<PAGE>
RULE NO. 424(A)
REGISTRATION NO. 33-66516
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS SUPPLEMENT IS SUBJECT TO +
+COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE +
+SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THAT A FINAL PROSPECTUS SUPPLEMENT IS DELIVERED. THIS PROSPECTUS +
+SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO +
+SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD +
+BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT (Subject to Completion, Issued February 11, 1994)
(To Prospectus dated November 12, 1993)
2,000,000 Shares
Western Gas Resources, Inc.
LOGO
$ CUMULATIVE CONVERTIBLE PREFERRED STOCK
(Liquidation Preference $50 Per Share)
-----------
The $ Cumulative Convertible Preferred Stock (the "Convertible Preferred
Stock") of the Company is convertible at the option of the holder, at any
time, unless previously redeemed, into common stock, par value $.10 per
share (the "Common Stock"), of the Company at a conversion price of
$ per share of Common Stock (equivalent to a conversion rate of
shares of Common Stock for each share of Convertible
Preferred Stock), subject to adjustment in certain events. The
Company's Common Stock is listed on the New York Stock Exchange
under the symbol "WGR." On February 10, 1994, the reported
last sale price of the Common Stock on the NYSE Composite
Tape was $33 3/4 per share.
-----------
THE CONVERTIBLE PREFERRED STOCK IS REDEEMABLE AT ANY TIME ON OR AFTER ,
1997, IN WHOLE OR IN PART, AT THE OPTION OF THE COMPANY, INITIALLY AT A
REDEMPTION PRICE OF $ PER SHARE AND THEREAFTER AT PRICES DECLINING
TO $50.00 PER SHARE ON OR AFTER , 2004 PLUS AN AMOUNT EQUAL TO
DIVIDENDS ACCRUED BUT UNPAID TO THE DATE FIXED FOR REDEMPTION.
DIVIDENDS ON THE CONVERTIBLE PREFERRED STOCK WILL BE
CUMULATIVE FROM THE DATE OF ISSUANCE AND PAID QUARTERLY,
COMMENCING MAY 15, 1994.
-----------
APPLICATION WILL BE MADE TO LIST THE CONVERTIBLE PREFERRED STOCK ON THE NEW
YORK STOCK EXCHANGE.
-----------
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. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $50 A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) COMPANY (3)
----------- --------------- -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total (4)............................... $ $ $
</TABLE>
- -----
(1) Plus accrued dividends, if any, from the date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Company estimated to be
approximately $ .
(4) The Company has granted to the Underwriters an option, exercisable within
30 days of the date hereof, to purchase up to 300,000 additional shares of
Convertible Preferred Stock at the price to public less underwriting
discounts and commissions for the purpose of covering over-allotments, if
any. If the Underwriters exercise such option in full, the total price to
public, total underwriting discounts and commissions and total proceeds to
Company will be $ , $ , and $ , respectively. See
"Underwriters."
-----------
The Convertible Preferred Stock is offered, subject to prior sale, when, as
and if accepted by the Underwriters and subject to approval of certain legal
matters by Davis Polk & Wardwell, counsel for the Underwriters. It is expected
that delivery of the Convertible Preferred Stock will be made on or about
February , 1994 at the office of Morgan Stanley & Co. Incorporated, New York,
N.Y., against payment therefor in New York funds.
-----------
MORGAN STANLEY & CO. DONALDSON, LUFKIN & JENRETTE
Incorporated
Securities Corporation
February , 1994
<PAGE>
[INSERT MAP HERE]
S-2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
PROSPECTUS SUPPLEMENT
<S> <C>
Incorporation of Certain Documents by Reference........................... S-4
Summary................................................................... S-5
Business.................................................................. S-11
Use of Proceeds........................................................... S-17
Price Range of Common Stock and Dividend Policy........................... S-18
Capitalization............................................................ S-19
Pro Forma Consolidated Financial Statements............................... S-20
Description of Capital Stock.............................................. S-25
Certain Federal Income Tax Considerations................................. S-32
Underwriters.............................................................. S-36
Legal Matters............................................................. S-37
Experts................................................................... S-37
PROSPECTUS
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 3
Western Gas Resources, Inc................................................ 3
Consolidated Ratios of Earnings to Fixed Charges and Earnings to Fixed
Charges
and Preferred Stock Dividends............................................ 3
Use of Proceeds........................................................... 4
Description of Debt Securities............................................ 4
Description of Capital Stock.............................................. 11
Plan of Distribution...................................................... 22
Legal Opinions............................................................ 23
Experts................................................................... 23
</TABLE>
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CONVERTIBLE
PREFERRED STOCK OFFERED HEREBY, THE $2.28 CUMULATIVE PREFERRED STOCK OR THE
COMMON STOCK AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) Annual Report on Form 10-K for the year ended December 31,
1992 (the "Form 10-K"), (ii) Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 1993 (the "Forms 10-Q"), (iii) Proxy
Statement for the Annual Meeting of Stockholders held on May 24, 1993 and (iv)
Current Reports on Form 8-K dated July 22, 1993, August 9, 1993 and October 4,
1993, each as amended by Form 8-K/A dated October 11, 1993, and the Current
Reports on Form 8-K dated January 31, 1994 and February 10, 1994 (collectively,
the "Forms 8-K"), all of which have previously been filed by the Company with
the Securities and Exchange Commission (the "SEC"), are incorporated by
reference in this Prospectus. As used herein, "Prospectus" shall mean this
Prospectus Supplement and the Prospectus dated November 12, 1993, unless the
context requires otherwise.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Convertible Preferred Stock made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus 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
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, upon the written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated by reference herein (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to John C. Walter, Vice
President-General Counsel and Secretary, Western Gas Resources, Inc., 12200
North Pecos Street, Denver, Colorado 80234-3439 (telephone (303) 452-5603).
S-4
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and in the Form 10-K, the Forms 10-Q and the Forms
8-K, which are incorporated by reference herein. Unless otherwise indicated,
the information in this Prospectus assumes that the Underwriters' over-
allotment option will not be exercised. Unless the context requires otherwise,
references to the "Company" refer to Western Gas Resources, Inc. and its
subsidiaries and predecessor.
THE COMPANY
The Company is a leading independent gas gatherer and processor with
operations in major gas-producing basins in the Rocky Mountain, Gulf Coast and
Southwestern regions of the United States. The Company owns and operates
natural gas gathering, processing and storage facilities and markets and
transports natural gas and natural gas liquids ("NGLs"). The Company provides
necessary services to the producers of natural gas and NGLs by connecting
producers' wells to the Company's gathering systems for delivery to its
processing plants, processing the natural gas to remove NGLs and by-products
and marketing the natural gas and NGLs throughout the United States. The
Company believes that its commitment to its gathering and processing operations
has established it as a reliable source of natural gas and NGLs, further
enhancing the Company's marketing capabilities.
Since its formation in 1977, the Company's strategy has been to expand
through acquisitions and internal project development. The Company's
acquisitions since January 1, 1988 include 19 gas gathering and processing
systems. Over the same period, gas throughput increased 880% to 901 MMcf/D for
the nine months ended September 30, 1993. The Company's internal projects
include the design and construction of its own gas gathering, processing and
storage facilities. Since 1988, the Company has designed and constructed three
processing plants and one natural gas storage facility and has substantially
increased the processing capacity at two other facilities.
The Company believes that its growth and success will continue to be
attributable primarily to its (i) record and reputation as an efficient,
dependable and technically resourceful provider of gathering, processing,
marketing and storage services, (ii) expertise in developing and operating
facilities which allows it to respond quickly to changing market conditions and
(iii) ability to identify and acquire attractive assets. To implement its
growth strategy more effectively, in 1993 the Company organized its gathering
and processing activities into three operating regions, enabling it to provide
producers with timely and reliable services and to identify regional expansion
opportunities.
RECENT DEVELOPMENTS
During 1993, the Company continued its expansion by completing a series of
acquisitions, forming a joint venture and continuing development of the Katy
Hub and Gas storage facility (the "Katy Facility"), located near Houston,
Texas, which has recently commenced operations. These activities have
strengthened the Company's position in several major producing basins and
expanded its access to multiple natural gas markets, including the East Coast
markets which the Company had not previously serviced. The table below
describes the Company's growth from December 31, 1992 to September 30, 1993:
<TABLE>
<CAPTION>
AVERAGE FOR THE YEAR ENDED
DECEMBER 31, 1992 OR FOR THE
NINE MONTHS ENDED SEPTEMBER 30,
1993
GAS GAS --------------------------------
GATHERING THROUGHOUT GAS GAS NGL
SYSTEMS CAPACITY THROUGHOUT PRODUCTION PRODUCTION
PLANTS (MILES) (MMCF/D) (MMCF/D) (MMCF/D) (MGAL/D)
------ --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1992....... 30 9,788 1,117 625 331 1,874
September 30, 1993...... 32 10,329 1,547 901(1) 574(1) 2,262(1)
% growth................ 7% 6% 38% 44% 73% 21%
</TABLE>
- --------
(1) Pro forma to give effect to the Mountain Gas Resources, Inc. and Black Lake
gas processing plant and related reserves acquisitions described below as
if such acquisitions had been completed on January 1, 1993.
S-5
<PAGE>
MOUNTAIN GAS
On July 29, 1993, effective January 1, 1993, the Company expanded its
presence in the Green River basin of southwestern Wyoming through the
acquisition of Mountain Gas Resources, Inc. ("Mountain Gas") from Morgan
Stanley Leveraged Equity Fund II, L.P. for total consideration of approximately
$164.6 million. The Mountain Gas acquisition represents a major growth
opportunity for the Company. Southwestern Wyoming has become a leading area for
new gas well drilling and is estimated by the U.S. Geological Survey to be one
of the largest undeveloped gas regions remaining in the United States. The
Mountain Gas acquisition has enhanced the Company's marketing capabilities
through access to additional major natural gas markets.
Mountain Gas owns the Red Desert facility, which has a capacity of 40 MMcf/D,
and the Granger facility, which has a capacity of 210 MMcf/D, both of which are
located near the Company's Lincoln Road gas processing plant and gathering
system. The 22% interest in the Granger facility previously not owned by
Mountain Gas was purchased by the Company in two separate transactions in
November and December 1993 for an aggregate of $27.7 million. In December 1993
the Company completed construction of a 100 MMcf/D cryogenic processing plant
at Granger to take advantage of increased drilling activity. Increased drilling
activity has resulted in increased well connections and gas throughput at the
Mountain Gas facilities.
In December 1993, a fire at the Granger facility's NGL tank farm required the
facility to be shut down for one week. The facility has since been able to
maintain gas throughput at approximately the same levels as prior to the fire,
and the Company expects it to be fully operational in May 1994 when the
construction of a new tank farm is expected to be completed. The new 100 MMcf/D
cryogenic processing plant as well as a smaller existing 30 MMcf/D cryogenic
unit were damaged and are expected to be operational in May 1994. The Company
believes that insurance will cover, subject to certain deductibles,
substantially all of the costs related to rebuilding the NGL tank farm and the
other affected facilities, the interruption of business and third-party claims,
if any. The Company does not expect uninsured losses, if any, to be material.
BLACK LAKE
In September 1993, the Company acquired the Black Lake gas processing plant
and related reserves ("Black Lake") from Nerco Oil and Gas, Inc. ("Nerco") for
approximately $134 million. The acquisition included a 68.9% working interest
in the Black Lake field in Louisiana and a 180 MMcf/D gas processing plant. The
net proved reserves (as determined by an independent consultant on behalf of
the seller) related to the purchased interests of Black Lake as of January 1,
1993 were approximately 94 Bcf of gas, 305 MBbl of oil and 150 MMGal of NGLs.
During September 1993, Black Lake produced an average of 77.0 MMcf/D of natural
gas and 163.8 MGal/D of NGLs.
The Company is in the process of increasing the efficiency of Black Lake's
processing capabilities with the installation of a cryogenic processing plant
at a cost of approximately $3.75 million, which, when completed, will decrease
fuel usage and plant operating expenses as well as provide flexibility to
recover or reject ethane. The Company has also begun a program to significantly
reduce payroll and contract labor costs. The Company believes that the Black
Lake acquisition has enhanced its marketing opportunities by providing a
reliable additional source of natural gas and NGLs for numerous natural gas
markets as well as for the Katy Facility.
WESTANA JOINT VENTURE
Effective August 1, 1993, the Company expanded its presence in the Anadarko
Basin in Oklahoma through the formation of a general partnership, Westana
Gathering Company ("Westana"), with Panhandle Eastern Pipe Line Company
("PEPL"). Westana provides gas gathering and processing services and markets
residue gas and NGLs for producers connected to its system. The Company is the
principal operator with each partner holding a 50% ownership interest.
S-6
<PAGE>
The Company contributed its Chester gas processing plant and gathering system
to Westana. Westana also operates PEPL's 400 mile gathering system, which will
be contributed to Westana, after abandonment approval by the Federal Energy
Regulatory Commission ("FERC"). The Company expects Westana to increase gas
throughput by lowering gathering pressures and by actively pursuing new well
connections.
KATY FACILITY DEVELOPMENT AND RELATED MARKETING EXPANSION
In order to meet the peaking demand for natural gas in certain markets, the
Company designed and is completing the construction of the Katy Facility which
has recently commenced operations. The ability to withdraw gas from the Katy
Facility on short notice positions the Company to market natural gas to local
distribution companies ("LDCs") and other customers that need a reliable yet
variable supply of natural gas. The Katy Facility will also allow the Company
to bypass transportation bottlenecks and enhance flexibility in its marketing
operations. The complex will consist of a natural gas reservoir with over 17
Bcf of working gas and the ability to deliver up to 400 MMcf/D of natural gas
as well as a pipeline header system with up to 13 interconnecting pipelines.
The pipeline header system together with the Black Lake acquisition will
provide access to markets in the Midwest and on the East Coast not previously
serviced by the Company.
In December 1993, the Company entered into a three-year winter-peaking gas
purchase and sales agreement with a major utility in East Texas with the
primary delivery point being the Katy Facility. Under the agreement, the
utility has the right to purchase, during each year of the contract, up to
approximately 30,000 MMBtu of gas per day in November and March and 70,000
MMBtu of gas per day in December, January and February, determined daily, at
the Houston Ship Channel Index Price plus a demand charge. The agreement calls
for minimum delivery of 3 million MMBtu and a maximum delivery of 6 million
MMBtu of natural gas per year.
As part of its strategy to penetrate East Coast markets and to utilize Black
Lake and the Katy Facility more effectively, in July 1993 the Company acquired
the assets of Citizens National Gas Company ("Citizens") which was
headquartered in Boston, Massachusetts. The acquisition provides the Company
with an established East Coast marketing operation which sold an average of
approximately 350 MMcf/D of natural gas during the first six months of 1993.
FISCAL 1993 EARNINGS ANNOUNCEMENT
For the year ended December 31, 1993, the Company's revenues increased 55%
over the same period in 1992 to $932.3 million, cash flow from operations
increased 18% to $89.6 million and net income decreased 4% to $38.1 million.
Exclusive of an $.11 per share of Common Stock gain from the sale of a 20%
interest in the Company's Midkiff/Benedum facility in 1992, an $.08 per share
charge in 1993 resulting from the recent increase in corporate income tax rates
and a $.07 per share charge in 1993 related to increased litigation reserves,
net income for 1993 increased 14% to $42.0 million, or $1.40 per share compared
to $1.32 per share.
For the three months ended December 31, 1993 revenues increased 46% over the
same period in 1992 to $291.7 million, cash flow from operations increased 8%
to $25.9 million and net income decreased 26% to $9.8 million. Exclusive of the
$.11 per share of Common Stock gain and the $.07 per share charge, as noted
above, net income for the three months ended December 31, 1993 increased 12% to
$11.5 million and earnings per share of common stock for the three months ended
December 31, 1993 increased $.03 to $.39 per share.
The acquisitions of Mountain Gas and Black Lake during 1993, as well as
significant well connect activity in certain operating areas, particularly
Midkiff/Benedum, Giddings, Lincoln Road and the Oklahoma areas helped achieve
record sales volumes of natural gas and NGLs for the year and fourth quarter
ended December 31, 1993. Average gas sales volumes increased 71% to 755 MMcf/D
and 90% to 1,041 MMcf/D
S-7
<PAGE>
for the year and three months ended December 31, 1993, respectively, when
compared to the same periods in 1992. Average gas sales volumes also increased
as a result of the 1993 acquisition of Citizens. Average NGL sales volumes
increased 23% to 2,941 MGal/D and 26% to 3,377 MGal/D for the year and three
months ended December 31, 1993, respectively, when compared to the same periods
in 1992.
Average gas prices for the year ended December 31, 1993 increased 17%
compared to the same period in 1992 to $2.02 per Mcf, although during the three
months ended December 31, 1993 they decreased 4% compared to the same period in
1992 to $2.06 per Mcf. Average NGL prices for the year ended December 31, 1993
decreased 3% compared to the same period in 1992 to $.31 per gallon, and during
the three months ended December 31, 1993 they decreased 16% compared to the
same period in 1992 to $.27 per gallon. The lower prices for natural gas and
NGLs during the three months ended December 31, 1993 were largely offset by the
positive impact of sales volume gains for natural gas and NGLs.
The following table sets forth certain financial and operating statistics for
the three months and years ended December 31, 1993 and 1992.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- ------------------------
1993 1992 1993 1992
----------- ----------- ----------- -----------
($000S, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C>
FINANCIAL STATISTICS:
Revenues....................... $ 291,655 $ 200,170 $ 932,338 $ 600,116
Net income..................... 9,788 13,182 38,102 39,688
Earnings per share of common
stock......................... .32 .47 1.25 1.43
Cash flow from operations...... 25,915 23,894 89,598 75,976
Weighted average common shares
outstanding................... 25,640,574 25,502,310 25,608,503 25,453,029
OPERATING STATISTICS:
Average gas sales (MMcf/D)..... 1,041 549 755 442
Average NGL sales (MGal/D)..... 3,377 2,689 2,941 2,400
Average gas prices ($/Mcf)..... $ 2.06 $ 2.14 $ 2.02 $ 1.72
Average NGL prices ($/Gal)..... $ .27 $ .32 $ .31 $ .32
</TABLE>
S-8
<PAGE>
THE OFFERING
Securities offered................. 2,000,000 shares of Convertible
Preferred Stock, par value $.10 per
share.
Ranking............................ On a parity with the 7.25% Cumulative
Senior Perpetual Convertible Preferred
Stock and the $2.28 Cumulative
Preferred Stock outstanding with
respect to dividends and liquidation
preference. See "Description of Capital
Stock."
Dividends.......................... Cumulative from the date of original
issue at an annual rate of per
share, payable quarterly out of funds
legally available therefor, commencing
May 15, 1994. Dividends will accrue
from the date of issuance and are
payable when, as and if declared by the
Board of Directors of the Company.
Liquidation preference............. $50.00 per share plus accrued and
unpaid dividends.
Optional redemption................ The Convertible Preferred Stock is not
redeemable prior to , 1997.
On or after such date, the Convertible
Preferred Stock is redeemable, in whole
or in part, at the option of the
Company, initially at a redemption
price of $ per share and thereafter
at prices declining to $50.00 per share
on or after , 2004 plus an
amount equal to dividends accrued and
unpaid to the date fixed for
redemption.
Conversion rights.................. The Convertible Preferred Stock is
convertible at the option of the holder
at any time, unless previously
redeemed, into shares of the Company's
Common Stock at a conversion price of
$ per share of Common Stock
(equivalent to a conversion rate of
shares of Common Stock for each
share of Convertible Preferred Stock),
subject to adjustment in certain
events.
Use of proceeds.................... The Company intends to use the net
proceeds for repayment of a portion of
the debt incurred in the acquisitions
of Mountain Gas and Black Lake.
Proposed listing................... New York Stock Exchange (Symbol: "WGRPRA.")
S-9
<PAGE>
SELECTED CONSOLIDATED AND PRO FORMA FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------------- -----------------------------------
PRO PRO
FORMA(1) HISTORICAL FORMA(1) HISTORICAL
---------- -------------------- -------- --------------------------
1993 1993 1992 1992 1992 1991 1990
---------- ---------- --------- -------- -------- -------- --------
($000S, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues............... $ 722,279 $ 640,683 $ 399,946 $741,775 $600,116 $358,242 $255,652
Earnings before
depreciation, interest
and taxes(2).......... 112,165 79,448 65,857 156,001 95,385 64,320 41,901
Gross profit........... 87,774 69,977 63,814 111,415 92,287 60,510 45,677
Income before taxes.... 56,508 43,180 38,573 66,866 58,445 32,783 27,856
Provision for income
taxes................. 19,455 14,866 12,067 21,460 18,757 11,933 10,362
Net income............. 37,053 28,314 26,506 45,406 39,688 20,850 17,494
Earnings per share of
common stock.......... 1.12 .93 .96 1.45 1.43 .94 .83
CASH FLOW DATA:
Net cash provided by
operating activities.. 63,683 52,082 93,277 36,228 23,772
Capital expenditures... 424,898 52,505 67,021 234,124 115,064
BALANCE SHEET DATA (AT
PERIOD END):
Total assets........... 1,038,511 1,038,511 581,946 582,188 552,321 291,025
Long-term debt......... 396,400 493,000 206,900 157,000 216,050 120,300
Stockholders' equity... 402,285 305,685 240,463 285,611 220,355 97,640
Dividends declared per
common share.......... .15 .15 .20 .15 --
RATIO OF EARNINGS TO
COMBINED FIXED CHARGES
AND PREFERRED STOCK
DIVIDENDS(3):.......... 2.43x 2.77x 3.86x 3.25x 3.87x 2.10x 2.99x
OPERATING DATA:
Average gas sales
(MMcf/D).............. 645.8 405.9 441.8 309.6 220.3
Average NGL sales
(MGal/D).............. 2,794.1 2,302.4 2,399.5 1,096.6 630.2
Average gas volumes
gathered (MMcf/D)..... 901.1 625.8 625.4 323.0 216.8
Plant capacity
(MMcf/D).............. 1,367.0 1,117.0 1,117.0 1,123.5 480.5
Average gas prices
($/Mcf)............... $ 2.00 $ 1.53 $ 1.72 $ 1.59 $ 1.78
Average NGL prices
($/Gal)............... $ .32 $ .32 $ .32 $ .36 $ .40
</TABLE>
- --------
(1) The pro forma statement of operations for the nine months ended September
30, 1993 and for the year ended December 31, 1992 comprise historical
financial data which have been retroactively adjusted or combined to give
effect to (i) the Mountain Gas and Black Lake acquisitions and the related
financing and (ii) the issuance and sale by the Company of 2,000,000 shares
of Convertible Preferred Stock. The pro forma balance sheet data as of
September 30, 1993 is comprised of historical data which have been
retroactively adjusted or combined to give effect to the issuance and sale
by the Company of 2,000,000 shares of Convertible Preferred Stock. A
dividend rate of $2.625 per share per year was assumed for the Convertible
Preferred Stock for pro forma financial information presentation only. Such
pro forma information should be read in conjunction with the related
historical consolidated financial information incorporated by reference
herein and pro forma consolidated financial information contained elsewhere
herein. The pro forma financial results are not indicative of the results
that would have actually occurred had the transactions been in effect on
the dates or for the periods indicated or which may occur in the future.
