<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-31039
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO COMPLETION OR
AMENDMENT. THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED APRIL 1, 1998
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 24, 1997)
$150,000,000
UNION TEXAS PETROLEUM HOLDINGS, INC. [UNION
% MANDATORY PUTABLE/REMARKETABLE SECURITIES (MAPS(SM)) TEXAS
DUE APRIL , 2038 LOGO]
(MANDATORY PUT/REMARKETING DATE APRIL , 2008)
------------------
The annual interest rate on the % MAndatory Putable/remarketable
Securities (MAPS(SM)) (the "MAPS") due April , 2038 of Union Texas Petroleum
Holdings, Inc. (the "Company") until April , 2008 is %. THE MAPS ARE
SUBJECT TO MANDATORY TENDER ON April , 2008 (the "Remarketing Date"). If
Salomon Brothers Inc, as Remarketing Dealer (the "Remarketing Dealer"), has
elected to remarket the MAPS as described herein, the MAPS will be subject to
mandatory tender to the Remarketing Dealer at 100% of the principal amount
thereof for remarketing on the Remarketing Date, except in the limited
circumstances described herein. See "Description of the MAPS -- Tender of MAPS;
Remarketing." If the Remarketing Dealer for any reason does not purchase all
MAPS on the Remarketing Date or elects not to remarket the MAPS, or in certain
other limited circumstances described herein, the Company will be required to
repurchase the entire principal amount of the MAPS from the Beneficial Owners
(as defined herein) thereof at 100% of the principal amount thereof plus accrued
and unpaid interest, if any. See "Description of the MAPS -- Repurchase."
Interest on the MAPS is payable semi-annually on April and October of
each year, commencing October , 1998. The MAPS are subject to optional
redemption by the Company after the Remarketing Date, in whole or in part at a
price equal to 100% of their principal amount plus accrued and unpaid interest
plus a Make-Whole Premium (as defined below) calculated by reference to the
then-prevailing Treasury Yield (as defined below) plus basis points and the
remaining life of the MAPS. See "Description of the MAPS -- Redemption."
The MAPS will be issued under a book-entry system in the form of one or
more global securities ("Global Securities") registered in the name of The
Depository Trust Company ("DTC") or its nominee. Interests in the Global
Securities will be shown on, and transfer thereof will be effected only through,
records maintained by DTC and its participants. The actual purchasers of the
MAPS ("Beneficial Owners") will not have the right to receive physical
certificates evidencing their ownership except under the limited circumstances
described herein. Settlement for the MAPS will be made in immediately available
funds and the MAPS will trade in DTC's Same-Day Funds Settlement System until
maturity. Secondary market trading activity in the MAPS will therefore settle in
immediately available funds. All payments of principal and interest will be made
by the Company in immediately available funds. See "Description of the
MAPS -- Same-Day Settlement and Payment."
------------------
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 TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
======================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)(4)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per MAPS.................................................. % % %
Total..................................................... $ $ $
======================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from , 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $200,000.
(4) The proceeds to the Company include a premium paid by the Remarketing Dealer
for the right to require the mandatory tender of all outstanding MAPS. See
"Underwriting."
------------------
The MAPS are being offered by the Underwriters, subject to prior sale,
when, as and if delivered 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. It is expected
that delivery of the MAPS will be made through the book-entry facilities of DTC
on or about April , 1998.
"MAPS(SM)" is a service mark of Salomon Brothers Inc
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
The date of this Prospectus Supplement is April , 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE MAPS. SUCH TRANSACTIONS MAY
INCLUDE OVER-ALLOTMENT TRANSACTIONS AND THE PURCHASE OF MAPS TO COVER THE
UNDERWRITERS' SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
THE COMPANY
The following discussion should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "Form
10-K") incorporated by reference in the Prospectus dated July 24, 1997 to which
this Prospectus Supplement relates.
GENERAL
The Company, the successor to a corporation founded in 1896, is a
U.S.-based independent (non-integrated) oil and gas company with worldwide
operations. At December 31, 1997, the Company had proved oil and gas reserves of
459 million barrels of oil equivalent. In February 1998, the Company recorded an
additional 114 million barrels of proved reserves in connection with its
Venezuelan acquisition described below. All of the Company's oil and gas
producing activities are currently conducted outside of the United States in the
United Kingdom (the "U.K.") sector of the North Sea, Indonesia, Venezuela and
Pakistan. The Company is also currently engaged in exploration activities in
several other countries. In addition, the Company and its co-venturers are
developing the Alpine oil field on Alaska's North Slope. Production from the
Alpine field is expected to begin in the first part of 2000. The Company also
operates a U.S.-based petrochemical business near Baton Rouge, Louisiana.
The Company's principal current international activities began in the late
1960s with its participation in a joint venture in Indonesia and in two
consortia in the U.K. North Sea. The Company's principal properties in the U.K.
North Sea are interests in the Alba, Piper, Claymore, Saltire, Chanter, Iona and
Scapa oil fields, the Sean gas fields and the Britannia gas and condensate
field. Production from the Britannia field is expected to begin in August 1998.
The Company's Indonesian activities consist primarily of its 37.81% working
interest in the East Kalimantan joint venture that produces natural gas and, to
a lesser extent, oil and condensate from several fields in Indonesia. The
Company holds its interests in this joint venture directly through a wholly
owned subsidiary and also indirectly through its 50% interest in a partnership,
which has an indirect subsidiary who serves as the operator of the joint
venture. Natural gas produced by the East Kalimantan joint venture is converted
into liquefied natural gas ("LNG") at facilities owned by Pertamina, the
Indonesian national oil and gas company. Currently, LNG is sold to buyers in
Japan, Taiwan and Korea. Payments for LNG under all LNG Sales Contracts are made
in U.S. dollars directly to a bank in the United States. During 1997, 80% of the
joint venture's share of LNG was sold, and in 1998, 74% is expected to be sold,
by Pertamina to Japanese customers.
Recently the Company established Venezuela as a significant core operated
area. The Company's activities in Venezuela consist of its interest in two
operating service contracts covering the Desarrollo Zulia Occidental ("DZO")
unit and the Boqueron contract area. The Company's reserves in Venezuela
currently account for over 25% of the Company's worldwide reserves. The
Venezuelan reserves relate to the Company's net interest in the two operating
service contracts pursuant to which the Company will receive certain fees based
on a predetermined formula for each barrel of crude oil produced. In February
1998, the Company acquired all of the stock of Compania Occidental de
Hidrocarburos, Inc., which operates the DZO unit under its 100% interest in an
operating service contract with a subsidiary of the national oil company,
Petroleos de Venezuela S.A. In June 1997, the Company and its co-venturer were
the successful bidders for the Boqueron area operating service contract awarded
under Venezuela's Third Operating Agreement Round. The Company has a 66.67%
interest in the Boqueron service contract and expects to assume operatorship in
May 1998. See "Reserves" including the notes thereto for a discussion of how the
Company's reserves in Venezuela are determined.
