<PAGE> 1
Pursuant to Rule 424(b)(5)
Registration No. 333-18929
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 27, 1996)
$250,000,000
NOBLE AFFILIATES, INC.
8% Senior Notes Due 2027
------------------------
Interest on the 8% Senior Notes Due 2027 (the "Senior Notes") is payable
semiannually on April 1 and October 1 of each year, commencing October 1, 1997.
The Senior Notes are not redeemable prior to maturity and will not be subject to
any sinking fund. See "Certain Terms of the Senior Notes" in this Prospectus
Supplement.
The Senior Notes will be represented by one or more Global Securities
registered in the name of a nominee of The Depository Trust Company, as
depositary ("DTC"), or other depositary. Beneficial interests in the Global
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by DTC's participants. Except as provided herein,
owners of beneficial interests in the Global Securities will not be entitled to
receive Senior Notes in definitive form and will not be considered owners or
holders thereof. See "Certain Terms of the Senior Notes" in this Prospectus
Supplement and "Description of Debt Securities" in the accompanying Prospectus.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
=======================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Senior Note 98.926% .875% 98.051%
- -----------------------------------------------------------------------------------------------------------------------
Total................................................ $247,315,000 $2,187,500 $245,127,500
=======================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from April 7, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $380,000.
------------------------
The Senior Notes are offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. See
"Underwriting." It is expected that the Senior Notes will be available for
delivery in book-entry form only through the facilities of DTC in New York, New
York on or about April 7, 1997 against payment therefor in immediately available
funds.
------------------------
The Joint Lead Managers of this offering are:
<TABLE>
<C> <C>
MORGAN STANLEY & CO. UBS SECURITIES
INCORPORATED
</TABLE>
------------------------
CHASE SECURITIES INC.
April 2, 1997
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE SENIOR NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, THE SENIOR NOTES IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the Prospectus include "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus Supplement, the Prospectus and
the documents incorporated herein by reference, including without limitation,
statements under "The Company -- General" and "-- EDC Acquisition" in this
Prospectus Supplement and "The Company -- Business Strategy," "-- Exploration
and Development," "-- Properties -- Reserves" and "-- Hedging Arrangements" in
the Prospectus, regarding the Company's estimates of oil and gas reserves and
the future net cash flows attributable thereto, anticipated capital
expenditures, business strategy, plans and objectives of management of the
Company for future operations and industry conditions, are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from the Company's expectations
("Cautionary Statements") include without limitation future production levels,
future prices and demand for oil and gas, results of future exploration and
development activities, future operating and development costs, the effect of
existing and future laws and governmental regulations (including those
pertaining to the environment) and the political and economic climate of the
United States and the foreign countries in which the Company operates from time
to time, as discussed in this Prospectus Supplement, the Prospectus and the
other documents of the Company filed with the Securities and Exchange Commission
(the "Commission"). All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
OIL AND GAS TERMINOLOGY
Quantities of oil, condensate and natural gas liquids are expressed in this
Prospectus Supplement and the Prospectus in barrels ("bbls"), thousands of
barrels ("Mbbls") or millions of barrels ("MMbbls"), and quantities of natural
gas are expressed in thousands of cubic feet ("Mcf"), millions of cubic feet
("MMcf") or billions of cubic feet ("Bcf"). As used herein, "Mcfe" means
thousands of cubic feet of gas equivalent, "MMcfe" means millions of cubic feet
of gas equivalent and "Bcfe" means billions of cubic feet of gas equivalent; and
"MMBTU" means one million British Thermal Units. Oil, condensate and natural gas
liquids are converted to gas equivalents using the ratio of six Mcf of natural
gas to one barrel of oil, condensate or natural gas liquids. A "gross" acre or
well is an acre or well in which a working interest is owned, and a "net" acre
or well is deemed to exist when the sum of fractional ownership interests in
gross acres or wells equals one. "Undeveloped acreage" means lease acres on
which wells have not been drilled or completed to a point that would permit
production of commercial quantities of oil or gas regardless of whether such
acreage contains proved reserves, including lease acres (held by production
under terms of a lease) that are not within the spacing unit containing, or
acreage assigned to, the productive well so holding the lease.
---------------------
Capitalized terms not otherwise defined herein shall have the meanings
given to them in the Prospectus.
S-2
<PAGE> 3
SUMMARY
This summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements
appearing elsewhere or incorporated by reference in the Prospectus and this
Prospectus Supplement. Unless otherwise indicated or the context otherwise
requires, the "Company" refers to Noble Affiliates, Inc. and its subsidiaries
(including EDC) and predecessors and "EDC" refers to Energy Development
Corporation and its subsidiaries.
For further information regarding the Senior Notes, see "Certain Terms of
the Senior Notes" in this Prospectus Supplement and "Description of Debt
Securities" in the accompanying Prospectus.
THE COMPANY
GENERAL
Noble Affiliates, Inc. is an independent energy company engaged, through
its subsidiaries, in the exploration, production and marketing of crude oil and
natural gas. The Company's reserves are located principally offshore in the Gulf
of Mexico with other significant domestic reserves located onshore in the gulf
coast of Texas and Louisiana, Midcontinent and Rocky Mountain regions and
onshore California. Its international operations are located primarily in
Argentina, the North Sea, Equatorial Guinea and Canada. The Company's estimated
proved reserves as of December 31, 1996 consisted of 1,156.3 Bcf of gas and
115.7 MMbbls of oil.
The Company's principal business strategy is to increase reserves,
production and cash flow through a balanced program of exploratory and
development drilling, supplemented by strategic acquisitions. The Company
focuses its exploration and development drilling efforts in areas where it has a
concentration of existing producing properties in order to achieve operating and
technical efficiencies. The Company's acquisition strategy is to purchase large
working interests in operated oil and gas properties with exploration and
development opportunities that complement its existing operations and where the
Company can capture operating synergies and efficiencies. During the three-year
period ended December 31, 1996, the Company replaced approximately 252 percent
of its production at an average cost of $1.10 per Mcfe. From January 1, 1994 to
December 31, 1996, the Company increased its proved reserves from 691.5 Bcf of
gas and 73.0 MMbbls of oil to 1,156.3 Bcf of gas and 115.7 MMbbls of oil,
reflecting increases of 67.2 percent and 58.5 percent, respectively.
Additionally, the Company increased its average daily production from 247.6 MMcf
of gas and 22.8 Mbbls of oil in 1994 to 469.4 MMcf of gas and 34.5 Mbbls of oil
in 1996, reflecting increases of 89.6 percent and 51.3 percent, respectively.
The Company has numerous development and exploration opportunities, the
most important of which are on its extensive properties in the Gulf of Mexico
where the Company believes it is one of the largest independent operators. The
Company believes that the size and scope of its operations provide it with
certain economies of scale which allow it to more efficiently operate properties
in the Gulf of Mexico and, combined with the Company's long presence in the Gulf
of Mexico, give it an advantage over many other operators in making drilling and
acquisition decisions.
EDC ACQUISITION
Pursuant to its stated business strategy, on July 31, 1996, the Company
purchased all of the outstanding common stock of Energy Development Corporation
("EDC"), a wholly owned indirect subsidiary of Public Service Enterprise Group
(the "EDC Acquisition"), for approximately $768 million in cash. The Company
estimated the total proved reserves of EDC at July 31, 1996 at approximately
417.3 Bcf of gas and 35.7 MMbbls of oil. EDC's major properties are located
domestically in the Gulf of Mexico and onshore Louisiana and Texas, and
internationally in Argentina and the United Kingdom sector of the North Sea. The
Company believes that the EDC Acquisition has significantly enhanced its current
operations by further increasing its position in the Gulf of Mexico where the
Company's proved reserves increased by 32.1 percent to 898.9 Bcfe at December
31, 1996 as compared to December 31, 1995. In addition, the longer-lived
reserves
S-3
<PAGE> 4
of certain of EDC's domestic and international properties provide an attractive
balance to the Company's shorter-lived fields in the Gulf of Mexico as well as
additional geographic diversity to the Company's portfolio of oil and gas
properties.
The EDC Acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to EDC's assets and
liabilities based on fair value at the date of the acquisition, and the
financial results of EDC have been included in the financial results of the
Company for 1996 included or incorporated by reference herein from the date of
the acquisition.
THE OFFERING
Securities Offered......... $250,000,000 aggregate principal amount of 8%
Senior Notes Due 2027 (the "Senior Notes").
Interest Payment Dates..... April 1 and October 1 of each year, commencing
October 1, 1997.
Ranking.................... The Senior Notes will rank senior in priority to
any subordinated indebtedness of the Company and
pari passu with any other senior unsecured
indebtedness of the Company. The Senior Notes will
be junior in right of payment to all of the
Company's secured obligations (insofar as the
assets securing such obligations are concerned) and
will be effectively junior in right of payment to
the indebtedness and other liabilities of the
Company's subsidiaries (insofar as the assets of
those subsidiaries are concerned). See "Certain
Terms of the Senior Notes" in this Prospectus
Supplement and "Description of Debt Securities" in
the accompanying Prospectus.
Covenants.................. The Indenture will contain covenants that limit the
Company's ability to incur indebtedness secured by
certain liens and to engage in certain sale and
leaseback transactions. These limitations will be
subject to certain qualifications and exceptions.
See "Description of Debt Securities -- Provisions
Applicable to the Senior Indenture -- Certain
Covenants of the Company" in the accompanying
Prospectus.
Use of Proceeds............ The estimated aggregate net proceeds of
approximately $244.7 million from the sale of the
Senior Notes will be used together with available
cash to repay $245 million of the outstanding
principal under the term loan under the Company's
Credit Agreement.
Absence of Market for the
Senior Notes.............. The Senior Notes will be a new issue of securities
for which there currently is no market. Although
the Underwriters have informed the Company that
they each currently intend to make a market in the
Senior Notes, they are not obligated to do so, and
any such market making may be discontinued at any
time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the Senior Notes.
S-4
<PAGE> 5
SUMMARY FINANCIAL AND OPERATING DATA
(Expressed in thousands, except per share amounts and as noted)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gas and oil sales and royalties........................... $259,765 $ 278,004 $306,169 $328,134 $ 604,588
Gathering, marketing and processing....................... -- -- 43,921 112,702 273,690
Other income(1)........................................... 44,017 8,579 8,299 46,182 8,925
-------- ---------- -------- -------- ----------
303,782 286,583 358,389 487,018 887,203
Costs and expenses........................................ 242,460 265,924 353,164 479,020(2) 750,914
-------- ---------- -------- -------- ----------
Income before taxes....................................... 61,322 20,659 5,225 7,998 136,289
Income tax provision...................................... 20,082 8,034 2,059 3,912 52,409
-------- ---------- -------- -------- ----------
Net income................................................ $ 41,240 $ 12,625 $ 3,166 $ 4,086 $ 83,880
======== ========== ======== ======== ==========
Net income per share...................................... $ .93 $ .26 $ .06 $ .08 $ 1.63
======== ========== ======== ======== ==========
Weighted average number of shares outstanding............. 44,341 48,098 49,970 50,046 51,414
OTHER FINANCIAL DATA:
Net cash provided by operating activities................. $125,107 $ 139,381 $188,621 $238,920 $ 380,945
Capital expenditures...................................... 65,810 510,113 161,344 259,242 985,984
BALANCE SHEET DATA (AT PERIOD END):
Property, plant and equipment, net........................ $421,632 $ 794,605 $813,380 $843,945 $1,571,764
Total assets.............................................. 625,621 1,067,996 933,516 989,176 1,956,938
Long-term debt (including current installments)........... 224,793 453,760 376,956 376,992 848,028
Shareholders' equity...................................... 304,779 415,432 412,066 411,911 720,067
OPERATING DATA:
Average daily production:
Natural gas (MMcf)...................................... 204.6 211.1 247.6 272.2 469.4
Oil and condensate (Mbbls).............................. 17.8 19.5 22.8 25.6 34.5
Gas equivalent (MMcfe).................................. 311.6 328.1 384.1 425.9 676.5
Average sales prices:
Natural gas (per Mcf)(3)................................ $ 1.81 $ 2.10 $ 1.97 $ 1.72 $ 2.17
Oil and condensate (per bbl)(4)......................... $ 18.68 $ 15.91 $ 14.90 $ 16.78 $ 18.28
Average lifting cost (per Mcfe)........................... $ .84 $ .74 $ .62 $ .70 $ .62
Average finding cost (per Mcfe) (5)....................... $ .66 $ .86 $ .77 $ .94 $ 1.25
Reserve replacement percentage (6)........................ 101% 504% 175% 183% 333%
GAS AND OIL PROVED RESERVE DATA (AT PERIOD END) (UNAUDITED):
Estimated proved reserves:
Natural gas (Bcf)....................................... 372.2 691.5 779.0 850.3 1,156.3
Crude oil and condensate (MMbbls)....................... 47.4 73.0 75.5 84.0 115.7
Gas equivalent (Bcfe)................................... 656.6 1,129.5 1,232.1 1,354.4 1,850.4
</TABLE>
- ---------------
(1) Includes for the year ended December 31, 1992, $27.9 million recorded as
gain on the sale of an unconsolidated affiliate, $4.3 million recorded as
income from the investment in an unconsolidated affiliate prior to its sale,
and $7.5 million in income recorded from the settlement of a gas contract,
and for the year ended December 31, 1995, $39 million related to the
settlement of a Columbia Gas Transmission Corporation bankruptcy claim.
