<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-44731
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 22, 1998)
$150,000,000
[APACHE CORPORATION LOGO]
7% SENIOR NOTES DUE 2018
------------------------
Interest on the Senior Notes is payable semiannually on February 1 and
August 1 of each year, commencing August 1, 1998. The Senior Notes will mature
on February 1, 2018. The Senior Notes represent senior unsecured obligations of
Apache Corporation ("Apache" or the "Company"). The Senior Notes are not
redeemable prior to maturity and will not be subject to any sinking fund. See
"Description of Senior Notes."
The Senior Notes will be represented by a global security registered in the
name of The Depository Trust Company ("DTC") or its nominee. Beneficial
interests in the global security will be shown on, and transfers thereof will be
effected through, records maintained by DTC or its participants. Except as
provided herein and in the accompanying Prospectus, Senior Notes in definitive
form will not be issued. See "DTC Book-Entry-Only System" in the accompanying
Prospectus.
------------------------
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 OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note................... 98.805% 0.875% 97.93%
- -------------------------------------------------------------------------------------------------------------
Total............................. $148,207,500 $1,312,500 $146,895,000
=============================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from February 3, 1998.
(2) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting estimated expenses payable by the Company of $280,000.
------------------------
The Senior Notes are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by the Underwriters, subject to
approval of certain legal matters by counsel for the Underwriters. The
Underwriters reserve the right to reject orders in whole or in part. It is
expected that delivery of the Senior Notes will be made through the book-entry
facilities of DTC on or about February 3, 1998.
------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
LEHMAN BROTHERS
------------------------
The date of this Prospectus Supplement is January 29, 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SENIOR NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF SENIOR NOTES TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
------------------------
THE COMPANY
Apache, a Delaware corporation formed in 1954, is an independent energy
company that primarily explores for, develops and produces natural gas and crude
oil. In North America, Apache's exploration and production interests are focused
on the Gulf Coast, the Gulf of Mexico, the Anadarko Basin, the Permian Basin,
East Texas 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 Poland, offshore the
People's Republic of China, offshore the Ivory Coast and in Indonesia. Apache
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'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.
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Senior
Notes offered hereby are estimated to be $146,615,000. The Company intends to
use a portion of the net proceeds from the offering to reduce its outstanding
amounts of commercial paper, with any remaining proceeds to be used for general
corporate purposes. On January 28, 1998, the Company had outstanding $98.5
million of commercial paper bearing interest at a weighted average discount rate
of 5.73 percent issued to finance current operations. The Company will continue
to incur short-term indebtedness to finance current operations.
RECENT DEVELOPMENTS
ACQUISITIONS AND DIVESTITURES
On October 8, 1997, the Company entered into three agreements with
subsidiaries of Mobil Exploration & Producing Australia Pty Ltd pursuant to
which the Company acquired all the capital stock of three companies owning
interests in certain oil and gas properties and production facilities offshore
Western Australia (the "Harriet/East Spar Properties") on November 20, 1997 (the
"Ampolex Group Transaction"). The total cost of the Ampolex Group Transaction
was approximately $300 million, of which $218 million represented the purchase
price for the capital stock of the acquired companies and $82 million was
applied to discharge existing intercompany debt of one of the acquired
companies.
On December 9, 1997, the Company entered into an agreement with Hardy
Petroleum under which Hardy Petroleum agreed to purchase a ten percent interest
in the Company's East Spar gas field and related production facilities in
Western Australia (the "Hardy Interest"). The transaction closed on January 28,
1998 with a total sales price of $63 million in cash.
The Ampolex Group Transaction, net of the sale of the Hardy Interest,
increased the Company's interest to 47.5 percent from 22.5 percent in the
Carnarvon Basin's Harriet area, which includes the Varanus Island pipeline,
processing and production complex and eight existing oil and gas fields. In
addition, the Company's interest in the East Spar field, which produces through
the Varanus Island facilities, increased to 45 percent from 20 percent. Apache
operates the Harriet/East Spar Properties.
S-2
<PAGE> 3
The Company conducts an ongoing evaluation of its oil and gas properties
and contemplates the maintenance of an active acquisition and divestiture
program in 1998.