(2) Earnings before depreciation, interest and taxes ("EBITDA") is defined as
earnings before income taxes plus interest expense, depletion, depreciation
and amortization expense. EBITDA is presented here to provide additional
information about the Company's ability to meet its future debt service,
capital expenditure and working capital requirements and should not be
construed as a substitute for earnings from operations or as a better
indicator of liquidity than cash flow from operating activities.
(3) In computing the ratio of earnings to combined fixed charges and preferred
stock dividends, earnings consist of income before taxes plus fixed
charges. Combined fixed charges and preferred stock dividends consist of
(i) the total of interest, whether expensed or capitalized, and one-third
of rents (which is deemed representative of an interest factor), (ii)
quarterly preference distributions of $0.45 per unit to minority interest
holders in predecessor company in 1990 and 1991, (iii) since 1991,
dividends on the 7.25% Convertible Preferred Stock and (iv) since 1992,
dividends on the $2.28 Cumulative Preferred Stock. The ratio for the year
ended December 31, 1991 includes approximately $3 million for the
prepayment in the second quarter of 1991 of the remaining preference
distributions of $1.75 per unit to minority interest holders in predecessor
company. The pro forma ratios give effect to the offering of the 2,000,000
shares of Convertible Preferred Stock offered hereby at an assumed dividend
rate $2.625 per share per year and the application of the net proceeds to
reduce indebtedness under the Company's revolving credit facility as if
such transactions occurred on January 1, 1992 and 1993, respectively.
S-10
<PAGE>
BUSINESS
GENERAL
The Company is a leading independent gas gatherer and processor with
operations in major gas-producing basins in the Rocky Mountain, Gulf Coast and
Southwestern regions of the United States. The Company owns and operates
natural gas gathering, processing and storage facilities and markets and
transports natural gas and NGLs. The Company provides necessary services to the
producers of natural gas and NGLs by connecting producers' wells to the
Company's gathering systems for delivery to its processing plants, processing
the natural gas to remove NGLs and by-products and marketing the natural gas
and NGLs throughout the United States. The Company's gathering and processing
activities have recently been organized into three operating regions, enabling
it to provide producers with timely and reliable services and to identify
regional expansion opportunities. The Company believes that its commitment to
its gathering and processing operations has established it as a reliable source
of natural gas and NGLs, further enhancing the Company's marketing
capabilities.
Historically, the Company has derived over 90% of its revenues from the sale
of gas and NGLs. Set forth below are the Company's revenues by type of
operation ($000s):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1993 % 1992 % 1991 % 1990 %
-------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of residue gas..... $365,639 57.1 $278,928 46.5 $179,659 50.2 $143,821 56.3
Sale of natural gas
liquids................ 249,848 39.0 290,230 48.4 150,224 41.9 92,945 36.4
Processing and
transportation
revenues............... 17,767 2.8 22,124 3.7 25,538 7.1 17,189 6.7
Other, net.............. 7,429 1.1 8,834 1.4 2,821 0.8 1,697 0.6
-------- ----- -------- ----- -------- ----- -------- -----
$640,683 100.0 $600,116 100.0 $358,242 100.0 $255,652 100.0
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
RECENT DEVELOPMENTS
MOUNTAIN GAS
On July 29, 1993, effective January 1, 1993, the Company expanded its
presence in the Green River basin of southwestern Wyoming through the
acquisition of Mountain Gas from Morgan Stanley Leveraged Equity Fund II, L.P.
for total consideration of approximately $164.6 million, including the payment
of certain transaction costs and the assumption and repayment of $35 million of
long-term debt of Mountain Gas. The Mountain Gas acquisition represents a major
growth opportunity for the Company. Southwestern Wyoming has become a leading
area for new gas well drilling and is estimated by the U.S. Geological Survey
to be one of the largest undeveloped gas regions remaining in the United
States. The Mountain Gas acquisition has enhanced the Company's marketing
capabilities through access to additional major natural gas markets.
Mountain Gas owns the Red Desert and Granger facilities, both located near
the Company's Lincoln Road gas processing plant and gathering system. The 22%
interest in the Granger facility previously not owned by Mountain Gas was
purchased by the Company in two separate transactions in November and December
1993 for an aggregate of $27.7 million. The plants are connected to a combined
300 miles of gathering lines and have a combined capacity of 250 MMcf/D. The
Red Desert facility consists of a 40 MMcf/D cryogenic plant and for the month
of September 1993 was processing approximately 36.1 MMcf/D of gas and producing
53.6 MGal/D of NGLs. The Granger plant consists of an 80 MMcf/D refrigeration
unit and a 30 MMcf/D cryogenic unit. For the month of September 1993, the
Granger plant was processing approximately 138.6 MMcf/D of gas and producing
approximately 153.5 MGal/D of NGLs. In December 1993 the Company completed
construction of a new 100 MMcf/D cryogenic processing plant at Granger, at a
total cost of $14 million. The addition of this unit is expected to increase
total NGL production capabilities at Granger to 390 MGal/D.
S-11
<PAGE>
In December 1993, a fire at the Granger facility's NGL tank farm required the
facility to be shut down for one week. The facility has since been able to
maintain gas throughput at approximately the same levels as prior to the fire,
and the Company expects it to be fully operational in May 1994 when the
construction of a new tank farm is expected to be completed. The new 100 MMcf/D
cryogenic processing plant as well as a smaller existing 30 MMcf/D cryogenic
unit were damaged and are expected to be operational in May 1994. The Company
believes that insurance will cover, subject to certain deductibles,
substantially all of the costs related to rebuilding the NGL tank farm and the
other affected facilities, the interruption of business and third-party claims,
if any. The Company does not expect uninsured losses, if any, to be material.
BLACK LAKE
In September 1993, the Company acquired Black Lake from Nerco for
approximately $134 million. The acquisition includes a 68.9% working interest
in the Black Lake field in Louisiana and a 180 MMcf per day gas processing
plant and a 500 MBbl NGL salt dome storage facility. The net proved reserves
(as determined by an independent consultant on behalf of the seller) related to
the purchased interests as of January 1, 1993 were approximately 94 Bcf of gas,
305 MBbl of oil and 150 MMGal of NGLs. For the month of September 1993, Black
Lake was processing approximately 98.3 MMcf/D of natural gas and producing
163.8 MGal/D of NGLs. During September 1993, Black Lake produced an average of
77.0 MMcf/D of natural gas and 163.8 MGal/D of NGLs.
The Company is in the process of increasing the efficiency of Black Lake's
processing capabilities with the installation of a cryogenic processing plant
at a cost of approximately $3.75 million, which, when completed, will decrease
fuel usage and plant operating expenses as well as provide flexibility to
recover or reject ethane. The Company has also begun a program to significantly
reduce payroll and contract labor costs. The Company believes that the Black
Lake acquisition has enhanced its marketing opportunities by providing a
reliable additional source of natural gas and NGLs for numerous natural gas
markets as well as for the Katy Facility.
WESTANA JOINT VENTURE
Effective August 1, 1993, the Company expanded its presence in the Anadarko
Basin in Oklahoma through the formation of a general partnership, Westana, with
PEPL. Westana provides gas gathering and processing services and markets
residue gas and NGLs for producers connected to its system. The Company is the
principal operator with each partner holding a 50% ownership interest.
The Company contributed its Chester gas processing plant and gathering
system, with a net book value of $13.8 million, to Westana. Westana also
operates PEPL's 400 mile gathering system, which will be contributed to
Westana, after abandonment approval by the FERC. The Company expects Westana to
increase gas throughput by lowering gathering pressures and by actively
pursuing new well connections. The Company is committed to provide an
additional partnership contribution of $8.3 million, of which $4.8 million was
contributed through September 30, 1993, for necessary modifications to the
gathering system. This contribution is expected to be recouped by the Company
through preferential partnership distributions.
KATY FACILITY DEVELOPMENT AND RELATED MARKETING EXPANSION
In order to meet the peaking demand for natural gas in certain markets, the
Company designed and is completing the construction of the Katy Facility, which
has recently commenced operations. The ability to withdraw gas from the Katy
Facility on short notice positions the Company to market natural gas to LDCs
and other customers requiring reliable yet variable supply of natural gas. The
Katy Facility will also allow the Company to bypass transportation bottlenecks
and enhance flexibility in its marketing operations. The complex will consist
of a natural gas reservoir with over 17 Bcf of working gas and the ability to
deliver up to 400 MMcf/D of natural gas as well as a pipeline header system
with up to 13 interconnecting pipelines. The pipeline header system together
with the Black Lake acquisition will provide access to markets in the Midwest
and on the East Coast not previously serviced by the Company.
S-12
<PAGE>
The Company estimates that the Katy Facility will cost approximately $90
million, including $75.7 million expended through September 30, 1993. The
Company has acquired the necessary mineral and sub-surface storage rights and
rights-of-way through negotiation and condemnation. Certain of the owners whose
interests have been condemned have appealed the condemnations in the county
court at law. The Company believes that the outcome of such proceedings will
not materially affect operation of the Katy Facility. The likelihood of any
particular result, however, cannot be determined because the condemnation law
under which the proceedings are being brought has never been interpreted by the
courts.
In December 1993, the Company entered into a three-year winter-peaking gas
purchase and sales agreement with a major utility in East Texas with the
primary delivery point being the Katy Facility. Under the agreement, the
utility has the right to purchase, during each year of the contract, up to
approximately 30,000 MMBtu of gas per day in November and March and 70,000
MMBtu of gas per day in December, January and February, determined daily, at
the Houston Ship Channel Index Price plus a demand charge. The agreement calls
for minimum delivery of 3 million MMBtu and a maximum delivery of 6 million
MMBtu of natural gas per year.
As part of its strategy to penetrate the East Coast market and to utilize
Black Lake and the Katy Facility more effectively, in July 1993 the Company
acquired the assets of Citizens, which was headquartered in Boston,
Massachusetts. Citizens was a joint venture between Citizens Gas Supply
Corporation and National Fuel Resources, Inc. of Buffalo, New York. The
acquisition provides the Company with an established East Coast marketing
operation which sold an average of approximately 350 MMcf/D of natural gas
during the first six months of 1993.
GAS GATHERING AND PROCESSING
The Company contracts with producers to gather raw natural gas from
individual wells located near its plants. Once a contract has been executed,
the Company connects wells to gathering lines through which the gas is
delivered to a processing plant. At the plant, the gas is compressed,
unfractionated NGLs are extracted, and the remaining dry residue gas is treated
to meet pipeline quality specifications. Eleven of the Company's processing
plants can further separate, or fractionate, the mixed NGL stream into ethane,
propane, butane and natural gasoline to obtain higher value for the NGLs. In
addition, the Reno Junction Isomerization facility converts normal butane into
iso-butane. Five of the Company's plants are able to process and treat gas
containing hydrogen sulfide or other impurities which require removal prior to
transportation.
The Company continually acquires additional gas supplies to maintain or
increase throughput levels to offset natural production declines in dedicated
volumes. Such gas supplies are obtained by purchasing existing systems from
third parties or by connecting additional wells. The opportunity to connect new
wells to existing facilities is primarily affected by levels of drilling
activity near the Company's gathering systems. The Company believes it has
expanded into areas which present significant potential for new drilling or
purchases of existing systems. Historically, the Company has connected
additional reserves which more than offset production from reserves dedicated
to existing facilities. However, certain individual plants have experienced
declines in dedicated reserves. In 1992, a year in which the Company had no
major acquisitions, the Company replaced 131% of 1992 production with new
reserves. On a Company-wide basis, dedicated reserves totaled 1,508 Bcf at
December 31, 1992.
Substantially all gas flowing through Company facilities is supplied under
long-term contracts providing for the dedication for purchase or processing of
such gas for periods ranging from 5 to 20 years. Under the typical gas purchase
contract, the Company is responsible for arranging the transportation and
marketing of the gas and NGLs after processing. However, some contracts are
structured as gas processing arrangements in which gathering and processing
services are performed for a fee and the producer retains marketing
responsibility for the gas. The Company has no "take-or-pay" contracts, which
would require the Company to purchase gas whether or not the price is economic
or the Company has processing capacity to service the gas.
S-13
<PAGE>
In most of its gathering areas, the Company's policy is to structure gas
purchase contracts on a percentage-of-proceeds basis under which it is entitled
to a specified percentage of the net proceeds received from the resale of
residue gas and NGLs along with ancillary fees for treating, compression and
marketing services. In percentage-of-proceeds contracts, the Company and
producers share proportionally in price changes. The Company's existing
contracts typically entitle it to retain the same percentage, typically between
20% to 40%, of the net proceeds from the resale of residue gas and NGLs. For
the nine months ended September 30, 1993, percentage-of-proceeds contracts
accounted for approximately 85% of gas throughput (exclusive of straddle
plants).
Under its gas processing contracts, the Company collects fees based on the
volume of gas processed or receives a predetermined percentage, ranging from
40% to 85%, of the NGLs produced. For the nine months ended September 30, 1993,
gas processing contracts accounted for 13% of gas throughput and other fee
based contracts accounted for 2% of gas throughput (exclusive of straddle
plants).
Approximately 78% of the gas processed at the recently acquired Mountain Gas
facilities is subject to contracts that combine gathering and compression fees
with "keep whole" arrangements. Typically, the producer is charged a gathering
and compression fee of $.10 to $.33 per Mcf of gas gathered and delivered to
the processing facility. In addition, the Company retains the NGLs recovered at
the processing facility and keeps the producer whole by returning to the
producer at the tailgate of the plant an amount of residue gas equal on a Btu
basis to the raw gas received at the plant inlet. The fixed nature of the
gathering and compression fees reduces the Company's exposure to the margin
volatility of residue gas and NGLs typically experienced in pure "keep-whole"
arrangements. The remaining 22% of contracts at the Mountain Gas facilities
consists of either percentage-of-proceeds or fee-based contracts.
MARKETING
NATURAL GAS
The Company markets residue gas produced at its plants and purchased from
third parties to end-users, LDCs, pipelines and other marketing companies
throughout the United States. The Company's success in obtaining markets for
gas has been an important factor in maintaining production levels for its
producers and throughput levels for its gas plants, none of which has been
shut-in or curtailed because of conditions in the gas markets.
In recent years, the Company has significantly increased its marketing
capabilities. Increased third party sales and sales attributable to new plants
have primarily accounted for the increase in average daily gas sales from 220
MMcf/D in 1990 to 646 MMcf/D for the nine months ended September 30, 1993.
While continuing to increase sales to end-users and to achieve greater market
penetration close to its facilities, the Company has expanded into new markets
throughout the United States. The Katy Facility will allow the Company to
bypass transportation bottlenecks and enhance flexibility in its marketing
operations. During the year ended December 31, 1992, the Company sold residue
gas to approximately 150 end-user, pipeline, LDCs and other customers. As a
result of the Citizens acquisition, the number of residue gas customers has
increased to 275 during September 1993, further reducing the Company's reliance
on any single customer. No single customer accounted for more than 10% of
consolidated revenues for the nine months ended September 30, 1993.
Most of the Company's current sales contracts are short-term, ranging from a
few days to one year. At September 30, 1993, the Company's commitment under
long-term contracts, several of which have an annual redetermination of prices
and several of which are rebid prior to expiration, was approximately 113.5
MMcf/D.
The Company intends to maintain its gas marketing and third party sales to
ensure a market for its products. Third party sales and gas storage, combined
with the stable supply from Company facilities, enable the Company to respond
quickly to changing market conditions and to take greater advantage of seasonal
price variations and peak demand periods. This enables the Company to obtain a
higher price on average for
S-14
<PAGE>
its delivered gas than marketers or brokers. The Company customarily stores gas
in underground storage facilities to assure an adequate supply for long-term
sales contracts and for resale during periods when prices are favorable. At
September 30, 1993, the Company held approximately 9.3 Bcf of natural gas in
underground gas storage at an average cost of $1.92 per Mcf ($1.79 per MMbtu).
The Katy Facility increases the Company's ability to store natural gas enabling
it to take advantage of seasonal price variations and peak demand periods. From
time to time, the Company has hedged a portion of its natural gas volumes and
requirements under gas sales contracts on the futures market.
NGLs
The Company markets NGLs (ethane, propane, iso-butane, normal butane, natural
gasoline, and condensate) produced at its plants and purchased from third
parties to the Rocky Mountain, Mid-Continent and Gulf Coast regions. A majority
of the Company's production of NGLs now moves to the Gulf Coast area, which is
the largest NGL market in the United States. Through the development of end-use
markets and distribution capabilities, the Company ensures that production from
the plants moves on a reliable basis and avoids curtailment of production. For
the nine months ended September 30, 1993, NGL sales averaged 2,794 MGal per
day, an increase from 630 MGal per day in 1990. Sales were made to
approximately 150 different customers and no single customer accounted for more
than 10% of the Company's consolidated revenues for the nine months ended
September 30, 1993. Revenues are also derived from marketing fees charged to
some producers for NGL marketing services.
The volatility of prices of NGLs over the past years has caused the Company
to move to short-term contracts, with no prices set on a firm basis for more
than a 30-day period. Although some contracts do commit the Company for as long
as a year, prices are redetermined on a market-related basis. Storage space is
leased at the major trading locations, near Houston and in central Kansas, in
order to store products so that they can be sold at higher prices on a seasonal
basis. At September 30, 1993, approximately 33.4 million gallons of NGLs were
in storage at an average cost of $.31 per gallon. The Company generally intends
that stored liquids turn over on an annual basis.
S-15
<PAGE>
PRINCIPAL FACILITIES
The following table provides information concerning the Company's principal
facilities. The Company also owns and operates several smaller treating and
processing facilities located in the same areas as its other facilities.
<TABLE>
<CAPTION>
AVERAGE FOR NINE MONTHS
ENDED SEPTEMBER 30, 1993
GAS GAS -----------------------------------
GATHERING THROUGHPUT GAS GAS NGL
YEAR PLACED SYSTEMS CAPACITY THROUGHPUT PRODUCTION PRODUCTION
FACILITY(1) IN SERVICE (MILES)(2) (MMCF/D)(2) (MMCF/D)(3) (MMCF/D)(4) (MGAL/D)(4)
----------- ----------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SOUTHERN REGION:
Texas
Midkiff and Benedum..... 1955 1,899 110.0 114.3 70.1 729.6
Giddings Gathering
System................. 1979 604 65.0 67.7 57.6 103.0
Edgewood(5)............. 1964 85 65.0 36.6 17.1 72.8
Perkins and Noel........ 1975 2,528 55.0 23.6 12.8 161.1
Walnut Bend............. 1978 402 8.0 4.0 1.7 25.4
East Sour Lake(6)(7).... 1983 - 20.0 0.1 - 1.1
Katy(8)................. 1993 - - - - -
MID-CONTINENT REGION:
Louisiana
Black Lake(9)(16)....... 1966 55 180.0 115.7 93.6 170.8
Toca(6)(10)............. 1958 - 160.0 85.2 - 59.1
Sligo(6)(10)(15)........ 1961 8 70.0 33.1 - 27.0
Pointe a la Hache(6).... 1962 - 20.0 11.4 - 3.7
Cox Bay(6).............. 1962 - 20.0 8.0 - 4.5
Oklahoma
Chaney Dell............. 1966 1,205 130.0 62.3 44.8 225.8
Lamont.................. 1981 739 28.0 30.0 20.5 99.5
Chester................. 1986 198 37.0 22.6 16.4 41.8
ROCKY MOUNTAIN REGION:
Wyoming
Granger(10)(11)(16)(17). 1987 200 210.0 124.2 117.9 111.5
Red Desert(11)(16)...... 1979 100 40.0 28.7 25.6 48.4
Lincoln Road............ 1988 143 45.0 25.2 24.0 24.3
Hilight(10)............. 1969 262 30.0 20.9 5.3 70.2
Hartzog Draw............ 1977 320 25.0 11.2 9.0 37.7
Amos Draw............... 1983 79 30.0 7.5 6.1 23.9
Kitty(10)............... 1969 225 17.0 7.1 4.7 40.7
Spearhead Ranch(10)..... 1975 7 18.0 3.7 2.5 7.7
Newcastle(10)........... 1981 138 5.0 2.3 1.5 17.6
Reno Junction(12)....... 1991 - - - - 59.4
New Mexico
San Juan River(5)....... 1955 122 60.0 27.1 23.1 -
North Dakota
Williston(5)(10)(13).... 1981 381 40.0 11.7 8.3 35.0
Temple(5)............... 1984 64 7.0 3.1 2.4 10.3
Teddy
Roosevelt(5)(10)(13)... 1979 236 25.0 2.7 1.3 11.5
Alexander Gathering
System(13)............. 1984 96 3.5 1.8 1.3 5.2
Utah
Four Corners............ 1988 60 15.0 5.3 4.5 11.3
Montana
Fairview(5)(10)(14)..... 1970 165 6.0 2.4 1.2 9.0
Baker(5)(10)............ 1981 8 2.5 1.6 1.0 12.7
------ ------- ----- ----- -------
Total ................ 10,329 1,547.0 901.1 574.3 2,261.6
====== ======= ===== ===== =======
</TABLE>
- --------
Footnotes on following page
S-16
<PAGE>
(1) The Company's interest in all facilities is 100% except for Midkiff and
Benedum (80%); Black Lake (69%); Lincoln Road (72%); Williston (50%);
Chester (50%); Newcastle (50%) and Walnut Bend (67%). Except as indicated,
all facilities are operated by the Company and all data include interests
of the Company, other joint interest owners and producers of gas volumes
dedicated to the facility.
