<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 033-53723
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED APRIL 12, 2000.
100,000 SHARES
CABOT OIL & GAS CORPORATION
CLASS A COMMON STOCK
These shares are being sold by Charles P. Siess, Jr., a director and
the former Chairman of the Board and Chief Executive Officer of Cabot Oil & Gas,
as selling stockholder. These shares are being issued to the selling stockholder
upon exercise of stock options previously granted to him. The shares are being
sold for $21.50 per share in an ordinary brokerage transaction through Jefferies
& Company, Inc., for which a regular and customary brokerage commission will be
paid by the selling stockholder.
The common stock of Cabot Oil & Gas is traded under the symbol "COG" on
the New York Stock Exchange. The last reported sale price of our common stock on
the New York Stock Exchange on May 17, 2000 was $22 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THE ATTACHED PROSPECTUS FOR
FACTORS THAT SHOULD BE CONSIDERED BEFORE INVESTING IN THE COMMON STOCK.
Delivery of the common stock will be made on or about May 23, 2000.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus supplement is May 18, 2000.
<PAGE> 2
PROSPECTUS
CABOT OIL & GAS CORPORATION
1200 Enclave Parkway
Houston, Texas 77077
(281) 589-4600
CLASS A COMMON STOCK
This prospectus relates to the reoffer and resale of shares of common
stock that have been or may in the future be acquired pursuant to the Cabot Oil
& Gas Corporation 1994 Long-Term Incentive Plan by certain of our employees. The
plan provides for the granting of options and other awards to employees of Cabot
Oil & Gas. A total of 1,500,000 shares of common stock were originally subject
to the plan. We will not receive any proceeds from these sales.
The selling stockholders described in this prospectus may reoffer and
resell the shares from time to time. The shares may be offered at prevailing
market prices, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices.
The common stock is traded on the New York Stock Exchange under the
symbol "COG." On April 7, 2000, the last reported sale price of the common stock
on the New York Stock Exchange was $17.125.
See "Risk Factors" on pages 4 to 7 for factors that should be
considered before investing in the common stock.
------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------------------
The date of this prospectus is April 12, 2000.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Where You Can Find More Information...............................................................................2
Forward-Looking Information.......................................................................................3
About Cabot Oil & Gas Corporation.................................................................................3
Risk Factors......................................................................................................4
Use of Proceeds...................................................................................................8
Selling Stockholders..............................................................................................8
Plan of Distribution..............................................................................................8
Description of Capital Stock......................................................................................9
Legal Opinions...................................................................................................12
Independent Accountants..........................................................................................12
Experts ........................................................................................................12
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You can read and copy any materials we file with
the SEC at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices located at Seven World
Trade Center, New York, New York 10048, and at 500 West Madison Street, Chicago,
Illinois 60661. You can obtain information about the operation of the SEC's
public reference room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the Internet at http://www.sec.gov. You can
obtain information about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005, or by visiting our Web site at
http://www.cabotog.com.
This prospectus is part of a registration statement we have filed with
the SEC relating to the common stock. As permitted by SEC rules, this prospectus
does not contain all of the information we have included in the registration
statement and the accompanying exhibits and schedules we file with the SEC. You
may refer to the registration statement, the exhibits and schedules for more
information about us and our common stock. The registration statement, exhibits
and schedules are available at the SEC's public reference room or through its
Web site.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
an important part of this prospectus, and later information that we file with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below, and any future filings we make with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934. The documents we incorporate by reference are:
o our annual report on Form 10-K for the year ended December 31,
1999
o the description of the common stock in our registration statement
on Form 8-A filed on January 24, 1990, and the description of the
rights to purchase preferred stock contained in our registration
statement on Form 8-A filed on April 1, 1991, as they may be
amended in the future to update or change these descriptions.