6% CONVERTIBLE SUBORDINATED DEBENTURES
On December 16, 1997, the Company called for redemption all of its 6%
Convertible Subordinated Debentures due 2002 (the "6% Debentures"), which had an
aggregate principal amount outstanding of $172.5 million. The redemption date
was January 15, 1998. The 6% Debentures were convertible into shares of Apache's
Common Stock at a conversion price of $30.68 per share. Approximately 90
percent, or $155.6 million, of the 6% Debentures was converted by the holders
into approximately 5.1 million shares of Apache Common Stock, while the
remainder of the 6% Debentures, approximately $16.9 million, was redeemed in
cash at a redemption price of 103 percent of the face principal amount, together
with accrued and unpaid interest through the redemption date.
YEAR-END OPERATING RESULTS
On January 29, 1998, the Company announced results for the quarter and year
ended December 31, 1997. A summary of the information released appears in the
table and discussion below. The information set forth below should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto incorporated by reference in the accompanying Prospectus. In addition,
the information set forth below will be superseded in its entirety by the
Company's Annual Report on Form 10-K for the year ended December 31, 1997 to be
filed on or before March 31, 1998. See "Available Information" and "Information
Incorporated by Reference" in the accompanying Prospectus. The financial and
operating data presented below are not audited and are not necessarily
indicative of the results that may be expected for future periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------------- ----------------------
1997 1996 1997 1996
-------- -------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND OPERATIONS DATA)
<S> <C> <C> <C> <C>
FINANCIAL DATA:
Consolidated revenues....................... $318,856 $304,641 $1,176,273 $977,151
Net income.................................. $ 45,488 $ 51,198 $ 154,896 $121,427
Basic net income per common share........... $ .50 $ .57 $ 1.71 $ 1.42
Diluted net income per common share......... $ .48 $ .54 $ 1.66 $ 1.38
Weighted average common shares
outstanding.............................. 91,864 89,999 90,677 85,777
OPERATIONS DATA:
Average Daily Production:
Oil (bbls)............................... 72,240 58,886 66,547 53,182
Natural gas (Mcf)........................ 620,079 583,218 608,872 560,940
Average Sales Price:
Oil (per bbl)............................ $ 18.59 $ 23.40 $ 19.20 $ 20.84
Natural gas (per Mcf).................... $ 2.51 $ 2.39 $ 2.28 $ 2.02
</TABLE>
BALANCE SHEET DATA (PERIOD END):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Total Debt............................................. $1,518,580 $1,237,706
Shareholders' Equity................................... $1,729,177 $1,518,516
</TABLE>
Net income for 1997 of $154.9 million was 28 percent greater than reported
for 1996. Contributing to the 1997 increase in net income, and offsetting an
eight percent decline in the average price received for oil production, were
higher levels of oil and gas production and a 13 percent improvement in the
average price
S-3
<PAGE> 4
received for gas production. Basic net income per common share of $1.71 for 1997
was 20 percent greater than 1996.
Net income for the fourth quarter of 1997 was $45.5 million, 11 percent
lower than for the same period in 1996. Basic net income per common share of
$.50 per share for the fourth quarter of 1997 was 12 percent less than for the
fourth quarter of 1996. Falling crude oil prices contributed to the decline.
DESCRIPTION OF SENIOR NOTES
The 7% Senior Notes due 2018 (the "Senior Notes") offered hereby are a
series of "Debt Securities," as defined and described in the accompanying
Prospectus, and the following description of the terms of the Senior Notes
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus. The Senior Notes will be senior unsecured obligations
of the Company. The Senior Notes will be issued pursuant to the provisions of an
Indenture, as supplemented (the "Indenture"), entered into between the Company
and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee (the
"Trustee").
The Chase Manhattan Bank is the global administrative agent and Australian
syndication agent and Chase Securities Inc. and The Chase Manhattan Bank of
Canada, affiliates of The Chase Manhattan Bank, are the global arranger and
Canadian syndication agent, respectively, of certain portions of the Company's
global credit facility. The Chase Manhattan Bank and The Chase Manhattan Bank of
Canada, an affiliate of The Chase Manhattan Bank, are also lenders under such
facility. The Chase Manhattan Bank is also the technical bank for, and a lender
under, the credit facility entered into by certain of the Company's Egyptian
subsidiaries. Chase Manhattan International Limited, an affiliate of The Chase
Manhattan Bank, is the facility agent for the Egyptian credit facility. Chase
Securities Inc. and Chase Manhattan PLC, affiliates of The Chase Manhattan Bank,
acted as arrangers for the Company's Egyptian credit facility.