(2) Gas gathering systems (miles) and gas throughput capacity are as of
September 30, 1993.
(3) Aggregate wellhead natural gas volumes collected by a gathering system.
(4) Volumes of gas and NGLs are allocated to a facility when a well is
dedicated to that facility; volumes exclude NGLs fractionated for third
parties.
(5) Sour gas facility (capable of processing gas containing hydrogen sulfide).
(6) Straddle plant.
(7) Facility was shut-in during February 1993.
(8) Start-up operations commenced in the fourth quarter of 1993.
(9) Acquired in the Black Lake acquisition.
(10) Fractionation facility (capable of fractionating raw NGLs).
(11) Acquired in the Mountain Gas acquisition.
(12) NGL production represents conversion of third-party feedstock to iso-
butane.
(13) Facility was shut-in during August 1993. The gas dedicated to these
facilities is being processed by a third-party under a contractual
arrangement.
(14) Facility was sold during July 1993.
(15) The Company is currently negotiating with a potential purchaser.
(16) Throughput and production volume averages are for the nine months ended
September 30, 1993 and include volumes prior to the Company's acquisition
of these facilities.
(17) At September 30, 1993, the Company's interest in the Granger facility was
78%. The remaining 22% was purchased by the Company in two separate
transactions in November and December 1993.
The Company does not anticipate that any additional significant capital
expenditures for improvements to its existing processing and gathering
facilities will be required in the near future, although capital expenditures
in connecting new reserves and for maintenance are anticipated to be
approximately $18 million per year.
USE OF PROCEEDS
The net proceeds from the sale of the 2,000,000 shares of Convertible
Preferred Stock offered by the Company are estimated to be approximately $96.6
million ($111.1 million if the Underwriters' over-allotment option is exercised
in full), all of which will be used to repay a portion of the debt incurred
under the Company's revolving credit facility in the Mountain Gas and Black
Lake acquisitions. The Company's borrowings under its revolving credit facility
bear interest at a variable rate, which was 4.4% at December 31, 1993.
The Company is considering issuing up to $100 million of senior notes in a
public offering upon the completion of the Convertible Preferred Stock offering
made hereby. The net proceeds from such sale would also be used to repay a
portion of the borrowings under the Company's revolving credit facility.
S-17
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
As of December 31, 1993, there were 25,651,722 shares of Common Stock
outstanding held by 484 holders of record. The Common Stock is traded on the
New York Stock Exchange under the symbol "WGR." The following table sets forth
quarterly high and low closing sales prices per share as reported by the NYSE
Composite Tape for the quarterly periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1992
First Quarter............................................. $21 3/8 $15
Second Quarter............................................ 20 5/8 15 1/2
Third Quarter............................................. 30 1/4 19 3/8
Fourth Quarter............................................ 29 3/8 23 3/8
1993
First Quarter............................................. 34 3/4 24 1/2
Second Quarter............................................ 36 29 5/8
Third Quarter............................................. 45 34 1/8
Fourth Quarter............................................ 44 7/8 28 3/8
1994
First Quarter (through February 10, 1994)................. 35 32 1/2
</TABLE>
The last reported sale price per share for the Company's Common Stock on the
NYSE is set forth on the cover page of this Prospectus Supplement.
The Company paid annual dividends on the Common Stock aggregating $.20 per
share during the years ended December 31, 1991 and 1992 and paid quarterly
dividends in the amount of $.05 per share for the quarters ended March 31, June
30, and September 30, 1993. The Company has declared a dividend, payable
February 14, 1994, of $.05 per share for the quarter ended December 31, 1993 to
holders of record as of such date. Declarations of dividends are within the
discretion of the Board of Directors and are dependent upon various factors,
including the earnings, cash flow, capital requirements and financial condition
of the Company. In addition, the Company's ability to pay dividends is
restricted by certain covenants in its credit facilities including a
prohibition on declaring or paying dividends that exceed, in the aggregate, the
sum of $25 million plus 50% of the Company's consolidated net income earned
after March 31, 1993 plus 50% of the cumulative net proceeds received from the
sale of any equity securities sold after March 31, 1993.
S-18
<PAGE>
CAPITALIZATION
The following table sets forth at September 30, 1993 the actual
capitalization of the Company and the capitalization adjusted to give effect to
the sale of the 2,000,000 shares of Convertible Preferred Stock offered hereby
and the application of the estimated net proceeds therefrom as described under
"Use of Proceeds". This table should be read in conjunction with the related
historical financial information incorporated by reference herein and the pro
forma consolidated financial information contained elsewhere herein.
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1993
---------------------
ACTUAL AS ADJUSTED
-------- -----------
($000S)
<S> <C> <C>
Long-term debt:
Bank term loan payable 1995-1997....................... $ 50,000 $ 50,000
Senior Notes payable 1998-2003(1)...................... 125,000 125,000
Variable rate revolving credit facility................ 318,000 221,400
-------- --------
Total long-term debt(2)............................ 493,000 396,400
-------- --------
Stockholders' equity:
Preferred Stock, par value $.10; authorized 10,000,000
shares:
7.25% Convertible Preferred Stock, 400,000 shares
issued and outstanding (liquidation preference of
$40,000)............................................ 40 40
$2.28 Cumulative Preferred Stock, 1,400,000 shares
issued and outstanding (liquidation preference of
$35,000)............................................ 140 140
Convertible Preferred Stock, no shares issued and
outstanding and 2,000,000 shares issued and
outstanding as adjusted (liquidation preference of
$0 and $100,000).................................... -- 200
Common Stock, par value $.10; authorized 100,000,000
shares; 25,633,703 shares issued and outstanding(3)... 2,563 2,563
Additional paid-in capital............................. 203,932 300,332
Notes receivable from key employees secured by common
stock................................................. (1,940) (1,940)
Retained earnings...................................... 100,950 100,950
-------- --------
Total stockholders' equity(2)...................... 305,685 402,285
-------- --------
Total capitalization..................................... $798,685 $798,685
======== ========
</TABLE>
- --------
(1) Excludes $25 million of Senior Notes payable 1998-2003 bearing interest at
an annual rate of 7.23% issued on December 27, 1993.
(2) If the Underwriters' over-allotment option is exercised in full, total
long-term debt will decrease to $381.9 million and total stockholders'
equity will increase to $416.8 million.
(3) Excludes shares of Common Stock reserved for issuance upon
conversion of the Convertible Preferred Stock, 2,090,000 shares reserved
for issuance upon conversion of the 7.25% Convertible Preferred Stock and
582,993 shares of Common Stock reserved for issuance pursuant to options
granted under the Company's Common Stock option plans.
S-19
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying pro forma consolidated balance sheet as of September 30,
1993 gives effect to the issuance and sale by the Company of 2,000,000 shares
of Convertible Preferred Stock. The pro forma consolidated statements of
operations for the nine months ended September 30, 1993 and for the year ended
December 31, 1992 give effect to (a) the acquisitions and financing of (i)
Mountain Gas, which closed on July 29, 1993, and (ii) the Black Lake gas
processing plant and related oil and gas properties, which closed on September
27, 1993 and (b) the issuance and sale by the Company of 2,000,000 shares of
Convertible Preferred Stock. A dividend rate of $2.625 per share per year was
assumed for the Convertible Preferred Stock for pro forma financial information
presentation only . The pro forma consolidated balance sheet and pro forma
consolidated statements of operations are based on the assumptions set forth in
the notes to such statements.
The pro forma consolidated financial statements comprise historical financial
data which have been retroactively combined and adjusted to reflect the effect
of the above transactions on the historical consolidated financial statements
of the Company. Certain amounts in the historical statement of operations for
Mountain Gas and the historical statement of gross revenues and direct
operating expenses attributable to Black Lake have been reclassified to conform
to the presentation used by the Company. The historical information assumes
that the transactions for which pro forma effects are shown were completed
September 30, 1993 for the pro forma consolidated balance sheet and January 1,
1992 and 1993 for the pro forma consolidated statements of operations. Such pro
forma information should be read in conjunction with the related historical
financial information and is not indicative of the results which would actually
have occurred had the transactions been in effect on the dates or for the
periods indicated or which may occur in the future.
S-20
<PAGE>
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
($000S)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
-------------------------------------
HISTORICAL OFFERING PRO FORMA
ASSETS COMPANY ADJUSTMENTS(1) COMBINED
------ ---------- -------------- ----------
<S> <C> <C> <C>
Current assets:
Cash.................................. $ 9,685 $ - $ 9,685
Trade accounts receivable, net........ 125,462 - 125,462
Product inventory..................... 27,424 - 27,424
Parts inventory....................... 1,974 - 1,974
Other................................. 1,669 - 1,669
---------- -------- ----------
Total current assets................ 166,214 - 166,214
---------- -------- ----------
Property and equipment, at cost......... 865,526 - 865,526
Accumulated depreciation and depletion.. (110,269) - (110,269)
---------- -------- ----------
Total property and equipment, net... 755,257 - 755,257
---------- -------- ----------
Other assets: -
Gas purchase contracts, net .......... 38,579 - 38,579
Other assets.......................... 78,461 - 78,461
---------- -------- ----------
Total other assets.................. 117,040 - 117,040
---------- -------- ----------
Total assets........................ $1,038,511 $ - $1,038,511
========== ======== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable...................... $ 142,498 $ - $ 142,498
Accrued expenses...................... 24,839 - 24,839
Dividends payable..................... 2,080 - 2,080
---------- -------- ----------
Total current liabilities........... 169,417 - 169,417
Long-term debt(2)....................... 493,000 (96,600) 396,400
Deferred income tax payable............. 66,964 - 66,964
Other long-term liabilities............. 3,445 - 3,445
---------- -------- ----------
Total liabilities....................... 732,826 (96,600) 636,226
Stockholders' equity.................... 305,685 96,600 402,285
---------- -------- ----------
Total liabilities and stockholders'
equity................................. $1,038,511 $ - $1,038,511
========== ======== ==========
</TABLE>
S-21
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
($000S, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1993
-----------------------------------------------------------------------------------------
MOUNTAIN GAS
HISTORICAL AND BLACK LAKE PRO FORMA
HISTORICAL MOUNTAIN HISTORICAL ACQUISITION HISTORICAL OFFERING PRO FORMA
COMPANY GAS BLACK LAKE ADJUSTMENTS COMPANY ADJUSTMENT(1) COMPANY
----------- ---------- ---------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sale of residue gas.... $ 365,639 $37,770 $22,396 $ - $ 425,805 $ - $ 425,805
Sale of natural gas
liquids............... 249,848 9,793 6,308 - 265,949 - 265,949
Processing and
transportation
revenues.............. 17,767 4,856 - - 22,623 - 22,623
Other, net............. 7,429 338 135 - 7,902 - 7,902
----------- ------- ------- -------- ----------- ------- -----------
Total revenues....... 640,683 52,757 28,839 - 722,279 - 722,279
Costs and expenses:
Product purchases...... 497,522 36,927 - - 534,449 - 534,449
Plant operating
expense............... 42,671 7,322 5,314 (1,837)(3) 53,470 - 53,470
Oil and gas
exploration and
production costs...... 2,074 29 874 - 2,977 - 2,977
Selling and
administrative
expense............... 18,968 2,044 - (1,794)(4) 19,218 - 19,218
Depreciation,
depletion and
amortization.......... 28,439 2,976 - 12,194 (5) 43,609 - 43,609
Interest expense....... 7,829 1,248 - 6,429 (6) 15,506 (3,458) 12,048
----------- ------- ------- -------- ----------- ------- -----------
Total costs and
expenses............ 597,503 50,546 6,188 14,992 669,229 (3,458) 665,771
----------- ------- ------- -------- ----------- ------- -----------
Income before taxes..... 43,180 2,211 22,651 (14,992) 53,050 3,458 56,508
Pro forma provision for
income taxes........... (14,866) (618) - (2,780) (18,264) (1,191) (19,455)
----------- ------- ------- -------- ----------- ------- -----------
Pro forma net income.... $ 28,314 $ 1,593 $22,651 $(17,772) $ 34,786 $ 2,267 $ 37,053
=========== ======= ======= ======== =========== ======= ===========
Pro forma preferred
stock dividends(7)..... $ 4,569 $ 4,569 $ 8,506
=========== =========== ===========
Pro forma net income
available to common
stock.................. $ 23,745 $ 30,217 $ 28,547
=========== =========== ===========
Pro forma earnings per
share of common stock.. $ .93 $ 1.18 $ 1.12
=========== =========== ===========
Weighted average common
shares outstanding..... 25,597,812 25,597,812 25,597,812
=========== =========== ===========
</TABLE>
S-22
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
($000S, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1992
--------------------------------------------------------------------------------------
MOUNTAIN GAS
HISTORICAL AND BLACK LAKE PRO FORMA
HISTORICAL MOUNTAIN HISTORICAL ACQUISITION HISTORICAL OFFERING PRO FORMA
COMPANY GAS BLACK LAKE ADJUSTMENTS COMPANY ADJUSTMENT(1) COMPANY
---------- ---------- ---------- -------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sale of residue gas.... $ 278,928 $60,151 $42,771 $ - $ 381,850 $ - $ 381,850
Sale of natural gas
liquids............... 290,230 15,324 14,520 - 320,074 - 320,074
Processing and
transportation
revenues.............. 22,124 7,886 - - 30,010 - 30,010
Other, net............. 8,834 719 288 - 9,841 - 9,841
---------- ------- ------- -------- ---------- ------- ----------
Total revenues....... 600,116 84,080 57,579 - 741,775 - 741,775
Costs and expenses:
Product purchases...... 427,906 57,481 - - 485,387 - 485,387
Plant operating
expense............... 50,904 11,586 12,226 (3,134)(3) 71,582 - 71,582
Oil and gas
exploration and
production costs...... 2,528 - 2,384 - 4,912 - 4,912
Selling and
administrative
expense............... 23,393 3,502 - (3,002)(4) 23,893 - 23,893
Depreciation,
depletion and
amortization.......... 26,491 4,737 - 37,251 (5) 68,479 - 68,479
Interest expense....... 10,449 1,364 - 13,224 (6) 25,037 (4,381) 20,656
---------- ------- ------- -------- ---------- ------- ----------
Total costs and
expenses............ 541,671 78,670 14,610 44,339 679,290 (4,381) 674,909
---------- ------- ------- -------- ---------- ------- ----------
Income before taxes..... 58,445 5,410 42,969 (44,339) 62,485 4,381 66,866
Pro forma provision for
income taxes........... (18,757) (341) - (956) (20,054) (1,406) (21,460)
---------- ------- ------- -------- ---------- ------- ----------
Pro forma net income.... $ 39,688 $ 5,069 $42,969 $(45,295) $ 42,431 $ 2,975 $ 45,406
========== ======= ======= ======== ========== ======= ==========
Pro forma preferred
stock dividends(7)..... $ 3,272 $ 3,272 $ 8,522
========== ========== ==========
Pro forma net income
available to common
stock.................. $ 36,416 $ 39,159 $ 36,884
========== ========== ==========
Pro forma earnings per
share of common stock.. $ 1.43 $ 1.54 $ 1.45
========== ========== ==========
Weighted average common
shares outstanding..... 25,453,029 25,453,029 25,453,029
========== ========== ==========
</TABLE>
S-23
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The offering adjustments reflect the use of the net proceeds to the
Company of $96.6 million from the offering of 2,000,000 shares of Convertible
Preferred Stock to reduce a portion of the long-term debt incurred in the
Mountain Gas and Black Lake acquisitions and the related reduction of interest
expense.
(2) Excludes $25 million of Senior Notes payable 1998-2003 bearing interest
at an annual rate of 7.23% issued on December 27, 1993.
(3) Plant operating expense was adjusted to reflect a reduction in staffing
at the acquired facilities which resulted in a reduction in payroll, the
related benefits and contract labor at the Mountain Gas facilities by 15%, or
approximately $117,000 and $80,000 for the nine months ended September 30, 1993
and for the year ended December 31, 1992, respectively, and at the Black Lake
facility by 50%, or approximately $1.0 million and $1.8 million for the nine
months ended September 30, 1993 and for the year ended December 31, 1992,
respectively. Additionally, due to increased operating efficiencies at the
Black Lake facility, fuel usage and utility costs were reduced by approximately
$682,000 and $1.2 million for the nine months ended September 30, 1993 and for
the year ended December 31, 1992, respectively.
(4) The Mountain Gas and Black Lake acquisitions were absorbed into the
Company's existing operations without the hiring of any administrative staff.
Accordingly, selling and administrative expense has been increased by $250,000
for the nine months ended September 30, 1993 and $500,000 for the year ended
December 31, 1992 to reflect only additional miscellaneous costs to be incurred
by the Company.
(5) Depreciation, depletion and amortization was adjusted to reflect the
depreciation and depletion of the capitalized acquisition costs of $186.5
million for Mountain Gas and $156.0 million for Black Lake. The Mountain Gas
assets are being depreciated and amortized over periods ranging from 25 to 30
years and the Black Lake assets are being depreciated and depleted over 16
years. Accordingly, for the nine months ended September 30, 1993, additional
depreciation, depletion and amortization of approximately $120,000 and $12.2
million was incurred for Mountain Gas and Black Lake, respectively. For the
year ended December 31, 1992, additional depreciation, depletion and
amortization of approximately $1.5 million and $37.3 million was incurred for
Mountain Gas and Black Lake, respectively.
(6) For the nine months ended September 30, 1993 and for the year ended
December 31, 1992, interest expense was adjusted by approximately $2.7 million
and $6.1 million to reflect the additional interest on debt of $165.7 million
for the acquisition of Mountain Gas. For the nine months ended September 30,
1993 and for the year ended December 31, 1992, interest expense was adjusted by
approximately $3.7 million and $7.1 million to reflect the additional interest
on debt of $156.0 million for the acquisition of Black Lake. The interest rates
used were the Company's weighted average interest rate on its revolving credit
facility for the periods presented.
(7) A dividend rate of $2.625 per share per year was assumed for the
Convertible Preferred Stock for pro forma financial information presentation
only.
S-24
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 100,000,000 shares of Common Stock,
par value $.10 per share, and up to 10,000,000 shares of Preferred Stock, par
value $.10 share (the "Preferred Stock"). As of December 31, 1993, there were
25,651,722 shares of Common Stock outstanding. The Company also had outstanding
on such date the following series of Preferred Stock: 400,000 shares of 7.25%
Cumulative Senior Perpetual Convertible Preferred Stock with a liquidation
preference of $100 per share (the "7.25% Convertible Preferred Stock") and
1,400,000 shares of $2.28 Cumulative Preferred Stock with a liquidation
preference of $25 per share (the "$2.28 Cumulative Preferred Stock," and with
the 7.25% Convertible Preferred Stock, the "Existing Preferred Stock").
The Board of Directors of the Company has the power, without further action
by the stockholders unless action is required by applicable laws or regulations
or by the terms of any outstanding Preferred Stock to issue Preferred Stock in
one or more series and to fix the designations, preferences and voting rights,
and relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions applicable thereto. The rights of
holders of any Preferred Stock will be subject to, and may be adversely
affected by, the rights of holders of any Preferred Stock which may be issued
in the future. The Board of Directors may cause Preferred Stock to be issued to
obtain additional financing, in connection with acquisitions and for other
proper corporate purposes. Issuance of shares of Preferred Stock by the Company
may have the effect, under certain circumstances, alone or in combination with
certain provisions of the Company's Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), described below, of rendering more
difficult or discouraging an acquisition of the Company deemed undesirable by
the Board of Directors.
The following summary description of the Convertible Preferred Stock and
Common Stock is subject to and qualified in its entirety by reference to the
Certificate of Incorporation and the By-Laws of the Company (the "By-Laws"),
copies of which are incorporated by reference as exhibits to the Registration
Statement, and the form of Certificate of Designation with respect to the
Convertible Preferred Stock (the "Certificate of Designation"), a copy of which
will be filed as an exhibit to the Registration Statement. Summary descriptions
of the $2.28 Cumulative Preferred Stock and the 7.25% Convertible Preferred
Stock are included in the Prospectus.
$ CUMULATIVE CONVERTIBLE PREFERRED STOCK
GENERAL
The following is a summary of the material terms of the Convertible Preferred
Stock offered hereby. This summary does not purport to be complete and is
subject to and qualified in its entirety by the Company's Certificate of
Incorporation, including the Certificate of Designation.
The 2,000,000 shares of Convertible Preferred Stock offered hereby constitute
a single series of preferred stock. When issued, the Convertible Preferred
Stock will be fully paid and nonassessable. The holders of the Convertible
Preferred Stock will have no preemptive rights with respect to any shares of
capital stock of the Company or any other securities of the Company convertible
into or carrying rights or options to purchase any such shares. The Convertible
Preferred Stock will not be subject to any sinking fund or other obligation of
the Company to redeem or retire the Convertible Preferred Stock. Unless
redeemed by the Company or converted, the Convertible Preferred Stock will be
perpetual. Application will be made to list the Convertible Preferred Stock on
the New York Stock Exchange under the symbol "WGRPRA."
