short Term Rate Period at fixed rates established by the Remarketing Agent
on the first day of such Short Term Rate Period as described below under
"Interest -- Determination of Interest Rates, Spreads and Spread Multipliers."
While a Remarketed Note is in the Long Term Rate Mode, it will earn interest
during each Long Term Rate Period at fixed rates established by the Remarketing
Agent prior to the commencement of such Long Term Rate Period and/or rates
established on the Interest Rate Adjustment Date (as defined below) for such
Long Term Rate Period and reset at intervals established by the Remarketing
Agent with the consent of the Company prior to the commencement of such Long
Term Rate Period by reference to an Interest Rate Basis or Interest Rate Bases
established by the Company prior to the commencement of such Long Term Rate
Period as adjusted by a Spread, if any, and a Spread Multiplier, if any,
established prior to the commencement of such Long Term Rate Period by the
Remarketing Agent, in each case as specified below under "Inter-
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<PAGE> 25
est --Determination of Interest Rates, Spreads and Spread Multipliers" and
"Determination of Floating Interest Rates."
Interest on each Remarketed Note during the Initial Interest Rate Period
will be payable on the Interest Payment Dates to holders on the Record Dates, in
each case, specified in the applicable Prospectus Supplement. Thereafter, unless
otherwise specified in the applicable Prospectus Supplement, the Interest
Payment Dates for such Remarketed Note will be determined as follows: (i)
interest with respect to each Short Term Rate Period will be payable on the
Business Day next following such Short Term Rate Period; and (ii) interest with
respect to each Long Term Rate Period will be payable no less than semiannually
on such dates as are established by the Remarketing Agent prior to the
commencement of each Long Term Rate Period in the case of a fixed interest rate,
and as described below under "Floating Interest Rates" in the case of a floating
interest rate. Also thereafter, unless otherwise specified in the applicable
Prospectus Supplement, the Record Date for each Interest Payment Date will be
(y) in the case of each Short Term Rate Period, the Business Day next preceding
such Interest Payment Date, and (z) in the case of each Long Term Rate Period,
the 15th day (whether or not a Business Day) prior to such Interest Payment
Date.
Interest on each Remarketed Note will be computed during the Initial
Interest Rate Period as specified in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, (i) interest
earned during a Short Term Rate Period and interest earned at a floating rate
during a Long Term Rate Period will be computed on the basis of actual days
elapsed over 360 (or over the actual number of days in the year if an applicable
Interest Rate Basis is the CMT Rate or Treasury Rate (each as defined below)),
and (ii) interest on Remarketed Notes bearing interest at a fixed rate during a
Long Term Rate Period will be computed on the basis of a year of 360 days
consisting of twelve 30-day months.
Payments of principal of, and interest on, Remarketed Notes will be made by
the Company through the Trustee to DTC. See "DTC Book-Entry Only System" and
"Purchase and Redemption of Remarketed Notes -- Special Mandatory Purchase"
below.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in New
York, New York; provided, however, that with respect to Debt Securities in the
Long Term Rate Mode as to which LIBOR (as hereinafter defined) is an applicable
Interest Rate Basis, such day is also a London Business Day (as hereinafter
defined). "London Business Day" means (i) if the Index Currency (as hereinafter
defined) is other than European Currency Units ("ECU"), any day on which
dealings in such Index Currency are transacted in the London interbank market or
(ii) if the Index Currency is ECU, any day that does not appear as an ECU
non-settlement day on the display designated as "ISDE" on the Reuter Monitor
Money Rates Service (or a day so designated by the ECU Banking Association) or,
if ECU non-settlement days do not appear on the page (and are not so
designated), is not a day on which payments in ECU cannot be settled in the
international interbank market.
Determination of Interest Rates, Spreads and Spread Multipliers. The
interest rate and, in the case of a floating interest rate, the Spread (if any)
and the Spread Multiplier (if any) for each Remarketed Note following the
Initial Interest Rate Period will be adjusted by the Remarketing Agent on the
first day of each succeeding Interest Rate Period, which must be a Business Day
(each, an "Interest Rate Adjustment Date"), and will be the minimum interest
rate and, in the case of a floating interest rate, Spread (if any) and Spread
Multiplier (if any) necessary in the judgment of the Remarketing Agent to
produce a par bid in the remarketing of such Remarketed Note for such Interest
Rate Period. Each remarketing will take place at the times described below under
"Interest Rate Modes." The floating interest rate for any Long Term Rate Period
for any Remarketed Note will be determined in the manner discussed below under
"Determination of Floating Interest Rates."
In the event that (i) the Remarketing Agent for any Remarketed Note has
been removed or has resigned and no successor has been appointed, or (ii) the
Remarketing Agent for such Remarketed Note has failed to announce the
appropriate interest rate, Spread or Spread Multiplier, as the case may be, on
the Interest Rate Adjustment Date for such Remarketed Note for whatever reason,
or (iii) the appropriate interest rate, Spread, Spread Multiplier or Interest
Rate Period cannot be determined for such Remarketed Note for whatever
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<PAGE> 26
reason, then in each case (y) the Interest Rate Period for such Remarketed Note
will be converted automatically to a Weekly Rate Period (a Short Term Rate
Period described below) and the rate of interest thereon will be equal to the
rate per annum announced by The First National Bank of Chicago (or such other
nationally recognized bank located in the United States as the Company may
select and notify the Trustee in writing) as its prime lending rate (such rate
of interest being referred to herein as the "Special Interest Rate") and (z)
such Remarketed Note will be subject to Special Mandatory Purchase. See
"Purchase and Redemption of Remarketed Notes" below.
The interest rate on the Remarketed Notes will not exceed the "Maximum
Rate," which, unless otherwise indicated in the applicable Prospectus
Supplement, is defined to mean 15% per annum or such higher rate as may be
established from time to time by the Board of Directors of the Company.
After any Interest Rate Adjustment Date, any Beneficial Owner may contact
the Trustee or the Remarketing Agent in order to be advised of the interest rate
and, in the case of a floating interest rate, Interest Rate Basis or Bases,
Spread (if any) and Spread Multiplier (if any), and in each case the other terms
applicable to such Beneficial Owner's Remarketed Notes. Except as described
below under "Floating Interest Rates" with respect to Remarketed Notes earning
interest at floating rates, no notice of the applicable interest rate, Spread
(if any) or Spread Multiplier (if any) will be sent to Beneficial Owners.
The interest rate, Spread (if any) and Spread Multiplier (if any) announced
by the Remarketing Agent, as well as the other matters disclosed to holders and
prospective purchasers of Remarketed Notes as described below under
"Determination of Floating Interest Rates," absent manifest error, will be
binding and conclusive upon the Beneficial Owners, the Company and the Trustee.
Interest Rate Modes
The Short Term Rate Mode and the Long Term Rate Mode, and conversion from
one Interest Rate Mode to another and among Interest Rate Periods within a
particular Interest Rate Mode, are described below.
The times specified below are subject to extension pursuant to standby
remarketing arrangements, if any, as described herein and in the applicable
Prospectus Supplement. See "Remarketing -- Interest Rate Adjustment Date;
Determination of Interest Rate" below.
Short Term Rate Mode. The Interest Rate Period for each Remarketed Note in
the Short Term Rate Mode will be a Short Term Rate Period, which will be a
period of not less than one nor more than 365 consecutive calendar days, as
determined by the Company (as described below under "Conversion Between Short
Term Rate Periods") or, if not so determined, by the Remarketing Agent for such
Remarketed Note (in its best judgment in order to obtain the lowest interest
cost for such Remarketed Note). Each Short Term Rate Period will commence on the
Interest Rate Adjustment Date therefor and end on the day preceding the date
specified by such Remarketing Agent as the first day of the next Interest Rate
Period for such Remarketed Note, which day must be a Business Day and will be
the Interest Adjustment Date for such next Interest Rate Period. The interest
rate for any Short Term Rate Period relating to a Remarketed Note will be a
fixed rate determined not later than 12:00 p.m., New York City time, on the
Interest Rate Adjustment Date for such Short Term Rate Period.
A Weekly Rate Period is a Short Term Rate Period and will be a period of
approximately seven days determined by the Remarketing Agent commencing on any
Interest Rate Adjustment Date and ending on the day preceding the first day of
the next Interest Rate Period for such Remarketed Note.
Long Term Rate Mode. The Interest Rate Period for each Remarketed Note in
the Long Term Rate Mode will be a Long Term Rate Period, which will be a period
of more than 365 consecutive days and less than the remaining term of such
Remarketed Note established by the Company upon fifteen (15) days prior notice
to the Remarketing Agent and the Trustee. Each Long Term Rate Period will
commence on the Interest Rate Adjustment Date therefor and end on the day
preceding the date specified by such Remarketing Agent as the first day of the
next Interest Rate Period for such Remarketed Note, which day must be a Business
Day and will be the Interest Adjustment Date for such next Interest Rate Period;
however, the last
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<PAGE> 27
day of each Long Term Rate Period must end on the day prior to the last Interest
Payment Date for such period. The interest rate for any Long Term Rate Period
for a Remarketed Note will be a fixed rate or a floating rate determined not
later than 4:00 p.m., New York City time, on the third Business Day preceding
the Interest Rate Adjustment Date for such Long Term Rate Period.
Floating Interest Rates
With respect to any Remarketed Note in the Long Term Rate Mode, the Company
may elect a floating interest rate by providing notice, which will be in or
promptly confirmed in writing (which includes facsimile or appropriate
electronic media), received by the Trustee and the Remarketing Agent for such
Remarketed Note (the "Floating Interest Rate Notice") not less than fifteen (15)
days prior to the Interest Rate Adjustment Date for such Long Term Rate Period.
Each Floating Interest Rate Notice must identify by CUSIP number or otherwise
each Remarketed Note to which it relates and state the Long Term Rate Period to
which it relates. Each Floating Interest Rate Notice must also state whether the
floating interest rate is a "Regular Floating Rate," a "Floating Rate/Fixed
Rate" or an "Inverse Floating Rate," the Fixed Rate Commencement Date, if
applicable, the Interest Rate Basis or Bases, the Initial Interest Reset Date,
the Interest Reset Period and Dates, the Interest Payment Period and Dates, the
Index Maturity and the Maximum Interest Rate and/or Minimum Interest Rate, if
any, as such terms are defined below. If one or more of the applicable Interest
Rate Bases is LIBOR or the CMT Rate, the Floating Interest Rate Notice will also
specify the Index Currency and Designated LIBOR Page or the Designated CMT
Maturity Index and Designated CMT Telerate Page, respectively, as such terms are
defined below. See "Determination of Floating Interest Rates" below.
Conversion
Conversion Between Short Term Rate Periods. Each Remarketed Note in a Short
Term Rate Period may be remarketed into the same Interest Rate Period or
converted at the option of the Company to a different Short Term Rate Period
(notwithstanding the determination that the Remarketing Agent may make as
described above under "Interest Rate Modes -- Short Term Rate Mode") on any
Interest Rate Adjustment Date upon receipt by the Remarketing Agent and the
Trustee of a notice, which will be in or promptly confirmed in writing (which
includes facsimile or appropriate electronic media), from the Company (a
"Conversion Notice") prior to 9:30 a.m., New York City time, or the remarketing
of such Remarketed Note, whichever later occurs, on such Interest Rate
Adjustment Date.
Conversion from the Short Term Rate Mode to the Long Term Rate Mode. Each
Remarketed Note in the Short Term Rate Mode may be converted at the option of
the Company to the Long Term Rate Mode on any Interest Rate Adjustment Date upon
receipt not less than fifteen (15) days prior to such Interest Rate Adjustment
Date by the Remarketing Agent and the Trustee of a Conversion Notice from the
Company.
Conversion Between Long Term Rate Periods or from the Long Term Rate Mode
to the Short Term Rate Mode. Each Remarketed Note in a Long Term Rate Period may
be remarketed in the same Interest Rate Period or converted at the option of the
Company to a different Long Term Rate Period or from the Long Term Rate Mode to
the Short Term Rate Mode on any Interest Rate Adjustment Date for such
Remarketed Note upon receipt by the Trustee and the Remarketing Agent for such
Remarketed Note of a Conversion Notice from the Company not less than fifteen
(15) days prior to such Interest Rate Adjustment Date.
