<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration Nos. 333-42315
333-42315-01
PROSPECTUS SUPPLEMENT
(To Prospectus Dated January 7, 1998)
PIONEER NATURAL RESOURCES COMPANY
$350,000,000
6.50% SENIOR NOTES DUE 2008
$250,000,000
7.20% SENIOR NOTES DUE 2028
PAYMENT OF PRINCIPAL AND INTEREST GUARANTEED BY PIONEER NATURAL RESOURCES USA,
INC.
LOGO
------------------
The 6.50% Senior Notes Due 2008 (the "2008 Notes"), which will mature on
January 15, 2008, and the 7.20% Senior Notes Due 2028 (the "2028 Notes" and,
collectively with the 2008 Notes, the "Notes"), which will mature on January 15,
2028, are being offered (the "Offering") by Pioneer Natural Resources Company
(the "Company") and will be unconditionally guaranteed (the "Guarantees") on an
unsecured basis by Pioneer Natural Resources USA, Inc. ("Pioneer USA" or the
"Guarantor"), a wholly-owned subsidiary of the Company. Interest on the Notes is
payable semiannually on January 15 and July 15 of each year, commencing July 15,
1998. The Notes may be redeemed at any time at the option of the Company, in
whole or from time to time in part, at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
redemption, plus a Make-Whole Premium, if any, relating to the then prevailing
Treasury Yield and the remaining life of the Notes.
The Notes will be general unsecured obligations of the Company ranking pari
passu in right of payment with all other senior unsecured indebtedness of the
Company and will be senior in right of payment to any subordinated indebtedness
of the Company. The Company is a holding company that conducts all its
operations through subsidiaries, and the Notes will be effectively subordinated
to all obligations of the Company's subsidiaries that are not guarantors of the
Notes. At December 31, 1997 (after giving effect to the Offering and the
application of estimated net proceeds therefrom), the Company would have had
approximately $1.1 billion of indebtedness for borrowed money ranking pari passu
in right of payment with the Notes, and non-Guarantor subsidiaries of the
Company would have had approximately $248.3 million of indebtedness for borrowed
money (excluding guarantees by some of those subsidiaries with respect to the
$1.375 billion United States Credit Facility). See "Description of
Notes -- Ranking." The Guarantees will be general unsecured obligations of the
Guarantor ranking pari passu in right of payment with all other senior unsecured
indebtedness of the Guarantor and will be senior in right of payment to any
subordinated indebtedness of the Guarantor. The Guarantees will terminate if the
Guarantor is released from its guarantees of the Company's United States Credit
Facility (as defined herein). See "Guarantees" and "Ranking" in "Description of
Notes."
The Notes will be represented by two or more Global Securities ("Global
Notes") deposited with the Depositary, which initially will be The Depository
Trust Company, and registered in the name of the Depositary or its nominee.
Beneficial ownership of the Notes will be shown on, and transfers thereof will
be effected only through, records maintained by the Depositary and its
participants. Except under the limited circumstances described herein, Notes in
definitive form will not be issued in exchange for Global Notes. So long as
Notes are represented by Global Notes, settlement for beneficial interests in
the Global Notes, including all secondary market trading activity, will be made
in immediately available funds as part of the Depositary's same-day funds
settlement system. All payments of principal and interest on the Notes will be
made by the Company in immediately available funds.
------------------
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 COMPANY(1)(2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2008 Note 99.514% 0.650% 98.864%
- ------------------------------------------------------------------------------------------------------------------------
Per 2028 Note 99.963% 0.875% 99.088%
- ------------------------------------------------------------------------------------------------------------------------
Total $598,206,500 $4,462,500 $593,744,000
========================================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from January 13, 1998, to the date of
delivery.
(2) Before deducting expenses payable by the Company, estimated to be
$761,000.
------------------
The Notes are offered subject to receipt and acceptance by the Underwriters,
to prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made through the facilities of The Depository
Trust Company on or about January 13, 1998, against payment therefor in
immediately available funds.
------------------
SALOMON SMITH BARNEY CHASE SECURITIES INC.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES
January 8, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
PURCHASES OF THE NOTES TO STABILIZE THEIR MARKET PRICE AND PURCHASES OF THE
NOTES TO COVER ANY SHORT POSITION IN THE NOTES MAINTAINED BY THE UNDERWRITERS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
FORWARD-LOOKING STATEMENTS
All statements in this Prospectus Supplement concerning the Company other
than purely historical information (collectively "Forward-Looking Statements")
reflect the current expectations of management and are based on the Company's
historical and pro forma operating trends, its proved reserves, and other
information available to management. These statements assume, among other
things, that no significant changes will occur in the operating environment for
the Company's oil and gas properties and that there will be no material
acquisitions or divestitures. There can be no assurance that the assumptions
used will prove to be accurate. The Company cautions that the Forward-Looking
Statements are subject to all the risks and uncertainties incident to the
acquisition, development and marketing of, and exploration for, oil and gas
reserves. These risks include, but are not limited to, commodity price risks,
risks relating to pricing and availability of third-party supplies, equipment
and services for operations, counterparty risks, drilling risks, and reserve,
operations and production risks. Certain of these risks are described in the
documents incorporated by reference herein. Moreover, the Company may make
material acquisitions, alter its capital expenditure budget or plans, or enter
into other financing transactions. None of these can be predicted with certainty
and, accordingly, are not taken into consideration in the Forward-Looking
Statements. For all of the foregoing reasons, actual results may vary materially
from the Forward-Looking Statements. The Company disclaims any obligation or
undertaking to release publicly any updates about changes in the Company's
expectations with regard to the subject matter of any Forward-Looking Statements
or any changes in events, conditions or circumstances on which any
Forward-Looking Statements are based.
S-2
<PAGE> 3
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in or incorporated by reference into this Prospectus
Supplement. As used herein, and unless the context requires otherwise, "Pioneer
Natural Resources Company" or the "Company" means Pioneer Natural Resources
Company and its consolidated subsidiaries.
THE COMPANY
Pioneer Natural Resources Company is the second largest independent
exploration and production company in the United States, based on total proved
reserves, and has a balanced oil and gas reserve base. Pioneer Natural Resources
Company was created through the merger (the "Parker/Mesa Merger") of Parker &
Parsley Petroleum Company ("Parker & Parsley") and MESA Inc. ("Mesa")on August
7, 1997. The Company's United States operations are located primarily in Texas,
Kansas, Oklahoma, Louisiana, New Mexico and offshore Gulf of Mexico.
International operations are located primarily in Argentina and Canada.
BUSINESS STRATEGY
Development and production enhancement activities. The Company seeks to
increase reserves and production through exploitation activities, including
developmental drilling and recompletions in its core operating areas. The
Company has identified over 3,700 infill drilling locations on its properties.
Development activities are expected to account for approximately 75% of the
Company's 1998 investment budget. Domestically, the majority of 1998 development
investments are expected to occur through drilling programs in the Spraberry,
West Panhandle and Hugoton fields, with additional investments occurring in the
south Louisiana inland waters, onshore Gulf Coast and Permian Basin areas.
Internationally, development opportunities are located in the Neuquen Basin of
Argentina and the Chinchaga area in Canada.
Exploration. The Company's exploration activities use seismic, drilling and
completion technology to identify and drill sites with high reserve potential,
such as those in the southern Louisiana transition zone, the Gulf of Mexico, the
East Texas Basin, western Canada and Argentina. Exploration activities are
expected to account for approximately 25% of the Company's 1998 investment
budget. Domestic exploration efforts in 1998 are expected to be focused on the
onshore and offshore Gulf of Mexico, the Cotton Valley Reef trend of the East
Texas Basin, and the Delaware Basin in West Texas. International exploration
efforts in 1998 are expected to be conducted in Canada and in the Neuquen basin
and Tierra del Fuego areas of Argentina.
Acquisitions. The Company pursues acquisitions to enhance existing core
areas and to establish new core areas. The Company's acquisition efforts focus
on assets with opportunities to increase reserves and production through both
exploitation and exploration activities with a high degree of operational
control. The Company believes that one of its strengths is a technical team that
concentrates on executing strategic acquisitions and mergers.
Increasing natural gas processing capacity in core areas. The Company
intends to expand the processing capabilities of its gas processing facilities
and to obtain additional dedications of third party gas to these plants. By
owning and operating these processing facilities, the Company retains the
processing margin on the gas it produces, as well as on gas produced by third
parties.
Maintaining financial strength and flexibility. The Company intends to
maintain financial strength, financial flexibility, and an investment grade
rating for its senior debt by seeking to: (i) maintain its credit ratios
consistent with guidelines established by the major credit rating agencies for
investment grade companies; (ii) fund its development and exploration activities
primarily with internally generated cash flow; (iii) continue a portfolio
management approach to its assets so as to direct future investments toward
projects that enhance growth; (iv) use hedging strategies to reduce price risk
in supporting its capital expenditure budget and its acquisition activities; and
(v) reduce per-unit operating and general and administrative expenditures.
S-3
<PAGE> 4
RECENT DEVELOPMENTS
Chauvco Acquisition. On December 18, 1997, the Company completed the
acquisition (the "Chauvco Acquisition") of the Canadian and Argentine oil and
gas businesses of Chauvco Resources Ltd. ("Chauvco"). Chauvco was a
publicly-traded Canadian oil and gas company concentrating on the acquisition,
exploration, development and production of oil and natural gas resources in
Canada in the provinces of Alberta, Saskatchewan, British Columbia and Manitoba,
and in Argentina in the provinces of Tierra del Fuego, Neuquen, Rio Negro and
Santa Cruz.
The Chauvco Acquisition established a new core area for the Company in
western Canada and expanded the Company's existing core area in Argentina. The
acquisition consideration paid to the shareholders of Chauvco was approximately
$946 million, consisting of the issuance of approximately 24.9 million
equivalent shares of the Company's Common Stock and the assumption of long-term
debt having an outstanding balance of $228 million as of September 30, 1997.
American Cometra Acquisition. On December 19, 1997, the Company completed
the acquisition of assets in the East Texas Basin from affiliates of American
Cometra, Inc. ("ACI") and Rockland Pipeline Co. ("Rockland"), both subsidiaries
of Electrafina S.A. of Belgium. The total consideration paid was approximately
$129 million, consisting of $84 million in cash and 1.7 million shares of the
Company's Common Stock. The Company acquired ACI's producing wells, acreage,
seismic data, royalties and mineral interests, and Rockland's gathering system,
pipeline and gas processing plant in the East Texas Basin. This acquisition
established a critical mass and core area in the East Texas Basin for the
Company and provided it with a major presence in the Cotton Valley Reef trend.
Credit Facility Agreements. On December 18, 1997, the Company amended and
restated its United States Credit Facility in order to substitute the Company as
the borrower in place of Pioneer USA and to establish credit amounts of $1.075
billion under the primary credit facility and $300 million under an additional,
364-day credit facility. Pursuant to the amendment, Pioneer USA and certain
other subsidiaries of the Company provide guarantees of the Company's
obligations under the United States Credit Facility. Pioneer USA is a direct,
wholly-owned subsidiary of the Company and owns substantially all of the United
States onshore and offshore properties of the Company. Pioneer USA has no
borrowed money obligations other than for a $9.1 million secured building loan
and certain capitalized lease obligations and has no guarantees of other
borrowed money obligations except as guarantor for the Notes, the $1.375 billion
United States Credit Facility, and the $300 million of senior notes of the
Company originally issued by Parker & Parsley (the "Parker & Parsley Notes").
The United States Credit Facility is also secured by a pledge of 65% of the
stock of certain non-U.S. subsidiaries, including Pioneer Natural Resources
(Canada) Ltd., the subsidiary that acquired Chauvco ("Pioneer Canada"). Also on
December 18, 1997, the Company refinanced all of Chauvco's outstanding debt by
establishing a $290 million Canadian credit facility (the "Canadian Credit
Facility") under which Chauvco is the borrower and the Company and certain of
its subsidiaries other than Pioneer USA provide guarantees. On December 22,
1997, the Company established an additional unsecured $100 million working
capital line of credit.
Subordinated Note Tender. On December 15, 1997, Pioneer USA completed its
offer to purchase for cash any and all of its $264 million 11 5/8% Senior
Subordinated Discount Notes Due 2006 and its $325 million 10 5/8% Senior
Subordinated Notes Due 2006 originally issued by Mesa Operating Company
(collectively, the "Mesa Notes"). The offer was completed with approximately 95%
of the Mesa Notes tendered, which will result in a fourth quarter after-tax
charge to the Company's financial results of approximately $11.9 million.
Pioneer USA paid for the tendered Mesa Notes on December 18, 1997, with
borrowings under the United States Credit Facility. Also on December 18, 1997,
in accordance with consents solicited in connection with the tender offer, the
indentures governing both series of Mesa Notes were amended to eliminate most of
their restrictive covenants.
Assumption of Certain Debts by the Company. On December 30, 1997, the
Company and Pioneer USA completed a restructuring that resulted in the Company
becoming the primary obligor on the $29.4 million of Mesa Notes that were not
tendered and on the $300 million of Parker & Parsley Notes. Pioneer USA has
guaranteed the payment of principal and interest on the Parker & Parsley Notes.
The guarantee of the Parker & Parsley Notes will terminate if Pioneer USA is
released from its guarantees of the Company's United States Credit Facility.
S-4
<PAGE> 5
Property Divestitures. On December 15 and 16, 1997, the Company sold
approximately $104 million of its non-strategic properties in two separate,
all-cash transactions. These divestitures involved approximately 800 properties,
representing less than 3% of the Company's total reserve base and about 1% of
the Company's daily production.
Fourth Quarter Charges. During the fourth quarter of 1997, the Company will
recognize certain charges that adversely affect the Company's financial results.
In addition to the after-tax charge of $11.9 million related to the purchase of
the Mesa Notes, the Company estimates that it will recognize after-tax charges
of between $13 and $16 million for the purchase of 3-D seismic data and
approximately $3 million resulting from the write-off of an unsuccessful well in
Guatemala. The decline of oil and gas prices during the fourth quarter of 1997
will also have an adverse effect on the Company's financial results.
THE OFFERING
SECURITIES OFFERED......... $350,000,000 principal amount of 6.50% Senior Notes
Due 2008.
$250,000,000 principal amount of 7.20% Senior Notes
Due 2028.
MATURITY................... January 15, 2008, and January 15, 2028,
respectively.
INTEREST PAYMENT DATES..... January 15 and July 15 of each year, commencing
July 15, 1998.
GUARANTEES................. The Notes will be unconditionally guaranteed on an
unsecured basis by Pioneer USA. No other subsidiary
of the Company will be a guarantor. The Guarantees
will terminate if the Guarantor is released from
its guarantees of the Company's indebtedness under
the United States Credit Facility, but are not
required to be reinstated if such guarantees under
the United States Credit Facility are subsequently
reinstated. Pioneer USA is a direct, wholly-owned
subsidiary of the Company and directly owns
substantially all of the United States onshore and
offshore properties of the Company. Pioneer USA has
no borrowed money obligations other than for a $9.1
million secured building loan and certain
capitalized lease obligations and has no guarantees
of other borrowed money obligations except as
guarantor for the Notes, the United States Credit
Facility, and the Parker & Parsley Notes.
RANKING.................... The Notes will be general unsecured obligations of
the Company ranking pari passu in right of payment
with all other senior indebtedness of the Company
and will be senior in right of payment to all
existing and future subordinated indebtedness of
the Company.
The Notes will be effectively subordinated in right
of payment to all existing and future secured
indebtedness of the Company to the extent of the
value of the assets securing such indebtedness. The
Company's $1.375 billion United States Credit
Facility is secured by a pledge of 65% of the
outstanding stock of certain non-U.S. subsidiaries,
including Pioneer Canada, and the Notes will
therefore be effectively subordinated to the United
States Credit Facility to the extent of the value
of such stock. The Company is a holding company
that conducts all its operations through
subsidiaries, and the Notes will be effectively
subordinated to all obligations of the Company's
subsidiaries that are not guarantors of the Notes.
At December 31, 1997 (after giving effect to the
Offering and application of the estimated net
proceeds therefrom), the Company would have had
approximately $1.1 billion of indebtedness for
borrowed money ranking pari passu in right of
payment with the Notes, and non-Guarantor
subsidiaries of the Company would have had
approximately $248.3 million of indebtedness for
borrowed money (excluding guaran-
S-5
<PAGE> 6
tees by some of those subsidiaries with respect to
the $1.375 billion United States Credit Facility).
In addition, Pioneer USA has guaranteed the United
States Credit Facility and the Parker & Parsley
Notes, which guarantees will be pari passu with the
Guarantees. The Indenture governing the Notes does
not restrict the ability of subsidiaries to incur
additional liabilities, including indebtedness
under and guarantees of bank credit facilities, in
the future. The Company's subsidiaries may also
have other liabilities, including contingent
liabilities.
The Guarantees will be general unsecured
obligations of the Guarantor ranking pari passu in
right of payment with all other senior unsecured
indebtedness of the Guarantor and will be senior in
right of payment to any subordinated indebtedness
of the Guarantor. The Guarantees will be
effectively subordinated in right of payment to any
secured indebtedness of the Guarantor to the extent
of the value of the assets securing such
indebtedness. The Guarantees could also be
effectively subordinated to all the obligations of
the Guarantor under certain circumstances. See
"Description of Notes -- Guarantees" and
"Description of Notes -- Ranking."
REDEMPTION................. The Notes may be redeemed at any time at the option
of the Company, in whole or from time to time in
part, at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if
any, to the date of redemption, plus a Make-Whole
Premium, if any, relating to the then prevailing
Treasury Yield and the remaining life of the Notes.
PRINCIPAL COVENANTS........ The Indenture governing the Notes contains certain
covenants that, among other things, restrict the
ability of the Company, under certain
circumstances, to create liens and to enter into
sale/leaseback transactions. These limitations will
be subject to a number of significant exceptions
and qualifications. See "Description of
Notes -- Certain Covenants."
USE OF PROCEEDS............ The net proceeds from the sale of the Notes will be
used primarily to repay existing bank indebtedness
under the United States Credit Facility. See "Use
of Proceeds."
S-6
<PAGE> 7
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The summary unaudited pro forma combined statement of operations data and
other financial data of the Company for the nine months ended September 30,
1997, and for the year ended December 31, 1996, give effect to the Parker/Mesa
Merger, the Chauvco Acquisition, and certain other transactions as if all those
transactions had occurred on January 1, 1996. The summary unaudited pro forma
combined balance sheet data of the Company as of September 30, 1997, give effect
to the Chauvco Acquisition as if the acquisition had occurred on September 30,
1997. These transactions are identified in, and the summary unaudited pro forma
combined financial data are qualified in their entirety by and should be read in
conjunction with, the unaudited pro forma combined financial statements of the
Company contained in the Company's Current Report on Form 8-K dated December 18,
1997 (the "Chauvco 8-K"), which is incorporated in the Prospectus by reference.
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS PRO FORMA
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Oil and gas............................................ $ 669,872 $ 881,639
Natural gas processing................................. -- 23,184
Interest and other..................................... 7,854 42,419
Gain on disposition of assets, net..................... 2,763 11,966
---------- ----------
680,489 959,208
---------- ----------
Costs and expenses:
Oil and gas production................................. 181,796 230,159
Natural gas processing................................. -- 11,949
Depletion, depreciation and amortization............... 283,588 365,499
Impairment of oil and gas properties and natural gas
processing facilities................................. 2,907 --
Exploration and abandonments........................... 52,718 37,555
General and administrative............................. 75,014 83,955
Interest............................................... 106,406 138,580
Other.................................................. 5,685 4,791
---------- ----------
708,114 872,488
---------- ----------
Income (loss) before income taxes......................... (27,625) 86,720
Income tax benefit (provision)............................ 12,400 (30,700)
---------- ----------
Income (loss) from continuing operations.................. $ (15,225) $ 56,020
========== ==========
OTHER FINANCIAL DATA:
EBITDAEX (a).............................................. $ 417,994 $ 628,354
Ratio of earnings to fixed charges(b)..................... (b) 1.62
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................................... $ 38,249
Property, plant and equipment, net........................ 4,586,667
Total assets.............................................. 4,930,221
Long-term obligations..................................... 1,975,220
Total stockholders' equity................................ 2,406,437
</TABLE>
- ---------------
(a) EBITDAEX is presented because the Company believes it to be a commonly used
financial indicator of a company's ability to service or incur debt.
EBITDAEX (as used herein) is calculated by adding interest, income taxes,
depletion, depreciation and amortization, impairment of oil and gas
properties and natural gas processing facilities, and exploration and
abandonment costs to income (loss) from continuing operations. Interest
includes accrued interest expense and amortization of deferred financing
costs. EBITDAEX 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.
(b) For purposes of computing the pro forma ratio of earnings to fixed charges,
earnings consists of income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense, interest capitalized and the
portion of rental expense attributable to interest. Unaudited pro forma
earnings for the Company were inadequate to cover its fixed charges during
the nine months ended September 30, 1997, by $27.6 million.