S-2
<PAGE> 3
RECENT DEVELOPMENTS
In March 1998, oil prices fell to their lowest levels since 1988. For
example, the spot price for West Texas Intermediate averaged approximately
$15.92 for the first quarter of 1998 down from approximately $22.74 for the
first quarter of 1997. As compared to the first quarter of 1997, which was
favorably impacted by higher oil prices with net income of $64 million or $.74
per share, lower oil prices in 1998 will result in the Company recording
significantly lower earnings in the first quarter of 1998. In light of the
current low oil price environment, the Company is reviewing its capital
expenditure budget for 1998 and expects that any reductions in capital and
operating expenses would not significantly impact current operations but defer
certain exploration and development plans. Any such deferrals could limit
opportunities for new reserves from exploration successes and delay anticipated
production from certain properties thus impacting future net income and cash
flows.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus, including
documents incorporated by reference herein and therein, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not even
be anticipated. Future events and actual results, financial and otherwise, may
differ materially from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
price volatility (as evidenced by the recent decline in market prices for crude
oil), exploration, development, operational and implementation risks, and other
factors included in the Company's publicly available reports filed with the
Securities and Exchange Commission.
S-3
<PAGE> 4
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the MAPS
are estimated at $ (1) after the deduction of the underwriting discount
and of the estimated expenses payable by the Company. The Company will use the
proceeds to pay down indebtedness under certain uncommitted and unsecured money
market lines of credit of the Company incurred primarily in connection with the
Company's 1998 acquisition in Venezuela and for general corporate purposes. At
the offering, the Company estimates $167 million will be outstanding under the
money market lines at a weighted average interest rate of 6.18% per annum. The
money market lines are used by the Company periodically in lieu of drawing down
under the Company's revolving credit agreement, which has a final maturity of
March 31, 2002. The use of proceeds may be applied to pay down indebtedness
under the money market lines owed to certain affiliates of the Underwriters. See
"Underwriting."
- ---------------
(1) The net proceeds to the Company include a premium paid by the Remarketing
Dealer for the right to require the mandatory tender of all outstanding
MAPS. See "Underwriting."
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997, and as adjusted to give effect to the Company's
1998 Venezuelan acquisition, the MAPS offered hereby, the issuance of the
1,750,000 shares of the Company's 7.14% Series A Cumulative Preferred Stock on
March 6, 1998 (the "Series A Preferred Stock"), the application of the estimated
net proceeds received by the Company from the issuance of the MAPS as described
in "Use of Proceeds" herein and the application of the net proceeds of the
offering of the Series A Preferred Stock. The following table should be read in
conjunction with the Company's consolidated financial statements and notes
thereto contained in the Form 10-K.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt
Long-term debt
Bank debt.............................................. $ 226,404 $ 143,292
8.25% Senior Notes due 1999............................ 100,000 100,000
8 3/8% Senior Notes due 2005........................... 125,000 125,000
8 1/2% Senior Notes due 2007........................... 75,000 75,000
Medium Term Notes...................................... 100,000 100,000
MAPS offered hereby.................................... -- 155,000
---------- ----------
Total debt........................................ 626,404 698,292
---------- ----------
Stockholders' equity
Preferred stock........................................... -- 171,300
Common stock.............................................. 4,391 4,391
Paid in capital........................................... 18,645 18,645
Cumulative foreign exchange translation adjust and
other.................................................. (34,954) (34,954)
Retained earnings......................................... 733,201 733,201
Treasury stock............................................ (52,688) (52,688)
---------- ----------
Total stockholders' equity........................ 668,595 839,895
---------- ----------
Total capitalization.............................. $1,294,999 $1,538,187
========== ==========
</TABLE>
S-4
<PAGE> 5
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary financial information of the Company
at the dates and for the periods indicated. The following data should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the consolidated financial statements and related
notes thereto included in the Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995
------------- ------------- -------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
OPERATING DATA:
Revenues......................................... $ 933,228 $ 1,036,449 $ 876,029
Costs and other deductions:
Product costs and operating expenses........... 314,330 341,057 299,133
Exploration expenses........................... 99,380 51,765 77,185
Depreciation, depletion and amortization....... 216,108 212,470 191,503
Selling, general and administrative expenses... 26,696 26,945 26,098
Interest expense............................... 7,412 25,173 28,783
----------- ----------- -----------
Income before income taxes....................... 269,302 379,039 253,327
Income taxes..................................... 133,436 226,812 150,977
----------- ----------- -----------
Net income............................. $ 135,866 $ 152,227 $ 102,350
=========== =========== ===========
Diluted earnings per share of common stock....... $ 1.59 $ 1.74 $ 1.16
=========== =========== ===========
Weighted average shares outstanding including
potential dilutive common shares............... 85,558,631 87,561,714 88,098,090
=========== =========== ===========
OTHER FINANCIAL DATA:
EBITDA(1)...................................... 492,822 616,682 473,613
Ratio of earnings to fixed charges(2).......... 5.71x(3) 7.84x 5.52x
Ratio of EBITDA to interest(4)................. 10.3x 12.0x 9.1x
BALANCE SHEET DATA (AT END OF PERIOD):
Net working capital.............................. $ (104,303) $ (77,297) $ (36,269)
Property, plant and equipment -- net............. 1,746,661 1,632,423 1,551,198
Total assets..................................... 2,021,556 1,942,004 1,836,818
Long-term debt................................... 626,404 558,463 712,132
Common stock and other stockholders' equity...... 668,595 586,022 423,790
</TABLE>
- ---------------
(1) EBITDA (as used herein) is calculated by adding interest, income taxes,
depreciation, depletion and amortization to net income. EBITDA should not be
considered as an alternative to income (loss) or operating income (loss), as
defined by generally accepted accounting principles, as an indicator of the
Company's financial performance, as an alternative to cash flow, as a
measure of liquidity or as being comparable to other similarly titled
measures of other companies.
(2) For purposes of calculating the ratio of earnings to fixed charges, earnings
consist of pretax income plus fixed charges less capitalized interest during
the period. Fixed charges consist of interest expense, capitalized interest,
amortization of discount and financing costs and the portion of rent expense
which is deemed to be representative of the interest component of rent
expense. There was no preferred stock outstanding for any of the periods
shown.
(3) Assuming the $150 million of MAPS offered hereby was issued on January 1,
1997 and the estimated net proceeds therefrom were applied as described
herein, the pro forma ratio of earnings to fixed charges would be 4.99x.
Assuming such issuance of the MAPS and application of the estimated net
proceeds therefrom and assuming the 1,750,000 shares of the Company's Series
A Preferred Stock were issued on January 1, 1997 and the application of the
proceeds therefrom, the pro forma ratio of earnings to combined fixed
charges and preferred stock dividends would be 3.50x. Fixed charges include
the preferred stock dividend requirement adjustment for the pro forma ratio.
(4) For purposes of calculating the ratio of EBITDA to interest, interest is
interest expense plus capitalized interest.