Conversion Notice. Each Conversion Notice must state each Remarketed Note
to which it relates and the new Interest Rate Mode (if applicable), the new
Interest Rate Period (which, if not so stated, shall be the Weekly Rate Period),
the date of the applicable conversion (the "Conversion Date") and, with respect
to any Long Term Rate Period, any optional redemption terms for each such
Remarketed Note. If the Company revokes a Conversion Notice or the Trustee and
the Remarketing Agent fail to receive a Conversion Notice from the Company by
the specified date in advance of the Interest Rate Adjustment Date for a
Remarketed Note, the Remarketed Note shall be converted automatically to the
Weekly Rate Period.
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Revocation or Change of Conversion Notice or Floating Interest Rate Notice
The Company may, upon written notice (which includes facsimile or
appropriate electronic media) received by the Remarketing Agent and the Trustee,
revoke any Conversion Notice or Floating Interest Rate Notice, change any
Interest Rate Mode or Interest Rate Period or any optional redemption terms
specified in any Conversion Notice or change any Floating Interest Rate Notice
not later than (i) 9:30 a.m., New York City time, on the Conversion Date with
respect to any attempted conversion of the applicable Remarketed Note to a Short
Term Rate Period, or (ii) 4:00 p.m., New York City time, on the third Business
Day preceding the Conversion Date with respect to any attempted conversion of
the applicable Remarketed Note to, or establishment of a floating interest rate
for, a Long Term Rate Period.
Tender of Remarketed Notes
Unless otherwise indicated in the applicable Prospectus Supplement, any
Remarketed Note bearing interest at the Initial Interest Rate or in the Long
Term Rate Mode or the Short Term Rate Mode will be automatically tendered for
purchase, or deemed tendered for purchase, on each Interest Rate Adjustment Date
relating thereto and, if successfully remarketed, repurchased or redeemed on
such date, each Beneficial Owner tendering Remarketed Notes will not be entitled
to further interest thereon after such date. Remarketed Notes will be purchased
on the Interest Rate Adjustment Date relating thereto as described below. See
"Remarketing" below.
Remarketing
When any Remarketed Note is tendered for remarketing, the Remarketing Agent
therefor will use its reasonable efforts to remarket such Remarketed Note on
behalf of the Beneficial Owner thereof at a price equal to 100% of the principal
amount thereof. The Remarketing Agent may purchase tendered Remarketed Notes for
its own account in a remarketing, but will not be obligated to do so. The
Company may offer to purchase Remarketed Notes in a remarketing, provided that
the interest rate established with respect to Remarketed Notes in such
remarketing is not different from the interest rate that would have been
established if the Company had not purchased such Remarketed Notes. Any
Remarketed Notes for which the Company shall have given a notice of redemption
to the Remarketing Agent and the Trustee shall not be included in a remarketing.
Interest Rate Adjustment Date; Determination of Interest Rate. In
connection with any Remarketed Note that is being remarketed into a Short Term
Rate Period on the next Interest Rate Adjustment Date for such Remarketed Note,
by 11:00 a.m., New York City time, on such Interest Rate Adjustment Date, the
Remarketing Agent will determine the interest rate for such Remarketed Note
being remarketed to the nearest one hundred-thousandth of one percent per annum
for the next Interest Rate Period; provided, that between 11:00 a.m., New York
City time, and 12:00 p.m., New York City time, the Remarketing Agent and Standby
Remarketing Agent (if any) shall use their reasonable efforts to determine the
interest rate for any Notes not successfully remarketed as of 11:00 a.m., New
York City time.
In connection with any Remarketed Note that is being remarketed into a Long
Term Rate Period on the next Interest Rate Adjustment Date for such Remarketed
Note, by 4:00 p.m., New York City time, on the third Business Day preceding such
Interest Rate Adjustment Date, the Remarketing Agent will determine the interest
rate for such Remarketed Note to the nearest one hundred-thousandth (.00001) of
one percent per annum for the next Interest Rate Period; provided, that if for
any reason the Remarketing Agent is unable to determine such interest rate by
such time, the next Interest Rate Period for such Remarketed Note shall be a
Weekly Rate Period or such other Short Term Rate Period as the Company may
determine by 9:30 a.m., New York City time, on such Interest Rate Adjustment
Date.
In determining the applicable interest rate for any Remarketed Note and
other terms, the Remarketing Agent will, after taking into account market
conditions as reflected in the prevailing yields on fixed and variable rate
taxable debt securities, (i) consider the principal amount of all Remarketed
Notes of such series tendered or to be tendered on the applicable Interest Rate
Adjustment Date and the principal amount of such Remarketed Notes prospective
purchasers are or may be willing to purchase and (ii) contact, by telephone or
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<PAGE> 29
otherwise, prospective purchasers and ascertain the interest rates therefor at
which they would be willing to hold or purchase such Remarketed Notes.
Notification of Results; Settlement. By 12:30 p.m., New York City time, on
the Interest Rate Adjustment Date for any Remarketed Notes, the Remarketing
Agent will notify the Company and the Trustee in writing (which includes
facsimile or appropriate electronic media) of (i) the interest rate or, in the
case of a floating interest rate, the initial interest rate and the initial
Interest Reset Date, the Spread and Spread Multiplier and in each case the
Interest Rate Adjustment Date applicable to such Remarketed Notes for the next
Interest Rate Period, (ii) the Interest Payment Dates (in the case of Remarketed
Notes in the Long Term Rate Mode), (iii) the aggregate principal amount of
tendered Remarketed Notes, (iv) the aggregate principal amount of such tendered
Remarketed Notes which the Remarketing Agent and the Standby Remarketing Agent,
if any, were able to remarket, at a price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon and (v) such other
information as the Trustee may require for settlement purposes. Promptly
thereafter, the Trustee will transmit to DTC, in accordance with DTC's
procedures in effect from time to time, such information as DTC may require.
By telephone at approximately 1:00 p.m., New York City time, on such
Interest Rate Adjustment Date, the Remarketing Agent will advise each purchaser
of such Remarketed Notes (or the DTC Participant of each such purchaser who it
is expected in turn will advise such purchaser) of the principal amount of such
Remarketed Notes that such purchaser is to purchase.
As long as DTC's nominee holds the certificates representing any Remarketed
Notes in the book entry system of DTC, no certificates for such Remarketed Notes
will be delivered by any selling Beneficial Owner to reflect any transfer of
such Remarketed Notes effected in any remarketing and the following procedures
will apply.
Each purchaser of Remarketed Notes in a remarketing will be required to
give instructions to its DTC Participant to pay the purchase price therefor in
same day funds to the Remarketing Agent by 3:00 p.m. New York City time, on the
Interest Rate Adjustment Date pending delivery of the principal amount of such
Remarketed Notes by book entry through DTC by the close of business on the
Interest Rate Adjustment Date. The Remarketing Agent will make or cause to be
made payment of such amount to the Trustee.
All tendered Remarketed Notes will be automatically delivered to the
account of the Trustee, by book entry through DTC pending payment of the
purchase price or redemption price therefor, on the Interest Rate Adjustment
Date relating thereto.
Subject to receipt of funds from the purchaser or the Company, as the case
may be, the Trustee will make payment to DTC, which will make payment to the DTC
Participant of each Beneficial Owner tendering Remarketed Notes subject to a
remarketing, by book entry through DTC by the close of business on the Interest
Rate Adjustment Date against delivery through DTC of such Beneficial Owner's
tendered Remarketed Notes, of: (i) the purchase price for tendered Remarketed
Notes that have been sold in the remarketing, and (ii) if any such Remarketed
Notes were purchased pursuant to a Special Mandatory Purchase, the purchase
price of such Remarketed Notes plus, in each case, accrued interest, if any to
such date.
The transactions described above for a remarketing of any Remarketed Notes
will be executed on the Interest Rate Adjustment Date for such Remarketed Notes
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and such Remarketed
Notes delivered by book entry as necessary to effect the purchases and sales
thereof, in each case as determined in the related remarketing. See "DTC
Book-Entry-Only System."
Except as otherwise set forth herein under "Purchase and Redemption of
Remarketed Notes" below, any Remarketed Notes tendered in a remarketing will be
purchased solely out of the proceeds received from purchasers of such Remarketed
Notes in such remarketing, and neither the Remarketing Agent for such Remarketed
Notes, the Standby Remarketing Agent, if any, the Trustee nor the Company will
be obligated to provide funds to make payment upon any Beneficial Owner's tender
in a remarketing.
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<PAGE> 30
Although tendered Remarketed Notes will be subject to purchase by the
Remarketing Agent in a remarketing, the Remarketing Agent will not be obligated
to purchase any such Remarketed Notes.
The remarketing procedures set forth above will apply to all Remarketed
Notes except to the extent otherwise indicated in the applicable Prospectus
Supplement for such Remarketed Notes. The settlement and remarketing procedures
described above, including the notice provisions and provisions for payment by
purchasers of tendered Remarketed Notes or for payment to selling Beneficial
Owners of tendered Remarketed Notes, may be modified to the extent required by
DTC. In addition, the Remarketing Agent may, in accordance with the terms of the
Remarketed Notes, modify the settlement and remarketing procedures set forth
above in order to facilitate the settlement and remarketing process.
Failed Remarketing. Unless otherwise provided in the applicable Prospectus
Supplement, any Remarketed Notes not successfully remarketed will be purchased
by the Company. By 12:15 p.m., New York City time, on any Interest Rate
Adjustment Date, the Remarketing Agent for such Remarketed Notes will notify the
Trustee and the Company by telephone, confirmed in writing (which includes
facsimile or appropriate electronic media), of the principal amount of
Remarketed Notes that such Remarketing Agent and the Standby Remarketing Agent,
if any, were unable to remarket on such date. Payment of the principal amount of
unremarketed Remarketed Notes by the Company and payment of accrued and unpaid
interest, if any, by the Company, shall be made by deposit of same-day funds
with the Trustee by 3:00 p.m., New York City time, on such Interest Rate
Adjustment Date. See "Purchase and Redemption of Remarketed Notes" below.
The Remarketing Agreement
The Company and each Remarketing Agent for Remarketed Notes will enter into
a Remarketing Agreement, a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The summaries below
are summaries of certain provisions of the form of Remarketing Agreement and do
not purport to be complete and are subject to and qualified in their entirety
by, the provisions of the Remarketing Agreement.
Fees and Expenses. For its services in determining the interest rate and
remarketing Remarketed Notes, the Remarketing Agent will receive from the
Company a fee to be determined at the time of execution of the Remarketing
Agreement. The Remarketing Agent may pay to selected broker-dealers, including
any Standby Remarketing Agent, a portion of any fees it receives from the
Company for its services as Remarketing Agent reflecting Remarketed Notes sold
through such broker-dealers to purchasers in remarketings.
Indemnification of Remarketing Agent. The Company will agree to indemnify
the Remarketing Agent and the Standby Remarketing Agent against certain
liabilities, including liabilities under the Securities Act arising out of or in
connection with its duties under the Remarketing Agreement.
Conditions to the Remarketing Agent's Obligations. The obligation of the
Remarketing Agent and any Standby Remarketing Agreement to remarket Remarketed
Notes and perform its other obligations under the Remarketing Agreement are
subject to certain conditions, including (a) the accuracy of certain
representations and warranties by the Company and the performance by the Company
of its obligations and agreements set forth in the Remarketing Agreement and the
Distribution Agreement relating to the initial sale of such Remarketed Notes;
(b) none of the following events shall exist at the time the Remarketing Agent's
performance is required: (i) all of the Remarketed Notes for which the
Remarketing Agent is responsible shall have been called for redemption or
purchased pursuant to a Special Mandatory Purchase; (ii) without the prior
written consent of the Remarketing Agent, the Indenture or the Remarketed Notes
shall have been amended in any manner, or otherwise contain any provision not
contained therein as of their dates, that in the reasonable opinion of the
Remarketing Agent materially changes the nature of the Remarketed Notes or
remarketing procedures; (iii) a suspension or material limitation in trading in
securities generally on the American Stock Exchange or the New York Stock
Exchange or the suspension of trading of the Company's securities on any
exchange shall have occurred or a banking moratorium shall have been declared by
federal or New York authorities; (iv) any outbreak or escalation of major
hostilities, any declaration of war by Congress or any other substantial
calamity or emergency shall have occurred; or (v) a material adverse change or
any
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<PAGE> 31
development which could reasonably be expected to result in a material adverse
change in the financial condition, results of operations or business affairs of
the Company shall have occurred; and (c) between the time at which the interest
rate on any Remarketed Note is established and the time at which payment
therefor is to be made, the rating of the Remarketed Notes shall not have been
downgraded or put on Credit Watch or Watch List with negative implications or
withdrawn by a national rating service, the effect of which, in the opinion of
the Remarketing Agent, is to affect materially and adversely the market price of
the Remarketed Notes or the Remarketing Agent's ability to remarket the
Remarketed Notes.