S-7
<PAGE> 8
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
THE COMPANY
The following table sets forth selected consolidated financial data of the
Company (as successor to Parker & Parsley for accounting purposes) for the nine
months ended September 30, 1997 and 1996, and for each of the five fiscal years
in the period ended December 31, 1996. The following data should be read in
conjunction with the Company's "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements and notes thereto contained in the reports incorporated in
the Prospectus by reference.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ -------------------------------------------------
1997(A) 1996 1996 1995 1994(B) 1993(C) 1992
------- -------- -------- -------- -------- ------- ------
(UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Oil and gas................................ $349.0 $ 283.3 $ 396.9 $ 375.7 $ 337.6 $207.2 $135.1
Natural gas processing..................... -- 16.8 23.8 33.2 39.2 77.5 54.6
Gas marketing.............................. -- -- -- 76.8 103.0 43.8 12.1
Interest and other......................... 3.7 15.0 17.5 11.4 6.9 4.4 4.2
Gain on disposition of assets, net(d)...... 2.7 96.9 97.1 16.6 9.5 23.2 4.2
------- -------- -------- -------- -------- ------ ------
355.4 412.0 535.3 513.7 496.2 356.1 210.2
------- -------- -------- -------- -------- ------ ------
Costs and expenses:
Oil and gas production..................... 91.7 82.2 110.3 130.9 127.1 78.3 51.8
Natural gas processing..................... -- 9.1 12.5 25.9 33.6 51.6 38.6
Gas marketing.............................. -- -- -- 75.7 101.5 42.8 11.0
Depletion, depreciation and amortization... 126.9 86.2 112.1 159.1 145.4 80.4 45.6
Impairment of oil and gas properties and
natural gas processing facilities........ -- -- -- 130.5 -- -- --
Exploration and abandonments............... 34.3 15.0 23.0 27.5 25.2 3.6 4.5
General and administrative................. 31.8 19.5 28.4 37.4 29.0 23.8 11.6
Interest................................... 44.2 36.1 46.2 65.4 50.6 23.3 14.7
Other...................................... 3.0 .9 2.5 11.3 4.3 3.9 2.3
------- -------- -------- -------- -------- ------ ------
331.9 249.0 335.0 663.7 516.7 307.7 180.1
------- -------- -------- -------- -------- ------ ------
Income (loss) before income taxes,
extraordinary item and cumulative effect of
accounting change.......................... 23.5 163.0 200.3 (150.0) (20.5) 48.4 30.1
Income tax benefit (provision)............... (8.5) (47.2) (60.1) 45.9 6.5 (17.0) (3.0)
------- -------- -------- -------- -------- ------ ------
Income (loss) before extraordinary item and
cumulative effect of accounting change..... 15.0 115.8 140.2 (104.1) (14.0) 31.4 27.1
Extraordinary item........................... (1.5) -- -- 4.3 (.6) -- --
Cumulative effect of accounting change....... -- -- -- -- -- 17.1 --
------- -------- -------- -------- -------- ------ ------
Net income (loss)............................ $ 13.5 $ 115.8 $ 140.2 $ (99.8) $ (14.6) $ 48.5 $ 27.1
======= ======== ======== ======== ======== ====== ======
OTHER FINANCIAL DATA:
EBITDAEX(e).................................. $228.9 $ 300.3 $ 381.7 $ 232.5 $ 200.7 $155.7 $ 95.0
Cash flows from operating activities......... 179.1 189.4 230.1 157.3 129.8 112.2 77.2
Cash flows from investing activities......... (244.1) 90.2 13.7 (53.3) (446.0) (398.2) (111.8)
Cash flows from financing activities......... 87.0 (232.2) (245.4) (107.9) 331.4 278.9 33.8
Capital expenditures......................... 256.5 144.1 227.8 228.4 554.9 583.5 129.7
Ratio of earnings to fixed charges(f)........ 1.5 5.4 5.3 (f) (f) 3.0 2.9
BALANCE SHEET DATA (END OF PERIOD):
Working capital.............................. $ 49.4 $ 47.6 $ 26.1 $ 31.5 $ 43.7 $ 39.5 $ 8.0
Property, plant and equipment, net........... 3,524.0 998.3 1,040.4 1,121.7 1,349.9 802.0 499.1
Total assets................................. 3,796.7 1,178.7 1,199.9 1,319.2 1,604.9 1,016.9 576.7
Long-term obligations........................ 1,728.8 325.2 329.0 603.2 727.2 544.3 225.9
Preferred stock of subsidiary................ -- 188.8 188.8 188.8 188.8 -- --
Total stockholders' equity................... 1,718.1 524.3 530.3 411.0 509.6 348.8 295.0
</TABLE>
- ---------------
(a) Includes amounts relating to the acquisition of Mesa beginning August 1,
1997.
(b) Includes amounts relating to the acquisition of Bridge Oil Limited in July
1994 and the acquisition of properties from PG&E Resources Company in August
1994.
(c) Includes amounts relating to the acquisition of certain Prudential-Bache
Energy limited partnerships in July 1993. Also includes results of
operations related to the Company's interest in the Carthage gas processing
plant that had been deferred in 1992 and 1993 and the gain of $7.3 million
recognized on the sale of that interest on June 30, 1993.
(d) Includes a gain of $83.3 million in 1996 related to the disposition of
certain wholly-owned subsidiaries.
(e) EBITDAEX is presented because the Company believes it to be a commonly used
financial indicator of a company's ability to service or incur debt.
EBITDAEX (as used herein) is calculated by adding interest, income taxes,
depletion, depreciation and amortization, impairment of oil and gas
properties and natural gas processing facilities and exploration and
abandonment costs to income (loss) before extraordinary item and cumulative
effect of accounting change. Interest includes accrued interest expense and
amortization of deferred financing costs. EBITDAEX 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.
S-8
<PAGE> 9
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, extraordinary item and
cumulative effect of account change plus fixed charges net of interest
capitalized. Fixed charges consist of interest expense, interest capitalized
and the portion of rental expense attributable to interest. The Company's
1995 and 1994 earnings were inadequate to cover its fixed charges. The
amount of the deficiencies were $150.0 million in 1995 and $20.5 million in
1994.
THE GUARANTOR
The following table sets forth selected consolidated financial data of
Pioneer USA for the nine months ended September 30, 1997, and for the period
ended December 31, 1996. The following data should be read in conjunction with
Pioneer USA's "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Pioneer USA's consolidated financial statements and
notes thereto contained in the reports incorporated in the Prospectus by
reference.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997(A) 1996
------------- ------------
(UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Oil and gas............................................. $ 349.0 $ 396.9
Natural gas processing.................................. -- 23.8
Gas marketing........................................... -- --
Interest and other...................................... 3.7 17.5
Gain on disposition of assets, net(b)................... 2.7 97.1
------- --------
355.4 535.3
------- --------
Costs and expenses:
Oil and gas production.................................. 91.7 110.3
Natural gas processing.................................. -- 12.5
Depletion, depreciation and amortization................ 126.9 112.1
Impairment of oil and gas properties and natural gas
processing facilities................................. -- --
Exploration and abandonments............................ 34.3 23.0
General and administrative.............................. 31.7 28.4
Interest................................................ 44.2 46.2
Other................................................... 3.0 2.5
------- --------
331.8 335.0
------- --------
Income before income taxes, extraordinary item and
cumulative effect of accounting change.................. 23.6 200.3
Income tax provision...................................... (8.5) (60.1)
------- --------
Income before extraordinary item and cumulative effect of
accounting change....................................... 15.1 140.2
Extraordinary item........................................ (1.5) --
Cumulative effect of accounting change.................... -- --
------- --------
Net income................................................ $ 13.6 $ 140.2
======= ========
OTHER FINANCIAL DATA:
EBITDAEX(c)............................................... $ 227.6 $ 381.7
Cash flows from operating activities...................... 184.8 230.1
Cash flows from investing activities...................... (243.6) 13.7
Cash flows from financing activities...................... 80.7 (245.4)
Capital expenditures...................................... 256.5 227.8
Ratio of earnings to fixed charges(d)..................... 1.5 5.3
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................................... $ 43.2 $ 26.1
Property, plant and equipment, net........................ 3,524.0 1,040.4
Total assets.............................................. 3,796.6 1,199.9
Long-term obligations:
Long term debt(e)....................................... 1,601.2 320.9
Other noncurrent liabilities............................ 127.6 8.1
Preferred stock of subsidiary............................. -- 188.8
Total stockholders' equity................................ 1,712.0 530.3
</TABLE>
- ---------------
(a) Includes amounts relating to the acquisition of Mesa beginning August 1,
1997.
(b) Includes a gain of $83.3 million in 1996 related to the disposition of
certain wholly-owned subsidiaries.
(c) EBITDAEX is presented because Pioneer USA believes it to be a commonly used
financial indicator of a company's ability to service or incur debt.
EBITDAEX (as used herein) is calculated by adding interest, income taxes,
depletion, depreciation and amortization, impairment of oil and gas
properties and natural gas processing facilities and exploration and
abandonment costs to income (loss) before extraordinary item and cumulative
effect of accounting change. Interest includes accrued interest expense and
amortization of deferred financing costs. EBITDAEX should not be considered
as an alternative to income (loss) or operating
S-9
<PAGE> 10
income (loss), as defined by generally accepted accounting principles, as an
indicator of Pioneer USA'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.
(d) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, extraordinary item and
cumulative effect of account change plus fixed charges net of interest
capitalized. Fixed charges consist of interest expense, interest capitalized
and the portion of rental expense attributable to interest.
(e) Represents amounts related to the United States Credit Facility, the Mesa
Notes and the Parker & Parsley Notes assumed by the Company in December
1997. Pioneer USA guarantees the United States Credit Facility and the
Parker & Parsley Notes. See "Credit Facility Agreements" and "Assumption of
Certain Debts by the Company" in "Summary -- Recent Developments."
MESA
The following table sets forth the selected financial data of Mesa for each
of the six months ended June 30, 1997 and 1996, and for the five fiscal years in
the period ended December 31, 1996. The following data should be read in
conjunction with Mesa's "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Mesa's consolidated financial
statements and notes thereto contained in the reports incorporated in the
Prospectus by reference.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenue................... $ 172.1 $ 152.0 $ 311.4 $ 235.0 $ 228.7 $ 222.2 $ 237.1
Total operating expenses.................. 124.1 105.6 214.7 187.0 200.0 200.2 210.9
-------- -------- -------- -------- -------- -------- --------
Operating income.......................... 48.0 46.4 96.7 48.0 28.7 22.0 26.2
-------- -------- -------- -------- -------- -------- --------
Net interest expense(a)................... (47.5) (66.9) (113.4) (132.7) (131.3) (131.3) (129.9)
Other income(b)........................... (2.5) 26.1 25.0 27.1 19.2 6.9 14.5
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations(c)........................... $ (2.0) $ 5.6 $ 8.3 $ (57.6) $ (83.4) $ (102.4) $ (89.2)
-------- -------- -------- -------- --------
Dividends on preferred stock.............. (11.1) (9.5)
-------- --------
Income (loss) from continuing operations
applicable to common stock(c)........... $ (13.1) $ (1.2)
======== ========
OTHER FINANCIAL DATA:
EBITDAEX(d)............................... $ 102.7 $ 135.2 $ 228.6 $ 183.4 $ 160.3 $ 142.4 $ 178.1
Cash flows from operating activities...... 87.8 78.6 101.3 69.2 48.6 32.5 (28.4)
Cash flows from investing activities...... (371.7) (19.8) (45.0) (41.4) (40.3) 37.5 (17.0)
Cash flows from financing activities...... 288.0 (33.6) (188.7) (22.1) (3.6) (88.5) (29.5)
Capital expenditures...................... 372.0 19.7 50.2 42.3 32.6 29.6 69.2
Ratio of earnings to fixed charges(e)..... (e) 1.1 (e) (e) (e) (e) (e)
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................... $ 11.9 $ 18.4 $ 14.8 $ 43.8 $ 115.7 $ 76.2 $ 102.9
Property, plant and equipment, net........ 1,351.7 1,048.7 1,046.4 1,104.8 1,130.4 1,191.8 1,280.3
Total assets.............................. 1,505.5 1,413.5 1,213.9 1,486.8 1,484.0 1,533.4 1,676.5
Long-term debt, including current
maturities.............................. 1,108.3 1,201.7 808.1 1,236.7 1,223.3 1,241.3 1,286.2
Stockholders' equity...................... 263.5 73.7 265.5 67.0 124.6 112.1 184.4
</TABLE>
- ---------------
(a) Net interest expense represents total interest expense less interest income.
(b) See "Business of Pioneer -- Management's Discussion and Analysis of
Financial Condition and Results of Operations of Mesa -- Results of
Operations -- Other Income (Expense)" in the definitive proxy statement for
the Chauvco Transaction incorporated in the Prospectus by reference.
(c) Loss from continuing operations excludes a $59.4 million extraordinary loss
on debt extinguishment for 1996. Net loss attributable to common stock was
$60.6 million for the year ended December 31, 1996. Net loss for the years
ended December 31, 1995, 1994, 1993 and 1992 and the six months ended June
30, 1997 and 1996 are the same as loss from continuing operations shown
above.
(d) EBITDAEX is presented because the Company believes it to be a commonly used
financial indicator of a company's ability to service or incur debt.
EBITDAEX (as used herein) is calculated by adding interest, income taxes,
depletion, depreciation and amortization, impairment of oil and gas
properties and exploration costs to loss from continuing operations
applicable to common stock. Interest includes accrued interest expense and
amortization of deferred financing costs. EBITDAEX 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 Mesa'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.
(e) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income (loss) before income taxes, extraordinary item and
cumulative effect of account change plus fixed charges net of interest
capitalized. Fixed charges consist of interest expense, interest capitalized
and the portion of rental expense attributable to interest. Earnings were
inadequate to cover fixed charges for the years ended December 31, 1996
through 1992, by $1.3 million, $58.5 million, $83.5 million, $105.3 million
and $91.6 million, respectively, and for the six months ended June 30, 1997,
by $24.2 million.
S-10
<PAGE> 11
CHAUVCO
The following table sets forth selected financial information of Chauvco
for the nine months ended September 30, 1997 and 1996, and for the five fiscal
years in the period ended December 31, 1996. The following data should be read
in conjunction with Chauvco's "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Chauvco's consolidated financial
statements and notes thereto contained in the reports incorporated in the
Prospectus by reference.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1997(A) 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Canadian GAAP
Revenue.............................. C$159,902 C$131,438 C$178,543 C$170,314 C$164,381 C$136,794 C$121,906
Net income........................... 29,879 25,931 34,131 25,425 29,052 28,220 22,726
U.S. GAAP
Revenue.............................. C$159,902 C$131,438 C$178,543 C$170,314 C$164,381 (a) (a)
Net income........................... 32,988 29,437 41,276 33,337 24,562 (a) (a)
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
SEPTEMBER 30, -------------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Canadian GAAP
Working capital (deficiency)....... C$(34,837) C$ (7,441) C$ 7,477 C$ (749) C$(11,872) C$ 631
Total assets....................... 888,454 637,436 590,490 564,652 384,603 332,052
Long-term debt..................... 288,433 127,207 139,087 180,715 51,405 50,303
Shareholders' equity............... 431,194 397,751 362,892 281,442 250,277 219,958
U.S. GAAP
Working capital.................... C$(34,837) C$ (7,441) C$ 7,477 (a) (a) (a)
Total assets....................... 842,022 585,453 526,601 (a) (a) (a)
Long-term debt..................... 288,433 127,207 139,087 (a) (a) (a)
Shareholders' equity............... 405,670 369,118 327,114 (a) (a) (a)
</TABLE>
- ---------------
(a) U.S. GAAP information for these periods is not available.
S-11
<PAGE> 12
SUMMARY HISTORICAL AND PRO FORMA OPERATING DATA
The following table sets forth summary historical and pro forma operating
data of the Company for the periods indicated. The summary pro forma operating
data give effect to the Parker/Mesa Merger, the Chauvco Acquisition, and certain
other transactions as if all those transactions had occurred on January 1, 1996.
The following data should be read in conjunction with the Company's
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and notes
thereto contained in the reports incorporated in the Prospectus by reference.
The historical operating data for the nine months ended September 30, 1997 and
1996, and the pro forma financial data are unaudited.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------------------
PRO FORMA PRO FORMA
1997 1997 1996 1996 1996 1995 1994
--------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PRODUCTION:
Oil (MBbls)............................... 16,366 9,425 8,297 19,550 11,275 12,902 12,147
Gas (MMcf)................................ 142,367 71,284 56,825 190,049 75,851 85,295 79,674
Natural gas liquids (MBbls)............... 4,864 1,151 -- 6,460 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total (MBOE)........................ 44,958 22,457 17,768 57,685 23,916 27,118 25,426
-------- -------- -------- -------- -------- -------- --------
AVERAGE DAILY PRODUCTION:
Oil (Bbls)................................ 59,949 34,525 30,282 53,415 30,805 35,348 33,279
Gas (Mcf)................................. 521,492 261,113 207,392 519,259 207,244 233,685 218,285
Natural gas liquids (Bbls)................ 17,818 4,214 -- 17,650 -- -- --
PRICES:
Average oil price (Bbls).................. $ 18.04 $ 18.70 $ 19.62 $ 19.67 $ 19.96 $ 16.96 $ 15.40
Average gas price (per Mcf)............... $ 2.11 $ 2.21 $ 2.12 $ 2.11 $ 2.27 $ 1.84 $ 1.89
Average NGL price (per Bbl)............... $ 14.87 $ 12.89 -- $ 14.93 -- -- --
Production costs per BOE.................... $ 4.04 $ 4.08 $ 4.63 $ 3.80 $ 4.61 $ 4.83 $ 5.00
Depletion................................... $ 6.31 $ 5.40 $ 4.45 $ 6.34 $ 4.30 $ 5.36 $ 5.18
</TABLE>
SUMMARY PRO FORMA RESERVE DATA
The following table sets forth pro forma information regarding changes in
the net quantities of oil and natural gas reserves of the Company for the year
ended December 31, 1996. The pro forma information gives effect to the
Parker/Mesa Merger, the Chauvco Acquisition, and certain other transactions as
if all those transactions had occurred on January 1, 1996. The following data
are qualified in their entirety by, and should be read in conjunction with, the
Company's unaudited pro forma combined financial statements and notes thereto
contained in the Chauvco 8-K which is incorporated in the Prospectus by
reference.
<TABLE>
<CAPTION>
MBBLS
-------------------------------------------
USA ARGENTINA CANADA TOTAL MBOE(A)
--------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
OIL, NATURAL GAS LIQUIDS AND CONDENSATE:
Balance, January 1, 1996.................................. 267,108 15,933 21,895 304,936 304,936
Revisions of previous estimates......................... 31,475 (722) 249 31,002 31,002
Purchase of mineral-in-place............................ 300 -- -- 300 300
New discoveries and extensions.......................... 2,794 1,608 650 5,052 5,052
Production.............................................. (20,497) (1,183) (4,330) (26,010) (26,010)
--------- ------- ------- --------- -------
Balance, December 31, 1996................................ 281,180 15,636 18,464 315,280 315,280
========= ======= ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
MMCF
-------------------------------------------
USA ARGENTINA CANADA TOTAL MBOE(A)
--------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
GAS:
Balance, January 1, 1996.................................. 1,984,726 322,000 136,264 2,442,990 407,165
Revisions of previous estimates......................... 42,246 (10,860) (5,180) 26,206 4,368
Purchase of mineral-in-place............................ 11,494 -- -- 11,494 1,916
New discoveries and extensions.......................... 30,151 4,588 3,320 38,059 6,343
Production.............................................. (160,729) (16,820) (12,500) (190,049) (31,675)
--------- ------- ------- --------- -------
Balance, December 31, 1996................................ 1,907,888 298,908 121,904 2,328,700 388,117
========= ======= ======= ========= =======
TOTAL MBOE, December 31, 1996(a)............................ 703,397
=======
</TABLE>
- ---------------
(a) Equivalent oil reserves are based on six Mcf of gas per barrel of oil.
S-12
<PAGE> 13
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be approximately $593 million after deduction of estimated expenses and
underwriting discount. The Company will use the net proceeds to repay existing
bank indebtedness outstanding under (i) its two Amended and Restated Credit
Facility Agreements each dated as of December 18, 1997 (the "United States
Credit Facility"), among the Company, as Borrower, and NationsBank of Texas,
N.A., as Administrative Agent, CIBC Inc., as Documentation Agent, Morgan
Guaranty Trust Company of New York, as Documentation Agent, The Chase Manhattan
Bank, as Syndication Agent, the co-agents signatory thereto and the other
lenders signatory thereto, and (ii) its $100 million note (the "Term Note"),
dated as of December 22, 1997, payable to NationsBank of Texas, N.A. The Company
must pay the amount outstanding, if any, under the Term Note before it may repay
existing bank indebtedness outstanding under the United States Credit Facility.
The United States Credit Facility consists of two credit facility
agreements. The primary facility provides for a $1.075 billion revolving line of
credit with a maturity date of August 7, 2002. The additional facility provides
for a $300 million line of credit with a maturity date of August 5, 1998.
Advances on the United States Credit Facility bear interest, at the borrower's
option, based on (a) the prime rate of NationsBank of Texas, N.A., (b) a
Eurodollar rate (substantially equal to LIBOR), adjusted for the reserve
requirement as determined by the Board of Governors of the Federal Reserve
System with respect to transactions in Eurocurrency liabilities ("LIBOR Rate"),
or (c) a competitive bid rate as quoted by the lenders electing to participate
following the borrower's request. Advances that bear a LIBOR Rate have periodic
maturities, at the borrower's option, of one, two, three, six, nine or twelve
months. Advances that bear competitive bid rates have periodic maturities, at
the borrower's option, of not less than 15 days nor more than 360 days. The
interest rates on LIBOR Rate advances vary with interest rate margins ranging
from 18 basis points to 45 basis points. The interest rate margin is determined
by a grid based upon the long-term public debt rating of the Company's senior
unsecured indebtedness. The Company's obligations are guaranteed by Pioneer USA
and certain other U.S. subsidiaries, and are secured by a pledge of 65% of the
capital stock of certain non-U.S. subsidiaries (including Pioneer Canada). As of
December 31, 1997, the Company had $1.344 billion outstanding under the United
States Credit Facility with an effective interest rate for borrowings of 6.24%
per annum, after giving effect to interest rate swaps. The United States Credit
Facility has been used to refinance the debt of Parker & Parsley and Mesa, to
fund the offer to purchase the Mesa Notes, to fund the acquisition of assets
from ACI and Rockland, and for other general corporate purposes. The Term Note
has a maturity date of April 1, 1999, and bears interest at the borrower's
option at the rates set forth in clauses (a) and (b) of this paragraph. At
December 31, 1997, the Company had $30 million outstanding under the Term Note
with an interest rate of 8.5% per annum. The Term Note has been used to finance
working capital.
NationsBank of Texas, N.A., is an affiliate of NationsBanc Montgomery
Securities LLC, Morgan Guaranty Trust Company of New York is an affiliate of
J.P. Morgan Securities Inc., and The Chase Manhattan Bank is an affiliate of
Chase Securities Inc. Each of these firms will receive 8.64% of the repayment of
borrowings outstanding under the United States Credit Facility from the net
proceeds of the Offering, and NationsBank of Texas, N.A., will receive 100% of
repayment of borrowings under the Term Note. See "Underwriting."