The transfer agent, registrar, dividend disbursing, redemption and conversion
agent for the Convertible Preferred Stock is Chemical Shareholder Services
Group, Inc.
RANKING
The Convertible Preferred Stock will rank senior to the Common Stock and on a
parity with the Existing Preferred Stock, with respect to the payment of
dividends and upon liquidation, dissolution or winding up.
S-25
<PAGE>
DIVIDENDS
Holders of shares of the Convertible Preferred Stock will be entitled to
receive, when and as declared by the Board of Directors of the Company out of
assets of the Company legally available for payment, cash dividends at an
annual rate of $ per share of Convertible Preferred Stock, payable in
arrears on February 15, May 15, August 15 and November 15 of each year,
commencing May 15, 1994. Each dividend will be payable to holders of record as
they appear on the stock books of the Company on a record date, not more than
60 nor less than 10 days before the payment date, fixed by the Board of
Directors of the Company. Dividends will be cumulative from the date of
original issuance of the Convertible Preferred Stock. Dividends payable on the
Convertible Preferred Stock for each full dividend period will be computed by
annualizing the dividend rate and dividing by four. Dividends payable for any
period less than a full dividend period will be computed on the basis of a 360-
day year consisting of twelve 30-day months. The Convertible Preferred Stock
will not be entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends. No interest, or sum of money in
lieu of interest, will be payable in respect of any accrued and unpaid
dividends.
No dividends may be declared or paid or set apart for payment on any
Preferred Stock, including the Existing Preferred Stock, ranking on a parity as
to dividends with the Convertible Preferred Stock unless there shall also be or
have been declared and paid or set apart for payment on the outstanding shares
of Convertible Preferred Stock dividends for all dividend payment periods of
the Convertible Preferred Stock ending on or before the dividend payment date
of such parity Preferred Stock, ratably in proportion to the respective amounts
of dividends, (i) accumulated and unpaid or payable on such parity Preferred
Stock, on the one hand, and (ii) accumulated and unpaid or payable through the
dividend payment period of the Convertible Preferred Stock next preceding such
dividend payment date, on the other hand. Except as set forth above, unless
full cumulative dividends on the outstanding shares of Convertible Preferred
Stock have been paid, dividends (other than in Common Stock) may not be paid or
declared and set aside for payment and other distribution may not be made upon
the Common Stock or on any other Preferred Stock of the Company ranking junior
to or on a parity as to dividends with the Convertible Preferred Stock,
including the Existing Preferred Stock, nor may any Common Stock or such other
Preferred Stock of the Company be redeemed, purchased or otherwise acquired by
the Company for any consideration or any payment be made to or monies set aside
for a sinking fund for the redemption of any shares of such stock; provided,
however, that any monies theretofore deposited in any sinking fund with respect
to any Preferred Stock in compliance with the provisions of such sinking fund
may thereafter be applied to the purchase or redemption of such Preferred Stock
in accordance with the terms of such sinking fund, regardless of whether at the
time of such application full cumulative dividends upon shares of the
Convertible Preferred Stock outstanding on the last dividend payment date shall
have been paid or declared and set apart for payment; and provided, further,
that any such junior or parity Preferred Stock or Common Stock may be converted
into or exchanged for stock of the Company ranking junior to the Convertible
Preferred Stock as to dividends.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Company,
the holders of shares of Convertible Preferred Stock are entitled to receive
out of assets of the Company available for distribution to stockholders, before
any distribution of assets is made to holders of: (i) any other shares of
Preferred Stock ranking junior to the Convertible Preferred Stock as to rights
upon liquidation, dissolution or winding up and (ii) Common Stock, liquidating
distributions in the amount of $50 per share plus dividends accrued and
accumulated but unpaid to the date of final distribution; but the holders of
the Convertible Preferred Stock will not be entitled to receive the liquidating
distributions of, plus such dividends on, such shares until the liquidation
preference of any other shares of the Company's capital stock ranking prior to
the Convertible Preferred Stock as to rights upon liquidation, dissolution or
winding up shall have been paid (or a sum set aside therefor sufficient to
provide for payment) in full. If upon any liquidation, dissolution or winding
up of
S-26
<PAGE>
the Company, the amounts payable with respect to the Convertible Preferred
Stock, the Existing Preferred Stock and any other Preferred Stock ranking as to
any such liquidating distribution on a parity with the Convertible Preferred
Stock are not paid in full, the holders of the Convertible Preferred Stock, the
Existing Preferred Stock and such other parity Preferred Stock will share
ratably in any such distribution of assets in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Company. Neither a
consolidation or merger of the Company with another corporation nor a sale or
transfer of all or part of the Company's assets for cash or securities shall be
considered a liquidation, dissolution or winding up of the Company.
OPTIONAL REDEMPTION
Shares of the Convertible Preferred Stock are not subject to any mandatory
redemption, sinking fund or other similar provision and will not be redeemable
prior to , 1997. On or after , 1997, the Convertible
Preferred Stock will be redeemable at the option of the Company upon notice at
any time and from time to time, in whole or in part, at the following
redemption prices per share (expressed as a percentage of the $50 liquidation
preference thereof), plus accrued and unpaid dividends, if any, up to but
excluding the date fixed for redemption, if redeemed during the twelve-month
period commencing on of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
1997........................................................... %
1998...........................................................
1999...........................................................
2000...........................................................
2001...........................................................
2002...........................................................
2003...........................................................
2004 and thereafter............................................
</TABLE>
If fewer than all of the outstanding shares of the Convertible Preferred
Stock are to be redeemed, the shares to be redeemed will be determined pro rata
as nearly as practicable or by lot, or by such other method as the Board of
Directors may determine to be fair and appropriate. In the event that any
quarterly dividends payable on the Convertible Preferred Stock are in arrears,
the Convertible Preferred Stock may not be redeemed unless all outstanding
shares of Convertible Preferred Stock are simultaneously redeemed and the
Company may not purchase or acquire any of such shares otherwise than pursuant
to a purchase or exchange offer made on the same terms to all holders of record
of the Convertible Preferred Stock.
Notice of redemption will be given by mail, not less than 30 nor more than 60
days prior to the date fixed for redemption thereof, to each record holder of
the shares of Convertible Preferred Stock to be redeemed at the address of such
holder in the stock register of the Company. If a notice of redemption has been
given, from and after the specified redemption date (unless the Company
defaults in making payment of the redemption price), dividends on the
Convertible Preferred Stock so called for redemption will cease to accrue, such
shares will no longer be deemed to be outstanding, and all rights, including
conversion rights of the holders thereof as stockholders of the Company (except
the right to receive the redemption price) will cease.
VOTING RIGHTS
Holders of the Convertible Preferred Stock will not have any voting rights
except as set forth below or as otherwise from time to time required by law.
Whenever dividends on the Convertible Preferred Stock or any other class or
series of stock ranking on a parity with the Convertible Preferred Stock
(including the
S-27
<PAGE>
$2.28 Cumulative Preferred Stock but excluding the 7.25% Convertible Preferred
Stock) with respect to the payment of dividends shall be in arrears for
dividend periods, whether or not consecutive, containing in the aggregate a
number of days equivalent to six calendar quarters, the holders of shares of
Convertible Preferred Stock, voting separately as a class with all other series
of Preferred Stock (including the $2.28 Cumulative Preferred Stock but
excluding the 7.25% Convertible Preferred Stock) upon which like voting rights
have been conferred and are exercisable, will be entitled to vote for the
election of two of the authorized number of directors of the Company at the
next annual meeting of stockholders and at each subsequent meeting until all
dividends accumulated on the Convertible Preferred Stock shall have been fully
paid or set apart for payment. The term of office of all directors elected by
the holders of such Preferred Stock shall terminate immediately upon the
termination of the right of the holders of such Preferred Stock to vote for
directors. Holders of shares of Convertible Preferred Stock will have one vote
for each share held.
So long as any shares of the Convertible Preferred Stock remain outstanding,
the Company shall not, without the consent of holders of at least two-thirds of
the shares of Convertible Preferred Stock outstanding at the time, voting
separately as a class with all other series of Preferred Stock (including the
$2.28 Cumulative Preferred Stock but excluding the 7.25% Convertible Preferred
Stock) upon which like voting rights have been conferred and are exercisable,
(i) issue or increase the authorized amount of any class or series of stock
ranking prior to the outstanding Convertible Preferred Stock as to dividends or
upon liquidation or (ii) amend, alter or repeal the provisions of the Company's
Certificate of Incorporation or of the resolutions contained in the Certificate
of Designation, whether by merger, consolidation or otherwise, so as to
materially adversely affect any power, preference or special right of the
outstanding Convertible Preferred Stock or the holders thereof; provided,
however, that any increase in the amount of the authorized Common Stock or
authorized Preferred Stock or any increase or decrease in the number of shares
of any series of Preferred Stock or the creation and issuance of other series
of Common Stock or Preferred Stock ranking on a parity with or junior to the
Convertible Preferred Stock as to dividends and upon liquidation, dissolution
or winding up shall not be deemed to materially adversely affect such powers,
preferences or special rights.
CONVERSION
Shares of the Convertible Preferred Stock will be convertible at any time at
the option of the holder thereof into such number of whole shares of Common
Stock as is equal to the aggregate liquidation preference of the shares of
Convertible Preferred Stock surrendered for conversion divided by the
conversion price of $ per share of Common Stock, subject to
adjustment as described below. Shares of Convertible Preferred Stock called for
redemption will not be convertible after the close of business on the business
day preceding the date fixed for redemption, unless the Company defaults in
payment of the redemption price. No fractional shares of Common Stock will be
issued as a result of conversion, but in lieu thereof, in the sole discretion
of the Board of Directors, either (i) such factional interest will be rounded
up to the next whole share or (ii) an appropriate amount will be paid in cash
by the Company.
The holders of shares of Convertible Preferred Stock at the close of business
on a dividend payment record date will be entitled to receive the dividend
payment on those shares on the corresponding dividend payment date
notwithstanding the subsequent conversion thereof or the Company's default in
payment of the dividend due on that dividend payment date. However, shares of
Convertible Preferred Stock surrendered for conversion during the period
between the close of business on any dividend payment record date and the
opening of business on the corresponding dividend payment date (except shares
called for redemption on a redemption date during that period) must be
accompanied by payment of an amount equal to the dividend payment on the shares
on that dividend payment date. A holder of shares of Convertible Preferred
Stock on a dividend payment record date who (or whose transferee) tenders any
shares for conversion on a dividend payment date will receive the dividend
payable by the Company on the Convertible Preferred Stock on that date, and the
converting holder need not include payment in the amount of such dividend upon
surrender of shares of the Convertible Preferred Stock for conversion.
S-28
<PAGE>
The initial conversion price of $ per share of Common Stock is subject
to adjustment (under formulae set forth in the Certificate of Designation) in
certain events, including: (i) the issuance of Common Stock as a dividend or
distribution on Common Stock of the Company; (ii) certain subdivisions and
combinations of the Common Stock; (iii) the issuance to all holders of Common
Stock of certain rights or warrants to purchase Common Stock; (iv) the
distribution to all holders of Common Stock of shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness of the Company
or assets (including securities, but excluding those rights, warrants,
dividends and distributions referred to above and dividends and distributions
in connection with the liquidation, dissolution or winding up of the Company or
paid in cash); (v) distributions consisting of cash, excluding any quarterly
cash dividend on the Common Stock to the extent that the aggregate cash
dividend per share of Common Stock in any quarter does not exceed the greater
of (x) the amount per share of Common Stock of the next preceding quarterly
cash dividend on the Common Stock to the extent that such preceding quarterly
dividend did not require an adjustment of the Conversion Price pursuant to this
clause (v) (as adjusted to reflect subdivisions or combinations of the Common
Stock), and (y) 3.75 percent of the average of the daily Closing Prices (as
defined in the Certificate of Designation) of the Common Stock for the 10
consecutive Trading Days (as defined in the Certificate of Designation)
immediately prior to the date of declaration of such dividend, and excluding
any dividend or distribution in connection with the liquidation, dissolution or
winding up of the Company; and (vi) payment in respect of a tender or exchange
offer by the Company or any subsidiary of the Company for the Common Stock to
the extent that the cash and value of any other consideration included in such
payment per share of Common Stock exceeds the Closing Price per share of Common
Stock on the trading day next preceding the date on which the Company becomes
irrevocably obligated to make such payment. If any adjustment is required to be
made as set forth in clause (v) above as a result of a distribution which is a
quarterly dividend, such adjustment would be based upon the amount by which
such distribution exceeds the amount of the quarterly cash dividend permitted
to be excluded pursuant to such clause (v). If an adjustment is required to be
made as set forth in clause (v) above as a result of a distribution which is
not a quarterly dividend, such adjustment would be based upon the full amount
of such distribution.
To the extent permitted by law, the Company from time to time may reduce the
conversion price by any amount for any period of at least 20 days, if the Board
of Directors has made a determination that such reduction would be in the best
interests of the Company, which determination shall be conclusive. In such
case, the Company shall give at least 15 days' notice of the reduction. In
addition, at its option the Company may make such reduction in the conversion
price as the Board of Directors deems advisable to avoid or diminish any income
tax to holders of Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated as such for income
tax purposes. See "Certain Federal Income Tax Considerations."
In the event of certain extraordinary corporate transactions (a "Fundamental
Change" as defined below), a holder may receive significantly different
consideration upon conversion. Generally, in the event of a Non-Stock
Fundamental Change (as defined below), the holder has the right to convert
shares of Convertible Preferred Stock into the kind and amount of the shares of
stock and other securities or property or assets (including cash) issuable with
respect to the number of shares of Common Stock receivable upon conversion at
the conversion price, as adjusted to reflect the benefit of any redemption
price premium then applicable to the Convertible Preferred Stock. However, in
the event of a Common Stock Fundamental Change (as defined below) the holder
does not receive the benefit of any redemption price premium. In addition, in
the event of a Common Stock Fundamental Change in which less than 100% of the
value of the consideration received by a holder of Common Stock is common stock
of the successor, acquiror or other third party, a holder of a share of
Convertible Preferred Stock who converts such share following the Common Stock
Fundamental Change will receive consideration in the form of such common stock
only, whereas a holder who converted such share prior to the Common Stock
Fundamental Change would have received consideration in the form of such common
stock as well as any other securities or assets (which may include cash)
issuable upon conversion of such shares of Convertible Preferred Stock
immediately prior to such Common Stock Fundamental Change. These provisions are
described more fully below.
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If any transaction shall occur, including without limitation (i) any
recapitalization or reclassification of shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination of the Common Stock),
(ii) any consolidation or merger of the Company with or into another person or
any merger of another person into the Company (other than a merger that does
not result in a reclassification, conversion, exchange or cancellation of
Common Stock), (iii) any sale or transfer of all or substantially all of the
assets of the Company, or (iv) any compulsory share exchange, pursuant to any
of which holders of Common Stock shall be entitled to receive other securities,
cash or other property, then appropriate provision shall be made so that the
holder of each share of Convertible Preferred Stock then outstanding shall have
the right thereafter to convert such share only into (x) in the case of any
such transaction that does not constitute a Common Stock Fundamental Change (as
defined below) and subject to funds being legally available for such purpose
under applicable law at the time of such conversion, the kind and amount of the
securities, cash or other property that would have been receivable upon such
recapitalization, reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock issuable
upon conversion of such share of Convertible Preferred Stock immediately prior
to such recapitalization, reclassification, consolidation, merger, sale,
transfer or share exchange, after giving effect, in the case of any Non-Stock
Fundamental Change (as defined below), to any adjustment in the conversion
price in accordance with clause (i) of the following paragraph, and (y) in the
case of any such transaction that constitutes a Common Stock Fundamental
Change, common stock of the kind received by holders of Common Stock as a
result of such Common Stock Fundamental Change in an amount determined in
accordance with clause (ii) of the following paragraph. The company formed by
such consolidation or resulting from such merger or that acquires such assets
or that acquires the Company's shares, as the case may be, shall make
provisions in its certificate or articles of incorporation or other constituent
document to establish such right. Such certificate or articles of incorporation
or other constituent document shall provide for adjustments that, for events
subsequent to the effective date of such certificate or articles of
incorporation or other constituent documents, shall be as nearly equivalent as
may be practicable to the relevant adjustments provided for in the preceding
paragraph and in this paragraph.
Notwithstanding any other provision in the preceding paragraphs to the
contrary, if any Fundamental Change (as defined below) occurs, then the
conversion price in effect will be adjusted immediately after such Fundamental
Change as follows:
(i) in the case of a Non-Stock Fundamental Change, the conversion price
of the shares of Convertible Preferred Stock immediately following such
Non-Stock Fundamental Change shall be the lower of (A) the conversion price
in effect immediately prior to such Non-Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to the
preceding paragraphs, and (B) the product of (1) the greater of the
Applicable Price (as defined below) and the then applicable Reference
Market Price (as defined below) and (2) a fraction, the numerator of which
is $ and the denominator of which is (x) the amount of the redemption
price for one share of Convertible Preferred Stock if the redemption date
were the date of such Non-Stock Fundamental Change (or, for the period
commencing on , 1994 and ending on , 1995 and the
12-month periods commencing , 1995 and 1996, the product of
%, % and %, respectively, times $ ), plus (y) any then-accrued and
then-accumulated and unpaid dividends on Convertible Preferred Stock; and
(ii) in the case of a Common Stock Fundamental Change, the conversion
price of the shares of Convertible Preferred Stock immediately following
such Common Stock Fundamental Change shall be the conversion price in
effect immediately prior to such Common Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to the
preceding paragraphs, multiplied by a fraction, the numerator of which is
the Purchaser Stock Price (as defined below) and the denominator of which
is the Applicable Price; provided, however, that in the event of a Common
Stock Fundamental Change in which (A) 100% of the value of the
consideration received by a holder of Common Stock is common stock of the
successor, acquiror, or other third party (and cash, if any, paid with
respect to any fractional interests in such common stock resulting from
such Common Stock Fundamental Change)
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and (B) all of the Common Stock of the Company shall have been exchanged
for, converted into, or acquired for, common stock of the successor,
acquiror or other third party (and any cash with respect to fractional
interests), the conversion price of the shares of Convertible Preferred
Stock immediately following such Common Stock Fundamental Change shall be
the conversion price in effect immediately prior to such Common Stock
Fundamental Change multiplied by a fraction, the numerator of which is one
and the denominator of which is the number of shares of common stock of the
successor, acquiror, or other third party received by a holder of one share
of Common Stock as a result of such Common Stock Fundamental Change.
The term "Applicable Price" means (i) in the event of a Non-Stock Fundamental
Change in which the holders of the Common Stock receive only cash, the amount
of cash received by a holder of one share of Common Stock and (ii) in the event
of any other Non-Stock Fundamental Change or any Common Stock Fundamental
Change, the average of the reported last sale price for one share of the Common
Stock (determined as provided in the Certificate of Designation) during the 10
Trading Days immediately prior to the record date for the determination of the
holders of Common Stock entitled to receive cash, securities, property or other
assets in connection with such Non-Stock Fundamental Change or Common Stock
Fundamental Change or, if there is no such record date, prior to the date upon
which the holders of the Common Stock shall have the right to receive such
cash, securities, property or other assets.
The term "Common Stock Fundamental Change" means any Fundamental Change in
which more than 50% of the value (as determined in good faith by the Board of
Directors of the Company) of the consideration received by holders of Common
Stock consists of common stock that, for the 10 Trading Days immediately prior
to such Fundamental Change, has been admitted for listing or admitted for
listing subject to notice of issuance on a national securities exchange or
quoted on the Nasdaq National Market of The Nasdaq Stock Market; provided,
however, that a Fundamental Change shall not be a Common Stock Fundamental
Change unless either (i) the Company continues to exist after the occurrence of
such Fundamental Change and the outstanding shares of Convertible Preferred
Stock continue to exist as outstanding shares of Convertible Preferred Stock,
or (ii) not later than the occurrence of such Fundamental Change, the
outstanding shares of Convertible Preferred Stock are converted into or
exchanged for shares of convertible preferred stock of a corporation succeeding
to the business of the Company; which convertible preferred stock has powers,
preferences and relative, participating, optional or other rights, and
qualifications, limitations and restrictions substantially similar to those of
the Convertible Preferred Stock.
The term "Fundamental Change" means the occurrence of any transaction or
event or series of transactions or events pursuant to which all or
substantially all of the Common Stock of the Company shall be exchanged for,
converted into, acquired for or shall constitute solely the right to receive
cash, securities, property or other assets (whether by means of an exchange
offer, liquidation, tender offer, consolidation, merger, combination,
reclassification, recapitalization or otherwise); provided, however, in the
case of any such series of transactions or events, for purposes of adjustment
of the conversion price, such Fundamental Change shall be deemed to have
occurred when substantially all of the Common Stock of the Company shall have
been exchanged for, converted into, or acquired for, or shall constitute solely
the right to receive, such cash, securities, property or other assets, but the
adjustment shall be based upon the consideration that the holders of Common
Stock received in the transaction or event as a result of which more than 50%
of the Common Stock of the Company shall have been exchanged for, converted
into, or acquired for, or shall constitute solely the right to receive, such
cash, securities, property or other assets; and provided, further, that such
term does not include (i) any such transaction or event in which the Company
and/or any of its subsidiaries are the issuers of all the cash, securities,
property or other assets exchanged, acquired or otherwise issued in such
transaction or event, or (ii) any such transaction or event in which the
holders of Common Stock receive securities of an issuer other than the Company
if, immediately following such transaction or event, such holders hold a
majority of the securities having the power to vote normally in the election of
directors of such other issuer outstanding immediately following such
transaction or other event.
The term "Non-Stock Fundamental Change" means any Fundamental Change other
than a Common Stock Fundamental Change.