(2) Includes a $59.5 million charge related to the write-down of certain assets
in connection with the Company's adoption in 1995 of Financial Accounting
Standards No. 121.
(3) Includes the effect of natural gas hedging transactions. The amounts shown
reflect (per Mcf) a reduction of $.045, a reduction of $.048, a reduction of
$.004 and a reduction of $.33 for the year ended December 31, 1992, 1993,
1995 and 1996, respectively. See "The Company -- Hedging Arrangements" in
the Prospectus.
(4) Includes the effect of crude oil hedging transactions. The amounts shown
reflect (per bbl) an increase of $.33, an increase of $.02, an increase of
$.16 and a reduction of $2.35 for the year ended December 31, 1992, 1993,
1995 and 1996, respectively. See "The Company -- Hedging Arrangements" in
the Prospectus.
(5) Finding cost reflects the sum of property acquisition costs, exploration
costs and development costs incurred during a year divided by the quantity
of reserves added during that year through drilling, acquisitions and
revision of previous estimates.
(6) The reserve replacement percentage reflects the percentage of the Company's
annual oil and gas production that is replaced during the same year through
additions of reserves from exploratory and development drilling,
acquisitions of proved properties and revisions of previous estimates.
S-5
<PAGE> 6
USE OF PROCEEDS
The estimated aggregate net proceeds of approximately $244.7 million from
the sale of the Senior Notes will be used together with available cash to repay
$245 million of the outstanding principal under the term loan under the
Company's Credit Agreement. On March 31, 1997, the principal amount outstanding
under the Credit Agreement was $749 million (including $349 million under the
term loan). The average interest rate on indebtedness outstanding under the
Credit Agreement on March 31, 1997 was 5.97% per annum. The Credit Agreement
matures on July 31, 2001. Borrowings of $800 million under the Credit Agreement
were used to fund the purchase price for EDC and, together with funds on hand,
to repay $48 million of outstanding indebtedness under the Company's prior
credit agreement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company and its consolidated subsidiaries for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.............. 3.92 1.76 0.92(1) 1.22 4.48
</TABLE>
- ---------------
(1) Earnings were insufficient to cover fixed charges by approximately $2.0
million.
For purposes of calculating the ratios, "earnings" consist of income from
continuing operations before income taxes, minority interest and fixed charges
and "fixed charges" consist of interest and that portion of rent which is deemed
representative of interest.
CAPITALIZATION
The following table sets forth the capitalization of the Company (including
current installments of long-term debt) as of December 31, 1996 (i) on an actual
basis and (ii) as adjusted to give effect to the issuance and sale of the Senior
Notes by the Company and the application of the estimated net proceeds therefrom
together with available cash to repay $245 million of the outstanding principal
under the term loan under the Company's Credit Agreement. See "Use of Proceeds"
in this Prospectus Supplement.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt (including current installments):
7 1/4% Notes Due 2023..................................... $ 99,028 $ 99,028
8% Notes Due 2027 offered hereby.......................... -- 247,315
Bank credit agreement..................................... 749,000 504,000
---------- ----------
Total long-term debt (including current
installments)................................... 848,028 850,343
---------- ----------
Shareholders' equity:
Common stock (1).......................................... 194,402 194,402
Capital in excess of par value............................ 355,651 355,651
Retained earnings......................................... 185,432 185,432
Less common stock in treasury, at cost.................... (15,418) (15,418)
---------- ----------
Total shareholders' equity........................ 720,067 720,067
---------- ----------
Total capitalization......................... $1,568,095 $1,570,410
========== ==========
</TABLE>
- ---------------
(1) Outstanding shares of Common Stock aggregated 56,796,397. Such amount
excludes 1,602,098 shares of Common Stock reserved for issuance upon
exercise of options outstanding under the Company's stock option plans.
S-6
<PAGE> 7
CERTAIN TERMS OF THE SENIOR NOTES
The Senior Notes offered hereby are a series of "Senior Debt Securities,"
as defined and described in the accompanying Prospectus, and the following
description of the terms of the Senior Notes supplements, and to the extent
inconsistent therewith replaces, the description of the general terms and
provisions of the Senior Debt Securities set forth in the accompanying
Prospectus.
GENERAL
The Senior Notes will be senior unsecured obligations of the Company. The
Senior Notes will be issued pursuant to the provisions of an Indenture dated as
of April 1, 1997 (as supplemented, the "Indenture"), entered into between the
Company and U.S. Trust Company of Texas, N.A., as trustee (the "Trustee"), and
will be limited to $250 million aggregate principal amount. A copy of the form
of Indenture is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. The following summaries
of certain provisions of the Senior Notes and the Indenture should be read in
conjunction with the statements under "Description of Debt Securities" in the
accompanying Prospectus. Such information does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Senior Notes
and the Indenture. Wherever particular provisions or defined terms of the
Indenture are referred to, such provisions or defined terms are incorporated
herein by reference.
The Company may, from time to time, without the consent of the holders of
the Senior Notes, provide for the issuance of additional Senior Notes or other
Debt Securities under the Indenture in addition to the Senior Notes offered
hereby. The Indenture will not limit the amount of other indebtedness that may
be issued by the Company or any of its subsidiaries.
The Senior Notes will not be redeemable prior to maturity and will not be
subject to any sinking fund. The Senior Notes will mature on April 1, 2027. The
Senior Notes will bear interest from April 7, 1997 (at the rate of interest
stated on the cover page of this Prospectus Supplement) payable on April 1 and
October 1 of each year, commencing on October 1, 1997, to the persons in whose
names the Senior Notes are registered at the close of business on the March 15
and September 15, as the case may be, immediately preceding such interest
payment date. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
RANKING
The Senior Notes will rank senior in priority to any subordinated
indebtedness of the Company and pari passu with any other senior unsecured
indebtedness of the Company. The Senior Notes will be junior in right of payment
to all of the Company's secured obligations (insofar as the assets securing such
obligations are concerned) and will be effectively junior in right of payment to
the indebtedness and other liabilities of the Company's subsidiaries (insofar as
the assets of those subsidiaries are concerned). The Company's two principal
subsidiaries, Samedan Oil Corporation and Energy Development Corporation, have
each guaranteed the indebtedness of the Company under the Credit Agreement.
CERTAIN COVENANTS APPLICABLE TO THE SENIOR NOTES
The Indenture, as applicable to the Senior Notes, will provide that the
Company will be subject to covenants pertaining to limitations on liens and sale
and leaseback transactions as described under "Description of Debt
Securities -- Provisions Applicable to the Senior Indenture -- Certain Covenants
of the Company -- Limitations on Liens" and "-- Limitations on Sale and
Leaseback Transactions" in the accompanying Prospectus.
DEFEASANCE
Subject to compliance with certain conditions, the Company may discharge
its indebtedness and its obligations or certain of its obligations under the
Indenture by depositing funds or obligations issued or guaranteed by the United
States of America ("U.S. Government Obligations") with the Trustee.
S-7
<PAGE> 8
The Indenture will provide that the Company will be discharged from
substantially all of its obligations in respect of the Senior Notes upon the
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, and each installment of interest on, the Senior Notes on the
Stated Maturity of such payments. Such a trust may only be established if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that (i) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling, or (ii) since the date of the
Indenture there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the holders of the Senior Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit, defeasance and
discharge, and will be subject to Federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred. In the event of any such
defeasance and discharge of the Senior Notes, holders of the Senior Notes would
be entitled to look only to such trust fund for payment of principal of and
interest on the Senior Notes until Maturity.
The Indenture will provide that the Company may omit to comply with certain
restrictive covenants, including the covenants described under "Description of
Debt Securities -- Provisions Applicable to the Senior Indenture -- Certain
Covenants of the Company" in the accompanying Prospectus, and any such omission
shall not be an Event of Default with respect to the Senior Notes, upon the
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
which through the payment of interest and principal in respect thereof in
accordance with their terms will provide money in an amount sufficient to pay
the principal of, and each installment of interest on, the Senior Notes on the
Stated Maturity of such payments. The obligations of the Company under the
Indenture and the Senior Notes other than with respect to such covenants shall
remain in full force and effect. Such a trust may be established only if, among
other things, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the holders of the Senior Notes will not recognize income, gain
or loss for Federal income tax purposes as a result of such deposit and
defeasance, and will be subject to Federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
Although the amount of money and U.S. Government Obligations on deposit
with the Trustee would be intended to be sufficient to pay amounts due on the
Senior Notes at the time of their Stated Maturity, in the event the Company
exercises its option to omit compliance with the covenants defeased with respect
to the Senior Notes as described above and the Senior Notes are declared due and
payable because of the occurrence of any Event of Default, such amount may not
be sufficient to pay amounts due on the Senior Notes at the time of the
acceleration resulting from such Event of Default. The Company shall in any
event remain liable for such payments as provided in the Indenture.
THE TRUSTEE
U.S. Trust Company of Texas, N.A. will initially be the Trustee under the
Indenture. The Company has also appointed the Trustee as the initial Registrar
and as initial Paying Agent under the Indenture. The Indenture and provisions of
the Trust Indenture Act incorporated by reference therein contain limitations on
the right of the Trustee, should it become a creditor of the Company to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claim as security or otherwise.
BOOK-ENTRY, DELIVERY AND FORM
The Senior Notes will be issued in the form of one or more registered
Global Securities that will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("DTC"). Unless and until it is exchanged in
whole or in part for Senior Notes in definitive form, a Global Security may not
be transferred except as a whole to a nominee of DTC for such Global Security,
or by a nominee of DTC to DTC or another nominee of DTC, or by DTC or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
Initially, the Senior Notes will be registered in the name of Cede & Co., the
nominee of DTC.
S-8
<PAGE> 9
Ownership of beneficial interests in a Global Security will be limited to
persons who have accounts with DTC or its nominee ("participants") or persons
who hold interests through participants. Ownership of beneficial interests in
the Global Security will be shown on, and the transfer of these ownership
interests will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons held by such participants on
their behalf).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Security, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Senior Notes represented by such Global Security for
all purposes under the Indenture and the Senior Notes. In addition, no
beneficial owner of an interest in a Global Security will be able to transfer
that interest except in accordance with the applicable procedures of DTC.
Payments on a Global Security will be made to DTC or its nominee, as the
registered owner thereof. None of the Company, the Trustee or any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records related to
such beneficial ownership interests.
The Company has been advised by DTC that upon receipt of any payment in
respect of a Global Security representing any Senior Notes held by it or its
nominee, DTC will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security for such Senior Notes as shown on the records of
DTC or its nominee. The Company also expects that payments by participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payment will be the responsibility of such
participants. None of the Company, the Trustee or any agent of the Company or
the Trustee shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in a
Global Security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. The laws of some states require that certain
persons take physical delivery of securities in definitive form. Consequently,
the ability to transfer beneficial interests in a Global Security to such
persons may be limited. Because DTC can only act on behalf of participants, who
in turn act on behalf of indirect participants (as defined below) and certain
banks, the ability of a person having a beneficial interest in a Global Security
to pledge such interest to persons that do not participate in the DTC system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate of such interest.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC holds securities that its participants
deposit with DTC and facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Access to the DTC system
is also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
direct participant, either directly or indirectly ("indirect participants"). The
rules applicable to DTC and its participants are on file with the Commission.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Security among participants of
DTC, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. None of the
Company or the Trustee will have any responsibility for the performance by DTC
or the participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
S-9
<PAGE> 10
Senior Notes represented by a Global Security will be exchangeable for
Senior Notes in definitive form of like tenor as such Global Security in
denominations of $1,000 and in any greater amount that is an integral multiple
if DTC notifies the Company that it is unwilling or unable to continue as
Depositary for such Global Security or if at any time DTC ceases to be a
clearing agency registered under applicable law and a successor depositary is
not appointed by the Company within 90 days or the Company in its discretion at
any time determines not to require all of the Senior Notes to be represented by
a Global Security and notifies the Trustee thereof. Any Senior Notes that are
exchangeable pursuant to the preceding sentence are exchangeable for Senior
Notes issuable in authorized denominations and registered in such names as DTC
shall direct. Subject to the foregoing, a Global Security is not exchangeable,
except for a Global Security or Global Securities of the same aggregate
denominations to be registered in the name of DTC or its nominee.