S-5
<PAGE> 6
RESERVES
The following table sets forth information regarding the Company's
estimates of its proved net reserves as of December 31, 1997. The Company's
estimates of reserves filed with federal agencies, including the Securities and
Exchange Commission, agree with the information set forth below. The following
table should be read in conjunction with the Form 10-K, including Item
1 -- "Business -- Risk Factors," Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations and Note 19 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
OIL (MBBLS)(A)(B) GAS (MMCF)(B)
--------------------------------- -----------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
United Kingdom.......... 40,835 35,820 76,655 124,843 247,349 372,192
Indonesia(c)............ 17,473 1,775 19,248 670,415 110,674 781,089
Venezuela(d)............ 40,000 40,000
Pakistan................ 4,206 1,640 5,846 75,107 44,787 119,894
Alaska.................. 32,005 32,005
------- ------ ------- --------- ------- ---------
Total........... 102,514 71,240 173,754 870,365 402,810 1,273,175
------- ------ ------- --------- ------- ---------
Equity Partnership:
Indonesia(c).......... 7,316 749 8,065 284,535 47,134 331,669
------- ------ ------- --------- ------- ---------
Total........... 109,830 71,989 181,819 1,154,900 449,944 1,604,844
======= ====== ======= ========= ======= =========
<CAPTION>
OIL EQUIVALENTS (MBOE)(A)(B)
---------------------------------
DEVELOPED UNDEVELOPED TOTAL
--------- ----------- -------
<S> <C> <C> <C>
United Kingdom.......... 62,360 78,466 140,826
Indonesia(c)............ 133,062 20,857 153,919
Venezuela(d)............ 40,000 40,000
Pakistan................ 17,155 9,362 26,517
Alaska.................. 32,005 32,005
------- ------- -------
Total........... 252,577 140,690 393,267
------- ------- -------
Equity Partnership:
Indonesia(c).......... 56,374 8,875 65,249
------- ------- -------
Total........... 308,951 149,565 458,516
======= ======= =======
</TABLE>
- ---------------
(a) For the purpose of calculating reserves, oil includes condensate, and for
the U.K., oil also includes natural gas liquids.
(b) Unless otherwise indicated in the Form 10-K, gas volumes are stated at the
legal pressure base of the area or country in which the reserves are
located and at 60 degrees Fahrenheit. As used herein, the term "BTU" means
British thermal unit, the term "TBtu" means trillion BTUs, the term "MMBtu"
means million BTUs, the term "Mcf" means thousand cubic feet, the term
"MMcf" means million cubic feet, the term "Bcf" means billion cubic feet,
the term "Tcf" means trillion cubic feet, the term "Bbl" means barrel, the
term "MBbls" means thousands of barrels, the term "MMBbls" means millions
of barrels, the term "boe" means barrel of oil equivalent, the term "Mboe"
means thousand barrels of oil equivalent and the term "MMboe" means million
barrels of oil equivalent. Gas is converted into a barrel of oil equivalent
based on 5.8 Mcf of gas to one barrel of oil. The term "LNG" means
liquefied natural gas and the term "LPG" means liquefied petroleum gas.
(c) Information regarding Indonesian reserves relates to the Company's net
interest in a production sharing contract between the Indonesian joint
venture and Pertamina. The joint venture has no ownership interest in the
reserves but does have the right to share revenues and production and is
entitled to recover most field and other operating costs and capital
depreciation. The reserve estimates, which are based on year-end prices,
are subject to revision as product prices and costs fluctuate due to the
cost recovery feature under the production sharing contract. The impact on
reserves is inversely related to price changes and directly related to
changes in field operating and capital costs. In addition, reserve
estimates are subject to revision due to the effect that price fluctuations
generally have on estimates of recoverable reserves. Debt relating to the
LNG processing facilities owned by Pertamina is contractually required to
be serviced from proceeds of LNG sales prior to the distribution of such
proceeds primarily to the members of the joint venture, Pertamina and the
other production sharing contractors. The debt obligation is not the
obligation of the joint venture. Debt service relating to such facilities
is accounted for in the Company's reserve estimates as a cost of production
and operation. Such debt service is deducted in estimating future net
revenues to be distributed among Pertamina and the production sharing
contractors, including the joint venture and the Company's interest
therein. See the Form 10-K, Item 1 -- "Business -- Exploration and
Production -- Indonesia" and Note 19 of Notes to Consolidated Financial
Statements.
(d) The reserves table, as well as the other tables in the Form 10-K, does not
include the reserves associated with the DZO unit, which were recorded in
February 1998. Information regarding all Venezuelan reserves relates to the
Company's net interest in an operating service contract for the Boqueron
area between the Company, the other contractor and a subsidiary of PDVSA.
The Government of Venezuela retains full ownership of all hydrocarbons. As
of December 31, 1997, the Company recorded 40 million barrels of proved
reserves for the Boqueron contract area. The Company will receive a service
fee for each barrel of crude oil produced at Boqueron, which consists of
the following two components: (i) a set fee of $1.25 per barrel for the
baseline production estimated as 8,500 gross barrels per day with a nominal
annual decline rate of 10% and (ii) a sliding incentive fee for the
incremental production, as well as cost recovery for field and other
capital and operating costs. In 1998, the Company recorded for the DZO unit
114 million barrels of proved reserves, of which 56 million barrels are
classified as proved undeveloped. With respect to the reserves associated
with the DZO that are not included in the reserve table or other tables in
the
S-6
<PAGE> 7
Form 10-K, the fees received are operating, capital reimbursement and
interest on unrecovered capital costs which are in total limited by a
maximum total fee. The maximum total fee is indexed with a basket of crude
oil products and was approximately $5.00 per barrel in the beginning of
1998. The Company cannot predict the extent that the future maximum total
fee will limit the operating, interest and capital fees received and
recorded. Additionally, an incremental incentive fee of several dollars per
barrel, which is also indexed to a basket of crude oil products but is not
limited by the maximum total fee, is payable when cumulative production
from the DZO unit (from inception of the 1993 contract) reaches 52 million
barrels. The contractor does not pay royalties related to the DZO unit but
does with respect to the Boqueron contract area. See the Form 10-K, Item
1 -- "Business -- Exploration and Production -- Venezuela" and Note 19 of
Notes to Consolidated Financial Statements.
S-7
<PAGE> 8
DESCRIPTION OF THE MAPS
The following description of the particular terms of the MAPS supplements
and, to the extent inconsistent therewith, replaces the description of the
general terms and provisions of the Debt Securities set forth in the
accompanying Prospectus, to which description reference is hereby made. Whenever
a defined term is referred to and not herein defined, the definition thereof is
contained in the accompanying Prospectus dated July 24, 1997 to which this
Prospectus Supplement relates or in the Indenture referred to therein.