2
<PAGE> 4
You may request a copy of these filings (other than an exhibit to those
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:
Cabot Oil & Gas Corporation
1200 Enclave Parkway
Houston, Texas 77077
Attention: Lisa A. Machesney
Telephone: (281) 589-4600
FORWARD-LOOKING INFORMATION
This prospectus, including the information we incorporate by reference,
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
You can identify our forward-looking statements by the words "expects,"
"projects," "estimates," "believes," "anticipates," "intends," "plans,"
"budgets," "predicts," "estimates" and similar expressions.
We have based the forward-looking statements relating to our operations
on our current expectations, estimates and projections about us and the oil and
gas industry in general. We caution you that these statements are not guarantees
of future performance and involve risks, uncertainties and assumptions that we
cannot predict. In addition, we have based many of these forward-looking
statements on assumptions about future events that may prove to be inaccurate.
Accordingly, our actual outcomes and results may differ materially from what we
have expressed or forecast in the forward-looking statements. Any differences
could result from a variety of factors, including the following:
o market factors
o market prices (including regional basis differentials) of natural
gas and oil
o results of future drilling and marketing activity
o future production and costs
When you consider these forward-looking statements, you should keep in
mind these risk factors and the other cautionary statements in this prospectus.
Our forward-looking statements speak only as of the date made. Neither Cabot,
nor any person acting on Cabot's behalf, undertakes any obligation to update any
forward-looking statements included or incorporated by reference in this
prospectus.
ABOUT CABOT OIL & GAS CORPORATION
Cabot Oil & Gas is an independent oil and gas company engaged in the
exploration, development, acquisition and exploitation of oil and gas properties
located in four areas of the United States:
o The onshore Texas and Louisiana Gulf Coast
o The Rocky Mountains
o Appalachia
o The Mid-Continent or Anadarko Basin
At December 31, 1999, we had approximately 978.7 Bcfe of total proved
reserves, of which 95% were natural gas. We operate approximately 83% of the
wells in which we have an interest.
In this prospectus, we refer to Cabot Oil & Gas Corporation, its wholly
owned and majority owned subsidiaries and its ownership interest in equity
affiliates as "we," "us" or "Cabot Oil & Gas," unless the context clearly
indicates otherwise. Our principal executive offices are located at 1200 Enclave
Parkway, Houston, Texas 77077, and our telephone number at that location is
(281) 589-4600.
3
<PAGE> 5
RISK FACTORS
The following should be considered carefully with the information
provided elsewhere in this prospectus and the document we incorporate by
reference in reaching a decision regarding an investment in our common stock.
OIL AND GAS PRICES FLUCTUATE WIDELY, AND LOW PRICES FOR AN EXTENDED PERIOD OF
TIME ARE LIKELY TO HAVE A MATERIAL ADVERSE IMPACT ON OUR BUSINESS.
Our revenues, operating results, financial condition and ability to
borrow funds or obtain additional capital depend substantially on prevailing
prices for natural gas and, to a lesser extent, oil. Declines in oil and gas
prices may materially adversely affect our financial condition, liquidity,
ability to obtain financing and operating results. Lower oil and gas prices also
may reduce the amount of oil and gas that we can produce economically.
Historically, oil and gas prices and markets have been volatile, with prices
fluctuating widely, and they are likely to continue to be volatile. Depressed
prices in the future would have a negative impact on our future financial
results. Because our reserves are predominantly natural gas, changes in natural
gas prices may have a particularly large impact on our financial results.
Prices for oil and gas are subject to wide fluctuations in response to
relatively minor changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors that are beyond our control.
These factors include:
o the domestic and foreign supply of oil and gas;
o the level of consumer product demand;
o weather conditions;
o political conditions in oil producing regions, including the
Middle East;
o the ability of the members of the Organization of Petroleum
Exporting Countries to agree to and maintain oil price and
production controls;
o the price of foreign imports;
o actions of governmental authorities;
o domestic and foreign governmental regulations;
o the price, availability and acceptance of alternative fuels; and
o overall economic conditions.
These factors and the volatile nature of the energy markets make it impossible
to predict with any certainty the future prices of oil and gas.