Replacement of the Remarketing Agent. The Remarketing Agreement will
provide that the Company may in its absolute discretion replace the Remarketing
Agent by giving 30 days prior notice to the Remarketing Agent and the Trustee,
such replacement to be effective upon the Company's appointment of a successor
to perform the services of the Remarketing Agent under the Remarketing
Agreement. The Remarketing Agreement will also provide that the Company reserves
the right to appoint or replace any Standby Remarketing Agent at any time.
Resignation of the Remarketing Agent. The Remarketing Agreement will also
provide that the Remarketing Agent or any Standby Remarketing Agent may resign
at any time as Remarketing Agent, such resignation to be effective 30 days after
the delivery to the Company and the Trustee of notice of such resignation. In
such case, it shall be the sole obligation of the Company to appoint a successor
Remarketing Agent.
Purchase and Redemption of Remarketed Notes
Special Mandatory Purchase. Remarketed Notes which have not been remarketed
by 12:15 p.m., New York City time, on an Interest Rate Adjustment Date for such
Remarketed Notes will be purchased by the Company pursuant to the Special
Mandatory Purchase Right. In such event the Company will deposit same-day funds
with the Trustee irrevocably in trust for the benefit of the Beneficial Owners
of Remarketed Notes subject to Special Mandatory Purchase by 3:00 p.m., New York
City time, on such Interest Rate Adjustment Date. Such funds shall be in an
amount sufficient to pay 100% of the principal amount of and accrued and unpaid
interest, if any, on such Remarketed Notes. Such Remarketed Notes will remain
outstanding and enjoy the benefits of the Indenture until such time as the
Company delivers certificates for the Remarketed Notes to the Trustee for
cancellation or the Trustee otherwise reflects on its records that such funds
have been paid in full.
Redemption While Remarketed Notes are in the Initial Interest Rate Period.
During the Initial Interest Rate Period for any Remarketed Notes, such
Remarketed Notes will be subject to redemption only to the extent provided, and
upon the terms set forth, in the applicable Prospectus Supplement.
Optional Redemption on any Interest Rate Adjustment Date. Unless otherwise
provided in the applicable Prospectus Supplement, each Remarketed Note will be
subject to redemption at the option of the Company without notice to the holder
thereof on any Interest Rate Adjustment Date therefor at a redemption price
equal to the principal amount thereof plus accrued and unpaid interest, if any,
to such date.
Redemption While Remarketed Notes are in the Long Term Rate Mode. Unless
otherwise provided in the applicable Prospectus Supplement, any Remarketed Notes
in the Long Term Rate Mode are subject to redemption at the option of the
Company at the times and upon the terms specified at the time of conversion to
such Long Term Rate Mode.
Allocation. Except in the case of a Special Mandatory Purchase, if the
Remarketed Notes are to be redeemed in part, and as long as DTC's nominee holds
the certificates representing any Remarketed Notes, DTC, after receiving notice
of redemption specifying the aggregate principal amount of Remarketed Notes to
be so redeemed, will determine by lot (or otherwise in accordance with the
procedures of DTC) the principal amount of such Remarketed Notes to be redeemed
from the account of each DTC Participant. After making its determination as
described above, DTC will give notice of such determination to each DTC
Participant from whose account such Remarketed Notes are to be redeemed. Each
such DTC Participant, upon receipt of such notice, will in turn determine the
principal amount of Remarketed Notes to be redeemed from the accounts of the
Beneficial Owners of such Remarketed Notes for which it serves as DTC
Participant, and give notice of such determination to the Remarketing Agent.
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<PAGE> 32
Events of Default
In addition to the Events of Default set forth above under "Provisions
Applicable to All Debt Securities -- Events of Default," failure by the Company
to purchase Remarketed Notes after written notice of a failed remarketing by the
Remarketing Agent on behalf of the Beneficial Owners of such Remarketed Notes in
the manner provided in the Remarketed Notes will constitute an Event of Default
under the Indenture with respect to such Remarketed Notes.
If an Event of Default occurs and is continuing with respect to the
Remarketed Notes of any series, the Trustee may in its discretion proceed to
protect and enforce its rights and the rights of the holders of Remarketed Notes
of such series by all appropriate judicial proceedings. (Section 504)
The Bank Credit Facility Agreement
In order to fulfill its obligations under the Special Mandatory Purchase
Right, the Company may from time to time, at its option, modify, amend and
restate its existing bank credit agreements or enter into one or more credit
agreements (the "Bank Credit Facility Agreement") with one or more banks or
other credit providers (referred to individually and collectively herein as the
"Bank"). The Company will retain the right to replace, add or discharge any or
all Banks at any time. Purchasers of the Remarketed Notes should not rely upon
the presence of Banks in making an investment decision regarding the Remarketed
Notes.
The Banks' obligation to advance funds may be subject to conditions
specified in the Bank Credit Facility Agreement. Unless otherwise indicated in
the applicable Prospectus Supplement, such conditions include: availability for
borrowing under such credit facility; receipt by the Banks of various documents,
certificates and opinions from the Company; the continued accuracy of certain
representations and warranties made by the Company in the Bank Credit Facility
Agreement; that no event has occurred and is continuing which would constitute
an event of default under the Bank Credit Facility Agreement (such events
include failure by the Company to pay amounts owing under the Bank Credit
Facility Agreement, inaccuracy of representations and warranties when made,
failure to perform covenants under the Bank Credit Facility Agreement, failure
to pay any debt owing by the Company in excess of $25,000,000, certain events of
bankruptcy or insolvency of the Company, an Event of Default under the Indenture
or the non-enforceability of certain related documents); and receipt by the
Banks of a borrowing request from the Company.
The Company may indemnify a Bank against certain liabilities arising out of
or in connection with its duties under the Bank Credit Facility Agreement. A
copy of the Company's current Bank Credit Facility Agreement has been filed as
an exhibit to the Registration Statement of which this Prospectus forms a part.
The summaries of certain provisions of any Bank Credit Facility Agreement do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all provisions of such Bank Credit Facility Agreement.
Determination of Floating Interest Rates
Unless otherwise specified in the applicable Prospectus Supplement, with
the consent of the Remarketing Agent, a floating interest rate described below
will apply to any Long Term Rate Period for a Remarketed Note specified by the
Company upon receipt by the Trustee, the Remarketing Agent for such Remarketed
Note and DTC of a notice in or confirmed in writing (the "Floating Interest Rate
Notice") from the Company not less than fifteen (15) days prior to the Interest
Rate Adjustment Date for such Long Term Rate Period. Each Floating Interest Rate
Notice must identify by CUSIP number or otherwise each Remarketed Note to which
it relates and the Long Term Rate Period to which it relates. Each Floating
Interest Rate Notice must also state whether the floating interest rate is a
"Regular Floating Rate," a "Floating Rate/Fixed Rate" or an "Inverse Floating
Rate," the Fixed Rate Commencement Date, if applicable, the Interest Rate Basis
or Bases, the Initial Interest Reset Date, the Interest Reset Period and Dates,
the Interest Payment Period and Dates, the Index Maturity and the Maximum
Interest Rate and/or Minimum Interest Rate, if any, as such terms are defined
below. If one or more of the applicable Interest Rate Bases is LIBOR or the CMT
Rate, the Floating Interest Rate Notice will also specify the Index Currency and
Designated LIBOR Page or the Designated CMT Maturity Index and Designated CMT
Telerate Page, respectively, as such terms are defined below.
20
<PAGE> 33
The floating interest rate for any Long Term Rate Period for any Remarketed
Note will be determined as follows:
(i) Unless the floating interest rate is a "Floating Rate/Fixed Rate"
or an "Inverse Floating Rate," such floating interest rate will be a
"Regular Floating Rate" and, except as described below or in the applicable
Floating Interest Rate Notice, will be the interest rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus
the applicable Spread, if any, and/or (b) multiplied by the applicable
Spread Multiplier, if any. Commencing on the Interest Rate Adjustment Date
for such Long Term Rate Period, the rate at which interest on such
Remarketed Note will be payable will be reset as of each Interest Reset
Date during such Long Term Rate Period.
(ii) If the floating interest rate is designated as a "Floating
Rate/Fixed Rate," then, except as described below or in the applicable
Floating Interest Rate Notice, such floating interest rate will be the
interest rate determined by reference to the applicable Interest Rate Basis
or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any. Commencing on the
Interest Rate Adjustment Date for such Long Term Rate Period, the rate at
which interest on such Remarketed Note shall be payable shall be reset as
of each Interest Reset Date during such Long Term Rate Period; provided,
however, that the interest rate in effect for the period commencing on the
Fixed Rate Commencement Date to the last day of such Long Term Rate Period
will be the Fixed Interest Rate if such rate is specified in the applicable
Floating Interest Rate Notice or, if no such Fixed Interest Rate is
specified, the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date.
(iii) If the floating interest rate is designated as an "Inverse
Floating Rate," then, except as described below or in the applicable
Floating Interest Rate Notice, such Remarketed Note will bear interest at
the Fixed Interest Rate minus the rate determined by reference to the
applicable Interest Rate Basis or Bases (a) plus or minus the applicable
Spread, if any, and/or (b) multiplied by the applicable Spread Multiplier,
if any; provided, however, that, unless otherwise specified in the
applicable Floating Interest Rate Notice, the interest rate thereon will
not be less than zero. Commencing on the Interest Rate Adjustment Date for
such Long Term Rate Period, the rate at which interest on such Remarketed
Note shall be payable shall be reset as of each Interest Reset Date during
such Long Term Rate Period.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Long Term Rate
Period for such Remarketed Note. The "Spread Multiplier" is the percentage of
the related Interest Rate Basis or Bases applicable to such Long Term Rate
Period by which such Interest Rate Basis or Bases will be multiplied to
determine the applicable interest rate from time to time for such Long Term Rate
Period. The "Index Maturity" is the period to maturity of the instrument or
obligation with respect to which the related Interest Rate Basis or Bases will
be calculated.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Floating Interest Rate Notice, the interest rate in effect on
each day during such Long Term Rate Period shall be (i) if such day is an
Interest Reset Date, the interest rate determined as of the Interest
Determination Date (as hereinafter defined) immediately preceding such Interest
Reset Date or (ii) if such day is not an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately preceding the most
recent Interest Reset Date.
The applicable floating interest rate on Remarketed Notes during any Long
Term Rate Period will be determined by reference to the applicable Interest Rate
Basis or Interest Rate Bases, which may, as described below, include (i) the CD
Rate, (ii) the CMT Rate, (iii) the Commercial Paper Rate, (iv) the Eleventh
District Cost of Funds Rate, (v) the Federal Funds Rate, (vi) LIBOR, (vii) the
Prime Rate, (viii) the Treasury Rate, or (ix) such other Interest Rate Basis or
interest rate formula as may be specified in the applicable Floating Interest
Rate Notice; provided, however, in the case of a Floating Rate/Fixed Rate, the
interest rate in effect for the period commencing on the Fixed Rate Commencement
Date to the last day of such Long Term Rate Period will be the Fixed Interest
Rate, if such rate is specified by the Remarketing
21
<PAGE> 34
Agent or, if no such Fixed Interest Rate is specified, the interest rate in
effect thereon on the day immediately preceding the Fixed Rate Commencement
Date.