Neither the Company nor the Trustee will be liable for any delay by the
related Global Security holder or DTC in identifying the beneficial owners of
the related Senior Notes, and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from such Global Security
Holder or of DTC for all purposes (including with respect to the registration
and delivery, and the respective principal amounts, of the Senior Notes to be
issued).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material United States Federal income
tax considerations relating to the purchase, ownership and disposition of the
Senior Notes, but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary and
proposed Treasury regulations, Internal Revenue Service ("IRS") rulings and
judicial decisions now in effect, all of which are subject to change (possibly
with retroactive effect) or different interpretations. This summary deals (i)
only with beneficial owners ("Holders") that will hold Senior Notes as "capital
assets" (within the meaning of Section 1221 of the Code) and (ii) only with
Holders that are citizens or residents of the United States, or any state
thereof, or a corporation or other entity created or organized under the laws of
the United States, or any political subdivision thereof, an estate the income of
which is subject to United States Federal income tax regardless of source or
that is otherwise subject to United States Federal income tax on a net income
basis in respect of the Senior Notes, or a trust whose administration is subject
to the primary supervision of a United States court and which has one or more
United States fiduciaries who have the authority to control all substantial
decisions of the trust ("U.S. Holders"). This summary does not address tax
considerations arising under the laws of any foreign, state or local
jurisdiction or applicable to investors that may be subject to special tax
rules, such as banks, tax-exempt organizations, insurance companies, dealers in
securities or currencies or persons that will hold Senior Notes as a position in
a hedging transaction, "straddle" or "conversion transaction" or other
integrated investment transaction for tax purposes. The Company has not sought
any ruling from the IRS with respect to the statements made and the conclusions
reached in the following summary, and there can be no assurance that the IRS
will agree with such statements and conclusions.
INVESTORS CONSIDERING THE PURCHASE OF SENIOR NOTES SHOULD CONSULT THEIR OWN
TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THEIR PARTICIPATION IN THE OFFERING AND THEIR OWNERSHIP AND DISPOSITION OF THE
SENIOR NOTES AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH
TAX CONSEQUENCES.
PAYMENTS OF INTEREST
Interest on the Senior Notes generally will be includable in the income of
a U.S. Holder as ordinary income at the time such interest is received or
accrued, in accordance with such U.S. Holder's method of accounting for United
States Federal income tax purposes. The Senior Notes will not be issued with
original issue discount ("OID") within the meaning of the Code.
S-10
<PAGE> 11
SALE OR EXCHANGE OF THE SENIOR NOTES
Upon the sale or exchange of a Senior Note, a U.S. Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash proceeds and the fair market value of any property received on the sale or
exchange (except to the extent such amount is attributable to accrued interest
income or any market discount not previously included in income which is taxable
as ordinary income) and (ii) such U.S. Holder's adjusted tax basis in the Senior
Note. A U.S. Holder's adjusted tax basis in a Senior Note generally will equal
the cost of the Senior Note to such U.S. Holder increased by the amount of
interest income on the Senior Note previously taken into income by the U.S.
Holder but not yet received by the U.S. Holder and by the amount of any market
discount previously taken into income by the U.S. Holder, and reduced by the
amount of any bond premium amortized by the U.S. Holder with respect to the
Senior Notes and by any principal payments on the Senior Notes. Such capital
gain or loss will be long-term capital gain or loss if the U.S. Holder's holding
period in the Senior Note is more than one year at the time of sale or exchange
(subject to the market discount rules discussed below).
AMORTIZABLE BOND PREMIUM
Generally, the excess of a U.S. Holder's tax basis in a Senior Note over
the amount payable at maturity is bond premium that the U.S. Holder may elect to
amortize under Section 171 of the Code on a yield to maturity basis over the
period from the U.S. Holder's acquisition date to the maturity date of the
Senior Note. The amortizable bond premium is treated as an offset to interest
income on the Senior Note for United States Federal income tax purposes. A U.S.
Holder who elects to amortize bond premium must reduce its tax basis in the
Senior Note by the deductions allowable for amortizable bond premium. An
election to amortize bond premium is revocable only with the consent of the IRS
and applies to all obligations owned or acquired by the U.S. Holder on or after
the first day of the taxable year to which the election applies.
MARKET DISCOUNT
A Senior Note has market discount if it is purchased at an amount less than
the issue price and less than the stated redemption price at maturity of the
Senior Note. De minimis market discount is not subject to the following rules. A
U.S. Holder of a Senior Note with market discount who does not elect to include
market discount in income as it accrues must treat a portion of the gain
recognized on the disposition or retirement of the Senior Note as ordinary
income. The amount of gain treated as ordinary income would equal the lesser of
(i) the gain recognized (or the appreciation, in the case of a nontaxable
transaction such as a gift) or (ii) the portion of the market discount that
accrued on a ratable basis (or, if elected, on a constant interest rate basis)
while the Senior Note was held by the U.S. Holder.
A U.S. Holder who acquires a Senior Note at a market discount also may be
required to defer a portion of any interest expense that otherwise may be
deductible on any indebtedness incurred or maintained to purchase or carry such
Senior Note until the U.S. Holder disposes of the Senior Note in a taxable
transaction. Moreover, to the extent of any accrued market discount on such
Senior Note, any partial principal payment with respect to the Senior Note will
be includible as ordinary income upon receipt, as will the fair market value of
the Senior Note on certain otherwise non-taxable transfers (such as gifts).
A U.S. Holder of Senior Notes acquired at a market discount may elect for
United States Federal income tax purposes to include market discount in gross
income as the discount accrues, either on a straight-line basis or on a constant
interest rate basis. This current inclusion election, once made, applies to all
market discount obligations acquired by the U.S. Holder on or after the first
day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS. If a U.S. Holder of Senior Notes makes
such an election, the foregoing rules with respect to the recognition of
ordinary income on sales and other dispositions of such debt instruments and on
any partial principal payment with respect to the Senior Notes, and the deferral
of interest deductions on indebtedness incurred or maintained to purchase or
carry such debt instruments, would not apply.
S-11
<PAGE> 12
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements may apply to principal and
interest payments on a Senior Note and to payments of the proceeds of the sale
of a Senior Note. A 31% backup withholding tax may apply to such payments unless
the U.S. Holder (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates its exemption, or (ii) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A U.S. Holder of a Senior Note who does not
provide the Company with the U.S. Holder's correct taxpayer identification
number may be subject to penalties imposed by the IRS. Any amounts withheld
under the backup withholding rules from a payment to a U.S. Holder will be
allowed as a credit against such U.S. Holder's United States Federal income tax,
provided that the required information is furnished to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company and Morgan Stanley & Co.
Incorporated, UBS Securities LLC and Chase Securities Inc. (collectively, the
"Underwriters"), the Company has agreed to sell to the Underwriters, and the
Underwriters have agreed, severally and not jointly, to purchase from the
Company, the respective principal amount of Senior Notes set forth below
opposite their respective names.
<TABLE>
<CAPTION>
UNDERWRITERS PRINCIPAL AMOUNT
------------ ----------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... $100,000,000
UBS Securities LLC.......................................... 100,000,000
Chase Securities Inc. ...................................... 50,000,000
------------
Total............................................. $250,000,000
============
</TABLE>
The Underwriters propose to offer the Senior Notes in part directly to the
public at the respective initial public offering price set forth on the cover
page of this Prospectus Supplement and in part to certain securities dealers at
such prices less a concession not to exceed .500% of the principal amount of the
Senior Notes. The Underwriters may allow, and such dealers may reallow, a
concession not to exceed .250% of the principal amount of the Senior Notes to
certain brokers and dealers. After the Senior Notes are released for sale to the
public, the offering prices and other selling terms may from time to time be
varied by the Underwriters.
The Underwriting Agreement provides that the obligation of the Underwriters
to pay for and accept delivery of the Senior Notes is subject to certain
conditions, including delivery of certain legal opinions by counsel for the
Underwriters.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities under the Securities Act and will
contribute to payments the Underwriters may be required to make in respect
thereof.
The Senior Notes will be a new issue of securities for which there is
currently no market. Although the Underwriters have informed the Company that
they currently intend to make a market in the Senior Notes, they are not
obligated to do so, and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Senior Notes.
In the ordinary course of their respective businesses, each of the
Underwriters, or affiliates thereof, have from time to time provided, and may in
the future provide, investment banking and/or commercial banking services to the
Company and its affiliates in connection with various transactions and proposed
transactions.
Union Bank of Switzerland ("UBS"), an affiliate of UBS Securities LLC, one
of the Underwriters, is the agent and a lender under the Credit Agreement, and
Texas Commerce Bank National Association ("TCB"), an affiliate of Chase
Securities Inc., one of the Underwriters, is a lender under the Credit
Agreement. It is expected that a portion of the debt outstanding under the
Credit Agreement will be repaid from the net
S-12
<PAGE> 13
proceeds of the issuance of the Senior Notes offered hereby and that UBS and TCB
will receive their respective proportionate share of such repayment. See "Use of
Proceeds." More than 10% of the net proceeds from the offering of the Senior
Notes is expected to be used to repay amounts outstanding under the Credit
Agreement. Accordingly, the offerings are being made in accordance with Section
2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc. UBS Securities LLC and Chase Securities Inc. are participating in
the offerings on the same terms as the other Underwriters and will not receive
any benefit in connection with the offerings other than customary management,
underwriting and selling fees.
In order to facilitate the offering of the Senior Notes, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Senior Notes. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Senior Notes for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Senior Notes, the Underwriters may bid for, and purchase, the
Senior Notes in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
Senior Notes in the offering, if the syndicate repurchases previously
distributed Senior Notes in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Senior Notes above independent market
levels. The Underwriters are not required to engage in these activities and may
end any of these activities at any time.
VALIDITY OF THE SENIOR NOTES
The validity of the Senior Notes offered hereby will be passed upon for the
Company by Thompson & Knight, P.C., Dallas, Texas, and for the Underwriters by
Sullivan & Cromwell, New York, New York. Harold F. Kleinman, a shareholder of
Thompson & Knight, P.C., is a director of the Company and is the beneficial
owner of 200 shares of Common Stock of the Company.
S-13
<PAGE> 14
PROSPECTUS
NOBLE AFFILIATES, INC.
DEBT SECURITIES
Noble Affiliates, Inc. (the "Company") may offer and issue from time to
time its debt securities (the "Debt Securities"), which may be either senior
debt securities (the "Senior Debt Securities") or subordinated debt securities
(the "Subordinated Debt Securities"), consisting of debentures, notes, bonds
and/or other unsecured evidences of indebtedness in one or more series. The Debt
Securities will be offered at an aggregate initial offering price not to exceed
$575 million, at prices and on terms to be determined at the time of sale.
The Senior Debt Securities will rank equally with all other unsubordinated
and unsecured indebtedness of the Company. The Subordinated Debt Securities will
be subordinated to all existing and future Senior Indebtedness (as defined) of
the Company. The Debt Securities will be effectively subordinated to all
indebtedness and liabilities of subsidiaries of the Company.
The accompanying Prospectus Supplement sets forth with regard to the
particular Debt Securities in respect of which this Prospectus is being
delivered, the title, aggregate principal amount, denominations, maturity, rate
and time of payment of interest, any terms for redemption at the option of the
Company or the holder, any terms for sinking fund payments, any conversion or
exchange rights, any listing on a securities exchange, the initial public
offering price and any other terms in connection with the offering and sale of
such Debt Securities. The Prospectus Supplement will also contain information,
as applicable, about certain United States Federal income tax considerations
relating to the Debt Securities in respect of which this Prospectus is being
delivered.
The common stock of the Company, par value $3.33 1/3 per share (the "Common
Stock"), is listed on the New York Stock Exchange under the symbol "NBL."
The Company may sell Debt Securities to or through underwriters or dealers,
and also may sell Debt Securities directly to other purchasers or through
agents. The accompanying Prospectus Supplement sets forth the names of any
underwriters or agents involved in the sale of Debt Securities in respect of
which this Prospectus is being delivered, the principal amounts, if any, to be
purchased by underwriters and the compensation of such underwriters or agents.
See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
The date of this Prospectus is December 27, 1996.