The Company may, from time to time, without the consent of the holders of
the Senior Notes, provide for the issuance of additional Senior Notes or other
Debt Securities under the Indenture in addition to the Senior Notes offered
hereby. The Indenture will not limit the amount of other indebtedness that may
be issued by the Company or any of its subsidiaries. The Senior Notes are not
redeemable prior to maturity and will not be subject to any sinking fund.
The Senior Notes will be issued only in book-entry form through the
facilities of DTC and will be represented by a global security registered in the
name of DTC or its nominee and will be issued in denominations of $1,000 and
integral multiples thereof. Payments on Senior Notes issued in book-entry form
will be made through DTC. Senior Notes represented by a global security will be
exchangeable with Senior Notes in definitive form only if (i) DTC notifies the
Company that it is unwilling, unable or ineligible to continue as depository for
such global security and is not replaced by a successor depository, (ii) the
Company in its sole discretion at any time determines not to have all of the
Senior Notes represented by the global security and notifies the Trustee thereof
or (iii) there shall have occurred and be continuing an Event of Default (as
defined in the Indenture) with respect to the Senior Notes represented by such
global security. See "DTC Book-Entry-Only System" in the accompanying
Prospectus.
The Senior Notes will mature on February 1, 2018. The Senior Notes will
bear interest from February 3, 1998 (at the rate of interest referred to above)
payable on February 1 and August 1 of each year, commencing on August 1, 1998.
Subject to certain exceptions therein set forth, the Indenture provides for the
payment of interest on any interest payment date only to persons in whose names
the Senior Notes are registered on the regular record date, which is the July 15
or January 15, as the case may be (whether or not a business day), next
preceding such interest payment date. Interest payments on the Senior Notes will
include interest accrued to, but excluding the applicable interest payment date
or maturity date.
Upon the occurrence of a "Change in Control" as defined in the Indenture,
the Company shall be obligated, at the election of each holder of Senior Notes,
to purchase such Senior Notes at the principal amount thereof plus accrued
interest to the purchase date. See "Description of Debt Securities -- Company's
Obligation to Purchase Debt Securities on Change of Control" in the accompanying
Prospectus.
S-4
<PAGE> 5
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
and terms agreement (the "Underwriting Agreement") by and among the Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co., J.P.
Morgan Securities Inc. and Lehman Brothers Inc. (the "Underwriters"), the
Company has agreed to sell to the Underwriters, and the Underwriters have
severally agreed to purchase, the respective principal amounts of the Senior
Notes set forth after their names below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF SENIOR NOTES
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $ 37,500,000
Goldman, Sachs & Co......................................... 37,500,000
J.P. Morgan Securities Inc.................................. 37,500,000
Lehman Brothers Inc......................................... 37,500,000
------------
Total.......................................... $150,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all the
Senior Notes offered hereby if any Senior Notes are purchased. The Company has
been advised by the Underwriters that the Underwriters propose initially to
offer the Senior Notes to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of .5 percent of the principal amount. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of .25 percent of the principal amount to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Senior Notes will not be listed on any securities exchange, and there
can be no assurance that there will be a secondary market for the Senior Notes.
From time to time the Underwriters may make a market in the Senior Notes.
However, at this time no determination has been made as to whether or not the
Underwriters will make a market in the Senior Notes.
In order to facilitate the offering of the Senior Notes, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Senior Notes.
Until the distribution of the Senior Notes is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase the Senior Notes. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the Senior Notes. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Senior Notes. If the Underwriters create a short position in
the Senior Notes in connection with the offering, i.e., if they sell more Senior
Notes than are set forth on the cover page of this Prospectus Supplement, the
Underwriters may reduce that short position by purchasing Senior Notes in the
open market. In general, purchases of a security for the purpose of
stabilization or to reduce a short position could cause the price of the
security to be higher than it might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Senior Notes. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Underwriters and/or certain of their affiliates have engaged and may in
the future engage in investment banking and/or commercial banking transactions
with the Company and certain of its affiliates in the ordinary course of
business.