The applicable Floating Interest Rate Notice will specify whether the rate
of interest will be reset daily, weekly, monthly, quarterly, semiannually or
annually or on such other specified basis (each, an "Interest Reset Period") and
the dates on which such rate of interest will be reset (each, an "Interest Reset
Date"). Unless otherwise specified in the applicable Floating Interest Rate
Notice, the Interest Reset Dates will be, in the case of a floating interest
rate which resets: (i) daily, each Business Day; (ii) weekly, the Wednesday of
each week (unless the Treasury Rate is an applicable Interest Rate Basis, in
which case the Tuesday of each week except as described below); (iii) monthly,
the third Wednesday of each month (unless the Eleventh District Cost of Funds
Rate is an applicable Interest Rate Basis, in which case the first calendar day
of the month); (iv) quarterly, the third Wednesday of March, June, September and
December of each year, (v) semiannually, the third Wednesday of the two months
specified in the applicable Prospectus Supplement; and (vi) annually, the third
Wednesday of the month specified in the applicable Floating Interest Rate
Notice; provided, however, that, with respect to a Floating Rate/Fixed Rate, the
rate of interest thereon will not reset after the applicable Fixed Rate
Commencement Date. If any Interest Reset Date would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, unless LIBOR is an applicable Interest Rate Basis and
such Business Day falls in the next succeeding calendar month, in which case
such Interest Reset Date will be the immediately preceding Business Day. In
addition, if the Treasury Rate is an applicable Interest Rate Basis and the
Interest Determination Date would otherwise fall on an Interest Reset Date, then
such Interest Reset Date will be postponed to the next succeeding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date on or prior to the Calculation Date (as hereinafter
defined). The "Interest Determination Date" with respect to the CD Rate, the CMT
Rate, the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will
be the second Business Day immediately preceding the applicable Interest Reset
Date; the "Interest Determination Date" with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home Loan Bank
of San Francisco (the "FHLB of San Francisco") publishes the Index (as
hereinafter defined); and the "Interest Determination Date" with respect to
LIBOR will be the second London Business Day immediately preceding the
applicable Interest Reset Date, unless the Index Currency is British pounds
sterling, in which case the "Interest Determination Date" will be the applicable
Interest Reset Date. With respect to the Treasury Rate, the "Interest
Determination Date" will be the day that Treasury Bills (as hereinafter defined)
are auctioned during or for the week in which the applicable Interest Reset Date
falls (Treasury Bills are normally sold at an auction held on Monday of each
week, unless that day is a legal holiday, in which case the auction is normally
held on the following Tuesday, except that such auction may be held on the
preceding Friday); provided, however, that if an auction is held on the Friday
of the week preceding the applicable Interest Reset Date, the Interest
Determination Date will be such preceding Friday. The "Interest Determination
Date" pertaining to a floating interest rate which is determined by reference to
two or more Interest Rate Bases will be the most recent Business Day which is at
least two Business Days prior to the applicable Interest Reset Date on which
each Interest Rate Basis is determinable. Each Interest Rate Basis will be
determined as of such date, and the applicable interest rate will take effect on
the applicable Interest Reset Date.
Either or both of the following may also apply to the floating interest
rate on a Remarketed Note for a Long Term Rate Period: (i) a Maximum Interest
Rate, or ceiling, that may accrue during any Interest Reset Period and (ii) a
Minimum Interest Rate, or floor, that may accrue during any Interest Reset
Period. In addition to any Maximum Interest Rate that may apply, the interest
rate on any Remarketed Note will in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States laws of
general application.
Except as provided below or in the applicable Floating Interest Rate
Notice, interest will be payable, in the case of floating interest rates which
reset: (i) daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the
22
<PAGE> 35
applicable Floating Interest Rate Notice; (ii) quarterly, on the third Wednesday
of March, June, September and December of each year, (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Floating Interest Rate Notice; and (iv) annually, on the third Wednesday of the
month of each year specified in the applicable Floating Interest Rate Notice
and, in each case, on the Business Day immediately following the applicable Long
Term Rate Period. If any Interest Payment Date for the payment of interest at a
floating rate (other than following the end of the applicable Long Term Rate
Period) would otherwise be a day that is not a Business Day, such Interest
Payment Date will be postponed to the next succeeding Business Day, except that
if LIBOR is an applicable Interest Rate Basis and such Business Day falls in the
next succeeding calendar month, such Interest Payment Date will be the
immediately preceding Business Day.
All percentages resulting from any calculation of floating interest rates
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation will be rounded, in the case of United
States dollars, to the nearest cent or, in the case of a foreign currency or
composite currency, to the nearest unit (with one-half cent or unit being
rounded upwards).
Accrued floating rate interest will be calculated by multiplying the
principal amount of the Remarketed Note to which it relates by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factor calculated for each day in the applicable Interest Reset Period.
Unless otherwise specified in the applicable Floating Interest Rate Notice, the
interest factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, if an applicable Interest Rate Basis is the CD
Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the
Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of days in
the year if an applicable Interest Rate Basis is the CMT Rate or the Treasury
Rate. Unless otherwise specified in the applicable Floating Interest Rate
Notice, if the floating interest rate is calculated with reference to two or
more Interest Rate Bases, the interest factor will be calculated in each period
in the same manner as if only one of the applicable Interest Rate Bases applied
as specified in the applicable Floating Interest Rate Notice.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
Chemical Bank will be the "Calculation Agent." Upon request of the Beneficial
Owner of any Remarketed Note, the Calculation Agent will disclose the interest
rate then in effect and, if determined, the interest rate that will become
effective as a result of a determination made for the next succeeding Interest
Reset Date with respect to such Remarketed Note. Unless otherwise specified in
the applicable Floating Interest Rate Notice, the "Calculation Date," if
applicable, pertaining to any Interest Determination Date will be the earlier of
(i) the tenth calendar day after such Interest Determination Date or, if such
day is not a Business Day, the next succeeding Business Day or (ii) the Business
Day immediately preceding the applicable Interest Payment Date or the Maturity
Date, as the case may be.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the Calculation Agent shall determine each Interest Rate Basis in accordance
with the following provisions.
CD Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, "CD Rate" means, with respect to any Interest Determination Date
relating to a Long Term Rate Period for which the interest rate is determined
with reference to the CD Rate (a "CD Rate Interest Determination Date"), the
rate on such date for negotiable United States dollar certificates of deposit
having the Index Maturity specified in the applicable Floating Interest Rate
Notice as published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates" or any successor
publication ("H.15(519)") under the heading "CDs (Secondary Market)," or, if not
published by 3:00 p.m., New York City time, on the related Calculation Date, the
rate on such CD Rate Interest Determination Date for negotiable United States
dollar certificates of deposit of the Index Maturity specified in the applicable
Floating Interest Rate Notice as published by the Federal Reserve Bank of New
York in its daily statistical release "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or any successor publication ("Composite Quotations")
under the heading "Certificates of Deposit." If such rate is not yet published
in
23
<PAGE> 36
either H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on
the related Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 A.M., New York
City time, on such CD Rate Interest Determination Date, of three leading nonbank
dealers in negotiable United States dollar certificates of deposit in The City
of New York (which may include the Remarketing Agent or its affiliates) selected
by the Calculation Agent, after consultation with the Company, for negotiable
United States dollar certificates of deposit of major United States money market
banks for negotiable certificates of deposit with a remaining maturity closest
to the Index Maturity specified in the applicable Floating Interest Rate Notice
in an amount that is representative for a single transaction in that market at
that time; provided, however, that if the dealers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the CD Rate determined as
of such CD Rate Interest Determination Date will be the CD Rate in effect on
such CD Rate Interest Determination Date.
CMT Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, "CMT Rate" means, with respect to any Interest Determination Date
relating to a Long Term Rate Period for which the interest rate is determined
with reference to the CMT Rate (a "CMT Rate Interest Determination Date"), the
rate displayed on the Designated CMT Telerate Page under the caption
". . . Treasury Constant Maturities . . . Federal Reserve Board Release H.15
. . . Mondays Approximately 3:45 p.m.," under the column for the Designated CMT
Maturity Index for (i) if the Designated CMT Telerate Page is 7055, the rate on
such CMT Rate Interest Determination Date and (ii) if the Designated CMT
Telerate Page is 7052, the weekly or monthly average, as specified in the
Floating Interest Rate Notice, for the week or the month, as applicable, ended
immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page or is not displayed by 3:00 p.m., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such treasury constant maturity rate for the Designated CMT
Maturity Index as published in H.15(519). If such rate is no longer published or
is not published by 3:00 p.m., New York City time, on the related Calculation
Date, then the CMT Rate on such CMT Rate Interest Determination Date will be
such treasury constant maturity rate for the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index) for the
CMT Rate Interest Determination Date with respect to such Interest Reset Date as
may then be published by either the Board of Governors of the Federal Reserve
System or the United States Department of the Treasury that the Calculation
Agent determines to be comparable to the rate formerly displayed on the
Designated CMT Telerate Page and published in H.15(519). If such information is
not provided by 3:00 p.m., New York City time, on the related Calculation Date,
then the CMT Rate on the CMT Rate Interest Determination Date will be calculated
by the Calculation Agent and will be a yield to maturity, based on the
arithmetic mean of the secondary market closing offer side prices as of
approximately 3:30 p.m., New York City time, on such CMT Rate Interest
Determination Date reported, according to their written records, by three
leading primary United States government securities dealers (each, a "Reference
Dealer") in The City of New York (which may include the Remarketing Agent or its
affiliates) selected by the Calculation Agent, after consultation with the
Company, (from five such Reference Dealers selected by the Calculation Agent,
after consultation with the Company, and eliminating the highest quotation (or,
in the event of equality, one of the highest) and the lowest quotation (or, in
the event of equality, one of the lowest)), for the most recently issued direct
noncallable fixed rate obligations of the United States ("Treasury Notes") with
an original maturity of approximately the Designated CMT Maturity Index and a
remaining term to maturity of not less than such Designated CMT Maturity Index
minus one year. If the Calculation Agent is unable to obtain three such Treasury
Note quotations, the CMT Rate on such CMT Rate Interest Determination Date will
be calculated by the Calculation Agent and will be a yield to maturity based on
the arithmetic mean of the secondary market offer side prices as of
approximately 3:30 p.m., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers in The City of New York (from five
such Reference Dealers selected by the Calculation Agent, after consultation
with the Company, and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least
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<PAGE> 37
$100 million. If three or four (and not five) of such Reference Dealers are
quoting as described above, then the CMT Rate will be based on the arithmetic
mean of the offer prices obtained and neither the highest nor the lowest of such
quotes will be eliminated; provided, however, that if fewer than three Reference
Dealers so selected by the Calculation Agent, after consultation with the
Company, are quoting as mentioned herein, the CMT Rate determined as of such CMT
Rate Interest Determination Date will be the CMT Rate in effect on such CMT Rate
Interest Determination Date. If two Treasury Notes with an original maturity as
described in the second preceding sentence have remaining terms to maturity
equally close to the Designated CMT Maturity Index, the Calculation Agent, after
consultation with the Company, will obtain from five Reference Dealers
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Floating Interest Rate Notice
(or any other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no such page is specified in the applicable Floating Interest Rate Notice, the
Designated CMT Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Floating Interest Rate Notice with respect to which
the CMT Rate will be calculated. If no such maturity is specified in the
applicable Floating Interest Rate Notice, the Designated CMT Maturity Index
shall be 2 years.
Commercial Paper Rate. Unless otherwise specified in the applicable
Floating Interest Rate Notice, "Commercial Paper Rate" means, with respect to
any Interest Determination Date relating to a Long Term Rate Period for which
the interest rate is determined with reference to the Commercial Paper Rate (a
"Commercial Paper Rate Interest Determination Date"), the Money Market Yield (as
hereinafter defined) on such date of the rate for commercial paper having the
Index Maturity specified in the applicable Floating Interest Rate Notice as
published in H.15(519) under the heading "Commercial Paper." In the event that
such rate is not published by 3:00 p.m., New York City time, on the related
Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate
Interest Determination Date will be the Money Market Yield of the rate for
commercial paper having the Index Maturity specified in the applicable Floating
Interest Rate Notice as published in Composite Quotations under the heading
"Commercial Paper" (with an Index Maturity of one month or three months being
deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If such rate is not yet published in either H.15(519) or
Composite Quotations by 3:00 p.m., New York City time, on the related
Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00, New York City time, on such Commercial Paper Rate Interest
Determination Date of three leading dealers of commercial paper in The City of
New York (which may include the Remarketing Agent or its affiliates) selected by
the Calculation Agent, after consultation with the Company, for commercial paper
having the Index Maturity specified in the applicable Floating Interest Rate
Notice placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized statistical rating organization;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Commercial Paper Rate determined
as of such Commercial Paper Rate Interest Determination Date will be the
Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
<TABLE>
<S> <C>
D X 360
Money Market Yield = -------------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the Interest Period for which interest is being calculated.