S-13
<PAGE> 14
CAPITALIZATION
The following table sets forth the current maturities of long-term debt and
the capitalization of the Company as of September 30, 1997, (i) on a historical
basis, (ii) on a pro forma basis to give effect to the Chauvco Acquisition, as
though it had occurred on that date, and (iii) on a pro forma basis as adjusted
to reflect the closing of the offer to purchase the Mesa Notes, the Offering,
and the application of the estimated net proceeds from the Offering. This table
should be read in conjunction with the Company's consolidated financial
statements and notes thereto and the Company's unaudited pro forma combined
financial statements and notes thereto contained in the reports incorporated in
the Prospectus by reference.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------
PRO PRO FORMA
HISTORICAL FORMA(A) AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt.................... $ 11,116 $ 16,088 $ 16,088
========== ========== ==========
Long term debt:
United States Credit Facility......................... $ 713,000 $ 743,000 $ 733,167
Canadian Credit Facility.............................. -- 223,227 223,227
2008 Notes (net of discount).......................... -- -- 348,299
2028 Notes (net of discount).......................... -- -- 249,908
8 7/8% senior notes due 2005.......................... 150,000 150,000 150,000
8 1/4% senior notes due 2007 (net of discount)........ 149,328 149,328 149,328
10 5/8% senior subordinated notes due 2006............ 369,572 369,571 7,776
11 5/8% senior subordinated discount notes due 2006... 209,481 209,481 17,884
Fixed rate building loan.............................. 9,336 9,336 9,336
Other................................................. 428 428 428
---------- ---------- ----------
Total long-term debt, excluding current
maturities.................................. 1,601,145 1,854,371 1,889,352
---------- ---------- ----------
Stockholders' equity:
Common stock.......................................... 745 994 994
Additional paid-in capital............................ 1,626,487 2,314,571 2,314,571
Unearned compensation................................. (17,316) (17,316) (17,316)
Retained earnings..................................... 108,191 108,191 96,314
---------- ---------- ----------
Total stockholders' equity.................... 1,718,107 2,406,440 2,394,563
---------- ---------- ----------
Total capitalization.......................... $3,319,252 $4,260,811 $4,283,915
========== ========== ==========
</TABLE>
- ---------------
(a) Does not give effect to (i) the acquisition of assets from ACI and Rockland,
or (ii) the divestiture of $104 million in non-strategic properties. See
"Summary -- The Company -- Recent Developments."
DESCRIPTION OF NOTES
GENERAL
The 2008 Notes and the 2028 Notes are separate series of Debt Securities
described in the accompanying Prospectus. The Notes are to be issued and
governed by an Indenture, to be dated as of January 13, 1998 (the "Indenture"),
between the Company and The Bank of New York, as Trustee (the "Trustee"),
substantially identical to the form of Indenture described in the accompanying
Prospectus.
The following is a summary of certain provisions of the Notes and the
Indenture, a form of which is an exhibit to the registration statement relating
hereto. The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939.
S-14
<PAGE> 15
2008 NOTES
The 2008 Notes will be unsecured senior obligations of the Company, limited
to $350 million aggregate principal amount, and will mature on January 15, 2008.
The 2008 Notes will bear interest at the rate per annum shown on the cover page
hereof from January 13, 1998, or from the most recent date to which interest has
been paid or provided for, payable semiannually to holders of record at the
close of business on the January 1 and July 1 immediately preceding the interest
payment date on January 15 and July 15 of each year, commencing July 15, 1998.
The Company will pay interest on overdue principal at 1% per annum in excess of
such rate, and it will pay interest on overdue installments of interest at such
higher rate to the extent lawful. Interest will be paid on the basis of a
360-day year comprised of twelve 30-day months.
2028 NOTES
The 2028 Notes will be unsecured senior obligations of the Company, limited
to $250 million aggregate principal amount, and will mature on January 15, 2028.
The 2028 Notes will bear interest at the rate per annum shown on the cover page
hereof from January 13, 1998, or from the most recent date to which interest has
been paid or provided for, payable semiannually to holders of record at the
close of business on the January 1 and July 1 immediately preceding the interest
payment date on January 15 and July 15 of each year, commencing July 15, 1998.
The Company will pay interest on overdue principal at 1% per annum in excess of
such rate, and it will pay interest on overdue installments of interest at such
higher rate to the extent lawful. Interest will be paid on the basis of a
360-day year comprised of twelve 30-day months.
GUARANTEES
The obligations of the Company under the Indenture will be unconditionally
guaranteed on an unsecured basis by Pioneer USA. The Guarantees will terminate
if the Guarantor is released from its guarantees of the Company's United States
Credit Facility. The Guarantees are not required to be reinstated if the
Guarantor's guarantees of the United States Credit Facility are subsequently
reinstated or if the Guarantor guarantees or incurs other debt. Subject to the
foregoing, the Guarantor may not consolidate or merge with or into any person,
or sell all or substantially all its assets, unless either (i) the Guarantor
shall be the continuing person in the case of merger, or (ii) the resulting,
surviving or transferee person, if other than the Guarantor, shall be a
corporation organized and existing under the laws of the United States, any
State, or the District of Columbia and shall expressly assume all of the
obligations of the Guarantor under the Guarantees. Violation of the preceding
covenant will constitute an Event of Default with respect to the Notes.
Pioneer USA is a direct, wholly-owned subsidiary of the Company and owns
substantially all of the United States onshore and offshore properties of the
Company. Pioneer USA has no borrowed money obligations other than for a $9.1
million secured building loan and certain capitalized lease obligations and has
no guarantees of other borrowed money obligations except as guarantor of the
Notes, the United States Credit Facility, and the Parker & Parsley Notes.
Although Holders of the Notes will be direct creditors of the Guarantor by
virtue of the Guarantees, existing or future creditors of the Guarantor, a
trustee in bankruptcy, or the Guarantor as debtor-in-possession could avoid or
subordinate the Guarantees under fraudulent conveyance laws if it were
successful in establishing that (i) the Guarantees were incurred with intent to
hinder, delay or defraud any present or future creditor, or (ii) the Guarantor
did not receive fair consideration or reasonably equivalent value for issuing
the Guarantees and that it (a) was insolvent at the time of the issuance, (b)
was rendered insolvent by reason of the issuance, (c) was engaged in a business
or transaction for which its assets constituted unreasonably small capital to
carry on its business, or (d) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured. Among other
things, a legal challenge of the Guarantees on fraudulent conveyance grounds may
focus on the benefits, if any, realized by the Guarantor as a result of the
issuance by the Company of the Notes. To the extent the Guarantees were avoided
as fraudulent conveyances or held unenforceable for any other reason, the
Holders of the Notes would cease to have any claim in respect of the Guarantor,
would be creditors solely of the Company, and may be required to return all
amounts received pursuant to the avoided Guarantees.
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The measure of insolvency for purposes of the foregoing will vary depending
upon the law of the jurisdiction that is being applied. Generally, however, a
company would be considered insolvent if the sum of its debts is greater than
all of its property at a fair valuation, or if the present fair saleable value
of its assets is less than the amount that will be required to pay its probable
liability on its existing debts as they become absolute and matured.
No other direct or indirect subsidiary of the Company will be a guarantor
of the Notes.
RANKING
The Notes will be general unsecured obligations of the Company ranking pari
passu in right of payment with all other senior unsecured indebtedness of the
Company and will be senior in right of payment to all existing and future
subordinated indebtedness of the Company. At December 31, 1997, after giving
effect to the Offering and the application of estimated net proceeds therefrom,
the Company would have had approximately $1.1 billion of indebtedness for
borrowed money ranking pari passu in right of payment with the Notes. The Notes
will be effectively subordinated in right of payment to all existing and future
secured indebtedness of the Company to the extent of the value of the assets
securing such indebtedness. The Company's $1.375 billion United States Credit
Facility is secured by a pledge of 65% of the outstanding stock of certain of
the Company's non-U.S. subsidiaries, including Pioneer Canada (the "Pledged
Stock"). Accordingly, the Notes will be effectively subordinated to any
indebtedness under the United States Credit Facility to the extent of the value
of the Pledged Stock. If an event of default occurs under the United States
Credit Facility, the lenders under the United States Credit Facility may
foreclose upon the Pledged Stock to the exclusion of the Holders of the Notes,
notwithstanding the existence of any event of default under the Indenture. In
that event, the Pledged Stock would first be used to repay in full amounts
outstanding under the United States Credit Facility, resulting in the Pledged
Stock being unavailable to satisfy the claims of Holders of the Notes and other
unsecured indebtedness.
The Company is a holding company that conducts all its operations through
subsidiaries, and the Notes will be effectively subordinated to all obligations
of the Company's subsidiaries that are not guarantors of the Notes, including
the claims of the lenders against guarantors of the United States Credit
Facility and the claims of the lenders against Chauvco and guarantors under the
Canadian Credit Facility. At December 31, 1997, after giving effect to the
Offering and the application of the estimated net proceeds therefrom, the
Company's subsidiaries that are not guarantors of the Notes, including Pioneer
Canada and Chauvco, would have had approximately $248.3 million of indebtedness
for borrowed money (excluding guarantees by some of those subsidiaries with
respect to the $1.375 billion United Stated Credit Facility). If Pioneer USA's
guarantees of the United States Credit Facility are terminated, the Guarantees
will also terminate. The Indenture does not require the Guarantees to be
reinstated if Pioneer USA's guarantees of the United States Credit Facility are
subsequently reinstated or if Pioneer USA guarantees or incurs other debt. If
Pioneer USA's guarantees of the United States Credit Facility are subsequently
reinstated or if Pioneer USA subsequently guarantees or incurs other debt, the
Notes would be effectively subordinated to the United States Credit Facility or
such debt or guarantees to the extent of the value of such debt or guarantees of
Pioneer USA unless Pioneer USA voluntarily provides a new guarantee of the
Notes. The United States Credit Facility is also guaranteed by certain other
subsidiaries of the Company that are not guaranteeing the Notes, and the Notes
will be effectively subordinated to the United States Credit Facility to the
extent of the value of such guarantees. The Indenture does not restrict the
ability of any subsidiaries to incur additional liabilities, including
indebtedness under and guarantees of bank credit facilities, in the future. The
Company's subsidiaries may also have other liabilities, including contingent
liabilities, which could be substantial.
Substantially all of the Company's operating income and cash flow is
generated by its subsidiaries. As a result, funds necessary to meet the
Company's debt service obligations are provided in part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of the Company's subsidiaries, could limit the Company's ability to
obtain cash from its subsidiaries for the purpose of meeting its debt service
obligations, including the payment of principal and interest on the Notes.
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The Guarantees will be general unsecured obligations of the Guarantor
ranking pari passu in right of payment with all other senior unsecured
indebtedness of the Guarantor and will be senior in right of payment to any
subordinated indebtedness of the Guarantor. The Guarantor has guaranteed the
United States Credit Facility and the Parker & Parsley Notes, which guarantees
will be pari passu with the Guarantees. The Guarantees will be effectively
subordinated in right of payment to any secured indebtedness of the Guarantor to
the extent of the value of the assets securing such indebtedness. The Guarantees
could also be effectively subordinated to all the obligations of the Guarantor
under certain circumstances. See "Description of Notes -- Guarantees."
OPTIONAL REDEMPTION
The Notes of each series will be redeemable at any time, at the option of
the Company, in whole or from time to time in part, upon not less than 30 and
not more than 60 days' notice as provided in the Indenture, on any date prior to
their respective maturity (the "Redemption Date") at a price equal to 100% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on an interest payment date that is on or
prior to the Redemption Date) plus a Make-Whole Premium, if any (the "Redemption
Price"). In no event will a Redemption Price ever be less than 100% of the
principal amount of the relevant Notes plus accrued and unpaid interest, if any,
to the Redemption Date.
The amount of the Make-Whole Premium with respect to any Note (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 Note (or portion thereof) being redeemed on
each interest payment date occurring 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 Note (or portion
thereof) being redeemed; over
(ii) the principal amount of the Note (or portion thereof) being
redeemed.
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) plus 20 basis
points in the case of the 2008 Notes and the Treasury Yield plus 25 basis points
in the case of the 2028 Notes.
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 45 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 Brothers Inc
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 applicable Notes, calculated to the
nearest 1/12th 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)
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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 1/100th of 1%, with
any figure of 1/200th 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.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
BOOK-ENTRY, DELIVERY AND FORM
Except as described below, the Notes sold will initially be issued in the
form of two or more global notes (the "Global Notes"). The Global Notes will be
deposited with, or on behalf of, The Depository Trust Company (the "Depositary")
and registered in the name of the Depositary or its nominee. Except as set forth
below, the Global Notes may be transferred, in whole and not in part, only to
the Depositary or another nominee of the Depositary. Investors may hold their
beneficial interests in the Global Notes directly through the Depositary if they
have an account with the Depositary or indirectly through organizations which
have accounts with the Depositary.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, including the
Underwriters, banks, trust companies, clearing corporations and certain other
organizations, some of which (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance by the Company of Notes represented by the Global Notes,
the Depositary or its nominee will credit, on its book-entry registration and
transfer system, the principal amount of the Notes represented by such Global
Notes to the accounts of participants. The accounts to be credited shall be
designated by the Underwriters. Ownership of beneficial interests in the Notes
represented by Global Notes will be limited to participants or persons that hold
interests through participants. Ownership of such beneficial interests in Notes
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary (with respect to participants'
interest) and such participants (with respect to the owners of beneficial
interests in the Global Notes other than participants). The laws of some
jurisdictions may
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require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may impair the ability to transfer or
pledge beneficial interests in Notes represented by Global Notes.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Notes, the Depositary or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Notes will not be entitled to have the Notes
represented by the Global Notes registered in their names, will not receive or
be entitled to receive physical delivery or certificated Notes in definitive
form and will not be considered to be the owners or holders of any Notes under
the Indenture. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Notes desires to take
any action that the Depositary, as the holder of the Global Notes, is entitled
to take, the Depositary would authorize the participants to take such action,
and that the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Payment of principal of and interest on Notes represented by Global Notes
registered in the name of and held by the Depositary or its nominee will be made
by the Company through the Paying Agent (as defined in the Indenture) to the
Depositary or its nominee, as the case may be, as the registered owner and
Holder of such Global Notes.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Notes represented by Global Notes,
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial interests in the principal amount of the Global
Notes as shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Notes represented by Global Notes held through such participants will be
governed by standing instructions and customary practices and will be the
responsibility of such participants. The Company will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on amount of, beneficial ownership interests in the Notes
represented by Global Notes or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests or for any other aspect
of the relationship between the Depositary and its participants or the
relationship between such participants and the owners of beneficial interests in
the Notes represented by Global Notes owned through such participants.
Unless and until they are exchanged in whole or in part for certificated
Notes in definitive form, the Global Notes may not be transferred except as a
whole by the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Notes represented by Global Notes among
participants of the Depositary, it is under no obligation to perform or continue
to perform such procedures, and such procedures may be discontinued at any time.
Neither the Trustee nor the Company will have any responsibility for the
performance by the Depositary or its participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
The Notes represented by the Global Notes are exchangeable for certificated
Notes in definitive form of like tenor as such Notes in denominations of U.S.
$1,000 and integral multiples thereof if (i) the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the Global Notes or
if at any time the Depositary ceases to be a clearing agency registered under
the Exchange Act and a successor Depositary is not appointed by the Company
within 90 days, (ii) the Company in its discretion at any time determines not to
have all of the Notes represented by the Global Notes, (iii) an Event of Default
has occurred and is continuing, or (iv) upon the occurrence of certain other
events. Any Note that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated Notes issuable in authorized denominations and
registered in such names as the Depositary shall direct. Subject to the
foregoing, the Global Notes
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are not exchangeable, except for a Global Note of the same aggregate
denomination to be registered in the name of the Depositary or its nominee.
SAME-DAY PAYMENT
The Indenture will require that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address.
CERTAIN COVENANTS
The Indenture will not limit the amount of indebtedness or other
obligations that may be incurred by the Company and its subsidiaries and will
not contain provisions that would give holders of the Notes the right to require
the Company to repurchase their Notes in the event of a decline in the credit
rating of the Company's debt securities or upon a change of control of the
Company. The Indenture will contain covenants including, among others, the
following:
Limitation on Liens. The Company will not, and will not permit any of
its Subsidiaries to, create or permit to exist any Liens upon any Principal
Property or any shares of stock or Indebtedness of any Subsidiary that owns
or leases any Principal Property (whether such Principal Property, shares
of stock or indebtedness are now owned or hereafter acquired) unless all
payments due under the Indenture with respect to the Notes are secured on
an equal and ratable basis with the obligations so secured until such time
as such obligations are no longer secured by a Lien. The preceding sentence
will not require the Company to secure the Notes if the Liens consist of
either (a) Permitted Liens or (b) Liens securing excepted indebtedness as
described below.
Limitation on Sale and Leaseback Transactions. Neither the Company nor
any Subsidiary will enter into any Sale and Leaseback Transaction with
respect to any Principal Property unless either (a) the Company or such
Subsidiary would be entitled, pursuant to the provisions of the Indenture,
to incur Indebtedness secured by a Lien on the property to be leased
without equally and ratably securing the Notes pursuant to the covenant
described above in "Limitation on Liens," or (b) the Company, within six
months after the effective date of such transaction, applies to the
voluntary defeasance or retirement of its funded debt an amount equal to
the Attributable Indebtedness of such transaction.
Excepted Indebtedness. Notwithstanding the foregoing limitations on
Liens and Sale and Leaseback Transactions, the Company and its Subsidiaries
may issue, assume, or guarantee Indebtedness secured by a Lien without
securing the Notes, or may enter into Sale and Leaseback Transactions
without defeasing or retiring funded debt, or enter into a combination of
such transactions, if the sum of the principal amount of all such
Indebtedness and the Attributable Indebtedness of all such Sale and
Leaseback Transactions does not at any time exceed 15% of Adjusted
Consolidated Net Tangible Assets.
The covenants described above will be subject to defeasance by the Company
under certain circumstances. See "Description of Debt Securities -- Satisfaction
and Discharge of the Indenture; Defeasance" in the Prospectus.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Company may have banking relationships in the ordinary course of business
with The Bank of New York.
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CERTAIN DEFINITIONS
"Adjusted Consolidated Net Tangible Assets" means (without duplication), as
of the date of determination, the remainder of:
(a) the sum of (i) discounted future net revenues from proved oil and
gas reserves of the Company and its Subsidiaries calculated in accordance
with SEC guidelines before any provincial, territorial, state, Federal or
foreign income taxes, as estimated by the Company in a reserve report
prepared as of the end of the Company's most recently completed fiscal year
for which audited financial statements are available, as increased by, as
of the date of determination, the estimated discounted future net revenues
from (A) estimated proved oil and gas reserves acquired since such year
end, which reserves were not reflected in such year end reserve report, and
(B) estimated oil and gas reserves attributable to upward revisions of
estimates of proved oil and gas reserves since such year end due to
exploration, development or exploitation activities, in each case
calculated in accordance with SEC guidelines (utilizing the prices utilized
in such year end reserve report), and decreased by, as of the date of
determination, the estimated discounted future net revenues from (C)
estimated proved oil and gas reserves produced or disposed of since such
year end, and (D) estimated oil and gas reserves attributable to downward
revisions of estimates of proved oil and gas reserves since such year end
due to changes in geological conditions or other factors which would, in
accordance with standard industry practice, cause such revisions, in each
case calculated on a pre-tax basis and substantially in accordance with SEC
guidelines (utilizing the prices utilized in such year end reserve report),
in each case as estimated by the Company's petroleum engineers or any
independent petroleum engineers engaged by the Company for that purpose;
(ii) the capitalized costs that are attributable to oil and gas properties
of the Company and its Subsidiaries to which no proved oil and gas reserves
are attributable, based on the Company's books and records as of a date no
earlier than the date of the Company's latest available annual or quarterly
financial statements, (iii) the Net Working Capital on a date no earlier
than the date of the Company's latest annual or quarterly financial
statements, and (iv) the greater of (A) the net book value on a date no
earlier than the date of the Company's latest annual or quarterly financial
statement, and (B) the appraised value, as estimated by independent
appraisers, of other tangible assets of the Company and its Subsidiaries,
as of a date no earlier than the date of the Company's latest audited
financial statements; minus
(b) the sum of (i) Minority Interests; (ii) any net gas balancing
liabilities of the Company and its Subsidiaries reflected in the Company's
latest audited financial statements; (iii) to the extent included in (a)(i)
above, the discounted future net revenues, calculated in accordance with
SEC guidelines (utilizing the prices utilized in the Company's year end
reserve report), attributable to reserves which are required to be
delivered to third parties to fully satisfy the obligations of the Company
and its Subsidiaries with respect to Volumetric Production Payments
(determined, if applicable, using the schedules specified with respect
thereto); and (iv) the discounted future net revenues, calculated in
accordance with SEC guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments which, based on the estimates of
production and price assumptions included in determining the discounted
future net revenues specified (a)(i) above, would be necessary to fully
satisfy the payment obligations of the Company and its Subsidiaries with
respect to Dollar-Denominated Production Payments (determined, if
applicable, using the schedules specified with respect thereto).
If the Company changes its method of accounting from the successful efforts
method to the full cost or a similar method of accounting, "Adjusted
Consolidated Net Tangible Assets" will continue to be calculated as if the
Company were still using the successful efforts method of accounting.
"Attributable Indebtedness" with respect to a Sale and Leaseback
Transaction means, as of the time of determination, (i) if the obligation with
respect to such Sale and Leaseback Transaction is a Capitalized Lease
Obligation, the amount equal to the capitalized amount of such obligation
determined in accordance with GAAP and included in the financial statements of
the lessee or (ii) if the obligation with respect to such Sale and Leaseback
Transaction is not a Capitalized Lease Obligation, the amount equal to the total
Net Amount of Rent required to be paid by the lessee under such lease during the
remaining term thereof (including any period for which the lease has been
extended), discounted from the respective due dates
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thereof to such determination date at the rate per annum borne by the applicable
series of Notes compounded semiannually.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Price Protection Agreement" means, in respect of any Person, any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.
"Consolidated Net Worth" of any Person means the stockholders' equity of
such Person and its Subsidiaries, as determined on a consolidated basis in
accordance with GAAP, less (to the extent included in stockholders' equity)
amounts attributable to Redeemable Stock of such Person or its Subsidiaries.
"Currency Exchange Protection Agreement" means, in respect of any Person,
any foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Government Contract Lien" means any Lien required by any contract,
statute, regulation or order in order to permit the Company or any of its
Subsidiaries to perform any contract or subcontract made by it with or at the
request of the United States or any State thereof or any department, agency or
instrumentality of either or to secure partial, progress, advance or other
payments by the Company or any of its Subsidiaries to the United States or any
State thereof or any department, agency or instrumentality of either pursuant to
the provisions of any contract, statute, regulation or order.