S-5
<PAGE> 6
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments the Underwriters may be required to make in respect
of such liabilities.
LEGAL MATTERS
Certain legal matters regarding the Senior Notes 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 Supplement, Mr. Kobiashvili owns 1,297 shares of Apache
common stock through the Company's retirement/401(k) savings plan; holds
employee stock options to purchase 31,900 shares of Apache common stock, of
which options to purchase 13,225 shares are currently exercisable, and holds a
conditional grant under Apache's 1996 Share Price Appreciation Plan relating to
18,900 shares of Apache common stock, none of which is vested. Certain legal
matters will also be passed upon for the Company by Mayor, Day, Caldwell &
Keeton, L.L.P., Houston, Texas, and for the Underwriters by Brown & Wood LLP,
New York, New York.
S-6
<PAGE> 7
PROSPECTUS
$300,000,000
APACHE LOGO
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, at an aggregate initial offering price not to exceed $300,000,000, 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,
method of distribution, and any prepayment, original issue discount or 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, the 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."
The applicable Prospectus Supplement will contain information, where
applicable and to the extent not set forth herein, concerning certain United
States federal income tax considerations relating to 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 (i) through underwriters or dealers, (ii)
directly by the Company to a limited number of institutional purchasers or to a
single purchaser, (iii) through agents designated from time to time, or (iv)
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 applicable 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 January 22, 1998.
<PAGE> 8
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT OR OTHER TRANSACTIONS EFFECTED BY THE
UNDERWRITERS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
---------------------
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. Also, the SEC maintains a web site that contains reports,
proxy and information statements regarding issuers that file electronically with
the SEC at <http://www.sec.gov>. 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, Suite 100, 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:
a. Annual Report on Form 10-K for the fiscal year ended December 31,
1996.
b. Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1997.
c. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1997.
d. Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1997.
e. Current Report on Form 8-K dated June 13, 1997.
f. Current Report on Form 8-K dated August 8, 1997.
g. Current Report on Form 8-K dated October 8, 1997.
h. Current Report on Form 8-K dated December 5, 1997, as amended on
Form 8-K/A.
i. Current Report on Form 8-K dated December 16, 1997.
2
<PAGE> 9
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.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995 ("PSLRA")
Certain forward-looking information contained in this Prospectus and
certain material incorporated by reference herein is being provided, and certain
forward-looking information in each Prospectus Supplement will be provided, in
reliance upon the "safe harbor" provisions of the PSLRA as set forth in Section
27A of the Securities Act and Section 21E of the Exchange Act. Such information
includes, without limitation, discussions as to estimates, expectations,
beliefs, plans, strategies and objectives concerning the Company's future
financial and operating performance. Such forward-looking information is subject
to assumptions and beliefs based on current information known to the Company and
factors that could yield actual results differing materially from those
anticipated. Such factors include, without limitation, the prices received for
the Company's oil and natural gas production, the costs of acquiring, finding,
developing and producing reserves, the rates of production of the Company's
hydrocarbon reserves, the Company's success in acquiring or finding additional
reserves, unforeseen operational hazards, significant changes in tax or
regulatory environments, and the political and economic uncertainties of foreign
operations.
---------------------
All defined terms under Rule 4-10(a) of Regulation S-X promulgated under
the Securities Act 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 treated as 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.
3
<PAGE> 10
THE COMPANY
Apache Corporation, a Delaware corporation formed in 1954, is an
independent energy company that explores for, develops and produces 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 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, among other areas,
Indonesia, Poland, offshore the People's Republic of 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 Limited, Apache International, Inc., Apache
Overseas, Inc., and Apache PHN Company, 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.
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,
- -------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
- ---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
2.91 2.33 2.72 1.15 2.34 2.37 .72
</TABLE>
The Company's ratios of earnings to fixed charges were computed based on:
(A) consolidated income or losses from continuing operations before income taxes
and fixed charges (excluding interest capitalized); and (B) consolidated fixed
charges, which consist of interest on indebtedness (including amounts
capitalized), amortization of debt discount and expense and the estimated
portion of rental expense attributable to interest. On May 17, 1995, Apache
acquired DEKALB Energy Company ("DEKALB", now known as DEK Energy Company)
through a merger which resulted in DEKALB becoming a wholly-owned subsidiary of
Apache. The merger was accounted for as a "pooling of interests." As a result,
Apache's financial information for all preceding periods was restated. After
such restatement, earnings were inadequate to cover fixed charges by $14.8
million for 1992, due to write downs of the carrying value of the U.S. and
Canadian oil and gas properties of DEKALB and losses incurred on the divestiture
of certain of DEKALB's U.S. assets.