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<PAGE> 38
Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Floating Interest Rate Notice, "Eleventh District Cost of Funds Rate"
means, with respect to any Interest Determination Date relating to a Long Term
Rate Period for which the interest rate is determined with reference to the
Eleventh District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate
Interest Determination Date"), the rate equal to the monthly weighted average
cost of funds for the calendar month immediately preceding the month in which
such Eleventh District Cost of Funds Rate Interest Determination Date falls, as
set forth under the caption "11th District" on Telerate Page 7058 as of 11:00
a.m., San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
Federal Funds Rate. Unless otherwise specified in the applicable Floating
Interest Rate Notice, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Long Term Rate Period for which the interest
rate is determined with reference to the Federal Funds Rate (a "Federal Funds
Rate Interest Determination Date"), the rate on such date for United States
dollar federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 p.m., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 p.m., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the arithmetic mean of the rates for the last transaction in overnight United
States dollar federal funds arranged by three leading brokers of federal funds
transactions in The City of New York (which may include the Remarketing Agent or
its affiliates) selected by the Calculation Agent, after consultation with the
Company, prior to 9:00 a.m., New York City time, on such Federal Funds Rate
Interest Determination Date; provided, however that if the brokers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the
Federal Funds Rate determined as of such Federal Funds Rate Interest
Determination Date will be the Federal Funds Rate in effect on such Federal
Funds Rate Interest Determination Date.
LIBOR. Unless otherwise specified in the applicable Floating Interest Rate
Notice, "LIBOR" means the rate determined in accordance with the following
provisions:
(i) With respect to any Interest Determination Date relating to a Long
Term Rate Period for which the interest rate is determined with reference
to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Floating Interest Rate
Notice, the arithmetic mean of the offered rates (unless the Designated
LIBOR Page by its terms provides only for a single rate, in which case such
single rate shall be used) for deposits in the Index Currency having the
Index Maturity specified in such Floating Interest Rate Notice, commencing
on the applicable Interest Reset Date, that appear (or, if only a single
rate is required as aforesaid, appears) on the Designated LIBOR Page as of
11:00 a.m., London time, on such LIBOR Interest Determination Date, or (b)
if "LIBOR Telerate" is specified in the applicable Floating Interest Rate
Notice or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in
the applicable Floating Interest Rate Notice as the method for calculating
LIBOR, the rate for deposits in the Index Currency having the Index
Maturity specified in such Floating Interest Rate Notice, commencing on
such Interest Reset Date, that appears on the Designated LIBOR Page as of
11:00 a.m., London time, on such LIBOR Interest Determination
26
<PAGE> 39
Date. If fewer than two such offered rates appear, or if no such rate
appears, as applicable, LIBOR on such LIBOR Interest Determination Date
will be determined in accordance with the provisions described in clause
(ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, after consultation with the Company, to provide the
Calculation Agent with its offered quotation for deposits in the Index
Currency for the period of the Index Maturity specified in the applicable
Floating Interest Rate Notice, commencing on the applicable Interest Reset
Date, to prime banks in the London interbank market at approximately 11:00
a.m., London time, on such LIBOR Interest Determination Date and in a
principal amount that is representative for a single transaction in such
Index Currency in such market at such time. If at least two such quotations
are so provided, then LIBOR on such LIBOR Interest Determination Date will
be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, then LIBOR on such LIBOR Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
a.m., in the applicable Principal Financial Center, on such LIBOR Interest
Determination Date by three major banks in such Principal Financial Center
selected by the Calculation Agent, after consultation with the Company, for
loans in the Index Currency to leading European banks, having the Index
Maturity specified in the applicable Floating Interest Rate Notice and in a
principal amount that is representative for a single transaction in such
Index Currency in such market at such time; provided, however, that if the
banks so selected by the Calculation Agent are not quoting as mentioned in
this sentence, LIBOR determined as of such LIBOR Interest Determination
Date will be LIBOR in effect on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Floating Interest Rate Notice as to which LIBOR shall be calculated.
If no such currency or composite currency is specified in the applicable
Floating Interest Rate Notice, the Index Currency shall be United States
dollars.
"Principal Financial Center" means the capital city of the country issuing
the Index Currency, except that with respect to United States dollars,
Australian dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs
and ECUs, the Principal Financial Center shall be New York City, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Floating Interest Rate Notice, the display on the Reuter Monitor
Money Rates Service (or any successor service) for the purpose of displaying the
London interbank rates of major banks for the applicable Index Currency, or (b)
if "LIBOR Telerate" is specified in the applicable Floating Interest Rate Notice
or neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Floating Interest Rate Notice as the method for calculating LIBOR, the display
on the Dow Jones Telerate Service (or any successor service) for the purpose of
displaying the London interbank rates of major banks for the applicable Index
Currency.
Prime Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Long Term Rate Period for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 p.m., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen U.S. PRIME 1 Page (as hereinafter defined) as such
bank's prime rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
U.S. PRIME 1 Page for such Prime Rate Interest Determination Date, then the
Prime Rate shall be the arithmetic mean of the prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Rate Interest Determination Date by four major
money center banks (which may include Chemical Bank) in New York City selected
by the Calculation Agent, after consultation with the Company. If fewer than
four such quotations are so provided, then the
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Prime Rate shall be the arithmetic mean of four prime rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as of the
close of business on such Prime Rate Interest Determination Date as furnished in
The City of New York by the major money center banks, if any, that have provided
such quotations and by as many substitute banks or trust companies (which may
include Chemical Bank) as necessary in order to obtain four such prime rate
quotations, provided such substitute banks or trust companies are organized and
doing business under the laws of the United States, or any State thereof, have
total equity capital of at least $500 million and are subject to supervision or
examination by Federal or State authority, selected by the Calculation Agent,
after consultation with the Company, to provide such rate or rates; provided,
however, that if the banks or trust companies so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Prime Rate determined
as of such Prime Rate Interest Determination Date will be the Prime Rate in
effect on such Prime Rate Interest Determination Date.
"Reuters Screen U.S. PRIME 1 Page" means the display designated as page
"U.S. PRIME 1" on the Reuters Monitor Money Rates Service (or such other page as
may replace the U.S. PRIME 1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).
Treasury Rate. Unless otherwise specified in the applicable Floating
Interest Rate Notice, "Treasury Rate" means, with respect to any Interest
Determination Date relating to a Long Term Rate Period for which the interest
rate is determined by reference to the Treasury Rate (a "Treasury Rate Interest
Determination Date"), the rate from the auction held on such Treasury Rate
Interest Determination Date (the "Auction") of direct obligations of the United
States ("Treasury Bills") having the Index Maturity specified in the applicable
Floating Interest Rate Notice, as such rate is published in H.15(519) under the
heading "Treasury Bills-auction average (investment)" or, if not published by
3:00 p.m., New York City time, on the related Calculation Date, the auction
average rate of such Treasury Bills (expressed as a bond equivalent on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the Auction of Treasury Bills having the Index
Maturity specified in the applicable Floating Interest Rate Notice are not
reported as provided by 3:00 p.m., New York City time, on the related
Calculation Date, or if no such Auction is held, then the Treasury Rate will be
calculated by the Calculation Agent, and will be a yield to maturity (expressed
as a bond equivalent on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 p.m., New York City time, on such Treasury Rate
Interest Determination Date, of three leading primary United States government
securities dealers (which may include the Remarketing Agent or its affiliates)
selected by the Calculation Agent, after consultation with the Company, for the
issue of Treasury Bills with a remaining maturity closest to the Index Maturity
specified in the applicable Floating Interest Rate Notice; provided, however,
that if the dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Treasury Rate determined as of such Treasury
Rate Interest Determination Date will be the Treasury Rate in effect on such
Treasury Rate Interest Determination Date.
DTC BOOK-ENTRY-ONLY SYSTEM
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be registered under a book-entry-only system maintained by
The Depository Trust Company, New York, New York ("DTC"). The book-entry-only
system will evidence ownership interests in the Debt Securities in book-
entry-only form. Purchasers of ownership interests in the Debt Securities will
not receive certificates representing their interests in the Debt Securities
purchased. Transfers of ownership interests will be effected on the records of
DTC and its participating organizations (the "DTC Participants") pursuant to
rules and procedures established by DTC.
Certain of the following information concerning the procedures and record
keeping with respect to ownership interests in the Debt Securities, payment of
interest and other payments on the Debt Securities to DTC Participants or
Beneficial Owners (as hereafter defined), confirmation and transfer of ownership
interests in the Debt Securities and other related transactions by and between
DTC, the DTC Participants and Beneficial Owners is based solely on information
contained in a published report of DTC.
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DTC, an automated clearinghouse for securities transactions, will act as
securities depository for the Debt Securities. DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the 1934 Act. DTC was created to hold securities of
the DTC Participants and to facilitate the clearance and settlement of
securities transactions among DTC Participants in such securities through
electronic book-entry changes in accounts of the DTC Participants, thereby
eliminating the need for physical movement of security certificates. DTC
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations, some of which (and/or
their representatives) own DTC. Access to the DTC system is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a DTC Participant, either directly or
indirectly (the "Indirect Participants").
The ownership of the fully-registered Debt Securities will be registered in
the name of Cede & Co., as nominee for DTC. Ownership interests in the Debt
Securities may be purchased by or through DTC Participants and will be recorded
on the records of the DTC Participants, whose interests in turn will be recorded
on a computerized book-entry-only system operated by DTC. Such DTC Participants
and the person for whom they acquire interests in the Debt Securities as
nominees ("Beneficial Owner") will not receive Debt Security certificates, but
each such DTC Participant will receive a credit balance in the records of DTC in
the amount of such DTC Participant's interest in the Debt Securities, which will
be confirmed in accordance with DTC's standard procedures. Each such Beneficial
Owner for whom a DTC Participant acquires an interest in the Debt Securities, as
nominee, may desire to make arrangements with such DTC Participant to have all
communications of the Company and the Trustee to DTC which may affect such
Beneficial Owner forwarded in writing by such DTC Participant and to have
notifications made of all payments of principal and interest with respect to his
beneficial interest. The Company and the Trustee will treat DTC (or its nominee)
as the sole and exclusive owner of the Debt Securities registered in its name
for the purposes of payment of the principal and interest on the Notes, giving
any notice permitted or required to be given to holders under the Indenture,
registering the transfer of Notes, and for all other purposes whatsoever, and
shall not be affected by any notice to the contrary. The Company and the Trustee
shall not have any responsibility or obligation to any DTC Participant, any
person claiming a beneficial ownership interest in the Debt Securities under or
through DTC or any DTC Participant, or any other person which is not shown on
the registration books of the Trustee as being a holder, with respect to: (i)
the accuracy of any records maintained by DTC or any DTC Participant; (ii) the
payment by DTC or any DTC Participant of any amount in respect of the principal
or interest on the Debt Securities; (iii) any notice which is permitted or
required to be given to holders thereunder or under the conditions to transfers
or exchanges adopted by the Company; or (iv) any other action taken by DTC as a
holder. Principal and interest on the Debt Securities will be paid by the
Trustee or, in the case of any Remarketed Notes, the Remarketing Agent to DTC or
its nominee. Disbursement of such payments to the DTC Participants is the
responsibility of DTC and disbursement of such payments to the Beneficial Owners
is the responsibility of the DTC Participants or the Indirect Participants.
NEITHER THE COMPANY NOR THE TRUSTEE NOR, IN THE CASE OF ANY SERIES OF REMARKETED
NOTES, THE REMARKETING AGENT WILL HAVE ANY RESPONSIBILITY OR OBLIGATIONS TO SUCH
DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO
THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, OR THE
INDIRECT PARTICIPANTS, OR THE BENEFICIAL OWNERS.