GENERAL
The MAPS are general senior unsecured obligations of the Company to be
issued pursuant to an Indenture, dated as of March 15, 1995 (as amended and
supplemented, the "Indenture"), between the Company and The First National Bank
of Chicago, as trustee (the "Trustee"), which is more fully described in the
accompanying Prospectus, and will rank on a parity with all other unsecured and
unsubordinated indebtedness of the Company. The MAPS will be limited to
$150,000,000 aggregate principal amount and will be issuable only in registered
form. The Indenture does not limit the amount of other Debt Securities that may
be issued by the Company.
The MAPS will mature on April , 2038 (the "Stated Maturity Date").
Because of the mandatory put and remarketing provisions described below,
however, all purchasers who purchase the MAPS in this offering or in the open
market prior to April , 2008, will have those MAPS either (i) repurchased by
the Company on the Remarketing Date or (ii) purchased by the Remarketing Dealer.
The MAPS will bear interest at the annual interest rate of % per annum
to but excluding April , 2008 (the "Remarketing Date"). If the Remarketing
Dealer elects to remarket the MAPS, except in the limited circumstances
described herein, (i) the MAPS will be subject to mandatory tender to the
Remarketing Dealer at 100% of the principal amount thereof for remarketing on
the Remarketing Date, on the terms and subject to the conditions described
herein, and (ii) on and after the Remarketing Date, the MAPS will bear interest
at the rate determined by the Remarketing Dealer in accordance with the
procedures set forth below (the "Interest Rate to Maturity"). See "-- Tender of
MAPS; Remarketing" below.
Under the circumstances described below, the MAPS are subject to redemption
by the Company from the Remarketing Dealer on the Remarketing Date. See
"-- Redemption" below. If the Remarketing Dealer for any reason does not
purchase all MAPS on the Remarketing Date or elects not to remarket the MAPS, or
in certain other limited circumstances described herein, the Company will be
required to repurchase the entire principal amount of the MAPS from the
Beneficial Owners thereof on the Remarketing Date, at 100% of the principal
amount thereof plus accrued interest, if any. See "-- Repurchase" below.
The MAPS are subject to optional redemption after the Remarketing Date in
whole or in part at a price equal to 100% of their principal amount plus accrued
and unpaid interest plus a Make-Whole Premium (as defined below) calculated by
reference to the then-prevailing Treasury Yield (as defined below) plus
basis points and the remaining life of the MAPS. See "-- Redemption" below.
The MAPS will bear interest from April , 1998, payable semi-annually on
April and October of each year (each, an "Interest Payment Date"),
commencing October , 1998 to the persons in whose name the MAPS are registered
on the fifteenth calendar day (whether or not a Business Day) immediately
preceding the related Interest Payment Date (each, a "Record Date"). Interest on
the MAPS will be computed on the basis of a 360-day year of twelve 30-day
months. "Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in The City of New York are authorized or obligated
by law, executive order or governmental decree to be closed. If any Interest
Payment Date or the Stated Maturity Date or date of redemption or repurchase of
the MAPS falls on a day that is not a Business Day, the payment shall be made on
the next Business Day with the same force and effect as if it were made on the
date such payment was due and no interest shall accrue on the amount so payable
for the period from and after such Interest Payment Date or the Stated Maturity
Date or date of earlier redemption or repurchase, as the case may be.
The MAPS will be issued in denominations of $1,000 and integral multiples
thereof.
S-8
<PAGE> 9
TENDER OF MAPS; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the MAPS, in the event that the Remarketing Dealer elects to
purchase the MAPS and to remarket the MAPS on the Remarketing Date.
Mandatory Tender
Provided that the Remarketing Dealer gives notice to the Company and the
Trustee on a Business Day not later than 10 Business Days prior to the
Remarketing Date of its intention to purchase the MAPS for remarketing (the
"Notification Date"), each MAPS will be automatically tendered, or deemed
tendered, to the Remarketing Dealer for purchase on the Remarketing Date, except
in the circumstances described under "Repurchase" or "Redemption" below. The
purchase price of such MAPS will be equal to 100% of the principal amount
thereof. See "-- Notification of Results; Settlement." When the MAPS are
tendered for remarketing, the Remarketing Dealer may remarket the MAPS for its
own account at varying prices to be determined by the Remarketing Dealer at the
time of each sale. From and after the Remarketing Date, the MAPS will bear
interest at the Interest Rate to Maturity, as described below. If the
Remarketing Dealer elects to remarket the MAPS, the obligation of the
Remarketing Dealer to purchase the MAPS on the Remarketing Date is subject,
among other things, to the conditions that, since the Notification Date, no
material adverse change in the condition of the Company and its subsidiaries,
considered as one enterprise, shall have occurred and that no Event of Default
(as defined in the Indenture), or any event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default, with respect to
the MAPS shall have occurred and be continuing. If for any reason the
Remarketing Dealer does not purchase all such MAPS on the Remarketing Date, the
Company will be required to repurchase the MAPS from the Beneficial Owners
thereof at a price equal to the principal amount thereof plus all accrued and
unpaid interest, if any, on the MAPS to, but not including, the Remarketing
Date. See "-- Repurchase" below.
The Interest Rate to Maturity shall be determined by the Remarketing Dealer
by 3:30 p.m., New York City time, on the third Business Day immediately
preceding the Remarketing Date (the "Determination Date") to the nearest one
hundred-thousandth (0.00001) of one percent per annum, and will be equal to the
sum of % (the "Base Rate") and the Applicable Spread (as defined below),
which will be based on the Dollar Price (as defined below) of the MAPS.
The "Applicable Spread" shall be the lowest firm commitment bid expressed
as a spread (in the form of a percentage or in basis points) above the Base
Rate, obtained by the Remarketing Dealer on the Determination Date from the bids
quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the MAPS at the Dollar Price, but assuming (i) an
issue date that is the Remarketing Date, with settlement on such date without
accrued interest, (ii) a maturity date that is the Stated Maturity Date and
(iii) a stated annual interest rate, payable semi-annually, equal to the Base
Rate plus the spread bid by the applicable Reference Corporate Dealer. If fewer
than five Reference Corporate Dealers bid as described above, then the
Applicable Spread shall be the lowest of such firm commitment bids obtained as
described above. The Interest Rate to Maturity announced by the Remarketing
Dealer, absent manifest error, shall be binding and conclusive upon the
Beneficial Owners and Holders of the MAPS, the Company and the Trustee.
"Dollar Price" means, with respect to the MAPS, the present value, as of
the Remarketing Date, of the Remaining Scheduled Payments (as defined below)
discounted to the Remarketing Date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate (as defined
below).
"Reference Corporate Dealers" means each of Salomon Brothers Inc, Chase
Securities Inc., NationsBanc Montgomery Securities LLC, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and J.P. Morgan Securities Inc. and their
respective successors; provided, however, that if any of the foregoing or their
affiliates shall cease to be a leading dealer of publicly traded debt securities
of the Company in The City of New York (a "Primary Corporate Dealer"), the
Remarketing Dealer shall substitute therefor another Primary Corporate Dealer.
