<PAGE> 1
FILED PURSUANT TO RULE 424(B)(2)
FILE NO. 333-75633
Prospectus Supplement to Prospectus dated April 9, 1999.
7,000,000 Shares
[APACHE CORPORATION LOGO]
$2.015 Depositary Shares
Each depositary share represents 1/50th of a share of Automatically Convertible
Equity Securities, Conversion Preferred Stock, Series C
-------------------------
Apache will pay annual dividends on each depositary share in the amount of
$2.015, which is based on the $100.75 annual dividend rate for each share of
conversion preferred stock. Dividends will be cumulative from the date of
issuance and will be paid after every quarter. The first dividend payment will
be made on August 13, 1999.
On May 15, 2002, each depositary share will automatically convert, subject
to adjustments described in this prospectus supplement, into not more than one
share and not less than 0.8197 of a share of Apache common stock, depending on
the Current Market Price of Apache common stock. At any time prior to May 15,
2002, holders may elect to convert each of their depositary shares, subject to
adjustments described in this prospectus supplement, into 0.8197 of a share of
Apache common stock.
Prior to this offering, there has been no public market for the depositary
shares. Apache has applied to list the depositary shares on the New York Stock
Exchange under the symbol "APAPrC". Apache common stock is listed on the New
York Stock Exchange and the Chicago Stock Exchange under the symbol "APA". On
May 12, 1999, the last reported sale price of Apache common stock on the New
York Stock Exchange was $31.0625 per share.
Consider carefully the "risk factors" beginning on page S-10 of this
prospectus supplement.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
<TABLE>
<CAPTION>
Per Depositary Share Total
-------------------- ------------
<S> <C> <C>
Initial price to public............................... $31.00 $217,000,000
Underwriting discount................................. $ 0.93 $ 6,510,000
Proceeds, before expenses, to Apache.................. $30.07 $210,490,000
</TABLE>
-------------------------
The underwriter expects to deliver the depositary shares against payment in
New York, New York on May 18, 1999.
GOLDMAN, SACHS & CO.
-------------------------
Prospectus Supplement dated May 12, 1999.
<PAGE> 2
Percentages are calculated by combining Apache's December 31, 1998 proved
reserves with
the proved reserves attributable to the offshore Gulf of Mexico properties
anticipated to be
acquired in the pending Shell transaction as of March 1, 1999.
Apache also has active exploration programs in Poland and offshore China.
OIL AND GAS TERMS
<TABLE>
<S> <C> <C> <C>
When describing natural gas: Mcf = thousand cubic feet
MMcf = million cubic feet
Bcf = billion cubic feet
When describing oil: bbl = barrel
Mbbls = thousand barrels
MMbbls = million barrels
When comparing natural gas to oil: 6 Mcf of gas = 1 bbl of oil equivalent
boe = barrel of oil equivalent
Mboe = thousand barrels of oil equivalent
MMboe = million barrels of oil equivalent
</TABLE>
S-2
<PAGE> 3
PROSPECTUS SUMMARY
This summary highlights selected information we have included or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. However, it does not contain all information that may be important
to you. This prospectus supplement and the accompanying prospectus include
information about this offering, our business and our financial and operating
data. We encourage you to read this prospectus supplement and the accompanying
prospectus in their entirety before making an investment decision.
In this prospectus supplement and the accompanying prospectus, we refer to
Apache Corporation and its subsidiaries as "we", "our" or "Apache" unless the
context clearly indicates otherwise.
ABOUT APACHE
Apache Corporation is a Delaware corporation formed in 1954. We are an
independent energy company that explores for, acquires and develops oil and gas
reserves and produces natural gas, crude oil, condensate and natural gas
liquids.
In North America, our 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 North America, we have
exploration and production interests offshore Western Australia, in Egypt and
offshore the Ivory Coast, and exploration interests in Poland and offshore The
People's Republic of China.
In 1998, we achieved our 21st consecutive year of production growth and our
11th consecutive year of oil and gas reserves growth. Our 1998 average daily
production was:
- - 75.8 Mbbls of crude oil, condensate and natural gas liquids; and
- - 590 MMcf of natural gas.
As of December 31, 1998, our worldwide proved reserves totaled 613 MMboe,
including:
- - 251 MMbbls of crude oil, condensate and natural gas liquids; and
- - 2,172 Bcf of natural gas.
STRATEGY
Our strategy is to increase oil and gas reserves, production, cash flow and
earnings through a balanced growth program that involves:
- - exploiting our existing asset base;
- - acquiring properties to which we can add incremental value; and
- - investing in high-potential exploration prospects.
EXPLOITING EXISTING ASSET BASE. We seek to maximize the value of our
existing asset base by reducing operating costs per unit and increasing the
amount of recoverable reserves. In order to achieve these objectives, we
rigorously examine operations to cut costs, identify production enhancement
initiatives such as workovers and recompletions, and divest marginal and non-
strategic properties.
ACQUIRING PROPERTIES TO WHICH WE CAN ADD INCREMENTAL VALUE. We seek to
purchase reserves at attractive prices by generally avoiding auction processes
where we are competing against other buyers. Our aim is to follow each
acquisition with a cycle of reserve enhancement, property consolidation and cash
flow acceleration, facilitating asset growth and debt reduction.
INVESTING IN HIGH-POTENTIAL EXPLORATION PROSPECTS. We seek to concentrate
our exploratory investments in a select number of international areas and to
become the dominant operator in those regions. We believe that these
investments, although higher-risk, offer the potential for significant
S-3
<PAGE> 4
reserve additions. Our international investments and exploration activities are
a significant component of our long-term growth strategy. They complement our
North American operations, which are more development oriented.
A critical component in implementing our three-pronged growth strategy is
maintenance of significant financial flexibility. We are committed to preserving
a strong balance sheet and credit position that gives us the foundation required
to pursue our growth initiatives.
RECENT DEVELOPMENTS
On April 29, 1999, we signed an agreement with Shell Offshore Inc. and
affiliated Shell entities to purchase Shell's interest in 22 producing fields
and 16 undeveloped blocks in the Gulf of Mexico. We will operate 18 of the 22
producing fields and will also acquire related production assets and proprietary
3-D seismic data covering over 1,000 blocks in the Gulf of Mexico.
The purchase agreement will be effective as of March 1, 1999. The purchase
price, subject to reduction for production since March 1, 1999 and other
adjustments, will be $715 million in cash and 1 million shares of Apache common
stock. Shell has agreed not to sell the shares until 90 days after signing of
the purchase agreement, or earlier depending upon future circumstances.
The Shell fields complement our extensive existing offshore Gulf of Mexico
production and reserves. The working interests we will acquire from Shell
typically exceed 80%. In 32 of the 58 blocks comprising the 22 producing fields,
and in all 16 of the undeveloped blocks, we will acquire 100% working interests.
We estimate that the properties we will acquire in the Shell acquisition
had proved reserves as of March 1, 1999 of:
- - 69.3 MMbbls of crude oil; and
- - 348 Bcf of natural gas.
Using the conventional equivalence of one barrel of oil to six Mcf of gas,
these estimated reserves totaled 127.3 MMboe and were approximately 54% oil and
46% gas.
Average daily production from these properties during February 1999 was:
- - 24.9 Mbbls of crude oil and natural gas liquids; and
- - 125 MMcf of natural gas.
Multiple pay horizons contribute to the long life of the Shell fields as
compared to many other offshore Gulf of Mexico properties. At March 1, 1999, the
reserve life of the Shell properties -- total proved reserves divided by prior
12 months' production -- was more than 7 years. These proved reserves were:
- - 85% proved developed; and
- - 15% proved undeveloped.
The Shell transaction has been approved by the boards of directors of
Apache and Shell and is not subject to financing. We expect that the only
remaining condition under the purchase agreement -- U.S. regulatory approval
under the Hart-Scott-Rodino Act -- will be satisfied and that the acquisition
will be completed in May 1999. However, we cannot be sure that the transaction
will be completed as expected until it is actually consummated. The $715 million
cash portion of the purchase price assumes that the other owners of working
interests in the Shell properties will not exercise any of their preferential
rights to purchase portions of the interests we have agreed to acquire from
Shell.
S-4
<PAGE> 5
THE OFFERING
DEPOSITARY SHARES AND
CONVERSION PREFERRED STOCK
TITLE. $2.015 Depositary Shares, each representing 1/50th of a share of
Automatically Convertible Equity Securities, Conversion Preferred Stock, Series
C.
SECURITIES OFFERED. 7,000,000 depositary shares.
INITIAL PRICE. $31.00 for each depositary share based on $1,550.00 for each
share of conversion preferred stock. $31.0625 is the last reported sale price of
Apache common stock on the New York Stock Exchange on the date of this
prospectus supplement.
DIVIDEND PAYMENT DATES. The 15th calendar day (or the preceding business
day if the 15th is not a business day) of each February, May, August and
November, starting August 13, 1999.
DIVIDEND RATE. $2.015 for each depositary share per year based on $100.75
for each share of conversion preferred stock per year.
MANDATORY CONVERSION DATE. May 15, 2002.
MANDATORY CONVERSION. On May 15, 2002, each depositary share will
automatically convert into shares of Apache common stock, based on the Exchange
Rate for 1/50th of a share of conversion preferred stock.
EXCHANGE RATE. The Exchange Rate for each depositary share, based on the
Exchange Rate for each share of conversion preferred stock, will be not more
than one share and not less than 0.8197 shares of Apache common stock, depending
on the Current Market Value.
The Exchange Rate is subject to adjustments as described under "Description
of Conversion Preferred Stock -- Conversion Adjustments" and "-- Adjustments for
Certain Consolidations or Mergers" on pages S-21 and S-22 of this prospectus
supplement.
The Current Market Value is the average trading price of Apache common
stock during the 20 Trading Days ending on the Trading Day before May 15, 2002.
It will be calculated as described under "Description of Conversion Preferred
Stock -- Automatic Conversion of Conversion Preferred Stock".
The following table illustrates the applicable Exchange Rate and
approximate market value of Apache common stock receivable upon conversion of
the depositary shares at specified assumed Current Market Values:
<TABLE>
<CAPTION>
VALUE OF SHARES
OF COMMON STOCK
RECEIVED PER
DEPOSITARY
IF THE CURRENT EXCHANGE SHARE UPON
MARKET VALUE IS RATE CONVERSION*
- --------------------- -------- ---------------------
<S> <C> <C>
$46.50 per share 0.8197 $38.116 (that is,
(that is, 150% of 123% of Initial
Initial Price) Price)
$37.82 per share 0.8197 $31.00 (that is, 100%
(that is, Threshold of Initial Price)
Price)
$34.41 per share 0.9009 $31.00 (that is, 100%
(that is, 1/2 way of Initial Price)
between Initial
Price and Threshold
Price)
$31.00 per share 1.0000 $31.00 (that is, 100%
(that is, 100% of of Initial Price)
Initial Price)
$15.50 per share 1.0000 $15.50 (that is, 50%
(that is, 50% of of Initial Price)
Initial Price)
</TABLE>
- ---------------
* Assumes that the Current Market Value accurately reflects fair market value on
May 15, 2002.
LIQUIDATION PREFERENCE. $31.00 for each depositary share based on
$1,550.00 for each share of conversion preferred stock, plus accrued and unpaid
dividends.
OPTIONAL CONVERSION. At any time prior to May 15, 2002, you may elect to
convert each of your depositary shares into 0.8197 of a share of Apache common
stock. This conversion rate is subject to adjustment as described below under
"Description of Conversion Preferred Stock -- Conversion Adjustments" and
"-- Adjustment for Certain Consolidations or Mergers" on page S-21 and S-22 of
this prospectus supplement.
S-5
<PAGE> 6
USE OF PROCEEDS
Net proceeds from this offering of approximately $210,290,000 will be added
to working capital and used for general corporate purposes. In particular, we
expect to use the net proceeds from this offering and the concurrent common
stock offering described below, together with funds available under lines of
credit, to fund the cash portion of the purchase price in the pending Shell
acquisition discussed above under "Recent Developments". If we complete the
Shell acquisition before we receive the net proceeds from this offering, then we
expect to borrow to fund the cash purchase price and use the net proceeds from
this offering for general corporate purposes. A portion of the net proceeds of
the common stock offering would be used to repay a portion of the borrowings.
LISTING
Apache has applied to list the depositary shares on the New York Stock
Exchange under the symbol "APAPrC".
FEDERAL INCOME TAX CONSIDERATIONS
Dividends paid on the conversion preferred stock will be taxable as
ordinary income to the extent of Apache's current or accumulated earnings and
profits. As a general rule, no gain or loss will be recognized by a holder on
the conversion of conversion preferred stock into shares of Apache common stock.
CONCURRENT OFFERING
We are concurrently offering 13,000,000 shares of Apache common stock in a
separate public offering pursuant to a separate prospectus. This offering of
depositary shares and the concurrent common stock offering are not conditioned
upon each other. On May 12, 1999, we executed an underwriting agreement for the
common stock offering and expect to receive net proceeds of approximately
$386,060,000 from that offering at the same time as we complete this offering.
This prospectus supplement relates only to the offering of depositary shares and
not to the offering of common stock.
S-6
<PAGE> 7
SUMMARY FINANCIAL AND OPERATING DATA
We have provided in the tables below our selected financial and operating
data. The financial information for each of the years in the five-year period
ended December 31, 1998 has been derived from our audited financial statements.
The financial information for the three-month periods ended March 31, 1998 and
1999 has been derived from our unaudited financial statements. Our previously
reported data for 1994 has been restated to reflect the merger with DEKALB
Energy Company in May 1995 under the pooling of interests method of accounting.
You should read the following financial information in conjunction with our
consolidated financial statements and related notes that we have incorporated by
reference in the accompanying prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1995(1) 1996(2) 1997(3) 1998
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues............. $ 592,626 $ 750,702 $ 977,151 $1,176,273 $ 875,715
Net income (loss).......... 45,583 20,207 121,427 154,896 (129,387)
Income (loss) attributable
to common stock.......... 45,583 20,207 121,427 154,896 (131,391)
Net income (loss) per
common share
Basic.................... .65 .28 1.42 1.71 (1.34)
Diluted.................. .65 .28 1.38 1.65 (1.34)
Cash dividends per common
share(4)................. .28 .28 .28 .28 .28
Net cash provided by
operating activities..... $ 357,769 $ 332,123 $ 490,504 $ 723,808 $ 471,511
BALANCE SHEET DATA (AT YEAR
END):
Working capital
(deficit)................ $ (3,203) $ (22,013) $ (41,501) $ 4,546 $ (78,804)
Total assets............... 2,036,627 2,681,450 3,432,430 4,138,633 3,996,062
Long-term debt............. 719,033 1,072,076 1,235,706 1,501,380 1,343,258
Shareholders' equity....... $ 891,087 $1,091,805 $1,518,516 $1,729,177 $1,801,833
Common shares outstanding
at end of year........... 69,666 77,379 90,059 93,305 97,769
</TABLE>
(1) Includes the results of the acquisitions of certain oil and gas properties
from Texaco Exploration and Production, Inc. and Aquila Energy Resources
Corporation after March 1, 1995 and September 1995, respectively, and the
sale of a substantial portion of Apache's Rocky Mountain properties in
September 1995.
(2) Includes financial data after May 20, 1996 for Apache PHN Company, Inc.,
formerly known as The Phoenix Resource Companies, Inc.
(3) Includes financial data after November 20, 1997 relating to the acquisition
from Mobil Exploration & Producing Australia Pty Ltd of three companies
owning interests in certain oil and gas properties and production facilities
offshore Western Australia.
(4) No cash dividends were paid on outstanding DEKALB common stock in 1994 and
1995.
S-7
<PAGE> 8
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------
1998 1999
-------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
INCOME STATEMENT DATA:
Total revenues.............................................. $ 245,941 $ 187,715
Net income (loss)........................................... 17,356 (2,168)
Income (loss) attributable to common stock.................. 17,356 (3,588)
Net income (loss) per common share
Basic..................................................... .18 (.04)
Diluted................................................... .18 (.04)
Cash dividends per common share............................. $ .07 $ .07
BALANCE SHEET DATA (AT PERIOD END):
Total debt.................................................. $ 1,547,082
Shareholders' equity........................................ $ 1,795,581
Common shares outstanding at end of period.................. 97,821
</TABLE>
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Proved Reserves at December 31:
Oil (Mbbls)(1)..................... 110,624 170,329 235,294 273,778 251,008
Natural Gas (Bcf).................. 1,316 1,502 1,625 1,872 2,172
Total Proved Reserves
(Mboe)(2)..................... 329,983 420,649 506,178 585,748 613,046
Reserves Outside North America (%
of Total)....................... 3.3% 4.7% 17.8% 27.9% 38.3%
Reserve Replacement Ratio(3)....... 189.7% 267.3% 257.2% 228.0% 142.9%
Reserve Life (years)(4)............ 7.5 7.8 9.3 9.4 9.6
Finding and Development Costs per
boe(2)(5)....................... $ 5.95 $ 5.30 $ 6.09 $ 5.75 $ 4.98
Average Daily Production:
Oil (Mbbls/day)(1)................. 40 52 55 69 76
Natural Gas (MMcf/day)............. 483 577 561 609 590
Total Production (Mboe/day)(2).. 120 148 149 170 174
Average Production Costs per
boe(2)............................. $ 2.85 $ 3.34 $ 3.43 $ 3.07 $ 2.88
</TABLE>
(1) Includes crude oil, condensate and natural gas liquids.
(2) 6 Mcf of natural gas = 1 boe.
(3) Total reserve additions for the year, including revisions and net of
property sales, divided by annual production.
(4) Total proved reserves at year end divided by annual production.
(5) Total capitalized costs incurred for the year, excluding capitalized
interest and property sales, divided by total reserve additions for the
year, including revisions.
S-8
<PAGE> 9
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus supplement, the accompanying prospectus and the documents
incorporated by reference contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of historical facts,
including, among others, statements regarding our future financial position,
business strategy, budgets, reserve information, projected levels of production,
projected costs and plans and objectives of management for future operations,
are forward-looking statements.
We typically use words such as "expect", "anticipate", "estimate",
"intend", "plan" and "believe" to identify our forward-looking statements.
Although we believe our expectations reflected in forward-looking
statements are based on reasonable assumptions, no assurance can be given that
these expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the expectations reflected in the
forward-looking statements include, among others:
- - the market prices of oil and gas;
- - economic and competitive conditions;
- - inflation rates;
- - legislative and regulatory changes;
- - financial market conditions;
- - political and economic uncertainties of foreign governments; and
- - future business decisions.
Some of these factors are discussed under "Risk Factors" beginning on page S-10
of this prospectus supplement.
In light of these risks, uncertainties and assumptions, the events
anticipated by our forward-looking statements might not occur. We undertake no
obligation to update or revise our forward-looking statements, whether as a
result of new information, future events or otherwise.