"Guarantor" means Pioneer Natural Resources USA, Inc. with respect to the
2008 Notes and the 2028 Notes.
"Hedging Obligation" of any Person means an obligation of such Person
pursuant to any Interest Rate Protection Agreement, Currency Exchange Protection
Agreement, Commodity Price Protection Agreement or other similar agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Indebtedness" means, with respect to any Person, at any date, any of the
following, without duplication: (i) any liability, contingent or otherwise, of
such Person (A) for borrowed money (whether or not the recourse of the lender is
to the whole of the assets of such Person or only to a portion thereof), (B)
evidenced by a note, bond, debenture or similar instrument, or (C) for the
payment of money relating to a Capitalized Lease Obligation or other obligation
(whether issued or assumed) relating to the deferred purchase price of property;
(ii) all conditional sale obligations and all obligations under any title
retention agreement (even if
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the rights and remedies of the seller under such agreement in the event of
default are limited to repossession or sale of such property); (iii) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction other than as entered into in
the ordinary course of business; (iv) all indebtedness of others secured by (or
for which the holder of such indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on any asset or property (including,
without limitation, leasehold interests and any other tangible or intangible
property) of such Person, whether or not such indebtedness is assumed by such
Person or is not otherwise such Person's legal liability; provided that if the
obligations so secured have not been assumed in full by such Person or are
otherwise not such Person's legal liability in full, the amount of such
indebtedness for the purposes of this definition shall be limited to the lesser
of the amount of such indebtedness secured by such Lien or the fair market value
of the assets or the property securing such lien; (v) all indebtedness of others
(including all interest and dividends on any Indebtedness or Preferred Stock of
any other Person the payment of which is) guaranteed, directly or indirectly, by
such Person or that is otherwise its legal liability or which such Person has
agreed to purchase or repurchase or in respect of which such Person has agreed
contingently to supply or advance funds; and (vi) to the extent not otherwise
included in this definition, obligations in respect of Hedging Obligations.
Indebtedness shall not include (a) accounts payable arising in the ordinary
course of business, and (b) any obligations in respect of prepayments for gas or
oil production or gas or oil imbalances.
"Interest Rate Protection Agreement" means, in respect of any Person, any
interest rate swap agreement, interest rate option agreement, interest rate cap
agreement, interest rate collar agreement, interest rate floor agreement or
other similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien,
charge or adverse claim affecting title or resulting in an encumbrance against
real or personal property or a security interest of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof or any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to the Company or any of
its Subsidiaries under a lease that is not in the nature of a conditional sale
or title retention agreement).
"Minority Interest" means the percentage interest represented by any shares
of stock of any class of a Subsidiary that are not owned by the Company or a
Subsidiary.
"Net Amount of Rent" as to any lease for any period means the aggregate
amount of rent payable by the lessee with respect to such period after excluding
amounts required to be paid on account of maintenance and repairs, insurance,
taxes, assessments, water rates and similar charges. In the case of any lease
that is terminable by the lessee upon the payment of a penalty, such net amount
shall also include the amount of such penalty, but no rent shall be considered
as payable under such lease subsequent to the first date upon which it may be so
terminated.
"Net Working Capital" means (a) all current assets of the Company and its
Subsidiaries, less (b) all current liabilities of the Company and its
Subsidiaries, except current liabilities included in Indebtedness, in each case
as set forth in consolidated financial statements of the Company prepared in
accordance with GAAP.
"Permitted Liens" means, with respect to any Person, (a) pledges or
deposits by such Person under worker's compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure performance, surety or appeal bonds to which such Person is a party or
which are otherwise required of such Person, or deposits as security for
contested taxes or import duties or for the payment of rent or other obligations
of like nature, in each case incurred in the ordinary course of business; (b)
Liens imposed by law, such as carriers', warehousemen's, laborers',
materialmen's, landlords', vendors', workmen's, operators', producers'
(including those arising pursuant to Article 9.319 of the
S-23
<PAGE> 24
Texas Uniform Commercial Code or other similar statutory provisions of other
states with respect to production purchased from others) and mechanics' Liens,
in each case for sums not yet due or being contested in good faith by
appropriate proceedings; (c) Liens for property taxes, assessments and other
governmental charges or levies not yet delinquent or subject to penalties for
nonpayment or which are being contested in good faith by appropriate
proceedings; (d) minor survey exceptions, minor encumbrances, easements or
reservations of or with respect to, or rights of others for or with respect to,
licenses, rights-of-way, sewers, electric and other utility lines and usages,
telegraph and telephone lines, pipelines, surface use, operation of equipment,
permits, servitudes and other similar matters or zoning or other restrictions as
to the use of real property or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of such properties or materially impair their use in
the operation of the business of such Person; (e) Liens existing on or provided
for under the terms of agreements existing on the date the Notes are issued
(including the United States Credit Facility and the Canadian Credit Facility);
(f) Liens on property or assets of, or any shares of stock of or secured debt
of, any Person at the time the Company or any of its Subsidiaries acquired the
property or the Person owning such property, including any acquisition by means
of a merger or consolidation with or into the Company or any of its
Subsidiaries; (g) Liens securing a Hedging Obligation so long as such Hedging
Obligation is of the type customarily entered into in connection with, and is
entered into for the purpose of, limiting risk; (h) Liens upon specific
properties of the Company or any of its Subsidiaries securing Indebtedness
incurred in the ordinary course of business to provide all or part of the funds
for the exploration, drilling or development of those properties; (i) Purchase
Money Liens; (j) Liens securing only Indebtedness of a wholly-owned Subsidiary
of the Company to the Company or to one or more wholly-owned Subsidiaries of the
Company; (k) Liens on any property to secure bonds for the construction,
installation or financing of pollution control or abatement facilities or other
forms of industrial revenue bond financing or Indebtedness issued or Guaranteed
by the United States, any state or any department, agency or instrumentality
thereof; (l) Government Contract Liens; (m) Liens in respect of Production
Payments and Reserve Sales; (n) Liens resulting from the deposit of funds or
evidences of Indebtedness in trust for the purpose of defeasing Indebtedness of
the Company or any of its Subsidiaries; (o) legal or equitable encumbrances
deemed to exist by reason of negative pledges or the existence of any litigation
or other legal proceeding and any related lis pendens filing (excluding any
attachment prior to judgment, judgment lien or attachment lien in aid of
execution on a judgment); (p) rights of a common owner of any interest in
property held by such Person; (q) farmout, carried working interest, joint
operating, unitization, royalty, overriding royalty, sales and similar
agreements relating to the exploration or development of, or production from,
oil and gas properties entered into in the ordinary course of business; (r) any
defects, irregularities or deficiencies in title to easements, rights-of-way or
other properties that do not in the aggregate materially adversely affect the
value of such properties or materially impair their use in the operation of the
business of such Person; and (s) Liens to secure any refinancing, refunding,
extension, renewal or replacement (or successive refinancings, refundings,
extensions, renewals or replacements), as a whole or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses (e)
through (m); provided, however, that (i) such new Lien shall be limited to all
or part of the same property that secured the original Lien, plus improvements
on such property, and (ii) the Indebtedness secured by such Lien at such time is
not increased to any amount greater than the sum of (A) the outstanding
principal amount or, if greater, committed amount of the Indebtedness described
under clauses (e) through (m) at the time the original Lien became a Permitted
Lien and (B) an amount necessary to pay any fees and expenses, including
premiums, related to such refinancing, refunding, extension, renewal or
replacement.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
S-24
<PAGE> 25
"Principal Property" means any property owned or leased by the Company or
any Subsidiary, the gross book value of which exceeds one percent of
Consolidated Net Worth.
"Production Payments and Reserve Sales" means the grant or transfer by the
Company or a Subsidiary of the Company to any Person of a royalty, overriding
royalty, net profits interest, production payment (whether volumetric or dollar
denominated), partnership or other interest in oil and gas properties, reserves
or the right to receive all or a portion of the production or the proceeds from
the sale of production attributable to such properties, including any such
grants or transfers pursuant to incentive compensation programs on terms that
are reasonably customary in the oil and gas business for geologists,
geophysicists and other providers of technical services to the Company or a
Subsidiary of the Company.
"Purchase Money Lien" means a Lien on property securing Indebtedness
incurred by the Company or any of its Subsidiaries to provide funds for all or
any portion of the cost of (i) acquiring such property incurred before, at the
time of, or within six months after the acquisition of such property or (ii)
constructing, developing, altering, expanding, improving or repairing such
property or assets used in connection with such property.
"Redeemable Stock" of any Person means any equity security of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable), or otherwise (including on the happening of an
event), is or could become required to be redeemed for cash or other property or
is or could become redeemable for cash or other property at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of the
stated maturity of the applicable series of Notes; or is or could become
exchangeable at the option of the holder thereof for Indebtedness at any time in
whole or in part, on or prior to the first anniversary of the stated maturity of
the applicable series of Notes; provided, however, that Redeemable Stock shall
not include any security that may be exchanged or converted at the option of the
holder for Capital Stock of the Company having no preference as to dividends or
liquidation over any other Capital Stock of the Company.
"Sale and Leaseback Transaction" means any arrangement with any Person
pursuant to which the Company or any Subsidiary leases any Principal Property
that has been or is to be sold or transferred by the Company or the Subsidiary
to such Person, other than (i) temporary leases for a term, including renewals
at the option of the lessee, of not more than five years, (ii) leases between
the Company and a Subsidiary or between Subsidiaries, (iii) leases of Principal
Property executed by the time of, or within 12 months after the latest of, the
acquisition, the completion of construction or improvement, or the commencement
of commercial operation of the Principal Property, and (iv) arrangements
pursuant to any provision of law with an effect similar to the former Section
168(f)(8) of the Internal Revenue Code of 1954.
"Subsidiary" of any Person means (i) any Person of which more than 50% of
the total voting power of shares of Capital Stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the Subsidiaries of that Person or a
combination thereof, and (ii) any partnership, joint venture or other Person in
which such Person or one or more of the Subsidiaries of that Person or a
combination thereof has the power to control by contract or otherwise the board
of directors or equivalent governing body or otherwise controls such entity.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Volumetric Production Payments" means production payment obligations
recorded as deferred revenue in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
S-25
<PAGE> 26
UNDERWRITING
The Company has entered into an Underwriting Agreement dated January 8,
1998 (the "Underwriting Agreement"), with Salomon Brothers Inc, Chase Securities
Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and
NationsBanc Montgomery Securities LLC (the "Underwriters"). Subject to the terms
and conditions set forth in the Underwriting Agreement, the Company has agreed
to sell to each of the Underwriters, and each of the Underwriters has severally
agreed to purchase from the Company, the aggregate principal amount of 2008
Notes and 2028 Notes set forth opposite its name below.
<TABLE>
<CAPTION>
2008 NOTES 2028 NOTES
PRINCIPAL PRINCIPAL
UNDERWRITER AMOUNT AMOUNT
----------- ------------ ------------
<S> <C> <C>
Salomon Brothers Inc........................................ $105,100,000 $ 75,500,000
Chase Securities Inc. ...................................... 105,100,000 75,500,000
J.P. Morgan Securities Inc.................................. 46,600,000 33,000,000
Morgan Stanley & Co. Incorporated........................... 46,600,000 33,000,000
NationsBanc Montgomery Securities LLC ...................... 46,600,000 33,000,000
------------ ------------
Total............................................. $350,000,000 $250,000,000
============ ============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes are subject to certain
conditions precedent.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933 (the "Securities Act"), and will contribute to payments
that the Underwriters may be required to make in respect thereof.
The Underwriters have advised the Company that they propose initially to
offer the Notes directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement and to certain dealers at such
price less a concession not in excess of 0.40% of the principal amount of the
2008 Notes and not in excess of 0.50% of the principal amount of the 2028 Notes.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of 0.25% of the principal amount of the 2008 Notes and not in excess of
0.25% of the 2028 Notes on sales to certain other dealers. After the initial
offering, the price to public and concessions to dealers may be changed.
The Notes are new issues of securities with no established trading market.
The Notes will not initially be listed for trading on any securities exchange or
other trading market, and the Company does not intend to make application for
the listing of the Notes. The Company has been advised by the Underwriters that
they currently intend to make a market in the Notes, as permitted by applicable
laws and regulations. The Underwriters are not obligated, however, to make a
market in the Notes, and any such market making may be discontinued at any time
as to any or all of the Notes at the sole discretion of the respective
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
the trading market for, the Notes.
Under Rule 2710(c)(8) of the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), if more than 10% of the net proceeds of a
public offering of debt securities are to be paid to members of the NASD that
are participating in the offering, or affiliated or associated persons, the
yield on the debt securities distributed to the public must be no lower than
that recommended by a "qualified independent underwriter," as defined in Rule
2720 of the Conduct Rules of the NASD. Because The Chase Manhattan Bank,
NationsBank of Texas, N.A., and Morgan Guaranty Trust Company of New York, agent
banks and lenders under the United States Credit Facility and affiliates of
Chase Securities Inc., NationsBanc Montgomery Securities LLC and J.P. Morgan
Securities Inc., respectively (each of which are Underwriters of the Offering),
will each receive 8.64% of the repayment of amounts outstanding under the United
States Credit Facility, and NationsBank of Texas, N.A., will receive 100% of the
repayment of amounts outstanding under the Term Note, in each case from the net
proceeds of the Offering, Salomon Brothers Inc, another Underwriter of the
Offering (the "Independent Underwriter"), will act as a qualified independent
underwriter in connection with the Offering. The Independent Underwriter in its
role as qualified independent underwriter
S-26
<PAGE> 27
has performed due diligence investigations and reviewed and participated in the
preparation of this Prospectus Supplement and the Registration Statement of
which this Prospectus Supplement and the Prospectus form a part. The Independent
Underwriter will not receive any additional fees for serving as a qualified
independent underwriter in connection with the Offering. The yield on the Notes
sold to the public will be no lower than that recommended by the Independent
Underwriter.
The Underwriters and certain of their affiliates and associates may be
customers of, have lending relationships with, engage in transactions with,
and/or perform services, including investment banking services, for the Company
and its affiliates in the ordinary course of business. In addition to the
lending relationships described above, Salomon Brothers Inc acted as financial
advisor to Chauvco in connection with the Chauvco Acquisition, for which Chauvco
has agreed to pay Salomon Brothers Inc a customary fee. The Chase Manhattan Bank
acts as Trustee under the indenture for the Parker & Parsley Notes, for which it
receives customary fees and indemnifications from the Company. The Company has a
contractual relationship with Phibro Energy, Inc., an affiliate of Salomon
Brothers Inc, pursuant to which Phibro Energy, Inc. purchases crude oil from the
Company and its affiliates.
In connection with the Offering, certain Underwriters and their affiliates
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the Notes. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M, pursuant to
which such persons may bid for or purchase Notes for the purpose of stabilizing
their market price. The Underwriters also may create a short position for the
account of the Underwriters by selling more Notes in connection with the
Offering than they are committed to purchase from the Company, and in such case
may purchase Notes in the open market following completion of the Offering to
cover such short position. Any of the transactions described in this paragraph
may result in the maintenance of the price of the Notes at a level above that
which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required, and, if they are undertaken, they may
be discontinued at any time.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any debt securities of the Company in an offering to the public (or
in a private offering where holders of the debt securities are granted rights to
have such debt securities registered under the Securities Act or to exchange
such debt securities for other debt securities that are so registered) from the
date of this Prospectus Supplement until the first business day after the
closing of the Offering without the prior consent of Salomon Brothers Inc.
S-27
<PAGE> 28
LEGAL OPINIONS
Certain legal matters in connection with the Notes offered hereby will be
passed upon for the Company by Vinson & Elkins L.L.P., Dallas, Texas. The
Underwriters are being represented by Cravath, Swaine & Moore, New York, New
York. Michael D. Wortley, a partner of Vinson & Elkins L.L.P., is also a
director of the Company and beneficially owns 6,623 shares of Common Stock of
the Company.
INDEPENDENT AUDITORS
The Consolidated Financial Statements of the Company (successor to Parker &
Parsley and subsidiaries) have been incorporated by reference in the Prospectus
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, and upon the authority of said firm as experts in accounting
and auditing. The report of KPMG Peat Marwick LLP refers to a change in the
method of accounting for the impairment of long-lived assets and for long-lived
assets to be disposed of in 1995 and a change in the method of accounting for
income taxes in 1993.
The Consolidated Financial Statements of Mesa incorporated by reference in
the Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in giving said report.
The Financial Statements of Greenhill Petroleum Corporation incorporated by
reference in the Prospectus have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The Consolidated Financial Statements of Chauvco incorporated by reference
in the Prospectus have been audited by Price Waterhouse, chartered accountants,
as indicated in their report with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said report.
RESERVE ENGINEERS
The estimates of the Company's proved reserves as of December 31, 1996,
incorporated by reference in the Prospectus, are based upon a reserve report
prepared by the Company and audited by Netherland, Sewell & Associates, Inc.,
independent petroleum consultants, and are incorporated by reference herein upon
the authority of such firm as experts with respect to such matters covered by
such report.
The estimates of Mesa's proved reserves as of December 31, 1996,
incorporated by reference in the Prospectus with respect to its Hugoton and West
Panhandle field properties, are based upon a reserve report prepared by
Williamson Petroleum Consultants, Inc., independent petroleum consultants, and
are incorporated by reference herein upon the authority of such firm as experts
with respect to such matters covered by such report. The estimates of Greenhill
Petroleum Corporation's proved reserves as of December 31, 1996, incorporated by
reference in the Prospectus, are based upon a reserve report prepared by Miller
and Lents, Ltd., independent petroleum consultants, and are incorporated by
reference herein upon the authority of such firm as experts with respect to such
matters covered by such report.
The estimates of Chauvco's proved reserves as of December 31, 1996,
incorporated by reference in the Prospectus, are based upon reserve reports
prepared by Gilbert Lausten Jung Associates, Ltd. and Martin Petroleum and
Associates, independent petroleum consultants, and are incorporated by reference
herein upon the authority of such firms as experts with respect to such matters
covered by such reports.
The Company anticipates that future estimates of its proved reserves will
be prepared by the Company's internal petroleum engineers and will not be
audited or reviewed by independent petroleum consultants.
S-28
<PAGE> 29
PROSPECTUS
PIONEER NATURAL RESOURCES COMPANY
PIONEER NATURAL RESOURCES USA, INC., AS GUARANTOR
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
GUARANTEES OF DEBT SECURITIES
LOGO
Pioneer Natural Resources Company (the "Company"), a Delaware corporation,
may offer from time to time (a) debt securities ("Debt Securities"), which may
be subordinated to other indebtedness of the Company, (b) warrants to purchase
Debt Securities ("Debt Warrants"), (c) shares of preferred stock, par value $.01
per share ("Preferred Stock"), (d) warrants to purchase shares of Preferred
Stock ("Preferred Stock Warrants"), (e) depositary shares representing
entitlement to all rights and preferences of a fraction of a share of Preferred
Stock of a specified series ("Depositary Shares"), (f) shares of common stock,
par value $.01 per share ("Common Stock"), and (g) warrants to purchase shares
of Common Stock ("Common Stock Warrants"), and Pioneer Natural Resources USA,
Inc. ("Pioneer USA"), a Delaware corporation and direct, wholly-owned subsidiary
of the Company, may offer from time to time guarantees of Debt Securities
("Guarantees"), all having an aggregate initial public offering price not to
exceed $1,400,000,000 or the equivalent thereof in one or more foreign
currencies, foreign currency units or composite currencies, including European
Currency Units. The Debt Warrants, Preferred Stock Warrants and Common Stock
Warrants are referred to herein collectively as "Warrants," and the Debt
Securities, Preferred Stock, Depositary Shares, Common Stock, Warrants and
Guarantees are referred to herein collectively as the "Offered Securities." The
Offered Securities may be offered, separately or as units with other Offered
Securities, in separate series in amounts, at prices and on terms to be
determined at or prior to the time of sale.
The specific terms of the Offered Securities with respect to which this
Prospectus is being delivered will be set forth in an accompanying supplement to
this Prospectus (a "Prospectus Supplement"), together with the terms of the
offering of the Offered Securities and the initial price and the net proceeds to
the Company or Pioneer USA from the sale thereof. The Prospectus Supplement will
include, with regard to the particular Offered Securities, the following
information: (a) in the case of Debt Securities, the specific designation,
aggregate principal amount, ranking, authorized denomination, maturity, rate or
method of calculation of interest and dates for payment thereof, any
exchangeability, conversion, redemption, prepayment, or sinking fund provisions,
the currency or currency unit in which principal, premium, or interest is
payable, the designation of the trustee acting under the applicable indenture,
and the initial offering price; (b) in the case of Preferred Stock, the
designation, number of shares, liquidation preference per share, initial public
offering price, dividend rate (or method of calculation thereof), dates on which
dividends shall be payable and dates from which dividends shall accrue, any
redemption or sinking fund provisions, any conversion or exchange rights, and
whether the Company has elected to offer the Preferred Stock in the form of
Depositary Shares; (c) in the case of Common Stock, the number of shares and the
terms of the offering and sale thereof; (d) in the case of Warrants, the number
and terms thereof, the designation and the number of securities issuable upon
exercise, the exercise price, the terms of the offering and sale thereof, and
where applicable, the duration and detachability thereof; (e) in the case of
Guarantees, the series of Debt Securities to which the Guarantees apply, whether
the Guarantees are secured or unsecured, conditional or unconditional, senior or
subordinate to other guarantees or indebtedness, and any other material terms;
and (f) in the case of all Offered Securities, whether the Offered Securities
will be offered separately or as a unit with other Offered Securities. The
Prospectus Supplement will also contain information, where applicable, about
material United States federal income tax considerations relating to, and any
listing on a securities exchange of, the Offered Securities covered by the
Prospectus Supplement.
The Company may sell the Offered Securities directly, through agents
designated from time to time, or through underwriters or dealers. If any agents,
underwriters or dealers are involved in the sale of the Offered Securities, the
names of the agents, underwriters or dealers and any applicable commissions or
discounts and the net proceeds to the Company from the sale will be set forth in
the applicable Prospectus Supplement.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF OFFERED SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
January 7, 1998
<PAGE> 30
CERTAIN PERSONS PARTICIPATING IN AN OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH OFFERED SECURITIES, AND THE IMPOSITION OF A PENALTY BID,
DURING AND AFTER AN OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN
OF DISTRIBUTION."