S-9
<PAGE> 10
"Remaining Scheduled Payments" means, with respect to the MAPS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to but excluding the Stated Maturity Date; provided, however, that if the
Remarketing Date is not an Interest Payment Date with respect to the MAPS, the
amount of the next succeeding scheduled interest payment thereon, calculated at
the Base Rate only, will be reduced by the amount of interest accrued thereon,
calculated at the Base Rate only, to the Remarketing Date.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semi-annual equivalent yield to maturity or interpolated (on
a day count basis) yield to maturity of the Comparable Treasury Issues (as
defined below), assuming a price for the Comparable Treasury Issues (expressed
as a percentage of its principal amount), equal to the Comparable Treasury Price
(as defined below) for such Remarketing Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the MAPS
being remarketed.
"Comparable Treasury Price" means, with respect to the Remarketing Date,
(a) the offer prices for the Comparable Treasury Issues (expressed in each case
as a percentage of its principal amount) on the Determination Date, as set forth
on "Telerate Page 500," or (b) if such page (or any successor page) is not
displayed or does not contain such offer prices on such Determination Date, (i)
the average of the Reference Treasury Dealer Quotations for the Remarketing
Date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (ii) if the Remarketing Dealer obtains fewer than four such
Reference Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations, and "Telerate Page 500" means the display designated as
"Telerate Page 500" on Dow Jones Markets Limited (or such other page as may
replace Telerate Page 500 on such service) or such other service displaying the
offer prices specified in (a) above as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Remarketing Date, the offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted in writing to the Remarketing Dealer by such Reference
Treasury Dealer by 3:30 p.m. on the Determination Date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc, Chase
Securities Inc., NationsBanc Montgomery Securities LLC, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and J.P. Morgan Securities Inc. and their respective
successors; provided, however, that if any of the foregoing or their affiliates
shall cease to be a primary U.S. Government securities dealer in The City of New
York (a "Primary Treasury Dealer"), the Remarketing Dealer shall substitute
therefor another Primary Treasury Dealer.
Notification of Results; Settlement
Provided the Remarketing Dealer has previously notified the Company and the
Trustee on the Notification Date of its intention to purchase all MAPS tendered
(or deemed to have been tendered) to the Remarketing Dealer on the Remarketing
Date, the Remarketing Dealer will notify the Company, the Trustee and DTC by
telephone, confirmed in writing, by 4:00 p.m., New York City time, on the
Determination Date, of the Interest Rate to Maturity.
All of such MAPS will be automatically delivered to the account of the
Trustee, by book-entry through the DTC pending payment of the purchase price
therefor, on the Remarketing Date.
The Remarketing Dealer will make or cause the Trustee to make payment to
the DTC participant (each, a "Participant") of each Beneficial Owner of MAPS so
tendered (or deemed to have been so tendered), by book entry through DTC by the
close of business on the Remarketing Date against delivery through DTC of such
Beneficial Owner's MAPS, of the purchase price for the MAPS that have been
purchased for remarketing by the Remarketing Dealer. The purchase price of such
MAPS will be equal to 100% of the principal amount thereof. If the Remarketing
Dealer does not purchase all of the MAPS on the Remarketing Date, it will be the
obligation of the Company to make or cause to be made such payment for the
entire
S-10
<PAGE> 11
principal amount of the MAPS, as described below under "Repurchase." In any
case, the Company will make or cause the Trustee to make payment of interest to
each Beneficial Owner of MAPS due on the Remarketing Date by book entry through
DTC by the close of business on the Remarketing Date.
The transactions described above will be executed on the Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective Participants will be debited and credited and the MAPS delivered by
book entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of the MAPS remarketed by the
Remarketing Dealer on and after the Remarketing Date will settle in immediately
available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of the MAPS in the remarketing or for payment to
selling Beneficial Owners of MAPS, may be modified, notwithstanding any contrary
terms of the Indenture, to the extent required by DTC or, if the book-entry
system is no longer available for the MAPS at the time of the remarketing, to
the extent required to facilitate the remarketing of the MAPS in certificated
form. In addition, the Remarketing Dealer may, notwithstanding any contrary
terms of the Indenture, modify the settlement procedures set forth above in
order to facilitate the settlement process.
As long as the DTC nominee holds the certificates representing any MAPS in
the book-entry system of DTC, no certificates for such MAPS will be delivered by
any selling Beneficial Owner to reflect any transfer of such MAPS effected in
the remarketing. In addition, under the terms of the MAPS and the Remarketing
Agreement (as defined below), the Company has agreed that, notwithstanding any
provision to the contrary set forth in the Indenture, (i) it will use its best
efforts to maintain the MAPS in book-entry form with DTC or any successor
thereto and to appoint a successor to DTC to the extent necessary to maintain
the MAPS in book-entry form and (ii) it will waive any discretionary right it
otherwise has under the Indenture to cause the MAPS to be issued in certificated
form. See "-- Book-Entry Systems" below.
The Remarketing Dealer
On or prior to the date of original issuance of the MAPS, the Company and
the Remarketing Dealer will enter into a Remarketing Agreement (the "Remarketing
Agreement").
The Remarketing Dealer will not receive any fees or reimbursement of
expenses from the Company in connection with the remarketing.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"), arising out of or in connection with its duties under
the Remarketing Agreement.
In the event that the Remarketing Dealer elects to remarket the MAPS as
described herein, the obligation of the Remarketing Dealer to purchase the MAPS
from Beneficial Owners of MAPS will be subject to several conditions precedent
set forth in the Remarketing Agreement that are customary in the Company's
public offerings, including the conditions that, since the Notification Date, no
material adverse change in the condition of the Company and its subsidiaries,
considered as one enterprise, shall have occurred and that no Event of Default
(as defined in the Indenture), or any event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default, with respect to
the MAPS shall have occurred and be continuing. In addition, the Remarketing
Agreement will provide for the termination thereof, or redetermination of the
Interest Rate to Maturity, by the Remarketing Dealer on or before the
Remarketing Date, upon the occurrence of certain events that are also customary
in the Company's public securities offerings.
No Beneficial Owner of any MAPS shall have any rights or claims under the
Remarketing Agreement or against the Company or the Remarketing Dealer as a
result of the Remarketing Dealer not purchasing such MAPS.
S-11
<PAGE> 12
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign at any time as Remarketing Dealer, such resignation to be effective 10
Business Days after the delivery to the Company and the Trustee of written
notice of such resignation. In such case, it shall be the sole obligation of the
Company to appoint a successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the MAPS. The Remarketing Dealer, as holder or
Beneficial Owner of MAPS, may exercise any vote or join in any action which any
Beneficial Owner of MAPS may be entitled to exercise or take with like effect as
if the Remarketing Dealer did not act in any capacity under the Remarketing
Agreement. The Remarketing Dealer, in its capacity either as principal or agent,
may also engage in or have an interest in any financial or other transaction
with the Company as freely as if it did not act in any capacity under the
Remarketing Agreement.