S-9
<PAGE> 10
RISK FACTORS
In considering whether to purchase the depositary shares, you should
carefully consider all the information we have included or incorporated by
reference in this prospectus supplement and the accompanying prospectus. In
particular, you should carefully consider the risk factors described below. In
addition, please read "Cautionary Statement Regarding Forward-Looking
Statements" on page S-9 of this prospectus supplement, where we describe
additional uncertainties associated with our business and the forward-looking
statements contained or incorporated by reference in this prospectus supplement
and the accompanying prospectus.
RISK FACTORS RELATING TO THE DEPOSITARY
SHARES AND THE CONVERSION PREFERRED STOCK
YOU ASSUME THE RISK THAT THE MARKET VALUE OF APACHE COMMON STOCK MAY DECLINE.
The Current Market Value of Apache common stock on May 15, 2002 may be less
than $31.00, which is called the Initial Price. If that Current Market Value is
less than the Initial Price, then holders of depositary shares will receive
shares of Apache common stock on May 15, 2002 with a market value that is less
than the Initial Price. Any decline in the market value of Apache common stock
may be substantial.
THE OPPORTUNITY FOR EQUITY APPRECIATION PROVIDED BY AN INVESTMENT IN THE
DEPOSITARY SHARES IS LESS THAN THAT PROVIDED BY A DIRECT INVESTMENT IN APACHE
COMMON STOCK.
The number of shares of Apache common stock that will be issued upon
conversion of the conversion preferred stock may decline by up to 18.03% if the
Current Market Value increases. Therefore, the opportunity for equity
appreciation provided by an investment in the depositary shares is less than
that provided by a direct investment in Apache common stock. Assuming the
Current Market Value accurately reflects fair market value, the Current Market
Value on May 15, 2002 must exceed the Threshold Price of $37.82 per depositary
share, based on the Threshold Price of $1,891.00 per share of conversion
preferred stock, before a holder of depositary shares will realize any equity
appreciation.
THE TRADING PRICES FOR THE DEPOSITARY SHARES WILL BE DIRECTLY AFFECTED BY THE
TRADING PRICES FOR APACHE COMMON STOCK.
To the extent there is a secondary market for the depositary shares, we
believe that the trading prices of the depositary shares will be directly
affected by the trading prices of Apache common stock. We cannot predict how
Apache common stock will trade. Trading prices of Apache common stock will be
influenced by our consolidated operating results and financial condition and by
economic, financial and other factors and market conditions that can affect the
capital markets generally. These include the level of, and fluctuations in, the
trading prices of stocks generally and sales of substantial amounts of Apache
common stock in the market at the same time as or subsequent to the offering of
the depositary shares, or the perception that these sales may occur.
Concurrently, we are also offering 13,000,000 shares of Apache common stock in a
separate public offering. This offering and the common stock offering are not
conditioned on each other. We have also agreed to issue 1,000,000 shares of
Apache common stock in connection with our pending Shell acquisition. Those
shares could be resold after 90 days from the signing of the purchase agreement
on April 29, 1999, or earlier depending upon future circumstances.
THE SECONDARY MARKET FOR THE DEPOSITARY SHARES MAY BE ILLIQUID.
Since the depositary shares are a new issue of securities, they currently
have no secondary market. We have applied to list the depositary shares on the
New York Stock Exchange. Also, the underwriter has advised us that it intends to
facilitate secondary market trading by making a market in the depositary shares.
However, the underwriter is not obligated to make a market in the depositary
shares and may discontinue market making at any time. We cannot predict
S-10
<PAGE> 11
how the depositary shares will trade in the secondary market.
RISK FACTORS RELATING TO APACHE
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL AND GAS PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
A substantial or extended decline in oil and gas prices would have a
material adverse effect on our financial position, results of operations,
quantities of oil and gas that may be economically produced, and access to
capital. Oil and natural gas prices have historically been and are likely to
continue to be volatile. This volatility makes it difficult to estimate with
precision the value of producing properties in acquisitions and to budget and
project the return on exploration and development projects involving our oil and
gas properties. In addition, unusually volatile prices often disrupt the market
for oil and gas properties, as buyers and sellers have more difficulty agreeing
on the purchase price of properties.
OUR ABILITY TO SELL OUR OIL AND GAS PRODUCTION COULD BE MATERIALLY HARMED IF WE
FAIL TO OBTAIN ADEQUATE SERVICES SUCH AS TRANSPORTATION AND PROCESSING.
The sale of our oil and gas production depends on a number of factors
beyond our control, including the availability and capacity of transportation
and processing facilities. Our failure to obtain such services on acceptable
terms could materially harm our business.
WE HAVE RECORDED WRITE-DOWNS BECAUSE OF FULL COST ACCOUNTING RULES AND MAY BE
REQUIRED TO DO SO AGAIN IN THE FUTURE.
Under the full cost accounting rules of the Securities and Exchange
Commission, we review the carrying value of our proved oil and gas properties
each quarter on a country-by-country basis. Under these rules, capitalized costs
of proved oil and gas properties -- net of accumulated depreciation, depletion
and amortization, and deferred income taxes -- may not exceed the present value
of estimated future net cash flows from proved oil and gas reserves, discounted
at 10 percent, plus the lower of cost or fair value of unproved properties
included in the costs being amortized, net of related tax effects.
These rules generally require pricing future oil and gas production at the
unescalated oil and gas prices in effect at the end of each fiscal quarter. They
also require a write-down if the "ceiling" is exceeded, even if prices declined
for only a short period of time. We recorded a $243.2 million pre-tax -- $158.1
million after-tax -- non-cash write-down of the carrying value of our U.S.
proved oil and gas properties as of December 31, 1998, due to these ceiling test
limitations.
If oil and gas prices again fall to the prices we realized at the end of
1998, it is likely that additional write-downs will occur in 1999. Write-downs
required by these rules do not impact cash flow from operating activities.
THE OIL AND GAS RESERVES DATA WE REPORT ARE ONLY ESTIMATES AND MAY PROVE TO BE
INACCURATE.
There are numerous uncertainties inherent in estimating quantities of oil
and natural gas reserves of any category and in projecting future rates of
production and timing of development expenditures, which underlie the reserve
estimates, including many factors beyond our control. Reserve data represent
only estimates. In addition, the estimates of future net cash flows from our
proved reserves and their present value are based upon various assumptions about
future production levels, prices and costs that may prove to be incorrect over
time. Any significant variance from the assumptions could result in the actual
quantity of our reserves and future net cash flows from them being materially
different from the estimates. In addition, our estimated reserves may be subject
to downward or upward revision based upon production history, results of future
exploration and development, prevailing oil and gas prices, operating and
development costs and other factors.
S-11
<PAGE> 12
IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent that we acquire additional
properties containing proved reserves, conduct successful exploration and
development activities or, through engineering studies, identify additional
behind-pipe zones or secondary recovery reserves, our proved reserves will
decline materially as reserves are produced. Future oil and gas production is,
therefore, highly dependent upon our level of success in acquiring or finding
additional reserves.
THE PENDING SHELL TRANSACTION MIGHT NOT BE CONSUMMATED AS EXPECTED.
Under the purchase agreement, U.S. regulatory approval under the
Hart-Scott-Rodino Act is the only remaining condition to the obligations of the
parties to complete the pending Shell transaction.
We expect that this condition will be satisfied and the transaction will be
completed in May 1999. However, we cannot be sure that the transaction will be
completed as expected until it is actually consummated.
Other owners of working interests in the Shell properties have preferential
rights to purchase portions of the interests we expect to acquire from Shell.
Although we do not expect that all of these preferential rights will be
exercised, properties valued at approximately 35% of the total purchase price
are subject to the rights. To the extent that these rights are exercised, the
properties we acquire and the cash portion of the purchase price we pay will
both be reduced.
WE INCUR SUBSTANTIAL COSTS TO COMPLY WITH GOVERNMENT REGULATIONS, ESPECIALLY
REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION, AND COULD INCUR EVEN GREATER
COSTS IN THE FUTURE.
Our exploration, production and marketing operations are regulated
extensively at the federal, state and local levels, as well as by other
countries in which we do business. We have made and will continue to make large
expenditures in our efforts to comply with the requirements of environmental and
other regulations. Further, the oil and gas regulatory environment could change
in ways that might substantially increase these costs.
Hydrocarbon-producing states regulate conservation practices and the
protection of correlative rights. These regulations affect our operations and
limit the quantity of hydrocarbons we may produce and sell. In addition, at the
U.S. federal level, the Federal Energy Regulatory Commission regulates
interstate transportation of natural gas under the Natural Gas Act. Other
regulated matters include marketing, pricing, transportation and valuation of
royalty payments.
As an owner or lessee and operator of oil and gas properties, we are
subject to various federal, state, local and foreign regulations relating to
discharge of materials into, and protection of, the environment. These
regulations may, among other things, impose liability on us for the cost of
pollution clean-up resulting from operations, subject us to liability for
pollution damages, and require suspension or cessation of operations in affected
areas. Changes in or additions to regulations regarding the protection of the
environment could hurt our business.
OUR BUSINESS COULD BE HARMED BY COMPETITION WITH OTHER COMPANIES.
The oil and gas industry is highly competitive. Our business could be
harmed by competition with other companies. Because oil and gas are fungible
commodities, our principal form of competition is price competition. We strive
to maintain the lowest finding and production costs possible to maximize
profits. In addition, as an independent oil and gas company, we frequently
compete for reserve acquisitions, exploration leases, licenses, concessions and
marketing agreements against companies with financial and other resources
substantially larger than we possess. Many of our competitors have established
strategic long-term positions and maintain strong governmental relationships in
countries in which we may seek new entry.
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WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY
UNEXPECTED LIABILITIES.
Exploration for and production of oil and natural gas can be hazardous,
involving natural disasters and other unforeseen occurrences such as blowouts,
cratering, fires and loss of well control, which can damage or destroy wells or
production facilities, injure or kill people, and damage property and the
environment. We maintain insurance against many potential losses or liabilities
arising from our operations in accordance with customary industry practices and
in amounts that we believe to be prudent. However, our insurance does not
protect us against all operational risks.
OUR HEDGING ACTIVITIES MAY PREVENT US FROM BENEFITING FROM PRICE INCREASES AND
MAY EXPOSE US TO OTHER RISKS.
To the extent that we engage in hedging activities, we may be prevented
from realizing the benefits of price increases above the levels of the hedges.
In addition, we are subject to risks associated with differences in prices at
different locations, particularly where transportation constraints restrict our
ability to deliver oil and gas volumes to the delivery point to which the
hedging transaction is indexed.
WHEN WE ACQUIRE OIL AND GAS PROPERTIES, OUR FAILURE TO FULLY IDENTIFY POTENTIAL
PROBLEMS, TO PROPERLY ESTIMATE RESERVES OR PRODUCTION RATES OR COSTS, OR TO
EFFECTIVELY INTEGRATE THE ACQUIRED OPERATIONS COULD SERIOUSLY HARM US.
We from time to time acquire oil and gas properties. When we do so, our
failure to fully identify potential problems, to properly estimate reserves or
production rates or costs, or to effectively integrate the acquired operations
could seriously harm us. Although we perform reviews of acquired properties that
we believe are consistent with industry practices, we do not review in depth
every individual property involved in each acquisition. Ordinarily we focus on
higher-value properties and sample the remainder. However, even a detailed
review of records and properties may not necessarily reveal existing or
potential problems, nor will it permit a buyer to become sufficiently familiar
with the properties to assess fully their deficiencies and potential.
Inspections may not always be performed on every well, and environmental
problems, such as ground water contamination, are not necessarily observable
even when an inspection is undertaken.
Even when problems are identified, we often assume environmental and other
risks and liabilities in connection with acquired properties. There are numerous
uncertainties inherent in estimating quantities of proved oil and gas reserves
and actual future production rates and associated costs with respect to acquired
properties. Actual results may vary substantially from those assumed in the
estimates. In addition, acquisitions may have adverse effects on our operating
results, particularly during the periods in which the operations of acquired
businesses are being integrated into our ongoing operations.
OUR NON-U.S. OPERATIONS, ESPECIALLY IN DEVELOPING COUNTRIES, ARE SUBJECT TO
INCREASED RISKS AND UNCERTAINTIES.
Our non-U.S. oil and natural gas exploration, development and production
activities are subject to:
- - political and economic uncertainties, including, among others, changes,
sometimes frequent or marked, in governmental energy policies or the personnel
administering them;
- - expropriation of property;
- - cancellation or modification of contract rights;
- - foreign exchange restrictions;
- - currency fluctuations;
- - risks of loss due to civil strife, acts of war, guerrilla activities and
insurrection;
- - royalty and tax increases; and
- - other risks arising out of foreign governmental sovereignty over the areas in
which our operations are conducted.
These risks may be higher in the developing countries in which we conduct these
activities. Consequently, our non-U.S. exploration, development and production
activities may be substantially affected by factors beyond our
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control, any of which could materially adversely affect our financial position
or results of operations. Furthermore, in the event of a dispute arising from
non-U.S. operations, we may be subject to the exclusive jurisdiction of courts
outside the United States or may not be successful in subjecting non-U.S.
persons to the jurisdiction of the courts in the United States, which could
adversely affect the outcome of the dispute.
A DECLINE IN THE CONDITION OF OUR CAPITAL MARKETS OR A SUBSTANTIAL RISE IN
INTEREST RATES COULD HARM US.
If the condition of the capital markets utilized by us to finance our
operations materially declines, we might not be able to finance our operations
on terms we consider acceptable. In addition, a substantial rise in interest
rates would decrease our net cash flows.
ADVERSE CHANGES IN THE EXCHANGE RATES WITH SOME FOREIGN CURRENCIES, ESPECIALLY A
DECREASE IN VALUE IN THE AUSTRALIAN OR CANADIAN DOLLARS RELATIVE TO THE U.S.
DOLLAR, COULD HARM US.
Our cash flow stream relating to certain international operations is based
on the U.S. dollar equivalent of cash flows measured in foreign currencies.
Australian gas production is sold under fixed-price Australian dollar contracts
and over half the costs incurred are paid in Australian dollars. Revenue and
disbursement transactions denominated in Australian dollars are converted to
U.S. dollar equivalents based on the exchange rate on the transaction date.
Reported cash flow relating to Canadian operations is based on cash flows
measured in Canadian dollars converted to the U.S. dollar equivalent based on
the average of the Canadian and U.S. dollar exchange rates for the period
reported. Substantially all of our international transactions, outside of Canada
and Australia, are denominated in U.S. dollars.
Our Canadian and Australian subsidiaries have net financial obligations
that are denominated in a currency other than the functional reporting currency
of the subsidiaries. A decrease in value of 10% in the Australian and Canadian
dollars relative to the U.S. dollar from the March 31, 1999 exchange rates would
result in a foreign currency loss of approximately $1.6 million, based on March
31, 1999 amounts.
OUR COMPUTER SYSTEMS AND THOSE OF THIRD PARTIES MAY NOT BE YEAR 2000 COMPLIANT,
WHICH MAY CAUSE SYSTEM FAILURES AND DISRUPTIONS IN OPERATIONS.
The inability of some computer programs and embedded computer chips to
distinguish between the year 1900 and the year 2000 poses a serious threat of
business disruption to any organization that utilizes computer technology and
computer chip technology in their business systems or equipment. We have formed
a Year 2000 Task Force with representation from major business units to
inventory and assess the risk associated with hardware, software,
telecommunications systems, office equipment, embedded chip controls and
systems, process control systems, facility control systems and dependencies on
external trading partners.
We presently believe that, with conversions to new software and completion
of efforts planned by the Year 2000 Task Force, the risk associated with year
2000 will be significantly reduced. However, we are unable to assure that the
consequences of year 2000 failures of systems maintained by us or by third
parties will not materially adversely impact our results of operations,
liquidity or financial condition.
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USE OF PROCEEDS
We expect the net proceeds from this offering of depositary shares to be
approximately $210,290,000, after deducting discounts to the underwriter and
estimated expenses of the offering that we will pay. We also expect the net
proceeds from the concurrent common stock offering to be approximately
$386,060,000, after deducting similar expenses. We will add the net proceeds of
both offerings to working capital and use them for general corporate purposes.
In particular, we expect to use the net proceeds from this offering and the
concurrent common stock offering, together with funds available under lines of
credit, to fund the cash portion of the purchase price in the pending Shell
acquisition. If we complete the Shell acquisition before we receive the net
proceeds from this offering, then we expect to fund the cash purchase price by
borrowing under our lines of credit and a new bridge loan facility. We would
then use the net proceeds of this offering for general corporate purposes, which
could include repaying the indebtedness incurred to fund the Shell acquisition
and indebtedness under commercial paper facilities in the ordinary course of our
business. A portion of the net proceeds of the concurrent common stock offering
would be used to repay the bridge loan, which would be on the following terms:
- - a principal amount of no more than $200 million;
- - to be prepaid on or before May 25, 1999;
- - at an interest rate determined at our option, based on either:
- a negotiated formula that on May 12, 1999 would be 5.15%, or
- the prime rate announced by The Chase Manhattan Bank, which on May 12, 1999
was 7.75%.
The underwriter or one or more of its affiliates would be the lender under the
bridge loan.
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CAPITALIZATION
The following table sets forth as of March 31, 1999:
- - our actual capitalization;
- - our as-adjusted capitalization showing the effects of our receipt of the
estimated net proceeds from the sale of the depositary shares we are selling
in this offering; and
- - our pro forma as-adjusted capitalization showing the effects of
- our receipt of the estimated net proceeds from the sale of the depositary
shares we are selling in this offering;
- our receipt of the estimated net proceeds from the issuance of the shares
of common stock we are selling in the separate, concurrent common stock
offering; and
- our issuance of the 1 million shares of common stock and payment of an
assumed $715 million to complete the pending Shell transaction.
The as-adjusted capitalization and the pro forma as-adjusted capitalization
assume that the underwriter does not exercise the option granted by Apache to
purchase additional shares in connection with the common stock offering and that
the Shell acquisition is completed after the completion of this offering. If we
complete the Shell acquisition before we receive the net proceeds from this
offering, then we expect to fund the cash purchase price by borrowing under our
lines of credit and a bridge loan facility as described under "Use of Proceeds".