In order to reduce our exposure to short-term fluctuations in the price
of oil and gas, we sometimes enter into hedging arrangements. Our hedging
arrangements apply to only a portion of our production and provide only partial
price protection against declines in oil and gas prices. These hedging
arrangements may expose us to risk of financial loss and limit the benefit to us
of increases in prices.
RESERVE ESTIMATES DEPEND ON MANY ASSUMPTIONS THAT MAY TURN OUT TO BE INACCURATE.
ANY MATERIAL INACCURACIES IN THESE RESERVE ESTIMATES OR UNDERLYING ASSUMPTIONS
WILL MATERIALLY AFFECT THE QUANTITIES AND PRESENT VALUE OF OUR RESERVES.
The process of estimating quantities of proved reserves is inherently
uncertain, and the reserve data included or incorporated by reference in this
prospectus are only estimates. Reserve engineering is a subjective process of
estimating underground accumulations of natural gas and crude oil that cannot be
measured in an exact manner. The process relies on interpretations of available
geologic, geophysic, engineering and production data. The extent, quality and
reliability of this technical data can vary. The process also requires certain
economic assumptions, some of which are mandated by the SEC, such as oil and gas
prices, drilling and operating expenses, capital expenditures, taxes and
availability of funds. The accuracy of a reserve estimate is a function of:
4
<PAGE> 6
o the quality and quantity of available data;
o the interpretation of that data;
o the accuracy of various mandated economic assumptions; and
o the judgment of the persons preparing the estimate.
Our proved reserve information included or incorporated by reference in this
prospectus is based on estimates we prepared. Estimates prepared by others might
differ materially from our estimates.
Because these estimates depend on many assumptions, all of which may
substantially differ from actual results, reserve estimates are often materially
different from the quantities of natural gas and crude oil that are ultimately
recovered. In addition, results of drilling, testing and production after the
date of an estimate may justify material revisions to the estimate.
You should not assume that the present value of future net cash flows
included or incorporated by reference in this prospectus is the current market
value of our estimated proved natural gas and oil reserves. In accordance with
SEC requirements, we generally base the estimated discounted future net cash
flows from proved reserves on prices and costs on the date of the estimate.
Actual future prices and costs may be materially higher or lower than the prices
and costs as of the date of the estimate.
OUR FUTURE PERFORMANCE DEPENDS ON OUR ABILITY TO FIND OR ACQUIRE ADDITIONAL OIL
AND GAS RESERVES THAT ARE ECONOMICALLY RECOVERABLE.
In general, production from oil and gas properties declines as reserves
are depleted, with the rate of decline depending on reservoir characteristics.
Unless we successfully replace the reserves that we produce, our reserves will
decline, resulting eventually in a decrease in oil and gas production and lower
revenues and cash flow from operations. Historically, we have succeeded in
increasing reserves after taking production into account through exploration,
development and exploitation activities. We have conducted these activities on
our existing oil and gas properties as well as on newly acquired properties. We
may not be able to continue to replace reserves from these activities at
acceptable costs. Low oil and gas prices may further limit the kinds of reserves
that we can develop economically. Lower prices also decrease our cash flow and
may cause us to decrease capital expenditures.
Exploration, development and exploitation activities involve numerous
risks that may result in dry holes, the failure to produce oil and gas in
commercial quantities and the inability to fully produce discovered reserves.
We are continually identifying and evaluating opportunities to acquire
oil and gas properties. We cannot assure you that we will successfully
consummate any acquisition, that we will be able to acquire producing oil and
gas properties that contain economically recoverable reserves or that any
acquisition will be profitably integrated into our operations.
WE FACE A VARIETY OF HAZARDS AND RISKS THAT COULD CAUSE SUBSTANTIAL FINANCIAL
LOSSES.
Our business involves a variety of operating risks, including:
o blowouts, cratering and explosions;
o mechanical problems;
o uncontrolled flows of oil, natural gas or well fluids;
o fires;
o formations with abnormal pressures;
o pollution and other environmental risks; and
o natural disasters.