REPURCHASE
In the event that (i) the Remarketing Dealer for any reason does not notify
the Company of the Interest Rate to Maturity by 4:00 p.m., New York time, on the
Determination Date, or (ii) prior to the Remarketing Date, the Remarketing
Dealer has resigned and no successor has been appointed on or before the
Determination Date, or (iii) since the Notification Date, a material adverse
change in the condition of the Company and its subsidiaries, considered as one
enterprise, shall have occurred or an Event of Default, or any event which, with
the giving of notice or passage of time, or both, would constitute an Event of
Default, with respect to the MAPS shall have occurred and be continuing, or any
other event constituting a termination event under the Remarketing Agreement
shall have occurred, or (iv) the Remarketing Dealer elects not to remarket the
MAPS, or (v) the Remarketing Dealer for any reason does not purchase all MAPS
tendered to it on the Remarketing Date, the Company will repurchase the MAPS as
a whole on the Remarketing Date at a price equal to 100% of the principal amount
of the MAPS plus all accrued and unpaid interest, if any, on the MAPS to the
Remarketing Date. In any such case, payment will be made by the Company to the
Participant of each Beneficial Owner of MAPS by book entry through DTC by the
close of business on the Remarketing Date against delivery through DTC of such
Beneficial Owner's MAPS.
REDEMPTION
Upon Remarketing
If the Remarketing Dealer elects to remarket the MAPS on the Remarketing
Date, the MAPS will be subject to mandatory tender to the Remarketing Dealer for
remarketing on such date, subject to the conditions described above under
"-- Tender of MAPS; Remarketing" and "-- Repurchase" and to the Company's right
to redeem the MAPS from the Remarketing Dealer as described in the next
sentence. The Company will notify the Remarketing Dealer and the Trustee, not
later than the Business Day immediately preceding the Determination Date, if the
Company irrevocably elects to exercise its right to redeem the MAPS, in whole
but not in part, from the Remarketing Dealer on the Remarketing Date at the
Remarketing Redemption Price. The "Remarketing Redemption Price" shall be the
greater of (i) 100% of the principal amount of the MAPS and (ii) the Dollar
Price, plus in either case any accrued and unpaid interest on the principal
amount being redeemed to the Remarketing Date. If the Company elects to redeem
the MAPS, it shall pay the Remarketing Redemption Price therefor in same-day
funds by wire transfer to an account designated by the Remarketing Dealer on the
Remarketing Date.
Optional
The MAPS will be redeemable, at the option of the Company, at any time
after the Remarketing Date in whole or from time to time in part, upon not less
than 30 and not more than 60 days' notice mailed to each Beneficial Owner of
MAPS to be redeemed as shown in the security register for the MAPS, on any date
prior to the Stated Maturity Date at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest to the applicable date fixed for
redemption (the "Redemption Date") (subject to the right of persons in whose
name the MAPS are registered on the relevant record date to receive interest due
on an Interest
S-12
<PAGE> 13
Payment Date that is on or prior to the Redemption Date) plus a make-whole
premium (the "Make-Whole Premium"), if any.
The amount of the Make-Whole Premium with respect to any MAPS (or portion
thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption, would have
been payable on the MAPS (or portion thereof) after the Redemption Date
(excluding any accrued interest for the period prior to the Redemption
Date); and
(B) the principal amount that, but for such redemption, would have
been payable at the final maturity of the MAPS (or portion thereof)
being redeemed;
over
(ii) the principal amount of the MAPS (or portion thereof) being
redeemed,
plus any accrued and unpaid interest thereon to but excluding the Redemption
Date. The present values of interest and principal payments referred to in
clause (i) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Treasury Yield (as defined below
for purposes of determining the Make-Whole Premium) plus basis points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 10 Business Days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation will be made by Salomon Smith
Barney or, if such firm is unwilling or unable to make such calculation, by an
independent investment banking institution of national standing appointed by the
Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the MAPS, calculated to the nearest 1/12 of a
year (the "Remaining Term"). The Treasury Yield will be determined as of the
third Business Day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100 of 1%, with any figure of
1/200 of 1% or above being rounded upward. If weekly average yields for United
States Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
If less than all of the MAPS are to be redeemed, the Trustee will select
the MAPS to be redeemed pro rata or by lot. The Trustee may select for
redemption MAPS and portions of MAPS in amounts of $1,000 or whole multiples of
$1,000, provided that if all of the MAPS of a holder are to be redeemed, the
entire outstanding amount of MAPS held by such holder, even if not a whole
multiple of $1,000, will be redeemed.
S-13
<PAGE> 14
The MAPS will not be entitled to the benefit of any sinking fund or other
mandatory redemption provisions.
BOOK-ENTRY SYSTEMS
The MAPS will be issued in fully registered form in the name of Cede & Co.
("Cede"), as nominee of DTC or in the name of a nominee of any successor or
alternate depository selected by the Company. One or more fully registered
certificates will be issued as Global Securities for the MAPS in the aggregate
principal amount of the MAPS. Such Global Securities will be deposited with DTC
and may not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee to a
successor of DTC or a nominee of such successor.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization" under
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 ("Participants")
deposit with DTC. DTC also 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.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. 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 Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of MAPS under the DTC system must be made by or through
Participants, which will receive a credit for the MAPS on DTC's records. The
ownership interest of each actual purchaser of MAPS ("Beneficial Owner") is in
turn to be recorded on the Participants' and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchases, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participants or Indirect Participant through which the
Beneficial Owners purchased the MAPS. Transfers of ownership interests in the
MAPS are to be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in the MAPS, except in the event that use
of the book-entry system for the MAPS is discontinued. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise any rights under
the MAPS.
To facilitate subsequent transfers, all MAPS deposited by Participants with
DTC are registered in the name of Cede. The deposit of MAPS with DTC and their
registration in the name of Cede effect no change in beneficial ownership. DTC
has no knowledge of the actual Beneficial Owners of the MAPS; DTC's records
reflect only the identity of the Participants to whose accounts such MAPS are
credited, which may or may not be the Beneficial Owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Redemption notices shall be sent to DTC. If less than all of the
MAPS are being redeemed, DTC will reduce the amount of the interest of each
Participant in such MAPS in accordance with its procedures.
Neither DTC nor Cede will consent or vote with respect to the Global
Securities. Under its usual procedures DTC would mail an omnibus proxy to the
Company as soon as possible after the record date. The omnibus proxy assigns
DTC's or Cede's consenting or voting rights to those Participants to whose
accounts the MAPS are credited on the record date (identified in the listing
attached to the omnibus proxy).
S-14
<PAGE> 15
Principal and interest payments on the Global Securities will be made to
DTC. The Company expects that DTC, upon receipt of any payment of principal or
interest in respect of a Global Security, will credit immediately Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Security as shown on DTC's
records. The Company also expects that payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and such payments will be the responsibility of
such Participant and not of DTC, the Company or the Trustee, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of interest and principal to DTC is the responsibility of the Company,
disbursement of such payments to Participants is the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners is the responsibility of
Participants and Indirect Participants.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Securities among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. DTC may discontinue providing
its service as securities depositary with respect to the MAPS at any time by
giving reasonable notice to the Company or the Trustee. In addition, the Company
may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor securities depositary). Under such circumstances, in the event
that a successor securities depositary is not obtained, certificates in fully
registered form will be delivered in exchange for beneficial interests in the
Global Securities representing such MAPS.