4
<PAGE> 11
DESCRIPTION OF DEBT SECURITIES
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be issued under an indenture (as supplemented from time to
time, the "Indenture") entered into between the Company and The Chase Manhattan
Bank, as trustee and successor to Chemical Bank (the "Trustee"). References
herein to "Sections" are references to Sections of the Indenture unless
otherwise indicated. The Debt Securities to be offered by this Prospectus are
limited to an aggregate initial offering price not to exceed $300,000,000.
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.
The maturity date, interest payment dates, and rate of interest of the Debt
Securities will be as set forth in the Prospectus Supplement applicable thereto.
Subject to certain exceptions therein set forth, the Indenture provides for the
payment of interest on any interest payment date only to persons in whose names
the Debt Securities are registered on the regular record date, which is the last
day of the calendar month preceding the month in which an interest payment is
due (whether or not a business day).
A copy of the Indenture is 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 or currencies or currency unit or units for which
Debt Securities may be purchased or in which principal, premium (if any) and any
interest 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 consisting 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
5
<PAGE> 12
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 any interest 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.(Section 301.)
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. (Section 302.)
Other than as described below under "Limitation on Liens," "Limitation on
Sale/Leaseback Transactions" 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 and contained in the Indenture, including
any addition of a covenant or other provision providing event risk or similar
protection.
Interest Rates
The Debt Securities will earn interest at the fixed or floating rate for
the period of time specified in the applicable Prospectus Supplement.
If the Debt Securities earn interest at a floating rate, the applicable
Prospectus Supplement shall state the Interest Rate Basis or Bases (including
the applicable Spread, if any, and the applicable Spread Multiplier, if any),
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, the
Prospectus Supplement must also specify the Index Currency and Designated LIBOR
Page, as such terms are defined below. Unless otherwise specified in the
applicable Prospectus Supplement, the Debt Securities shall bear interest on the
basis of a 360-day year consisting of twelve 30-day months.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to each respective Debt
Security. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases by which such Interest Rate Basis or Bases will be multiplied to
determine the applicable interest rate. 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.
6
<PAGE> 13
Unless otherwise specified in the Prospectus Supplement, the Interest Rate
Basis may, as described below, include (i) the Commercial Paper Rate, as such
term is defined below, (ii) LIBOR, as such term is defined below, (iii) the
Treasury Rate, as such term is defined below, or (iv) such other Interest Rate
Basis or interest rate formula as may be specified in the applicable Prospectus
Supplement.
The applicable Prospectus Supplement will specify whether the floating 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 Prospectus Supplement, the
Interest Reset Dates will be, in the case of a floating interest rate which
resets: (i) daily, each Business Day(as defined in the Indenture); (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; (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 Prospectus Supplement. 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 such terms
are defined below. The "Interest Determination Date" (i) with respect to the
Commercial Paper Rate, will be the second Business Day immediately preceding the
applicable Interest Reset Date; (ii) with respect to LIBOR, will be the second
London Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency (as hereinafter defined) is British pounds sterling,
in which case the "Interest Determination Date" will be the applicable Interest
Reset Date; and (iii) with respect to the Treasury Rate, 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 being 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 Debt Securities: (i) a Maximum Interest Rate, or ceiling, that may apply
during any Interest Reset Period, and (ii) a Minimum Interest Rate, or floor,
that may apply during any Interest Reset Period. In addition to any Maximum
Interest Rate that may apply, the interest rate on any Debt Securities 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 Prospectus Supplement,
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 applicable Prospectus Supplement; (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 Prospectus Supplement; and (iv) annually, on the third Wednesday
of the month of each year specified in the applicable Prospectus Supplement. If
any Interest Payment Date (as defined in the Indenture) for the payment of
interest at a floating rate 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
7
<PAGE> 14
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 Debt Securities 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 Prospectus Supplement, 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
Commercial Paper Rate or LIBOR, or by the actual number of days in the year if
an applicable Interest Rate Basis is the Treasury Rate. Unless otherwise
specified in the applicable Prospectus Supplement, 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
Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, The
Chase Manhattan Bank will be the "Calculation Agent." Upon request of the
Beneficial Owner of any Debt Securities, 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 Debt Securities. Unless otherwise
specified in the applicable Prospectus Supplement, 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 Prospectus Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
Commercial Paper Rate. Unless otherwise specified in the applicable
Prospectus Supplement, "Commercial Paper Rate" means, with respect to any
Interest Determination Date 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 Prospectus Supplement as published in H.15(519) by the Federal
Reserve Bank of New York 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
Prospectus Supplement 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 New York
City, selected by the Calculation Agent, after consultation with the Company,
for commercial paper having the Index Maturity specified in the applicable
Prospectus Supplement 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
8
<PAGE> 15
Interest Determination Date will be the Commercial Paper Rate as most recently
determined prior to 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>
<C> <C> <S>
D X 360
Money Market = --------------- 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.