The operation of our natural gas gathering and pipeline systems also
involves various risks, including the risk of explosions and environmental
hazards caused by pipeline leaks and ruptures. The location of pipelines near
populated areas, including residential areas, commercial business centers and
industrial sites, could increase these
5
<PAGE> 7
risks. As of December 31, 1999, we owned or operated approximately 2,390 miles
of natural gas gathering and pipeline systems in the Appalachian region. As part
of our normal maintenance program, we have identified certain segments of our
pipelines that we believe periodically require repair, replacement or additional
maintenance.
Any of these events could result in loss of human life, significant
damage to property, environmental pollution, impairment of our operations and
substantial losses to us. In accordance with customary industry practice, we
maintain insurance against some, but not all, of these risks and losses. The
occurrence of any of these events not fully covered by insurance could have a
material adverse effect on our financial position and results of operations.
OUR ABILITY TO SELL OUR OIL AND GAS PRODUCTION COULD BE MATERIALLY HARMED IF WE
FAIL TO OBTAIN ADEQUATE SERVICES SUCH AS TRANSPORTATION AND PROCESSING.
The sale of our oil and gas production depends on a number of factors
beyond our control. The factors include, except in the Appalachian region, the
availability and capacity of transportation and processing facilities. Our
failure to obtain these services on acceptable terms could materially harm our
business.
COMPETITION IN OUR INDUSTRY IS INTENSE, AND MANY OF OUR COMPETITORS HAVE
SUBSTANTIALLY GREATER FINANCIAL RESOURCES THAN WE DO.
Competition in the oil and gas industry, generally, and in our primary
producing areas, specifically, is intense. Major and independent oil and gas
companies actively bid for desirable oil and gas properties, as well as for the
equipment and labor required to operate and develop these properties. Our
competitive position is affected by price, contract terms and quality of
service, including pipeline connection times, distribution efficiencies and
reliable delivery record. Many of our competitors have financial resources and
exploration and development budgets that are substantially greater than ours,
particularly in the Rocky Mountains, Mid-Continent and Gulf Coast areas, which
may adversely affect our ability to compete with these companies.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR ABILITY TO OPERATE.
Our operations are dependent upon a relatively small group of key
management and technical personnel. We cannot assure you that these individuals
will remain with us for the immediate or foreseeable future. The unexpected loss
of the services of one or more of these individuals could have a detrimental
effect on us.
WE ARE SUBJECT TO COMPLEX LAWS AND REGULATIONS, INCLUDING ENVIRONMENTAL
REGULATIONS, THAT CAN ADVERSELY AFFECT THE COST, MANNER OR FEASIBILITY OF DOING
BUSINESS.
Our operations are subject to extensive federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Many laws and
regulations require permits for the operation of various facilities, and these
permits are subject to revocation, modification and renewal. Governmental
authorities have the power to enforce compliance with their regulations, and
violations could subject us to fines, injunctions or both. These laws and
regulations have increased the costs of planning, designing, drilling,
installing and operating oil and gas facilities. Risks of substantial costs and
liabilities related to environmental compliance issues are inherent in oil and
gas operations. It is possible that other developments, such as stricter
environmental laws and regulations, and claims for damages to property or
persons resulting from oil and gas production, would result in substantial costs
and liabilities.
6
<PAGE> 8
PROVISIONS OF DELAWARE LAW AND OUR CHARTER COULD DISCOURAGE CHANGE IN CONTROL
TRANSACTIONS AND PREVENT STOCKHOLDERS FROM RECEIVING A PREMIUM ON THEIR
INVESTMENT.
Our charter provides for a classified board of directors with staggered
terms and authorizes our board of directors to set the terms of preferred stock.
In addition, our charter and Delaware law contain provisions that impose
restrictions on business combinations with interested parties. Our bylaws
prohibit stockholder action by written consent and limit stockholder proposals
at meetings of stockholders. We also have adopted a stockholders rights plan.