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The term "Purchaser Stock Price" means, with respect to any Common Stock
Fundamental Change, the average of the reported last sale price for one share
of the common stock received by holders of Common Stock (determined as provided
in the Certificate of Designation) in such Common Stock Fundamental Change
during the 10 Trading Days immediately prior to the date fixed for the
determination of the holders of Common Stock entitled to receive such common
stock or, if there is no such date, prior to the date upon which the holders of
the Common Stock shall have the right to receive such common stock.
The term "Reference Market Price" shall initially mean $ (which is an
amount equal to 66 2/3% of the reported last sale price for the Common Stock on
the New York Stock Exchange on the date of this Prospectus) and, in the event
of any adjustment to the conversion price other than as a result of a
Fundamental Change, the Reference Market Price shall also be adjusted so that
the ratio of the Reference Market Price to the conversion price after giving
effect to any such adjustment shall always be the same as the ratio of the
initial Reference Market Price to the initial conversion price of $ per
share.
No adjustment in the conversion price will be required unless the adjustment
would require a change of at least 1% in the conversion price then in effect;
provided, however, that any adjustment that would otherwise be required to be
made shall be carried forward and taken into account in any subsequent
adjustment.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders except as otherwise
provided by law. There are no cumulative voting rights with respect to the
election of directors. Holders of Common Stock are entitled to receive ratably
such dividends as may be declared by the Board of Directors out of legally
available funds. In the event of dissolution of the Company, they will be
entitled to share ratably in all assets remaining after payment of liabilities
and amounts owed in respect of outstanding Preferred Stock, including the
Convertible Preferred Stock and the Existing Preferred Stock. Holders of Common
Stock have no preemptive rights and have no right to convert their Common Stock
into any other securities.
The transfer agent and registrar for the Common Stock is Chemical
Shareholders Services Group, Inc.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States ("U.S.")
federal income tax consequences applicable to initial purchasers of the
Convertible Preferred Stock under current law. Changes to existing law, which
could have retroactive effect, may alter the consequences described below. The
discussion does not cover all aspects of U.S. federal taxation that may be
relevant to, or the actual tax effect that any of the matters described herein
will have on, particular purchasers, and does not address state, local or
foreign income or other tax laws. Certain holders (including financial
institutions, tax-exempt organizations, broker-dealers and insurance companies)
may be subject to special rules not discussed below. For purposes of this
discussion, a U.S. Holder is a holder of Convertible Preferred Stock that is
(i) an individual who is a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the law of the United States or any state, or (iii) an estate or trust, the
income of which is includable in gross income for United States federal income
tax purposes regardless of its source. A Non-U.S. Holder is any person other
than a U.S. Holder. The discussion assumes that purchasers of the Convertible
Preferred Stock will hold the Convertible Preferred Stock as a "capital asset"
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"). Each purchaser of the Convertible
Preferred Stock should consult its own tax advisor with respect to its
particular U.S. federal tax situation as well as any tax consequences arising
under the laws of any applicable state, local or foreign taxing jurisdictions.
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U.S. HOLDERS
DISTRIBUTIONS. Distributions made with respect to the Convertible Preferred
Stock will be treated as dividends and taxable as ordinary income to the extent
that the distributions are made out of the Company's current or accumulated
earnings and profits. To the extent that a distribution is not made out of the
Company's current or accumulated earnings and profits, the distribution will
constitute a non-taxable return of capital to the extent of the holder's
adjusted tax basis in its shares of Convertible Preferred Stock and, to the
extent the distribution exceeds such basis, will result in capital gain.
A U.S. corporate holder will generally be entitled to a 70% dividends-
received deduction with respect to distributions that are treated as dividends
on shares of the Convertible Preferred Stock provided that the corporate holder
has held for at least 46 days (91 days in the case of dividends attributable to
a period or periods aggregating more that 366 days). A taxpayer's holding
period for these purposes is reduced by periods during which taxpayer's risk of
loss with respect to the share is considered diminished by reason of the
existence of certain options, contracts to sell or other similar transactions.
The dividends-received deduction may be reduced or eliminated if a corporation
has indebtedness "directly attributable to its investment" in portfolio stock.
Shares of Convertible Preferred Stock will generally be portfolio stock for
purposes of these rules.
A U.S. corporate holder is required to reduce its basis (but not below zero)
in the Convertible Preferred Stock by the non-taxed portion (generally the
portion eligible for the dividends-received deduction described above) of any
"extraordinary dividend." If any part of the non-tax portion of an
extraordinary dividend has not been applied to reduce basis as a result of the
limitation on reducing basis below zero, such part will be treated as gain from
the sale or exchange of stock when such stock is disposed of or sold. It is
anticipated that regular quarterly dividends paid to an original holder of the
Convertible Preferred Stock generally will not constitute extraordinary
dividends.
Under certain circumstances, the operation of the conversion price adjustment
provisions of the Convertible Preferred Stock could result in the deemed
receipt of a taxable distribution by the holders of the Convertible Preferred
Stock if the effect of such adjustment is to increase such holders'
proportionate interest in the Company. Any such constructive distributions may
constitute (and cause other distributions to constitute) extraordinary
dividends to U.S. corporate holders.
In general, under current U.S. tax law, if the redemption price of preferred
stock that is subject to optional redemption by the issuer exceeds its issue
price, and if such excess is not considered "reasonable", the entire amount of
the redemption premium is treated as being distributed to the holder of such
stock, taxable as described above, on an economic accrual basis over the period
from issuance of the stock until the date the stock is first redeemable. A
premium is considered to be reasonable if it is in the nature of a penalty for
a premature redemption and if such premium does not exceed the amount which the
issuer would be required to pay for such redemption right under market
conditions existing at the time of issuance of the stock. Although there can be
no assurance in this regard, the Company does not believe that the Convertible
Preferred Stock will be considered to have been issued with a redemption
premium that is in excess of a reasonable call premium.
CONVERSION, REDEMPTION AND DISPOSITION. The conversion of Convertible
Preferred Stock into Common Stock generally will not result in the recognition
of gain or loss (except with respect to cash received in lieu of fractional
shares). A holder's adjusted tax basis in Common Stock received upon conversion
would be equal to that of the shares of Convertible Preferred Stock converted
less any amount of basis allocable to fractional shares exchanged for cash.
Upon the sale or exchange of shares of Convertible Preferred Stock, or of
shares of Common Stock acquired upon conversion of shares of Convertible
Preferred Stock, a holder will recognize capital gain or loss equal to the
difference between the amount realized on such sale or exchange and the
holder's adjusted
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tax basis in such stock. A holder who redeems shares of Convertible Preferred
Stock, or shares of Common Stock acquired upon conversion of shares of
Convertible Preferred Stock, will recognize capital gain or loss equal to the
difference between the redemption proceeds (other than any proceeds
attributable to declared but unpaid dividends, which will be taxed as dividends
as described above) and the holder's adjusted tax basis in such stock if the
redemption completely terminates the holder's stock interest in the Company or,
based on all facts and circumstances, results in a meaningful reduction in the
holder's proportionate stock interest. Stock attributed to a holder under
Section 318 of the Code would generally be taken into consideration in
determining the holder's stock ownership interest in the Company. Any capital
gain or loss recognized will generally be treated as long-term capital gain or
loss if the holder held the stock for more than one year. For this purpose, the
period for which the Convertible Preferred Stock was held would be included in
the holding period of Common Stock received upon conversion. If a redemption of
the Convertible Preferred Stock does not meet either of the tests described
above, then the gross proceeds received would be treated as a distribution to
the holder that is taxable in the manner described above under "Distribution".
NON-U.S. HOLDERS
DISTRIBUTIONS. In general, any dividend paid to a Non-U.S. Holder of
Convertible Preferred Stock will be subject to U.S. federal income tax
collected through withholding at a rate of 30% of the gross amount of the
dividend or lesser applicable income tax treaty rate. Dividends received by a
Non-U.S. Holder that are effectively connected with a U.S. trade or business
conducted by such holder will be subject to U.S. federal income tax at ordinary
federal income tax rates, and will be exempt from the withholding tax, provided
the Non-U.S. Holder files Internal Revenue Service Form 4224. A Non-U.S.
corporation receiving effectively connected dividends may also be subject to an
additional "branch profit tax" which is imposed under certain circumstances at
a rate of 30% (or such lower rate as may be specified by an applicable treaty)
of the Non-U.S. corporation's effectively connected earnings and profits,
subject to certain adjustments.
Under current U.S. Treasury regulations, in order to determine the
applicability of a tax treaty providing for a lower rate of withholding on
dividends, dividends paid to an address outside the U.S. are presumed to be
paid to a resident of such country absent knowledge of the status of the
shareholder to the contrary. Under proposed U.S. Treasury regulations not
currently in effect, a Non-U.S. Holder of Convertible Preferred Stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification and other requirements. If any excess amounts
have been withheld, the Non-U.S. Holder may obtain a refund of the excess by
filing an appropriate claim for refund with the Internal Revenue Service.
Distributions by the Company to a Non-U.S. Holder with respect to such holder's
Convertible Preferred Stock in excess of its current and accumulated earnings
and profits will be treated as a return of basis to the extent thereof and then
as capital gain.
CONVERSION, REDEMPTION AND DISPOSITION. A Non-U.S. Holder generally is not
subject to U.S. federal income tax on gain recognized upon the disposition of
its stock of a U.S. corporation, such as the Company, unless (i) such gain is
effectively connected with such Non-U.S. Holder's U.S. trade or business, (ii)
in the case of an individual Non-United States Holder, such holder is present
in the United States for a period or periods aggregating 183 days or more
during the taxable year in which such disposition occurs, or (iii) the U.S.
corporation is or has been a "United States real property holding corporation"
("USRPHC") within the meaning of section 897(c)(2) of the Code at any time
within the shorter of the five-year period preceding such disposition or such
Holder's holding period (unless the exception described below applies).
The Company believes it currently is and is likely to remain a USRPHC. As a
result of such status, Non-U.S. Holders will generally be subject to U.S.
federal income tax at ordinary Federal income tax rates on any gain recognized
on the disposition of shares of their Convertible Preferred Stock (or Common
Stock acquired upon conversion). A disposition for this purpose would include
any sale or redemption of the Convertible Preferred Stock (or Common Stock
acquired upon conversion), but generally would not include
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a conversion of such stock into Common Stock (except to the extent of cash
received in lieu of fractional share interests). Moreover, all or a portion of
any U.S. federal income tax imposed will be collected through withholding at a
rate of 10% of the amount realized on the disposition. Any amount withheld will
be creditable against such Non-U.S. Holder's U.S. federal income tax liability.
An exception to the imposition of the U.S. federal income tax described above
will apply to dispositions of Convertible Preferred Stock (or Common Stock
acquired upon conversion) by a Non-U.S. Holder that does not own, directly or
indirectly, more than 5% of the outstanding shares of the Convertible Preferred
Stock (or Common Stock acquired upon conversion) at any time during the five-
year period ending on the date of disposition, provided that the Convertible
Preferred Stock (or Common Stock acquired upon conversion) is "regularly traded
on an established securities market," within the meaning of Section 897(c) of
the Code, during the year in which the Non-United States Holder disposes of its
Convertible Preferred Stock (or Common Stock acquired upon conversion).
If the Convertible Preferred Stock (or Common Stock acquired upon conversion)
ceases to be listed on the New York Stock Exchange and is not otherwise
considered to be "regularly traded" on an established market for U.S. Federal
income tax purposes during the relevant time period described in the preceding
paragraph, all Non-U.S. Holders (including holders of 5% or less of the
outstanding Convertible Preferred Stock (or Common Stock acquired upon
conversion)) generally will be subject to U.S. federal income tax with respect
to any gain recognized on disposition of the Convertible Preferred Stock (or
Common Stock acquired upon conversion). Due to the complexity of these rules,
Non-U.S. Holders should consult with their tax adviser before making any
disposition of their shares of Convertible Preferred Stock (or Common Stock
acquired upon conversion).
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under U.S. Treasury
Regulations, the Company must report annually to the IRS the amount of
dividends paid to each Non-U.S. Holder and the federal income tax, if any,
withheld with respect to such dividends. Such information may be made available
by the IRS to the tax authorities in a foreign country under the provisions of
an applicable tax treaty or information exchange agreement.
Payments of dividends to a Non-U.S. Holder at an address outside the U.S.
will generally not be subject to backup withholding. The payment of the
proceeds from the disposition of Convertible Preferred Stock (or Common Stock
acquired upon conversion) to or through the U.S. office of a broker may be
subject to information reporting and backup withholding at a rate of 31% unless
the owner certifies its Non-U.S. status under penalties of perjury or otherwise
establishes an exemption. The payment of the proceeds on the disposition by a
Non-U.S. Holder of Convertible Preferred Stock (or Common Stock acquired upon
conversion) to or through a foreign office of a broker generally will not be
subject to backup withholding. However, information reporting will apply to
such payments of proceeds to or through a foreign office of a broker that is a
U.S. person or a U.S.-related person unless such broker has documentary
evidence in its files of the owner's Non-U.S. status or the owner otherwise
established an exemption.
Proposed U.S. Treasury regulations not currently in effect provide, among
other things, that payments of dividends to a Non-U.S. Holder would generally
be subject to information reporting and backup withholding unless such Non-U.S.
Holder satisfies certain certification requirements or otherwise establishes an
exemption.
Amounts withheld under the backup withholding rules do not constitute a
separate U.S. federal income tax. Rather, such amounts withheld from a payment
to a Non-U.S. Holder will be allowed as a credit against such Non-U.S. Holder's
U.S. federal income tax liability and any amounts withheld in excess of such
federal income tax liability may be refunded to the Non-U.S. Holder.
ESTATE TAX. Any Convertible Preferred Stock (or Common Stock acquired upon
conversion) owned or treated as owned by an individual who is a Non-U.S. Holder
at the time of his death will be included in such holder's gross estate for
U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.
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THE FOREGOING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, PROSPECTIVE HOLDERS OF THE CONVERTIBLE PREFERRED STOCK SHOULD
CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH
HOLDERS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CONVERTIBLE
PREFERRED STOCK, INCLUDING THE APPLICATION AND EFFECT OF U.S. FEDERAL, STATE,
LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, Morgan Stanley & Co. Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation (the "Underwriters") have
agreed to purchase, and the Company has agreed to sell to the Underwriters,
2,000,000 shares of Convertible Preferred Stock.
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the shares of the Convertible Preferred Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are committed to take
and pay for all of the shares of the Convertible Preferred Stock offered hereby
if any are taken.
The Underwriters initially propose to offer part of the shares directly to
the public at the public offering price set forth on the cover page hereof and
part to certain dealers at a price which represents a concession not in excess
of $. per share under the public offering price. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $. per share to
certain other dealers. After the initial offering, the public offering price
and other selling terms may be varied by the Underwriters.
The Company has agreed to indemnify the Underwriters, and the Underwriters
have agreed to indemnify the Company, against certain liabilities, including
liabilities under the Securities Act.
Pursuant to the Underwriting Agreement, the Company has granted the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 300,000 additional shares of the Convertible
Preferred Stock at the public offering price set forth on the cover page
hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option to purchase solely for the purpose of covering over-
allotments, if any, made in connection with the offering of the shares of the
Convertible Preferred Stock described above. To the extent such option is
exercised, the Underwriters will become obligated, subject to certain
conditions, to purchase such additional shares.
The Company and the directors of the Company (who hold an aggregate of
12,718,743 shares of Common Stock at December 31, 1993) have agreed that,
without the prior written consent of Morgan Stanley & Co. Incorporated, they
will not offer, sell, contract to sell or otherwise dispose of any share of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, for a period of 90 days after the date of this Prospectus,
subject to certain limited exceptions. Similarly, The 1818 Fund, L.P. has
agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated, it will not offer, sell, contract to sell or otherwise dispose of
any of the Company's 7.25% Convertible Preferred Stock, or any Common Stock
into which it is convertible, for a period of 90 days after the date of this
Prospectus.
Each of the Underwriters have provided and may continue to provide services
to the Company in the ordinary course of business. In addition, Morgan Stanley
& Co. Incorporated acted as an advisor to the seller and to Mountain Gas in
connection with the sale of Mountain Gas to the Company, and an affiliate of
Morgan Stanley & Co. Incorporated is the general partner of Morgan Stanley
Leveraged Equity Fund II, L.P., the seller of Mountain Gas.
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LEGAL MATTERS
The validity of the issuance of the shares of the Convertible Preferred Stock
offered hereby and the Common Stock into which the Convertible Preferred Stock
is convertible and certain tax matters will be passed upon for the Company by
Skadden, Arps, Slate, Meagher & Flom, New York, New York. Davis Polk &
Wardwell, New York, New York is acting as counsel for the Underwriters in
connection with certain legal matters relating to the Convertible Preferred
Stock offered hereby.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1992
and the audited historical financial statements included on page 5 of the
Company's Form 8-K/A dated October 11, 1993 have been so incorporated in
reliance on the reports of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The audited financial statements of Mountain Gas Resources, Inc. at December
31, 1992 and for the period from inception (July 16, 1992) to December 31,
1992, incorporated by reference herein and elsewhere in the Registration
Statement, except as they relate to the unaudited six-month period ended June
30, 1993, have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in the report with respect thereto, and are
incorporated by reference herein and in the Registration Statement in reliance
upon the report of said firm as experts in auditing and accounting.
The financial statements of Mountain Gas Resources, Inc., incorporated in
this prospectus by reference from the Company's Form 8-K/A dated October 11,
1993, have been audited by Deloitte & Touche, independent auditors, as stated
in their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
S-37
<PAGE>
PROSPECTUS
$200,000,000
WESTERN GAS RESOURCES, INC.
LOGO
DEBT SECURITIES AND PREFERRED STOCK
----------------
Western Gas Resources, Inc. (the "Company"), directly, through agents
designated from time to time, or through dealers or underwriters also to be
designated, may offer and issue from time to time debt securities (the "Debt
Securities") in one or more series, on terms to be determined at the time of
sale. The Company may also offer and issue from time to time in one or more
series its Preferred Stock, par value $.10 per share (the "Preferred Stock"),
on terms to be determined at the time of sale. The Debt Securities and
Preferred Stock will be limited to an aggregate initial public offering price
of up to $200,000,000 or the equivalent thereof in one or more foreign
currencies or composite currencies. The Debt Securities and the Preferred Stock
are hereinafter collectively referred to as the "Securities."
The accompanying Prospectus Supplement will set forth specific terms of the
Securities, including (i) in the case of Debt Securities, specific designation,
ranking as senior or subordinated Debt Securities, aggregate principal amount,
maturity, rate and time of payment of interest, purchase price, any terms for
redemption, whether and on what terms the Debt Securities may be converted into
the Company's common stock, par value $.10 per share (the "Common Stock"), and
any other specific terms of the Debt Securities, and (ii) in the case of a
particular series of Preferred Stock, specific designation, aggregate number of
shares offered, dividend rate (or manner of calculation thereof), dividend
periods (or manner of calculation thereof), liquidation preference, voting
rights, any terms for redemption, whether and on what terms the shares of such
series may be converted into the Company's Common Stock at the option of the
holder, whether depositary shares representing shares of such series of
Preferred Stock will be offered and, if so, the fraction of a share of
Preferred Stock represented by each depositary share, listing, if any, on a
securities exchange and any other specific terms of such series of Preferred
Stock. The accompanying Prospectus Supplement will also set forth the name of
and compensation to each dealer, underwriter or agent, if any, involved in the
sale of the Securities being offered and the managing underwriters with respect
to each series of Securities sold to or through underwriters. The Company
reserves the sole right to accept and, together with its agents from time to
time, to reject, in whole or in part, any proposed purchase of Securities to be
made directly or through agents.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURI-
TIES 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.
----------------
If an agent of the Company or a dealer or underwriter is involved in the sale
of the Securities in respect of which this Prospectus is being delivered, the
agent's commission, dealer's purchase price, or underwriter's discount is set
forth in, or may be calculated from, the accompanying Prospectus Supplement and
the net proceeds to the Company from such sale will be the purchase price of
such Securities less such commission in the case of an agent, the purchase
price of such Securities in the case of a dealer or the public offering price
less such discount in the case of an underwriter, and less, in each case, the
other attributable issuance expenses. See "Plan of Distribution" for possible
indemnification arrangements for any agents, dealers and underwriters.
----------------
MORGAN STANLEY & CO.
Incorporated
November 12, 1993
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE TO THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES 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
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661 and 7 World Trade Center, 13th Floor, New York,
NY 10048. Copies of such material can also be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, such material can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
The Company has filed a registration statement (the "Registration Statement")
on Form S-3 with respect to the Securities offered hereby with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"). The
Registration Statement also relates to (i) the offering by The 1818 Fund, L.P.
(the "Selling Stockholder") of up to 400,000 shares of 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock, par value $.10 per share, with a
liquidation preference of $100 per share (the "7.25% Convertible Preferred
Stock"), of the Company, including 2,090,000 shares of Common Stock (subject to
anti-dilution adjustments) issuable upon conversion thereof, and (ii) offerings
by the Company of up to 4,000,000 shares of Common Stock and by the Selling
Stockholder of up to 2,390,000 shares of Common Stock, including the 2,090,000
shares of Common Stock issuable upon conversion of the 400,000 shares of 7.25%
Convertible Preferred Stock. This Prospectus, which constitutes a part of the
Registration Statement, relates only to the Securities offered by the Company,
and does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to
the Registration Statement as permitted by the rules and regulations of the
Commission. Statements contained in this Prospectus as to the contents of any
agreement, instrument or other document referred to are not necessarily
complete. With respect to each such agreement, instrument or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in its entirety by such reference.