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
TOTAL DEBT:
Apache:
7.95% notes due 2026............................ $ 178,549 $ 178,549 $ 178,549
7.625% debentures due 2096...................... 149,175 149,175 149,175
7.375% debentures due 2047...................... 147,988 147,988 147,988
9.25% notes due 2002............................ 99,851 99,851 99,851
7.7% notes due 2026............................. 99,643 99,643 99,643
7.0% notes due 2018............................. 148,256 148,256 148,256
Money market lines of credit and commercial
paper......................................... 237,434 27,144 356,084
Subsidiary and other obligations:
Global credit facility -- Australia............. 62,000 62,000 62,000
Global credit facility -- Canada................ 5,000 5,000 5,000
Apache Finance 6.5% notes due 2007.............. 168,840 168,840 168,840
Apache Finance 7% notes due 2009................ 99,341 99,341 99,341
Revolving credit facility -- Egypt.............. 121,780 121,780 121,780
DEKALB 9.875% notes due 2000.................... 29,225 29,225 29,225
---------- ---------- ----------
Total debt......................................... 1,547,082 1,336,792 1,665,732
---------- ---------- ----------
SHAREHOLDERS' EQUITY:
Series B preferred stock........................ 98,386 98,386 98,386
Series C conversion preferred stock............. -- 210,290 210,290
Common stock.................................... 124,793 124,793 142,293
Paid-in capital................................. 1,246,380 1,246,380 1,643,065
Retained earnings............................... 392,662 392,662 392,662
Treasury stock.................................. (36,790) (36,790) (36,790)
Accumulated other comprehensive income.......... (29,850) (29,850) (29,850)
---------- ---------- ----------
Total shareholders' equity......................... 1,795,581 2,005,871 2,420,056
---------- ---------- ----------
TOTAL CAPITALIZATION................................. $3,342,663 $3,342,663 $4,085,788
========== ========== ==========
</TABLE>
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PRICE RANGE OF COMMON STOCK
Our common stock is traded on the New York Stock Exchange and the Chicago
Stock Exchange under the symbol "APA". The table below provides information
regarding Apache common stock for 1997 and 1998. Prices shown are from the New
York Stock Exchange Composite Transactions Reporting System.
<TABLE>
<CAPTION>
1997 1998
-------------------------- --------------------------
PRICE RANGE PRICE RANGE
------------- DIVIDENDS ------------ DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- ----- --------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
First Quarter........................... $39 3/8 $31 1/4 $.07 $38 3/4 $31 3/16 $.07
Second Quarter.......................... 35 5/8 30 1/8 $.07 38 1/8 30 3/8 $.07
Third Quarter........................... 42 7/8 32 1/16 $.07 32 3/8 22 1/2 $.07
Fourth Quarter.......................... 45 1/16 32 11/16 $.07 29 5/16 21 3/8 $.07
</TABLE>
For the first quarter of 1999, the high closing price for our common stock
was $28 1/4, the low closing price was $18 1/8, and we paid dividends per share
of $.07. The last reported sale price of Apache common stock on the New York
Stock Exchange for May 12, 1999 was $31.0625. At March 31, 1999, there were
97,820,667 shares of Apache common stock outstanding, held by approximately
10,000 shareholders of record and 45,000 beneficial owners.
DIVIDEND POLICY
We have paid cash dividends on Apache common stock for 129 consecutive
quarters through March 31, 1999. Since January 1983, we have paid an annual
common stock dividend of $.28 per share. We expect to continue the payment of
dividends at that level. However, future dividend payments will depend upon our
level of earnings, financial requirements and other relevant factors.
In December 1995, we declared a dividend of one preferred stock purchase
right for each share of Apache common stock outstanding on January 31, 1996 or
issued after that date. These rights are more fully described on pages 6 and 7
of the accompanying prospectus.
DESCRIPTION OF CONVERSION PREFERRED STOCK
The description in this prospectus supplement of the terms of Apache's
Automatically Convertible Equity Securities, Conversion Preferred Stock, Series
C is only a summary. The terms of the conversion preferred stock are contained
in a certificate of designation that amends our charter. A copy of this
certificate of designation is incorporated by reference as an exhibit to the
registration statement that relates to this prospectus supplement.
GENERAL
Our charter authorizes the issuance of 5,000,000 shares of preferred stock.
The conversion preferred stock constitutes a series of this preferred stock. See
"Description of Capital Stock" in the accompanying prospectus for a description
of our capital stock.
As described below under "Description of Depositary Shares", each of the
depositary shares represents beneficial ownership of 1/50th of a single share of
conversion preferred stock and entitles the owner to that proportion of all the
rights and preferences of that share.
The conversion preferred stock is a single series consisting of 140,000
shares. The holders of conversion preferred stock will have no preemptive
rights. The conversion
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preferred stock will be fully paid and non-assessable.
The conversion preferred stock will rank prior to all common stock now
outstanding or that we may issue in the future, and prior to Apache's Series A
Junior Participating Preferred Stock, as to payment of dividends and
distribution of assets upon dissolution, liquidation or winding up of Apache.
The conversion preferred stock will rank equal to Apache's 5.68% Cumulative
Preferred Stock, Series B, as to payment of dividends and distribution of assets
upon dissolution, liquidation or winding up of Apache. The Series B preferred
stock has a liquidation preference of $1,000 per share, plus accumulated
dividends. There are currently 100,000 shares of Series B preferred stock
outstanding.
The terms of the conversion preferred stock restrict our ability to issue
capital stock that ranks senior to the conversion preferred stock, as discussed
below under "Voting Rights".
DIVIDENDS
GENERAL
Dividends on the conversion preferred stock will be payable quarterly, if
declared, on the 15th calendar day (or the preceding business day if the 15th is
not a business day) of February, May, August and November of each year (each a
"Dividend Payment Date") at the annual rate of $100.75 per share, which is
equivalent to $2.015 per depositary share. The initial dividend on the
conversion preferred stock, for the dividend period commencing on May 18, 1999,
to but excluding August 15, 1999, will be $24.348 per share, which is equivalent
to $0.48696 per depositary share, and will be payable, if declared, on August
13, 1999.
The amount of dividends payable on each share of conversion preferred stock
for each full quarterly period will be computed by dividing the annual dividend
rate by four. The amount of dividends payable for any other period that is
shorter or longer than a full quarterly dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months.
A dividend period is the period ending on the day before a Dividend Payment
Date and beginning on the preceding Dividend Payment Date or, if none, the date
of issue. Dividends payable, if declared, on a Dividend Payment Date will be
payable to holders of record as they appear on our stock books on the fifteenth
day of the calendar month in which the applicable Dividend Payment Date falls.
We are only obligated to pay a dividend on the conversion preferred stock
if our board of directors or an authorized committee of our board declares the
dividend payable and we have assets that legally can be used to pay the
dividend.
Dividends on the conversion preferred stock will be cumulative. This means
that, if our board of directors or an authorized committee of our board fails to
declare a dividend, the dividend will accumulate until declared and paid.
We are not obligated to pay holders of conversion preferred stock any
interest or sum of money in lieu of interest on any dividend not paid on a
Dividend Payment Date or any other late payment. We are also not obligated to
pay holders of conversion preferred stock any dividend in excess of the full
dividends on the conversion preferred stock that are payable as described above.
If our board of directors or an authorized committee of our board does not
declare a dividend on any Dividend Payment Date, the board of directors or an
authorized committee may declare and pay the dividend on any other date, whether
or not a Dividend Payment Date. The persons entitled to receive the dividend
will be holders of the conversion preferred stock as they appear on our stock
register on a date selected by the board of directors or an authorized
committee. That date must be not less than ten and not more than 30 days prior
to the payment date.
PAYMENT RESTRICTIONS
If we do not pay a dividend on a Dividend Payment Date, then, until all
accrued and unpaid dividends are paid and the full
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quarterly dividend on the conversion preferred stock for the current and all
prior dividend periods is declared and paid or set apart for payment:
- - We may not take any of the following actions with respect to any capital stock
of Apache that ranks junior to the conversion preferred stock as to payment of
dividends or the distribution of assets upon winding up, including Apache
common stock and the Series A preferred stock:
- declare or pay any dividend or make any distribution of assets on the
junior capital stock, other than dividends or distributions of capital
stock of Apache that ranks junior to the conversion preferred stock as to
payment of dividends and the distribution of assets upon winding up; or
- redeem, purchase or otherwise acquire the junior capital stock, except
upon conversion or exchange for capital stock of Apache that ranks junior
to the conversion preferred stock as to payment of dividends and the
distribution of assets upon winding up.
- - We may not declare dividends or make any distributions on any capital stock of
Apache that ranks equally with the conversion preferred stock as to payment of
dividends or the distribution of assets upon winding up, including the Series
B preferred stock unless:
- the dividends or distributions are of capital stock of Apache that ranks
junior to the conversion preferred stock as to payment of dividends and
the distribution of assets upon winding up; or
- all dividends and other distributions on the conversion preferred stock
and the equally-ranking capital stock are declared and paid or set apart
for payment or made pro rata such that the dividends or distributions on
the conversion preferred stock and the equally-ranking capital stock will
bear the same ratio that accrued and unpaid dividends per share on the
conversion preferred stock and the equally-ranking capital stock bear to
each other.
- - We may not redeem, purchase or otherwise acquire other capital stock of Apache
that ranks equally with the conversion preferred stock as to payment of
dividends or the distribution of assets upon winding up, including the Series
B preferred stock, except for conversion or exchange for capital stock of
Apache that ranks junior to the conversion preferred stock as to payment of
dividends and the distribution of assets upon winding up.
AUTOMATIC CONVERSION OF CONVERSION
PREFERRED STOCK
On May 15, 2002, unless previously converted at the option of the holder,
each of the outstanding shares of conversion preferred stock will automatically
convert into a number of shares of Apache common stock equal to 50 times the
Exchange Rate. The Exchange Rate, subject to adjustment as described below, is
equal to:
- - if the Current Market Price of Apache common stock is greater than or equal to
$37.82 per share (the "Threshold Price"), 0.8197 of a share of Apache common
stock per depositary share;
- - if the Current Market Price is less than the Threshold Price but greater than
the Initial Price, a fractional share of Apache common stock per depositary
share having a value, determined at the Current Market Price, equal to the
Initial Price; and
- - if the Current Market Price is less than or equal to the Initial Price, one
share of Apache common stock per depositary share.
The "Initial Price" is $31.00 per share of Apache common stock.
The "Current Market Price" means the average Closing Price per share of our
common stock on the 20 Trading Days immediately prior to, but not including, May
15, 2002.
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<PAGE> 20
The "Closing Price" of a share of Apache common stock on any date of
determination means:
- - the closing per share sale price or, if no closing sale price is reported, the
last reported per share sale price of Apache common stock on the New York
Stock Exchange on that date; or
- - if Apache common stock is not listed for trading on the New York Stock
Exchange on that date, on the principal U.S. securities exchange on which
Apache common stock is listed for trading; or
- - if Apache common stock is not listed for trading on a U.S. national or
regional securities exchange on that date, as reported by The Nasdaq Stock
Market; or
- - if none of the foregoing is available on that date, the last quoted per share
bid price for Apache common stock in the over-the-counter market as reported
by the National Quotation Bureau or similar organization; or
- - if none of the foregoing is available on that date, the market value of a
share of Apache common stock on that date as determined by a nationally
recognized independent investment banking firm retained for this purpose by
Apache.
"Trading Day" means a day on which Apache common stock:
- - is not suspended from trading on any national or regional securities exchange
or association or over-the-counter market at the close of business; and
- - has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of Apache common stock.
Because the price of Apache common stock is subject to market fluctuations,
the value of Apache common stock received by a holder of the conversion
preferred stock upon automatic conversion of the conversion preferred stock on
May 15, 2002 may be more or less than the Current Market Price used to compute
the Exchange Rate.
CONVERSION AT OPTION OF HOLDER
The holders of the conversion preferred stock and the related depositary
shares have the right to convert them, in whole or in part, at any time prior to
May 15, 2002, into shares of Apache common stock at the rate (the "Optional
Conversion Rate") of 40.985 shares of Apache common stock for each share of
conversion preferred stock -- 0.8197 of a share of common stock per depositary
share -- subject to adjustment as described below. The Optional Conversion Rate
is equivalent to a conversion price equal to the Threshold Price.
Holders of conversion preferred stock at the close of business on a record
date for any payment of dividends will be entitled to receive the dividend then
payable on that conversion preferred stock on the corresponding Dividend Payment
Date even though the optional conversion of that conversion preferred stock is
between the record date and that Dividend Payment Date. However, if you
surrender conversion preferred stock for conversion after the close of business
on a record date for any payment of dividends and before the opening of business
on the next succeeding Dividend Payment Date, you must include with the
conversion preferred stock payment of an amount equal to the dividend on
conversion preferred stock which is to be paid on that Dividend Payment Date.
Except as described above, upon any optional conversion of conversion
preferred stock, we will make no payment or allowance for unpaid dividends,
whether or not in arrears, on that conversion preferred stock, or for dividends
or distributions on the shares of Apache common stock issued upon conversion.
ENHANCED DIVIDEND YIELD; LESS EQUITY
APPRECIATION
We will pay holders of conversion preferred stock or the depositary shares
representing conversion preferred stock dividends at a higher annual rate than
the current annual rate of dividends paid on Apache common stock. The
opportunity for
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<PAGE> 21
equity appreciation afforded by an investment in the conversion preferred stock
and in the related depositary shares, however, is less than that afforded by an
investment in Apache common stock.
Holders of conversion preferred stock or the related depositary shares will
realize no equity appreciation if, on May 15, 2002, the Current Market Price of
Apache common stock is below the Threshold Price, and less than all of that
appreciation if, at that time, the Current Market Price of Apache common stock
is above the Threshold Price. Holders of conversion preferred stock or the
related depositary shares will realize the entire decline in equity value if, at
that time, the Current Market Price of Apache common stock is less than the
Initial Price.
CONVERSION ADJUSTMENTS
The Exchange Rate and the Optional Conversion Rate are subject to
adjustment if we:
- - pay a stock dividend or make a distribution on Apache common stock in shares
of Apache common stock;
- - subdivide or split Apache common stock;
- - combine our common stock into a smaller number of shares;
- - issue any shares of common stock with respect to reclassification of any
shares of our common stock;
- - pay a dividend or distribute to all holders of Apache common stock evidences
of its indebtedness, securities, cash or other assets, including capital stock
of Apache but excluding any cash dividends or distributions and any dividends
or distributions referred to in the points above;
- - issue certain rights or warrants to all holders of Apache common stock;
- - make distributions consisting exclusively of cash to all holders of Apache
common stock in the aggregate amount that, when combined with (1) other
all-cash distributions made within the preceding 12 months and (2) the cash
and fair market value, as of the date of expiration of the tender or exchange
offer referred to below, of the consideration paid in respect of any tender or
exchange offer by Apache or a subsidiary for Apache common stock concluded
within the preceding 12 months, exceeds 12.5% of our aggregate market
capitalization -- being the product of the current market price of Apache
common stock multiplied by the number of shares of Apache common stock then
outstanding -- on the date fixed for the determination of stockholders
entitled to receive those distributions; or
- - complete successfully a tender or exchange offer made by Apache or any
subsidiary for Apache common stock that involves an aggregate consideration
that, when combined with (1) any cash and the fair market value of other
consideration payable in respect of any other tender or exchange offer by
Apache or a subsidiary for Apache common stock concluded within the preceding
12 months and (2) the aggregate amount of any all-cash distributions to all
holders of Apache common stock made within the preceding 12 months, exceeds
12.5% of our aggregate market capitalization on the date of expiration of that
tender or exchange offer.
In addition, we may make upward adjustments in the Exchange Rate and the
Optional Conversion Rate if we, in our discretion, determine it to be advisable.
Consequently, any stock dividend, subdivision of shares, distribution of rights
to purchase stock or securities, or distribution of securities convertible into
or exchangeable for stock -- or any transaction that could be treated as any of
the foregoing transactions pursuant to Section 305 of the Internal Revenue Code
of 1986 -- hereafter made by us to our stockholders will not be taxable. All
adjustments to the Exchange Rate and the Optional Conversion Rate will be
calculated to the nearest 1/10,000th of a share of Apache common stock.
No adjustment in the Exchange Rate or the Optional Conversion Rate will be
required unless that adjustment would require an increase or decrease of at
least 1% in the
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Exchange Rate. However, any adjustments which, by reason of the foregoing, are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment. All adjustments will be made successively.
Whenever the Exchange Rate and the Optional Conversion Rate are adjusted as
provided in the preceding paragraph, we will:
- - notify each transfer agent for the conversion preferred stock of the
adjustment;
- - make a prompt public announcement of the adjustment; and
- - mail a notice of the adjustment to holders of the conversion preferred stock.
At least 10 days prior to taking any action that could result in an
adjustment in the Exchange Rate and the Optional Conversion Rate, we will notify
each holder of conversion preferred stock about the proposed action.
ADJUSTMENT FOR CERTAIN
CONSOLIDATIONS OR MERGERS
In case of any consolidation or merger to which we are a party -- other
than a merger or consolidation in which we are the continuing corporation and in
which Apache common stock outstanding immediately prior to the merger or
consolidation remains unchanged -- or in case of any sale or transfer to another
corporation of the property of Apache as an entirety or substantially as an
entirety, or in case of any statutory exchange of securities with another
corporation other than in connection with a merger or acquisition, each share of
conversion preferred stock will, after consummation of that transaction, be
subject to:
- - conversion at the option of the holder into the kind and amount of securities,
cash, or other property receivable upon consummation of that transaction by a
holder of the number of shares of Apache common stock into which that share of
conversion preferred stock might have been converted immediately prior to
consummation of that transaction; and
- - conversion on May 15, 2002 into the kind and amount of securities, cash, or
other property receivable upon consummation of that transaction by a holder of
the number of shares of Apache common stock into which that conversion
preferred stock would have been converted if the conversion on May 15, 2002
had occurred immediately prior to the date of consummation of that
transaction,
assuming in each case that the holder of Apache common stock fails to exercise
rights of election, if any, as to the kind or amount of securities, cash, or
other property receivable upon consummation of that transaction.
If the kind or amount of securities, cash or other property receivable upon
consummation of the transaction is not the same for each non-electing share,
then we will treat the kind and amount of securities, cash or other property
receivable upon consummation of the transaction for each non-electing share as
the kind and amount so receivable per share by a plurality of the non-electing
shares.
The kind and amount of securities into which the conversion preferred stock
will be convertible after consummation of the transaction will be subject to
adjustment as described above under the caption "Conversion Adjustments"
following the date of consummation of the transaction. We may not become a party
to any like transaction unless the terms are consistent with the foregoing.
FRACTIONAL SHARES
No fractional shares of Apache common stock will be issued upon conversion
of the conversion preferred stock. In lieu of any fractional share otherwise
issuable in respect of the aggregate number of shares of conversion preferred
stock of any holder which are converted upon mandatory conversion or any
optional conversion, that holder will be entitled to receive an amount in cash
equal to the same fraction of:
- - in the case of automatic conversion, the Current Market Price; or
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- - in the case of an optional conversion by a holder, the Closing Price of Apache
common stock determined as of the second Trading Day immediately preceding the
effective date of conversion.