LIBOR. Unless otherwise specified in the applicable Prospectus Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date 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 Prospectus Supplement, 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
Prospectus Supplement, 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 Prospectus Supplement or if neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable Prospectus Supplement as the
method for calculating LIBOR, the rate for deposits in the Index Currency
having the Index Maturity specified in such Prospectus Supplement,
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 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
Prospectus Supplement, 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 Prospectus Supplement 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 as most recently determined prior to such LIBOR Interest
Determination Date.
9
<PAGE> 16
"Index Currency" means the currency or composite currency specified in the
applicable Prospectus Supplement as to which LIBOR shall be calculated. If no
such currency or composite currency is specified in the applicable Prospectus
Supplement, 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 Prospectus Supplement, the display on the Reuters 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 Prospectus Supplement or neither
"LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable Prospectus
Supplement 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.
Treasury Rate. Unless otherwise specified in the applicable Prospectus
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date 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 Prospectus Supplement, 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 Prospectus Supplement 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, after consultation with the Company, 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 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 Prospectus Supplement; 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 as most recently determined prior
to such Treasury Rate Interest Determination Date.
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 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
10
<PAGE> 17
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 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 exploring, producing, gathering, processing, marketing, drilling or
developing 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 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,
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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 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 a Change in Control
Purchase Date, as defined below; (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
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<PAGE> 19
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 (as defined in the Indenture) 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.)
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
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<PAGE> 20
or Persons who are not Subsidiaries (as such terms are defined in the Indenture)
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 are 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 (as
defined in the Indenture), 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") 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, 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").
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 (as defined below) in which such Debt
Securities are payable at Stated Maturity (as defined in the Indenture), 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 401.)
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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.)
"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 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.)
"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
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<PAGE> 22
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.)
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.)
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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, The
Chase Manhattan Bank, New York, New York, successor to Chemical Bank, will be
the Trustee under the Indenture.
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.
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 "banking
organization" within the meaning of New York banking law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange 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 rules
applicable to DTC and its participants are on file with the SEC.
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
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<PAGE> 24
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 Debt Securities, giving any notice permitted or required to
be given to holders under the Indenture, registering the transfer of Debt
Securities, 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. 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 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.
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.
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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 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 is a summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Debt Securities.
It is the opinion of Mayor, Day, Caldwell & Keeton, L.L.P., special tax counsel
to the Company, that the following summary addresses the material Federal income
tax considerations of the acquisition, ownership and disposition of Debt
Securities. This summary is based upon laws, regulations, rulings and decisions
now in effect, all of which are subject to change 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 tax advisors concerning the 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 ("OID Regulations") under the original issue discount
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
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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 number of years to 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 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, however, 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.
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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; (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; (c) it provides
that the qualified floating rate or single objective rate in effect at any time
equals a current value of that rate; and (d) it does not provide for any
payments of principal that are contingent.
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 0.65 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 0.65 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 objective financial or economic information. A rate unique to the
circumstances of the issuer or a related party, or based on information within
the control of the issuer or 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 OID Regulations also
provide that other variable 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.
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
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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.