SO LONG AS CEDE & CO., AS NOMINEE OF DTC, IS THE REGISTERED OWNER OF THE
DEBT SECURITIES, REFERENCES HEREIN TO THE SECURITY HOLDERS OR REGISTERED OWNERS
OF THE DEBT SECURITIES SHALL MEAN CEDE & CO., AND SHALL NOT MEAN THE BENEFICIAL
OWNERS.
For every transfer and exchange of beneficial ownership of Debt Securities,
a Beneficial Owner may be charged a sum sufficient to cover any tax, fee or
other governmental charge that may be imposed in relation thereto.
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When reference is made to any action which is required or permitted to be
taken by the Beneficial Owners, such reference shall only relate to action by
such Beneficial Owner, or others permitted to act (by statute, regulation or
otherwise) on behalf of such Beneficial Owners for such purposes. When notices
are given, they shall be sent by the Trustee to DTC only. Conveyance of notices
and other communications by DTC to DTC Participants and Indirect Participants
and in turn by DTC Participants and Indirect Participants to Beneficial Owners
will be governed by arrangements among them, subject to any statutory and
regulatory requirements then in effect.
Principal and interest payments on the Debt Securities will be made to DTC
or its nominee, Cede & Co., as registered owner of the Debt Securities. Upon
receipt of any such payments, DTC's current practice is to immediately credit
the accounts of the DTC Participants in accordance with their respective
holdings shown on the records of DTC. Payments by DTC Participants and Indirect
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such DTC Participant or Indirect Participant.
DTC may determine to discontinue providing its services with respect to the
Debt Securities at any time by giving notice to the Company and discharging its
responsibilities with respect thereto under applicable law. In addition, the
Company may determine that continuation of the system of book-entry-only
transfers through DTC (or a successor securities depository) is not in the best
interests of the Beneficial Owners or is burdensome to the Company. If for
either reason the book-entry-only system is discontinued, certificates for the
Debt Securities will be delivered to the Beneficial Owners thereof.
Certain of the information contained in this sub-section has been extracted
from a report from DTC. No representation is made by the Company as to the
completeness or the accuracy of such information or as to the absence of
material adverse changes in such information subsequent to the date hereof.
Same-Day Settlement and Payment
Unless otherwise indicated in the applicable Prospectus Supplement,
settlement for the Debt Securities will be made by a purchaser in immediately
available funds. While the Debt Securities are in the book-entry-only system
described above, all payments of principal and interest will be made by the
Trustee or, in the case of any series of Remarketed Notes, the Remarketing Agent
on behalf of the Company to DTC in immediately available funds.
Secondary trading in long-term debt securities is generally settled in
clearing-house or next-day funds. Unless otherwise set forth in the applicable
Prospectus Supplement, while the Debt Securities are in the book-entry-only
system described above, they will trade in DTC's Same-Day Fund Settlement System
until maturity. During such period, secondary market trading activity in the
Debt Securities will settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
the trading activity in the Debt Securities.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary, which is based upon the advice of Woodard, Hall &
Primm, P.C., Houston, Texas, special tax counsel to the Company whose opinion is
set forth herein, of certain United States Federal income tax consequences of
the purchase, ownership and disposition of the Debt Securities is based upon
laws, regulations, rulings and decisions now in effect (or, in the case of
certain regulations, in proposed form), all of which are subject to change
(including changes in effective dates) or possible differing interpretations. It
deals only with Debt Securities held as capital assets and does not purport to
deal with persons in special tax situations, such as financial institutions,
insurance companies, regulated investment companies, dealers in securities or
currencies, persons holding Debt Securities as a hedge against currency risks or
as a position in a "straddle" for tax purposes, or persons whose functional
currency is not the United States dollar. It also does not deal with holders
other than original purchasers (except where otherwise specifically noted).
Persons considering the purchase of the Debt Securities should consult their own
tax advisors concerning the
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application of United States Federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of the Debt Securities arising under the laws of any other taxing
jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Debt
Security that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) any other person whose income or gain in respect of a Debt Security is
effectively connected with the conduct of a United States trade or business. As
used herein, the term "non-U.S. Holder" means a holder of a Debt Security that
is not a U.S. Holder.
U.S. Holders
Payments of Interest. Payments of interest on a Debt Security generally
will be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting).
Original Issue Discount. The following summary is a general discussion of
the United States Federal income tax consequences to U.S. Holders of the
purchase, ownership and disposition of Debt Securities issued with original
issue discount ("Discount Debt Securities"). The following summary is based upon
final Treasury regulations (the "OID Regulations") released by the Internal
Revenue Service ("IRS") on January 27, 1994 under the original issue discount
provisions of the Internal Revenue Code of 1986, as amended (the "Code"). The
OID Regulations, which replaced certain proposed original issue discount
regulations that were issued on December 21, 1992 (the "1992 Proposed
Regulations"), generally apply to debt instruments issued on or after April 4,
1994.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Debt Security over
its issue price, if such excess equals or exceeds a de minimis amount (generally
1/4 of 1% of the Debt Security's stated redemption price at maturity multiplied
by the number of complete years to its maturity from its issue date or, in the
case of a Debt Security providing for the payment of any amount other than
qualified stated interest, as defined below, prior to maturity, multiplied by
the weighted average maturity of such Debt Security). The issue price of an
issue of Debt Securities equals the first price at which a substantial amount of
such Debt Securities has been sold (ignoring sales to bond houses, brokers, or
similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers). The stated redemption price at maturity of a
Debt Security is the sum of all payments provided by the Debt Security other
than "qualified stated interest" payments. The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate. In addition, under the OID Regulations, if a Debt Security
bears interest for one or more accrual periods at a rate below the rate
applicable for the remaining term of such Debt Security (e.g., Debt Securities
with teaser rates or interest holidays), and if the greater of either the
resulting foregone interest on such Debt Security or any "true" discount on such
Debt Security (i.e., the excess of the Debt Security's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Debt Security would be treated as original issue discount
rather than qualified stated interest.
Payments of qualified stated interest on a Debt Security are taxable to a
U.S. Holder as ordinary interest income at the time such payments are accrued or
are received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Debt Security must include original
issue discount in income as ordinary interest for United States Federal income
tax purposes as it accrues over the entire term of the Discount Debt Security
under a constant yield method in advance of receipt of the cash payments
attributable to such income, regardless of such U.S. Holder's regular method of
tax accounting. In general, the amount of original issue discount includible in
income by the initial U.S. Holder of a Discount Debt Security is the sum of the
daily portions of original issue discount with respect to such Discount Debt
Security for each day during the taxable year (or portion of the taxable year)
on which such U.S. Holder held such Discount
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Debt Security. The "daily portion" of original issue discount on any Discount
Debt Security is determined by allocating to each day in any accrual period a
ratable portion of the original issue discount allocable to that accrual period.
An "accrual period" may be of any length and the accrual period may vary in
length over the term of the Discount Debt Security, provided that each accrual
period is no longer than one year and each scheduled payment of principal or
interest occurs either on the final day of an accrual period or on the first day
of an accrual period. The amount of original issue discount allocable to each
accrual period is generally equal to the difference between (i) the product of
the Discount Debt Security's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and appropriately adjusted to take into
account the length of the particular accrual period) and (ii) the amount of any
qualified stated interest payments, allocable to such accrual period. The
"adjusted issue price" of a Discount Debt Security at the beginning of any
accrual period is the sum of the issue price of the Discount Debt Security plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Debt Security that were
not qualified stated interest payments. Under these rules, U.S. Holders
generally will have to include in income increasingly greater amounts of
original issue discount in successive accrual periods.
A U.S. Holder who purchases a Discount Debt Security for an amount that is
greater than its adjusted issue price as of the purchase date and less than or
equal to the sum of all amounts payable on the Discount Debt Security after the
purchase date other than payments of qualified stated interest, will be
considered to have purchased the Discount Debt Security at an "acquisition
premium." Under the acquisition premium rules, the amount of original issue
discount which such U.S. Holder must include in its gross income with respect to
such Discount Debt Security for any taxable year (or portion thereof in which
the U.S. Holder holds the Discount Debt Security) will be reduced (but not below
zero) by the portion of the acquisition premium properly allocable to the
period.
Under the OID Regulations, Debt Securities that provide for stated interest
at one or more variable interest rates ("Floating Rate Debt Securities") are
subject to special rules whereby a Floating Rate Debt Security will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Floating Rate Debt Security by
more than a specified de minimis amount and (b) it provides for stated interest,
paid or compounded at least annually, at current values of (i) one or more
qualified floating rates, (ii) a single fixed rate and one or more qualified
floating rates, (iii) a single objective rate, or (iv) a single fixed rate and a
single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Floating Rate Debt Security is denominated. Although a multiple of a qualified
floating rate will generally not itself constitute a qualified floating rate, a
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than zero but not more than 1.35 will constitute a
qualified floating rate. A variable rate equal to the product of a qualified
floating rate and a fixed multiple that is greater than zero but not more than
1.35, increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Floating Rate Debt Security (e.g., two or more
qualified floating rates with values within 25 basis points of each other as
determined on the Floating Rate Debt Security's issue date) will be treated as a
single qualified floating rate. Notwithstanding the foregoing, a variable rate
that would otherwise constitute a qualified floating rate but which is subject
to one or more restrictions such as a maximum numerical limitation (i.e., a cap)
or a minimum numerical limitation (i.e., a floor) may under certain
circumstances, fail to be treated as a qualified floating rate under the OID
Regulations. An "objective rate" is a rate that is not itself a qualified
floating rate but which is determined using a single fixed formula and which is
based upon (i) one or more qualified floating rates, (ii) one or more rates
where each rate would be a qualified floating rate for a debt instrument
denominated in a currency other than the currency in which the Floating Rate
Debt Security is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property (other than stock or debt
of the issuer or a related party) or (iv) a combination of objective rates. The
OID Regulations also provide that other variable
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interest rates may be treated as objective rates if so designated by the IRS in
the future. Despite the foregoing, a variable rate of interest on a Floating
Rate Debt Security will not constitute an objective rate if it is reasonably
expected that the average value of such rate during the first half of the
Floating Rate Debt Security's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Floating Rate Debt Security term.
In 1994 the Treasury Department issued new proposed regulations (the "1994
Proposed Regulations") which, if adopted, would redefine "objective rate," to
mean a rate (other than a qualified floating rate) determined using a single
fixed formula and based on objective financial or economic information. Under
the 1994 Proposed Regulations, a rate unique to the circumstances of the issuer
or a related party, or based on information within the control of the issuer or
a related party, would not qualify as an objective rate, but a rate based on the
credit quality of the issuer would not, solely on that basis, be disqualified as
an objective rate. The 1994 Proposed Regulations are generally proposed to be
effective for debt obligations issued on or after the date that is 60 days after
the date on which the 1994 Proposed Regulations (or successor regulations
thereto) are published as final Treasury regulations in the Federal Register.
The Treasury Department has not indicated whether taxpayers willing to apply the
1994 Proposed Regulations to debt obligations issued after publication of the
1994 Proposed Regulations but prior to their publication as final regulations
will be able to do so. In the absence of such permission the present definition
of "objective rate" discussed above would continue to be applied.
A "qualified inverse floating rate" is any objective rate where such rate
is equal to a fixed rate minus a qualified floating rate, as long as variations
in the rate can reasonably be expected to inversely reflect contemporaneous
variations in the cost of newly borrowed funds. The OID Regulations also provide
that if a Floating Rate Debt Security provides for stated interest at a fixed
rate for an initial period of less than one year followed by a variable rate
that is either a qualified floating rate or an objective rate and if the
variable rate on the Floating Rate Debt Security's issue date is intended to
approximate the fixed rate (e.g., the value of the variable rate on the issue
date does not differ from the value of the fixed rate by more than 25 basis
points), then the fixed rate and the variable rate together will constitute
either a single qualified floating rate or objective rate, as the case may be.