Because of our stockholders rights plan and these provisions of our charter,
bylaws and Delaware law, persons considering unsolicited tender offers or other
unilateral takeover proposals may be more likely to negotiate with our board of
directors rather than pursue non-negotiated takeover attempts. As a result,
these provisions may make it more difficult for our stockholders to benefit from
transactions that are opposed by an incumbent board of directors.
7
<PAGE> 9
USE OF PROCEEDS
We will not receive any proceeds from sales of common stock by any of
the selling stockholders.
SELLING STOCKHOLDERS
This prospectus covers the reoffer and resale of shares of common stock
by participants in the Cabot Oil & Gas Corporation 1994 Long-Term Incentive
Plan. The participants are officers or employees (or former officers or
employees or their transferees by descent or distribution) of Cabot Oil & Gas
who received stock options or other awards under the plan. The shares that may
be sold were acquired or will be acquired pursuant to the exercise of stock
options or other awards granted under the plan.
The selling stockholders may sell up to all of the shares of common
stock they receive under the plan pursuant to this prospectus in one or more
transactions from time to time as described below under "Plan of Distribution."
However, the selling stockholders are not obligated to sell any of the shares of
common stock offered by this prospectus.
PLAN OF DISTRIBUTION
The selling stockholders may offer and sell the shares of common stock
offered by this prospectus from time to time in one or more of the following
transactions:
o through the New York Stock Exchange or any other securities
exchange that quotes the common stock
o in the over-the-counter market
o in transactions other than on such exchanges or in the
over-the-counter market (including negotiated transactions and
other private transactions)
o in short sales of the common stock, in transactions to cover
short sales or otherwise in connection with short sales
o by pledge to secure debts and other obligations or on foreclosure
of a pledge
o in a combination of any of the above transactions
The selling stockholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The transactions listed above
may include block transactions.
The selling stockholders may use broker-dealers to sell their shares or
may sell their shares to broker-dealers acting as principals. If this happens,
broker-dealers will either receive discounts or commissions from the selling
stockholders, or they will receive commissions from purchasers of shares for
whom they acted as agents, or both. If a broker-dealer purchases shares as a
principal, it may resell the shares for its own account under this prospectus.
We have informed the selling stockholders that the anti-manipulation
provisions of Regulation M under the Securities Exchange Act of 1934 may apply
to their sales of common stock.
The selling stockholders and any agent, broker or dealer that
participates in sales of common stock offered by this prospectus may be deemed
"underwriters" under the Securities Act of 1933, and any commissions or other
consideration received by any agent, broker or dealer may be considered
underwriting discounts or commissions under the Securities Act. The selling
stockholders may agree to indemnify any agent, broker or dealer that
participates in sales of common stock or warrants against liabilities arising
under the Securities Act of 1933 from sales of common stock.
Instead of selling common stock under this prospectus, the selling
stockholders may sell common stock in compliance with the provisions of Rule 144
under the Securities Act of 1933, if available.
8
<PAGE> 10
DESCRIPTION OF CAPITAL STOCK
GENERAL
We have authorized for issuance 40,000,000 shares of common stock and
5,000,000 shares of preferred stock, issuable in series. As of March 15, 2000,
there were 25,098,846 shares of common stock issued and outstanding, which
excludes 302,600 shares held as treasury stock.
Holders of common stock may receive dividends if and when declared by
our board of directors. The payment of dividends on our common stock may be
limited by obligations we may have to holders of any preferred stock. Holders of
common stock are entitled to one vote per share on matters submitted to them.
Cumulative voting of shares is prohibited, meaning that the holders of a
majority of the voting power of the shares voting for the election of directors
can elect all directors to be elected if they choose to do so. The common stock
has no preemptive rights and is not convertible, redeemable or assessable, or
entitled to the benefits of any sinking fund.
If we liquidate or dissolve our business, the holders of common stock
will share ratably in all assets available for distribution to stockholders
after creditors are paid and preferred stockholders receive their distributions.
All issued and outstanding shares of common stock are fully paid and
nonassessable. Any shares of common stock we offer under this prospectus will be
fully paid and nonassessable.