COMMON STOCK RIGHTS
Reference is made to the "Description of Capital Stock -- Stockholder
Rights Plan" in the accompanying prospectus for a description of Apache common
stock purchase rights that will accompany the common stock delivered upon
conversion of the conversion preferred stock.
LIQUIDATION RIGHTS
In the event of the voluntary or involuntary liquidation, dissolution or
winding up of Apache, the holders of shares of conversion preferred stock will
be entitled to receive out of the assets of Apache available for distribution to
stockholders -- before any distribution of assets is made on Apache common stock
or any other class or series of stock of Apache ranking junior to the conversion
preferred stock -- a liquidating distribution in the amount of $1,550.00 per
share, which is equivalent to $31.00 per depositary share, plus an amount equal
to the sum of all accrued and unpaid dividends, whether or not earned or
declared, for the then-current dividend period and all prior dividend periods.
For the purpose of the last paragraph, none of the following will
constitute a voluntary or involuntary liquidation, dissolution or winding up of
Apache:
- - the sale of all or substantially all of the property or business of Apache;
- - the merger or consolidation of Apache into or with any other corporation; or
- - the merger or consolidation of any other corporation into or with Apache.
After the payment to the holders of conversion preferred stock of the full
preferential amounts provided above, the holders of conversion preferred stock
will have no right or claim to any of the remaining assets of Apache.
In the event the assets of Apache available for distribution to the holders
of conversion preferred stock upon any liquidation, dissolution or winding up of
Apache, whether voluntary or involuntary, are insufficient to pay in full all
amounts to which the holders are entitled as provided above, no such
distribution will be made on account of any other stock ranking equally with the
conversion preferred stock as to the distribution of assets upon that
liquidation, dissolution or winding up unless a pro rata distribution is made on
the conversion preferred stock and that other stock of Apache, with the amount
allocable to each series of that stock determined on the basis of the aggregate
liquidation preference of the outstanding shares of each series and
distributions to the shares of each series being made on a pro rata basis.
VOTING RIGHTS
The holders of the shares of conversion preferred stock are not entitled to
any voting rights, except as required by applicable state law and as described
below.
If the equivalent of six quarterly dividends payable on the conversion
preferred stock or any other class or series of preferred stock ranking equally
with the conversion preferred stock as to the payment of dividends, including
the Series B preferred stock, has not been paid, the number of directors of
Apache shall be increased by two, without duplication of any increase made
pursuant to the terms of any other series of preferred stock of Apache. The
holders of conversion preferred stock -- voting as a single class with the
holders of shares of any other class of preferred stock ranking equally with the
conversion preferred stock either as to dividends or distributions of assets and
upon which like voting rights have been conferred and are exercisable -- will be
entitled to elect two directors at any meeting of stockholders of Apache at
which directors are to be elected during the period their dividends remain in
arrears. This voting right will continue until we have paid, or declared and set
apart for payment, full cumulative dividends for all past periods on all of that
preferred stock, including the Series B
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preferred stock and the conversion preferred stock.
We will not, without the approval of the holders of at least 80% of the
shares of conversion preferred stock then outstanding, amend any of the
provisions of our charter so as to affect adversely the powers, preferences,
privileges or rights of the holders of conversion preferred stock.
We will not, without the approval of the holders, voting together as a
single class, of 80% of all the shares of conversion preferred stock then
outstanding and all shares of any other series of the preferred stock of Apache
ranking equally with the conversion preferred stock as to dividends or upon
dissolution:
- - issue, authorize or increase the authorized amount of, or issue or authorize
any obligation or security convertible into or evidencing a right to purchase,
any stock of any class ranking prior to the conversion preferred stock as to
dividends or upon dissolution; or
- - reclassify any authorized Apache stock into any stock of any class, or any
obligation or security convertible into or evidencing a right to purchase such
stock, ranking prior to the conversion preferred stock,
provided that no such vote will be required for Apache to take any of these
actions to issue, authorize or increase the authorized amount of, or issue or
authorize any obligation or security convertible into or evidencing a right to
purchase, any stock ranking equally with or junior to the conversion preferred
stock.
We will not, without the approval of the holders of at least a majority of
the shares of conversion preferred stock then outstanding, become a party to any
merger, conversion, consolidation or compulsory share exchange unless the terms
of that transaction do not provide for a change in the terms of the conversion
preferred stock and the conversion preferred stock ranks equally with or prior
to any stock of the surviving corporation as to dividends or upon dissolution,
other than prior-ranking Apache stock previously authorized with the consent of
holders of the conversion preferred stock.
MISCELLANEOUS
We will at all times reserve and keep available out of our authorized and
unissued common stock, solely for issuance upon the conversion of conversion
preferred stock, that number of shares of common stock as shall from time to
time be issuable upon the conversion of all the conversion preferred stock then
outstanding. Conversion preferred stock converted into Apache common stock or
otherwise reacquired by Apache shall resume the status of authorized and
unissued shares of Apache preferred stock, undesignated as to series, and shall
be available for subsequent issuance.
TRANSFER AGENT, REGISTRAR AND DIVIDEND
DISBURSING AGENT
Norwest Bank Minnesota, National Association will act as transfer agent,
registrar, and paying agent for the payment of dividends for the conversion
preferred stock.
DESCRIPTION OF DEPOSITARY SHARES
Each depositary share represents 1/50th of a share of conversion preferred
stock deposited under the Deposit Agreement dated as of May 13, 1999, among us,
Norwest Bank Minnesota, National Association, as Depositary, and all holders
from time to time of depositary receipts issued under the Depositary Agreement.
Subject to the terms of the Deposit Agreement, each owner of a depositary
share is entitled, proportionately, to all the rights, preferences and
privileges of the share of conversion preferred stock they represent, including
dividend, conversion, voting, and liquidation rights, and is subject to all of
the limitations of the fractional share of conversion preferred stock it
represents, which are summarized above under "Description of Conversion
Preferred Stock" or in the accompanying prospectus under "Description of Capital
Stock". The depositary shares are evidenced by depositary receipts.
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<PAGE> 25
The description in this prospectus supplement of the Deposit Agreement, the
depositary shares and the Depositary is only a summary. The terms of the
depositary shares and the depositary receipts are detailed in the Deposit
Agreement, which contains the form of the depositary receipts. A copy of the
Deposit Agreement is incorporated by reference as an exhibit to the registration
statement that relates to this prospectus supplement.
Copies of the forms of Deposit Agreement and depositary receipt may be
obtained from Apache or the Depositary at the principal office of the Depositary
at 161 North Concord Exchange, P.O. Box 738, South St. Paul, Minnesota 55075,
upon written request during regular business hours.
ISSUANCE OF DEPOSITARY RECEIPTS AND
WITHDRAWAL OF CONVERSION PREFERRED STOCK
Immediately following our issuance of the conversion preferred stock, we
will deposit the conversion preferred stock with the Depositary, which will then
issue and deliver the depositary receipts to us. We will, in turn, deliver the
depositary receipts to the underwriter. Depositary receipts will be issued
evidencing only whole depositary shares.
The depositary shares will be registered under a book-entry-only system
maintained by The Depository Trust Company, New York, New York. The book-entry
only system will evidence interests in the depositary shares in book-entry-only
form. When you purchase depositary shares, you will not receive a certificate
representing your interests in the depositary shares. Instead, your ownership
interest will be reflected in the records of the direct or indirect participant
in DTC whom you elect, which may be the broker or dealer that sold the
depositary shares to you.
For more information about DTC's facilities and the book-entry-only system
it maintains, see "Book-Entry Securities" in the accompanying prospectus.
Upon surrender of depositary receipts at the Corporate Office (as defined
in the Deposit Agreement) of the Depositary or any other office as the
Depositary may designate, Apache is entitled to delivery at the Corporate Office
of certificates evidencing the number of shares of conversion preferred stock,
but only in whole shares, and any money and other property represented by those
depositary receipts. If the depositary receipts we deliver evidence a number of
depositary shares in excess of the number of whole shares of conversion
preferred stock to be withdrawn, the Depositary will deliver to us at the same
time a new depositary receipt evidencing that excess number of depositary
shares. We do not expect that there will be any public trading market for the
shares of conversion preferred stock except those represented by the depositary
shares.
CONVERSION PROVISIONS
AUTOMATIC CONVERSION. As described above under "Description of Conversion
Preferred Stock -- Automatic Conversion of Conversion Preferred Stock", the
conversion preferred stock is subject to automatic conversion into shares of
Apache common stock on May 15, 2002. The depositary shares are subject to
automatic conversion upon the same terms and conditions as the conversion
preferred stock held by the Depositary, except that the number of shares of
Apache common stock that the Depositary will deliver upon automatic conversion
of each depositary share will be equal to the number of shares of Apache common
stock it receives upon automatic conversion of each share of conversion
preferred stock divided by 50.
CONVERSION AT OPTION OF HOLDER. As described above under "Description of
Conversion Preferred Stock -- Conversion at Option of Holder", the conversion
preferred stock may be converted, in whole or in part, into shares of Apache
common stock at the option of the holders of conversion preferred stock at any
time prior to May 15, 2002. The depositary shares may, at the option of their
holders, be converted into shares of Apache common stock upon the same terms and
conditions as the conversion preferred stock, except that the number of shares
of Apache common stock that the Depositary will deliver upon conversion of each
depositary share will be equal to the number of shares of Apache
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common stock it receives upon conversion of each share of conversion preferred
stock divided by 50.
To effect an optional conversion, a holder of depositary shares must
deliver depositary receipts evidencing the depositary shares to be converted,
together with a written notice of conversion and a proper assignment of the
depositary receipts to Apache, to any transfer agent for the depositary shares,
or in blank and, if applicable, payment of an amount equal to the dividend
payable on those depositary shares, to the Depositary or its agent. Each
optional conversion of depositary shares will be effective immediately prior to
the close of business on the date on which the holder satisfies the requirements
described above. The conversion will be at the Optional Conversion Rate in
effect at that time and on that date, adjusted to reflect the fact that 50
depositary shares are the equivalent of one share of conversion preferred stock.
FRACTIONAL SHARES. No fractional shares of Apache common stock will be
issued to any holder of depositary shares upon the conversion of depositary
shares. If any conversion would result in a fractional share of Apache common
stock being issued, we will pay the holder an amount in cash equal to the value
of the fractional interest.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions it receives in respect of the conversion preferred stock to the
record holders of depositary shares in proportion, insofar as possible, to the
number of depositary shares owned by the record holders, subject to obligations
of the record holders to file proofs, certificates and other information and to
pay certain charges and expenses to the Depositary.
In the event of a distribution other than cash in respect of the conversion
preferred stock, the Depositary will distribute property it receives to the
record holders of depositary shares in proportion, insofar as possible, to the
number of depositary shares owned by the record holder, subject to obligations
of holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Depositary. However, if the Depositary determines
that it is not feasible to make that distribution, the Depositary may, with our
approval, sell that property and distribute the net proceeds from that sale to
the record holders.
RECORD DATE
Whenever:
- - any cash dividend or other cash distribution becomes payable, any distribution
other than cash shall be made or any rights, preferences or privileges are
offered with respect to the conversion preferred stock; or
- - the Depositary receives notice of any meeting at which holders of conversion
preferred stock are entitled to vote or of which holders of conversion
preferred stock are entitled to notice,
the Depositary will in each instance fix a record date, which will be the same
date as the record date for the conversion preferred stock, for the
determination of the holders of depositary receipts:
- - who are entitled to receive that dividend, distribution, rights, preferences,
or privileges, or the net proceeds of the sale thereof; and
- - who are entitled to give instructions for the exercise of voting rights at any
such meeting or to receive notice of such meeting.
VOTING OF CONVERSION PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of conversion
preferred stock are entitled to vote, the Depositary will mail the information
contained in that notice of meeting to the record holders of depositary shares.
Each record holder of depositary shares on the record date, which will be the
same date as the record date for the conversion preferred stock, will be
entitled to instruct the Depositary as to the exercise of voting rights
pertaining to the number of shares of conversion preferred stock or
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fraction thereof, represented by that holder's depositary shares.
The Depositary will endeavor, insofar as practicable, to vote the number of
shares of conversion preferred stock or fractions thereof represented by those
depositary shares in accordance with the instructions it receives, and we have
agreed to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so. The Depositary will abstain from voting
the shares of conversion preferred stock if it does not receive specific written
instructions from the holders of depositary shares representing those shares.
Each depositary share will entitle the holder to instruct the Depositary to
cast 1/50th of the vote of a share of conversion preferred stock on each matter
on which holders of the conversion preferred stock are entitled to vote.
RESIGNATION AND REMOVAL OF DEPOSITARY; TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary may resign at any time by delivering to us notice of its
election to do so. We may at any time remove the Depositary. Any such
resignation or removal will take effect upon the appointment of a successor
Depositary and its acceptance of that appointment. We will appoint a successor
Depositary within 60 days after delivery of the notice of resignation or
removal.
The Deposit Agreement may be terminated by us or by the Depositary if:
- - there has been a final distribution in respect of the conversion preferred
stock in connection with any liquidation, dissolution or winding up of Apache
and that distribution has been distributed to the holders of depositary
receipts; or
- - each share of conversion preferred stock has been converted into shares of
Apache common stock.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax
consequences relevant to the purchase, ownership, and disposition of the
conversion preferred stock. The following summary is based upon current
provisions of the Internal Revenue Code of 1986, Treasury regulations and
judicial or administrative authority, all of which are subject to change, which
change may be retroactive. The summary is limited to the U.S. federal income tax
consequences to investors who are citizens or residents of the United States or
that are U.S. corporations. State, local and foreign tax consequences are not
summarized, nor are tax consequences to special classes of investors, including
tax-exempt organizations, insurance companies, banks or dealers in securities.
Tax consequences may vary depending upon the particular status of an investor.
The summary is limited to taxpayers who will hold the depositary shares and any
Apache common stock received in exchange therefor as "capital assets" within the
meaning of Section 1221 of the Internal Revenue Code. There can be no assurance
that future changes in applicable law or administrative and judicial
interpretations thereof will not adversely affect the tax consequences
summarized herein or that there will not be differences of opinion as to the
interpretation of applicable law.
Each potential investor should consult with its own tax adviser as to the
federal, state, local, foreign and any other tax consequences of the purchase,
ownership, and disposition of the conversion preferred stock.
DEPOSITARY SHARES
The owners of the depositary shares will be treated for federal income tax
purposes as if they were the owners of the underlying securities. Accordingly,
the tax treatment for the owners of the depositary shares will be the same as
the tax treatment for the owners of securities described below. In addition, no
gain or loss will be recognized upon the withdrawal of conversion preferred
stock in exchange for depositary shares pursuant to the Deposit Agreement, an
owner's tax basis in the withdrawn conversion preferred stock will be the same
as the tax basis in the surrendered depositary shares, and the owner's holding
period of the withdrawn securities will include the period during which the
owner held the surrendered depositary shares.
DIVIDENDS
Dividends paid on conversion preferred stock will be taxable as ordinary
income to the extent of Apache's current or accumulated earnings and profits.
Corporate holders of the conversion preferred stock should consider the 46-day
holding period required by Section 246(c) of the Internal Revenue Code for the
70% dividends received deduction, the rules in Section 246A of the Internal
Revenue Code that reduce the 70% dividends received deduction for dividends on
certain debt-financed stock, and the rules in Section 1059 of the Internal
Revenue Code that reduce the basis of stock in respect of certain extraordinary
dividends. Under a special rule in Section 1059(f), any dividend with respect to
"disqualified preferred stock" is treated as an extraordinary dividend.
"Disqualified preferred stock" is defined to include stock that has a dividend
rate that declines in the future. While the issue is not free from doubt due to
the lack of authority directly on point, the conversion preferred stock should
not constitute "disqualified preferred stock".
DISPOSITIONS
A holder will generally recognize capital gain or loss on a sale or
exchange of the conversion preferred stock or Apache common stock equal to the
difference between the amount realized upon the sale or exchange and the
holder's tax basis in the stock sold or exchanged. Such capital gain or loss
will be long-term capital gain or loss if the holder has held the securities for
more than one year.
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CONVERSION INTO COMMON STOCK
As a general rule, no gain or loss will be recognized by a holder on the
conversion of conversion preferred stock into shares of Apache common stock.
Gain may be recognized upon the receipt by a holder of cash in lieu of a
fractional share of Apache common stock.
The tax basis of the shares of Apache common stock received upon conversion
will generally be equal to the tax basis of the conversion preferred stock
converted, adjusted to reflect any income or gain recognized on the conversion.
The holding period of the Apache common stock received will include the holding
period of the conversion preferred stock converted.
CONVERSION PREMIUM
Under some circumstances, Section 305 of the Internal Revenue Code requires
that any excess of the redemption price of preferred stock over its issue price
is includable in income, prior to receipt, as a constructive dividend. While the
issue is not free from doubt due to a lack of authority directly on point, a
holder of conversion preferred stock should not be required to include any
conversion premium in income as a redemption premium under Section 305 of the
Internal Revenue Code in respect of the conversion into Apache common stock.
ADJUSTMENT OF CONVERSION RATE
Holders of conversion preferred stock might be treated as receiving a
constructive distribution from Apache if:
- - a conversion rate is adjusted and as a result of the adjustment the
proportionate interest of holders of conversion preferred stock in the assets
or earnings and profits of Apache is increased; and
- - the adjustment is not made pursuant to a bona fide, reasonable antidilution
formula. An adjustment in a conversion rate would not be considered made
pursuant to a reasonable antidilution formula if the adjustment were made to
compensate for certain taxable distributions with respect to Apache common
stock.
Thus, under some circumstances, an increase in a conversion rate would be
likely to be taxable to holders of conversion preferred stock as a dividend to
the extent of our current or accumulated earnings and profits. Holders of
conversion preferred stock would be required to include their allocable share of
that constructive dividend in gross income but would not receive any cash
related to it.
FOREIGN INVESTORS
Generally, dividends paid to a nonresident alien individual or foreign
corporation who does not hold the conversion preferred stock or Apache common
stock in connection with a U.S. trade or business will be subject to a 30% U.S.
withholding tax. The withholding tax may be reduced if a tax treaty is in effect
between the United States and the foreign investor's country. A nonresident
alien individual or foreign corporation generally will not be subject to U.S.
federal income tax with respect to gain recognized on a sale, exchange or
redemption of the conversion preferred stock or Apache common stock, unless:
- - the gain is effectively connected with a U.S. trade or business of the holder;
or
- - in the case of a nonresident alien individual who holds stock as a capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale or disposition and certain other conditions are met.
Foreign investors are urged to consult their own tax advisors regarding the
purchase, ownership and disposition of the conversion preferred stock.