If a Floating Rate Debt Security that provides for stated interest at
either a single qualified floating rate or a single objective rate throughout
the term thereof qualifies as a "variable rate debt instrument" under the OID
Regulations, then any stated interest on such Debt Security which is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually will constitute qualified stated interest and will be
taxed accordingly. Thus, a Floating Rate Debt Security that provides for stated
interest at either a single qualified floating rate or a single objective rate
throughout the term thereof and that qualifies as a "variable rate debt
instrument" under the OID Regulations will generally not be treated as having
been issued with original issue discount unless the Floating Rate Debt Security
is issued at a "true" discount (i.e., at a price below the Debt Security's
stated principal amount) in excess of a specified de minimis amount. Original
issue discount on such a Floating Rate Debt Security arising from "true"
discount is allocated to an accrual period using the constant yield method
described above by assuming that the variable rate is a fixed rate equal to (i)
in the case of a qualified floating rate or qualified inverse floating rate, the
value, as of the issue date, of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
floating rate or qualified inverse floating rate), a fixed rate that reflects
the yield that is reasonably expected for the Floating Rate Debt Security.
In general, any other Floating Rate Debt Security that qualifies as a
"variable rate debt instrument" will be converted into an "equivalent" fixed
rate debt instrument for purposes of determining the amount and accrual of
original issue discount and qualified stated interest on the Floating Rate Debt
Security. The OID Regulations generally require that such a Floating Rate Debt
Security be converted into an "equivalent" fixed rate debt instrument by
substituting any qualified floating rate or qualified inverse floating rate
provided for under the terms of the Floating Rate Debt Security with a fixed
rate equal to the value of the qualified floating rate or qualified inverse
floating rate, as the case may be, as of the Floating Rate Debt Security's issue
date. Any objective rate (other than a qualified inverse floating rate) provided
for under the terms of the Floating Rate Debt Security is converted into a fixed
rate that reflects the yield that is reasonably expected for the
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Floating Rate Debt Security. In the case of a Floating Rate Debt Security that
qualifies as a "variable rate debt instrument" and provides for stated interest
at a fixed rate in addition to either one or more qualified floating rates or a
qualified inverse floating rate, the fixed rate is initially converted into a
qualified floating rate (or a qualified inverse floating rate, if the Floating
Rate Debt Security provides for a qualified inverse floating rate). Under such
circumstances, the qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
Floating Rate Debt Security as of the Floating Rate Debt Security's issue date
is approximately the same as the fair market value of an otherwise identical
debt instrument that provides for either the qualified floating rate or
qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Floating Rate Debt Security is then converted into an
"equivalent" fixed rate debt instrument in the manner described above.
Once the Floating Rate Debt Security is converted into an "equivalent"
fixed rate debt instrument pursuant to the foregoing rules, the amount of
original issue discount and qualified stated interest, if any, are determined
for the "equivalent" fixed rate debt instrument by applying the general original
issue discount rules to the "equivalent" fixed rate debt instrument and a U.S.
Holder of the Floating Rate Debt Security will account for such original issue
discount and qualified stated interest as if the U.S. Holder held the
"equivalent" fixed rate debt instrument. Each accrual period appropriate
adjustments will be made to the amount of qualified stated interest or original
issue discount assumed to have been accrued or paid with respect to the
"equivalent" fixed rate debt instrument in the event that such amounts differ
from the actual amount of interest accrued or paid on the Floating Rate Debt
Security during the accrual period.
If a Floating Rate Debt Security does not qualify as a "variable rate debt
instrument" under the OID Regulations, the Floating Rate Debt Security would be
treated as a contingent payment debt obligation. It is not entirely clear under
current law how a Floating Rate Debt Security would be taxed if such Floating
Rate Debt Security were treated as a contingent payment debt obligation. The
proper United States Federal income tax treatment of Floating Rate Debt
Securities that are treated as contingent payment debt obligations will be more
fully described in the applicable Pricing Supplement. Furthermore, any other
special United States Federal income tax considerations not otherwise discussed
herein, which are applicable to any particular issue of Floating Rate Debt
Securities, will be discussed in the applicable Pricing Supplement.
Certain of the Debt Securities (i) may be redeemable at the option of the
Company prior to their stated maturity (a "call option") and/or (ii) may be
repayable at the option of the holder prior to their stated maturity (a "put
option"). Debt Securities containing such features may be subject to rules that
differ from the general rules discussed above. Investors intending to purchase
Debt Securities with such features should consult their own tax advisors, since
the original issue discount consequences will depend, in part, on the particular
terms and features of the purchased Debt Securities. Additionally, upon the
occurrence of a "Change in Control" as defined in the Indenture, each Holder of
Debt Securities of any series then outstanding may elect, by proper execution
and delivery of a Change in Control Purchase Notice, to require the Company to
purchase such Debt Securities prior to their stated maturity. The original issue
discount consequences of such an election and purchase will depend on the
particular terms and features of the Debt Securities, and Holders should consult
their own tax advisors prior to making such an election.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions. This election is only available for debt instruments
acquired on or after April 4, 1994.
Remarketed Notes. Under general principles of current United States Federal
income tax law, payments of interest on a Remarketed Note generally would be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular method
of tax accounting). Under these principles, all interest payable with respect to
the Remarketed Notes at the Initial Interest Rate generally would be includible
in income by a U.S. Holder as ordinary interest when such
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<PAGE> 47
interest is accrued or received. Any amounts payable on Remarketed Notes in the
Short Term Rate Mode or in the Long Term Rate Mode would be treated as
contingent interest and generally would be includible in income by a U.S. Holder
as ordinary interest on the respective dates that the amount of such interest is
accrued or when such amount is received.
Although the matter is not free from doubt, each Short Term Rate Mode and
certain Long Term Rate Modes should individually constitute separate qualified
floating rates under the OID Regulations. The Remarketed Notes will initially
bear interest at the Initial Interest Rate. Thereafter, each Remarketed Note
will bear interest in either the Short Term Rate Mode or the Long Term Rate
Mode.
Since the Remarketed Notes provide for payment of 100% of the principal
amount thereof at maturity and assuming that the Remarketed Notes will not be
issued at a premium in excess of the de minimis premium permitted under the OID
Regulations for qualification as a "variable rate debt instrument", depending
upon how often the Remarketed Notes are converted into different Interest Rate
Modes and depending upon which Interest Rate Modes the Remarketed Notes are
converted into, it could be argued that some of the Remarketed Notes should
qualify as "variable rate debt instruments" under the OID Regulations and should
not be treated as contingent payment debt obligations. If any of the Remarketed
Notes were to qualify as "variable rate debt instruments" under the OID
Regulations, all payments of interest on such Remarketed Notes generally should
constitute payments of qualified stated interest and should be taxed
accordingly.
Despite the foregoing, because it will be unknown, as of the original
issuance of the Remarketed Notes, whether or to what extent the Company will
convert the Remarketed Notes from one Interest Rate Mode to another, none of the
Remarketed Notes may qualify as "variable rate debt instruments" under the OID
Regulations and all of the Remarketed Notes may be treated as contingent payment
debt obligations, regardless of the extent to which the Company actually
converts the Remarketed Notes from one Interest Rate Mode to another. Due to the
uncertainty surrounding the proper treatment of the Remarketed Notes under the
OID Regulations, prospective investors in the Remarketed Notes are advised to
consult their own tax advisors regarding the proper treatment of the Remarketed
Notes under the OID Regulations.
If the Remarketed Notes do not qualify as "variable rate debt instruments"
under the OID Regulations, the Remarketed Notes will be treated as contingent
payment debt obligations. It is not entirely clear under current law how the
Remarketed Notes would be taxed if they were treated as contingent payment debt
obligations. As previously discussed, under general principles of current United
States Federal income tax law, any amounts payable with respect to Remarketed
Notes in the Short Term Rate Mode or in the Long Term Rate Mode should be
treated as contingent interest and generally should be includible in income by a
U.S. Holder as ordinary interest on the respective dates that the amount of such
interest is accrued or when such amount is received. All interest payable with
respect to the Remarketed Notes at the Initial Interest Rate generally should be
includible in a U.S. Holder's income as ordinary interest when such interest is
accrued or received.
In 1986, the Treasury Department issued proposed regulations (the "1986
Proposed Regulations") under the original issue discount provisions of the Code
concerning contingent payment debt obligations. In 1991, the Treasury Department
proposed an amendment to the 1986 Proposed Regulations (the "1991 Amendment")
that would have required bifurcation of certain contingent debt obligations into
their component parts. Neither the 1992 Proposed Regulations nor the OID
Regulations contained rules for contingent payment debt obligations. In response
to criticism of the proposed treatment of contingent payment debt obligations
under both the 1986 Proposed Regulations and the 1991 Amendment, the Treasury
Department in 1994 issued the 1994 Proposed Regulations concerning contingent
payment debt obligations, superseding both the 1986 Proposed Regulations and the
1991 Amendment which were withdrawn.
The 1994 Proposed Regulations are generally proposed to be effective for
debt obligations issued on or after the date that is 60 days after the date on
which the 1994 Proposed Regulations (or successor regulations thereto) are
published as final Treasury regulations in the Federal Register. The Treasury
Department has not indicated whether taxpayers willing to apply the 1994
Proposed Regulations consistently to contingent payment debt obligations issued
after publication of the 1994 Proposed Regulations, but prior to their
35
<PAGE> 48
publication as final regulations will be permitted to do so. In the absence of
such permission, contingent payment debt obligations issued in advance of final
regulations will be treated for tax purposes under general principles of Federal
income tax law as described above. Thus, if (a) the Remarketed Notes were
treated as contingent payment debt obligations, (b) the Treasury Department
provides that the 1994 Proposed Regulations may be applied to contingent payment
debt obligations issued in advance of adoption of final regulations, and (c) the
1994 Proposed Regulations are ultimately adopted in their current form, then the
1994 Proposed Regulations could be applied to the Remarketed Notes.
Under the 1994 Proposed Regulations, contingent payment debt obligations
issued for cash or publicly traded property are subject to the "noncontingent
bond method," under which interest on the debt obligation is taken into account
whether or not the amount of any payment is fixed or determinable in the taxable
year, based on a projected payment schedule including each noncontingent payment
and the projected amount of each contingent payment. The issuer determines the
projected payment schedule as of the issue date of the obligation, which remains
fixed throughout the term of the obligation, and to which all holders of the
obligation are bound unless the projected schedule is unreasonable. Debt
obligations subject to the noncontingent bond method are required to set forth
the projected payment schedule on the face of the debt instrument. Interest
generally is accrued under the noncontingent bond method according to generally
applicable rules provided by the OID Regulations. Since no interest on these
instruments is treated as qualified stated interest under the OID Regulations,
all interest income and expense is calculated as original issue discount.
Differences between the projected amount of a contingent payment and the actual
amount of the payment result in periodic positive and negative adjustments that
are netted for each taxable year.
If the 1994 Proposed Regulations were applied to the Remarketed Notes, the
adjusted positive amount, after netting, of interest that accrues with respect
to a Remarketed Note in a taxable year in which interest is payable at a rate
other than the Initial Interest Rate should be treated as ordinary interest, and
generally should be includible in income by a U.S. Holder for the taxable year.
The adjusted negative amount, after netting, of actual interest first reduces
projected interest considered to accrue for the taxable year, then is treated as
ordinary loss by a U.S. Holder and as ordinary income by the issuer, up to the
amount of previously accrued interest income on the obligation, to the extent
not previously affected by prior years' net negative adjustments. The amount of
principal due and payable with respect to a Remarketed Note at maturity, or upon
earlier redemption of the Remarketed Note, should be treated by a U.S. Holder as
a return of principal. Under the noncontingent bond method, any gain recognized
by a U.S. Holder on the sale, exchange, or retirement of a contingent payment
debt obligation is treated as interest income. Any loss recognized by a U.S.
Holder on the sale, exchange or retirement of a contingent payment debt
obligation is treated as ordinary loss, to the extent of the U.S. Holder's prior
interest inclusions (reduced by prior ordinary losses attributable to net
negative adjustments) on the obligation. Any residual negative adjustment
carryforward remaining on such obligation at its sale, exchange or retirement is
treated as a capital loss.