<PAGE> 15
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF ANY DEBT SECURITIES
OFFERED HEREBY AND THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON
THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street N.W., Room 1024, Washington, D.C. 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and Seven World Trade Center, New York, New York
10048. Copies of such material can also be obtained from the Commission at
prescribed rates through its Public Reference Section at 450 Fifth Street N.W.,
Room 1024, Washington, D.C. 20549. In addition, similar information concerning
the Company can be inspected and copied at the New York Stock Exchange, 20 Broad
Street, New York, NY 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933 (the "Securities Act") with respect to the
Debt Securities offered hereby (including all amendments or supplements thereto,
the "Registration Statement"). This Prospectus, which forms a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. Statements contained herein
concerning the provisions of certain documents are not necessarily complete and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-7062) pursuant to the Exchange Act are incorporated herein by reference: (i)
Annual Report on Form 10-K for the year ended December 31, 1995, as amended by
Form 10-K/A (No. 1) dated June 27, 1996; (ii) Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996; and
(iii) Current Report on Form 8-K (Date of Event: July 31, 1996) dated August 13,
1996, as amended by Form 8-K/A (No. 1) dated September 27, 1996. All other
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Debt Securities shall be deemed to be
incorporated by reference in this Prospectus from the date of filing thereof.
Any statement contained herein or in a document or information incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded to the extent that a statement contained herein or in any
subsequently filed document which also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of any such person, a
copy of any or all of the foregoing documents or information that has been
incorporated by reference in this Prospectus, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). Requests should be directed to William D. Dickson, Vice
President -- Finance and Treasurer, Noble Affiliates, Inc., P.O. Box 1967,
Ardmore, Oklahoma 73402, (405) 223-4110.
2
<PAGE> 16
THE COMPANY
GENERAL
The Company is an independent energy company engaged, through its
subsidiaries, in the exploration, production and marketing of crude oil and
natural gas. It conducts operations throughout the major basins of the United
States as well as in selected international areas. The Company is one of the
largest independent oil and gas companies in the United States.
The Company, incorporated in Delaware in 1969, and its predecessors have
been engaged in oil and gas exploration and production since 1932. Its principal
executive offices are located at 110 West Broadway, Ardmore, Oklahoma 73401, and
its telephone number is (405) 223-4110. Unless otherwise indicated or the
context otherwise requires, the "Company" refers to Noble Affiliates, Inc. and
its subsidiaries (including EDC) and predecessors and "EDC" refers to Energy
Development Corporation and its subsidiaries (see "-- Business Strategy -- EDC
Acquisition").
BUSINESS STRATEGY
The Company's principal business strategy is to increase reserves,
production and cash flow through a balanced program of exploratory and
development drilling, supplemented by strategic acquisitions. During the
three-year period ended December 31, 1995, the Company replaced approximately
273 percent of its production at an average cost of $0.86 per Mcfe. From January
1, 1993 through December 31, 1995, the Company (not including EDC) increased its
proved reserves from 372.2 Bcf of gas and 47.4 MMbbls of oil to 850.3 Bcf of gas
and 84.0 MMbbls of oil. Additionally, the Company (not including EDC) increased
its production from 75.1 Bcf of gas and 7.4 MMbbls of oil in 1993 to 97.0 Bcf of
gas and 9.6 MMbbls of oil in 1995.
The Company seeks to achieve operating and technical efficiencies by
focusing its exploration and development drilling efforts in areas in which the
Company has a concentration of existing producing properties, the most important
of which is its portfolio of properties in the Gulf of Mexico. The Company seeks
to retain the largest available interest consistent with its analysis of the
risks and potential returns of a prospect and to serve as operator whenever
appropriate. Typically, the Company finances its exploration and development
drilling with internally generated funds.
The Company seeks to supplement its exploration and development drilling
activities with acquisitions of producing and non-producing properties. The
Company attempts to acquire properties that complement its existing operations,
thereby allowing the Company to use its engineering knowledge and expertise in
the area, and in many cases its existing facilities, to find, develop and
produce reserves in a cost-effective manner. In addition, the Company actively
seeks to increase its average working interest per well by purchasing additional
interests in existing properties and divesting non-strategic or economically
marginal wells or wells in which it has a small interest.
EDC Acquisition
Pursuant to its stated business strategy, on July 31, 1996, the Company
purchased all of the outstanding common stock of Energy Development Corporation,
a wholly owned indirect subsidiary of Public Service Enterprise Group
Incorporated (the "EDC Acquisition"), for approximately $768 million in cash.
EDC's major properties are located domestically in the Gulf of Mexico and
onshore Louisiana and Texas, and internationally in Argentina and the United
Kingdom sector of the North Sea.
As of December 31, 1995, EDC's estimated proved reserves were approximately
460.9 Bcf of gas and 37.5 MMbbls of oil, as evaluated by Samedan Oil Corporation
("Samedan"), a wholly owned subsidiary of the Company. Approximately 67 percent
of such reserves were natural gas and 75 percent of such reserves were located
in the United States. EDC's average daily production in 1995 and the nine months
ended September 30, 1996 was approximately 205 MMcf and 213 MMcf of gas and
11,000 bbls and 11,650 bbls of oil, respectively. Approximately 86 percent of
such production of EDC for the nine months ended
3
<PAGE> 17
September 30, 1996 was located in the United States. As of December 31, 1995,
EDC held 483,344 net domestic undeveloped leasehold acres, and royalty,
overriding royalty and other mineral interests in 37,663 net acres.
On a pro forma basis giving effect to the EDC Acquisition, as of December
31, 1995, the Company's estimated proved reserves were approximately 2,040.2
Bcfe. Natural gas accounted for approximately 64 percent of such proved
reserves. Approximately 86 percent of such proved reserves were located in the
United States, most notably in the Gulf of Mexico, with the balance located in
Argentina, the North Sea, Equatorial Guinea and Canada. The Company's average
daily production in 1995 and the nine months ended September 30, 1996, pro forma
for the EDC Acquisition, was approximately 696.9 MMcfe and 836.7 MMcfe,
respectively. Approximately 91 percent of such production for the nine months
ended September 30, 1996 was located in the United States.
The Company believes that the EDC Acquisition achieved several of its
strategic objectives. First, it materially enhanced and leveraged the Company's
significant position in the Gulf of Mexico where the Company's proved reserves
as of December 31, 1995 (pro forma for the EDC Acquisition) increased 46 percent
to approximately 993.9 Bcfe. Second, it furthers the Company's goals of owning
large working interests in oil and gas properties and operating such properties
whenever appropriate. The Company believes that it can capitalize on its
capabilities as a low-cost operator and realize cost savings, particularly in
the Gulf of Mexico, where it already has extensive operations in place. Third,
the longer-lived reserves of certain of EDC's domestic onshore and international
properties provide an attractive balance to the Company's shorter-lived fields
in the Gulf of Mexico. Fourth, the acquisition of international reserves in
Argentina and the United Kingdom sector of the North Sea adds geographic
diversity to the Company's portfolio of oil and gas properties consistent with
its traditional risk profile.
In connection with the EDC Acquisition, the Company entered into a new $800
million bank credit facility pursuant to a credit agreement (the "Credit
Agreement") dated as of July 31, 1996. Borrowings of $800 million under the
Credit Agreement were used to fund the purchase price for EDC and, together with
funds on hand, to repay $48 million of outstanding indebtedness under the
Company's then existing bank credit agreement, which was cancelled in connection
with the repayment thereunder. The Credit Agreement generally permits the
Company to prepay at its option, in whole or in part and without premium or
penalty, the indebtedness under the Credit Agreement. The Company therefore has
the ability to consider the refinancing of part or all of the indebtedness
outstanding under the Credit Agreement from time to time in the public or
private financial markets on such terms as it considers satisfactory.
EXPLORATION AND DEVELOPMENT
The Company has numerous drilling and development opportunities throughout
its portfolio, the most important of which are on its extensive Gulf of Mexico
properties. The Company's capital expenditures in the nine months ended
September 30, 1996 for exploration and development drilling, not including any
such drilling associated with properties acquired through the EDC Acquisition,
were approximately $202.4 million, of which approximately 72 percent was spent
in the Gulf of Mexico. The Company currently estimates that its capital
expenditures for exploration and development drilling for the last three months
of 1996, including any such drilling associated with properties acquired through
the EDC Acquisition, will be approximately $54 million, of which approximately
70 percent is scheduled to be spent in the Gulf of Mexico.
4
<PAGE> 18
PROPERTIES
Reserves
The following table sets forth information as to estimated net proved and
proved developed reserves as of December 31, 1995 for (i) the Company, (ii) EDC
and (iii) the Company on a pro forma combined basis, assuming the EDC
Acquisition occurred on December 31, 1995. For additional information about the
Company's reserves and the standardized measure of discounted future net cash
flows attributable thereto (not including EDC), see Note 10 of the Notes to
Consolidated Financial Statements incorporated in this Prospectus by reference
to the Company's Form 10-K for the year ended December 31, 1995, as amended.
TOTAL PROVED AND PROVED DEVELOPED
RESERVES AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMPANY EDC(1) PRO FORMA COMBINED
---------------- ---------------- ------------------
GAS OIL GAS OIL GAS OIL
(BCF) (MMBBLS) (BCF) (MMBBLS) (BCF) (MMBBLS)
----- -------- ----- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Total Proved Reserves:
Domestic:
Offshore Gulf of Mexico.............. 513.3 27.9 241.2 12.0 754.5 39.9
Onshore.............................. 305.0 43.0 171.8 4.7 476.8 47.7
----- ---- ----- ---- ------- -----
818.3 70.9 413.0 16.7 1,231.3 87.6
International........................... 32.0 13.1 47.9 20.8 79.9 33.9
----- ---- ----- ---- ------- -----
850.3 84.0 460.9 37.5 1,311.2 121.5
===== ==== ===== ==== ======= =====
Total Proved Developed
Reserves...................... 782.8 79.0 409.8 29.0 1,192.6 108.0
===== ==== ===== ==== ======= =====
</TABLE>
- ---------------
(1) In connection with the EDC Acquisition, Samedan's in-house engineers
prepared estimates of the proved reserves of EDC based on geological and
engineering evaluations as of December 31, 1995. Prior to closing of the EDC
Acquisition, Miller and Lents, Ltd., independent petroleum consultants,
estimated the proved reserves of EDC as of July 1, 1996. A summary of such
estimates, together with a summary of the estimates of EDC's proved reserves
prepared by Samedan as of July 31, 1996 (the closing date of the EDC
Acquisition), is set forth in the Company's Form 8-K (Date of Event: July
31, 1996), as amended, which is incorporated by reference in this
Prospectus. After taking into account adjustments for EDC's production and
exploration and development activities during 1996, there are no material
differences in the aggregate among such estimate of proved reserves prepared
by Miller and Lents, Ltd. and the estimates of proved reserves prepared by
Samedan as of December 31, 1995 and July 31, 1996.
Samedan's in-house engineers annually estimate the Company's proved
reserves, and Samedan does not employ independent engineers to prepare, review
or audit such estimates.
Because of the direct relationship between quantities of proved undeveloped
reserves and development plans, Samedan has assigned to undeveloped locations
only those reserves that will definitely be drilled, and only those reserves
assigned to the undeveloped portions of secondary or tertiary projects that will
definitely be developed have been included in proved reserves and proved
undeveloped reserves. The Company has interests in certain tracts that may have
additional hydrocarbon quantities that were not classified at the time of the
estimate as proved reserves because Samedan did not have definitive plans at
such time to drill or develop these tracts, but which tracts may be reclassified
as proved reserves in the future as a result of the Company's exploration and
development programs. Under the regulations of the Commission, a company may
classify reserves as proved undeveloped reserves, assuming they otherwise meet
the Commission's criteria for proved reserves, without regard to whether such
company has definitive plans to drill or develop such reserves.
There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves and in projecting the future rates of production and
timing of development expenditures. Oil and gas reserve engineering is a
subjective process of estimating underground accumulations of oil and gas that
cannot be
5
<PAGE> 19
precisely measured, and estimates of other engineers might differ materially
from the estimates contained or incorporated by reference in this Prospectus.
The accuracy of any reserve estimate is a function of the quality of available
data and of engineering and geological interpretation and judgment. Results of
drilling, testing and production subsequent to the date of the estimate may
justify revision of such estimate. Accordingly, reserve estimates are often
different from the quantities of oil and gas that are ultimately recovered. In
addition, estimates of the standardized measure of discounted future net cash
flows attributable to the Company's proved reserves are based on certain
assumptions regarding future oil and gas prices, production levels, and
operating and development costs that may not prove to be correct. Any
significant variance in these assumptions could materially affect the estimated
quantities of proved reserves and future net cash flows therefrom contained or
incorporated by reference in this Prospectus.