AVAILABLE INFORMATION
The Company and Pioneer USA are subject to the informational requirements
of the Securities Exchange Act of 1934 (the "Exchange Act"). Each of the Company
and Pioneer USA files reports and other information, and the Company files proxy
statements, with the Securities and Exchange Commission (the "SEC"). Those
reports, proxy statements, and other information can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC at
7 World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60611. Copies of these materials can be
obtained at prescribed rates from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. These reports, proxy statements and
other information may also be obtained without charge from the web site that the
SEC maintains at http://www.sec.gov. These reports, proxy statements, and other
information about the Company also may be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company and Pioneer USA have filed with the SEC a Registration
Statement on Form S-3 (the "Registration Statement") under the Securities Act of
1933 (the "Securities Act") with respect to the Offered Securities. This
Prospectus and any accompanying Prospectus Supplement do not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information with respect to the Company, Pioneer USA and the Offered Securities,
reference is made to the Registration Statement and to the exhibits thereto.
Statements contained herein concerning the provisions of certain documents are
not necessarily complete, and in each instance, reference is made to the copy of
the document filed as an exhibit to the Registration Statement or otherwise
filed with the SEC. Each such statement is qualified in its entirety by that
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company, Pioneer USA, Parker
& Parsley Petroleum Company ("Parker & Parsley") and MESA Inc. ("Mesa") with the
SEC, are incorporated by reference into this Prospectus, and are deemed to be a
part of this Prospectus:
1. Mesa's Annual Report on Forms 10-K and 10-K/A for the year ended
December 31, 1996;
2. Mesa's Quarterly Report on Form 10-Q for the period ended March 31,
1997;
3. Mesa's Quarterly Report on Form 10-Q for the period ended June 30,
1997;
4. Mesa's Current Reports on Form 8-K, dated February 7, 1997, and April
6, 1997, and Mesa's Current Report on Form 8-K/A, dated February 7,
1997;
5. Mesa's Current Report on Form 8-K, dated August 7, 1997;
6. Parker & Parsley's Annual Report on Forms 10-K and 10-K/A for the year
ended December 31, 1996;
7. Parker & Parsley's Current Report on Form 8-K, dated February 3, 1997;
8. Parker & Parsley's Quarterly Report on Form 10-Q for the period ended
March 31, 1997;
9. Parker & Parsley's Current Reports on Form 8-K, dated April 3, 1997,
July 28, 1997, and July 29, 1997;
2
<PAGE> 31
10. Parker & Parsley's Quarterly Report on Form 10-Q for the period ended
June 30, 1997;
11. Parker & Parsley's Current Report on Form 8-K, dated April 6, 1997;
12. Parker & Parsley's Current Report on Form 8-K, dated August 7, 1997;
13. The Company's Registration Statement on Form S-4 (No. 333-26951) filed
on June 26, 1997, including any amendment or report for the purpose of
updating any such material;
14. The Company's Quarterly Report on Form 10-Q for the period ended June
30, 1997;
15. The Company's Quarterly Report on Form 10-Q for the period ended
September 30, 1997;
16. The Company's Current Report on Form 8-K, dated August 7, 1997;
17. The Company's Current Report on Form 8-K, dated September 3, 1997;
18. The Company's Current Report on Form 8-K, dated December 5, 1997;
19. The Company's Current Report on Form 8-K, dated December 18, 1997;
20. The Definitive Joint Management Information Circular and Proxy
Statement of the Company and Chauvco Resources Ltd. (File No.
001-13245) filed with the SEC on November 17, 1997, including any
amendment or report for the purpose of updating any such material;
21. The description of the Company's Common Stock contained in the
Company's Registration Statement on Forms 8-A and 8-A/A (File No.
001-13245), declared effective by the SEC on August 8, 1997; and
22. Pioneer USA's Quarterly Report on Form 10-Q for the period ended
September 30, 1997.
All documents filed by the Company and Pioneer USA pursuant to Section
13(a), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
that also is or is deemed to be incorporated by reference herein or in any
Prospectus Supplement modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part of this
Prospectus, except as so modified or superseded.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, on the written or oral request of any
person, a copy of any or all of the documents referred to above that have been
or may be incorporated by reference into this Prospectus, other than exhibits to
the documents (unless the exhibits are specifically incorporated by reference
into the documents). Written or telephone request for the copies should be
directed to Corporate Secretary, Pioneer Natural Resources Company, 1400
Williams Square West, 5205 North O'Connor Boulevard, Irving, Texas 75039
(Telephone: (972) 444-9001).
THE ISSUERS
The Company is one of the largest public independent oil and gas companies
in the United States, engaged principally in the acquisition, development and
production of, and exploration for, oil and gas reserves and related activities.
Pioneer USA is a direct, wholly-owned subsidiary of the Company and, at December
31, 1997, directly owned substantially all of the United States onshore and
offshore properties of the Company. The executive offices and operating
headquarters of the Company and Pioneer USA are located at 1400 Williams Square
West, 5205 North O'Connor Blvd., Irving, Texas 75039, and their telephone number
at those offices is (972) 444-9001.
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<PAGE> 32
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of Offered Securities will be used for general corporate
purposes, which may include repayment of indebtedness, redemption or repurchase
of securities of the Company or any subsidiary, additions to working capital,
and capital expenditures, including exploration, development and acquisitions.
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges and earnings to fixed charges and preferred stock
dividends (a) for each of 1996, 1995, 1994, 1993 and 1992, and for the nine
months ended September 30, 1997, on a historical basis, and (b) for 1996 and the
nine months ended September 30, 1997, on a pro forma basis after giving effect
to (i) the merger of Mesa with and into the Company, (ii) the merger of Parker &
Parsley with and into MESA Operating Co., a subsidiary of Mesa, and (iii) the
Company's acquisition of Chauvco Resources Ltd. ("Chauvco"), a corporation
organized under the laws of Alberta, Canada ("Chauvco Acquisition").
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------------
SEPTEMBER 30, 1997 1996 1996 1995 1994 1993 1992
---------------------- ------------- ---------------------- ---- ---- ---- ----
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(a)................. 1.5 5.4 5.3 1.6 3.0 2.9
Ratio of earnings to fixed
charges and preferred stock
dividends(c)............... 1.5 5.4 5.3 1.6 3.0 2.9
</TABLE>
- ---------------
(a) For purposes of computing the ratio, earnings consist of income before
income taxes and cumulative effect of accounting change plus fixed charges,
net of preferred stock dividends of subsidiary and interest capitalized, and
fixed charges consist of interest expense, interest capitalized, the portion
of rental expense attributable to interest, and preferred stock dividends of
subsidiary.
(b) The ratio indicates a less than one-to-one coverage because the earnings are
inadequate to cover the fixed charges for the period. Pro forma combined
earnings for the nine months ended September 30, 1997, and the Company's
historical earnings for the years ended December 31, 1995 and 1994, were
insufficient to cover its fixed charges. The amounts of the deficiencies
were $27.6 million, $150 million and $20.5 million, respectively.
(c) For purposes of computing the ratio, adjusted earnings consist of income
before income taxes and cumulative effect of accounting change plus fixed
charges and preferred stock dividends, net of preferred stock dividends of
subsidiary and interest capitalized, and fixed charges and preferred stock
dividends consist of interest expense, interest capitalized, the portion of
rental expense attributable to interest, preferred stock dividends of
subsidiary, and preferred stock dividends. The dividends on the 6 1/4%
Cumulative Guaranteed Monthly Income Convertible Preferred Shares of Parker
& Parsley Capital LLC, a subsidiary of Parker & Parsley, were recorded as
interest expense for financial reporting purposes until those shares were
converted into common stock of Parker & Parsley on July 28, 1997.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which the
general provisions may apply to the Debt Securities so offered will be described
in the Prospectus Supplement relating to the Debt Securities. Accordingly, for a
description of the terms of a particular issue of Debt Securities, reference
must be made to both the Prospectus Supplement relating thereto and to the
following description.
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<PAGE> 33
The Debt Securities will be general obligations of the Company and may be
subordinated to Senior Indebtedness (as defined below) of the Company to the
extent set forth in the Prospectus Supplement relating thereto. See "Description
of Debt Securities -- Subordination." Debt Securities will be issued under an
indenture (the "Indenture"), between the Company and one or more commercial
banks to be selected as trustees (the trustee or trustees selected are referred
to collectively as the "Trustee"). The Indenture is subject to and governed by
the Trust Indenture Act of 1939 (the "TIA"), and the terms of the Debt
Securities will include those made part of the Indenture by reference to the TIA
as in effect on the date of the Indenture. A copy of the Indenture is filed as
an exhibit to the Registration Statement of which this Prospectus is a part. The
Indenture will also be available for inspection at the corporate trust office of
the Trustee. The following discussion of certain provisions of the Indenture is
a summary only and does not purport to be a complete description of the terms
and provisions of the Indenture. Accordingly, the following discussion is
qualified in its entirety by reference to the provisions of the Indenture and
the TIA, including the definition in the Indenture of terms used below with
their initial letters capitalized.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder. The Debt Securities may be issued in
one or more series as may be authorized from time to time by the Company.
Reference is made to the applicable Prospectus Supplement for the following
terms of the Debt Securities of the series with respect to which the Prospectus
Supplement is being delivered:
(a) The title of the Debt Securities of the series;
(b) Any limit on the aggregate principal amount of the Debt Securities
of the series that may be authenticated and delivered under the Indenture;
(c) The date or dates on which the principal and premium with respect
to the Debt Securities of the series are payable;
(d) The rate or rates (which may be fixed or variable) at which the
Debt Securities of the series shall bear interest (if any) or the method of
determining the rate or rates, the date or dates from which the interest
shall accrue, the interest payment dates on which the interest shall be
payable or the method by which the dates will be determined, the record
dates for the determination of holders thereof to whom the interest is
payable (in the case of Registered Securities), and the basis upon which
interest will be calculated if other than that of a 360-day year of twelve
30-day months;
(e) The place or places, if any, in addition to or instead of the
corporate trust office of the Trustee (in the case of Registered
Securities) or the principal London office of the Trustee (in the case of
Bearer Securities), where the principal, premium, and interest with respect
to Debt Securities of the series shall be payable;
(f) The price or prices at which, the period or periods within which,
and the terms and conditions upon which, Debt Securities of the series may
be redeemed, in whole or in part, at the option of the Company or
otherwise;
(g) Whether Debt Securities of the series are to be issued as
Registered Securities or Bearer Securities or both and, if Bearer
Securities are to be issued, whether coupons will be attached thereto,
whether Bearer Securities of the series may be exchanged for Registered
Securities of the series, and the circumstances under which and the places
at which any such exchanges, if permitted, may be made;
(h) If any Debt Securities of the series are to be issued as Bearer
Securities or as one or more Global Securities (as defined below)
representing individual Bearer Securities of the series, whether certain
provisions for the payment of additional interest or tax redemptions shall
apply; whether interest with respect to any portion of a temporary Bearer
Security of the series payable with respect to any interest payment date
prior to the exchange of the temporary Bearer Security for definitive
Bearer Securities of the series shall be paid to any clearing organization
with respect to the portion of the temporary Bearer Security held for its
account and, in such event, the terms and conditions (including
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<PAGE> 34
any certification requirements) upon which any such interest payment
received by a clearing organization will be credited to the persons
entitled to interest payable on the interest payment date; and the terms
upon which a temporary Bearer Security may be exchanged for one or more
definitive Bearer Securities of the series;
(i) The obligation, if any, of the Company to redeem, purchase or
repay Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof and the price or
prices at which, the period or periods within which, and the terms and
conditions upon which, Debt Securities of the series shall be redeemed,
purchased or repaid, in whole or in part, pursuant to such obligations;
(j) The terms, if any, upon which the Debt Securities of the series
may be convertible into or exchanged for Common Stock, Preferred Stock
(which may be represented by Depositary Shares), other Debt Securities, or
warrants for Common Stock, Preferred Stock, or indebtedness or other
securities of any kind of the Company or any other issuer or obligor and
the terms and conditions upon which the conversion or exchange shall be
effected, including the initial conversion or exchange price or rate, the
conversion or exchange period, and any other additional provisions;
(k) If other than denominations of $1,000 or any integral multiple
thereof, the denominations in which Debt Securities of the series shall be
issuable;
(l) If the amount of principal, premium or interest with respect to
the Debt Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which the amounts will be
determined;
(m) If the principal amount payable at the stated maturity of Debt
Securities of the series will not be determinable as of any one or more
dates prior to the stated maturity, the amount that will be deemed to be
the principal amount as of any date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the stated maturity or which will be deemed to be outstanding as
of any date (or, in any such case, the manner in which the deemed principal
amount is to be determined), and if necessary, the manner of determining
the equivalent thereof in United States currency;
(n) Any changes or additions to the provisions of the Indenture
dealing with defeasance, including the addition of additional covenants
that may be subject to the Company's covenant defeasance option;
(o) If other than the coin or currency of the United States as at the
time of payment is legal tender for payment of public and private debts,
the coin or currency or currencies or units of two or more currencies in
which payment of the principal, premium, and interest with respect to Debt
Securities of the series shall be payable;
(p) If other than the principal amount thereof, the portion of the
principal amount of Debt Securities of the series that shall be payable
upon declaration of acceleration of the maturity thereof or provable in
bankruptcy;
(q) The terms, if any, of the transfer, mortgage, pledge or assignment
as security for the Debt Securities of the series of any properties,
assets, moneys, proceeds, securities, or other collateral, including
whether certain provisions of the Trust Indenture Act are applicable and
any corresponding changes to provisions of the Indenture as then in effect;
(r) Any addition to or change in the Events of Default with respect to
the Debt Securities of the series and any change in the right of the
Trustee or the holders to declare the principal, premium and interest with
respect to the Debt Securities due and payable;
(s) If the Debt Securities of the series shall be issued in whole or
in part in the form of a Global Security, the terms and conditions, if any,
upon which the Global Security may be exchanged in whole or in part for
other individual Debt Securities in definitive registered form, the
Depositary for the Global
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<PAGE> 35
Security, and the form of any legend or legends to be borne by the Global
Security in addition to or in lieu of the legend referred to in the
Indenture;
(t) Any Trustee, authenticating or paying agents, transfer agents or
registrars;
(u) The applicability of, and any addition to or change in, the
covenants and definitions then set forth in the Indenture or in the terms
then set forth in the Indenture relating to permitted consolidations,
mergers or sales of assets, including conditioning any merger, conveyance,
transfer or lease permitted by the Indenture upon the satisfaction of an
indebtedness coverage standard by the Company and any successor to the
Company;
(v) The terms, if any, of any guarantee of the payment of principal,
premium and interest with respect to Debt Securities of the series and any
corresponding changes to the provisions of the Indenture as then in effect;
(w) The subordination, if any, of the Debt Securities of the series
pursuant to the Indenture and any changes or additions to the provisions of
the Indenture relating to subordination;
(x) With regard to Debt Securities of the series that do not bear
interest, the dates for certain required reports to the Trustee; and
(y) Any other terms of the Debt Securities of the series (which terms
shall not be prohibited by the provisions of the Indenture).
The Prospectus Supplement will also describe any material United States
federal income tax consequences or other special considerations applicable to
the series of Debt Securities to which the Prospectus Supplement relates,
including those applicable to (a) Bearer Securities, (b) Debt Securities with
respect to which payments of principal, premium or interest are determined with
reference to an index or formula (including changes in prices of particular
securities, currencies or commodities), (c) Debt Securities with respect to
which principal, premium or interest is payable in a foreign or composite
currency, (d) Debt Securities that are issued at a discount below their stated
principal amount, bearing no interest or interest at a rate that at the time of
issuance is below market rates ("Original Issue Discount Debt Securities"), and
(e) variable rate Debt Securities that are exchangeable for fixed rate Debt
Securities.
Payments of interest on Registered Securities may be made at the option of
the Company by check mailed to the registered holders thereof or, if so provided
in the applicable Prospectus Supplement, at the option of a holder by wire
transfer to an account designated by the holder. Except as otherwise provided in
the applicable Prospectus Supplement, no payment on a Bearer Security will be
made by mail to an address in the United States or by wire transfer to an
account in the United States.
Unless otherwise provided in the applicable Prospectus Supplement,
Registered Securities may be transferred or exchanged at the office of the
Trustee at which its corporate trust business is principally administered in the
United States or at the office of the Trustee or the Trustee's agent in the
Borough of Manhattan, the City and State of New York, at which its corporate
agency business is conducted, subject to the limitations provided in the
Indenture, without the payment of any service charge, other than any tax or
governmental charge payable in connection therewith. Bearer Securities will be
transferable only by delivery. Provisions with respect to the exchange of Bearer
Securities will be described in the Prospectus Supplement relating to the Bearer
Securities.
All funds paid by the Company to a paying agent for the payment of
principal, premium, or interest with respect to any Debt Securities that remain
unclaimed at the end of two years after the principal, premium, or interest
shall have become due and payable will be repaid to the Company, and the holders
of the Debt Securities or any coupons appertaining thereto will thereafter look
only to the Company for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities. A Global Security is a Debt Security that
represents, and is denominated in an amount equal to,
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<PAGE> 36
the aggregate principal amount of all outstanding Debt Securities of a series,
or any portion thereof, in either case having the same terms, including the same
original issue date, date or dates on which principal and interest are due, and
interest rate or method of determining interest. A Global Security will be
deposited with, or on behalf of, a Depositary, which will be identified in the
Prospectus Supplement relating to the Debt Securities. Global Securities may be
issued in either registered or bearer form and in either temporary or definitive
form. Unless and until it is exchanged in whole or in part for the individual
Debt Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depositary to a nominee of the Depositary, by a nominee
of the Depositary to the Depositary or another nominee of the Depositary, or by
the Depositary or any nominee of the Depositary to a successor Depositary or any
nominee of the successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
the Debt Securities. The Company anticipates that the following provisions will
generally apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for the Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the individual Debt Securities represented by
the Global Security to the accounts of persons that have accounts with the
Depositary ("participants"). The accounts shall be designated by the dealers or
underwriters with respect to the Debt Securities or, if the Debt Securities are
offered and sold directly by the Company or through one or more agents, by the
Company or the agents. Ownership of beneficial interests in a Global Security
will be limited to participants or persons that hold beneficial interests
through participants. Ownership of beneficial interests in the Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary (with respect to interests of
participants) or records maintained by participants (with respect to interests
of persons other than participants). The laws of some states require that
certain purchasers of securities take physical delivery of the securities in
definitive form. Such limitations and laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner or holder of the Global Security, the Depositary or nominee, as
the case may be, will be considered the sole owner or holder of the individual
Debt Securities represented by the Global Security for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Security will not be entitled to have any of the individual Debt Securities
represented by the Global Security registered in their names, will not receive
or be entitled to receive physical delivery of any of the Debt Securities in
definitive form, and will not be considered the owners or holders thereof under
the Indenture.
Subject to the restrictions described under "Description of Debt
Securities -- Limitations on Issuance of Bearer Securities," payments of
principal, premium and interest with respect to individual Debt Securities
represented by a Global Security will be made to the Depositary or its nominee,
as the case may be, as the registered owner or holder of the Global Security.
Neither the Company, the Trustee, any paying agent or registrar for the Debt
Securities, or any agent of the Company or the Trustee will have any
responsibility or liability for (a) any aspect of the records relating to or
payments made by the Depositary, its nominee, or any participants on account of
beneficial interests in the Global Security or for maintaining, supervising or
reviewing any records relating to the beneficial interests, (b) the payment to
the owners of beneficial interests in the Global Security of amounts paid to the
Depositary or its nominee, or (c) any other matter relating to the actions and
practices of the Depositary, its nominee or its participants. Neither the
Company, the Trustee, any paying agent or registrar for the Debt Securities, nor
any agent of the Company or the Trustee will be liable for any delay by the
Depositary, its nominee or any of its participants in identifying the owners of
beneficial interests in the Global Security, and the Company and the Trustee may
conclusively rely on, and will be protected in relying on, instructions from the
Depositary or its nominee for all purposes.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest with
respect to a definitive Global Security representing any of the Debt Securities,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Security, as shown on the records of
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<PAGE> 37
the Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Security held
through the participants will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of customers
and registered in street name. The payments will be the responsibility of the
participants. Receipt by owners of beneficial interests in a temporary Global
Security of payments of principal, premium or interest with respect thereto will
be subject to the restrictions described under "Description of Debt
Securities -- Limitations on Issuance of Bearer Securities."
If the Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary, the Company shall appoint a
successor depositary. If a successor depositary is not appointed by the Company
within 90 days, the Company will issue individual Debt Securities of the series
in exchange for the Global Security representing the series of Debt Securities.
In addition, the Company may at any time and in its sole discretion, subject to
any limitations described in the Prospectus Supplement relating to the Debt
Securities, determine no longer to have Debt Securities of a series represented
by a Global Security and, in that event, will issue individual Debt Securities
of the series in exchange for the Global Security representing the series of
Debt Securities. Furthermore, if the Company so specifies with respect to the
Debt Securities of a series, an owner of a beneficial interest in a Global
Security representing Debt Securities of the series may, on terms acceptable to
the Company, the Trustee, and the Depositary for the Global Security, receive
individual Debt Securities of the series in exchange for the beneficial
interests, subject to any limitations described in the Prospectus Supplement
relating to the Debt Securities. In any such instance, an owner of a beneficial
interest in a Global Security will be entitled to physical delivery of
individual Debt Securities of the series represented by the Global Security
equal in principal amount to the beneficial interest and to have the Debt
Securities registered in its name (if the Debt Securities are issuable as
Registered Securities). Individual Debt Securities of the series so issued will
be issued (a) as Registered Securities in denominations, unless otherwise
specified by the Company, of $1,000 and integral multiples thereof if the Debt
Securities are issuable as Registered Securities, (b) as Bearer Securities in
the denomination or denominations specified by the Company if the Debt
Securities are issuable as Bearer Securities, or (c) as either Registered
Securities or Bearer Securities as described above if the Debt Securities are
issuable in either form. See, however, "Description of Debt
Securities -- Limitations on Issuance of Bearer Securities" for a description of
certain restrictions on the issuance of individual Bearer Securities in exchange
for beneficial interests in a bearer Global Security.
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES
The Debt Securities of a series may be issued as Registered Securities
(which will be registered as to principal and interest in the register
maintained by the registrar for the Debt Securities) or Bearer Securities (which
will be transferable only by delivery). If the Debt Securities are issuable as
Bearer Securities, certain special limitations and considerations will apply.
In compliance with United States federal income tax laws and regulations,
the Company and any underwriter, agent or dealer participating in an offering of
Bearer Securities will agree that, in connection with the original issuance of
the Bearer Securities and during the period ending 40 days after the issue date,
they will not offer, sell or deliver any such Bearer Security, directly or
indirectly, to a United States Person (as defined below) or to any person within
the United States, except to the extent permitted under United States Treasury
regulations.