BACKUP WITHHOLDING
Each holder -- other than an exempt holder such as a corporation,
tax-exempt organization, qualified pension and profit-sharing trust, individual
retirement account, or a nonresident alien who provides certification as to
status as a nonresident -- will be required to provide, under penalties of
perjury, a certification setting forth the holder's name, address, correct
federal
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taxpayer identification number and a statement that the holder is not subject to
backup withholding. Should a nonexempt holder fail to provide the required
certification, we will be required to withhold 31% of the amount otherwise
payable to the holder, and remit the withheld amount to the IRS as a credit
against the holder's federal income tax liability. Holders should consult their
tax advisers regarding their qualification for exemption from backup withholding
and the procedure for obtaining any applicable exemption.
VALIDITY OF SECURITIES
The validity of the depositary shares,
the conversion preferred stock and the Apache common stock issuable upon
conversion thereof will be passed upon for Apache by its Vice President and
General Counsel, Z. S. Kobiashvili, and for Goldman, Sachs & Co. by Brown & Wood
LLP, New York, New York. As of the date of this prospectus supplement, Mr.
Kobiashvili owns 2,068 shares of Common Stock through Apache's 401(k) savings
plan, holds employee stock options to purchase 45,700 shares of Apache common
stock, of which options to purchase 25,250 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.
Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas, our outside legal
counsel, and Mr. Kobiashvili will issue opinions about some legal matters in
connection with the offering. Brown & Wood LLP will issue an opinion about some
legal matters in connection with the offering for Goldman, Sachs & Co.
EXPERTS
The audited consolidated financial statements of Apache Corporation
incorporated by reference into this prospectus supplement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The information incorporated by reference into this prospectus supplement
regarding the total proved reserves of Apache was prepared by Apache and
reviewed by Ryder Scott Company Petroleum Engineers, as stated in their letter
reports, and is incorporated by reference in reliance upon the authority of said
firm as experts in such matters. The information incorporated by reference into
this prospectus supplement regarding the total estimated proved reserves
acquired from Texaco Exploration and Production Inc. was prepared by Apache and
reviewed by Ryder Scott, as stated in their letter reports, and is incorporated
by reference in reliance upon the authority of that firm as experts in these
matters. The information incorporated by reference into this prospectus
supplement regarding the total proved reserves of DEKALB Energy Company 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
incorporated by reference in reliance upon the authority of that firm as experts
in these matters.
A portion of the information incorporated by reference in this prospectus
supplement regarding the total proved reserves of Aquila Energy Resources
Corporation acquired by Apache was prepared by Netherland, Sewell & Associates,
Inc. as of December 31, 1994, as stated in their letter report, and is
incorporated by reference in reliance upon the authority of that firm as experts
in those matters. Netherland, Sewell did not review any of the reserves of
Aquila acquired during 1995.
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UNDERWRITING
Apache and Goldman, Sachs & Co. ("Goldman Sachs") have entered into an
underwriting agreement with respect to the depositary shares being offered.
Subject to certain conditions, Goldman Sachs has agreed to purchase the
depositary shares.
Depositary shares sold by Goldman Sachs to the public will initially be
offered at the initial price to public set forth on the cover of this prospectus
supplement. Any depositary shares sold by Goldman Sachs to securities dealers
may be sold at a discount of up to $0.558 per depositary share from the initial
price to public. Any of those securities dealers may resell any depositary
shares purchased from Goldman Sachs to certain other brokers or dealers at a
discount of up to $0.10 per depositary share from the initial price to public.
If all the depositary shares are not sold at the initial price to public,
Goldman Sachs may change the offering price and the other selling terms.
Apache and the directors and executive officers of Apache have agreed with
Goldman Sachs not to offer, sell, contract to sell or otherwise dispose of or
hedge any of its common stock, preferred stock, depositary shares or securities
convertible into or exchangeable for shares of Apache common stock during the
period from the date of this prospectus supplement continuing through the date
90 days after the date of this prospectus supplement, except the common stock
that is the subject of a concurrent public offering and with the prior written
consent of Goldman Sachs. This agreement does not apply to any existing employee
benefit plans or to Apache's dividend reinvestment plan.
In connection with the offering, Goldman Sachs may purchase and sell the
depositary shares or common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by Goldman Sachs of a
greater number of depositary shares than it is required to purchase in the
offering. Stabilizing transactions consist of certain bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the
depositary shares or Apache common stock while the offering is in progress.
The depositary shares will be a new issue of securities with no established
trading market. Apache intends to list the depositary shares on the New York
Stock Exchange. Goldman Sachs has advised Apache that it intends to make a
market in the depositary shares, but it is not obligated to do so and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of the trading market for the depositary shares.
These activities by Goldman Sachs may stabilize, maintain or otherwise
affect the market price of the depositary shares or Apache common stock. As a
result, the price of the depositary shares or Apache common stock may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by Goldman Sachs at any time.
These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
Apache estimates that its total expenses of the offering of depositary
shares, excluding underwriting discounts and commissions, will be approximately
$200,000.
Apache has agreed to indemnify Goldman Sachs against certain liabilities,
including liabilities under the Securities Act of 1933.
Goldman Sachs in the past has performed investment banking and other
financial services for Apache and has received compensation for these services,
which have included advice to Apache in connection with the Shell acquisition.
In addition, Goldman Sachs or one or more of its affiliates and Apache may enter
into a bridge loan facility that would be used to fund the pending Shell
acquisition if it is completed before the offering closes. None of the proceeds
from this offering would be used to repay the bridge loan. Goldman Sachs or its
affiliates may in the future provide investment banking and other financial
services to Apache or its affiliates for which it will receive compensation.
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$1,000,000,000
APACHE CORPORATION
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
DEBT SECURITIES
-------------------------
We may from time to time issue up to a total of $1,000,000,000 of our
common stock and related rights, preferred stock, depositary shares and/or debt
securities. The accompanying prospectus supplement will specify the terms of the
securities.
-------------------------
Apache may sell these securities to or through underwriters, and also to
other purchasers or through agents. The accompanying prospectus supplement will
specify the names of these underwriters or agents.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
This prospectus may not be used to sell securities unless it is accompanied
by a prospectus supplement.
-------------------------
Prospectus dated April 9, 1999.
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Apache Corporation.......................................... 2
Ratios of Earnings to Fixed Charges and Ratios of Earnings
to Combined Fixed Charges and Preferred Stock Dividends... 2
Use of Proceeds............................................. 3
The Securities We May Offer................................. 3
Description of Capital Stock................................ 4
Description of Depositary Shares............................ 9
Description of Debt Securities.............................. 12
Book-Entry Securities....................................... 24
Plan of Distribution........................................ 26
Legal Matters............................................... 27
Experts..................................................... 27
</TABLE>
i
<PAGE> 34
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $1,000,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we offer to sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. This prospectus,
together with applicable prospectus supplements, will include or refer you to
all material information relating to each offering.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. Our Securities and
Exchange Commission filings are available to the public over the Internet at the
Securities and Exchange Commission's web site at http://www.sec.gov. You may
also read and copy any document we file at the Securities and Exchange
Commission's public reference rooms located at:
- - 450 Fifth Street, N.W.
Washington, D.C. 20549;
- - 7 World Trade Center
New York, New York 10048; and
- - Citicorp Center
500 West Madison Street
Chicago, Illinois 60661.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms and their copy charges.
Our common stock has been listed and traded on the New York Stock Exchange
since 1969 and the Chicago Stock Exchange since 1960. Accordingly, you may
inspect the information we file with the Securities and Exchange Commission at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005, and at
the Chicago Stock Exchange, One Financial Place, 440 S. LaSalle Street, Chicago,
Illinois 60605-1070.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents. The
information incorporated by reference is an important part of this prospectus,
and information that we file later with the Securities and Exchange Commission
will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the
Securities and Exchange Commission under Sections 13(a), 13(c), 14 and 15(d) of
the Securities Exchange Act of 1934 until we sell all of the securities:
- - Our Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
- - Current Report on Form 8-K dated March 2, 1999 (as amended by Amendment No. 1
on Form 8-K/A filed on March 5, 1999).
Each of these documents is available from the Securities and Exchange
Commission's web site and public reference rooms described above. You may also
request a copy of these filings, excluding exhibits, at no cost by writing or
telephoning Cheri L. Peper, Corporate Secretary, at our principal executive
office, which is:
Apache Corporation
2000 Post Oak Boulevard, Suite 100
Houston, Texas 77056-4400
(713) 296-6000
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement.
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<PAGE> 35
We have not authorized anyone to provide you with different information.
We are not making an offer of the securities covered by this prospectus in
any state where the offer is not permitted. You should not assume that the
information in this prospectus or any prospectus supplement or in any other
document incorporated by reference in this prospectus is accurate as of any date
other than the date on the front of those documents.
APACHE CORPORATION
Apache Corporation is a Delaware corporation formed in 1954. We are an
independent energy company that explores for, develops and produces natural gas,
crude oil and natural gas liquids. In North America, our 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, we have exploration and production interests offshore
Western Australia, in Egypt and offshore the Ivory Coast, and exploration
interests in Poland and offshore The People's Republic of China.
We hold interests in many of our U.S., Canadian and international
properties through operating subsidiaries, such as Apache Canada Ltd., DEK
Energy Company, which was formerly known as DEKALB Energy Company, Apache Energy
Limited, which was formerly known as Hadson Energy Limited, Apache
International, Inc., and Apache Overseas, Inc. The properties referred to in
this prospectus, in any prospectus supplement or in any other document
incorporated by reference in this prospectus may be held by our subsidiaries. We
treat all operations as one line of business.
RATIOS OF EARNINGS TO FIXED CHARGES AND
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
Our ratios of earnings to fixed charges and our ratios of earnings to
combined fixed charges and preferred stock dividends were the same for each of
the periods indicated in the table below. This is because there were no shares
of preferred stock outstanding prior to 1998, and because our 1998 earnings were
inadequate to cover fixed charges and dividends as described below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- --------------------------------
1998 1997 1996 1995 1994
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
-- 2.93 2.72 1.15 2.34
</TABLE>
Our ratios of earnings to fixed charges and our ratios of earnings to
combined fixed charges and preferred stock dividends were computed based on:
- - "earnings," which consist of consolidated income or losses from continuing
operations plus income taxes and fixed charges, except capitalized interest,
or, in the case of our ratios of earnings to combined fixed charges and
preferred stock dividends, those earnings plus preferred stock dividends; and
- - "fixed charges," which consist of consolidated interest on indebtedness,
including capitalized interest, amortization of debt discount and expense, and
the estimated portion of rental expense attributable to interest, or, in the
case of our ratios of earnings to combined fixed charges and preferred stock
dividends, those fixed charges plus preferred stock dividends.
Due to the $243.2 million non-cash write-down of the carrying value of our
U.S. proved oil and gas properties, for the year ended
2
<PAGE> 36
December 31, 1998, our 1998 earnings were inadequate to cover fixed charges by
$236.8 million and inadequate to cover combined fixed charges and preferred
stock dividends by $239.7 million.
On May 17, 1995, Apache acquired DEKALB Energy Company, which is 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, our financial information for all preceding periods was
restated.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying prospectus supplement, we
expect to use the net proceeds from the sale of the securities for general
corporate purposes, which may include, among other things:
- - the repayment of outstanding indebtedness;
- - working capital;
- - capital expenditures; and
- - acquisitions.
The precise amount and timing of the application of such proceeds will
depend upon our funding requirements and the availability and cost of other
funds.
THE SECURITIES WE MAY OFFER
The descriptions of the securities contained in this prospectus, together
with the applicable prospectus supplements, summarize all the material terms and
provisions of the various types of securities that we may offer. The particular
terms of the securities offered by any prospectus supplement will be described
in that prospectus supplement. If indicated in the applicable prospectus
supplement, the terms of the securities may differ from the terms summarized
below. The prospectus supplement will also contain information, where
applicable, about material U.S. federal income tax considerations relating to
the securities, and the securities exchange, if any, on which the securities
will be listed.
We may sell from time to time, in one or more offerings:
- - common stock and related rights;
- - preferred stock;
- - depositary shares; and/or
- - debt securities.
In this prospectus, we will refer to the common stock and related rights,
preferred stock, depositary shares and debt securities collectively as
"securities." The total dollar amount of all securities that we may issue under
this prospectus will not exceed $1,000,000,000.
If we issue debt securities at a discount from their original stated
principal amount, then, for purposes of calculating the total dollar amount of
all securities issued under this prospectus, we will treat the initial offering
price of the debt securities as the total original principal amount of the debt
securities.
This prospectus may not be used to sell securities unless it is accompanied
by a prospectus supplement.
3
<PAGE> 37
DESCRIPTION OF CAPITAL STOCK
The following description of our common stock and preferred stock, together
with the additional information included in any applicable prospectus
supplements, summarizes the material terms and provisions of these types of
securities. For the complete terms of our common stock and preferred stock,
please refer to our charter, bylaws and stockholder rights plan that are
incorporated by reference into the registration statement that includes this
prospectus or may be incorporated by reference in this prospectus. The terms of
these securities may also be affected by the General Corporation Law of the
State of Delaware.
Under our charter, our authorized capital stock consists of 215,000,000
shares of common stock, $1.25 par value per share, and 5,000,000 shares of
preferred stock, no par value. We will describe the specific terms of any common
stock or preferred stock we may offer in a prospectus supplement. If indicated
in a prospectus supplement, the terms of any common stock or preferred stock
offered under that prospectus supplement may differ from the terms described
below.
COMMON STOCK
As of March 31, 1999, Apache had approximately 97,820,667 shares of common
stock issued and outstanding. Each outstanding share of common stock currently
has attached to it one preferred share purchase right issued under our
stockholder rights plan, which is summarized below. All outstanding shares of
common stock are duly authorized, validly issued, fully paid and nonassessable.
VOTING
For all matters submitted to a vote of stockholders, each holder of common
stock is entitled to one vote for each share registered in his or her name on
the books of Apache. Our common stock does not have cumulative voting rights. As
a result, subject to the voting rights of Series B preferred stockholders and
any future holders of preferred stock, persons who hold more than 50% of the
outstanding common stock entitled to elect members of the board of directors can
elect all of the directors who are up for election in a particular year.
DIVIDENDS
If our board of directors declares a dividend, holders of common stock will
receive payments from the funds of Apache that are legally available to pay
dividends. However, this dividend right is subject to any preferential dividend
rights we have granted to Series B preferred stockholders or may grant to future
holders of preferred stock.
LIQUIDATION
If Apache is dissolved, the holders of common stock will be entitled to
share ratably in all the assets that remain after we pay our liabilities and any
amounts we may owe to the persons who hold preferred stock.
OTHER RIGHTS AND RESTRICTIONS
Holders of common stock do not have preemptive rights, and they have no
right to convert their common stock into any other securities. Our common stock
is not subject to redemption by Apache. Our charter and bylaws do not restrict
the ability of a holder of common stock to transfer his or her shares of common
stock.
When we issue shares of common stock, the shares will be fully paid and
nonassessable. Delaware law provides that, if we make a distribution to our
stockholders other than a distribution of our capital stock, when we are
insolvent, or that renders us insolvent, then our stockholders would be required
to pay back to us the amount of the distribution we made to them, or the portion
of the distribution that causes us to become insolvent.
LISTING
Our common stock is listed on the New York Stock Exchange and the Chicago
Stock Exchange.
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<PAGE> 38
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Norwest Bank
Minnesota, National Association.
PREFERRED STOCK
GENERAL
We have 5,000,000 shares of no par preferred stock authorized, of which
25,000 shares have been designated as Series A Junior Participating Preferred
Stock and 100,000 shares have been designated as 5.68% Series B Cumulative
Preferred Stock. The remaining shares of preferred stock are undesignated.
Our charter authorizes our board of directors to issue preferred stock in
one or more series and to determine the voting rights and dividend rights,
dividend rates, liquidation preferences, conversion rights, redemption rights,
including sinking fund provisions and redemption prices, and other terms and
rights of each series of preferred stock.
SERIES A
The shares of Series A preferred stock are authorized for issuance pursuant
to rights that trade with outstanding Apache common stock and are reserved for
issuance upon the exercise of the rights discussed below under the caption
"-- Stockholder Rights Plan."
SERIES B
As of March 31, 1999, Apache had issued and outstanding 100,000 shares of
Series B preferred stock in the form of one million depositary shares, each
representing one-tenth ( 1/10) of a share of Series B preferred stock. The
Series B preferred stock has no stated maturity, is not subject to a sinking
fund and is not convertible into Apache common stock or any other securities.
Apache has the option to redeem the Series B preferred stock at $1,000 per share
on or after August 25, 2008. Holders of the shares are entitled to receive
cumulative cash dividends at an annual rate of $5.68 per depositary share when,
and if, declared by Apache's board of directors.
The Series B preferred stock ranks prior and superior to our common stock
and Series A preferred stock as to payment of dividends and distribution of
assets upon our dissolution, liquidation or winding up.
If dividends are not paid on the Series B preferred stock, payments on our
common stock are prohibited and payments on any other capital stock are
restricted.
Shares of Series B preferred stock generally do not have voting rights.
However, if we fail to pay the equivalent of six quarterly dividends payable on
the Series B preferred stock or another class or series of preferred stock that
ranks equally with the Series B preferred stock, then we will increase the size
of our board of directors by two members. The holders of the Series B preferred
stock and any other class or series of preferred stock ranking equally with the
Series B preferred stock, voting as a single class, will then have the right to
vote for the two additional directors. This voting right would continue until we
paid all past dividends on all that preferred stock.
Without the vote of at least 80% of the outstanding shares of Series B
preferred stock, we may not alter or repeal any provision in our charter so as
to adversely affect the rights of the Series B preferred stock.
UNDESIGNATED PREFERRED STOCK
This summary of the undesignated preferred stock discusses terms and
conditions that we expect will apply to all series of the preferred stock
offered under this prospectus. The applicable prospectus supplement will
describe the particular terms of each particular series of preferred stock
offered. If indicated in the prospectus supplement, the terms of any series may
differ from the terms described below.
The following description, together with the applicable prospectus
supplements, summarizes all the material terms and provisions of any preferred
stock being offered by this prospectus. It does not restate the terms and
provisions in their entirety. We urge you to read our charter and the
5
<PAGE> 39
applicable certificate of designation because they, and not this description,
define the rights of any holders of preferred stock. We have filed our charter
as an exhibit to the registration statement which includes this prospectus. We
will incorporate by reference as an exhibit to the registration statement the
form of any certificate of designation before the issuance of any series of
preferred stock.