The Company periodically estimates restoration and abandonment costs
relating to its oil and gas properties that will be required to be paid at the
end of the properties' productive lives. The estimated costs, as adjusted from
time to time, are recorded by charges to depreciation, depletion and
amortization expense in the Company's financial statements. The estimated
restoration and abandonment costs are also included in estimated future
production and development costs for purposes of estimating the future net cash
flows attributable to the Company's proved reserves.
CONVERSION OF CONVERTIBLE NOTES
In October 1996, the Company called for redemption all $230,000,000
outstanding principal amount of its 4 1/4% Convertible Subordinated Notes due
2003 (the "Convertible Notes"). Prior to the close of business on November 1,
1996, an aggregate of $229,962,000 principal amount of the Convertible Notes
were converted into 6,274,474 shares of Common Stock, at the stated conversion
price of $36.65 of principal amount of Convertible Notes per share of Common
Stock. The Company redeemed the remaining $38,000 outstanding principal amount
of the Convertible Notes using the proceeds of the sale of 1,036 shares of
Common Stock to a standby underwriter engaged in connection with the redemption.
HEDGING ARRANGEMENTS
The Company, from time to time, uses various hedging arrangements in
connection with anticipated crude oil and natural gas sales of its own
production and third party production purchased and sold by its natural gas
marketing subsidiary to minimize the impact of product price fluctuations. Such
arrangements include fixed price hedges, costless collars and other contractual
arrangements. Although these hedging arrangements expose the Company to credit
risks, the Company monitors the creditworthiness of its counterparties, which
generally are major institutions, and believes that losses from nonperformance
are unlikely to occur. A discussion of the historical effect of such hedging
arrangements and of the Company's hedging arrangements in respect of future
anticipated production is included in the Company's annual report on Form 10-K
and quarterly reports on Form 10-Q incorporated by reference in this Prospectus.
USE OF PROCEEDS
Except as otherwise described in the accompanying Prospectus Supplement,
the net proceeds from the sale of Debt Securities will be used for general
corporate purposes, which may include refinancings of indebtedness, working
capital, capital expenditures, acquisitions, and repurchases and redemptions of
securities.
6
<PAGE> 20
SELECTED FINANCIAL DATA
The following table sets forth certain consolidated (i) historical
financial data of the Company for each of the three years in the period ended
December 31, 1995 and for the nine months ended September 30, 1995 and 1996 and
(ii) pro forma financial data of the Company that give effect to the EDC
Acquisition and the financing thereof which occurred on July 31, 1996. Financial
statement data for the historical interim periods are unaudited but, in the
opinion of management, include all adjustments (which include only normal
recurring accruals) necessary for a fair presentation of the information. Pro
forma financial data also are unaudited. The results of operations for interim
periods are not necessarily indicative of results for the entire year. The table
should be read in conjunction with (i) the Consolidated Financial Statements and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated in this Prospectus by
reference to the Company's Form 10-K for the year ended December 31, 1995, as
amended, and Form 10-Q for the quarter ended September 30, 1996 and (ii) the
Consolidated Financial Statements and related notes thereto of EDC and the Pro
Forma Consolidated Condensed Financial Statements and related notes thereto
incorporated in this Prospectus by reference to the Company's Form 8-K (Date of
Event: July 31, 1996), as amended.
<TABLE>
<CAPTION>
COMPANY HISTORICAL PRO FORMA(1)
----------------------------------------------------------- -----------------------------
NINE MONTHS
ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED ENDED
-------------------------------- ----------------------- DECEMBER 31, SEPTEMBER 30,
1993 1994 1995 1995 1996 1995 1996
---------- -------- -------- ---------- ---------- ------------ -------------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Gas and oil sales and
royalties.................. $ 278,004 $306,169 $328,134 $ 234,150 $ 396,149 $532,184 $539,575
Gathering, marketing and
processing................. -- 43,921 112,702 71,334 209,796 202,751 278,427
Other income................. 8,579 8,299 46,182(2) 3,790 5,282 107,822(3) 9,356
---------- -------- -------- ---------- ---------- -------- --------
Total.................. 286,583 358,389 487,018 309,274 611,227 842,757 827,358
---------- -------- -------- ---------- ---------- -------- --------
Costs and expenses:
Oil and gas operations....... 75,110 74,661 81,735 61,775 83,595 90,165 118,116
Oil and gas exploration...... 36,473 54,321 33,246 19,701 38,797 110,058 61,920
Gathering, marketing and
processing................. -- 42,758 107,867 69,402 193,687 193,472 258,204
Depreciation, depletion and
amortization............... 107,215 127,470 200,914(4) 106,667 153,668 335,563(4) 233,608
Selling, general and
administrative............. 31,784 36,408 36,514 27,264 32,671 49,908 37,175
Interest, net of amount
capitalized................ 15,342 17,546 18,744 13,919 22,116 63,470 50,423
---------- -------- -------- ---------- ---------- -------- --------
Total.................. 265,924 353,164 479,020 298,728 524,534 842,636 759,446
---------- -------- -------- ---------- ---------- -------- --------
Income before taxes............ 20,659 5,225 7,998 10,546 86,693 121 67,913
Income tax provision........... 8,034 2,059 3,912 4,020 31,849 48 22,867
---------- -------- -------- ---------- ---------- -------- --------
Net income..................... $ 12,625 $ 3,166 $ 4,086 $ 6,526 $ 54,844 $ 73 $ 45,046
========== ======== ======== ========== ========== ======== ========
Primary earnings per share..... $ .26 $ .06 $ .08 $ .13 $ 1.09 $ .00 $ .90
========== ======== ======== ========== ========== ======== ========
Fully diluted earnings per
share(5)..................... $ .26 $ .06 $ .08 $ .13 $ 1.04 $ .00 $ .84
========== ======== ======== ========== ========== ======== ========
Cash dividends paid............ $ .16 $ .16 $ .16 $ .12 $ .12 $ .16 $ .12
========== ======== ======== ========== ========== ======== ========
OTHER FINANCIAL DATA:
Net cash provided by operating
activities................... $ 139,381 $188,621 $238,920 $ 180,372 $ 293,664
Capital expenditures........... 510,113 161,344 259,242 197,060 944,007
BALANCE SHEET DATA (AT PERIOD
END):
Property, plant and equipment,
net.......................... $ 794,605 $813,380 $843,945 $ 893,434 $1,619,732
Total assets................... 1,067,996 933,516 989,176 1,006,501 1,916,963
Long-term debt (including
current installments)........ 453,760 376,956 376,992 401,983 1,129,019(6)
Shareholders' equity........... 415,432 412,066 411,911 413,439 465,230(6)
</TABLE>
- ---------------
(1) The pro forma financial data assume the EDC Acquisition and the financing
thereof occurred on January 1, 1995.
7
<PAGE> 21
(2) Includes $39 million related to the settlement of a Columbia Gas
Transmission Corporation bankruptcy claim.
(3) Includes $74 million ($39 million for the Company and $35 million for EDC)
related to the settlement of Columbia Gas Transmission Corporation
bankruptcy claims.
(4) Includes a $59.5 million charge related to the write-down of certain assets
in connection with the Company's adoption in 1995 of Financial Accounting
Standards No. 121.
(5) Amounts shown were computed using the "if converted method" assuming the
Convertible Notes were converted into Common Stock at the beginning of the
period. The Convertible Notes were antidilutive for all periods ending on or
before December 31, 1995. See footnote (6) below.
(6) Subsequent to September 30, 1996, $229,962,000 aggregate principal amount of
the Convertible Notes were converted into 6,274,474 shares of Common Stock,
and the Company redeemed the remaining $38,000 principal amount of the
Convertible Notes using the proceeds from the sale of 1,036 shares of Common
Stock to a standby underwriter engaged in connection with the redemption of
the Convertible Notes. See "The Company -- Conversion of Convertible Notes."
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of each series of Debt Securities offered by any Prospectus
Supplement and the extent, if any, to which such general provisions may apply to
the Debt Securities so offered will be described in the Prospectus Supplement
relating to such series of Debt Securities.
Debt Securities may be issued from time to time in one or more series by
the Company. The Debt Securities will constitute indebtedness designated as
either Senior Debt Securities or Subordinated Debt Securities. The Senior Debt
Securities will be issued under an indenture (the "Senior Indenture") to be
entered into between the Company and a trustee (the "Senior Trustee") prior to
the issuance of such Senior Debt Securities. The Subordinated Debt Securities
will be issued under an indenture (the "Subordinated Indenture") to be entered
into between the Company and a trustee (the "Subordinated Trustee") prior to the
issuance of such Subordinated Debt Securities. The Senior Indenture and the
Subordinated Indenture are sometimes hereinafter referred to individually as an
"Indenture" and collectively as the "Indentures." The Senior Trustee and the
Subordinated Trustee are sometimes hereinafter referred to individually as a
"Trustee" and collectively as the "Trustees." Information regarding the Trustee
under an Indenture will be included in any Prospectus Supplement relating to the
Debt Securities issued thereunder.
The following discussion includes a summary description of all material
terms of the Indentures, other than terms which are specific to a particular
series of Debt Securities and which will be described in the Prospectus
Supplement relating to such series. The following summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures, including the definitions therein of
certain terms capitalized in this Prospectus. Wherever particular Sections or
Articles or defined terms of the Indentures are referred to herein or in a
Prospectus Supplement, such Sections, Articles or defined terms are incorporated
herein or therein by reference. The term "Company" in this section of the
Prospectus means Noble Affiliates, Inc.
Other than as set forth under "Provisions Applicable to the Senior
Indenture -- Certain Covenants of the Company," and only to the extent
applicable to the Senior Debt Securities of a particular series, as indicated by
the applicable Prospectus Supplement, the Indentures do not contain any
provisions which are intended to afford holders of the Debt Securities
protection in the event of a highly leveraged or other transaction involving the
Company or in the event of a material adverse change in the Company's financial
condition or results of operations.
GENERAL PROVISIONS APPLICABLE TO BOTH INDENTURES
The Indentures do not limit the aggregate amount of Debt Securities which
may be issued thereunder, and Debt Securities may be issued thereunder from time
to time in separate series up to the aggregate amount
8
<PAGE> 22
authorized by the Company for each such series. Debt Securities of a series may
be issued in registered form without coupons ("Registered Debt Securities"), in
bearer form with or without coupons attached ("Bearer Debt Securities") or in a
form of one or more Global Securities in registered or bearer form (each, a
"Global Security"). Bearer Debt Securities, if any, will be offered only to
non-United States persons and to offices located outside of the United States of
certain United States financial institutions. The Debt Securities will be
unsecured obligations of the Company. The Senior Debt Securities will be
unsubordinated obligations of the Company and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. The Subordinated
Debt Securities will be subordinated in right of payment to the prior payment in
full of the Senior Indebtedness (as defined) of the Company, as described below
under "Provisions Applicable to the Subordinated Indenture -- Subordination" and
in a Prospectus Supplement applicable to an offering of Subordinated Debt
Securities.
Since the Company is a holding company, its rights and the rights of its
creditors, including the holders of the Debt Securities, to participate in the
distribution of the assets of the subsidiaries of the Company upon any
liquidation or reorganization of any such subsidiary, or otherwise, will be
subject to the prior claims of creditors of such subsidiaries, except to the
extent that the Company may itself be a creditor with recognized claims against
any such subsidiary. The ability of the Company to pay principal of and interest
on the Debt Securities is, to a large extent, dependent upon the payment to it
of dividends, interest or other charges by the subsidiaries of the Company.