----------------
IN CONNECTION WITH THE OFFERING OF CERTAIN SECURITIES, THE UNDERWRITERS MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES
OF SUCH SECURITIES OR OTHER SECURITIES OF THE COMPANY AT LEVELS ABOVE THOSE
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) Annual Report on Form 10-K for the year ended December 31,
1992, (ii) Quarterly Reports on Form 10-Q for the quarters ended March 31 and
June 30, 1993, (iii) Proxy Statement for the Annual Meeting of Stockholders
held on May 24, 1993 and (iv) Current Reports on Form 8-K dated July 22, 1993,
August 9, 1993 and October 4, 1993, each as amended by Form 8-K/A dated October
11, 1993, all of which have previously been filed by the Company with the
Commission, are incorporated by reference in this Prospectus.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in this Prospectus 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
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus has been delivered, upon the written or oral request of such person,
a copy of any or all of the documents referred to above which have been or may
be incorporated by reference herein (other than exhibits to such documents
unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to John C. Walter, Vice
President-General Counsel and Secretary, Western Gas Resources, Inc., 12200
North Pecos Street, Denver, Colorado 80234-3439 (telephone (303) 452-5603).
WESTERN GAS RESOURCES, INC.
Western Gas Resources, Inc., a Delaware corporation, is a leading independent
gas gatherer and processor with operations located in major gas-producing
basins in the Rocky Mountain, Gulf Coast and Southwestern regions of the United
States. The Company owns and operates natural gas gathering, processing and
storage facilities and markets and transports natural gas and natural gas
liquids ("NGLs"). The Company provides necessary services to the producers of
natural gas and NGLs by connecting producers' wells to the Company's gathering
system for transportation to its processing plants, processing the gas to
remove NGLs and by-products and providing access for the gas and NGLs to
multiple markets. The Company's principal offices are located at 12200 North
Pecos Street, Denver, Colorado 80234-3439, and its telephone number is (303)
452-5603.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND
EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the unaudited consolidated ratios of earnings
to fixed charges and earnings to fixed charges and preferred stock dividends of
the Company for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ------------------------
JUNE 30, 1993 1992 1991 1990 1989 1988
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges... 4.88 5.30 3.19 5.50 4.36 1.85
Ratio of earnings to fixed charges
and preferred stock dividends....... 2.91 3.87 2.10 2.99 2.38 .95
</TABLE>
For the purpose of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes and fixed charges. For the purpose of
computing the ratio of earnings to fixed charges and preferred stock dividends,
earnings consist of income before income taxes and fixed charges and preferred
stock dividends. For purposes of calculating both ratios, fixed charges consist
of interest (including capitalized
3
<PAGE>
interest, but excluding amortization of amounts previously capitalized) on all
indebtedness, amortization of debt discount and expense and that portion of
rental expense which the Company believes to be representative of interest.
Statements setting forth the unaudited computations of the consolidated ratio
of earnings to fixed charges and consolidated ratio of earnings to fixed
charges and preferred stock dividends are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
USE OF PROCEEDS
Unless otherwise set forth in the accompanying Prospectus Supplement, the net
proceeds from the sale of the Securities will be used for general corporate
purposes, which may include acquisitions, repayment of debt, working capital
and capital expenditures. Pending application for specific purposes, the net
proceeds will be invested in short-term marketable securities.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an indenture (the "Indenture")
between the Company and Texas Commerce Bank National Association, as trustee
(the "Trustee"). The Debt Securities may constitute either senior or
subordinated debt of the Company as set forth in any accompanying Prospectus
Supplement for a specific series of Debt Securities. The following statements
are subject to the detailed provisions of the Indenture, a copy of which is
filed as an exhibit to the Registration Statement. Wherever references are made
to particular provisions of the Indenture, such provisions are incorporated by
reference as a part of the statements made and such statements are qualified in
their entirety by such reference. Capitalized terms not otherwise defined
herein shall have the meanings given in the Indenture.
GENERAL
The Indenture does not limit the amount of the Debt Securities which may be
issued thereunder. The accompanying Prospectus Supplement sets forth the
following terms of and information relating to the Debt Securities in respect
of which this Prospectus is delivered (to the extent such terms are applicable
to such Debt Securities): (1) the designation of such Debt Securities; (2)
classification as senior or subordinated Debt Securities; (3) the aggregate
principal amount of such Debt Securities; (4) the percentage of their principal
amount at which such Debt Securities will be issued; (5) the date or dates on
which such Debt Securities will mature; (6) the rate or rates, if any, per
annum, at which such Debt Securities will bear interest, or the method of
determination of such rate or rates; (7) the times at which such interest, if
any, will be payable; (8) provisions for sinking, purchase or other analogous
fund, if any; (9) the date or dates, if any, after which such Debt Securities
may be redeemed at the option of the Company or of the holder and the
redemption price or prices; (10) the date or the dates, if any, after which
such Debt Securities may be converted at the option of the holder into shares
of Common Stock of the Company and the terms for any such conversion; and (11)
any other specific terms of the Debt Securities. Principal, premium, if any,
and interest, if any, will be payable and the Debt Securities offered hereby
will be transferable, at the corporate trust office of the Trustee's agent in
the borough of Manhattan, the City of New York, provided that payment of
interest, if any, may be made at the option of the Company by check mailed to
the address of the person entitled thereto as it appears in the Security
Register.
If the accompanying Prospectus Supplement specifies that a series of Debt
Securities is denominated in a currency or currency unit other than United
States dollars, such Prospectus Supplement shall also specify the denomination
in which such Debt Securities will be issued and the coin or currency in which
the principal, premium, if any, and interest, if any, on such Debt Securities
will be payable, which may be United States dollars based upon the exchange
rate for such other currency or currency unit existing on or about the time a
payment is due. Special United States federal income tax considerations
applicable to any Debt Securities so denominated are also described in the
applicable Prospectus Supplement.
4
<PAGE>
The Debt Securities offered hereby will be issued only in fully registered
form without coupons and, unless otherwise specified in the Prospectus
Supplement, in denominations of $1,000 and multiples of $1,000. Debt Securities
may be issued in book-entry form, without certificates. Any such issue will be
described in the Prospectus Supplement relating to such Debt Securities. No
service charge will be made for any transfer or exchange of the Debt
Securities, but the Company or the Trustee may require payment of a sum
sufficient to cover any tax or other government charge payable in connection
therewith.
Debt Securities may be issued under the Indenture as Original Issue Discount
Securities to be sold at a substantial discount from their stated principal
amount. Federal income tax consequences and other considerations applicable
thereto will be described in the applicable Prospectus Supplement.
The Indenture contains no covenants or other provisions affording protection
to holders of the Debt Securities in the event of a highly leveraged
transaction or a change in control of the Company, except to the limited extent
described under "Limitation on Mergers and Sales of Assets."
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more
fully registered global Debt Securities (a "Registered Global Security") that
will be deposited with a depositary (a "Debt Depositary") or with a nominee for
a Debt Depositary or a nominee thereof. In such case, one or more Registered
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Registered Global Security
or Securities. Unless and until it is exchanged in whole for Debt Securities in
definitive form, a Registered Global Security may not be transferred except as
a whole by the Debt Depositary for such Registered Global Security, to a
nominee of such Debt Depositary or by a nominee of such Debt Depositary to such
Debt Depositary or another nominee of such Debt Depositary or by such Debt
Depositary or any such nominee to a successor of such Debt Depositary or a
nominee of such successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to all
depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Debt Depositary for such
Registered Global Security ("participants") or persons that may hold interests
through participants. Upon the issuance of a Registered Global Security, the
Debt Depositary for such Registered Global Security will credit, on its book-
entry registration and transfer system, the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. Ownership
of beneficial interests in such Registered Global Security will be shown on,
and the transfer of such ownership interest will be effected only through,
records maintained by the Debt Depositary for such Registered Global Security
(with respect to interests of participants) and on the records of participants
(with respect to interests of persons holding through participants). The laws
of some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in
Registered Global Securities.
So long as the Debt Depositary for a Registered Global Security, or its
nominee, is the registered owner of such Registered Global Security, such Debt
Depositary or such nominee, as the case may be, will be considered the sole
owner or holder of the Debt Securities represented by such Registered Global
Security for all purposes under the Indenture. Each person owning a beneficial
interest in a Registered Global Security must rely on the procedures of the
Debt Depositary for such Registered Global Security and, if such person is not
a participant, on the procedures of the participant through which such person
owns its interest, to exercise any rights of a holder under the Indenture.
5
<PAGE>
Principal, premium, if any, and interest payments on Debt Securities
represented by a Registered Global Security registered in the name of a Debt
Depositary or its nominee will be made to such Debt Depositary or its nominee,
as the case may be, as the registered owner of such Registered Global Security.
None of the Company, the Trustee or any other agent of the Company or agent of
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Registered Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
SENIOR DEBT
The Debt Securities that will be designated and will constitute part of the
Senior Indebtedness (hereinafter defined) of the Company, will rank pari passu
with all other unsecured and unsubordinated debt of the Company.
SUBORDINATED DEBT
The Debt Securities that will constitute part of the subordinated debt of the
Company (the "Subordinated Debt Securities"), will be subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
existing and future Senior Indebtedness of the Company. "Senior Indebtedness"
means the principal of (and premium, if any) and interest on (including
interest accruing after the filing of a petition initiating any proceeding
pursuant to any Bankruptcy Law, but only to the extent allowed or permitted to
the holder of such Indebtedness against the bankruptcy or any other insolvency
estate of the Company in such proceeding) or accrued Original Issue Discount on
and other amounts due on or in connection with any Indebtedness incurred,
assumed or guaranteed by the Company, whether outstanding on the date of the
Indenture or thereafter incurred, assumed or guaranteed, and all renewals,
extensions and refunding of any such Indebtedness; provided, however, that the
following will not constitute Senior Indebtedness: (a) any Indebtedness which
expressly provides (i) that such Indebtedness shall not be senior in right of
payment to the Subordinated Debt Securities or (ii) that such Indebtedness
shall be subordinated to any other Indebtedness of the Company, unless such
Indebtedness expressly provides that such Indebtedness shall be senior in right
of payment to the Subordinated Debt Securities; (b) any Indebtedness or
liability for compensation to employees, for goods or materials purchased in
the ordinary course of business or for services; (c) any Indebtedness of the
Company to any Subsidiary for money borrowed or advanced from such Subsidiary;
and (d) any liability for federal, state, local or other taxes owed or owing by
the Company. "Indebtedness" means any and all obligations of a corporation for
money borrowed which in accordance with generally accepted accounting
principles would be reflected on the balance sheet of such corporation as a
liability on the date as of which Indebtedness is to be determined.
By reason of the subordination described herein, in the event of insolvency,
upon any distribution of the assets of the Company, (i) the Holders of the
Subordinated Debt Securities are required to pay over their share of such
distribution to the trustee in bankruptcy, receiver or other person
distributing the assets of the Company for application to the payment of all
Senior Indebtedness remaining unpaid, to the extent necessary to pay all
holders of Senior Indebtedness in full and (ii) unsecured creditors of the
Company who are not Holders of Subordinated Debt Securities or Holders of
Senior Indebtedness of the Company may recover less, ratably, than Holders of
Senior Indebtedness of the Company and may recover more, ratably, than the
Holders of Subordinated Debt Securities.
In the event that the Subordinated Debt Securities are declared due and
payable prior to their Stated Maturity by reason of the occurrence of an Event
of Default, then the Company is obligated to notify promptly holders of Senior
Indebtedness of such acceleration. The Company may not pay the Subordinated
Debt Securities until 120 days have passed after such acceleration occurs and
may thereafter pay the Subordinated Debt Securities if the terms of the
Indenture otherwise permit payment at that time.
6
<PAGE>
No payment of the principal amount at maturity, Issue Price plus accrued
Original Issue Discount, in the case of Original Issue Discount Securities, any
redemption price, or interest, if any, in respect of the Subordinated Debt
Securities may be made, nor may the Company otherwise acquire any Subordinated
Debt Securities except as set forth in the Indenture, if any default with
respect to Senior Indebtedness occurs and is continuing that permits the
acceleration of the maturity thereof and the Company has actual knowledge of
the default, unless (a) 120 days pass after notice of the default is given to
the Trustee and such default is not then the subject of judicial proceedings or
the default with respect to the Senior Indebtedness is cured (including,
without limitation, by the payment of such Senior Indebtedness in full) or
waived and (b) the terms of the Indenture otherwise permit the payment or
acquisition of the Subordinated Debt Securities at that time. The Company is
required to give the Trustee notice of a default with respect to Senior
Indebtedness within five Business Days after the Company has actual knowledge
of the default.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the end of the most recent
fiscal quarter for which the Company has filed an Annual Report on Form 10-K or
a Quarterly Report on Form 10-Q.
CONVERTIBILITY
No series of Debt Securities will be convertible into, or exchangeable for,
other securities or properties except as set forth in the applicable Prospectus
Supplement.
CERTAIN COVENANTS APPLICABLE TO SENIOR DEBT SECURITIES
Unless otherwise set forth in the applicable Prospectus Supplement, the
following covenants will be applicable to Debt Securities that constitute
Senior Indebtedness.
Limitation on Liens. The Company will not, and will not permit any Restricted
Subsidiary to, incur, issue, assume or guarantee any Indebtedness secured by a
Lien on any Restricted Property, or on any shares of stock or Indebtedness of a
Restricted Subsidiary, without providing that the Debt Securities shall be
secured equally and ratably with (or prior to) such secured Indebtedness,
unless after giving effect thereto the aggregate amount of all such
Indebtedness so secured (other than Indebtedness secured by excepted Liens
referred to in the following sentence), together with all Attributable Debt of
the Company and its Restricted Subsidiaries in respect of Sale-Leaseback
Transactions except Sale-Leaseback Transactions the proceeds of which are
applied to the retirement of Funded Debt, would not exceed 10 percent of
Consolidated Adjusted Net Assets as shown on the Company's latest audited
consolidated financial statements. This restriction will not apply to (a) Liens
on property of, or on any shares of stock or Indebtedness of, any corporation
existing at the time such corporation becomes a Subsidiary, (b) Liens on
property existing at the time of acquisition thereof (including acquisition
through merger or consolidation) or to secure the payment of all or any part of
the purchase price or construction cost thereof or to secure any Indebtedness
incurred prior to, at the time of, or within six months after such acquisition
or completion of such property for the purpose of financing all or any part of
the purchase price or construction cost thereof, (c) Liens on substantially
unimproved property to secure the cost of exploration, drilling or development
of, or improvements to, such property, (d) Liens in favor of the Company or a
Restricted Subsidiary, and (e) any extension, renewal or replacement of any
Lien referred to in the foregoing clauses (a) through (d) inclusive, provided
that such extension, renewal or replacement Liens shall be limited to all or
part of the same property that secured the Liens extended, renewed or replaced
(plus improvements on such property). The following types of transactions are
not deemed to create Indebtedness secured by a Lien: (i) a sale or transfer of
crude oil, natural gas or NGLs in place for a period of time until, or in an
amount such that, the purchaser will realize therefrom a specified amount of
money or of such oil, natural gas or NGLs, or any other interest in property
commonly referred to as a "production payment," or (ii) the Lien of any
property of the Company or any Subsidiary in favor of governmental bodies to
secure partial, progress, advance or other payments to the Company or any
Subsidiary pursuant to any contract or statute, or the Lien of any property to
secure Indebtedness of the pollution control or industrial revenue bond type.
7
<PAGE>
LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Indenture provides that the
Company shall not, and it shall not permit any Restricted Subsidiary to, enter
into a Sale-Leaseback Transaction unless: (1) the lease has a term of three
years or less; (2) the lease is between the Company and a Restricted Subsidiary
or between Restricted Subsidiaries; (3) the Company or a Restricted Subsidiary
could create a Lien under the terms of the Indenture on the Restricted Property
to secure Funded Debt at least equal in amount to the Attributable Debt for the
lease; or (4) the Company or a Restricted Subsidiary could create a Lien on
Restricted Property under the terms of the Indenture to secure Funded Debt at
least equal in amount to the Attributable Debt for the lease without having to
secure equally and ratably any Debt Securities that constitute Senior
Indebtedness or (5) the Company or a Restricted Subsidiary within 120 days of
the effective date of the Sale-Leaseback Transaction (i) retires Funded Debt of
the Company or of a Restricted Subsidiary at least equal in amount to the fair
value (as determined by the Company's Board of Directors) of the Restricted
Property at the time of the Sale Leaseback transaction or (ii) if the net
proceeds of the Sale-Leaseback Transaction equal or exceed the fair value of
the Restricted Property (as determined by the Company's Board of Directors),
applies the net proceeds to fund investment in other Restricted Properties
which investments were made within twelve months prior to or subsequent to the
Sale-Leaseback transaction.
LIMITATION ON MERGERS AND SALES OF ASSETS
The Company shall not consolidate with, or merge with, or merge into any
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person unless the successor entity shall be a corporation
organized under the laws of the United States or any state or the District of
Columbia and shall expressly assume the obligations of the Company under the
Indenture. If,with respect to Debt Securities that constitute Senior
Indebtedness, upon any such consolidation, merger, conveyance or transfer of
the Company with or into any Person or of any such Subsidiary with or to any
other Subsidiary, any Property of the Company or of any Restricted Subsidiary
or any shares of stock or indebtedness of any Restricted Subsidiary would
thereupon become subject to any Lien (other than a Lien permitted under
"Limitation on Liens" without the Company's having to secure such Debt
Securities equally and ratably), the Company will secure such Debt Securities
(together with, if the Company shall so determine, other securities ranking on
a parity with such Debt Securities) prior to all Liens other than any
theretofore existing.
Although the amount of the Company's property that will constitute a sale of
such property "substantially as an entirety" is not readily quantifiable, a
determination whether such a sale has occurred will depend on the percentage of
operating and total assets transferred, among other measurements, and other
facts and circumstances of the transaction. In any particular transaction, this
determination will be made by the Company and, if such a transaction occurs,
the person to which such amount of the Company's property is transferred shall
enter into a supplemental Indenture satisfactory in form to the Trustee.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Attributable Debt" means the total net amount of rent (discounted at the
rate per annum indicated in the Indenture) required to be paid during the
remaining term of any lease.
"Consolidated Adjusted Net Assets" means the total amount of assets after
deducting therefrom (a) all current liabilities (excluding any thereof which
are by their terms extendible or renewable at the option of the obligor thereon
to a time more than 12 months after the time as of which the amount thereof is
being computed), and (b) total prepaid expenses and deferred charges.
"Funded Debt" means, with respect to any Person, all Indebtedness having a
maturity of more than 12 months from the date as of which the amount thereof is
to be determined or having a maturity of less than 12 months but by its terms
being renewable or extendible beyond 12 months from such date at the option of
such Person.
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"Restricted Property" means (a) any interest in property located in the
United States, Puerto Rico or Canada (including any interest in property
located off the coast of the United States operated pursuant to leases from any
governmental body) which is producing crude oil, natural gas or NGLs in paying
quantities, or (b) any manufacturing plant or transportation or storage
facility located in the United States, Puerto Rico or Canada, in each case now
owned or hereafter acquired by the Company or a Restricted Subsidiary except
any such plant or facility or portion thereof which has a book value equal to
not more than 2% of the Consolidated Adjusted Net Assets of the Company as
shown on the Company's latest audited consolidated balance sheet.
"Restricted Subsidiary" means a corporation (a) organized under the laws of
the United States, Puerto Rico or Canada or a jurisdiction thereof, (b) that
conducts substantially all of its business and has substantially all of its
Property within the United States, Puerto Rico and Canada, and (c) at least 80
percent (by number of votes) of each class of Voting Stock of which and 100
percent of all other Capital Stock and all other securities convertible into,
exchangeable for, or representing the right to purchase, Voting Stock, of which
are legally and beneficially owned by the Company and its wholly-owned
Restricted Subsidiaries.
"Sale and Leaseback Transaction" means an arrangement (other than an
arrangement made for the purposes of Section 168(f) (8) of the Internal Revenue
Code) with any bank, insurance company or other lender or investor
(collectively "lenders") or to which the lender is a party where the Company or
a Restricted Subsidiary now owns or hereafter acquires a Restricted Property,
transfers it to a lender, or to any person to whom funds have been or are to be
advanced by a lender on the security of such Restricted Property on the rental
payments under the lease, and leases it back from the lender or other person.
"Subsidiary" means, at any time, a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries or by the Company and one or more
other Subsidiaries.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to Debt
Securities of any series: (a) failure to pay principal of or premium, if any,
on any Debt Security of that series at its Maturity (in the case of any
Subordinated Debt Securities, whether or not payment is prohibited by the
provisions described under "Subordinated Debt"); (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days
(in the case of any Subordinated Debt Securities, whether or not payment is
prohibited by the provisions described under "Subordinated Debt"); (c) failure
to deposit any sinking fund payment, when due, in respect of any Debt Security
of that series (in the case of any Subordinated Debt Securities, whether or not
payment is prohibited by the provisions described under "Subordinated Debt");
(d) any other defaults in the performance, or breach, of any covenant of the
Company in the Indenture, continued for 90 days after notice of such default or
breach from the Trustee or the Holders of at least 25% in principal amount of
the Outstanding Debt Securities of that series (other than a covenant included
in the Indenture solely for the benefit of any series of Debt Securities other
than that series); (e) certain events of bankruptcy, insolvency or
reorganization; and (f) any other Event of Default provided with respect to
Debt Securities of that series.
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series
may declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal amount as may
be specified in the terms of that series) of all Debt Securities of that series
to be due and payable immediately. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before a judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
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acceleration. Notwithstanding the foregoing, if any Subordinated Debt
Securities are declared due and payable prior to their Stated Maturity by
reason of the occurrence of an Event of Default, the Company may not pay the
Subordinated Debt Securities until 120 days have passed after such acceleration
occurs and may thereafter pay the Subordinated Debt Securities if the terms of
the Indenture otherwise permit payment at the time. See "Subordinated Debt."
For information as to waiver of defaults, see "Modification and Waiver."