The common stock is listed on the New York Stock Exchange and trades
under the symbol "COG."
PREFERRED STOCK
Our board of directors is allowed, without action by stockholders, to
issue one or more series of preferred stock. The board of directors can also
determine the rights, preferences, privileges and restrictions, including
dividend rights, voting rights, conversion rights, terms of redemption and
liquidation preferences, of a series of the preferred stock.
STAGGERED BOARD OF DIRECTORS
Our by-laws divide our board of directors into three classes, as nearly
equal in number as possible, serving staggered three-year terms. The by-laws
also provide that the classified board provision may not be amended without the
affirmative vote of a majority of the voting power of our capital stock. The
classification of the board of directors has the effect of requiring at least
two annual stockholder meetings, instead of one, to effect a change in control
of the board of directors, unless the by-laws are amended.
STOCKHOLDER RIGHTS PLAN
On January 21, 1991, our board of directors adopted a preferred stock
purchase rights plan. Under the plan, each share of common stock currently
includes one right to purchase preferred stock. We have summarized selected
provisions of the rights below. This summary is not complete. We have filed the
form of the rights agreement with the SEC and you should read it for provisions
that may be important to you.
Currently, the rights are not exercisable and are attached to all
outstanding shares of common stock. The rights will separate from the common
stock and become exercisable:
o ten days after public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the
right to acquire, beneficial ownership of 15% of the outstanding
common stock, or
9
<PAGE> 11
o ten business days following the start of a tender offer or
exchange offer that would result in a person's acquiring
beneficial ownership of 15% of the outstanding common stock
Our board of directors can elect to delay the separation of the rights from the
common stock beyond the ten business days after the start of a tender or
exchange offer referred to in the second bullet point. A 15% beneficial owner is
referred to as an "acquiring person" under the plan. Until the rights are
separately distributed, the rights will be evidenced by the common stock
certificates and will be transferred with and only with the common stock
certificates.
After the rights are separately distributed, each right will entitle
the holder to purchase from Cabot Oil & Gas one one-hundredth of a share of
junior participating preferred stock for a purchase price of $55. The rights
will expire at the close of business on January 21, 2001, unless we redeem or
exchange them earlier as described below.
If a person becomes an acquiring person, the rights will become rights
to purchase shares of common stock for one-half the current market price (as
defined in the rights agreement) of the common stock. This occurrence is
referred to as a "flip-in event" under the plan. After any flip-in event, all
rights that are beneficially owned by an acquiring person, or by certain related
parties, will be null and void. Our board of directors has the power to decide
that a particular tender or exchange offer for all outstanding shares of our
common stock is fair to and otherwise in the best interests of our stockholders.
If our board makes this determination, the purchase of shares under the offer
will not be a flip-in event.
If, after there is an acquiring person, we are acquired in a merger or
other business combination transaction or 50% or more of our assets or earning
power are sold or transferred, each holder of a right will have the right to
purchase shares of common stock of the acquiring company at a price of one-half
the current market price of that stock. An acquiring person will not be entitled
to exercise its rights, which will have become void.
Until ten days after the announcement that a person has become an
acquiring person, our board may decide to redeem the rights at a price of $.01
per right, payable in cash, shares of common stock or other consideration. The
rights will not be exercisable after a flip-in event until the rights are no
longer redeemable.
At any time after a flip-in event and prior to a person's becoming the
beneficial owner of 50% or more of the shares of common stock, our board may
decide to exchange the rights for shares of common stock on a one-for-one basis.
Rights owned by an acquiring person, which will have become void, will not be
exchanged.
Other than certain provisions relating to the principal economic terms
of the rights, the rights agreement may be amended by our board of directors
prior to the distribution of the rights. After the distribution of the rights,
the provisions of the rights agreement may be amended by our board of directors
in order to cure any ambiguity, defect or inconsistency, to make changes that do
not materially adversely affect the interests of holders of rights (excluding
the interests of any acquiring person), or to shorten or lengthen any time
period under the rights agreement. No amendment to lengthen the time period for
redemption may be made if the rights are not redeemable at that time.