We expect the prospectus supplement to include some or all of the following
terms:
- - the designation of the series of preferred stock;
- - the number of shares of preferred stock offered, the liquidation preference
per share and the offering price of the preferred stock;
- - the dividend rate or rates of the shares, the dates at which dividends, if
declared, will be payable, and whether or not the dividends are to be
cumulative and, if cumulative, the date or dates from which dividends shall be
cumulative;
- - the amounts payable on shares of the preferred stock in the event of our
voluntary or involuntary liquidation, dissolution or winding up;
- - the redemption rights and price or prices, if any, for the shares of preferred
stock;
- - any terms, and the amount, of any sinking fund or analogous fund providing for
the purchase or redemption of the shares of preferred stock;
- - any restrictions on our ability to make payments on any of our capital stock
if dividend or other payments are not made on the preferred stock;
- - any voting rights granted to the holders of the shares of preferred stock in
addition to those required by Delaware law or our certificate of
incorporation;
- - whether the shares of preferred stock will be convertible into shares of our
common stock or any other class of our capital stock, and, if convertible, the
conversion price or prices, and any adjustment or other terms and conditions
upon which the conversion shall be made;
- - any other rights, preferences, restrictions, limitations or conditions
relative to the shares of preferred stock permitted by Delaware law or our
certificate of incorporation;
- - any listing of the preferred stock on any securities exchange; and
- - the federal income tax considerations applicable to the preferred stock.
Subject to our charter and to any limitations imposed by any
then-outstanding preferred stock, we may issue additional series of preferred
stock, at any time or from time to time, with such powers, preferences, rights
and qualifications, limitations or restrictions, as the board of directors
determines, and without further action of the stockholders, including holders of
our then outstanding preferred stock, if any.
STOCKHOLDER RIGHTS PLAN
In 1995, our board of directors adopted a stockholder rights plan to
replace the former plan adopted in 1986. Under our stockholder rights plan, each
of our common stockholders received a dividend of one "preferred stock purchase
right" for each outstanding share of common stock that the stockholder owned. We
refer to these preferred stock purchase rights as the "rights." Unless the
rights have been previously redeemed, all shares of Apache common stock issued
after the 1996 dividend are issued with rights. The rights trade automatically
with our shares of common stock and become exercisable only under certain
circumstances described below.
The purpose of the rights is to encourage potential acquirors to negotiate
with our board of directors before attempting a takeover bid and to provide our
board of directors with leverage in negotiating on behalf of our stockholders
the terms of any proposed takeover. The rights may have certain anti-takeover
effects. They should not, however, interfere with any merger or other business
combination approved by our board of directors.
The following description is a summary of all the material terms of our
stockholder rights plan. It does not restate these terms in their entirety. We
urge you to read our stockholder rights plan because it, and not
6
<PAGE> 40
this description, defines the terms and provisions of our plan. Our stockholder
rights plan is an exhibit to our registration statement on Form 8-A, as amended,
which we filed with the Securities and Exchange Commission on January 24, 1996
and which is incorporated by reference as an exhibit to the registration
statement that includes this prospectus. You may obtain a copy at no charge by
writing to us at the address listed under the caption "Where You Can Find More
Information."
EXERCISE OF RIGHTS
Until a right is exercised, the holder of a right will not have any rights
as a stockholder. When the rights become exercisable, holders of the rights will
be able to purchase from us 1/10,000th of a share of our Series A preferred
stock, at a purchase price of $100, subject to adjustment, per 1/10,000th of a
share.
In general, the rights will become exercisable upon the earlier of:
- - ten calendar days after a public announcement that a person or group has
acquired beneficial ownership of 20% or more of the outstanding shares of our
common stock; or
- - ten business days after the beginning of a tender offer or exchange offer that
would result in a person or group beneficially owning 30% or more of our
common stock.
FLIP IN EVENT
If a person or group becomes the beneficial owner of 20% or more of our
common stock, then each right will then entitle its holder to receive, upon
exercise, a number of shares of our common stock which is equal to the exercise
price of the right divided by one-half of the market price of our common stock
on the date of the occurrence of this event. We refer to this occurrence as a
"flip in event." A flip in event does not occur if there is an offer for all of
our outstanding shares of common stock that our board of directors determines is
fair to our stockholders and in Apache's best interests.
FLIP OVER EVENT
If at any time after a person or group becomes the beneficial owner of 20%
or more of our common stock, Apache is acquired in a merger or other transaction
in which Apache does not survive or in which our common stock is changed or
exchanged or 50% or more of Apache's assets or earning power is sold or
transferred, then each holder of a right will be entitled to receive, upon
exercise, a number of shares of common stock of the acquiring company in the
transaction equal to the exercise price of the right divided by one-half of the
market price of the acquiring company's common stock on the date of the
occurrence of this event. This exercise right will not occur if the merger or
other transaction follows an offer for all of our outstanding shares of common
stock that our board of directors determines is fair to our stockholders and in
Apache's best interests.
EXCHANGE OF RIGHTS
At any time after a flip in event, our board of directors may exchange the
rights by providing to the holder one share of our common stock or 1/10,000th of
a share of our Series A preferred stock for each of the holder's rights.
REDEMPTION OF RIGHTS
At any time before a flip in event, we may redeem the rights at a price of
$.01 per right. The rights will expire on the close of business on January 31,
2006, subject to earlier expiration or termination as described in our
stockholder rights plan.
Unless and until the rights become exercisable, they will be transferred
with and only with the shares of Apache common stock.
ANTI-TAKEOVER EFFECT OF PROVISIONS OF APACHE'S CHARTER AND BYLAWS AND DELAWARE
LAW
Apache's charter and bylaws include provisions designed to prevent the use
of certain tactics in connection with a potential takeover of Apache. Please
refer to our charter and bylaws that are incorporated by reference into the
registration statement that
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<PAGE> 41
includes this prospectus. You may obtain copies at no charge by writing to us at
the address listed under the caption "Where You Can Find More Information."
Provisions of Delaware law have a similar anti-takeover effect.
APACHE'S BYLAWS
Apache's board of directors is divided into three classes, with directors
serving staggered three-year terms.
APACHE'S CHARTER
Article Twelve generally stipulates that the affirmative vote of 80% of our
voting shares is required to adopt any agreement for the merger or consolidation
with or into any other corporation which is the beneficial owner of more than 5%
of our voting shares. Article Twelve further provides that such 80% approval is
necessary to authorize any sale or lease of assets between Apache and any
beneficial holder of 5% or more of our voting shares.
Article Fourteen contains a "fair price" provision which requires that any
tender offer made by a beneficial owner of more than 5% of our outstanding
voting stock in connection with any:
- - plan of merger;
- - consolidation or reorganization;
- - any sale or lease of substantially all of our assets; or
- - any issuance of our equity securities to the 5% stockholder
must provide at least as favorable terms to each holder of common stock other
than the stockholder making the tender offer.
Article Fifteen contains an "anti-greenmail" mechanism which prohibits
Apache from acquiring any voting stock from the beneficial owner of more than 5%
of the outstanding voting stock, except for acquisitions pursuant to a tender
offer to all holders of voting stock on the same price, terms and conditions,
acquisitions in compliance with Rule 10b-18 of the Securities Exchange Act of
1934 and acquisitions at a price not exceeding the market value per share.
Article Sixteen prohibits the stockholders from acting by written consent
in lieu of a meeting.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS UNDER DELAWARE LAW
Section 203 of the Delaware General Corporation Law prevents a publicly
held corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless:
- - before the date on which the person became an interested stockholder, the
board of directors of the corporation approved either the business combination
or the transaction in which the person became an interested stockholder;
- - the interested stockholder owned at least 85% of the outstanding voting stock
of the corporation at the beginning of the transaction in which it became an
interested stockholder, excluding stock held by directors who are also
officers of the corporation and by employee stock plans that do not provide
participants with the rights to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange offer; or
- - after the date on which the interested stockholder became an interested
stockholder, the business combination is approved by the board of directors
and the holders of two-thirds of the outstanding voting stock of the
corporation voting at a meeting, excluding the voting stock owned by the
interested stockholder.
As defined in Section 203, an "interested stockholder" is generally a
person owning 15% or more of the outstanding voting stock of the corporation. As
defined in Section 203, a "business combination" includes mergers,
consolidations, stock and assets sales and other transactions with the
interested stockholder.
The provisions of Section 203 may have the effect of delaying, deferring or
preventing a change of control of Apache.
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<PAGE> 42
DESCRIPTION OF DEPOSITARY SHARES
The following description, together with the applicable prospectus
supplements, summarizes all the material terms and provisions of the depositary
shares that we may offer under this prospectus and the related deposit
agreements and depositary receipts. Specific deposit agreements and depositary
receipts will contain additional important terms and provisions and will be
incorporated by reference into the registration statement which includes this
prospectus before we issue any depositary shares.
This summary of depositary agreements, depositary shares and depositary
receipts relates to terms and conditions applicable to these types of securities
generally. The particular terms of any series of depositary shares will be
summarized in the applicable prospectus supplement. If indicated in the
applicable prospectus supplement, the terms of any series may differ from the
terms summarized below.
GENERAL
We may elect to offer fractional shares of preferred stock rather than full
shares of preferred stock. If so, we will issue "depositary receipts" for these
"depositary shares." Each depositary share will represent a fraction of a share
of a particular series of preferred stock. Each holder of a depositary share
will be entitled, in proportion to the fraction of preferred stock represented
by that depositary share, to the rights and preferences of the preferred stock,
including dividend, voting, redemption, conversion and liquidation rights, if
any. We will enter into a deposit agreement with a depositary, which will be
named in the related prospectus supplement.
In order to issue depositary shares, we will issue preferred stock and
immediately deposit these shares with the depositary. The depositary will then
issue and deliver depositary receipts to the persons who purchase depositary
shares. Each whole depositary share issued by the depositary may represent a
fraction of a share of preferred stock held by the depositary. The depositary
will issue depositary receipts in a form that reflects whole depositary shares,
and each depositary receipt may evidence any number of whole depositary shares.
Pending the preparation of definitive engraved depositary receipts, a
depositary may, upon our written order, issue temporary depositary receipts,
which will temporarily entitle the holders to all the rights pertaining to the
definitive depositary receipts. We will bear the costs and expenses of promptly
preparing definitive depositary receipts and of exchanging the temporary
depositary receipts for such definitive depositary receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash and non-cash distributions it
receives with respect to the underlying preferred stock to the record holders of
depositary shares in proportion to the number of depositary shares they hold. In
the case of non-cash distributions, the depositary may determine that the
distribution cannot be made proportionately or that it may not be feasible to
make the distribution. If so, the depositary will, with our approval, adopt a
method it deems equitable and practicable to effect the distribution, including
the sale, public or private, of the securities or other non-cash property it
receives in the distribution at a place and on terms it deems proper. The
amounts distributed by the depositary will be reduced by any amount required to
be withheld by Apache or the depositary on account of taxes.
REDEMPTION OF DEPOSITARY SHARES
If we redeem the series of preferred stock that underlies the depositary
shares, the depositary will redeem the depositary shares from the proceeds it
receives from the redemption of the preferred stock it holds. The depositary
will redeem the number of depositary shares that represent the amount of
underlying preferred stock that we have redeemed. The redemption price for
depositary shares will be in proportion to the redemption price per share that
we paid for the underlying preferred stock. If we redeem less than all of the
depositary shares, the
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<PAGE> 43
depositary will select which depositary shares to redeem by lot, or some
substantially equivalent method.
After a redemption date is fixed, the depositary shares to be redeemed no
longer will be considered outstanding. The rights of the holders of the
depositary shares will cease, except for the rights to receive money or other
property upon redemption. In order to redeem their depositary shares, holders
will surrender their depositary receipts to the depositary.
VOTING THE PREFERRED STOCK
We will notify the depositary about any meeting at which the holders of
preferred stock are entitled to vote, and the depositary will mail the
information to the record holders of depositary shares related to that preferred
stock. Each record holder of depositary shares on the record date will be
entitled to instruct the depositary on how to vote the shares of preferred stock
represented by that holder's depositary shares. The depositary will vote the
preferred stock represented by the depositary shares in accordance with these
instructions, provided the depositary receives these instructions sufficiently
in advance of the meeting. If the depositary does not receive instructions from
the holders of the depositary shares, the depositary will abstain from voting
the preferred stock that underlies those depositary shares.
WITHDRAWAL OF PREFERRED STOCK
When a holder surrenders depositary receipts at the corporate trust office
of the depositary, and pays any necessary taxes, charges or other fees, the
holder will be entitled to receive the number of whole shares of the related
series of preferred stock, and any money or other property, if any, represented
by the holder's depositary shares. Once a holder exchanges depositary shares for
whole shares of preferred stock, that holder cannot "re-deposit" these shares of
preferred stock with the depositary, or exchange them for depositary shares. If
a holder delivers depositary receipts that represent a number of depositary
shares that exceeds the number of whole shares of related preferred stock the
holder seeks to withdraw, the depositary will issue a new depositary receipt to
the holder that evidences the excess number of depositary shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
Apache and the depositary can agree, at any time, to amend the form of
depositary receipt and any provisions of the deposit agreement. However, if an
amendment has a material adverse effect on the rights of the holders of related
depositary shares, the holders of at least a majority of the depositary shares
then outstanding must first approve the amendment. Every holder of a depositary
receipt at the time an amendment becomes effective will be bound by the amended
deposit agreement. However, subject to any conditions in the deposit agreement
or applicable law, no amendment can impair the right of any holder of a
depositary share to receive shares of the related preferred stock, or any money
or other property represented by the depositary shares, when they surrender
their depositary receipts.
We can terminate the deposit agreement at any time, as long as the
depositary mails notice of termination to the record holders of depositary
shares then-outstanding at least 30 days prior to the date fixed for
termination.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and the government charges that
relate solely to the depositary arrangements. We will also pay the charges of
each depositary, including charges in connection with the initial deposit of the
related series of preferred stock, the initial issuance of the depositary
shares, and all withdrawals of shares of the related series of preferred stock.
However, holders of depositary shares will be required to pay transfer and other
taxes and government charges, as provided in the deposit agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering written notice of its
decision to us.
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We may remove the depositary at any time. Any resignation or removal will take
effect when we appoint a successor depositary. We must appoint the successor
depositary within 60 days after delivery of the notice of resignation or
removal. The successor depositary must be a bank or trust company that has its
principal office in the United States and has a combined capital and surplus of
at least $50,000,000.
MISCELLANEOUS
We will be required to furnish certain information to the holders of the
preferred stock underlying any depositary shares. The depositary, as the holder
of the underlying preferred stock, will forward any report or information it
receives from us to the holders of depositary shares.
Neither the depositary nor Apache will be liable if its ability to perform
its obligations under the deposit agreement is prevented or delayed by law or
any circumstance beyond its control. Both Apache and the depositary will be
obligated to use their best judgment and to act in good faith in performing its
duties under the deposit agreement. Each of Apache and the depositary will be
liable only for gross negligence and willful misconduct in performing their
duties under the deposit agreement. They will not be obligated to appear in,
prosecute or defend any legal proceeding with respect to any depositary
receipts, depositary shares or preferred stock unless they receive what they, in
their sole discretion, determine to be a satisfactory indemnity from one or more
holders of the depositary shares. Apache and the depositary will evaluate any
proposed indemnity in order to determine whether the financial protection
afforded by the indemnity is sufficient to reduce each party's risk to a
satisfactory and customary level. Apache and the depositary may rely on the
advice of legal counsel or accountants of their choice. They may also rely on
information provided by persons they believe, in good faith, to be competent,
and on documents they believe, in good faith, to be genuine.
The applicable prospectus supplement will identify the depositary's
corporate trust office. Unless the prospectus supplement indicates otherwise,
the depositary will act as transfer agent and registrar for depositary receipts,
and if we redeem shares of preferred stock, the depositary will act as
redemption agent for the corresponding depositary receipts.
TITLE
Apache, each depositary and any agent of Apache or the applicable
depositary may treat the registered owner of any depositary share as the
absolute owner of the depositary shares for all purposes, including making
payment, regardless of whether any payment in respect of the depositary share is
overdue and regardless of any notice to the contrary. See "Book-Entry
Securities" below.
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DESCRIPTION OF DEBT SECURITIES
The following description, together with the applicable prospectus
supplements, summarizes all the material terms and provisions of the debt
securities that we may offer under this prospectus and the related trust
indenture. The indenture under which debt securities will be issued contains
additional important terms and provisions and is or will be filed as an exhibit
to the registration statement that includes this prospectus.
This summary of the indenture and the debt securities relates to terms and
conditions applicable to the debt securities generally. The particular terms of
any series of debt securities will be summarized in the applicable prospectus
supplement. If indicated in the prospectus supplement, the terms of any series
may differ from the terms summarized below.
Unless otherwise specified in the applicable prospectus supplement, we will
issue the debt securities under an indenture entered into between us and The
Chase Manhattan Bank, as trustee. We may only offer up to $1,000,000,000 of debt
securities under this prospectus. However, the indenture does not limit the
amount of debt securities we may issue under the indenture and provides that
additional debt securities of any series may be issued up to the aggregate
principal amount that we authorize from time to time. Debt securities may also
be issued pursuant to the indenture in transactions exempt from the registration
requirements of the Securities Act of 1933. Those debt securities will not be
considered in determining the aggregate amount of securities issued under this
prospectus.
Unless otherwise indicated in the applicable prospectus supplement, we will
issue the debt securities in denominations of $1,000 or integral multiples of
$1,000.
Unless otherwise indicated in the applicable prospectus supplement, the
payment of principal of, and any premium and interest on, the debt securities
will rank pari passu with all of our other unsecured unsubordinated
indebtedness. Principal and any premium and any interest will be payable, and
the debt securities will be transferable, at the corporate trust office of the
appropriate trustee, unless we specify otherwise in the accompanying prospectus
supplement. At our option, however, payment of interest may be made by check
mailed to the registered holders of the debt securities at their registered
addresses.
We will describe special U.S. federal income tax and other considerations
relating to debt securities denominated in foreign currencies or units of two or
more foreign currencies in the applicable prospectus supplement.
Unless we specify otherwise in the applicable prospectus supplement, the
covenants contained in the indenture and the debt securities will not provide
special protection to holders of debt securities if we enter into a highly
leveraged transaction, recapitalization or restructuring.