Qualified stated interest allocable to an accrual period will be increased (or
decreased) if the interest actually paid during the accrual period exceeds (or
is less than) the interest assumed to be paid during the accrual period,
according to the formula set forth in the preceding sentence.
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 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. 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 Prospectus 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 Prospectus 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
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"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. See "Description of Debt
Securities -- Provisions Applicable to All Debt Securities -- Company's
Obligation to Purchase Debt Securities on Change in Control." 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. Also, special rules
apply to Debt Securities that constitute "inflation-indexed debt instruments"
(as defined in the OID Regulations). If any such Debt Securities are issued, the
special tax considerations will be discussed in the applicable Prospectus
Supplement.
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.
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 purchaser who does not purchase the Debt Security at its original
issue, 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 with "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 Debt Security. 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
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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. The Taxpayer Relief Act of
1997 established different rates for long-term capital gains depending on the
taxpayer's holding period.
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 deceased
individual who was a non-U.S. Holder unless the individual was 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. Certain exceptions to inclusion in the estate may be
applicable, and the estate of a non-U.S. Holder should consult its tax advisor
in this regard.
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
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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.
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 designated from time to time, 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.
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 Debt Securities in respect of which this
Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
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LEGAL MATTERS
Certain legal matters regarding the Debt Securities offered hereby 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 1,297
shares of Apache Common Stock through the Company's 401(k) savings plan; holds
employee stock options to purchase 31,900 shares of Apache Common Stock, of
which options to purchase 13,225 shares are currently exercisable, and holds a
conditional grant under the Company's 1996 Share Price Appreciation Plan
relating to 18,900 shares of Apache Common Stock, none of which is vested.
Certain legal matters will also be passed upon for the Company by Mayor, Day,
Caldwell & Keeton, L.L.P., Houston, Texas, and for any of the underwriters or
agents by counsel to be named by such underwriters or agents.
EXPERTS
The audited consolidated financial statements of the Company, incorporated
by reference into this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants ("Arthur Andersen"), as indicated in their
reports with respect thereto. In Arthur Andersen's report on the consolidated
financial statements of the Company, that firm states that with respect to
DEKALB, for the year ended December 31, 1994, its opinion is based on the report
of other independent public accountants, namely Coopers & Lybrand, Chartered
Accountants. The financial statements referred to above have been incorporated
by reference 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 into this Prospectus have been audited by Coopers & Lybrand, Chartered
Accountants, as indicated in their report with respect thereto, and have been
incorporated by reference herein in reliance upon the authority of that firm as
experts in accounting and auditing in giving said report.
The information 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 incorporated by reference in reliance upon the
authority of said firm as experts in such matters. The information incorporated
by reference herein regarding the total estimated proved reserves acquired from
Texaco Exploration and Production Inc. was prepared by the Company and reviewed
by Ryder Scott, as stated in their letter reports with respect thereto, and is
so incorporated by reference in reliance upon the authority of said firm as
experts in such matters. The information 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 incorporated by reference
in reliance upon the authority of said firm as experts in such matters.
A portion of the information incorporated by reference herein regarding the
total proved reserves of Aquila Energy Resources Corporation ("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, and is so incorporated by reference in reliance upon the
authority of said firm as experts in such matters. Netherland, Sewell did not
review any of the reserves of Aquila acquired during 1995.
26
<PAGE> 33
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE
OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND 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 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
The Company........................... S-2
Use of Proceeds....................... S-2
Recent Developments................... S-2
Description of Senior Notes........... S-4
Underwriting.......................... S-5
Legal Matters......................... S-6
PROSPECTUS
Available Information................. 2
Information Incorporated by
Reference........................... 2
Safe Harbor Statement Under the
Private Securities Litigation Reform
Act of 1995 ("PSLRA")............... 3
The Company........................... 4
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 5
DTC Book-Entry-Only System............ 17
Certain United States Federal Income
Tax Considerations.................. 19
Plan of Distribution.................. 25
Legal Matters......................... 26
Experts............................... 26
</TABLE>
======================================================
======================================================
$150,000,000
[APACHE CORPORATION LOGO]
7% SENIOR NOTES
DUE 2018
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
LEHMAN BROTHERS
JANUARY 29, 1998
======================================================