Bearer Securities 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
Sections 165(j) and 1287(a) of the Internal Revenue Code." The sections referred
to in the legend provide that, with certain exceptions, a United States taxpayer
who holds Bearer Securities will not be allowed to deduct any loss with respect
to, and will not be eligible for capital gain treatment with respect to any gain
realized on the sale, exchange, redemption or other disposition of, the Bearer
Securities.
For this purpose, "United States" includes the United States of America and
its possessions, and "United States person" means a citizen or resident of the
United States, a corporation, partnership or other
9
<PAGE> 38
entity created or organized in or under the laws of the United States, or an
estate or trust the income of which is subject to United States federal income
taxation regardless of its source.
Pending the availability of a definitive Global Security or individual
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security, without interest coupons, to be deposited with a common depositary in
London for Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear"), or Centrale de Livraison de
Valeurs Mobilieres S.A. ("CEDEL") for credit to the accounts designated by or on
behalf of the purchasers thereof. Following the availability of a definitive
Global Security in bearer form, without coupons attached, or individual Bearer
Securities and subject to any further limitations described in the applicable
Prospectus Supplement, the temporary Global Security will be exchangeable for
interests in the definitive Global Security or for the individual Bearer
Securities, respectively, only upon receipt of a "Certificate of Non-U.S.
Beneficial Ownership," which is a certificate to the effect that a beneficial
interest in a temporary Global Security is owned by a person that is not a
United States Person or is owned by or through a financial institution in
compliance with applicable United States Treasury regulations. No Bearer
Security will be delivered in or to the United States. If so specified in the
applicable Prospectus Supplement, interest on a temporary Global Security will
be paid to each of Euroclear and CEDEL with respect to that portion of the
temporary Global Security held for its account, but only upon receipt as of the
relevant interest payment date of a Certificate of Non-U.S. Beneficial
Ownership.
SUBORDINATION
Debt Securities of a series may be subordinated ("Subordinated Debt
Securities") to Senior Indebtedness (as defined below) to the extent set forth
in the Prospectus Supplement relating thereto. The Company currently conducts
substantially all its operations through subsidiaries, and the holders of Debt
Securities (whether or not Subordinated Debt Securities) will be structurally
subordinated to the creditors of the Company's subsidiaries.
Subordinated Debt Securities of a series and any coupons appertaining
thereto will be subordinate in right of payment, to the extent and in the manner
set forth in the Indenture and the Prospectus Supplement relating to the
Subordinated Debt Securities, to the prior payment of all indebtedness of the
Company that is designated as "Senior Indebtedness" with respect to the series.
"Senior Indebtedness," with respect to any series of Subordinated Debt
Securities, will consist of (a) any and all amounts payable under or with
respect to the Company's "Bank Indebtedness" and (b) any other indebtedness of
the Company that is designated in a resolution of the Company's Board of
Directors or in any supplemental indenture establishing any other series as
Senior Indebtedness with respect to the series. "Bank Indebtedness" is defined
as (i) the Amended and Restated Credit Facility Agreement (Primary Facility),
dated as of December 18, 1997, among the Company, as Borrower, and NationsBank
of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation Agent,
Morgan Guaranty Trust Company of New York, as Documentation Agent, The Chase
Manhattan Bank, as Syndication Agent, and the Co-Agents and Lenders party
thereto; (ii) the Amended and Restated Credit Facility Agreement (364 Day
Facility), dated as of December 18, 1997, among the Company, as Borrower, and
NationsBank of Texas, N.A., as Administrative Agent, CIBC Inc., as Documentation
Agent, Morgan Guaranty Trust Company of New York, as Documentation Agent, The
Chase Manhattan Bank, as Syndication Agent, and the Co-Agents and Lenders party
thereto; (iii) the Term Note, dated as of December 22, 1997, executed by the
Company and payable to NationsBank of Texas, N.A., in the original principal
amount of $100 million; and (iv) the Credit Agreement, dated as of December 18,
1997, among Chauvco Resources Ltd., Canadian Imperial Bank of Commerce, and the
other lenders signatory thereto; each as amended or modified from time to time,
and each of which is incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part.
Upon any payment or distribution of assets of the Company to creditors or
upon a total or partial liquidation or dissolution of the Company or in a
bankruptcy, receivership or similar proceeding relating to the Company or its
property, holders of Senior Indebtedness shall be entitled to receive payment in
full in cash of the Senior Indebtedness before holders of Subordinated Debt
Securities shall be entitled to receive any payment of principal, premium or
interest with respect to the Subordinated Debt Securities, and until the
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Senior Indebtedness is paid in full, any distribution to which holders of
Subordinated Debt Securities would otherwise be entitled shall be made to the
holders of Senior Indebtedness (except that the holders may receive shares of
stock and any debt securities that are subordinated to Senior Indebtedness to at
least the same extent as the Subordinated Debt Securities).
The Company may not make any payments of principal, premium or interest
with respect to Subordinated Debt Securities, make any deposit for the purpose
of defeasance of the Subordinated Debt Securities, or repurchase, redeem or
otherwise retire (except, in the case of Subordinated Debt Securities that
provide for a mandatory sinking fund, by the delivery of Subordinated Debt
Securities by the Company to the Trustee in satisfaction of the Company's
sinking fund obligation) any Subordinated Debt Securities if (a) any principal,
premium or interest with respect to Senior Indebtedness is not paid within any
applicable grace period (including at maturity), or (b) any other default on
Senior Indebtedness occurs and the maturity of the Senior Indebtedness is
accelerated in accordance with its terms, unless, in either case, the default
has been cured or waived and the acceleration has been rescinded, the Senior
Indebtedness has been paid in full in cash, or the Company and the Trustee
receive written notice approving the payment from the representatives of each
issue of "Designated Senior Indebtedness" (which will include the Bank
Indebtedness and any other specified issue of Senior Indebtedness of at least
$100 million). During the continuance of any default (other than a default
described in clause (a) or (b) above) with respect to any Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect the
acceleration) or the expiration of any applicable grace periods, the Company may
not pay the Subordinated Debt Securities for a period (the "Payment Blockage
Period") commencing on the receipt by the Company and the Trustee of written
notice of the default from the representative of any Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period (a
"Blockage Notice"). The Payment Blockage Period may be terminated before its
expiration by written notice to the Trustee and the Company from the person who
gave the Blockage Notice, by repayment in full in cash of the Senior
Indebtedness with respect to which the Blockage Notice was given, or because the
default giving rise to the Payment Blockage Period is no longer continuing.
Unless the holders of the Senior Indebtedness shall have accelerated the
maturity thereof, the Company may resume payments on the Subordinated Debt
Securities after the expiration of the Payment Blockage Period. Not more than
one Blockage Notice may be given in any period of 360 consecutive days unless
the first Blockage Notice within the 360-day period is given by or on behalf of
holders of Designated Senior Indebtedness other than the Bank Indebtedness, in
which case, the representative of the Bank Indebtedness may give another
Blockage Notice within the period. In no event, however, may the total number of
days during which any Payment Blockage Period or Periods is in effect exceed 179
days in the aggregate during any period of 360 consecutive days. After all
Senior Indebtedness is paid in full and until the Subordinated Debt Securities
are paid in full, holders of the Subordinated Debt Securities shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness.
By reason of the subordination, in the event of insolvency, creditors of
the Company who are holders of Senior Indebtedness, as well as certain general
creditors of the Company, may recover more, ratably, than the holders of the
Subordinated Debt Securities.
EVENTS OF DEFAULT AND REMEDIES
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities:
(a) Default in the payment of any installment of interest on any Debt
Securities of that series or any payment with respect to the related
coupons, if any, as and when the same shall become due and payable (whether
or not, in the case of Subordinated Debt Securities, the payment shall be
prohibited by reason of the subordination provisions described above) and
continuance of the default for a period of 30 days;
(b) Default in the payment of principal or premium with respect to any
Debt Securities of that series as and when the same shall become due and
payable, whether at maturity, upon redemption, by declaration, upon
required repurchase or otherwise (whether or not, in the case of
Subordinated Debt Securities, the payment shall be prohibited by reason of
the subordination provisions described above);
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(c) Default in the payment of any sinking fund payment with respect to
any Debt Securities of that series as and when the same shall become due
and payable;
(d) Failure on the part of the Company to comply with the provisions
of the Indenture relating to consolidations, mergers, and sales of assets;
(e) Failure on the part of the Company duly to observe or perform any
other of the covenants or agreements on the part of the Company in the Debt
Securities of that series, in any resolution of the Board of Directors of
the Company authorizing the issuance of that series of Debt Securities, in
the Indenture with respect to the series, or in any supplemental indenture
with respect to the series (other than a covenant a default in the
performance of which is otherwise specifically dealt with) continuing for a
period of 60 days after the date on which written notice specifying the
failure and requiring the Company to remedy the same shall have been given
to the Company by the Trustee or to the Company and the Trustee by the
holders of at least 25% in aggregate principal amount of the Debt
Securities of that series at the time outstanding;
(f) Indebtedness of the Company or any subsidiary of the Company is
not paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default, the total amount
of the Indebtedness unpaid or accelerated exceeds $20 million, and the
default remains uncured or the acceleration is not rescinded for 10 days
after the date on which written notice specifying the failure and requiring
the Company to remedy the same shall have been given to the Company by the
Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the Debt Securities of that series at the
time outstanding;
(g) The Company or any of its "Significant Subsidiaries" (defined as
any subsidiary of the Company that would be a "significant subsidiary" as
defined in Rule 405 under the Securities Act as in effect on the date of
the Indenture) shall (1) voluntarily commence any proceeding or file any
petition seeking relief under the United States Bankruptcy Code or other
federal or state bankruptcy, insolvency or similar law, (2) consent to the
institution of, or fail to controvert within the time and in the manner
prescribed by law, any such proceeding or the filing of any such petition,
(3) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for the Company or any
Significant Subsidiary or for a substantial part of its property, (4) file
an answer admitting the material allegations of a petition filed against it
in any such proceeding, (5) make a general assignment for the benefit of
creditors, (6) admit in writing its inability to pay its debts as they
become due, (7) take corporate action for the purpose of effecting any of
the foregoing, or (8) take any comparable action under any foreign laws
relating to insolvency;
(h) The entry of an order or decree by a court having competent
jurisdiction for (1) relief with respect to the Company or any of its
Significant Subsidiaries or a substantial part of any of their property
under the United States Bankruptcy Code or any other federal or state
bankruptcy, insolvency or similar law, (2) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for the Company or any
Significant Subsidiary or for a substantial part of any of their property
(except any decree or order appointing the official of any Significant
Subsidiary pursuant to a plan under which the assets and operations of the
Significant Subsidiary are transferred to or combined with another
Significant Subsidiary or Subsidiaries of the Company or to the Company),
or (3) the winding-up or liquidation of the Company or any Significant
Subsidiary (except any decree or order approving or ordering the winding-up
or liquidation of the affairs of a Significant Subsidiary pursuant to a
plan under which the assets and operations of the Significant Subsidiary
are transferred to or combined with another Significant Subsidiary or
Subsidiaries of the Company or to the Company), and the order or decree
shall continue unstayed and in effect for 60 consecutive days, or any
similar relief is granted under any foreign laws and the order or decree
stays in effect for 60 consecutive days;
(i) Any judgment or decree for the payment of money in excess of $20
million is entered against the Company or any subsidiary of the Company by
a court of competent jurisdiction, which judgment is not covered by
insurance, and is not discharged and either (1) an enforcement proceeding
has been commenced by any creditor upon the judgment or decree, or (2)
there is a period of 60 days following the
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<PAGE> 41
entry of the judgment or decree during which the judgment or decree is not
discharged or waived or the execution thereof stayed and, in either case,
the default continues for 10 days after the date on which written notice
specifying the failure and requiring the Company to remedy the same shall
have been given to the Company by the Trustee or to the Company and the
Trustee by the holders of at least 25% in aggregate principal amount of the
Debt Securities of that series at the time outstanding; or
(j) Any other Event of Default provided with respect to Debt
Securities of that series.
An Event of Default with respect to one series of Debt Securities is not
necessarily an Event of Default for another series.
If an Event of Default described in clause (a), (b), (c), (d), (e), (f),
(i) or (j) above occurs and is continuing with respect to any series of Debt
Securities, unless the principal and interest with respect to all the Debt
Securities of the series shall have already become due and payable, either the
Trustee or the holders of not less than 25% in aggregate principal amount of the
Debt Securities of that series then outstanding may declare the principal amount
(or, if Original Issue Discount Debt Securities, the portion of the principal
amount as may be specified in the series) of and interest on all the Debt
Securities of that series due and payable immediately. If an Event of Default
described in clause (g) or (h) above occurs, unless the principal and interest
with respect to all the Debt Securities of all series shall have become due and
payable, the principal amount (or, if Original Issue Discount Debt Securities,
the portion of the principal amount as may be specified in the series) of and
interest on all Debt Securities of all series then outstanding shall become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Debt Securities.
If an Event of Default occurs and is continuing, the Trustee shall be
entitled and empowered to institute any action or proceeding for the collection
of the sums so due and unpaid or to enforce the performance of any provision of
the Debt Securities of the affected series or the Indenture, to prosecute any
such action or proceeding to judgment or final decree, and to enforce any
judgment or final decree against the Company or any other obligor on the Debt
Securities of the series. In addition, if there shall be pending proceedings for
the bankruptcy or reorganization of the Company or any other obligor on the Debt
Securities, or if a receiver, trustee, or similar official shall have been
appointed for its property, the Trustee shall be entitled and empowered to file
and prove a claim for the whole amount of principal, premium and interest (or,
in the case of Original Issue Discount Debt Securities, the portion of the
principal amount as may be specified in the terms of the series) owing and
unpaid with respect to the Debt Securities.
The holders of not less than a majority in aggregate principal amount of a
series of Debt Securities may direct the time, method and place of conducting
any proceedings for any remedy available to the Trustee, or exercising any trust
or power conferred on the Trustee; provided that such direction is not in
conflict with any rule of law or with the Indenture. The Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.
The Trustee will be entitled, subject to the duty of the Trustee during the
continuance of an Event of Default to act with the required standard of care, to
be indemnified by the holders of a series of Debt Securities before proceeding
to exercise any right or power under the Indenture at the request of the holders
of that series of Debt Securities.
No holder of any Debt Security or coupon of any series shall have any right
to institute any action or proceeding upon or under or with respect to the
Indenture, for the appointment of a receiver or trustee, or for any other
remedy, unless (a) the holder previously shall have given to the Trustee written
notice of an Event of Default with respect to Debt Securities of that series and
of the continuance thereof, (b) the holders of not less than 25% in aggregate
principal amount of the outstanding Debt Securities of that series shall have
made written request to the Trustee to institute the action or proceeding with
respect to the Event of Default and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs, expenses, and
liabilities to be incurred therein or thereby, and (c) the Trustee, for 60 days
after its receipt of such notice, request, and offer of indemnity shall have
failed to institute the action or proceeding and no direction inconsistent with
the written request shall have been given to the Trustee pursuant to the
provisions of the Indenture. However, such limitations do not apply to a suit
instituted by a holder of Debt Securities for
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<PAGE> 42
enforcement of payment of the principal of, premium, if any, or interest on such
Debt Securities on or after the respective due dates expressed in such Debt
Securities.
Prior to the acceleration of the maturity of the Debt Securities of any
series, the holders of a majority in aggregate principal amount of the Debt
Securities of that series at the time outstanding may, on behalf of the holders
of all Debt Securities and any related coupons of that series, waive any past
default or Event of Default and its consequences for that series, except (a) a
default in the payment of the principal, premium or interest with respect to the
Debt Securities, or (b) a default with respect to a provision of the Indenture
that cannot be amended without the consent of each holder affected thereby. In
case of any waiver, the default shall cease to exist, any Event of Default
arising therefrom shall be deemed to have been cured for all purposes, and the
Company, the Trustee and the holders of the Debt Securities of that series shall
be restored to their former positions and rights under the Indenture.
The Trustee shall, within 90 days after the occurrence of a default known
to it with respect to a series of Debt Securities, give to the holders of that
series of Debt Securities of the series notice of all uncured defaults with
respect to the series known to it, unless the defaults shall have been cured or
waived before the giving of the notice; provided, however, that except in the
case of default in the payment of principal, premium, or interest with respect
to the Debt Securities of that series or in the making of any sinking fund
payment with respect to the Debt Securities of that series, the Trustee shall be
protected in withholding notice if it in good faith determines that the
withholding of such notice is in the interest of the holders of the Debt
Securities of that series.
The Indenture will require the Company to file annually with the Trustee a
certificate, executed by a designated officer of the Company, stating to the
best of his knowledge that the Company is not in default under certain covenants
under the Indenture or if he has knowledge that the Company is in such default,
specifying such default.
MODIFICATION OF THE INDENTURE
The Company and the Trustee may enter into supplemental indentures without
the consent of the holders of Debt Securities for one or more of the following
purposes:
(a) To evidence the succession of another person to the Company
pursuant to the provisions of the Indenture relating to consolidations,
mergers and sales of assets and the assumption by the successor of the
covenants, agreements, and obligations of the Company in the Indenture and
in the Debt Securities;
(b) To surrender any right or power conferred upon the Company by the
Indenture, to add to the covenants of the Company such further covenants,
restrictions, conditions, or provisions for the protection of the holders
of all or any series of Debt Securities as the Board of Directors of the
Company shall consider to be for the protection of the holders of the Debt
Securities, and to make the occurrence, or the occurrence and continuance,
of a default in any of the additional covenants, restrictions, conditions
or provisions a default or an Event of Default under the Indenture
(provided, however, that with respect to any such additional covenant,
restriction, condition or provision, the supplemental indenture may provide
for a period of grace after default, which may be shorter or longer than
that allowed in the case of other defaults, may provide for an immediate
enforcement upon the default, may limit the remedies available to the
Trustee upon the default, or may limit the right of holders of a majority
in aggregate principal amount of any or all series of Debt Securities to
waive the default);
(c) To cure any ambiguity or omission or to correct or supplement any
provision contained in the Indenture, in any supplemental indenture, or in
any Debt Securities that may be defective or inconsistent with any other
provision contained therein, to convey, transfer, assign, mortgage or
pledge any property to or with the Trustee, or to make such other
provisions in regard to matters or questions arising under the Indenture as
shall not adversely affect the interests of any holders of Debt Securities
of any series;
(d) To modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental indenture under the
Trust Indenture Act as then in effect;
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(e) To add to or change any of the provisions of the Indenture to
provide that Bearer Securities may be registerable as to principal, to
change or eliminate any restrictions on the payment of principal or premium
with respect to Registered Securities or of principal, premium or interest
with respect to Bearer Securities, or to permit Registered Securities to be
exchanged for Bearer Securities, so long as any such action does not
adversely affect the interests of the holders of Debt Securities or any
coupons of any series in any material respect or permit or facilitate the
issuance of Debt Securities of any series in uncertificated form;
(f) To comply with the provisions of the Indenture relating to
consolidations, mergers, and sales of assets;
(g) In the case of Subordinated Debt Securities, to make any change in
the provisions of the Indenture relating to subordination that would limit
or terminate the benefits available to any holder of Senior Indebtedness
under such provisions (but only if the holder of Senior Indebtedness
consents to the change);
(h) To add guarantees with respect to any or all of the Debt
Securities or to secure any or all of the Debt Securities;
(i) To make any change that does not adversely affect the rights of
any holder;
(j) To add to, change or eliminate any of the provisions of the
Indenture with respect to one or more series of Debt Securities, so long as
any such addition, change or elimination not otherwise permitted under the
Indenture shall (1) neither apply to any Debt Security of any series
created prior to the execution of the supplemental indenture and entitled
to the benefit of the provision nor modify the rights of the holders of any
such Debt Security with respect to the provision, or (2) become effective
only when there is no such Debt Security outstanding;
(k) To evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions of the Indenture
as shall be necessary to provide for or facilitate the administration of
the Indenture by more than one Trustee;
(l) To establish the form or terms of Debt Securities and coupons of
any series, as described under "Description of Debt Securities -- General";
and
(m) To provide for uncertificated Debt Securities in addition to or in
place of certificated Debt Securities (provided that the uncertificated
Debt Securities are issued in registered form for purposes of Section
163(f) of the Code or in a manner such that the uncertificated Debt
Securities are described in Section 163(f)(2)(B) of the Code).
With the consent of the holders of a majority in aggregate principal amount
of the outstanding Debt Securities of each series affected thereby, the Company
and the Trustee may from time to time and at any time enter into a supplemental
indenture for the purpose of adding any provisions to, changing in any manner,
or eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the Debt
Securities of that series; provided, however, that without the consent of the
holders of each Debt Security so affected, no such supplemental indenture shall
(a) reduce the percentage in principal amount of Debt Securities of any series
whose holders must consent to an amendment, (b) reduce the rate of or extend the
time for payment of interest on any Debt Security or coupon or reduce the amount
of any payment to be made with respect to any coupon, (c) reduce the principal
of or extend the stated maturity of any Debt Security, (d) reduce the premium
payable upon the redemption of any Debt Security or change the time at which any
Debt Security may or shall be redeemed, (e) make any Debt Security payable in a
currency other than that stated in the Debt Security, (f) in the case of any
Subordinated Debt Security or coupons appertaining thereto, make any change in
the provisions of the Indenture to subordination that adversely affects the
rights of any holder under the provisions, (g) release any security that may
have been granted with respect to the Debt Securities, (h) impair the right of a
holder of Debt Securities to receive payment of principal of and interest on
such holder's Debt Securities on or after the due dates
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therefor or to institute suit for the enforcement of or with respect to such
holder's Debt Securities, (i) make any change in the provisions of the Indenture
to waivers of defaults or amendments that require unanimous consent, (j) change
any obligation of the Company provided for in the Indenture to pay additional
interest with respect to Bearer Securities, or (k) limit the obligation of the
Company to maintain a paying agency outside the United States for payment on
Bearer Securities or limit the obligation of the Company to redeem certain
Bearer Securities.