GENERAL
The prospectus supplement relating to the particular series of debt
securities being offered will specify the amounts, prices and terms of those
debt securities. These terms may include:
- - the designation, aggregate principal amount and authorized denominations of
the debt securities;
- - the date or dates on which the debt securities will mature;
- - the percentage of the principal amount at which the debt securities will be
issued;
- - the date on which the principal of the debt securities will be payable;
- - whether the debt securities will be issued as registered securities, bearer
securities or a combination of the two;
- - whether the debt securities will be issued in the form of one or more global
securities and whether such global securities will be issued in a temporary
global form or permanent global form;
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- - the currency or currencies or units of two or more currencies in which debt
securities are denominated, for which they may be purchased, and in which
principal and any premium and interest is payable;
- - if the currency or currencies or currency unit or units for which debt
securities may be purchased or in which principal and any premium interest may
be paid is at our election or at the election of a purchaser, the manner in
which an election may be made and its terms;
- - the annual rate or rates, which may be fixed or variable, or the method of
determining the rate or rates at which the debt securities will bear interest;
- - the date or dates from which any interest will accrue and the date or dates on
which such interest will be payable;
- - a description of any provisions providing for redemption, exchange or
conversion of the debt securities at our option or a holder's option and the
terms and provisions of such redemption, exchange or conversion;
- - information with respect to book-entry procedures relating to global debt
securities;
- - any redemption or sinking fund terms;
- - whether and under what circumstances we will pay "additional amounts," as
defined in the indenture, on the debt securities to any holder who is a
"United States alien," as defined in the indenture, in respect of any tax,
assessment or governmental charge and, if so, whether and on what terms we
will have the option to redeem the debt securities rather than pay any
additional amounts. The term "interest," as used in this prospectus, includes
any additional amounts;
- - any events of default or covenants of Apache with respect to the debt
securities of a certain series that are different from those described in this
prospectus;
- - if either or both of Section 402(2) of the indenture relating to defeasance or
Section 402(3) of the indenture relating to covenant defeasance is not
applicable to the debt securities, or if any covenants in addition to those
specified in Section 402(3) of the indenture shall be subject to covenant
defeasance;
- - any deletions from, or modifications or additions to, the provisions of the
indenture relating to satisfaction and discharge in respect of the debt
securities;
- - any index or other method used to determine the amount of payments of
principal of, and any premium and interest on, the debt securities; and
- - any other specific terms of the debt securities.
We are not obligated to issue all debt securities of any one series at the
same time. The debt securities of any one series may not bear interest at the
same rate or mature on the same date.
If any of the debt securities are sold for foreign currencies or foreign
currency units or if the principal of, or any premium or interest on, any series
of debt securities is payable in foreign currencies or foreign currency units,
we will describe the restrictions, elections, tax consequences, specific terms
and other information with respect to those debt securities and such foreign
currencies or foreign currency units in the applicable prospectus supplement.
Other than as described below under "The Indenture Limits Our Ability to
Incur Liens," "The Indenture Limits Our Ability to Engage in Sale/Leaseback
Transactions" and "We Are Obligated to Purchase Debt Securities on a Change in
Control," the indenture does not limit our ability to incur indebtedness or
afford holders of debt securities protection in the event of a decline in our
credit quality or if we are involved in a takeover, recapitalization or highly
leveraged or similar transaction. The prospectus supplement relating to the
particular series of debt securities, to the extent not otherwise described in
this prospectus, will include 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
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addition of a covenant or other provision providing event risk or similar
protection.
INTEREST RATES AND DISCOUNTS
The debt securities will earn interest at a fixed or floating rate or rates
for the period or periods of time specified in the applicable prospectus
supplement. Unless otherwise specified in the applicable prospectus supplement,
the debt securities will bear interest on the basis of a 360-day year consisting
of twelve 30-day months.
We may sell debt securities 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. Federal income tax consequences and special
considerations that apply to any series will be described in the applicable
prospectus supplement.
EXCHANGE, REGISTRATION AND TRANSFER
Registered securities of any series that are not global securities will be
exchangeable for other registered securities of the same series and of like
aggregate principal amount and tenor in different authorized denominations. In
addition, if debt securities of any series are issuable as both registered
securities and bearer securities, the holder may choose, upon written request,
and subject to the terms of the indenture, to exchange bearer securities and the
appropriate related coupons of that series into registered securities of the
same series of any authorized denominations and of like aggregate principal
amount and tenor. Bearer securities with attached coupons surrendered in
exchange for registered securities between a regular record date or a special
record date and the relevant date for interest payment shall be surrendered
without the coupon relating to the interest payment date. Interest will not be
payable with respect to the registered security issued in exchange for that
bearer security. That interest will be payable only to the holder of the coupon
when due in accordance with the terms of the indenture. Bearer securities will
not be issued in exchange for registered securities.
You may present registered securities for registration of transfer,
together with a duly executed form of transfer, at the office of the security
registrar or at the office of any transfer agent designated by us for that
purpose with respect to any series of debt securities and referred to in the
applicable prospectus supplement. This may be done without service charge but
upon payment of any taxes and other governmental charges as described in the
indenture. The security registrar or the transfer agent will effect the transfer
or exchange upon being satisfied with the documents of title and identity of the
person making the request. We have appointed the trustee as security registrar
for the indenture. If a prospectus supplement refers to any transfer agents
initially designated by us with respect to any series of debt securities in
addition to the security registrar, we may at any time rescind the designation
of any of those transfer agents or approve a change in the location through
which any of those transfer agents acts. However, if debt securities of a series
are issuable solely as registered securities, we will be required to maintain a
transfer agent in each place of payment for that series, and if debt securities
of a series are issuable as bearer securities, we will be required to maintain a
transfer agent in a place of payment for that series located in Europe in
addition to the security registrar. We may at any time designate additional
transfer agents with respect to any series of debt securities.
In the event of any redemption, we will not be required to:
- - issue, register the transfer of or exchange debt securities of any series
during a period beginning at the opening of business 15 days before any
selection of debt securities of that series to be redeemed and ending at the
close of business on the day of mailing of the relevant notice of redemption;
or
- - register the transfer of or exchange any registered security, or portion
thereof, called for redemption, except the unredeemed portion of any
registered security being redeemed in part.
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PAYMENT AND PAYING AGENTS
Unless we specify otherwise in the applicable prospectus supplement,
payment of principal of, and any premium and interest on, bearer securities will
be payable in accordance with any applicable laws and regulations, at the
offices of those paying agents outside the United States that we may designate
at various times. We will make interest payments on bearer securities and the
attached coupons on any interest payment date only against surrender of the
coupon relating to that interest payment date. No payment with respect to any
bearer security will be made at any of our offices or agencies in the United
States by check mailed to any U.S. address or by transfer to an account
maintained with a bank located in the United States. However, if, but only if,
payment in U.S. dollars of the full amount of principal of, and any premium and
interest on, bearer securities denominated and payable in U.S. dollars at all
offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions, then those
payments will be made at the office of our paying agent in the Borough of
Manhattan, The City of New York.
Unless we specify otherwise in the applicable prospectus supplement,
payment of principal of, and any premium and interest on, registered securities
will be made at the office of the paying agent or paying agents that we
designate at various times. However, at our option, we may make interest
payments by check mailed to the address, as it appears in the security register,
of the person entitled to the payments. Unless we specify otherwise in the
applicable prospectus supplement, we will make payment of any installment of
interest on registered securities to the person in whose name that registered
security is registered at the close of business on the regular record date for
such interest.
Unless we specify otherwise in the applicable prospectus supplement, the
Corporate Trust Office of the trustee in the Borough of Manhattan, The City of
New York, will be designated:
- - as our sole paying agent for payments with respect to debt securities that are
issuable solely as registered securities; and
- - as our paying agent in the Borough of Manhattan, The City of New York, for
payments with respect to debt securities, subject to the limitation described
above in the case of bearer securities, that are issuable solely as bearer
securities or as both registered securities and bearer securities.
We will name any paying agents outside the United States and any other
paying agents in the United States initially designated by us for the debt
securities in the applicable prospectus supplement. We may at any time designate
additional paying agents or rescind the designation of any paying agent or
approve a change in the office through which any paying agent acts. However, if
debt securities of a series are issuable solely as registered securities, we
will be required to maintain a paying agent in each place of payment for that
series. If debt securities of a series are issuable as bearer securities, we
will be required to maintain:
- - a paying agent in the Borough of Manhattan, The City of New York, for payments
with respect to any registered securities of the series and for payments with
respect to bearer securities of the series in the circumstance described
above, but not otherwise; and
- - a paying agent in a place of payment located outside the United States where
debt securities of that series and any attached coupons may be presented and
surrendered for payment.
However, if the debt securities of that series are listed on the London
Stock Exchange, the Luxembourg Stock Exchange or any other stock exchange
located outside the United States and if the stock exchange requires it, we will
maintain a paying agent in London or Luxembourg or any other required city
located outside the United States for those debt securities.
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All moneys we pay to a paying agent for the payment of principal of, and
any premium or interest on, any debt security or coupon that remains unclaimed
at the end of two years after becoming due and payable will be repaid to us.
After that time, the holder of the debt security or coupon will look only to us
for payments out of those repaid amounts.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global certificates that we will deposit with a depositary
identified in the applicable prospectus supplement. Global securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for the individual
debt securities it represents, a global security may not be transferred except
as a whole:
- - by the applicable depositary to a nominee of the depositary;
- - by any nominee to the depositary itself or another nominee; or
- - by the depositary or any nominee to a successor depositary or any nominee of
the successor.
We will describe the specific terms of the depositary arrangement with
respect to a series of debt securities in the applicable prospectus supplement.
We anticipate that the following provisions will generally apply to depositary
arrangements.
When we issue a global security in registered form, the depositary for the
global security or its nominee will credit, on its book-entry registration and
transfer system, the respective principal amounts of the individual debt
securities represented by that global security to the accounts of participants
that have accounts with the depositary. Those accounts will be designated by the
dealers, underwriters or agents with respect to the underlying debt securities
or by us if those debt securities are offered and sold directly by us. Ownership
of beneficial interests in a global security will be limited to participants or
persons that may hold interests through participants. For interests of
participants, ownership of beneficial interests in the global security will be
shown on records maintained by the applicable depositary or its nominee. For
interests of persons other than participants, that ownership information will be
shown on the records of participants. Transfer of that ownership will be
effected only through those records. The laws of some states require that
certain purchasers of securities take physical delivery of securities in
definitive form. These limits and laws may impair our ability to transfer
beneficial interests in a global security.
As long as the depositary for a global security, or its nominee, is the
registered owner of that global security, the depositary or nominee will be
considered the sole owner or holder of the debt securities represented by the
global security for all purposes under the applicable indenture. Except as
provided below, owners of beneficial interests in a global security:
- - will not be entitled to have any of the underlying debt securities registered
in their names;
- - will not receive or be entitled to receive physical delivery of any of the
underlying debt securities in definitive form; and
- - will not be considered the owners or holders under the indenture relating to
those debt securities.
Payments of principal of, and any premium and interest on, individual debt
securities represented by a global security registered in the name of a
depositary or its nominee will be made to the depositary or its nominee as the
registered owner of the global security representing such debt securities.
Neither we, the trustee, any paying agent nor the registrar for the debt
securities will be responsible for any aspect of the records relating to or
payments made by the depositary or any participants on account of beneficial
interests of the global security.
We expect that the depositary or its nominee, upon receipt of any payment
of principal, premium or interest relating to a permanent global security
representing any series of debt securities, immediately will credit
participants' accounts with the
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payments. Those payments will be credited in amounts proportional to the
respective beneficial interests of the participants in the principal amount of
the global security as shown on the records of the depositary or its nominee. We
also expect that payments by participants to owners of beneficial interests in
the global security held through those participants will be governed by standing
instructions and customary practices. This is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
Those payments will be the sole responsibility of those participants.
If the depositary for a series of debt securities is at any time unwilling,
unable or ineligible to continue as depositary and we do not appoint a successor
depositary within 90 days, we will issue individual debt securities of that
series in exchange for the global security or securities representing that
series. In addition, we may at any time in our sole discretion determine not to
have any debt securities of a series represented by one or more global
securities. In that event, we will issue individual debt securities of that
series in exchange for the global security or securities. Further, if we
specify, an owner of a beneficial interest in a global security may, on terms
acceptable to us, the trustee and the applicable depositary, receive individual
debt securities of that series in exchange for those beneficial interests. The
foregoing is subject to any limitations described in the applicable prospectus
supplement. In that instance, the owner of the beneficial interest will be
entitled to physical delivery of individual debt securities equal in principal
amount to the beneficial interest and to have the debt securities registered in
its name. Those individual debt securities will be issued in denominations,
unless we specify otherwise, of $1,000 or integral multiples of $1,000.
For a description of the depository arrangements for global securities held
by The Depository Trust Company, see "Book-Entry Securities."
THE INDENTURE LIMITS OUR ABILITY TO INCUR LIENS
Nothing in the indenture or the debt securities will in any way limit the
amount of indebtedness or securities which we or our subsidiaries, as defined in
the indenture, may incur or issue. The indenture provides that neither us nor
any of our subsidiaries may 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 unless we provide that
any and all debt securities then outstanding shall be secured by a lien equally
and ratably with any and all other obligations by the lien. The restrictions on
liens will not, however, apply to:
- - liens existing on the date of the indenture or provided for under the terms of
agreements existing on the date thereof;
- - liens securing all or part of the cost of exploring, producing, gathering,
processing, marketing, drilling or developing any of our or our subsidiaries'
properties, or securing indebtedness incurred to provide funds therefor or
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;
- - liens securing only indebtedness owed by us or one of our subsidiaries to us
or to one or more of our subsidiaries;
- - liens on the property of any corporation or other entity existing at the time
it becomes our subsidiary;
- - 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
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foreign government, any state or any department, agency or instrumentality of
either or an international finance agency or any division or department
thereof, including the World Bank, the International Finance Corp. and the
Multilateral Investment Guarantee Agency;
- - any extension, renewal or replacement or successive extensions, renewals or
replacements of any lien referred to in the foregoing clauses that existed on
the date of the indenture;
- - certain other liens incurred in the ordinary course of business; or
- - liens which secure "Limited Recourse Indebtedness," as defined in the
indenture.
In addition, the following types of transactions, among others, shall not
be deemed to create indebtedness secured by liens:
- - 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 receive as a result of the transfer a specified amount of
money or of such crude oil, natural gas or other petroleum hydrocarbons;
- - 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
- - liens required by any contract or statute in order to permit us or one of our
subsidiaries to perform any contract or subcontract made by it with or at the
request of the U.S. 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 us or one of our subsidiaries by any of these entities pursuant to
the provisions of any contract or statute.
THE INDENTURE LIMITS OUR ABILITY TO ENGAGE IN SALE/LEASEBACK TRANSACTIONS
Unless we specify otherwise in the applicable prospectus supplement,
neither we nor any of our subsidiaries will enter into any arrangement with any
person, other than us or one of our subsidiaries, to lease any property to us or
a subsidiary of ours for more than three years. For the restriction to apply, we
or one of our subsidiaries must sell or plan to sell the property to the person
leasing it to us or our subsidiary or to another person to which funds have been
or are to be advanced on the security of the leased property. The limitation
does not apply where:
- - either we or our subsidiary would be entitled to create debt secured by a lien
on the property to be leased in a principal amount equal to or exceeding the
value of that sale/leaseback transaction;
- - since the date of the indenture and within a period commencing six months
prior to the consummation of that arrangement and ending six months after the
consummation of the arrangement, we have or our 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 to the property -- an amount equal to
all or a portion of the net proceeds of that arrangement and we designate such
amount as a credit against that arrangement, with any that amount not being so
designated to be applied as set forth in the next item; or
- - during or immediately after the expiration of the 12 months after the
effective date of that transaction, we apply to the voluntary defeasance or
retirement of the debt securities and or 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 that transaction or the fair value
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 we utilize
as set forth in the prior item. The amount will be reduced by
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the principal amount of senior indebtedness we voluntarily retire within that
12-month period.
THE INDENTURE INCLUDES 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:
- - if we fail to pay any interest on any debt security of that series when due,
and the failure continues for 30 days;
- - if we fail to pay principal of or any premium on the debt securities of that
series when due and payable, either at maturity or otherwise;
- - if we fail to perform, or we breach any of our other covenants or warranties
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 -- and that breach of failure continues for 60
days after written notice as provided in the indenture;
- - if any of our indebtedness, as defined in the indenture, in excess of an
aggregate of $25,000,000 in principal amount is accelerated under any event of
default as defined in any mortgage, indenture or instrument and the
acceleration has not been rescinded or annulled within 30 days after written
notice as provided in the indenture specifying such event of default and
requiring us to cause that acceleration to be rescinded or annulled;
- - if we fail to pay, bond or otherwise discharge within 60 days of entry, a
judgment, court order or uninsured monetary damage award against us in excess
of an aggregate of $25,000,000 which is not stayed on appeal or otherwise
being appropriately contested in good faith;
- - certain events of bankruptcy, insolvency or reorganization involving us; and
- - any other event of default provided with respect to the debt securities of
that series.
If an event of default with respect to the debt securities of any series,
other than an event of default described in the second to last and third to last
items above, occurs and is continuing, either the trustee or the holders of at
least 25% in aggregate principal amount of the outstanding debt securities of
that series may declare the principal amount of the 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 that series may, under certain circumstances,
rescind and annul such acceleration. If an event of default described in the
second to last and third to last items above occurs, the principal amount and
accrued interest -- or a lesser amount as provided for in the debt securities of
that series -- will become immediately due and payable without any declaration
or other act by the trustee or any holder.
Within 90 days after the occurrence of any event of default under the
indenture with respect to the debt securities of any series, the trustee must
transmit notice of the event of default to the holders of the debt securities of
that series unless the event of default has been cured or waived. However,
except in the case of a payment default, the trustee may withhold the notice if
and so long as the board of directors, the executive committee or a trust
committee of directors or responsible officers of the trustee has in good faith
determined that the withholding of the notice is in the interest of the holders
of debt securities of that series.
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 that
series by all appropriate judicial proceedings.
Subject to the duty of the trustee during any default to act with the
required standard of care, the trustee is under no obligation to
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<PAGE> 53
exercise any of its rights or powers under the indenture at the request or
direction of any of the holders of debt securities, unless the holders offer the
trustee reasonable indemnity. Subject to indemnifying 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 may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee, or exercising any trust or
power conferred on the trustee, with respect to the debt securities of that
series.
WE ARE OBLIGATED TO PURCHASE DEBT SECURITIES ON A CHANGE IN CONTROL
If a change in control, as defined in the indenture, occurs, within 15 days
we must mail a written notice regarding the change in control to the trustee and
to every holder of the debt securities of each series. The notice must also be
published at least once in an authorized newspaper, as defined in the indenture,
and must state:
- - the event causing the change in control and the date thereof;
- - the date by which notice of the change in control is required by the indenture
to be given;
- - the date, 35 business days after the occurrence of the change in control, by
which we must purchase debt securities we are obligated to purchase pursuant
to the selling holder's exercise of rights on change in control;
- - the price we must pay for the debt securities we are obligated to purchase;
- - the name and address of the trustee;
- - the procedure for surrendering debt securities to the trustee or other
designated office or agent for payment;
- - a statement of our obligation to make prompt payment on proper surrender of
the debt securities;
- - the procedure for holders' exercise of rights of sale of the debt securities;
and
- - the procedures by which a holder may withdraw such a notice after it is given.