Neither the Company, the Trustee nor the Underwriters will have any
responsibility or obligation to Participants, or the persons for whom they act
as nominees, with respect to the accuracy of the records of DTC, its nominee or
any Participant with respect to any ownership interest in the MAPS, or payments
to, or the providing of notice to Participants or Beneficial Owners.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable
(including DTC), but the Company takes no responsibility for the accuracy
thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the MAPS will be made by the Underwriters in immediately
available funds. So long as the MAPS are represented by Global Securities
registered in the name of DTC or its nominee, all payments of principal and
interest will be made by the Company in immediately available funds. In
addition, so long as the MAPS are represented by such Global Securities, the
MAPS will trade in DTC's Same-Day Funds Settlement System, and secondary market
trading activity in the MAPS will therefore be required by DTC to settle in
immediately available funds. No assurance can be given as to the effect, if any,
of settlement in immediately available funds on trading activity in the MAPS.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
consequences of the purchase, ownership and disposition of the MAPS is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (possibly retroactively) by legislation, administrative action
or judicial decision. It deals only with MAPS held as capital assets (within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code")) and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, tax-exempt organizations,
individual retirement and other tax-deferred accounts, regulated investment
companies, dealers in securities or currencies, persons holding MAPS as a hedge
against currency risk or as a position in a "straddle" for tax purposes, or
persons whose functional currency is not the U.S. dollar. In addition, this
summary only addresses the federal income tax consequences of the MAPS until the
Remarketing Date and generally does not deal with holders other than the
original purchasers of the MAPS who purchase the MAPS at the "issue price" (the
first price at which a substantial amount of the MAPS is sold to the public,
ignoring sales to bond houses, brokers and similar persons acting as
underwriters, placement agents or wholesalers). PERSONS CONSIDERING THE
S-15
<PAGE> 16
PURCHASE OF THE MAPS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE
APPLICATION OF THE FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS
WELL AS ANY CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE MAPS
ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a Beneficial Owner of a MAPS
that is for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
or under the laws of the United States or of any political subdivision thereof
(other than a partnership that is not treated as a United States person under
any applicable Treasury regulations), (iii) an estate whose income is subject to
United States federal income tax regardless of its source, (iv) a trust if a
court within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, or (v) any other
person whose income or gain in respect of a MAPS is effectively connected with
the conduct of a United States trade or business. Notwithstanding the preceding
sentence, to the extent provided in Treasury regulations, certain trusts in
existence on August 20, 1996 and treated as United States persons prior to such
date, that elect to continue to be treated as United States persons also will be
U.S. Holders. As used herein, the term "non-U.S. Holder" means a Beneficial
Owner of a MAPS that is not a U.S. Holder.
The federal income tax treatment of the MAPS depends, in part, on whether
the MAPS are treated as maturing on their Stated Maturity Date (i.e., 2038) or
on the Remarketing Date. The Company intends to treat the MAPS as maturing on
the Remarketing Date because (i) the holders are required to tender their MAPS
on such date, and the tendered MAPS are required to be purchased on such date
either by the Remarketing Dealer or, if the Remarketing Dealer elects not to
purchase, by the Company, and (ii) the holders will in either case be paid only
the stated principal amount of the MAPS plus any accrued and unpaid interest.
Further, if the Remarketing Dealer elects to purchase the tendered MAPS for
resale, the Company intends to treat the MAPS as newly issued debt instruments
on such date.
Because no debt instrument closely comparable to the MAPS has been the
subject of any Treasury regulation, revenue ruling or judicial decision, the
U.S. federal income tax treatment of the MAPS is not certain. No ruling on any
of the issues discussed below will be sought from the Internal Revenue Service
("IRS"). Accordingly, significant aspects of the U.S. federal income tax
consequences of an investment in the MAPS are uncertain, and no assurance can be
given that the IRS or the courts will agree that the MAPS should be treated as
maturing on the Remarketing Date.
Assuming the Company's treatment of the MAPS as maturing on the Remarketing
Date is respected, interest payments in respect of the MAPS will constitute
"qualified stated interest" under the Treasury regulations dealing with the
determination and reporting of original issue discount. As a result, the MAPS
will not be treated as issued with original issue discount if (i) they are sold
at par value or (ii) the excess (if any) of the par value over the MAPS' issue
price is less than a statutory de minimis amount (generally 1/4 of 1% of the
MAPS' stated redemption price at the Remarketing Date multiplied by the number
of complete years to the Remarketing Date from the issue date). Further,
interest payments on the MAPS will be taxable to a U.S. Holder as ordinary
interest income at the time such payments are accrued or received, in accordance
with the U.S. Holder's regular method of tax accounting.
If the MAPS are issued at a discount equal to or greater than the statutory
de minimis amount, a U.S. Holder must include original issue discount in income
as ordinary interest for federal income tax purposes as it accrues under a
constant yield method regardless of when the cash payments attributable to such
income are received and regardless of the U.S. Holder's regular method of
accounting.
Under the foregoing treatment, upon the sale, exchange or retirement of a
MAPS, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the MAPS. A U.S. Holder's adjusted tax basis in a
MAPS generally will equal such U.S. Holder's initial investment in the MAPS
increased by any original issue discount included in income and decreased by the
amount of any payments, other than qualified stated interest payments, received.
S-16
<PAGE> 17
There can be no assurance that the IRS will agree with the Company's
treatment of the MAPS and it is possible that the IRS could assert another
treatment. For instance, it is possible that the IRS could seek to treat the
MAPS as maturing on the Stated Maturity Date and to treat the holders as if they
had granted the remarketing right to the Remarketing Dealer. If the MAPS were
treated as maturing on the Stated Maturity Date, the MAPS would be treated as
having contingent interest under the Treasury regulations governing debt
instruments that provide for contingent payments (the "Contingent Payment
Regulations"). In that event, the Company would be required to construct a
projected payment schedule for the MAPS, based upon the Company's current
borrowing costs for comparable noncontingent debt instruments of the Company,
from which an estimated yield on the MAPS would be calculated. A U.S. Holder
would be required to include in income original issue discount in an amount
equal to the product of the adjusted issue price of the MAPS at the beginning of
each interest accrual period and the estimated yield of the MAPS and to make
certain adjustments to such income accruals for differences between actual
payments and projected payments. In general, for these purposes, a MAPS adjusted
issue price would equal the MAPS issue price increased by the interest
previously accrued on the MAPS, and reduced by all payments made on the MAPS. As
a result of the application of the Contingent Payment Regulations, it is
possible that a U.S. Holder would be required to include amounts in income in
excess of actual cash payments received for certain taxable years.