The applicable Prospectus Supplement will describe the following terms of
the series of Debt Securities in respect of which this Prospectus is being
delivered: (1) the title of such Debt Securities; (2) any limit on the aggregate
principal amount of such Debt Securities; (3) whether such Debt Securities will
be issued as Registered Debt Securities, Bearer Debt Securities or any
combination thereof, and any limitation on issuance of such Bearer Debt
Securities and any provisions regarding the transfer or exchange of such Bearer
Debt Securities, including exchange for Registered Debt Securities of the same
series; (4) whether any of such Debt Securities are to be issuable as a Global
Security, whether such Global Securities are to be issued in temporary global
form or permanent global form, and, if so, the terms and conditions, if any,
upon which interests in such Global Securities may be exchanged, in whole or in
part, for the individual Debt Securities represented thereby; (5) the person to
whom any interest on any Debt Security of the series shall be payable if other
than the person in whose name the Debt Security is registered on the Regular
Record Date; (6) the date or dates on which such Debt Securities will mature;
(7) the rate or rates of interest, if any, or the method of calculation thereof,
which such Debt Securities will bear; (8) the date or dates from which any such
interest will accrue, the Interest Payment Dates on which any such interest on
such Debt Securities will be payable and the Regular Record Dates for any
interest payable on any Interest Payment Date; (9) the place or places where the
principal of, premium, if any, and interest on such Debt Securities will be
payable; (10) the period or periods within which, the events upon the occurrence
of which, and the price and prices at which, such Debt Securities may, pursuant
to any optional or mandatory provisions, be redeemed or purchased, in whole or
in part, by the Company and any terms and conditions relevant thereto; (11) the
obligation of the Company, if any, to redeem or repurchase such Debt Securities
at the option of the holders thereof; (12) the denominations in which any such
Debt Securities will be issuable, if other than denominations of $1,000 and any
integral multiple thereof; (13) the currency, currencies or currency unit or
units of payment of principal of and any premium and interest on such Debt
Securities if other than U.S. dollars; (14) any index or formula used to
determine the amount of payments of principal of and any premium and interest on
such Debt Securities; (15) if the principal amount of or any premium or interest
on such Debt Securities is to be payable, at the election of the Company or a
holder thereof, in one or more currencies or currency units other than that or
those in which such Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on Debt Securities of such series as to which such election
is made shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made; (16) the place or places
where such Debt Securities may be presented for exchange, registration of
transfer or, if applicable, conversion; (17) if other than the principal amount
thereof, the portion the principal amount of such Debt Securities of the series
which will be payable upon declaration of the acceleration of the Maturity
thereof; (18) with respect to any Senior Debt Securities, the applicability of
any provisions described under "Provisions of the Senior Indenture -- Certain
Covenants of the Company";
9
<PAGE> 23
(19) the applicability of any provisions described under "Defeasance"; (20) the
terms and conditions, if any, pursuant to which such Debt Securities are
convertible or exchangeable into Common Stock or other securities or instruments
and (21) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
Debt Securities may be issued at a discount from their principal amount.
United States Federal income tax considerations and other special considerations
applicable to any such Original Issue Discount Securities will be described in
the applicable Prospectus Supplement.
If the purchase price of any Debt Securities is denominated in a foreign
currency or currencies or a foreign currency unit or units or if the principal
amount of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such issue of Debt Securities and such a
foreign currency or currencies or a foreign currency unit or units will be set
forth in the applicable Prospectus Supplement.
Form, Exchange, Registration, Conversion and Transfer
Debt Securities are issuable in definitive form as Registered Debt
Securities, as Bearer Debt Securities or both. Unless otherwise indicated in an
applicable Prospectus Supplement, Bearer Debt Securities will have interest
coupons attached. Debt Securities are also issuable in temporary or permanent
global form.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, with
respect to any series of Bearer Debt Securities, at the option of the holder,
subject to the terms of the Indenture, such Bearer Debt Securities (with all
unmatured coupons, except as provided below, and all matured coupons in default)
will be exchangeable into Registered Debt Securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor.
Bearer Debt Securities surrendered in exchange for Registered Debt Securities
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest shall be surrendered without the coupon relating to such
date for payment of interest, and interest accrued as of such date will not be
payable in respect of the Registered Debt Security issued in exchange for such
Bearer Debt Security, but will be payable only to the holder of such coupon when
due in accordance with the terms of the Indenture.
In connection with its sale during the restricted period (as defined
below), no Bearer Debt Security (including a Debt Security in permanent global
form that is either a Bearer Debt Security or exchangeable for Bearer Debt
Securities) shall be mailed or otherwise delivered to any location in the United
States (as defined under "-- Limitations on Issuance of Bearer Debt Securities")
and a Bearer Debt Security may be delivered outside the United States in
definitive form in connection with its original issuance only if prior to
delivery the person entitled to receive such Bearer Debt Security furnishes
written certification, in the form required by the Indenture, to the effect that
such Bearer Debt Security is owned by: (a) a person (purchasing for its own
account) who is not a United States person (as defined under "-- Limitations on
Issuance of Bearer Debt Securities"); (b) a United States person who (i) is a
foreign branch of a United States financial institution purchasing for its own
account or for resale or (ii) acquired such Bearer Debt Security through the
foreign branch of a United States financial institution and who for purposes of
the certification holds such Bearer Debt Security through such financial
institution on the date of certification and, in either case, such United States
financial institution certifies to the Company or the distributor selling the
Bearer Debt Security within a reasonable time stating that it agrees to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder; or (c) a United States or foreign financial institution for purposes
of resale within the "restricted period" as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7). A financial institution described in
clause (c) of the preceding sentence (whether or not also described in clauses
(a) and (b)) must certify that it has not acquired the Bearer Debt Security for
purpose of resale, directly or indirectly, to a United States person or to a
person within the United States or its possessions. In the case of a Bearer Debt
Security in permanent global form, such certification must be given in
connection with notation of a
10
<PAGE> 24
beneficial owner's interest therein in connection with the original issuance of
such Debt Security or upon exchange of a portion of a temporary global Debt
Security.
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities may be presented for registration or transfer (with
the form of transfer endorsed thereon duly executed), at the office or agency of
the Company maintained for such purposes and at any other office or agency
maintained for such purpose with respect to any series of Debt Securities and
referred to in the applicable Prospectus Supplement, without a service charge
and upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Company or its
agent, as the case may be, being satisfied with the documents of title and
identity of the person making the request.
In the event of any redemption in part, the Company shall not be required
to (i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (a) if Debt Securities of the series are issued only as
Registered Debt Securities, the day of mailing of the relevant notice of
redemption and (b) if Debt Securities of the series are issued as Bearer Debt
Securities, the day of the first publication of the relevant notice of
redemption except that, if Debt Securities of the series are also issued as
Registered Debt Securities and there is no publication, the day of mailing of
the relevant notice of redemption; (ii) register the transfer of or exchange any
Registered Debt Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Debt Security being redeemed in part; or
(iii) exchange any Bearer Debt Security called for redemption, except to
exchange such Bearer Debt Security for a Registered Debt Security of that series
and like tenor which is simultaneously surrendered for redemption.
Payment and Paying Agents
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and any premium) and interest on Bearer Debt Securities will be
payable, subject to any applicable laws and regulations, in the designated
currency or currency unit, at the offices of such Paying Agents ("Paying
Agents") outside the United States as the Company may designate from time to
time, at the option of the holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States; provided,
however, that the written certification described above under "-- Form,
Exchange, Registration, Conversion and Transfer" has been delivered prior the
first actual payment of interest. Unless otherwise indicated in the applicable
Prospectus Supplement, payment of interest on Bearer Debt Securities on any
Interest Payment Date will be made only against surrender to the Paying Agent of
the coupon relating to such Interest Payment Date. No payment with respect to
any Bearer Debt Security will be made at any office or agency of the Company in
the United States or by check mailed to any address in the United States or by
transfer to any account maintained with a bank located in the United States, nor
shall any payments be made in respect of Bearer Debt Securities upon
presentation to the Company or its designated Paying Agents within the United
States. Notwithstanding the foregoing, payments of principal of (and premium, if
any) and interest on Bearer Debt Securities denominated and payable in U.S.
dollars will be made at the office of the Company's Paying Agent in the United
States, if (but only if) payment of the full amount thereof in U.S. dollars at
all offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest on Registered Debt Securities
will be made in the designated currency or currency unit at the office of such
Paying Agent or Paying Agents as the Company may designate from time to time,
except that at the option of the Company payment of any interest may be made by
check mailed to the address of the person entitled thereto as such address shall
appear in the Security Register. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered Debt
Securities will be made to the person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest.
11
<PAGE> 25
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee will be designated as a Paying Agent for
the Trustee for payments with respect to Debt Securities which are issuable
solely as Registered Debt Securities, and the Company will maintain a Paying
Agent outside the United States for payments with respect to Debt Securities
(subject to limitations described above in the case of Bearer Debt Securities)
which are issued solely as Bearer Debt Securities, or as both Registered Debt
Securities and Bearer Debt Securities. Any Paying Agents outside the United
States and any other Paying Agents in the United States initially designated by
the Company for the Debt Securities will be named in an applicable Prospectus
Supplement. The Company 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, except that, if Debt Securities of a series
are issued solely as Registered Debt Securities, the Company will be required to
maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issued as Bearer Debt Securities, the Company will be
required to maintain (i) a Paying Agent in the United States for principal
payments with respect to any Registered Debt Securities of the series (and for
payments with respect to Bearer Debt Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Payment Agent in a
Place of Payment located outside the United States where Bearer Debt Securities
of such series and any coupons appertaining thereto may be presented and
surrendered for payment.
All monies paid by the Company to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Company and the holder of such Debt Security or any coupon will
thereafter look only to the Company for payment thereof.
Temporary Global Securities
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series which are issuable as Bearer Debt Securities
will initially be represented by one or more temporary global Debt Securities,
without interest coupons, to be deposited with a common depository in London for
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("CEDEL") for
credit to the designated accounts. On and after the date determined as provided
in any such temporary global Debt Security and described in the applicable
Prospectus Supplement, each such temporary global Debt Security will be
exchangeable for definitive Bearer Debt Securities, definitive Registered Debt
Securities or all or a portion of a permanent global security, or any
combination thereof, as specified in the applicable Prospectus Supplement, but,
unless otherwise specified in the applicable Prospectus Supplement, only upon
written certification in the form and to the effect described under "-- Form,
Exchange, Registration, Conversion and Transfer." No Bearer Debt Security
delivered in exchange for a portion of a temporary global Debt Security will be
mailed or otherwise delivered to any location in the United States in connection
with such exchange.
Unless otherwise specified in the applicable Prospectus Supplement,
interest in respect of any portion of a temporary global Debt Security payable
in respect of any Interest Payment Date occurring prior to the issuance of
definitive Debt Securities or a permanent global Debt Security will be paid to
each of Euroclear and CEDEL with respect to the portion of the temporary global
Debt Security held for its account. Each of Euroclear and CEDEL will undertake
in such circumstances to credit such interest received by it in respect of a
temporary global Debt Security to the respective accounts for which it holds
such temporary global Debt Security only upon receipt in each case of written
certification in the form and to the effect described above under "-- Form,
Exchange, Registration, Conversion and Transfer" as of the relevant Interest
Payment Date regarding the portion of such temporary global Debt Security on
which interest is to be so credited.
Permanent Global Securities
If any Debt Securities of a series are issuable in permanent global form,
the applicable Prospectus Supplement will describe the circumstances, if any,
under which beneficial owners of interests in any such permanent global Debt
Securities may exchange such interests for Debt Securities of such series and of
like tenor and principal amount in any authorized form and denomination. No
Bearer Debt Security delivered in
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exchange for a portion of a permanent global Debt Security shall be mailed or
otherwise delivered to any location in the United States in connection with such
exchange.
Book-Entry Debt Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a Depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement. (Sections 305 and 312)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of beneficial
interest in such Global Security will be limited to participants or Persons that
may hold interest through participants. Ownership of beneficial interests by
participants in such Global Security will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Securities
represented by such Global Security for all purposes under the applicable
Indenture. Unless otherwise specified in the applicable Prospectus Supplement,
owners of beneficial interests in such Global Security will not be entitled to
have Debt Securities of the series represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities of such series in certificated form and will not be
considered the holders thereof for any purposes under the applicable Indenture.
(Sections 305 and 312) Accordingly, each Person owning a beneficial interest in
such Global Security must rely on the procedures of the Depositary and, if such
Person is not a participant, on the procedures of the participant through which
such Person owns its interest, to exercise any rights of a holder under the
applicable Indenture. The Company understands that under existing industry
practices, if the Company requests any action of holders or an owner of a
beneficial interest in such Global Security desires to give any notice or take
any action a holder is entitled to give or take under an Indenture, the
Depositary would authorize the participants to give such notice or take such
action, and participants would authorize beneficial owners owning through such
participants to give such notice or take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
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Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
Limitations on Issuance of Bearer Debt Securities
In compliance with United States Federal tax laws and regulations, Bearer
Debt Securities (including securities in permanent global form that are either
Bearer Debt Securities or exchangeable for Bearer Debt Securities) will not be
offered or sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (generally, the first 40
days after the closing date, and, with respect to unsold allotments, until sold)
within the United States or to United States persons (each as defined below)
other than to an office located outside the United States of a United States
financial institution (as defined in Section 1.165-12(c)(1)(v) of the United
States Treasury Regulations), purchasing for its own account or for resale or
for the account of certain customers, that provides a certificate stating that
it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Code and the United States Treasury Regulations thereunder, or to certain
other persons described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B) of the United
States Treasury Regulations. Moreover, such Bearer Debt Securities will not be
delivered in connection with their sale during the restricted period within the
United States. Any underwriters and dealers participating in the offering of
Bearer Debt Securities must covenant that they will not offer or sell during the
restricted period any Bearer Debt Securities within the United States or to
United States persons (other than the persons described above) or deliver in
connection with the sale of Bearer Debt Securities during the restricted period
any Bearer Debt Securities within the United States and that they have in effect
procedures reasonably designed to ensure that their employees and agents who are
directly engaged in selling the Bearer Debt Securities are aware of the
restrictions described above. No Bearer Debt Security (other than a temporary
global Bearer Debt Security) will be delivered in connection with its original
issuance nor will interest be paid on any Bearer Debt Security until receipt by
the Company of the written certification described above under "-- Form,
Exchange, Registration, Conversion and Transfer." Each Bearer Debt Security,
other than temporary global Bearer Debt Security, will bear a legend to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States Federal income tax laws,
including the limitations provided in Section 165(j) and 1287(a) of the Internal
Revenue Code."