There is no assurance that the 1994 Proposed Regulations will be adopted,
or if adopted, adopted in their current form. The 1994 Proposed Regulations are
not binding upon either the IRS or taxpayers prior to becoming effective as
temporary or final regulations. Thus, the Company, where required, intends to
file information returns with the IRS reporting payments on any Debt Securities
that are treated as contingent payment debt obligations in accordance with
general principles of current United States Federal Income tax law, in the
absence of any change or clarification in the law, by regulation or otherwise,
requiring that another method be used. In general, if ultimately adopted in
their current form, the 1994 Proposed Regulations would cause the timing and
character of income, gain or loss reported on a contingent payment debt
obligation to differ substantially from the timing and character of income, gain
or loss reported on a contingent payment debt obligation under general
principles of Federal income tax law. Prospective investors in the Remarketed
Notes are urged to consult their own tax advisors regarding the application of
the 1994 Proposed Regulations and the OID Regulations to their investment in the
Remarketed Notes and the effect on their investment in the Remarketed Notes of
possible changes to the 1994 Proposed Regulations and the OID Regulations.
Short-Term Debt Securities. Debt Securities that have a fixed maturity of
one year or less ("Short-Term Debt Securities") will be treated as having been
issued with original issue discount. In general, an individual or other cash
method U.S. Holder is not required to accrue such original issue discount unless
the U.S. Holder
36
<PAGE> 49
elects to do so. If such an election is not made, any gain recognized by the
U.S. Holder on the sale, exchange or maturity of the Short-Term Debt Security
will be ordinary income to the extent of the original issue discount accrued on
a straight-line basis, or upon election under the constant yield method (based
on daily compounding), through the date of sale or maturity, and a portion of
the deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Debt Security will be deferred until a corresponding
amount of income is realized. U.S. Holders who report income for United States
Federal income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original issue
discount on a Short-Term Debt Security on a straight-line basis unless an
election is made to accrue the original issue discount under a constant yield
method (based on daily compounding).
Market Discount. If a U.S. Holder purchases a Debt Security, other than a
Discount Debt Security, for an amount that is less than its issue price (or, in
the case of a subsequent purchaser, its stated redemption price at maturity) or,
in the case of a Discount Debt Security, for an amount that is less than its
adjusted issue price as of the purchase date, such U.S. Holder will be treated
as having purchased such Debt Security "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Debt Security, any
payment that does not constitute qualified stated interest) on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Debt
Security as ordinary income to the extent of the lesser of (i) the amount of
such payment or realized gain or (ii) the market discount which has not
previously been included in income and is treated as having accrued on such Debt
Security at the time of such payment or disposition. Market discount will be
considered to accrue ratably during the period from the date of acquisition to
the maturity date of the Debt Security, unless the U.S. Holder elects to accrue
market discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Debt Security with market discount until the maturity of the
Debt Security or its earlier disposition in a taxable transaction, because a
current deduction is only allowed to the extent the interest expense exceeds an
allocable portion of market discount. A U.S. Holder may elect to include market
discount in income currently as it accrues (on either a ratable or semiannual
compounding basis), in which case the rules described above regarding the
treatment as ordinary income of gain upon the disposition of the Debt Security
and upon the receipt of certain cash payments and regarding the deferral of
interest deductions will not apply. Generally, such currently included market
discount is treated as ordinary interest for United States Federal income tax
purposes.
Premium. If a U.S. Holder purchases a Debt Security for an amount that is
greater than the sum of all amounts payable on the Debt Security after the
purchase date other than payments of qualified stated interest, such U.S. Holder
will be considered to have purchased the Debt Security with "amortizable bond
premium" equal in amount to such excess. A U.S. Holder may elect to amortize
such premium using a constant yield method over the remaining term of the Debt
Security and may offset interest otherwise required to be included in respect of
the Debt Security during any taxable year by the amortized amount of such excess
for the taxable year. However, if the Debt Security may be optionally redeemed
after the U.S. Holder acquires it at a price in excess of its stated redemption
price at maturity, special rules would apply which could result in a deferral of
the amortization of some bond premium until later in the term of the Debt
Security.
Disposition of a Note. Except as discussed above, upon the sale, exchange
or retirement of a Debt Security, a U.S. Holder generally will recognize taxable
gain or loss equal to the difference between the amount realized on the sale,
exchange or retirement and such U.S. Holder's adjusted tax basis in the Debt
Security. A U.S. Holder's adjusted tax basis in a Debt Security generally will
equal such U.S. Holder's initial investment in the Debt Security increased by
any original issue discount included in income (and accrued market discount, if
any, if the U.S. Holder has included such market discount in income) and
decreased by the amount of any payments, other than qualified stated interest
payments, received and amortizable bond premium taken with respect to such Debt
Security. Such gain or loss generally will be long-term capital gain or loss if
the Debt Security were held for more than one year.
37
<PAGE> 50
Foreign Currency Debt Securities. Any special United States Federal income
tax considerations applicable to Debt Securities that provide for the payment of
principal, premium (if any) or interest in a currency other than U.S. dollars
will be discussed in the applicable Prospectus Supplement.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Debt Security, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the beneficial owner
of the Debt Security under penalties of perjury, (ii) certifies that such owner
is not a U.S. Holder and (iii) provides the name and address of the beneficial
owner. The statement may be made on an IRS Form W-8 or a substantially similar
form, and the beneficial owner must inform the Withholding Agent of any change
in the information on the statement within 30 days of such change. If a Debt
Security is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide a signed
statement to the Withholding Agent. However, in such case, the signed statement
must be accompanied by a copy of the IRS Form W-8 or the substitute form
provided by the beneficial owner to the organization or institution. The
Treasury Department is considering implementation of further certification
requirements aimed at determining whether the issuer of a debt obligation is
related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Debt Security, provided the gain is not effectively connected with the conduct
of a trade or business in the United States by the non-U.S. Holder. Certain
other exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Debt Securities will not be includible in the estate of a non-U.S.
Holder unless the individual is a direct or indirect 10% or greater shareholder
of the Company or, at the time of such individual's death, payments in respect
of the Debt Securities would have been effectively connected with the conduct by
such individual of a trade or business in the United States.
Backup Withholding
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Debt Securities to registered owners
who are not "exempt recipients" and who fail to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the required manner. Generally, individuals are not exempt recipients, whereas
corporations and certain other entities generally are exempt recipients.
Payments made in respect of the Debt Securities to a U.S. Holder must be
reported to the IRS, unless the U.S. Holder is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in the preceding section would establish an exemption from backup
withholding for those non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Debt Security to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller is
a non-U.S. Holder (and certain other conditions are met). Such a sale must also
be reported by the broker to the IRS, unless either (i) the broker determines
that the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
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<PAGE> 51
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (i) through underwriters or
dealers, (ii) directly to a limited number of institutional purchasers or to a
single purchaser, (iii) through agents or (iv) through any combination of the
above. An accompanying Prospectus Supplement will set forth the terms of the
offering of the Debt Securities offered thereby, including the name or names of
any underwriters, the purchase price of the Debt Securities and the net proceeds
to the Company from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in the sale of Debt Securities, such Debt
Securities will be acquired by the underwriters for their own account and may be
resold 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. Unless otherwise set forth in the Prospectus Supplement,
the several obligations of the underwriters to purchase any Debt Securities
offered thereby will be subject to certain conditions precedent and the
underwriters will be obligated to take and pay for all of such Debt Securities,
if any are taken.
The Debt Securities may be sold directly by the Company or through
underwriters or agents designated by the Company from time to time. Any agent
involved in the offer or sale of the Debt Securities will be named, and any
commissions payable by the Company to such agents will be set forth, in an
accompanying Prospectus Supplement. Unless otherwise indicated in such
Prospectus Supplement, any such agent will be acting on a reasonable efforts
basis for the period of its appointment.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Debt Securities from the Company pursuant to
contracts providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others, but in all cases such institutions must be approved by
the Company. The obligations of any purchaser under such contract will be
subject to the condition that the purchase of the offered Debt Securities shall
not at the time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject. The underwriters and such other agents will not
have any responsibility in respect to the validity of performance of such
contracts.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with and perform services for the Company in the
ordinary course of business.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act.
The place and time of delivery for the Debt Securities in respect of which
this Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters regarding the Debt Securities offered hereby under
laws other than federal or state securities laws have been passed upon for the
Company by its Vice President and General Counsel, Z. S. Kobiashvili. As of the
date of this Prospectus, Mr. Kobiashvili owns 543 shares of Apache Common Stock
through the Company's retirement/401(k) savings plan and holds employee stock
options to purchase 18,000 shares of Apache Common Stock, of which 2,500 options
are currently exercisable. Certain legal matters will also be passed upon for
the Company by Woodard, Hall & Primm, P.C., Houston, Texas, and for any of the
underwriters or agents by Brown & Wood, New York, New York.
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<PAGE> 52
EXPERTS
The audited consolidated financial statements of the Company and the
audited statement of Combined Revenues and Direct Operating Expenses for the Oil
and Gas Properties of Texaco Exploration and Production Inc. Sold to Apache
Corporation, each incorporated by reference into this Prospectus, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto. In its report on the consolidated financial
statements of the Company, that firm states that with respect to DEKALB its
opinion is based on the report of other independent public accountants, namely
Coopers & Lybrand. The financial statements referred to above have been
incorporated by reference or included herein in reliance upon the authority of
those firms as experts in accounting and auditing in giving said reports.
The audited consolidated financial statements of DEKALB incorporated by
reference in this Registration Statement have been audited by Coopers & Lybrand,
Chartered Accountants, as indicated in their report with respect thereto, and
are incorporated herein in reliance upon the authority of said firm as experts
in accounting and auditing in giving said reports.
The information included and incorporated by reference herein regarding the
total proved reserves of the Company was prepared by the Company and reviewed by
Ryder Scott Company Petroleum Engineers ("Ryder Scott"), as stated in their
letter reports with respect thereto, and is so included and so incorporated by
reference in reliance upon the authority of said firm as experts in such
matters. The information included and incorporated by reference herein regarding
the total estimated proved reserves acquired from Texaco was prepared by the
Company and reviewed by Ryder Scott, as stated in their letter reports with
respect thereto, and is so included and so incorporated by reference in reliance
upon the authority of said firm as experts in such matters. The information
included and incorporated by reference herein regarding the total proved
reserves of DEKALB was prepared by DEKALB and for the four years ended December
31, 1994 was reviewed by Ryder Scott, as stated in their letter reports with
respect thereto, and is so included and so incorporated by reference in reliance
upon the authority of said firm as experts in such matters. The reserve review
letters of Ryder Scott as of December 31, 1994, are filed as exhibits to the
Registration Statement of which this Prospectus is a part, in reliance upon the
authority of said firm as experts with respect to the matters covered by their
reports and the giving of their reports.
A portion of the information included herein regarding the total proved
reserves of Aquila acquired by the Company was prepared by Netherland, Sewell &
Associates, Inc. ("Netherland, Sewell") as of December 31, 1994, as stated in
their letter report with respect thereto. Netherland, Sewell has not reviewed
any of the reserves of Aquila acquired during 1995, including those set forth in
this Prospectus on a pro forma basis as of December 31, 1994. The reserve review
letter of Netherland, Sewell is filed as an exhibit to the Registration
Statement of which this Prospectus is a part in reliance upon the authority of
said firm as experts with respect to the matters covered by their report and the
giving of their report.
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===============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors.......................... S-2
Use of Proceeds....................... S-4
The Company........................... S-5
Summary Consolidated Financial,
Operating and Reserve Data.......... S-7
Recent Developments................... S-9
Description of Notes.................. S-11
Plan of Distribution.................. S-12
PROSPECTUS
Available Information................. 2
Information Incorporated by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 4
DTC Book-Entry-Only System............ 28
Certain United States Federal Income
Tax Considerations.................. 30
Plan of Distribution.................. 39
Legal Matters......................... 39
Experts............................... 40
</TABLE>
===============================================================================
===============================================================================
$250,000,000
[LOGO]
REMARKETED NOTES
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
FIRST CHICAGO CAPITAL
MARKETS, INC.
LEHMAN BROTHERS
J.P. MORGAN SECURITIES INC.
DECEMBER 15, 1995
===============================================================================