The Indenture provides that, subject to the provisions of the Trust Indenture
Act of 1939, as amended, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request or direction of
any of the Holders, unless such Holders shall have offered to the Trustee
reasonable indemnity. Subject to such provisions for indemnification of the
Trustee, the Holders of a majority in principal amount of the Outstanding Debt
Securities of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Debt Securities of that series.
The Company will be required to furnish annually to the Trustee a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments to the Indenture may be made by the Company and
the Trustee with the consent of the Holders of a majority in principal amount
of the Debt Securities of each series affected thereby; provided, however, that
no such modification or amendment may, without the consent of the Holder of
each Outstanding Debt Security affected thereby, (a) change the Stated Maturity
of the principal of, or any installment of principal of or interest on, any
Debt Security, (b) reduce the principal amount of, or the premium, if any, or
interest, if any, on, any Debt Security, (c) reduce the amount of principal of
any Original Issue Discount Security payable upon acceleration of the Maturity
thereof, (d) change the coin or currency in which any Debt Securities or
premium, if any, or interest, if any, thereon is payable, (e) in the case of
convertible Debt Securities, adversely affect the right to convert any Debt
Security, or (f) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, the consent of the Holders of which is required for
(i) modification or amendment of the Indenture, (ii) in the case of any
Subordinated Debt Securities, modification of the subordination provisions in a
manner adverse to the Holders of the Subordinated Debt Securities, (iii) waiver
of compliance with certain provisions of the Indenture, or (iv) waiver of
certain defaults.
Modifications and amendments of the Indenture may be made by the Company and
the Trustee without the consent of any Holder to evidence a successor to the
Company, to add to the Company's covenants or Events of Default, to permit or
facilitate Debt Securities to be issued by book entry or in bearer form or
relating to the place of payment thereof, to provide for a successor trustee,
to establish forms or terms of Debt Securities, to change or eliminate any
provision not adversely affecting any interests of Holders of Outstanding Debt
Securities in any material respect or to cure any ambiguity or inconsistency.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. The Holders of a
majority in principal amount of the Outstanding Debt Securities of any series
may on behalf of the Holders of all Debt Securities of that series waive any
past default under the Indenture with respect to Debt Securities of that
series, except a default in the payment of the principal of, or premium, if
any, or interest, if any, on, any Debt Security of that series or in respect of
any provision which under the Indenture cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security of that series
affected.
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DEFEASANCE
The following provisions of the Indenture are applicable to the Debt
Securities. The Company (a) shall be discharged from its obligations in respect
of the Debt Securities of such series ("defeasance and discharge"), or (b) may
cease to comply with certain restrictive covenants ("covenant defeasance")
including those described under "Certain Covenants" and "Limitations on Mergers
and Sales of Assets" and, in the case of any Subordinated Debt Securities, the
provisions described under "Subordinated Debt," and any such omission shall not
be an Event of Default with respect to the Debt Securities of such series, in
each case at any time prior to the Stated Maturity or redemption thereof, when
the Company has irrevocably deposited with the Trustee, in trust, (i)
sufficient funds in the currency or currency unit in which the Debt Securities
are denominated to pay the principal of (and premium, if any), and interest to
Stated Maturity (or redemption) on, the Debt Securities of such series, or (ii)
such amount of direct obligations of, or obligations the principal of and
interest on which are fully guaranteed by, the government which issued the
currency in which the Debt Securities are denominated, and which are not
subject to prepayment, redemption or call, as will, together with the
predetermined and certain income to accrue thereon without consideration of any
reinvestment thereof, be sufficient to pay when due the principal of (and
premium, if any), and interest to Stated Maturity (or redemption) on, the Debt
Securities of such series. Such defeasance and discharge and covenant
defeasance are conditioned upon, among other things, the Company's delivery of
(i) an opinion of counsel that the Holders of the Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance, and will be taxed in the same manner as if no
defeasance and discharge or covenant defeasance, as the case may be, had
occurred and (ii) an opinion of counsel that such defeasance would not cause
the Debt Securities to be delisted from any national securities exchange on
which such Debt Securities may then be listed. Upon such defeasance and
discharge, the Holders of the Debt Securities of such series shall no longer be
entitled to the benefits of the Indenture, except for the purposes of
registration of transfer and exchange of the Debt Securities of such series and
replacement of lost, stolen or mutilated Debt Securities and shall look only to
such deposited funds or obligations for payment.
THE TRUSTEE
The Company may have customary banking relationships with the Trustee in the
ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 100,000,000 shares of Common Stock,
par value $.10 per share, and up to 10,000,000 shares of Preferred Stock, par
value $.10 per share. As of September 30, 1993, there were 25,633,703 shares of
Common Stock outstanding. The Company also had outstanding on such date the
following series of Preferred Stock: 400,000 shares of 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock with a liquidation preference of $100 per
share (the "7.25% Convertible Preferred Stock") and 1,400,000 shares of $2.28
Cumulative Preferred Stock with a liquidation preference of $25 per share (the
"$2.28 Preferred Stock"). Unless otherwise provided in any Prospectus
Supplement for a series of Preferred Stock offered hereby (the "Offered
Preferred Stock"), the 7.25% Convertible Preferred Stock and the $2.28
Preferred Stock will rank on a parity with the Offered Preferred Stock.
The Board of Directors of the Company has the power, without further action
by the stockholders unless action is required by applicable laws or regulations
or by the terms of any outstanding Preferred Stock, including the 7.25%
Convertible Preferred Stock, to issue Preferred Stock in one or more series and
to fix the designations, preferences and voting rights, and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions applicable thereto. The rights of holders of any
Offered Preferred Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock which may be issued in the future.
The Board of Directors may cause Preferred Stock to be issued to
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obtain additional financing, in connection with acquisitions and for other
proper corporate purposes. Issuance of shares of Preferred Stock by the Company
may have the effect, under certain circumstances, alone or in combination with
certain of the provisions of the Company's Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), described below, of rendering
more difficult or discouraging an acquisition of the Company deemed undesirable
by the Board of Directors.
The following summary does not purport to be complete and is, subject to, and
qualified in its entirety by, the Company's Certificate of Incorporation,
including the Certificate of Designation, Preferences and Rights of the 7.25%
Convertible Preferred Stock and the Certificate of Designation of the $2.28
Preferred Stock.
OFFERED PREFERRED STOCK
The following is a description of certain general terms and provisions of the
Offered Preferred Stock. The particular terms of any series of Offered
Preferred Stock will be described in the applicable Prospectus Supplement. If
so indicated in a Prospectus Supplement, the terms of any such series may
differ from the terms set forth below. The summary of terms of the Company's
Offered Preferred Stock contained in this Prospectus does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions of
the Company's Certificate of Incorporation and the Certificate of Designation
relating to a specific series of the Offered Preferred Stock (the "Certificate
of Designation"), which will be in the form filed as an exhibit to or
incorporated by reference in the Registration Statement of which this
Prospectus is a part at or prior to the time of issuance of such series of
Offered Preferred Stock.
The Board of Directors of the Company has authorized the issuance in series
of up to 8,000,000 additional shares of Preferred Stock and has authorized a
committee of the Board of Directors (the "Committee") to establish and
designate series and fix the number of shares and the relative rights,
preferences and limitations of the respective series of Offered Preferred Stock
(except for voting rights of the Offered Preferred Stock, which will be
established by the Board of Directors). The Board of Directors or the Committee
shall be authorized to determine for each series of Offered Preferred Stock,
and the Prospectus Supplement shall set forth with respect to such series: (i)
the number of shares that constitute such series, (ii) the dividend rate (or
the method of calculation thereof) on the shares of such series, (iii) the
dividend periods (or the method of calculation thereof), (iv) the voting rights
of the shares, (v) the liquidation preference and any other rights of the
shares of such series upon any liquidation or winding-up of the Company, (vi)
whether or not and on what terms the shares of such series will be subject to
redemption at the option of the Company, (vii) whether and on what terms the
shares of such series will be convertible into shares of Common Stock of the
Company, (viii) whether depositary shares representing shares of such series of
Preferred Stock will be offered and, if so, the fraction of a share of such
series of Offered Preferred Stock represented by each depositary share (see
"Depositary Shares" below), (ix) whether the shares of such series of Offered
Preferred Stock will be listed on a securities exchange and (x) the other
rights and privileges and any qualifications, limitations or restrictions of
such rights or privileges of such series.
DIVIDENDS
Holders of shares of Offered Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds of the Company
legally available therefor, an annual cash dividend payable at such dates and
at such rates per share per annum as set forth in the applicable Prospectus
Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement, each
series of Offered Preferred Stock will be junior as to dividends to any
Preferred Stock that may be issued in the future that is expressly senior as to
dividends to the Offered Preferred Stock. If at any time the Company has failed
to pay accrued dividends on any such senior shares at the time such dividends
are payable, the Company may not pay any dividend on the Offered Preferred
Stock or redeem or otherwise repurchase shares of Offered Preferred Stock until
such accumulated but unpaid dividends on such senior shares have been paid or
set aside for payment in full by the Company.
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No dividends may be declared or paid or set apart for payment on any
Preferred Stock, including the 7.25% Convertible Preferred Stock and the $2.28
Preferred Stock, ranking on parity as to dividends with the Offered Preferred
Stock unless there shall also be or have been declared and paid or set apart
for payment on the outstanding shares of Offered Preferred Stock dividends for
all dividend payment periods of the Offered Preferred Stock ending on or before
the dividend payment date of such parity Preferred Stock, ratably in proportion
to the respective amounts of dividends, (i) accumulated and unpaid or payable
on such parity Preferred Stock, on the one hand, and (ii) accumulated and
unpaid or payable through the dividend payment period of the Offered Preferred
Stock next preceding such dividend payment date, on the other hand. Except as
set forth above, dividends (other than in Common Stock) may not be paid or
declared and set aside for payment and other distributions may not be made upon
the Common Stock or on any other Preferred Stock of the Company ranking junior
to or on parity as to dividends with the Offered Preferred Stock, including the
7.25% Convertible Preferred Stock and the $2.28 Preferred Stock, nor may any
Common Stock or such other Preferred Stock of the Company be redeemed,
purchased or otherwise acquired by the Company for any consideration or any
payment be made to or available for a sinking fund for the redemption of any
shares of such stock; provided, however, that any monies theretofore deposited
in any sinking fund with respect to any Preferred Stock in compliance with the
provisions of such sinking fund may thereafter be applied to the purchase or
redemption of such Preferred Stock in accordance with the terms of such sinking
fund, regardless of whether at the time of such application full cumulative
dividends upon shares of the Offered Preferred Stock outstanding on the last
dividend payment date shall have been paid or declared and set apart for
payment; and provided, further, that any such junior or parity Preferred Stock
or Common Stock may be converted into or exchanged for stock of the Company
ranking junior to the Offered Preferred Stock as to dividends.
The amount of dividends payable for the initial dividend period or any period
shorter than a full dividend period shall be computed on the basis of a 360-day
year of twelve 30-day months. Accrued but unpaid dividends will not bear
interest.
CONVERTIBILITY
No series of Offered Preferred Stock will be convertible into, or
exchangeable for, other securities or property except as set forth in the
applicable Prospectus Supplement.
REDEMPTION AND SINKING FUND
No series of Offered Preferred Stock will be redeemable or receive the
benefit of a sinking fund except as set forth in the applicable Prospectus
Supplement.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the Company,
the holders of shares of each series of Offered Preferred Stock are entitled to
receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of: (i) any
other shares of Preferred Stock ranking junior to such series of Offered
Preferred Stock as to rights upon liquidation, dissolution or winding up and
(ii) Common Stock, liquidating distributions per share in the amount of the
liquidation preference specified in the applicable Prospectus Supplement for
such series of Offered Preferred Stock plus dividends accrued and accumulated
but unpaid to the date of final distribution; but the holders of each series of
Offered Preferred Stock will not be entitled to receive the liquidating
distribution of, plus such dividends on, such shares until the liquidation
preference of any shares of the Company's capital stock ranking senior to such
series of the Offered Preferred Stock as to the rights upon liquidation,
dissolution or winding up shall have been paid (or a sum set aside therefor
sufficient to provide for payment) in full. If upon any liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Offered Preferred Stock, the 7.25% Convertible Preferred Stock, the $2.28
Preferred Stock and any other Preferred Stock ranking as
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to any such distribution on a parity with the Offered Preferred Stock are not
paid in full, the holders of the Offered Preferred Stock, the 7.25% Convertible
Preferred Stock, the $2.28 Preferred Stock and such other parity Preferred
Stock will share ratably in any such distribution of assets in proportion to
the full respective preferential amount to which they are entitled. Unless
otherwise specified in a Prospectus Supplement for a series of Offered
Preferred Stock, after payment of the full amount of the liquidating
distribution to which they are entitled, the holders of shares of Offered
Preferred Stock will not be entitled to any further participation in any
distribution of assets by the Company. Neither a consolidation or merger of the
Company with another corporation nor a sale of securities shall be considered a
liquidation, dissolution or winding up the Company.
VOTING RIGHTS
Holders of Offered Preferred Stock will not have any voting right except as
set forth below or in the applicable Prospectus Supplement or as otherwise from
time to time required by law. Whenever dividends on any applicable series of
Offered Preferred Stock or any other class or series of stock ranking on a
parity with the applicable series of Offered Preferred Stock (excluding the
7.25% Convertible Preferred Stock) with respect to the payment of dividends
shall be in arrears for dividend periods, whether or not consecutive containing
in the aggregate a number of days equivalent to six calendar quarters, the
holders of shares of such series of Offered Preferred Stock (voting separately
as a class with all other series of Preferred Stock, other than the 7.25%
Convertible Preferred Stock, upon which like voting rights have been conferred
and are exercisable) will be entitled to vote for the election of two of the
authorized number of directors of the Company at the next annual meeting of
stockholders and at each subsequent meeting until all dividends accumulated on
such series of Offered Preferred Stock shall have been fully paid or set apart
for payment. The term of office of all directors elected by the holders of such
Offered Preferred Stock shall terminate immediately upon the termination of the
right of the holders of such Offered Preferred Stock to vote for directors.
Unless otherwise set forth in the applicable Prospectus Supplement, holders of
shares of Offered Preferred Stock will have one vote for each share held.
So long as any shares of any series of Offered Preferred Stock remain
outstanding, the Company shall not, without the consent of holders of at least
two-thirds of the shares of such series of Offered Preferred Stock outstanding
at the time, voting separately as a class with all other series of Preferred
Stock (excluding the 7.25% Convertible Preferred Stock) upon which like voting
rights have been conferred and are exercisable, (i) issue or increase the
authorized amount of any class or series of stock ranking prior to the
outstanding Offered Preferred Stock as to dividends or upon liquidation or (ii)
amend, alter or repeal the provisions of the Company's Certificate of
Incorporation or of the resolutions contained in the Certificate of Designation
relating to such series of Offered Preferred Stock, whether by merger,
consolidation or otherwise, so as to materially adversely affect any power,
preference or special right of such series of Offered Preferred Stock or the
holders thereof; provided, however, that any increase in the amount of the
authorized Common Stock or authorized Preferred Stock or any increase or
decrease in the number of shares of any series of Preferred Stock or the
creation and issuance of other series of Common Stock or Preferred Stock
ranking on a parity with or junior to Preferred Stock as to dividends and upon
liquidation, dissolution or winding up shall not be deemed to materially
adversely affect such powers, preferences or special rights.
MISCELLANEOUS
The holders of Offered Preferred Stock will have no preemptive rights.
Offered Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. Shares of Offered
Preferred Stock redeemed or otherwise reacquired by the Company shall resume
the status of authorized and unissued shares of Offered Preferred Stock
undesignated as to series, and shall be available for subsequent issuance.
There are no restrictions on repurchase or redemption of the Offered Preferred
Stock while there is any arrearage on sinking fund installments except as may
be set forth in a applicable Prospectus Supplement. Neither the par value nor
the liquidation preference is indicative of the price at which the Offered
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Preferred Stock will actually trade on or after the date of issuance. Payment
of dividends on any series of Offered Preferred Stock may be restricted by loan
agreements, indentures and other transactions entered into by the Company. The
accompanying Prospectus Supplement or information incorporated by reference
will describe any material contractual restrictions on dividend payments.
NO OTHER RIGHTS
The shares of a series of Offered Preferred Stock will not have any
preferences, voting powers or relative, participating, optional or other
special rights except as set forth above or in the applicable Prospectus
Supplement, the Certificate of Incorporation or Certificate of Designation or
as otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for each series of Offered Preferred Stock
will be designated in the applicable Prospectus Supplement.
DEPOSITARY SHARES
GENERAL
The Company may, at its option, elect to offer fractional shares of the
Offered Preferred Stock, rather than full shares of the Offered Preferred
Stock. In the event such option is exercised, the Company will issue receipts
for Depositary Shares, each of which will represent a fraction (to be set forth
in the Prospectus Supplement relating to a particular series of Offered
Preferred Stock) of a share of a particular series of Preferred Stock as
described below.
The shares of any series of Offered Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
among the Company, a depositary to be named in the applicable Prospectus
Supplement (the "Preferred Stock Depositary"), and the holders from time to
time of depositary receipts issued thereunder. Subject to the terms of the
Deposit Agreement, each holder of a Depositary Share will be entitled, in
proportion to the applicable fraction of a share of Offered Preferred Stock
represented by such Depositary Share, to all the rights and preferences of the
Offered Preferred Stock represented thereby (including dividend, voting,
redemption, subscription and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of the
related series of Offered Preferred Stock. Copies of the forms of Deposit
Agreement and Depositary Receipt are filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and the following summary is
qualified in its entirety by reference to such exhibit. Immediately following
the issuance of shares of a series of Offered Preferred Stock by the Company,
the Company will deposit such shares with the Preferred Stock Depositary, which
will then issue and deliver the Depositary Receipts to the purchasers thereof.
Depositary Receipts will only be issued evidencing whole Depositary Shares. A
Depositary Receipt may evidence any number of whole Depositary Shares.
Pending the preparation of definitive engraved Depositary Receipts, the
Preferred Stock Depositary may, upon the written order of the Company, issue
temporary Depositary Receipts substantially identical to (and entitling the
holders thereof to all the rights pertaining to) the definitive Depositary
Receipts but not in definitive form. Definitive Depositary Receipts will be
prepared thereafter without unreasonable delay, and such temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at the
Company's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of the related series of Offered
Preferred Stock to the record holders of Depositary Shares relating to such
series of Offered Preferred Stock in proportion to the number of such
Depositary Shares owned by such holders.
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In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Shares entitled thereto in proportion to the number of Depositary
Shares owned by such holders, unless the Preferred Stock Depositary determines
that such distribution cannot be made proportionately among such holders or
that it is not feasible to make such distributions, in which case the Preferred
Stock Depositary may, with the approval of the Company, adopt such method as it
deems equitable and practicable for the purpose of effecting such distribution,
including the sale (at public or private sale) of the Securities or property
thus received, or any part thereof, at such place or places and upon such terms
as it may deem proper.
The amount distributed in any of the foregoing cases will be reduced by any
amounts required to be withheld by the Company or the Preferred Stock
Depositary on account of taxes or other governmental charges.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Offered Preferred Stock underlying the Depositary Shares
is subject to redemption, the Depositary Shares will be redeemed from the
proceeds received by the Preferred Stock Depositary resulting from any
redemption, in whole or in part, of such series of the Preferred Stock held by
the Preferred Stock Depositary. The redemption price per Depositary Share will
be equal to the applicable fraction of the redemption price per share payable
with respect to such series of the Offered Preferred Stock. If the Company
redeems shares of a series of Offered Preferred Stock held by the Preferred
Stock Depositary, the Preferred Stock Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the 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
substantially equivalent method determined by the Preferred Stock Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
moneys payable upon such redemption and any money or other property to which
the holders of such Depositary Shares were entitled upon such redemption, upon
surrender to the Preferred Stock Depositary of the Depositary Receipts
evidencing such Depositary Shares. Any funds deposited by the Company with the
Preferred Stock Depositary for any Depositary Shares that the holders thereof
fail to redeem will be returned to the Company after a period of two years from
the date such funds are so deposited.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of any series of
the Offered Preferred Stock are entitled to vote, the Preferred Stock
Depositary will mail the information contained in such notice of meeting to the
record holders of the Depositary Shares relating to such series of Offered
Preferred Stock. Each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the related series of
Offered Preferred Stock) will be entitled to instruct the Preferred Stock
Depositary as to the exercise of the voting rights pertaining to the number of
shares of the series of Offered Preferred Stock represented by such holder's
Depositary Shares. The Preferred Stock Depositary will endeavor, insofar as
practicable, to vote or cause to be voted the number of shares of the Preferred
Stock represented by such Depositary Shares in accordance with such
instructions, provided the Offered Preferred Stock Depositary receives such
instructions sufficiently in advance of such meeting to enable it to so vote or
cause to be voted the shares of Offered Preferred Stock, and the Company will
agree to take all reasonable action that may be deemed necessary by the
Preferred Stock Depositary in order to enable the Preferred Stock Depositary to
do so. The Preferred Stock Depositary will abstain from voting shares of the
Offered Preferred Stock to the extent it does not receive specific instructions
from the holders of Depositary Shares representing such Offered Preferred
Stock.
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WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary and upon payment of the taxes, charges and fees
provided for in the Deposit Agreement and subject to the terms thereof, the
holder of the Depositary Shares evidenced thereby is entitled to delivery at
such office, to or upon his or her order, of the number of whole shares of the
related series of Offered Preferred Stock and any money or other property, if
any, represented by such Depositary Shares. Holders of Depositary Shares will
be entitled to receive whole shares of the related series of Offered Preferred
Stock, but holders of such whole shares of Offered Preferred Stock will not
thereafter be entitled to deposit such shares of Offered Preferred Stock with
the Preferred Stock Depositary or to receive Depositary Shares therefor. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
whole shares of the related series of Offered Preferred Stock to be withdrawn,
the Preferred Stock Depositary will deliver to such holder or upon his or her
order at the same time a new Depositary Receipt evidencing such excess number
of Depositary Shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time and from time to time be
amended by agreement between the Company and the Preferred Stock Depositary.