As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or organized
in or under the laws of the United States and any estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
states and the District of Columbia) and its possessions.
Defaults and Remedies
The following are Events of Default under the Indentures with respect to
Debt Securities of any series: (i) failure to pay principal or premium, if any,
on any Debt Security of that series when due; (ii) failure to pay any interest
due on any Debt Security of that series for 30 days; (iii) failure to make any
sinking fund payment, when due, in respect of any Debt Security of that series;
(iv) failure by the Company for 60 days after written notice to it to comply
with any of its other covenants in such respective Indenture; (v) default by the
Company or any Restricted Subsidiary (as defined herein) under any instrument or
other evidence of indebtedness of the Company or any Restricted Subsidiary for
money borrowed, or any guarantee of payment by the Company or any Restricted
Subsidiary for money borrowed, in an amount in excess of five percent of
Consolidated Net Tangible Assets (as defined herein), unless such default has
been cured or waived; (vi) certain events of bankruptcy, insolvency or
reorganization relative to the Company or any Restricted Subsidiary and (vii)
any other Events of Default provided with respect to Debt Securities of that
series. (Section 501)
If an Event of Default with respect to Outstanding Debt Securities of any
series occurs and is continuing, either the Trustee or holders of at least 25
percent in aggregate principal amount of the Debt Securities of that series then
outstanding under such Indenture may declare the principal amount of all Debt
Securities of that
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series and the interest accrued thereon to be due and payable immediately.
However, under certain conditions, such acceleration may be rescinded by holders
of a majority in principal amount of such Debt Securities of that series then
outstanding. (Section 502)
Holders of the Debt Securities of any series may not enforce the applicable
Indenture except as provided in such Indenture and except that, subject to any
applicable subordination provisions, nothing shall prevent the holders of Debt
Securities of any series from enforcing payment of the principal of or premium,
if any, or interest on, or, if applicable, conversion of, their Debt Securities.
Each Trustee may refuse to enforce an applicable Indenture unless it receives
reasonable security or indemnity. Subject to certain limitations, holders of a
majority in principal amount of the Debt Securities of any series under an
applicable Indenture may direct the Trustee thereunder in its exercise of any
trust or power under such Indenture. (Sections 508, 512 and 514)
The Company will furnish the Trustees with an officers' certificate with
respect to compliance with the terms of the applicable Indenture. (Section 1005
of the Subordinated Indenture and Section 1006 of the Senior Indenture)
Modification
Modification and amendment of an Indenture may be effected by the Company
and the Trustee thereunder with the consent of the holders of a majority in
aggregate principal amount of the Debt Securities of each series affected
thereby then Outstanding; provided, however, that no such modification or
amendment may, without the consent of each holder affected thereby: (i) reduce
the rate or change the time or place for payment of principal or interest on any
Debt Security; (ii) reduce the principal of or rate of interest thereon, or the
premium, if any, payable upon the redemption of, or change the fixed maturity
of, any Debt Security; (iii) make any Debt Security payable in a currency other
than that stated in the Debt Security; (iv) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt Security;
(v) make any change that adversely affects the right to convert any Debt
Security that is convertible at the option of the holder; (vi) in the case of
the Subordinated Indenture, modify the subordination provisions in a manner
adverse to holders of the Subordinated Debt Securities of any series or (vii)
reduce the amount of Debt Securities of any series whose holders must consent to
modification or amendment of or waiver of compliance with certain provisions of
the applicable Indenture. The Indentures also contain provisions permitting the
Company and the Trustees to effect certain minor modifications to the applicable
Indentures not adversely affecting the rights of holders of the Debt Securities
of any series in any material respect. (Sections 901 and 902)
Consolidation, Merger and Sale of Assets
The Company, without the consent of any holders of Debt Securities, may
consolidate or merge with or into any person, or convey, transfer, lease or
otherwise dispose of its assets substantially as an entirety to any person, and
any person may consolidate or merge with, or into, or transfer or lease its
assets substantially as an entirety to, the Company, provided that (i) the
person (if other than the Company) formed by such consolidation or into which
the Company is merged or which acquires or leases the assets of the Company
substantially as an entirety is organized and existing under the laws of the
United States, any state thereof or the District of Columbia, and assumes the
Company's obligations on the Debt Securities and under the respective
Indentures; (ii) after giving effect to such transaction, no Event of Default
(as herein defined) and no event that, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing and
(iii) certain other conditions are met. (Section 801)
Defeasance
Subject to compliance with certain conditions, the Company may discharge
its indebtedness and its obligations or certain of its obligations under the
applicable Indenture by depositing funds or obligations issued or guaranteed by
the United States of America (as further defined in the applicable Indenture,
the "U.S. Government Obligations") with the applicable Trustee.
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Defeasance and Discharge. The applicable Indenture will provide that the
Company will be discharged from any and all obligations in respect of Debt
Securities of such series (except for certain obligations relating to temporary
Debt Securities of such series and exchange of Debt Securities of such series,
registration of transfer or exchange of Debt Securities of such series,
replacement of stolen, lost or mutilated Debt Securities of such series,
maintenance of paying agencies to hold monies for payment in trust and payment
of additional amounts, if any, required in consequence of United States
withholding taxes imposed on payments to non-United States persons) upon the
deposit with the applicable Trustee, in trust, of money and/or U.S. Government
Obligations which through the payment of interest and principal in respect
thereof in accordance with their terms will provide money in an amount
sufficient to pay the principal of and premium, if any, and each installment of
interest on, the Debt Securities of such series on the Stated Maturity of such
payments in accordance with the terms of the applicable Indenture and the Debt
Securities of such series. (Sections 1502 and 1504 of the Subordinated Indenture
and Sections 1302 and 1304 of the Senior Indenture) Such a trust may only be
established if, among other things, the Company has delivered to the applicable
Trustee an Opinion of Counsel to the effect that (i) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling, or
(ii) since the date of the applicable Indenture there has been a change in the
applicable Federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the holders of Debt
Securities of such series will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit, defeasance and discharge, and
will be subject to Federal income tax on the same amounts and in the same manner
and at the same times as would have been the case if such deposit, defeasance
and discharge had not occurred. (Section 1504 of the Subordinated Indenture and
Section 1304 of the Senior Indenture) In the event of any such defeasance and
discharge of Debt Securities of such series, holders of Debt Securities of such
series would be entitled to look only to such trust fund for payment of
principal of and any premium and interest on their Debt Securities until
Maturity.
Defeasance of Certain Obligations. The Indentures will provide that the
Company may omit to comply with certain restrictive covenants, including the
covenants described under "Provisions Applicable to the Senior
Indenture -- Certain Covenants of the Company" below, and any such omission
shall not be an Event of Default with respect to the Debt Securities of such
series, upon the deposit with the applicable Trustee, in trust, of money and/or
U.S. Government Obligations which through the payment of interest and principal
in respect thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any), and each
installment of interest on, the Debt Securities of such series on the Stated
Maturity of such payments in accordance with the terms of the applicable
Indenture and the Debt Securities of such series. The obligations of the Company
under the applicable Indenture and the Debt Securities of such series other than
with respect to such covenants shall remain in full force and effect. (Sections
1503 and 1504 of the Subordinated Indenture and Sections 1303 and 1304 of the
Senior Indenture) Such a trust may be established only if, among other things,
the Company has delivered to the applicable Trustee an Opinion of Counsel to the
effect that the holders of the Debt Securities of such series will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance, and will be subject to Federal income tax on the same amounts
and in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred. (Section 1504 of the Subordinated
Indenture and Section 1304 of the Senior Indenture)
Although the amount of money and U.S. Government Obligations on deposit
with the applicable Trustee would be intended to be sufficient to pay amounts
due on the Debt Securities of such series at the time of their Stated Maturity,
in the event the Company exercises its option to omit compliance with the
covenants defeased with respect to the Debt Securities of such series as
described above and the Debt Securities of such series are declared due and
payable because of the occurrence of any Event of Default, such amount may not
be sufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. The Company shall
in any event remain liable for such payments as provided in the applicable
Indenture.
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Governing Law
The Debt Securities and the Indentures provide that they are governed by
the laws of the State of New York, without regard to the principles of conflicts
of laws. (Section 112)
Concerning the Trustees
Each Indenture contains certain limitations on the rights of the Trustee
thereunder, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. (Section 613) Each Trustee will be
permitted to engage in other transactions with the Company; provided, however,
if it acquires any conflicting interest (as defined) and there exists a default
with respect to the Debt Securities of any series outstanding under the
applicable Indenture, it must eliminate such conflict or resign. (Section 608)
The holders of a majority in aggregate principal amount of Outstanding Debt
Securities under an Indenture will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy power available to
the Trustee under such Indenture, provided that such direction does not conflict
with any rule of law or with the applicable Indenture and would not involve the
Trustee in personal liability or be unduly prejudicial to holders not joining in
such action (as determined by the Trustee in good faith). (Section 512)
In case a default or an Event of Default under an Indenture shall occur and
be continuing and if it is known to the Trustee under such Indenture, such
Trustee shall mail to each holder of Debt Securities of such series notice of
the default or Event of Default within 90 days after it occurs. Except in the
case of a default or an Event of Default in payment of the principal of, or
premium, if any, or interest on, any Debt Security of any series, such Trustee
may withhold the notice if and so long as the Trustee in good faith determines
that withholding the notice is in the interest of the holders of Debt Securities
of such series under the respective Indenture. Subject to such provisions, when
a Trustee incurs expenses or renders services after an Event of Default, the
expenses and the compensation for the services are intended to constitute
expenses of administration under any bankruptcy law. (Section 602)
PROVISIONS APPLICABLE TO THE SENIOR INDENTURE
The Senior Debt Securities will rank pari passu with all other
unsubordinated and unsecured indebtedness of the Company and senior to the
Subordinated Debt Securities and all other subordinated debt of the Company.
Certain Covenants of the Company
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Senior Debt Securities, the Company will be subject to
either or both of the following covenants or such other covenants as are therein
indicated, if any.
Limitations on Liens. Neither the Company nor any Restricted Subsidiary (as
hereafter defined) may create or cause to be created, by issuance, assumption or
guarantee of any Debt (as hereafter defined) (including in connection with any
merger, consolidation or other transaction whether or not permitted under the
Senior Indenture), any Mortgage (as hereafter defined) on any Mineral Interest
(as hereafter defined) or on any shares of capital stock or debt of any
Restricted Subsidiary, whether owned at the date of the Senior Indenture or
thereafter acquired, unless the Company secures, or causes the Restricted
Subsidiary to secure, the Senior Debt Securities equally and ratably with (or
prior to) such secured Debt, except that the Company or a Restricted Subsidiary
may, without so securing the Senior Debt Securities, incur (i) Mortgages in
existence on the date of the applicable Indenture; (ii) Mortgages affecting
Mineral Interests, shares of capital stock or debt of an entity existing at the
time it becomes a subsidiary or at the time it is merged into or consolidated
with the Company or a subsidiary or on any shares of capital stock or debt of
any Restricted Subsidiary at the time its becomes a Restricted Subsidiary; (iii)
Mortgages on property existing at the time of acquisition of such property, or
Mortgages on any property acquired by the Company or any Restricted
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Subsidiary after the date of the applicable Indenture which are created or
assumed to secure the payment of all or any part of the purchase price of such
property or to secure any Debt incurred prior to, at the time of, or within 120
days after the acquisition of such property for the purpose of financing all or
any part of the purchase price thereof; (iv) Mortgages on property constructed
or improved after the date of the applicable Indenture by the Company or any
Restricted Subsidiary which are created or assumed to secure the payment of all
or any part of the cost of such construction or improvement, provided, however,
that any such Mortgage shall not apply to any property owned by the Company or
any Restricted Subsidiary prior to the date of the applicable Indenture; (v)
Mortgages on property of the Company or a Restricted Subsidiary to secure the
payment of all or any part of the costs incurred after the date of the
applicable Indenture of exploration, drilling, mining or development of such
property for the purposes of increasing the production and sale of oil, gas and
other minerals or any Debt incurred to provide funds for all or any such
purposes; (vi) Mortgages which secure only Debt of a Restricted Subsidiary owed
to the Company or to another Restricted Subsidiary; (vii) Mortgages in favor of
the United States or any state or governmental instrumentality thereof securing
payments pursuant to any contract or statute or to secure any indebtedness
incurred for the purpose of financing all or any part of the purchase price or
cost of constructing or improving the property subject thereto and (viii) any
extension, renewal or replacement, in whole or in part, of any of the Mortgages
referred to in the foregoing clauses (i) through (vii), inclusive, or of any
Debt secured thereby. (Section 1004)
The Company and any one or more Restricted Subsidiaries will be permitted
to issue, assume or guarantee Debt secured by Mortgages, which would otherwise
be subject to the foregoing restrictions, in an aggregate principal amount
which, together with the aggregate outstanding principal amount of all other
Debt of the Company and its Restricted Subsidiaries which would otherwise be
subject to the foregoing restrictions (not including the Debt permitted to be
secured under clauses (i) through (viii), inclusive, above) and all Attributable
Debt (as hereafter defined) in respect to Sale and Leaseback Transactions (as
hereafter defined) entered into pursuant to the provisions of clause (i)
described under "-- Limitations on Sale and Leaseback Transactions" below (not
including any such Sale and Leaseback Transactions permitted under clauses (i)
through (viii) above), does not at any time exceed ten percent of the
Consolidated Net Tangible Assets (as hereafter defined) of the Company and its
Restricted Subsidiaries.