The consent of the holders of Debt Securities is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Debt Securities of all affected series a
notice briefly describing such amendment. However, the failure to give such
notice, or any defect therein, will not impair or affect the validity of the
amendment.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Company may not consolidate with or merge with or into any person, or
convey, transfer or lease all or substantially all its assets, or permit any
person to consolidate with or merge into or convey, transfer or lease
substantially all its assets to the Company, unless the following conditions
have been satisfied:
(a) Either (1) the Company shall be the continuing person in the case
of a merger, or (2) the resulting, surviving or transferee person, if other
than the Company (the "Successor Company"), shall be a corporation
organized and existing under the laws of the United States, any State, or
the District of Columbia and shall expressly assume all the obligations of
the Company under the Debt Securities and coupons and the Indenture;
(b) Immediately after giving effect to the transaction (and treating
any indebtedness that becomes an obligation of the Successor Company or any
subsidiary of the Company as a result of the transaction as having been
incurred by the Successor Company or the subsidiary at the time of the
transaction), no Default or Event of Default would occur or be continuing;
(c) The Successor Company waives any right to redeem any Bearer
Security under circumstances in which the Successor Company would be
entitled to redeem the Bearer Security but the Company would not have been
so entitled to redeem if the consolidation, merger, conveyance, transfer or
lease had not occurred; and
(d) The Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that the consolidation,
merger or transfer complies with the Indenture.
Upon any consolidation by the Company with, or merger by the Company into,
any other person or any conveyance, transfer or lease of the properties and
assets of the Company as an entirety or virtually as an entirety as described in
the preceding paragraph, the successor resulting from such consolidation or into
which the Company is merged or the transferee or lessee to which such
conveyance, transfer or lease is made, will succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture, and
thereafter, except in the case of a lease, the predecessor (if still in
existence) will be released from its obligations and covenants under the
Indenture and all outstanding Debt Securities.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Indenture shall generally cease to be of any further effect with
respect to a series of Debt Securities if (a) the Company has delivered to the
Trustee for cancellation all Debt Securities of that series (with certain
limited exceptions), or (b) all Debt Securities and coupons of the series not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year, and the Company shall have
deposited with the Trustee as trust funds the entire amount sufficient to pay at
maturity or upon redemption all the Debt
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<PAGE> 45
Securities and coupons of that series (and if, in either case, the Company shall
also pay or cause to be paid all other sums payable under the Indenture by the
Company).
In addition, the Company shall have a "legal defeasance option" (pursuant
to which it may terminate, with respect to the Debt Securities of a particular
series, all its obligations under the Debt Securities of that series and the
Indenture with respect to the Debt Securities of that series) and a "covenant
defeasance option" (pursuant to which it may terminate, with respect to the Debt
Securities of a particular series, its obligations with respect to the Debt
Securities under certain specified covenants contained in the Indenture). If the
Company exercises its legal defeasance option with respect to a series of Debt
Securities, payment of that series of Debt Securities may not be accelerated
because of an Event of Default. If the Company exercises its covenant defeasance
option with respect to a series of Debt Securities, payment of that series of
Debt Securities may not be accelerated because of an Event of Default related to
the specified covenants.
The Company may exercise its legal defeasance option or its covenant
defeasance option with respect to the Debt Securities of a series only if (a)
the Company irrevocably deposits in trust with the Trustee cash or U.S
Government Obligations (as defined in the Indenture) for the payment of
principal, premium, and interest with respect to that series of Debt Securities
to maturity or redemption, as the case may be, (b) the Company delivers to the
Trustee a certificate from a nationally recognized firm of independent
accountants expressing their opinion that the payments of principal and interest
when due and without reinvestment on the deposited U.S. Government Obligations
plus any deposited money without investment will provide cash at such times and
in such amounts as will be sufficient to pay the principal, premium and interest
when due with respect to all the Debt Securities of that series to maturity or
redemption, as the case may be, (c) 123 days pass after the deposit is made and
during the 123-day period no default described in clause (g) or (h) under
"Description of Debt Securities -- Events of Default and Remedies" with respect
to the Company occurs that is continuing at the end of the period, (d) no
Default has occurred and is continuing on the date of the deposit and after
giving effect thereto, (e) the deposit does not constitute a default under any
other agreement binding on the Company and, in the case of Subordinated Debt
Securities, is not prohibited by the provisions of the Indenture relating to
subordination, (f) the Company delivers to the Trustee an opinion of counsel to
the effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company Act of
1940, (g) the Company shall have delivered to the Trustee an opinion of counsel
addressing certain federal income tax matters relating to the defeasance, and
(h) the Company delivers to the Trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent to the defeasance and
discharge of the Debt Securities of the series as contemplated by the Indenture
have been complied with.
The Trustee shall hold in trust cash or U.S. Government Obligations
deposited with it as described above and shall apply the deposited cash and the
proceeds from deposited U.S. Government Obligations to the payment of principal,
premium, and interest with respect to the Debt Securities and coupons of the
defeased series. In the case of Subordinated Debt Securities and coupons related
thereto, the money and U.S. Government Obligations so held in trust will not be
subject to the subordination provisions of the Indenture.
THE TRUSTEE
The Company may appoint a separate Trustee for any series of Debt
Securities. As used herein in the description of a series of Debt Securities,
the term "Trustee" refers to the Trustee appointed with respect to the series of
Debt Securities.
The Company may maintain banking and other commercial relationships with
the Trustee and its affiliates in the ordinary course of business, and the
Trustee may own Debt Securities.
GOVERNING LAW
The Indenture provides that it and the Debt Securities will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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<PAGE> 46
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 500,000,000 shares
of common stock, par value $.01 per share ("Common Stock"), and 100,000,000
shares of preferred stock, par value $.01 per share ("Preferred Stock"), of
which one share has been designated as Special Preferred Voting Stock.
COMMON STOCK
All shares of Common Stock issued under the Registration Statement of which
this Prospectus is a part will be fully paid and nonassessable. The holders of
Common Stock are entitled to one vote for each share held on all matters
submitted to a vote of common stockholders. The Common Stock does not have
cumulative voting rights. Shares of Common Stock have no preemptive rights,
conversion rights, redemption rights or sinking fund provisions. The Common
Stock is not subject to redemption by the Company.
Subject to the rights of the holders of any class of capital stock of the
Company having any preference or priority over the Common Stock, the holders of
Common Stock are entitled to dividends in such amounts as may be declared by the
Board of Directors from time to time out of funds legally available for such
payments and, in the event of liquidation, to share ratably in any assets of the
Company remaining after payment in full of all creditors and provision for any
liquidation preferences on any outstanding preferred stock ranking prior to the
Common Stock.
PREFERRED STOCK
The Board of Directors, without further stockholder action, is authorized
to issue up to 100,000,000 shares of Preferred Stock in one or more series and
to fix and determine as to any series all the relative rights and preferences of
shares in the series, including voting rights, dividend rights, liquidation
preferences, terms of redemption and conversion rights.
Special Preferred Voting Stock
In connection with the Company's acquisition of Chauvco Resources Ltd., an
Alberta, Canada corporation (the "Chauvco Acquisition"), the Board of Directors
has designated one share of the 100,000,000 authorized shares of Preferred Stock
as Special Preferred Voting Stock (the "Voting Share"). The Montreal Trust
Company of Canada, or any successor thereto (for purposes of this discussion,
the "Share Trustee"), shall hold the Voting Share as trustee for and on behalf
of, and for the use and benefit of, the holders of exchangeable shares (the
"Exchangeable Shares") of Pioneer Natural Resources (Canada) Ltd., an
indirectly-owned subsidiary of the Company ("Pioneer Canada"), and in accordance
with the Voting and Exchange Trust Agreement described in "Description of
Capital Stock -- Pioneer Canada Exchangeable Shares." The Certificate of
Designations for the Voting Share includes the following principal terms:
Dividends. No dividend shall be paid to the Share Trustee as the holder of
the Voting Share.
Voting Rights. The Share Trustee, as the holder of record of the Voting
Share, shall be entitled to all of the voting rights attached to the Voting
Share, including the right to consent to or vote in person or by proxy the
Voting Share, on any matter, question or proposition whatsoever that may
properly come before the stockholders of the Company at a meeting thereof or
with respect to any written consent sought by the Company from its stockholders.
For each Exchangeable Share owned of record on the relevant record date, the
holder thereof shall be entitled to instruct the Share Trustee to cast and
exercise, in the manner instructed, a number of votes (including for purposes of
a quorum) equal to the number of votes to which a holder of one share of Common
Stock is entitled with respect to any matter, proposition or question on which
the holders of Common Stock are entitled to vote. Except as otherwise described
herein or required by law, the holder of the Voting Share will vote together
with the Common Stock as a single class and not as a separate class or series
apart therefrom, including any vote to approve or adopt: (i) any plan of merger,
consolidation or share exchange for which Delaware law requires a stockholder
vote; (ii) any disposition of assets for which Delaware law requires a
stockholder vote; and (iii) any dissolution of the Company for which Delaware
law requires a stockholder vote.
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The holders of Exchangeable Shares have the right to submit stockholder
proposals to the Trustee and the Trustee has agreed pursuant to the Voting and
Exchange Trust Agreement to submit any such proposals to the Company. Such
stockholder proposals may be considered at any meeting of the Company at which
the holders of Common Stock of the Company are entitled to submit stockholder
proposals. The Company has agreed pursuant to the Voting and Exchange Trust
Agreement to accept all stockholder proposals submitted by the Trustee provided
that not more than one proposal is submitted by the Trustee on behalf of any one
holder of Exchangeable Shares.
So long as any Exchangeable Shares are outstanding, the number of shares
comprising the Special Preferred Voting Stock will not be increased or
decreased, and no other term of the Special Preferred Voting Stock may be
amended, except upon the approval of the holder of the Voting Share.
Conversion. The Voting Share is not convertible into any other class or
series of the capital stock of the Company or into cash, property or other
rights.
Redemption. The Voting Share may not be redeemed, except when no
Exchangeable Shares are outstanding, in which case the Voting Share will be
automatically redeemed. The redemption price due and payable upon the automatic
redemption will be $1.00. The Voting Share will be deemed retired and will be
canceled upon any purchase or other acquisition thereof by the Company. After
cancellation, the Voting Share may not be reissued or otherwise disposed of by
the Company.
Liquidation. The Voting Share will rank prior to each share of Common Stock
with respect to the distribution of assets upon a liquidation, dissolution or
winding-up of the Company. In the event of any such liquidation, dissolution or
winding-up, the holder of the Voting Share will be entitled to receive a
liquidation preference of $1.00 before any distribution to the holders of Common
Stock, but only after the liquidation preference of any other shares of
preferred stock of the Company has been paid in full.
Certain Covenants of the Company. For so long as the Voting Share is
outstanding, the Company will (i) fully comply with all terms of the
Exchangeable Shares and with all associated contractual obligations of the
Company, and (ii) not amend, alter or repeal the terms and conditions of the
Special Preferred Voting Stock, except with the approval of the holder of the
Voting Share.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Board of Directors is divided into three classes. The
directors of each class are elected for three-year terms, with the terms of the
three classes staggered so that directors from a single class are elected at
each annual meeting of stockholders. Stockholders may remove a director only for
cause. In general, the Board of Directors, not the stockholders, has the right
to appoint persons to fill vacancies on the Board of Directors.
The Amended and Restated Certificate of Incorporation of the Company (the
"Restated Certificate") contains a "fair price" provision that requires the
affirmative vote of the holders of least 80% of the Company's voting stock and
the affirmative vote of at least 66 2/3% of the Company's voting stock not
owned, directly or indirectly, by a Related Person (as defined below) to approve
any merger, consolidation, sale or lease of all or substantially all of the
Company's assets, or certain other transactions involving a Related Person. For
purposes of this fair price provision, a "Related Person" is any person
beneficially owning 10% or more of the voting power of the outstanding capital
stock of the Company who is a party to the transaction at issue. The voting
requirement is not applicable to certain transactions, including those that are
approved by the Continuing Directors (as defined in the Restated Certificate) or
that meet certain "fair price" criteria contained in the Restated Certificate.
The Restated Certificate further provides that stockholders may act only at
annual or special meetings of stockholders and not by written consent, that
special meetings of stockholders may be called only by the Board of Directors,
and that only business proposed by the Board of Directors may be considered at
special meetings of stockholders.
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The Restated Certificate also provides that the only business (including
election of directors) that may be considered at an annual meeting of
stockholders, in addition to business proposed (or persons nominated to be
directors) by the Company's directors, is business proposed (or persons
nominated to be directors) by stockholders who comply with the notice and
disclosure requirements set forth in the Restated Certificate. In general, the
Restated Certificate requires that a stockholder give the Company notice of
proposed business or nominations no later than 60 days before the annual meeting
of stockholders (meaning the date on which the meeting is first scheduled and
not postponements or adjournments thereof) or (if later) ten days after the
first public notice of the annual meeting is sent to common stockholders. In
general, the notice must also contain information about the stockholder
proposing the business or nomination, his interest in the business, and (with
respect to nominations for director) information about the nominee of the nature
ordinarily required to be disclosed in public proxy solicitations. The
stockholder also must submit a notarized letter from each of his nominees
stating the nominee's acceptance of the nomination and indicating the nominee's
intention to serve as director if elected.
The Restated Certificate also restricts the ability of stockholders to
interfere with the powers of the Board of Directors in certain specified ways,
including the constitution and composition of committees and the election and
removal of officers.
The Restated Certificate provides that approval by the holders of at least
66 2/3% of the outstanding voting stock of the Company is required to amend the
provisions of the Restated Certificate discussed above and certain other
provisions, except that (a) approval by the holders of at least 80% of the
outstanding voting stock of the Company together with approval by the holders of
at least 66 2/3% of the outstanding voting stock not owned, directly or
indirectly, by the Related Person, is required to amend the fair price
provisions, and (b) approval of the holders of at least 80% of the outstanding
voting stock of the Company is required to amend the provisions prohibiting
stockholders from acting by written consent.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
the Company's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with the Company for three years
following the date that person becomes an interested stockholder unless (a)
before that person became an interested stockholder, the Board of Directors
approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination, (b) upon completion
of the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85% of the
Company's voting stock outstanding at the time the transaction commenced
(excluding stock held by directors who are also officers of the Company and by
employee stock plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer), or (c) following the transaction in which that person
became an interested stockholder, the business combination is approved by the
Board of Directors and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the outstanding voting
stock of the Company not owned by the interested stockholder.
Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one or certain extraordinary transactions involving the Company
and a person who was not an interested stockholder during the previous three
years or who became an interested stockholder with the approval of a majority of
the Company's directors, if that extraordinary transaction is approved or not
opposed by a majority of the directors before any person became an interested
stockholder in the previous three years or who were recommended for election or
elected to succeed such directors by a majority of such directors then in
office.
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PIONEER CANADA EXCHANGEABLE SHARES
In connection with the Chauvco Acquisition, the Company issued the Voting
Share and entered into the Support Agreement and the Voting and Trust Agreement,
and assumed certain obligations with respect to the Exchangeable Shares issued
by Pioneer Canada. The Exchangeable Shares have the rights and preferences
summarized below.
Voting Rights. The holders of Exchangeable Shares have voting rights or
matters submitted to the holders of the Company's Common Stock as previously
described in "Description of Capital Stock -- Preferred Stock -- Special
Preferred Voting Stock."
Dividends. Holders of Exchangeable Shares will be entitled to receive
dividends equal to dividends paid from time to time by the Company on shares of
the Common Stock. The declaration date, record date and payment date for
dividends on the Exchangeable Shares will be the same as that for the
corresponding dividends on the Common Stock. In the event of the liquidation,
dissolution or winding-up of Pioneer Canada, a holder of Exchangeable Shares
will be entitled to receive for each Exchangeable Share one share of Common
Stock, together with a cash amount equal to the full amount of all unpaid
dividends on the Exchangeable Shares. See "Description of Capital
Stock -- Pioneer Canada Exchangeable Shares -- Voting and Exchange Trust
Agreement." The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be changed only with the approval of the holders
thereof.
Redemption of Exchangeable Shares by Holders. Each Exchangeable Share is
redeemable at the option of the holder for one share of Common Stock plus the
amount equal of unpaid dividends thereon. The redemption price must be delivered
on the date specified by the holder (not less than three nor more than ten
business days after the redemption request) and is payable by Pioneer Canada,
or, if it is unable to do so, by the Company.
Redemption of Exchangeable Shares. Upon at least 120-days prior written
notice by Pioneer Canada to the holders of Exchangeable Shares and subject to
the Company's redemption call right (as described below), on the Automatic
Redemption Date (as defined below) Pioneer Canada will redeem all but not less
than all of the then outstanding Exchangeable Shares for one share of Common
Stock for each Exchangeable Share plus an additional amount equivalent to the
full amount of all unpaid dividends thereon. "Automatic Redemption Date" means
December 18, 2003, unless (a) such date shall be extended at any time or from
time to time to a specified later date by the Board of Directors of Pioneer
Canada but not later than December 31, 2005, or (b) such date shall be
accelerated at any time to a specified earlier date (but no earlier than the
third anniversary of the first issuance of Exchangeable Shares) by the Board of
Directors of Pioneer Canada if at such time there are issued and outstanding
less than 5% of the number of Exchangeable Shares initially issued and
outstanding in the Chauvco Transaction.
Support Agreement
Under the Support Agreement, the Company agreed that: (i) it will not
declare or pay dividends on the Common Stock unless Pioneer Canada is able to
and simultaneously pays an equivalent dividend on the Exchangeable Shares; (ii)
it will advise Pioneer Canada in advance of the declaration of any dividend on
the Common Stock and ensure that the declaration date, record date and payment
date for dividends on the Exchangeable Shares are the same as that for the
Common Stock; (iii) it will take all actions and do all things necessary to
ensure that Pioneer Canada is able to provide to the holders of the Exchangeable
Shares the equivalent number of shares of Common Stock in the event of a
liquidation, dissolution, or winding-up of Pioneer Canada, a redemption request
by a holder of Exchangeable Shares, or a redemption of Exchangeable Shares of
Pioneer Canada; and (iv) it will not vote or otherwise take any action or omit
to take any action causing the liquidation, dissolution or winding-up of Pioneer
Canada.
The Support Agreement also provides that, without the prior approval of
Pioneer Canada and the holders of the Exchangeable Shares, the Company will not
distribute additional shares of Common Stock or rights to subscribe therefor or
other property or assets to all or substantially all holders of shares of Common
Stock, nor change the Common Stock nor effect any tender offer, share exchange
offer, issuer bid, take-over bid or
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similar transaction affecting the Common Stock, unless the same or an equivalent
distribution on or change to the Exchangeable Shares (or in the rights of the
holders thereof) is made simultaneously. The Company has agreed that so long as
there remain outstanding any Exchangeable Shares not owned by the Company or any
entity controlled by the Company, the Company will remain the beneficial owner,
directly or indirectly, of all outstanding shares of Pioneer Canada other than
the Exchangeable Shares.
With certain limited exceptions, the Support Agreement may not be amended
without the approval of the holders of the Exchangeable Shares.
Under the Support Agreement, the Company has agreed not to exercise any
voting rights attached to the Exchangeable Shares owned by it or any entity
controlled by it on any matter considered at meetings of holders of Exchangeable
Shares (including any approval sought from such holders in respect of matters
arising under the Support Agreement).
Voting and Exchange Trust Agreement
Under the terms of the Voting and Exchange Trust Agreement, the Company
will issue and grant to the Share Trustee the (i) rights of the holders of
Exchangeable Shares to direct the voting of the Voting Share in accordance with
the Voting and Exchange Trust Agreement (the "Voting Rights"), and (ii) the
Automatic Exchange Rights (as defined below) and the optional exchange right
granted to the Share Trustee for the use and benefit of the holders of the
Exchangeable Shares pursuant to the Voting and Exchange Trust Agreement to
require the Company to purchase Exchangeable Shares from the holders thereof in
exchange for shares of Common Stock upon the occurrence of a Pioneer Canada
Insolvency Event (as defined herein). "Automatic Exchange Rights" means the
rights granted to the Share Trustee for the benefit of the holders of the
Exchangeable Shares pursuant to the Voting and Exchange Trust Agreement to
automatically exchange the Exchangeable Shares for shares of Common Stock upon a
Pioneer Liquidation Event (as defined herein).
Voting Rights. Under the Voting and Exchange Trust Agreement, the Company
will issue the Voting Share to the Share Trustee for the benefit of the holders
(other than the Company and its subsidiaries) of the Exchangeable Shares. The
Voting Share will have those voting rights with respect to the Company's Common
Stock as previously discussed in "Description of Capital Stock -- Special
Preferred Voting Stock."
Exchange Rights. Under the Voting and Exchange Trust Agreement, the Company
will grant the Exchange Rights (as defined below) to the Trustee for the benefit
of the holders of the Exchangeable Shares. "Exchange Rights" means the Automatic
Exchange Rights and the optional exchange right granted to the Share Trustee for
the use and benefit of the holders of the Exchangeable Shares pursuant to the
Voting and Exchange Trust Agreement to require the Company to purchase
Exchangeable Shares from the holders thereof in exchange for shares of Common
Stock upon the occurrence of a Pioneer Canada Insolvency Event.
Optional Exchange Right. Upon the occurrence and during the continuance of
a Pioneer Canada Insolvency Event, a holder of Exchangeable Shares will be
entitled to instruct the Share Trustee to exercise the optional Exchange Right
with respect to any or all of the Exchangeable Shares held by such holder,
thereby requiring the Company to purchase such Exchangeable Shares from the
holder. Immediately upon the occurrence of a Pioneer Canada Insolvency Event or
any event which may with the passage of time or the giving of notice become a
Pioneer Canada Insolvency Event, Pioneer Canada and the Company will give
written notice thereof to the Share Trustee. As soon as practicable thereafter,
the Trustee will notify each holder of Exchangeable Shares of such event or
potential event and will advise the holder of its rights with respect to the
optional Exchange Right. "Pioneer Canada Insolvency Event" means any insolvency
or bankruptcy proceeding instituted by or against Pioneer Canada, including any
such proceeding under the Companies' Creditors Arrangement Act (Canada) and the
Bankruptcy and Insolvency Act (Canada) and the admission in writing by Pioneer
Canada of its inability to pay its debts generally as they become due and the
inability of Pioneer Canada, as a result of solvency requirements of applicable
law, to redeem any Exchangeable Shares tendered for redemption.
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The consideration for each Exchangeable Share to be acquired under the
optional Exchange Right will be one share of Common Stock plus an additional
amount equivalent to the full amount of all dividends declared and unpaid on the
Exchangeable Share.
If, as a result of liquidity or solvency provisions of applicable law,
Pioneer Canada is unable to redeem all of the Exchangeable Shares tendered for
redemption by a holder in accordance with the Exchangeable Share Provisions, the
holder will be deemed to have exercised the optional Exchange Right with respect
to the unredeemed Exchangeable Shares and the Company will be required to
purchase such shares from the holder in the manner set forth above.