In addition, the character of any gain or loss, upon the sale or exchange
of a MAPS (including a sale pursuant to the mandatory tender on the Remarketing
Date) by a U.S. Holder, will likely differ if the MAPS were treated as
contingent payment obligations. Any such taxable gain generally would be treated
as ordinary income. Any such taxable loss generally would be ordinary to the
extent of previously accrued original issue discount, and any excess would
generally be treated as capital loss. The ability to use capital losses to
offset ordinary income in determining taxable income is generally limited.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States federal income taxes
on payments of principal or interest (including original issue discount, if any)
on a MAPS, unless such non-U.S. Holder is an actual or constructive 10% or
greater shareholder of the Company, a controlled foreign corporation related to
the Company through stock ownership, or a bank receiving interest described in
Section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment prior to payment to a
non-U.S. Holder (the "Withholding Agent") must have received in the year in
which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (i) is signed by the Beneficial Owner
of the MAPS under penalties of perjury, (ii) certifies that such owner is not a
U.S. Holder and (iii) provides the name and address of the Beneficial Owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the Beneficial Owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a MAPS is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
Beneficial Owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof.
If a non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described above, payments of interest (including original
issue discount, if any) made to such non-U.S. Holder will be subject to a 30%
withholding tax unless the Beneficial Owner of the MAPS provides the Company or
its paying agent, as the case may be, with a properly executed (i) IRS Form 1001
(or successor form) claiming an exemption from withholding under the benefit of
a tax treaty or (ii) IRS Form 4224 (or successor form) stating that interest
paid on the MAPS is not subject to withholding tax because it is effectively
connected with the Beneficial Owner's conduct of a trade or business in the
United States.
Generally, a non-U.S. Holder will not be subject to United States federal
income taxes on any amount which constitutes gain upon retirement or disposition
of a MAPS, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
S-17
<PAGE> 18
The MAPS will not be includible in the estate of a non-U.S. Holder for
United States federal estate tax purposes unless the individual is a direct or
indirect 10% or greater shareholder of the Company or, at the time of such
individual's death, payments in respect of the MAPS would have been effectively
connected with the conduct by such individual of a trade or business in the
United States.
BACKUP WITHHOLDING
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the MAPS to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the MAPS to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a MAPS to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
Beneficial Owner would be allowed as a refund or a credit against such
Beneficial Owner's federal income tax provided the required information is
furnished to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
"New Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations generally will be effective for payments made after December 31,
1998, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") dated , 1998 among the Company and
the several Underwriters named below (the "Underwriters"), the Company has
agreed to sell to each of the Underwriters, and the Underwriters have severally
agreed to purchase from the Company, the following respective principal amounts
of the MAPS:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF MAPS
----------- ----------------
<S> <C>
Salomon Brothers Inc........................................
Chase Securities Inc. ......................................
NationsBanc Montgomery Securities LLC.......................
------------
Total............................................. $150,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the MAPS offered
hereby if any MAPS are purchased. The Underwriters have advised the Company that
the Underwriters propose to offer the MAPS to the public initially at the
offering
S-18
<PAGE> 19
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers initially at such price less a discount not in excess of % of the
principal amount of the MAPS. The Underwriters may allow, and such dealers may
reallow, a concession to certain other dealers not in excess of % of the
principal amount of the MAPS. After the initial offering of the MAPS to the
public, the public offering price and such concessions may be changed. In
addition, in consideration for the right to require the mandatory tender of all
outstanding MAPS as described above, the Remarketing Dealer will pay to the
Company, on the same date the Underwriters pay the purchase price for the MAPS,
an amount equal to % of the principal amount of the MAPS.
The MAPS are a new issue of securities with no established trading market.
The Company does not intend to list the MAPS on any securities exchange or
include the MAPS on any quotation system. The Company has been advised by the
Underwriters that the Underwriters intend to make a market in the MAPS, but they
are not obligated to do so and may discontinue market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the MAPS.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the MAPS. Such transactions may
include over-allotment transactions and purchases to cover short positions
created by the Underwriters in connection with the offering. If the Underwriters
create a short position in the MAPS in connection with the offering, i.e., if
they sell the MAPS in an aggregate principal amount exceeding that set forth on
the cover page of this Prospectus Supplement, the Underwriters may reduce that
short position by purchasing MAPS in the open market.
In general, purchases of a security to reduce a short position could cause
the price of the security to be higher than it might be in the absence of such
purchases.
Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the MAPS. In addition, neither the
Company nor the Underwriters make any representation that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
In the ordinary course of business, Salomon Brothers Inc and its affiliates
have engaged and may in the future engage in investment banking transactions
with the Company and certain of its affiliates. As discussed in "Use of
Proceeds," the Company may apply a portion of the proceeds from the offering of
the MAPS to pay down indebtedness under money market lines owed to The Chase
Manhattan Bank, an affiliate of Chase Securities Inc., and NationsBank of Texas,
N.A., an affiliate of NationsBanc Montgomery Securities LLC. The Chase Manhattan
Bank and NationsBank of Texas, N.A., or affiliates thereof, have in the past and
may in the future engage in investment banking or other transactions of a
financial nature with the Company and certain of its affiliates, including the
making of loans to the Company and its affiliates. Certain of the Underwriters
or their affiliates have provided certain advisory services to the Company.
Because more than 10% of the net proceeds of the offering of the MAPS will be
used to repay indebtedness of the Company owed to affiliates of certain of the
Underwriters, this offering is being made pursuant to the provisions of Rule
2710(c)(8) of the Conduct Rules of the National Association of Securities
Dealers, Inc.
The Company has agreed to indemnify the Underwriters and certain other
persons against certain liabilities, including liabilities under the Securities
Act, or to make contribution to certain payments in respect thereof.
LEGAL MATTERS
The validity of the MAPS and certain legal matters relating to the offering
of the MAPS will be passed upon for the Company by King & Spalding, Houston,
Texas. Certain legal matters relating to the offering of the MAPS will be passed
upon for the Underwriters by Simpson Thacher & Bartlett, New York, New York.
S-19
<PAGE> 20
================================================================================
NO DEALER, SALESPERSON, OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE
OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company........................... S-2
Use of Proceeds....................... S-4
Capitalization........................ S-4
Summary Financial Information......... S-5
Reserves.............................. S-6
Description of the MAPS............... S-8
Certain United States Federal Income
Tax Considerations.................. S-15
Underwriting.......................... S-18
Legal Matters......................... S-19
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Description of Capital Stock.......... 18
Description of Depositary Shares...... 22
Description of Warrants............... 26
Plan of Distribution.................. 27
Legal Matters......................... 29
Experts............................... 29
</TABLE>
================================================================================
================================================================================
UNION TEXAS PETROLEUM
HOLDINGS, INC.
% MANDATORY
PUTABLE/REMARKETABLE
SECURITIES (MAPS(SM))
DUE APRIL , 2038
[UNION TEXAS LOGO]
------------
PROSPECTUS SUPPLEMENT
DATED APRIL , 1998
------------
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
"MAPS(SM)" is a service mark of
Salomon Brothers Inc
================================================================================