After we give this notice we will obligated, at the election of each
holder, to purchase such debt securities. Under the indenture, a change in
control is deemed to have occurred when:
- - any event requiring the filing of any report under or in response to Schedule
13D or 14D-1 pursuant to the Securities Exchange Act of 1934 disclosing
beneficial ownership of either 50% or more of the our common stock then
outstanding or 50% or more of the voting power of the our voting stock then
outstanding;
- - the completion of any sale, transfer, lease, or conveyance of our properties
and assets substantially as an entirety to any person or persons that is not
our subsidiary, as those terms are defined in the indenture; or
- - the completion of a consolidation or merger of us with or into any other
person or entity in a transaction in which either we are not the sole
surviving corporation or our common stock existing prior to the transaction is
converted into cash, securities or other property and those exchanging our
common stock do not, as a result of the transaction, receive either 75% or
more of the survivor's common stock or 75% or more of the voting power of the
survivor's voting stock.
We will not purchase any debt securities if there has occurred and is
continuing an event of default under the indenture, other than default in
payment of the purchase price payable for the debt securities upon change in
control. In connection with any purchase of debt securities after a change in
control, we will comply with all federal and state securities laws, including,
specifically, Rule 13E-4, if applicable, of the Securities Exchange Act, and any
related Schedule 13E-4 required to be submitted under that rule.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
We may discharge certain obligations to holders of any series of debt
securities that
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<PAGE> 54
have not already been delivered to the trustee for cancellation and that:
- - have become due and payable;
- - will become due and payable within one year; or
- - are scheduled for redemption within one year.
To discharge the obligations with respect to a series of debt securities, we
must deposit with the trustee, in trust, an amount of funds in U.S. dollars or
in the foreign currency in which those debt securities are payable sufficient to
pay the entire amount of principal of, and any premium or interest on, those
debt securities to the date of the deposit if those debt securities have become
due and payable or to the maturity of the debt securities, as the case may be.
The indenture provides that, unless the provisions of section 402 of the
indenture are made inapplicable to the debt securities, we may elect either
- - to defease and be discharged from any and all obligations with respect to
those debt securities, which we refer to as "legal defeasance"; or
- - to be released from its obligations with respect to such debt securities under
the covenants described in "The Indenture Limits Our Ability to Incur Liens"
and "The Indenture Limits Our Ability to Engage in Sale/Leaseback
Transactions" above or, if provided pursuant to section 301 of the indenture,
its obligations with respect to any other covenant, which we refer to as
"covenant defeasance."
In the case of legal defeasance we will still retain some obligations in
respect of the debt securities, including or obligations:
- - to pay additional amounts, if any, upon the occurrence of certain events of
taxation, assessment or governmental charge with respect to payments on the
debt securities;
- - to register the transfer or exchange of the debt securities;
- - to replace temporary or mutilated, destroyed, lost or stolen debt securities;
and
- - to maintain an office or agency with respect to the debt securities and to
hold moneys for payment in trust.
After a covenant defeasance, any omission to comply with the obligations or
covenants that have been defeased shall not constitute a default or an event of
default with respect to the debt securities.
To elect either legal defeasance or covenant defeasance we must deposit
with the trustee, in trust, an amount, in U.S. dollars or in the foreign
currency in which the relevant debt securities are payable at stated maturity,
or in 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 any premium and interest on those debt securities on their
scheduled due dates.
In addition, we can only elect legal defeasance or covenant defeasance if,
among other things:
- - the applicable 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 we are a party or by which we are is bound;
- - 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
- - we have delivered to the trustee an opinion of counsel 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 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 had not
occurred, and such
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<PAGE> 55
opinion of counsel, in the case of legal defeasance, must refer to and be
based upon a letter ruling of the Internal Revenue Service received by us, 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.
The indenture deems a foreign currency to be 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 or by any
recognized confederation or association of governments.
The indenture defines government obligations as securities which are not
callable or redeemable at the option of the issuer or issuers thereof and are:
- - direct obligations of the United States 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
- - obligations of a person or entity controlled or supervised by and acting as an
agency or instrumentality of the United States or the government or
governments which issued the foreign currency in which the debt securities of
a particular series are payable, the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States or that other government or governments.
Government obligations also include a depository receipt issued by a bank or
trust company as custodian with respect to any government obligation described
above or a specific payment of interest on or principal of or any other amount
with respect to any government obligation held by that custodian for the account
of the holder of such depository receipt, as long as, except as required by law,
that custodian is not authorized to make any deduction from the amount payable
to the holder of the 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 the depository receipt.
Unless we disclose otherwise in the applicable prospectus supplement, if
after we have deposited funds and/or government obligations to effect legal
defeasance or covenant defeasance with respect to debt securities of any series,
either:
- - the holder of a debt security of that series is entitled to, and does, elect
to receive payment in a currency other than that in which such deposit has
been made in respect of that debt security; or
- - a conversion event, as defined below, occurs in respect of the foreign
currency in which the deposit has been made,
the indebtedness represented by that debt security shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the principal
of, and any premium and interest on, that debt security as that debt security
becomes due out of the proceeds yielded by converting the amount or other
properties so deposited in respect of that debt security into the currency in
which that debt security becomes payable as a result of the election or
conversion event based on:
- - in the case of payments made pursuant to the first of the two items in the
list above, the applicable market exchange rate for the currency in effect on
the second business day prior to the date of the payment; or
- - 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.
The indenture defines a "conversion event" as the cessation of use of:
- - 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
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<PAGE> 56
public institutions of or within the international banking community;
- - the ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Community; or
- - any currency unit or composite currency other than the ECU for the purposes
for which it was established. Unless otherwise provided in the applicable
prospectus supplement, all payments of principal of, and any premium 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.
If we effect a covenant defeasance with respect to any debt securities and
the 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 which there
has been covenant defeasance, the amount in the foreign currency in which the
debt securities are payable, and government obligations on deposit with the
trustee, will be sufficient to pay amounts due on the debt securities at the
time of the stated maturity but may not be sufficient to pay amounts due on the
debt securities at the time of the acceleration resulting from the event of
default. However, we would remain liable for payment of the 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, we are required to furnish to the trustee annually a
statement as to our performance of certain of our obligations under the
indenture and as to any default in such performance. We are 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.
MODIFICATION AND WAIVER
We and the trustee may modify the indenture or waive certain provisions of
the indenture with the consent of the holders of not less than a majority in
aggregate principal amount of the debt securities of each series affected by the
modification or waiver. However, provisions of the indenture may not be waived
or modified without the consent of the holder of each debt security affected
thereby if the modification or waiver would:
- - 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;
- - reduce the principal amount of, or premium or interest on, or any additional
amounts with respect to, any debt security;
- - change the coin or currency in which any debt security or any premium or any
interest on such debt security or any additional amounts with respect to the
debt security is payable;
- - 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, exchange or conversion, on or after the redemption, exchange or
conversion 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;
- - reduce the percentage and principal amount of the outstanding debt securities,
the consent of whose holders is required in order to take certain actions;
- - change any of our obligations to maintain an office or agency in the places
and for the purposes required by the indenture; or
- - modify any of the above provisions.
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
that series, waive our compliance certain restrictive provisions of the
indenture. The holders of not less than a
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<PAGE> 57
majority in aggregate principal amount of debt securities of any series may, on
behalf of all holders of debt securities of that series, waive any past default
and its consequences under the indenture with respect to the debt securities of
that series, except:
- - a payment default with respect to debt securities of that series; or
- - a default 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.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We 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. We may also permit any of those
persons to consolidate with or merge into us or convey, transfer or lease its
properties and assets substantially as an entirety to us, as long as any
successor person assumes our obligations on the debt securities and that after
giving effect to the transaction no event of default under the indenture, and no
event which, after notice or lapse of time or both, would become an event of
default, will have occurred and be continuing, and as long as some other
conditions are met.
BOOK-ENTRY SECURITIES
Unless otherwise specified in the applicable prospectus supplement, we will
issue securities, other than common stock, in the form of one or more book-entry
certificates registered in the name of a depositary or a nominee of a
depositary. Unless otherwise specified in the applicable prospectus supplement,
the depositary will be The Depository Trust Company. We have been informed by
DTC that its nominee will be Cede & Co. Accordingly, Cede is expected to be the
initial registered holder of all securities that are issued in book-entry form.
No person that acquires a beneficial interest in securities issued in
book-entry form will be entitled to receive a certificate representing those
securities, except as set forth in this prospectus or in the applicable
prospectus supplement. Unless and until definitive securities are issued under
the limited circumstances described below, all references to actions by
beneficial owners of securities issued in book-entry form will refer to actions
taken by DTC upon instructions from its participants, and all references to
payments and notices to beneficial owners will refer to payments and notices to
DTC or Cede, as the registered holder of such securities.
DTC has informed us that it is:
- - a limited purpose trust company organized under New York banking laws;
- - a "banking organization" within the meaning of the New York banking laws;
- - 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 under the Securities Exchange Act.
DTC has also informed us that it was created to:
- - hold securities for "participants"; and
- - facilitate the clearance and settlement of securities transactions among
participants through electronic book-entry, thereby eliminating the need for
the physical movement of securities certificates.
Participants have accounts with DTC and include securities brokers and
dealers, banks, trust companies and clearing corporations. Indirect access to
the DTC system also is available to indirect participants such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
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<PAGE> 58
relationship with a participant, either directly or indirectly.
Persons that are not participants or indirect participants but desire to
buy, sell or otherwise transfer ownership of or interests in securities may do
so only through participants and indirect participants. Under the book-entry
system, beneficial owners may experience some delay in receiving payments, as
payments will be forwarded by our agent to Cede, as nominee for DTC. DTC will
forward these payments to its participants, which thereafter will forward them
to indirect participants or beneficial owners. Beneficial owners will not be
recognized by the applicable registrar, transfer agent, trustee or depositary as
registered holders of the securities entitled to the benefits of the
certificate, the indenture or any deposit agreement. Beneficial owners that are
not participants will be permitted to exercise their rights as an owner only
indirectly through participants and, if applicable, indirect participants.
Under the current rules and regulations affecting DTC, DTC will be required
to make book-entry transfers of securities among participants and to receive and
transmit payments to participants. Participants and indirect participants with
which beneficial owners of securities have accounts are also required by these
rules to make book-entry transfers and receive and transmit such payments on
behalf of their respective account holders.
Because DTC can act only on behalf of participants, who in turn act only on
behalf of other participants or indirect participants, and on behalf of certain
banks, trust companies and other persons approved by it, the ability of a
beneficial owner of securities issued in book-entry form to pledge those
securities to persons or entities that do not participate in the DTC system may
be limited due to the unavailability of physical certificates for the
securities.
DTC has advised us that it will take any action permitted to be taken by a
registered holder of any securities under the certificate, the indenture or any
deposit agreement only at the direction of one or more participants to whose
accounts with DTC the securities are credited.
DTC has further advised us that its management is aware that some computer
applications, systems, and the like for processing data that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." DTC has informed its participants and other
members of the financial community that it has developed and is implementing a
program so that its computer systems, as they relate to the timely payment of
distributions to securityholders, book-entry deliveries, and settlement of
trades within DTC, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including issuers and their agents, as well as DTC's direct
and indirect participants and third party vendors from whom DTC licenses
software and hardware, and third party vendors on whom DTC relies for
information or the provision of services, including telecommunication and
electrical utility service providers, among others. DTC has informed its
participants and other members of the financial community that it is contacting
and will continue to contact third party vendors from whom it acquires services
to impress upon them the importance of such services being Year 2000 compliant
and determine the extent of their efforts for Year 2000 remediation -- and, as
appropriate, testing -- of their services. In addition, DTC is in the process of
developing contingency plans that it considers appropriate.
According to DTC, the information with respect to DTC has been provided to
its participants and other members of the financial community for informational
purposes only and is not intended to serve as a representation, warranty, or
contract modification of any kind.
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<PAGE> 59
Unless otherwise specified in the applicable prospectus supplement, a book-
entry security will be exchangeable for definitive securities registered in the
names of persons other than DTC or its nominee only if:
- - DTC notifies us that it is unwilling or unable to continue as depositary for
the book-entry security or DTC ceases to be a clearing agency registered under
the Securities Exchange Act at a time when DTC is required to be so
registered; or
- - we execute and deliver to the applicable registrar, transfer agent, trustee
and/or depositary an order complying with the requirements of the certificate,
the indenture or any deposit agreement that the book-entry security will be so
exchangeable.
Any book-entry security that is exchangeable in accordance with the preceding
sentence will be exchangeable for securities registered in such names as DTC
directs.
If one of the events described in the immediately preceding paragraph
occurs, DTC is generally required to notify all participants of the availability
through DTC of definitive securities. Upon surrender by DTC of the book-entry
security representing the securities and delivery of instructions for
re-registration, the registrar, transfer agent, trustee or depositary, as the
case may be, will reissue the securities as definitive securities. After
reissuance of the securities, such persons will recognize the beneficial owners
of such definitive securities as registered holders of securities.
Except as described above:
- - a book-entry security may not be transferred except as a whole book-entry
security by or among DTC, a nominee of DTC and/or a successor depositary
appointed by us; and
- - DTC may not sell, assign or otherwise transfer any beneficial interest in a
book-entry security unless the beneficial interest is in an amount equal to an
authorized denomination for the securities evidenced by the book-entry
security.
None of Apache, the trustees, any registrar and transfer agent or any
depositary, or any agent of any of them, will have any responsibility or
liability for any aspect of DTC's or any participant's records relating to, or
for payments made on account of, beneficial interests in a book-entry security.
PLAN OF DISTRIBUTION
We may sell the securities through agents, underwriters or dealers, or
directly to one or more purchasers.
We may designate agents who agree to use their reasonable efforts to
solicit purchases for the period of their appointment or to sell securities on a
continuing basis.
If we use underwriters for a sale of securities, the underwriters will
acquire the securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase the securities will be subject
to the conditions set forth in the applicable underwriting agreement. The
underwriters will be obligated to purchase all the securities of the series
offered if any of the securities of that series are purchased. Any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers may be changed from time to time.
We may also sell securities directly to one or more purchasers without
using underwriters or agents.
Underwriters, dealers and agents that participate in the distribution of
the securities may be underwriters as defined in the Securities Act and any
discounts or commissions they receive from us and any profit on their resale of
the securities may be treated as underwriting discounts and commissions under
the Securities Act. The applicable prospectus supplement will identify any
underwriters, dealers or agents and will describe their compensation. We may
have
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agreements with the underwriters, dealers and agents to indemnify them against
certain civil liabilities, including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with or perform
services for us or our subsidiaries in the ordinary course of their businesses.
TRADING MARKETS AND LISTING OF SECURITIES
Unless otherwise specified in the applicable prospectus supplement, each
class or series of securities will be a new issue with no established trading
market, other than the common stock, which is listed on the New York Stock
Exchange and the Chicago Stock Exchange. We may elect to list any other class or
series of securities on any exchange, but we are not obligated to do so. It is
possible that one or more underwriters may make a market in a class or series of
securities, but the underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot give any
assurance as to the liquidity of the trading market for any of the securities.
STABILIZATION ACTIVITIES
Any underwriter may engage in over-allotment, stabilizing transactions,
short-covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act. Over-allotment involves sales in excess of
the offering size, which create a short position. Stabilizing transactions
permit bids to purchase the underlying security so long as the stabilizing bids
do not exceed a specified maximum. Short-covering transactions involve purchases
of the securities in the open market after the distribution is completed to
cover short positions. Penalty bids permit the underwriters to reclaim a selling
concession from a dealer when the securities originally sold by the dealer are
purchased in a covering transaction to cover short positions. Those activities
may cause the price of the securities to be higher than it would otherwise be.
If commenced, the underwriters may discontinue any of the activities at any
time.
LEGAL MATTERS
The legality of the securities will be passed upon for Apache by its Vice
President and General Counsel, Z. S. Kobiashvili. As of the date of this
prospectus, Mr. Kobiashvili owns 1,990 shares of Apache common stock through
Apache's 401(k) savings plan, holds employee stock options to purchase 45,700
shares of Apache common stock, of which options to purchase 21,200 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. In addition, other customary legal matters relating to the
offering of the securities, including matters relating to our due incorporation,
legal existence and authorized capitalization, will be passed upon for Apache by
Mr. Kobiashvili or Mayor, Day, Caldwell & Keeton, L.L.P., Houston, Texas.
EXPERTS
The audited consolidated financial statements of Apache that are
incorporated by reference into this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
The information incorporated by reference into this prospectus regarding
the total proved reserves of Apache was prepared by Apache and reviewed by Ryder
Scott Company Petroleum Engineers, as stated in their letter reports, and is
incorporated by reference in reliance upon the authority of said firm as experts
in such matters. The information incorporated by reference into this prospectus
regarding the total estimated proved reserves acquired from Texaco Exploration
and Production Inc. was prepared by Apache and reviewed by Ryder
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<PAGE> 61
Scott, as stated in their letter reports, and is incorporated by reference in
reliance upon the authority of that firm as experts in these matters. The
information incorporated by reference into this prospectus 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 incorporated by reference in reliance upon the
authority of that firm as experts in these matters.
A portion of the information incorporated by reference in this prospectus
regarding the total proved reserves of Aquila Energy Resources Corporation
acquired by Apache was prepared by Netherland, Sewell & Associates, Inc. as of
December 31, 1994, as stated in their letter report, and is incorporated by
reference in reliance upon the authority of that firm as experts in those
matters. Netherland, Sewell did not review any of the reserves of Aquila
acquired during 1995.
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================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
and accompanying prospectus. You must not rely on any unauthorized information
or representations. This prospectus is an offer to sell only the shares offered
hereby, but only under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus supplement and accompanying
prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Oil and Gas Terms..................... S-2
Prospectus Summary.................... S-3
Risk Factors.......................... S-10
Use of Proceeds....................... S-15
Capitalization........................ S-16
Price Range of Common Stock........... S-17
Dividend Policy....................... S-17
Description of Conversion Preferred
Stock............................... S-17
Description of Depositary Shares...... S-24
Certain Federal Income Tax
Considerations...................... S-28
Validity of Securities................ S-30
Experts............................... S-30
Underwriting.......................... U-1
Prospectus
About This Prospectus................. 1
Where You Can Find More Information... 1
Apache Corporation.................... 2
Ratios of Earnings to Fixed Charges
and Ratios of Earnings to Combined
Fixed Charges and Preferred Stock
Dividends........................... 2
Use of Proceeds....................... 3
The Securities We May Offer........... 3
Description of Capital Stock.......... 4
Description of Depositary Shares...... 9
Description of Debt Securities........ 12
Book-Entry Securities................. 24
Plan of Distribution.................. 26
Legal Matters......................... 27
Experts............................... 27
</TABLE>
================================================================================
================================================================================
7,000,000 Shares
[APACHE CORPORATION LOGO]
$2.015 Depositary Shares
Each depositary share represents
1/50th of a share of Automatically
Convertible Equity Securities, Conversion
Preferred Stock, Series C
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PROSPECTUS SUPPLEMENT
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GOLDMAN, SACHS & CO.
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