Automatic Exchange Right. In the event of a Pioneer Liquidation Event, the
Company will be required to acquire each outstanding Exchangeable Share by
exchanging one share of Common Stock for each such Exchangeable Share, plus an
additional amount equivalent to the full amount of all declared and unpaid
dividends on the Exchangeable Shares. "Pioneer Liquidation Event" means: (i) any
determination by the Company's Board of Directors to institute voluntary
liquidation, dissolution or winding-up proceedings with respect to the Company
or to effect any other distribution of assets of the Company among its
stockholders for the purpose of winding up its affairs; or (ii) immediately upon
the earlier of (A) receipt by the Company of notice of, and (B) the Company
becoming aware of any threatened or instituted claim, suit, petition or other
proceeding with respect to the involuntary liquidation, dissolution or
winding-up of the Company or to effect any other distribution of assets of the
Company among its stockholders for the purpose of winding-up its affairs.
Delivery of Common Stock
The Company has agreed to ensure that all shares of Common Stock to be
delivered by it under the Support Agreement or on the exercise of the Exchange
Rights under the Voting and Exchange Trust Agreement are duly registered,
qualified or approved under applicable Canadian and United States securities
laws, if required so that such shares may be freely traded by the holder thereof
(other than any restriction on transfer by reason of a holder being a "control
person" of the Company for purposes of Canadian law or an "affiliate" of the
Company for purposes of United States law). In addition, the Company will take
all actions necessary to cause all such shares of Common Stock to be listed or
quoted for trading on all stock exchanges or quotation systems on which
outstanding shares of Common Stock are then listed or quoted for trading.
Call Rights
The following section describes (i) the right of the Company, in the event
of a proposed liquidation, dissolution or winding-up of Pioneer Canada, to
purchase all of the outstanding Exchangeable Shares from the holders thereof on
the effective date of any such liquidation, dissolution or winding-up in
exchange for shares of Common Stock pursuant to the Plan of Arrangement (the
"Liquidation Call Right"), (ii) the right of the Company to purchase all of the
outstanding Exchangeable Shares from the holders thereof on the Automatic
Redemption Date in exchange for shares of Common Stock pursuant to the Plan of
Arrangement, and (iii) the overriding right of the Company, in the event of a
proposed redemption of Exchangeable Shares by a holder thereof, to purchase from
such holder on the redemption date the Exchangeable Shares tendered for
redemption in exchange for shares of Common Stock pursuant to the Exchangeable
Share Provisions.
Optional Redemption by the Holders. Pursuant to the Exchangeable Share
Provisions, a holder requesting Pioneer Canada to redeem the Exchangeable Shares
will be deemed to offer such shares to the Company, and the Company will have an
overriding redemption call right to acquire all but not less than all of the
Exchangeable Shares that the holder has requested Pioneer Canada to redeem in
exchange for one share of Common Stock for each Exchangeable Share, plus an
additional amount equivalent to the full amount of all declared and unpaid
dividends thereon.
At the time of a redemption request by a holder of Exchangeable Shares,
Pioneer Canada will immediately notify the Company. The Company must then advise
Pioneer Canada within two business days as to whether the Company will exercise
its redemption call right. If the Company does not advise Pioneer Canada within
such two business day period, Pioneer Canada will notify the holder as soon as
possible
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thereafter that the Company will not exercise its redemption call right. A
holder may revoke his or her redemption request, at any time prior to the close
of business on the business day preceding the redemption date, in which case the
holder's Exchangeable Shares will neither be purchased by the Company nor
redeemed by Pioneer Canada. If the holder does not revoke his or her redemption
request, on the redemption date the Exchangeable Shares that the holder has
requested Pioneer Canada to redeem will be acquired by the Company (assuming the
Company exercises its redemption call right) or redeemed by Pioneer Canada, as
the case may be, in each case for one share of Common Stock for each
Exchangeable Share plus an additional amount equal to the full amount of all
declared and unpaid dividends on the Exchangeable Shares.
Liquidation Call Right. Pursuant to the Plan of Arrangement, the Company
will be granted an overriding Liquidation Call Right, in the event of and
notwithstanding a proposed Pioneer Canada Insolvency Event, to acquire all but
not less than all of the Exchangeable Shares then outstanding in exchange for
Common Stock and, upon the exercise by the Company of the Liquidation Call
Right, the holders thereof will be obligated to transfer such shares to the
Company. The acquisition by the Company of all of the outstanding Exchangeable
Shares upon the exercise of the Liquidation Call Right will occur on the
effective date of the voluntary or involuntary liquidation, dissolution or
winding-up of Pioneer Canada.
Optional Redemption by the Company. Pursuant to the Plan of Arrangement,
the Company will be granted an overriding redemption call right, notwithstanding
the proposed automatic redemption of the Exchangeable Shares by Pioneer Canada
pursuant to the Exchangeable Share Provisions, to acquire on the Automatic
Redemption Date all but not less than all of the Exchangeable Shares then
outstanding in exchange for Common Stock plus an additional amount equal to the
full amount of all declared and unpaid dividends on the Exchangeable Shares and,
upon the exercise by the Company of the redemption call right, the holders
thereof will be obligated to transfer such shares to the Company.
Effect of Call Right Exercise. If the Company exercises one or more of its
call rights, it will directly issue shares of Common Stock to holders of
Exchangeable Shares and will become the holder of such Exchangeable Shares. The
Company will not be entitled to exercise any voting rights attached to the
Exchangeable Shares it so acquires. If the Company declines to exercise its call
rights when applicable, it will be required, pursuant to the Support Agreement,
to issue shares of Common Stock to Pioneer Canada which will, in turn, transfer
such stock to the holders of Exchangeable Shares in consideration for the return
and cancellation of such Exchangeable Shares.
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in any Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below), Depositary Shares (as
defined below) and Depositary Receipts (as defined below) does not purport to be
complete and is subject to and qualified in its entirety by reference to the
forms of Deposit Agreement and Depositary Receipts to each series of Preferred
Stock that will be filed with the SEC in connection with the offering of the
series of Preferred Stock.
GENERAL
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, the Company will provide for the issuance by a
depositary to the public of receipts for depositary shares ("Depositary
Shares"), each of which will represent fractional interests of a particular
series of Preferred Stock (which will be set forth in the Prospectus Supplement
to a particular series of Preferred Stock).
The shares of any series of Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $50 million. The Prospectus Supplement to a
series of Depositary Shares will set forth the name and address of the
depositary with respect to the Depositary Shares. Subject to the terms of the
Deposit Agreement, each owner of Depositary Shares will be entitled, in
proportion to the applicable fractional
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interests in shares of Preferred Stock underlying the Depositary Shares, to all
the rights and preferences of the Preferred Stock underlying the Depositary
Shares (including dividend, voting, redemption, conversion, and liquidation
rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). Depositary
Receipts will be distributed to those persons purchasing the fractional
interests in shares of the related series of Preferred Stock in accordance with
the terms of the offering described in the related Prospectus Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions received with respect to Preferred Stock to the record holders of
Depositary Shares to the Preferred Stock in proportion to the numbers of the
Depositary Shares owned by the holders on the relevant record date. The
depositary shall distribute only the amount, however, as can be distributed
without attributing to any holder of Depositary Shares a fraction of one cent,
and the balance not so distributed shall be added to and treated as part of the
next sum received by the depositary for distribution to record holders of
Depositary Shares.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the depositary determines that it is not feasible to
make the distribution, in which case the depositary may, with the approval of
the Company, sell the property and distribute the net proceeds from the sale to
the holders.
The Deposit Agreement will also contain provisions to the manner in which
any subscription or similar rights offered by the Company to holders of the
Preferred Stock shall be made available to the holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the depositary resulting from the redemption, in whole or in part,
of the series of the Preferred Stock held by the depositary. The depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary Shares
to be so redeemed at their respective addresses appearing in the depositary's
books. The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to the series of
the Preferred Stock. Whenever the Company redeems shares of Preferred Stock held
by the depositary, the depositary will redeem as of the same redemption date the
number of Depositary Shares to shares of Preferred Stock so redeemed. If less
than all the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected by lot or pro rata as may be determined by the
depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be outstanding and all rights of the holders of the
Depositary Shares will cease, except the right to receive the money, securities,
or other property payable upon the redemption and any money, securities, or
other property to which the holders of the Depositary Shares were entitled upon
the redemption upon surrender to the depositary of the Depositary Receipts
evidencing the Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the Depositary Shares to the
Preferred Stock. Each record holder of the Depositary Shares on the record date
(which will be the same date as the record date for the Preferred Stock) will be
entitled to instruct the depositary as to the exercise of the voting rights
pertaining to the number of shares of Preferred Stock underlying the holder's
Depositary Shares. The depositary will endeavor, insofar as practicable, to vote
the number of shares of Preferred Stock underlying the Depositary Shares in
accordance with the instructions, and the Company will
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agree to take all action that may be deemed necessary by the depositary in order
to enable the depositary to do so.
AMENDMENT AND TERMINATION OF DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the depositary. However, any amendment that materially
and adversely alters the rights of the existing holders of Depositary Shares
will not be effective unless the amendment has been approved by the record
holders of at least a majority of the Depositary Shares then outstanding. A
Deposit Agreement may be terminated by the Company or the depositary only if (a)
all outstanding Depositary Shares thereto have been redeemed or, (b) there has
been a final distribution with respect to the Preferred Stock of the relevant
series in connection with any liquidation, dissolution, or winding up of the
Company and the distribution has been distributed to the holders of the related
Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the depositary in connection with the initial deposit of the
Preferred Stock and any redemption of the Preferred Stock. Holders of Depositary
Shares will pay transfer and other taxes and governmental charges and the other
charges as are expressly provided in the Deposit Agreement to be for their
accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the depositary,
any such resignation or removal to take effect upon the appointment of a
successor depositary and its acceptance of the appointment. The successor
depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50 million.
MISCELLANEOUS
The depositary will forward to the holders of Depositary Shares all reports
and communications from the Company that are delivered to the depositary and
that the Company is required to furnish to the holders of the Preferred Stock.
Neither the depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding with respect to any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or information provided by persons presenting
Preferred Stock for deposit, holders of Depositary Shares, or other persons
believed to be competent and on documents believed to be genuine.
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<PAGE> 55
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Debt Securities,
Preferred Stock or Common Stock. Warrants may be issued independently or
together with Debt Securities, Preferred Stock or Common Stock offered by any
Prospectus Supplement and may be attached to or separate from any such Offered
Securities. Each series of Warrants will be issued under a separate warrant
agreement (a "Warrant Agreement") to be entered into between the Company and a
bank or trust company, as warrant agent (the "Warrant Agent"). The Warrant Agent
will act solely as an agent of the Company in connection with the Warrants and
will not assume any obligation or relationship of agency or trust for or with
any holders or beneficial owners of Warrants. The following summary of certain
provisions of the Warrants does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the Warrant
Agreement that will be filed with the SEC in connection with the offering of the
Warrants.
DEBT WARRANTS
The Prospectus Supplement to a particular issue of Debt Warrants will
describe the terms of the Debt Warrants, including the following: (a) the title
of the Debt Warrants; (b) the offering price for the Debt Warrants, if any; (c)
the aggregate number of the Debt Warrants; (d) the designation and terms of the
Debt Securities purchasable upon exercise of the Debt Warrants; (e) if
applicable, the designation and terms of the Debt Securities with which the Debt
Warrants are issued and the number of the Debt Warrants issued with each Debt
Security; (f) if applicable, the date from and after which the Debt Warrants and
any Debt Securities issued therewith will be separately transferable; (g) the
principal amount of Debt Securities purchasable upon exercise of a Debt Warrant
and the price at which the principal amount of Debt Securities may be purchased
upon exercise (which price may be payable in cash, securities, or other
property); (h) the date on which the right to exercise the Debt Warrants shall
commence and the date on which the right shall expire; (i) if applicable, the
minimum or maximum amount of the Debt Warrants that may be exercised at any one
time; (j) whether the Debt Warrants represented by the Debt Warrant certificates
or Debt Securities that may be issued upon exercise of the Debt Warrants will be
issued in registered or bearer form; (k) information with respect to book- entry
procedures, if any; (l) the currency or currency units in which the offering
price, if any, and the exercise price are payable; (m) if applicable, a
discussion of material United States federal income tax considerations; (n) the
antidilution provisions of the Debt Warrants, if any; (o) the redemption or call
provisions, if any, applicable to the Debt Warrants; and (p) any additional
terms of the Debt Warrants, including terms, procedures, and limitations to the
exchange and exercise of the Debt Warrants.
STOCK WARRANTS
The Prospectus Supplement to any particular issue of Preferred Stock
Warrants or Common Stock Warrants will describe the terms of the Warrants,
including the following: (a) the title of the Warrants; (b) the offering price
for the Warrants, if any; (c) the aggregate number of the Warrants; (d) the
designation and terms of the Common Stock or Preferred Stock purchasable upon
exercise of the Warrants; (e) if applicable, the designation and terms of the
Offered Securities with which the Warrants are issued and the number of the
Warrants issued with each Offered Security; (f) if applicable, the date from and
after which the Warrants and any Offered Securities issued therewith will be
separately transferable; (g) the number of shares of Common Stock or Preferred
Stock purchasable upon exercise of a Warrant and the price at which the shares
may be purchased upon exercise (which price may be payable in cash, securities,
or other property); (h) the date on which the right to exercise the Warrants
shall commence and the date on which the right shall expire; (i) if applicable,
the minimum or maximum amount of the Warrants that may be exercised at any one
time; (j) the currency or currency units in which the offering price, if any,
and the exercise price are payable; (k) if applicable, a discussion of material
United States federal income tax considerations; (l) the antidilution provisions
of the Warrants, if any; (m) the redemption or call provisions, if any,
applicable to the Warrants; and (n) any additional terms of the Warrants,
including terms, procedures and limitations to the exchange and exercise of the
Warrants.
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<PAGE> 56
DESCRIPTION OF GUARANTEES
Pioneer USA may issue Guarantees in connection with Debt Securities offered
by any Prospectus Supplement. The following summary of certain provisions of the
Guarantees does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the form of Guarantee that will
be filed with the SEC in connection with the offering of Guarantees. Each
Guarantee will be issued under the Indenture. The Prospectus Supplement to a
particular issue of Guarantees will describe the terms of the Guarantees,
including the following: (a) the series of Debt Securities to which the
Guarantees apply; (b) whether the Guarantees are secured or unsecured; (c)
whether the Guarantees are conditional or unconditional; (d) whether the
Guarantees are senior or subordinate to other Guarantees or debt; (e) the terms
under which the Guarantees may be amended, modified, waived, released or
otherwise terminated, if different from the provisions applicable to the
guaranteed Debt Securities; and (f) any additional terms of the Guarantees.
PLAN OF DISTRIBUTION
The Company or Pioneer USA may sell the Offered Securities within or
outside the United States through underwriters, brokers or dealers, directly to
one or more purchasers, or through agents. The Prospectus Supplement with
respect to the Offered Securities will set forth the terms of the offering of
the Offered Securities, including the name or names of any underwriters, dealers
or agents, the purchase price of the Offered Securities and the proceeds to the
Company or Pioneer USA from the sale, any delayed delivery arrangements, any
underwriting discounts and other items constituting underwriters' compensation,
the initial public offering price, any discounts or concessions allowed or
reallowed or paid to dealers, and any securities exchanges on which the Offered
Securities may be listed.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement to the offering, and if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth on
the cover of the Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters or
agents to purchase the Offered Securities will be subject to conditions
precedent and the underwriters will be obligated to purchase all the Offered
Securities if any are purchased. The initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
The Company or Pioneer USA may also sell the Offered Securities pursuant to
one or more standby agreements with one or more underwriters in connection with
the call for redemption of a specified class or series of any securities of the
Company or any subsidiary of the Company. In such a standby agreement, the
underwriter or underwriters would agree either (a) to purchase from the Company
up to the number of shares of Common Stock that would be issuable upon
conversion of all the shares of the class or series of securities of the Company
or its subsidiary at an agreed price per share of Common Stock, or (b) to
purchase from the Company or Pioneer USA up to a specified dollar amount of
Offered Securities at an agreed price per Offered Security which price may be
fixed or may be established by formula or other method and which may or may not
relate to market prices of the Common Stock or any other security of the Company
then outstanding. The underwriter or underwriters would also agree, if
applicable, to convert into Common Stock or other security of the Company any
securities of the class or series held or purchased by the underwriter or
underwriters. The underwriter or underwriters may assist in the solicitation of
conversions by holders of the class or series of securities.
If dealers are used in the sale of Offered Securities with respect to which
this Prospectus is delivered, the Company or Pioneer USA will sell the Offered
Securities to the dealers as principals. The dealers may then resell the Offered
Securities to the public at varying prices to be determined by the dealers at
the time of
28
<PAGE> 57
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement thereto.
Offered Securities may be sold directly by the Company or Pioneer USA or
through agents designated by the Company or Pioneer USA from time to time at
fixed prices, which may be changed, or at varying prices determined at the time
of sale. Any agent involved in the offer or sale of the Offered Securities with
respect to which this Prospectus is delivered will be named, and any commissions
payable by the Company to the agent will be set forth, in the Prospectus
Supplement thereto. Unless otherwise indicated in the Prospectus Supplement, any
agent will be acting on a best efforts basis for the period of its appointment.
In connection with the sale of the Offered Securities, underwriters or
agents may receive compensation from the Company or Pioneer USA or from
purchasers of Offered Securities for whom they may act as agents in the form of
discounts, concessions, or commissions. Underwriters, agents, and dealers
participating in the distribution of the Offered Securities may be deemed to be
underwriters, and any discounts or commissions received by them from the Company
or Pioneer USA and any profit on the resale of the Offered Securities by them
may be deemed to be underwriting discounts or commissions under the Securities
Act.
If so indicated in the Prospectus Supplement, the Company or Pioneer USA
will authorize agents, underwriters or dealers to solicit offers from certain
types of institutions to purchase Offered Securities from the Company or Pioneer
USA at the public offering price set forth in the Prospectus Supplement pursuant
to delayed delivery contracts providing for payment and delivery on a specified
date in the future. The contracts will be subject only to those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commission payable for solicitation of the contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company or Pioneer USA to indemnification by the Company or
Pioneer USA against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments that the agents,
dealers or underwriters may be required to make with respect thereto. Agents,
dealers and underwriters may be customers of, engage in transactions with, or
perform services for the Company or Pioneer USA in the ordinary course of
business.
The Offered Securities may or may not be listed on a national securities
exchange. No assurances can be given that there will be a market for the Offered
Securities.
LEGAL OPINIONS
Certain legal matters in connection with the Offered Securities will be
passed upon for the Company and Pioneer USA by Vinson & Elkins L.L.P., Dallas,
Texas, and for any underwriters or agents by a firm named in the Prospectus
Supplement to a particular issue of Offered Securities.
EXPERTS
The Consolidated Financial Statements of the Company (successor to Parker &
Parsley and subsidiaries) have been incorporated by reference in this
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, and upon the authority of said firm as
experts in accounting and auditing. The report of KPMG Peat Marwick LLP refers
to a change in the method of accounting for the impairment of long-lived assets
and for long-lived assets to be disposed of in 1995 and a change in the method
of accounting for income taxes in 1993.
The Consolidated Financial Statements of Mesa incorporated by reference in
this Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said report.
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<PAGE> 58
The Financial Statements of Greenhill Petroleum Corporation incorporated by
reference in this Registration Statement, have been incorporated herein in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The Consolidated Financial Statements of Chauvco Resources Ltd.
incorporated by reference in this Registration Statement have been audited by
Price Waterhouse, chartered accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report.
The estimates of the proved reserves of the Company (successor to Parker &
Parsley and subsidiaries) as of December 31, 1996, incorporated by reference in
this Registration Statement, are based upon a reserve report prepared by the
Company and audited by Netherland, Sewell & Associates, Inc., independent
petroleum consultants, and are incorporated by reference herein upon the
authority of such firm as experts with respect to such matters covered by such
report.
The estimates of Mesa's proved reserves as of December 31, 1996,
incorporated by reference in this Registration Statement with respect to its
Hugoton and West Panhandle field properties are based upon a reserve report
prepared by Williamson Petroleum Consultants, Inc., independent petroleum
consultants, and are incorporated by reference herein upon the authority of such
firm as experts with respect to such matters covered by such report. The
estimates of Greenhill Petroleum Corporation's proved reserves as of December
31, 1996, incorporated by reference in this Registration Statement pursuant to
items 10 and 16 under the section entitled "Incorporation of Certain Documents
By Reference" in this Registration Statement, are based upon a reserve report
prepared by Miller and Lents, Ltd., independent petroleum consultants, and are
incorporated by reference herein upon the authority of such firm as experts with
respect to such matters covered by such report.
The estimates of Chauvco Resources Ltd. proved reserves as of December 31,
1996, incorporated by reference in this Registration Statement, are based upon
reserve reports prepared by Gilbert Lausten Jung Associates, Ltd. and Martin
Petroleum and Associates, independent petroleum consultants, and are
incorporated by reference herein upon the authority of such firm as experts with
respect to such matters covered by such report.
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<PAGE> 59
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE 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 AND THEREUNDER 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
Forward-Looking Statements............ S-2
Summary............................... S-3
Use of Proceeds....................... S-13
Capitalization........................ S-14
Description of Notes.................. S-14
Underwriting.......................... S-26
Legal Opinions........................ S-28
Independent Auditors.................. S-28
Reserve Engineers..................... S-28
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Issuers........................... 3
Use of Proceeds....................... 4
Ratios of Earnings to Fixed Charges
and Earnings to Fixed Charges and
Preferred Stock Dividends........... 4
Description of Debt Securities........ 4
Description of Capital Stock.......... 18
Description of Depositary Shares...... 24
Description of Warrants............... 27
Description of Guarantees............. 28
Plan of Distribution.................. 28
Legal Opinions........................ 29
Experts............................... 29
</TABLE>
======================================================
======================================================
PIONEER NATURAL
RESOURCES COMPANY
$350,000,000
6.50% SENIOR NOTES DUE 2008
$250,000,000
7.20% SENIOR NOTES DUE 2028
LOGO
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PROSPECTUS SUPPLEMENT
JANUARY 8, 1998
-------------
SALOMON SMITH BARNEY
CHASE SECURITIES INC.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES
======================================================