However, any amendment that materially adversely alters the rights of the
holders of Depositary Shares will not be effective unless such amendment has
been approved by the holders of at least a majority of the Depositary Shares
then outstanding. Every holder of a Depositary Receipt at the time such
amendment becomes effective will be deemed, by continuing to hold such
Depositary Receipt, to be bound by the Deposit Agreement as so amended.
Notwithstanding the foregoing, in no event may any amendment impair the right
of any holder of any Depositary Shares, upon surrender of the Depositary
Receipts evidencing such Depositary Shares and subject to any conditions
specified in the Deposit Agreement, to receive shares of the related series of
Offered Preferred Stock and any money or other property represented thereby,
except in order to comply with mandatory provisions of applicable law. The
Deposit Agreement may be terminated by the Company at any time upon not less
than 60 days prior written notice to the Preferred Stock Depositary, in which
case, on a date that is not later than 30 days after the date of such notice,
the Preferred Stock Depositary shall deliver or make available for delivery to
holders of Depositary Shares, upon surrender of the Depositary Receipts
evidencing such Depositary Shares, such number of whole or fractional shares of
the related series of Offered Preferred Stock as are represented by such
Depositary Shares. The Deposit Agreement shall automatically terminate after
all outstanding Depositary Shares have been redeemed or there has been a final
distribution in respect of the related series of Offered Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of Depositary Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and the governmental
charges arising solely from the existence of the depositary arrangements. The
Company will pay the charges of the Preferred Stock Depositary, including
charges in connection with the initial deposit of the related series of Offered
Preferred Stock and the initial issuance of the Depositary Shares and all
withdrawals of shares of the related series of Offered Preferred Stock, except
that holders of Depositary Shares will pay other transfer and other taxes and
governmental charges and such other charges as are expressly provided in the
Deposit Agreement to be for their accounts.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to the
Company written 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 Preferred Stock Depositary, which successor
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Preferred Stock 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 $50,000,000.
MISCELLANEOUS
The Preferred Stock Depositary will forward to the holders of Depositary
Shares all reports and communications from the Company that are delivered to
the Preferred Stock Depositary and which the Company is required to furnish to
the holders of the Offered Preferred Stock.
Neither the Preferred Stock 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 Preferred Stock Depositary under the Deposit Agreement will be
limited to performance with best judgment and in good faith of their duties
thereunder, except that they are liable for gross negligence and willful
misconduct in the performance of their duties thereunder, and they will not be
obligated to appear in, prosecute or defend any legal proceeding in respect of
any Depositary Receipts, Depositary Shares or series of Preferred Stock unless
satisfactory indemnity is furnished. The Preferred Stock Depositary and the
Company may rely on advice of legal counsel or accountants of their choice, or
information provided by persons presenting Preferred Stock for deposit, holders
of Depositary Shares or other persons believed in good faith to be competent
and on documents believed to be genuine.
The Preferred Stock Depositary's corporate trust office will be identified in
the applicable Prospectus Supplement. Unless otherwise set forth in the
applicable Prospectus Supplement, the Preferred Stock Depositary will act as
transfer agent and registrar for Depositary Receipts and if shares of a series
of Offered Preferred Stock are redeemable, the Preferred Stock Depositary will
act as redemption agent for the corresponding Depositary Receipts.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders except as otherwise
provided by law. There are no cumulative voting rights with respect to the
election of directors. Holders of Common Stock are entitled to receive ratably
such dividends as may be declared by the Board of Directors out of legally
available funds. In the event of dissolution of the Company, they will be
entitled to share ratably in all assets remaining after payment of liabilities
and amounts owed in respect of outstanding Preferred Stock, including the
Offered Preferred Stock, the $2.28 Preferred Stock and the 7.25% Convertible
Preferred Stock. Holders of Common Stock have no preemptive rights and have no
right to convert their Common Stock into any other securities.
The transfer agent and registrar for the Common Stock is Chemical Shareholder
Services Group, Inc.
$2.28 PREFERRED STOCK
On November 19, 1992, the Company authorized and issued 1,400,000 shares of
Preferred Stock designated "$2.28 Cumulative Preferred Stock." Holders of $2.28
Preferred Stock are entitled to receive dividends quarterly at an annual rate
of $2.28125 per share, when and as declared by the Board of Directors out of
funds legally available therefor. Such dividends are cumulative.
The $2.28 Preferred Stock has a liquidation preference of $25.00 per share.
Holders of $2.28 Preferred Stock are entitled, in the event of the Company's
liquidation, to share ratably in all of the Company's assets remaining after
payment of all of its debts and liabilities up to the amount of the liquidation
preference set forth above, plus all accrued and unpaid dividends. The rights
of holders of $2.28 Preferred Stock rank upon liquidation of the Company on a
parity with the 7.25% Convertible Preferred Stock and will rank on a parity
with the Offered Preferred Stock and prior to those of the holders of the
Common Stock and of any other series of Preferred Stock which is not
specifically on a parity with or senior to the $2.28 Preferred Stock.
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The $2.28 Preferred Stock is redeemable on or after November 15, 1997 at a
redemption price equal to $25.00 per share plus in all instances all accrued
and unpaid dividends.
Holders of $2.28 Preferred Stock have no voting rights except as set forth
below or as otherwise from time to time required by law. Whenever dividends on
the $2.28 Preferred Stock or any other class or series of stock ranking on a
parity with the $2.28 Preferred Stock (excluding the 7.25% Convertible
Preferred Stock) with respect to the payment of dividends shall be in arrears
for dividend periods, whether or not consecutive, containing in the aggregate a
number of days equivalent to six calendar quarters, the holders of shares of
$2.28 Preferred Stock (voting separately as a class with all other series of
Preferred Stock, other than the 7.25% Convertible Preferred Stock, upon which
like voting rights have been conferred and are exercisable) will be entitled to
vote for the election of two of the authorized number of directors of the
Company at the next annual meeting of stockholders and at each subsequent
meeting until all dividends accumulated on the $2.28 Preferred Stock shall have
been fully paid or set apart for payment. The term of office of all directors
elected by the holders of such Preferred Stock shall terminate immediately upon
the termination of the right of the holders of such Preferred Stock to vote for
directors. Holders of shares of $2.28 Preferred Stock have one vote for each
share held.
So long as any shares of the $2.28 Preferred Stock remain outstanding, the
Company shall not, without the consent of holders of at least two-thirds of the
shares of $2.28 Preferred Stock outstanding at the time, voting separately as a
class with all other series of Preferred Stock (excluding the 7.25% Convertible
Preferred Stock) upon which like voting rights have been conferred and are
exercisable, (i) issue or increase the authorized amount of any class or series
of stock ranking prior to the outstanding $2.28 Preferred Stock as to dividends
or upon liquidation or (ii) amend, alter or repeal the provisions of the
Company's Certificate of Incorporation or of the resolutions contained in the
Certificate of Designation relating to the $2.28 Preferred Stock, whether by
merger, consolidation or otherwise, so as to materially adversely affect any
power, preference or special right of the outstanding $2.28 Preferred Stock or
the holders thereof; provided, however, that any increase in the amount of the
authorized Common Stock or authorized Preferred Stock or any increase or
decrease in the number of shares of any series of Preferred Stock or the
creation and issuance of other series of Common Stock or Preferred Stock
ranking on a parity with or junior to the $2.28 Preferred Stock as to dividends
and upon liquidation, dissolution or winding up shall not be deemed to
materially adversely affect such powers, preferences or special rights.
7.25% CONVERTIBLE PREFERRED STOCK
On October 23, 1991, the Company authorized and issued 400,000 shares of
Preferred Stock designated "7.25% Cumulative Senior Perpetual Convertible
Preferred Stock." Holders of 7.25% Convertible Preferred Stock are entitled to
receive dividends quarterly at an annual rate of $7.25 per share, when and as
declared by the Board of Directors out of funds legally available therefor.
Such dividends are cumulative. In addition, if the Company declares a dividend
or makes any other distribution to holders of Common Stock, other than a
Regular Dividend (as defined), then the holders of 7.25% Convertible Preferred
Stock shall be entitled to receive a dividend or distribution in an amount
equal to the amount of such dividend or distribution received by a holder of
the number of shares of Common Stock into which such 7.25% Convertible
Preferred Stock is convertible.
The 7.25% Convertible Preferred Stock has a liquidation preference of $100
per share (the "Liquidation Preference"). Holders of 7.25% Convertible
Preferred Stock are entitled, in the event of the Company's liquidation, to
share ratably in all of the Company's assets remaining after the payment of all
of its debts and liabilities as follows: (i) if a Voluntary Liquidation Event
shall have occurred, up to an amount equal to the Optional Redemption Price (as
hereinafter defined) with respect to each share and (ii) if any other type of
liquidation event shall have occurred, the Liquidation Preference, plus in each
case, all accrued and unpaid dividends. A Voluntary Liquidation Event is
generally defined as the Company commencing a voluntary case under United
States bankruptcy law or any applicable bankruptcy, insolvency or similar law
of any other country, the Company consenting to the entry of an order for
relief in an involuntary case under any such
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law or the appointment of a receiver, liquidator, custodian or other similar
official of the Company or any substantial part of its property, the Company
making an assignment for the benefit of its creditors, or the Company admitting
in writing its inability to pay its debts generally as they become due. The
rights of the holders of 7.25% Convertible Preferred Stock rank upon
liquidation of the Company on a parity with the $2.28 Preferred Stock and will
rank on a parity with the Offered Preferred Stock and prior to those of the
holders of the Common Stock and of any other series of Preferred Stock which is
not specifically on a parity with or senior to the 7.25% Convertible Preferred
Stock.
The 7.25% Convertible Preferred Stock is redeemable on or after October 31,
1994 at a price per share ranging from 105.075% of the Liquidation Preference
on October 31, 1994 to 100% thereof on or after October 31, 2001, plus in all
instances all accrued and unpaid dividends.
Each share of 7.25% Convertible Preferred Stock is convertible into such
number of shares of Common Stock as is equal to the Liquidation Preference of
such share divided by the Conversion Price. As of the date hereof, the
Conversion Price is $19.13875, subject to adjustment for stock dividends, stock
splits and other dilutive events.
In addition to any voting rights provided by law, the holders of 7.25%
Convertible Preferred Stock are entitled to vote on all matters voted on by
holders of Common Stock voting together as a single class, with each holder of
7.25% Convertible Preferred Stock able to cast that number of votes per share
equal to the number of votes that such holder would be entitled to cast had
such holder converted his shares of 7.25% Convertible Preferred Stock into
Common Stock. In addition, the affirmative vote of the holders of at least 66
2/3% of the outstanding shares of 7.25% Convertible Preferred Stock, voting
separately as a single class, is necessary to (i) authorize, increase the
authorized number of shares of, or issue (including on conversion or exchange
of any convertible or exchangeable securities or by reclassification), any
shares of any class or classes of capital stock that rank on a parity with or
senior to (either as to dividends or upon liquidation) to the 7.25% Convertible
Preferred Stock ("Parity Stock" and "Senior Stock", respectively), including
any Offered Preferred Stock, (ii) authorize, increase the authorized number of
shares of, or issue any shares of any class of capital stock of the Company
having an optional or mandatory redemption date earlier than January 1, 1997 or
amend the terms of any class of capital stock of the Company to provide that
such class of capital stock has an optional or mandatory redemption date
earlier than January 1, 1997, (iii) authorize, adopt or approve an amendment to
the Certificate of Incorporation that would increase or decrease the par value
of the shares of 7.25% Convertible Preferred Stock, or alter or change the
powers, preferences or special rights of the shares of 7.25% Convertible
Preferred Stock, other Parity Stock or Senior Stock, (iv) amend, alter or
repeal the Certificate of Incorporation so as to affect the shares of 7.25%
Convertible Preferred Stock adversely, including, without limitation, by
granting any voting right to any holder of notes, bonds, debentures or other
debt obligations of the Company, (v) authorize or issue any security
convertible into, exchangeable for or evidencing the right to purchase or
otherwise receive any shares of any class or classes of Senior Stock or Parity
Stock, and (vi) effect the voluntary liquidation, recapitalization or
reorganization of the Company, or the consolidation or merger of the Company
with or into any other Person (except a wholly-owned subsidiary of the
Company), or the sale or other distribution to another Person of all or
substantially all of the assets of the Company except if certain conditions are
satisfied. The Company will obtain the approval of the holder of the 7.25%
Convertible Preferred Stock prior to the authorization and issuance of any
Offered Preferred Stock, except for any series of Offered Preferred Stock which
will be junior to the 7.25% Convertible Preferred Stock as to dividends or upon
liquidation.
In addition, if the Company shall fail to declare or pay in full two
quarterly dividends, or to satisfy its obligation to convert or exchange shares
of 7.25% Convertible Preferred Stock or there is a breach of certain covenants
contained in the Stock Purchase Agreement pursuant to which the 7.25%
Convertible Preferred Stock was issued (the "Stock Purchase Agreement"), then
the holders of the 7.25% Convertible Preferred Stock shall have the right,
voting separately as a single class, to elect one director until such time as
all dividends have been paid, any such conversion or exchange obligation has
been satisfied or any such breach cured.
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The Company has the right, at its sole option, at any time but on only one
occasion, to exchange all of the outstanding shares of 7.25% Convertible
Preferred Stock for 7.25% Convertible Subordinated Notes due October 31, 1999
(the "Convertible Notes") at a price per share equal to the Liquidation
Preference plus all accrued and unpaid dividends thereon. The Convertible Notes
will have redemption and conversion provisions substantially identical to those
of the 7.25% Convertible Preferred Stock. The Convertible Notes, if issued,
will be subordinated in right of payment to all Senior Indebtedness of the
Company, which is defined to mean substantially all indebtedness of the Company
except for such obligations that are expressly made subordinate to or pari
passu with the Convertible Notes.
At any time on or after October 23, 1996, the holders of at least 50% of the
shares of 7.25% Convertible Preferred Stock may require the Company to exchange
all (but not less than all) of the outstanding shares of 7.25% Convertible
Preferred Stock for, at the Company's option, Common Stock or Notes (the
"Exchange Notes"), or both, at any time, during the period from the 40th day
following the date of the demand notice to the third anniversary thereof, at a
price per share equal to (i) the Liquidation Preference plus (ii) all accrued
and unpaid dividends thereon, to the applicable exchange date, with any shares
of Common Stock to be exchanged valued for such purpose at 95% of the Current
Market Price (as defined) as of the date immediately preceding the applicable
exchange date and with any Exchange Notes valued for such purpose at their face
value. The Exchange Notes will be subordinated nonconvertible notes having a
floating interest rate, a final maturity date the same as that of all other
such Exchange Notes but in any event no later than November 30, 2001 and such
other terms and conditions as shall result in a determination that such Notes
have a fair market value at least equal to their face value as of the date of
their proposed issuance.
The Stock Purchase Agreement also provides that if either or both of Brion G.
Wise, Chairman of the Board and Chief Executive Officer, and Bill M. Sanderson,
Chief Operating Officer, propose to sell or transfer 20% or more of the shares
of Common Stock that they collectively own at such time (subject to certain
exceptions), so long as The 1818 Fund, L.P. (but not its transferees) holds
shares of Common Stock or shares of 7.25% Convertible Preferred Stock or
Convertible Notes which would constitute, on conversion or exchange, 750,000 or
more shares of Common Stock (subject to appropriate adjustment), The 1818 Fund,
L.P. may participate in such sale or transfer on the same terms as those
offered to Messrs. Wise and Sanderson on a pro rata basis.
REGISTRATION RIGHTS
The Company has a registration rights agreement with certain principal
stockholders (which does not include The 1818 Fund, L.P.) granting them the
right to require the Company to effect one registration of any or all of their
Common Stock at their expense. In addition, they have the right to have any or
all of such Common Stock included, at their pro rata expense, in any
registration statement relating to the Common Stock filed by the Company,
subject to the right of the underwriter of that offering to limit the number of
shares of such Common Stock to be included in that registration.
In connection with the issuance of the 7.25% Convertible Preferred Stock, the
Company entered into a registration rights agreement with The 1818 Fund, L.P.
The 1818 Fund, L.P. has the right to require the Company to effect three
registrations of the shares of 7.25% Convertible Preferred Stock, the shares of
Common Stock issuable upon conversion or exchange of either the 7.25%
Convertible Preferred Stock or the Convertible Notes, under certain
circumstances, the Convertible Notes and certain other shares of Common Stock
owned by The 1818 Fund, L.P. In addition, The 1818 Fund, L.P. has the right to
have such securities included in any registration statement relating to the
Common Stock filed by the Company, subject to the right of the underwriter of
that offering to limit the number of such shares to be included in that
registration statement. The Company will pay all expenses in connection with
such registration (excluding any underwriting discounts or commissions).
In connection with the registration of the Securities under the Securities
Act, at the request of The 1818 Fund, L.P., the Company has registered for
sale, from time to time, by The 1818 Fund, L.P. (i) 400,000
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shares of the 7.25% Convertible Preferred Stock and (ii) 2,390,000 shares of
Common Stock, including the 2,090,000 shares of Common Stock (subject to anti-
dilution adjustments) issuable upon conversion of the 7.25% Convertible
Preferred Stock. See "Available Information."
CERTAIN PROVISIONS OF CERTIFICATE OF INCORPORATION AND DELAWARE LAW
The Company's Certificate of Incorporation contains certain provisions that
may have an effect of delaying, deferring or preventing a change of control of
the Company. First, the Certificate of Incorporation provides that the Board
shall consist of three classes of Directors, each serving a three-year term
ending in a successive year. This provision would make it more difficult to
effect a takeover of the Company because it would generally take two annual
meetings of stockholders for an acquiring party to elect a majority of the
Board. As a result, the classified Board may discourage proxy contests for the
election of Directors or purchases of a substantial block of stock because it
could operate to prevent obtaining control of the Board in a relatively short
period of time.
In addition, the Certificate of Incorporation provides that the holders of a
minimum of 60% of the Company's capital stock entitled to vote on a matter (or
such higher percentage as may otherwise be required) may take action thereon
without a meeting by executing a written consent or consents. This increases
the percentage that would otherwise be required under Delaware law to take
certain actions by written consent, and thus may make it more difficult to
effect a takeover of the Company involving certain transactions, such as a
merger or sale of assets, by requiring a potential acquirer to obtain a higher
percentage of the Company's voting securities or hold a stockholders meeting
before such a transaction could be consummated.
The Company is subject to Section 203 of the Delaware General Corporation
Law, which provides for restrictions on business combinations (as defined
therein) with interested persons (any person who acquires 15% or more of the
Company's outstanding voting stock). In general, the Company is prohibited from
engaging in business combinations with an interested person for a period of
three years from the date a person becomes an interested person, subject to
certain exceptions. By restricting the ability of the Company to engage in
business combinations with an interested person, the application of Section 203
to the Company may provide a barrier to hostile or unwanted takeovers. Certain
principal stockholders of the Company became interested persons under Section
203 upon their acquisitions of Common Stock either in December 1989 or in May
1991, but because the Board approved both acquisitions, none of them (acting
alone or together) is prohibited from engaging in a business combination with
the Company.
PLAN OF DISTRIBUTION
The Company may sell the Securities being offered hereby in any of, or any
combination of, the following ways: (i) directly to purchasers, (ii) through
agents, (iii) through underwriters and (iv) through dealers.
Offers to purchase Securities may be solicited directly by the Company or by
agents designated by the Company from time to time. Any such agent, who may be
deemed to be an underwriter as that term is defined in the Securities Act of
1933, involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the accompanying Prospectus
Supplement. Unless otherwise indicated in the accompanying Prospectus
Supplement, any such agent will be acting in a best efforts basis for the
period of its appointment (ordinarily five business days or less).
If an underwriter or underwriters are utilized in the sale, the Company will
execute an underwriting agreement with such underwriters at the time of sale to
them and the names of the underwriters and the terms of the transaction will be
set forth in the accompanying Prospectus Supplement, which will be used by the
underwriters to make resales of the Securities in respect of which this
Prospectus is delivered to the public.
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If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale. The
name of the dealer and the terms of the transaction will be set forth in the
accompanying Prospectus Supplement.
Agents, underwriters, and dealers may be entitled under the relevant
agreements to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for the Company in the ordinary course of business.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered are set forth in the accompanying Prospectus
Supplement.
LEGAL OPINIONS
The validity of the 400,000 shares of 7.25% Convertible Preferred Stock and
the Common Stock into which such shares are convertible in respect of which
this Prospectus is being delivered will be passed on for the Company by
Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York
10022.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K of the Company for the year ended December 31, 1992
and the audited historical financial statements included on page 5 of the
Company's Form 8-K/A dated October 11, 1993 have been so incorporated in
reliance on the reports of Price Waterhouse, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
The audited financial statements of Mountain Gas Resources, Inc. at December
31, 1992 and for the period from inception (July 16, 1992) to December 31,
1992, incorporated by reference herein and elsewhere in the Registration
Statement, except as they relate to the unaudited six-month period ended June
30, 1993, have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in the report with respect thereto, and are
incorporated by reference herein and in the Registration Statement in reliance
upon the report of said firm as experts in auditing and accounting.
The financial statements of Mountain Gas Resources, Inc., incorporated in
this prospectus by reference from the Company's Form 8-K/A dated October 11,
1993, have been audited by Deloitte & Touche, independent auditors, as stated
in their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
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GRAPHIC MATERIAL CROSS-REFERENCE PAGE
A MAP OF THE UNITED STATES IDENTIFYING THE LOCATION OF THE HEADQUARTERS
AND OPERATIONS OF THE COMPANY BY STATE AND MAJOR OIL AND GAS PRODUCING
BASIN APPEARS ON PAGE S-2.