Various actions under the rights agreement, including redeeming and
exchanging the rights or amending the rights agreement, will require the
approval of our "continuing directors." A "continuing director" is any member of
our board of directors who was a member of the board prior to the date of the
rights agreement, and any person who is subsequently elected to the board if the
person is recommended or approved by a majority of the continuing directors. The
"continuing directors" do not include an acquiring person, or an affiliate or
associate of an acquiring person, or any representative or nominee of them.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to any person or group that attempts to acquire us without
the approval of our board of directors. As a result, the overall effect of the
rights may be to render more difficult or discourage any attempt to acquire us
even if the acquisition may be favorable to the interests of our stockholders.
Because our board of directors can redeem the rights or approve a
10
<PAGE> 12
tender or exchange offer, the rights should not interfere with a merger or other
business combination approved by our board of directors.
LIMITATION ON DIRECTORS' LIABILITY
Delaware has adopted a law that allows corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations allowed by the
law, directors are accountable to corporations and their stockholders for
monetary damages for acts of gross negligence. Although the Delaware law does
not change directors' duty of care, it allows corporations to limit available
relief to equitable remedies such as injunction or rescission. Our certificate
of incorporation limits the liability of our directors to the fullest extent
permitted by this law. Specifically, our directors will not be personally liable
for monetary damages for any breach of their fiduciary duty as a director,
except for liability
o for any breach of their duty of loyalty to the company or our
stockholders
o for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law
o under provisions relating to unlawful payments of dividends or
unlawful stock repurchases or redemptions
o for any transaction from which the director derived an improper
personal benefit
This limitation may have the effect of reducing the likelihood of
derivative litigation against directors, and may discourage or deter
stockholders or management from bringing a lawsuit against directors for breach
of their duty of care, even though such an action, if successful, might
otherwise have benefitted our stockholders.
DELAWARE ANTI-TAKEOVER STATUTE
We are a Delaware corporation and are subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents us from
engaging in a business combination with an "interested stockholder" (generally,
a person owning 15% or more of our outstanding voting stock) for three years
following the time that person becomes a 15% stockholder unless either:
o before that person became a 15% stockholder, our board of
directors approved the transaction in which the stockholder
became a 15% stockholder or approved the business combination
o upon completion of the transaction that resulted in the
stockholder's becoming a 15% stockholder, the stockholder owns at
least 85% of our voting stock outstanding at the time the
transaction began (excluding stock held by directors who are also
officers and by employee stock plans that do not provide
employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or
exchange offer) or
o after the transaction in which that person became a 15%
stockholder, the business combination is approved by our board of
directors and authorized at a stockholder meeting by at least
two-thirds of the outstanding voting stock not owned by the 15%
stockholder.
Under Section 203, these restrictions also do not apply to certain
business combinations proposed by a 15% stockholder following the disclosure of
an extraordinary transaction with a person who was not a 15% stockholder during
the previous three years or who became a 15% stockholder with the approval of a
majority of our directors. This exception applies only if the extraordinary
transaction is approved or not opposed by a majority of our
11
<PAGE> 13
directors who were directors before any person became a 15% stockholder in the
previous three years, or the successors of these directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is EquiServe,
L.P., Boston, Massachusetts.
LEGAL OPINIONS
Baker Botts L.L.P., Houston, Texas, our outside counsel, has issued an
opinion about the legality of the common stock for us.
INDEPENDENT ACCOUNTANTS
The financial statements incorporated in this prospectus by reference
to the annual report on Form 10-K for the year ended December 31, 1999, have
been so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
EXPERTS
We have incorporated in this prospectus by reference the review letter
of Miller and Lents, Ltd., independent oil and gas consultants, dated February
4, 2000 with respect to certain proved reserve estimates prepared by us in
reliance on the authority of that firm as experts in petroleum engineering.
12