Under the terms of the Senior Indenture, the sale or transfer of (i) oil,
gas or other minerals in place for a period of time only, or in an amount such
that the transferee will realize therefrom a specified amount of money (however
determined) or a specified amount of such oil, gas and other minerals or (ii)
any other interest in property of the character commonly referred to as a
"production payment," will not be deemed to create Debt secured by a Mortgage.
Limitations on Sale and Leaseback Transactions. The Senior Indenture
provides that neither the Company nor any Restricted Subsidiary will enter into
any Sale and Leaseback Transaction (as hereafter defined) with any person
(except the Company or a Restricted Subsidiary), unless: (i) the Company or such
Restricted Subsidiary would be entitled to incur such indebtedness in a
principal amount equal to the Attributable Debt with respect to such Sale and
Leaseback Transaction, secured by a Mortgage on the property subject to such
Sale and Leaseback Transaction pursuant to the provisions described under
"-- Limitations on Liens" above without equally and ratably securing the Senior
Debt Securities pursuant to such covenant; (ii) after the date on which the
Senior Debt Securities are originally issued and within a period commencing 180
days prior to the consummation of such Sale and Leaseback Transaction and ending
180 days after the consummation thereof, the Company or such Restricted
Subsidiary shall have expended for property used or to be used in the ordinary
course of business of the Company and the Restricted Subsidiaries (including
amounts expended for the acquisition, exploration, drilling and development
thereof, and for additions, alterations, repairs and improvements thereto) an
amount equal to all or a portion of the net proceeds of such Sale and Leaseback
Transaction and the Company shall have elected to designate such amount as a
credit against such Sale and Leaseback Transaction (with any amount not being so
designated to be applied in clause (iii) below) or (iii) the Company, during the
365-day period after the effective date of such Sale and Leaseback Transaction,
shall have applied to the voluntary defeasance or retirement of any Senior
Indebtedness (as hereafter defined) an amount equal to the greater of (a) the
net proceeds of the sale or transfer of the property leased in such Sale and
Leaseback Transaction and (b) the fair value, as
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determined by the Board of Directors of the Company, of such property at the
time of entering into such Sale and Leaseback Transaction (in either case
adjusted to reflect the remaining term of the lease and any amount expended by
the Company or any Restricted Subsidiary as set forth in clause (ii) above),
less an amount equal to the principal amount of Senior Indebtedness voluntarily
defeased or retired by the Company within such 365-day period and not designated
as a credit against any other Sale and Leaseback Transaction entered into by the
Company or any Restricted Subsidiary during such period. (Section 1005)
Certain Definitions. The Senior Indenture will contain definitions of
certain terms used in such Indenture, including the following:
"Attributable Debt" means, when used with respect to any Sale and Leaseback
Transaction, as at the time of determination, the present value (discounted at a
rate equal to the Company's then current weighted average cost of funds for
borrowed money as at the time of determination, compounded on a semiannual
basis) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in the Sale and Leaseback Transaction
(including any period for which such lease has been extended).
"Consolidated Net Tangible Assets" means the total amount of assets
included in the consolidated balance sheet of the Company and its Restricted
Subsidiaries (less depreciation, depletion, valuation and other reserves) after
deducting: (i) all current liabilities; (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles; (iii) investments in and advances to Subsidiaries that are not
Restricted Subsidiaries and (iv) minority interests in the equity of Restricted
Subsidiaries.
"Debt" means any notes, bonds, debentures or other similar evidences of
indebtedness for borrowed money.
"Hydrocarbons" means oil, gas and other liquid or gaseous hydrocarbons.
"Mineral Interests" means leasehold and other interests of the Company or a
Restricted Subsidiary in or under oil, gas or other mineral fee interests,
overriding royalty and royalty interests and any other interest in Hydrocarbons
and any other interest in minerals in place wherever located and classified by
the Board of Directors of the Company as capable of producing Hydrocarbons by
the Company or a Restricted Subsidiary, except any such interest which in the
opinion of the Board of Directors of the Company is not of material importance
to the total business conducted by the Company and its Restricted Subsidiaries.
"Mortgage" means any mortgage, lien, security interest, pledge, charge or
other encumbrance.
"Restricted Subsidiary" means any subsidiary of the Company the assets of
which comprise in excess of 15 percent of total consolidated assets of the
Company and its consolidated subsidiaries as included in the latest audited
consolidated balance sheet contained in the latest annual report sent to the
Company's shareholders. As of December 31, 1995 (giving pro forma effect to the
EDC Acquisition), Samedan Oil Corporation and Energy Development Corporation
were the only subsidiaries of the Company that would qualify as Restricted
Subsidiaries.
"Sale and Leaseback Transaction" means any arrangement with any person
providing for the leasing to the Company or any Restricted Subsidiary, for a
period of more than three years, of any real or tangible personal property which
has been, or is to be, sold or transferred by the Company or such Restricted
Subsidiary to such person in contemplation of such leasing.
"Senior Indebtedness" means the principal of and premium, if any, and
unpaid interest on the following, whether outstanding at the date of the
applicable Indenture or thereafter incurred or created: (i) indebtedness of the
Company for money borrowed (including purchase money obligations) evidenced by
notes or other written obligations; (ii) indebtedness of the Company evidenced
by notes, debentures, bonds or other securities issued under the provisions of
an indenture or other similar instrument; (iii) obligations of the Company as
lessee under capitalized leases and under leases of property made as part of any
Sale and Leaseback Transaction; (iv) obligations of the Company in respect of
letters of credit issued for its account and swaps of interest rates (and other
interest rate hedging agreements) to which the Company is a party; (v)
indebtedness of others of any kinds described in the preceding clauses (i)
through (iv) assumed or
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guaranteed by the Company and (vi) renewals, extensions and refundings of, and
indebtedness and obligations of a successor person issued in exchange for or in
replacement of, indebtedness or obligations of the kind described in the
preceding clauses (i) through (v); provided, however, that the following will
not constitute Senior Indebtedness: (a) any indebtedness or obligation which by
its terms refers explicitly to the Subordinated Debt Securities or other
subordinated debt and states that such indebtedness and obligation shall not be
senior in right of payment thereto; (b) any indebtedness or obligation of the
Company in respect of the Subordinated Debt Securities or other subordinated
debt and (c) any indebtedness or obligation of the Company to a subsidiary.
PROVISIONS APPLICABLE TO THE SUBORDINATED INDENTURE
The Subordinated Debt Securities will rank junior to the Senior Debt
Securities and all other unsecured and unsubordinated indebtedness of the
Company and pari passu with all other subordinated debt of the Company.
Subordination
Payment of the principal of and premium, if any, and interest on the
Subordinated Debt Securities will be subordinated in right of payment, as set
forth in the Subordinated Indenture, to the prior payment in full of all Senior
Indebtedness of the Company when due in accordance with the terms thereof.
(Section 1401)
There are no restrictions on the creation of Senior Indebtedness (as
defined in the Senior Indenture) in the Subordinated Indenture.
By reason of such subordination, in the event of dissolution, insolvency,
bankruptcy or other similar proceeding, holders of Subordinated Debt Securities
may recover less, ratably, than holders of Senior Indebtedness and other general
creditors of the Company, and, upon any distribution of assets, the holders of
Subordinated Debt Securities will be required to pay over their share of such
distribution to the holders of Senior Indebtedness until such Senior
Indebtedness is paid in full. In addition, if any Subordinated Debt Securities
are declared due and payable prior to their stated maturity, or in the event of
any default in the payment of principal of or premium, if any, or interest on
any Senior Indebtedness beyond any applicable grace period, or in the event of
any default with respect to Senior Indebtedness that would permit acceleration
of the maturity thereof, or in the event a judicial proceeding is pending with
respect to any such Senior Indebtedness default, the holders of Senior
Indebtedness will be entitled to be paid in full before any payments may be made
to the holders of Subordinated Debt Securities. (Sections 1401, 1402 and 1403)
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through one or more underwriters
or dealers, and also may sell Debt Securities directly to other purchasers or
through agents or through a combination of any such methods of sale.
The distribution of the Debt Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Debt Securities in
the form of discounts, concessions or commissions. Underwriters, dealers and
agents that participate in the distribution of the Debt Securities may be deemed
to be underwriters, and any discounts or commissions received by them from the
Company and any profit on the resale of the Debt Securities by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such person who may be deemed to be an underwriter will be identified, and
any such compensation received from the Company will be described, in a
Prospectus Supplement delivered with this Prospectus.
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<PAGE> 34
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of Debt Securities may be
entitled to indemnification by the Company against or contribution toward
certain liabilities, including liabilities under the Securities Act and to
reimbursement by the Company for certain expenses.
If so indicated in the Prospectus Supplement, the Company may issue Debt
Securities to or through underwriters, agents or dealers in connection with the
conversion or redemption of its outstanding securities.
All Debt Securities, when first issued, will have no established trading
market. Any underwriters or agents to or through whom such Debt Securities are
sold by the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters or agents will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any Debt Securities.
Certain of the underwriters, dealers or agents may engage in transactions
with and perform services for the Company in the ordinary course of business.
The specific terms and manner of sale of offered Debt Securities are set
forth or summarized in the Prospectus Supplement.
EXPERTS
The consolidated financial statements of Noble Affiliates, Inc.
incorporated by reference in this Prospectus, to the extent and for the periods
indicated in their report, have been audited by Arthur Andersen LLP, independent
public accountants, and are incorporated by reference herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
reports. Reference is made to said report, which includes an explanatory
paragraph with respect to the adoption of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" as discussed in Note 9 to the consolidated
financial statements.
The consolidated financial statements incorporated into this Prospectus by
reference from EDC's report appearing in Form 8-K (Date of Event: July 31, 1996)
of Noble Affiliates Inc., as amended, as of December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995 have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated by reference, and have been so incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
Estimates of EDC's proved reserves as of July 1, 1996 prepared by Miller
and Lents, Ltd., independent petroleum consultants, are set forth in the
Company's Form 8-K (Date of Event: July 31, 1996), as amended, which is
incorporated by reference in this Prospectus. Such estimates are incorporated by
reference herein in reliance upon the authority of said firm as experts in
estimating proved reserves.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OF
THEIR RESPECTIVE AFFILIATES. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, THE SENIOR NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Disclosure Regarding Forward-Looking
Statements.......................... S-2
Oil and Gas Terminology............... S-2
Summary............................... S-3
Use of Proceeds....................... S-6
Ratio of Earnings to Fixed Charges.... S-6
Capitalization........................ S-6
Certain Terms of the Senior Notes..... S-7
Certain Federal Income Tax
Considerations...................... S-10
Underwriting.......................... S-12
Validity of the Senior Notes.......... S-13
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 6
Selected Financial Data............... 7
Description of Debt Securities........ 8
Plan of Distribution.................. 20
Experts............................... 21
</TABLE>
$250,000,000
NOBLE AFFILIATES, INC.
$250,000,000 8%
SENIOR NOTES DUE 2027
-------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------
MORGAN STANLEY & CO.
INCORPORATED
UBS SECURITIES
CHASE SECURITIES INC.
APRIL 2, 1997
